As filed with the Securities and Exchange Commission on February 28, 1995
Registration No. 33-16338
811-5270 SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /_/
Pre-Effective Amendment No. _____ /_/
Post-Effective Amendment No. 34 /X/
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. 35
THE DREYFUS/LAUREL FUNDS, INC.
-------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
200 Park Avenue - 55th floor
New York, New York 10166
------------------------
(Address of Principal Executive Office) (ZIP Code)
Registrant's Telephone Number, including area code: (800) 225-5267
-------------------------------------------------------------------
John E. Pelletier
Secretary
The Dreyfus/Laurel Funds, Inc.
200 Park Avenue - 55th floor
New York, New York 10166
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering:
--------------------------------------------
As soon as possible after this Post-Effective Amendment becomes effective.
It is proposed that this filing will become effective (check
appropriate box):
/X/ Immediately upon filing /_/ on (date) pursuant to paragraph
pursuant to paragraph (b) (b)
/_/ 60 days after filing pursuant /_/ on (date) pursuant to
to paragraph (a)(1) paragraph (a)(1)
/_/ 75 days after filing pursuant /_/ on (date) pursuant to
to paragraph (a)(2) paragraph (a)(2)
If appropriate, check the following box:
/_/ this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
The Registrant has registered an indefinite amount of securities
under the Securities Act of 1933 pursuant to Section 24(f) under the
Investment Company Act of 1940, accordingly no fee is payable herewith. A
Rule 24f-2 Notice for the Registrant's most recent fiscal year ended
October 31, 1994 was filed with the Commission on December 30, 1994.
Dreyfus/Laurel Cross-Reference Sheet Pursuant to Rule 495(a)
----------------------------------------------------
Items in
Part A of
Form N-1A Caption Prospectus Caption
------ ------- ------------------
1. Cover Page Cover Page
2. Synopsis Expense Summary
3. Condensed Financial Financial Highlights
Information
4. General Description of Investment Objective and
Registrant Policies; Further
Information About The
Fund
5. Management of the Fund Further Information About
The Fund; Management
6. Capital Stock and Other Cover Page; Investor
Securities Line; Distributions;
Taxes;
7. Purchase of Securities Expense Summary;
Being Offered Alternative Purchase
Methods; Special
Shareholder Services; How
to Invest in The Fund;
Distribution and Service
Plans; How to Exchange
Your Investment From One
Fund to Another;
8. Redemption or Repurchase How to Redeem Shares
9. Pending Legal Proceedings N.A.
Items in
Part B of Statement of Additional
Form N-1A Information Caption
------- -----------------------
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and General Information
History
13. Investment Objectives and Investment Information
Policies and Risk Factors;
Investment Limitations
14. Management of the Fund Directors and Officers
15. Control Persons and Controlling Shareholders;
Principal Holders of Principal Shareholders;
Securities Directors and Officers;
Investment Management and
Other Services
16. Investment Advisory and Investment Management and
Other Services Other Services
17. Brokerage Allocation and Portfolio Transactions
Other Practices
18. Capital Stock and Other See Prospectus -- "Cover
Securities Page"; "How to Redeem
Fund Shares"; "Further
Information About The
Funds; The Dreyfus/Laurel
Funds, Inc."
19. Purchase, Redemption and Investment Management and
Pricing of Securities Other Services; Net Asset
Being Offered Value
20. Tax Status Dividends, Other
Distributions and Taxes
21. Underwriters Investment Management and
Other Services
Calculation of Performance Calculations
Performance Data
22. Financial Statements Financial Statements
- 2 -
Dreyfus
Cross-Reference Sheet Pursuant to Rule 495(a)
---------------------------------------------
Items in
Part A of
Form N-1A
Caption Prospectus Caption
------ ------- ------------------
1. Cover Page Cover Page
2. Synopsis Expense Summary
3. Condensed Financial Financial Highlights
Information
4. General Description of Investment Objective and
Registrant Policies; Further
Information About The
Fund
5. Management of the Fund Further Information About
The Fund; Management
6. Capital Stock and Other Cover Page; Investor
Securities Line; Distributions;
Taxes;
7. Purchase of Securities Expense Summary;
Being Offered Alternative Purchase
Methods; Special
Shareholder Services; How
to Invest in The Fund;
Distribution Plan; How to
Exchange Your Investment
From One Fund to Another;
8. Redemption or Repurchase How to Redeem Shares
9. Pending Legal Proceedings N.A.
Items in
Part B of Statement of Additional
Form N-1A Information Caption
------ -----------------------
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and General Information
History
13. Investment Objectives and Investment Information
Policies and Risk Factors;
Investment Limitations
14. Management of the Fund Directors and Officers
15. Control Persons and Controlling Shareholders;
Principal Holders of Principal Shareholders;
Securities Directors and Officers;
Investment Management and
Other Services
16. Investment Advisory and Investment Management and
Other Services Other Services
17. Brokerage Allocation and Portfolio Transactions
Other Practices
18. Capital Stock and Other See Prospectus -- "Cover
Securities Page"; "How to Redeem
Fund Shares"; "Further
Information About The
Funds; The Dreyfus/Laurel
Funds, Inc."
19. Purchase, Redemption and Investment Management and
Pricing of Securities Other Services; Net Asset
Being Offered Value
20. Tax Status Dividends, Other
Distributions and Taxes
21. Underwriters Investment Management and
Other Services
Calculation of Performance Calculations
Performance Data
22. Financial Statements Financial Statements
- 2 -
THE DREYFUS/LAUREL FUNDS, INC.
CONTENTS OF POST-EFFECTIVE AMENDMENT
This post-effective amendment to the registration statement of The
Dreyfus/Laurel Funds, Inc.* contains the following documents:
Facing Sheet
Cross-Reference Sheet
Contents of Post-Effective Amendment
Part A - Prospectus
- Dreyfus Disciplined Stock Fund
- Dreyfus Disciplined Midcap Stock Fund
- Dreyfus S&P 500 Stock Index Fund
- Dreyfus Equity Income Fund
- Dreyfus European Fund
- Dreyfus Bond Market Index Fund
- Dreyfus/Laurel Prime Money Market Fund
- Dreyfus/Laurel U.S. Treasury Money Market Fund
- Dreyfus/Laurel Tax-Exempt Money Market Fund
- Dreyfus/Laruel Institutional Prime Money Market Fund
- Dreyfus/Laurel Institutional U.S. Treasury Money Market
Fund
- Dreyfus/Laurel Institutional Government Money Market
Fund
- Dreyfus/Laurel Institutional U.S. Treasury Only Money
Market Fund
- Dreyfus/Laurel Institutional Short-Term Bond Fund
- Premier Balanced Fund
- Premier Small Company Stock Fund
- Premier Limited Term Income Fund
Part B - Statement of Additional Information
- Dreyfus Disciplined Stock Fund
- Dreyfus Disciplined Midcap Stock Fund
- Dreyfus S&P 500 Stock Index Fund
- Dreyfus Equity Income Fund
- Dreyfus European Fund
- Dreyfus Bond Market Index Fund
- Dreyfus/Laurel Prime Money Market Fund
- Dreyfus/Laurel U.S. Treasury Money Market Fund
- Dreyfus/Laurel Tax-Exempt Money Market Fund
- Dreyfus/Laruel Institutional Prime Money Market Fund
- Dreyfus/Laurel Institutional U.S. Treasury Money Market
Fund
- Dreyfus/Laurel Institutional Government Money Market
Fund
- Dreyfus/Laurel Institutional U.S. Treasury Only Money
Market Fund
- Dreyfus/Laurel Institutional Short-Term Bond Fund
- Premier Balanced Fund
- Premier Small Company Stock Fund
- Premier Limited Term Income Fund
Part C - Other Information
Signature Page - The Dreyfus/Laurel Funds, Inc.
Exhibits
____________
*The currently effective prospectuses and statements of additional
information for each of the following series of the Registrant are not
affected by this Amendment: Dreyfus/Laurel Short Term Government Securities
Fund and Dreyfus International Equity Allocation Fund.
THE DREYFUS/LAUREL FUNDS, INC.
(formerly The Laurel Funds, Inc.)
- - - -----------------------------------------------------------------------------
PROSPECTUS MARCH 1, 1995
DREYFUS DISCIPLINED STOCK FUND
- - - -----------------------------------------------------------------------------
DREYFUS DISCIPLINED STOCK FUND (THE "FUND"), FORMERLY CALLED THE
"LAUREL STOCK FUND," IS A SEPARATE PORTFOLIO OF THE DREYFUS/LAUREL FUNDS,
INC., AN OPEN-END, DIVERSIFIED MANAGEMENT INVESTMENT COMPANY (THE "COMPANY"),
KNOWN AS A MUTUAL FUND. THE FUND SEEKS INVESTMENT RETURNS (INCLUDING CAPITAL
APPRECIATION AND INCOME) CONSISTENTLY SUPERIOR TO THE STANDARD & POOR'S 500
COMPOSITE STOCK PRICE INDEX BY INVESTING IN A BROADLY DIVERSIFIED LIST OF
EQUITY SECURITIES GENERATED BY THE APPLICATION OF QUANTITATIVE SECURITY
SELECTION AND RISK CONTROL TECHNIQUES.
BY THIS PROSPECTUS, THE FUND IS OFFERING INVESTOR SHARES AND CLASS R
SHARES. (CLASS R SHARES OF THE FUND WERE FORMERLY CALLED TRUST SHARES.)
INVESTOR SHARES AND CLASS R SHARES ARE IDENTICAL, EXCEPT AS TO THE SERVICES
OFFERED TO AND THE EXPENSES BORNE BY EACH CLASS. CLASS R SHARES ARE SOLD
PRIMARILY TO BANK TRUST DEPARTMENTS AND OTHER FINANCIAL SERVICE PROVIDERS
(INCLUDING MELLONBANK, N.A. AND ITS AFFILIATES) ("BANKS") ACTING ON BEHALF OF
CUSTOMERS HAVING A QUALIFIED TRUST OR INVESTMENT ACCOUNT OR RELATIONSHIP AT
SUCH INSTITUTION. INVESTOR SHARES ARE PRIMARILY SOLD TO RETAIL INVESTORS BY
THE FUND'S DISTRIBUTOR AND BY BANKS, SECURITIES BROKERS OR DEALERS AND OTHER
FINANCIAL INSTITUTIONS ("AGENTS") THAT HAVE ENTERED INTO A SELLING AGREEMENT
WITH THE FUND'S DISTRIBUTOR.
SHARES OF THE FUND ARE SOLD WITHOUT A SALES LOAD. INVESTOR SHARES OF
THE FUND ARE SUBJECT TO DISTRIBUTION AND SHAREHOLDER SERVICING FEES.
YOU CAN PURCHASE OR REDEEM INVESTOR SHARES BY TELEPHONE USING THE
DREYFUS TELETRANSFER PRIVILEGE.
THE DREYFUS CORPORATION SERVES AS THE FUND'S INVESTMENT MANAGER. THE
DREYFUS CORPORATION IS REFERRED TO AS "DREYFUS."
SHARES OF THE FUND ARE ALSO AVAILABLE THROUGH A SERVICING NETWORK
ASSOCIATED WITH MELLON BANK, N.A. ("MELLON BANK"), AN AFFILIATE OF DREYFUS.
EXCHANGE AND SHAREHOLDER SERVICES VARY DEPENDING UPON THE NETWORK THROUGH
WHICH YOU PURCHASE FUND SHARES. SEE "HOW TO BUY FUND SHARES."
THIS PROSPECTUS SETS FORTH CONCISELY INFORMATION ABOUT THE FUND THAT
YOU SHOULD KNOW BEFORE INVESTING. IT SHOULD BE READ CAREFULLY BEFORE YOU
INVEST AND RETAINED FOR FUTURE REFERENCE.
A STATEMENT OF ADDITIONAL INFORMATION ("SAI") DATED MARCH 1, 1995,
WHICH MAY BE REVISED FROM TIME TO TIME, PROVIDES A FURTHER DISCUSSION OF
CERTAIN AREAS IN THIS PROSPECTUS AND OTHER MATTERS WHICH MAY BE OF INTEREST
TO SOME INVESTORS. IT HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION ("SEC") AND IS INCORPORATED HEREIN BY REFERENCE. FOR A FREE COPY,
WRITE TO THE FUND AT 144 GLENNCURTISS BOULEVARD, UNIONDALE, NEW YORK
11556-0144, OR CALL 1-800-645-6561. WHEN TELEPHONING, ASK FOR OPERATOR 666.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
THE NET ASSET VALUE OF FUNDS OF THIS TYPE WILL FLUCTUATE FROM TIME TO TIME.
THE FEES TO WHICH THE FUND IS SUBJECT ARE SUMMARIZED IN THE "EXPENSE
SUMMARY" SECTION OF THE FUND'S PROSPECTUS. THE FUND PAYS MELLON BANK OR ITS
AFFILIATES TO BE ITS INVESTMENT MANAGER. MELLON BANK OR AN AFFILIATE MAY BE
PAID FOR PERFORMING OTHER SERVICES FOR THE FUND, SUCH AS CUSTODIAN, TRANSFER
AGENT OR FUND ACCOUNTANT SERVICES. THE FUND IS DISTRIBUTED BY PREMIER MUTUAL
FUND SERVICES, INC.
- - - --------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
- - - ---------------------------------------------------------------------------
TABLE OF CONTENTS
EXPENSE SUMMARY................................. 4
FINANCIAL HIGHLIGHTS............................ 5
DESCRIPTION OF THE FUND......................... 7
MANAGEMENT OF THE FUND.......................... 11
HOW TO BUY FUND SHARES.......................... 13
SHAREHOLDER SERVICES............................ 16
HOW TO REDEEM FUND SHARES....................... 19
DISTRIBUTION PLAN (INVESTOR SHARES ONLY)........ 21
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES........ 22
PERFORMANCE INFORMATION......................... 23
GENERAL INFORMATION............................. 24
Page 2
[This Page Intentionally Left Blank]
Page 3
<TABLE>
<CAPTION>
EXPENSE SUMMARY
INVESTOR SHARES CLASS R SHARES
------------------ ----------------
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on Purchases . . . . . . . . . . . . . none none
Maximum Sales Load Imposed on Reinvestments . . . . . . . . . . . none none
Deferred Sales Load . . . . . . . . . . . . . . . . . . . . . . . none none
Redemption Fee . . . . . . . . . . . . . . . . . . . . . . . . .. none none
Exchange Fee . . . . . . . . . . . . . . . . . . . . . . . . . . none none
ESTIMATED ANNUAL FUND OPERATING EXPENSES:
(as a percentage of net assets)
Management Fee . . . . . . . . . . . . . . . . . . . . . . . . . .90% .90%
12b-1 Fee1 . . . . . . . . . . . . . . . . . . . . . . . . . . . .25% none
Other Expenses2 . . . . . . . . . . . . . . . . . . . . . . . . .00% .00%
______ _____
Total Fund Operating Expenses . . . . . . . . . . . . . . . . . 1.15% .90%
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE:
You would pay the following expenses
on a $1,000 investment, assuming (1) a 5% annual
return and (2) redemption at the end of each
Time Period: INVESTOR SHARES CLASS R SHARES
------------------ ----------------
<S> <C> <C>
1 Year $12 $ 9
3 Years $37 $ 29
5 Years N/A $ 50
10 Years N/A $111
</TABLE>
- - - --------------------
(1) See "Distribution Plan (Investor Shares Only)" for a description of the
Fund's Distribution Plan for the Investor Class.
(2) Does not include fees and expenses of the non-interested directors
(including counsel). The investment manager is contractually required to
reduce its Management Fee in an amount equal to the Fund's allocable portion
of such fees and expenses, which are estimated to be .02% of the Fund's net
assets. (See "Management of the Fund.")
- - - --------------------------------------------------------------------------
THE AMOUNTS LISTED IN THE EXAMPLE SHOULD NOT BE CONSIDERED AS
REPRESENTATIVE OF FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS
THAN THOSE INDICATED. MOREOVER, WHILE THE EXAMPLE ASSUMES A 5% ANNUAL RETURN,
THE FUND'S ACTUAL PERFORMANCE WILL VARY AND MAY RESULT IN AN ACTUAL RETURN
GREATER OR LESS THAN 5%.
- - - ----------------------------------------------------------------------------
The purpose of the foregoing table is to assist you in understanding
the various costs and expenses that investors will bear, directly or
indirectly, the payment of which will reduce investors' return on an annual
basis. Long-term investors in Investor shares could pay more in 12b-1 fees
than the economic equivalent of paying the maximum front-end sales charges
applicable to mutual funds sold by members of the National Association of
Securities Dealers, Inc. The information in the foregoing table does not
reflect any fee waivers or expense reimbursement arrangements that may be in
effect. Certain Agents may charge their clients direct fees for effecting
transactions in Fund shares; such fees are not reflected in the foregoing
table. See "Management of the Fund," "How to Buy Fund Shares" and
"Distribution Plan (Investor Shares Only)."
The Fund understands that banks, brokers, dealers or other financial
institutions (including Mellon Bank and its affiliates) (collectively
"Agents") may charge fees to their clients who are owners of the Fund's
Investor shares for various services provided in connection with a client's
account. These fees would be in addition to any amounts received by an Agent
under its Selling Agreement ("Agreement") with Premier Mutual Fund Services,
Inc. (the "Distributor"). The Agreement requires each Agent to disclose to
its clients any compensation payable to such Agent by the Distributor and any
other compensation payable by the client for various services provided in
connection with their accounts.
Page 4
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
The tables below are based upon a single Investor Share or Class R Share
outstanding through each period and should be read in conjunction with the
financial statements and related notes that appear in the Fund's Annual
Report dated October 31, 1994 which is incorporated by reference in the SAI.
The financial statements included in the Fund's Annual Report for the year
ended October 31, 1994 have been audited by KPMG Peat Marwick LLP,
independent accountants, whose report appears in the Fund's Annual Report.
Further information about the Fund's performance is contained in the Fund's
Annual Report which may be obtained without charge.
DREYFUS DISCIPLINED STOCK FUND
FOR AN INVESTOR SHARE OUTSTANDING THROUGHOUT THE PERIOD.
PERIOD
ENDED
10/31/94*#
- - - --------------------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period $17.86
--------
Income from investment operations:
Net investment income 0.16
Net realized and unrealized gain on investments 0.66
--------
Total from investment operations 0.82
--------
Less distributions:
Distributions from net investment income (0.14)
Net asset value, end of period $18.54
=======
Total return 4.62%
=======
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $19,580
Ratio of operating expenses to average net assets 1.15%**
Ratio of net investment income to average net assets 1.29%**
Portfolio turnover rate 106%
- - - ----------------------------------------------------------------------------------------
* The Fund commenced selling Investor shares on April 6, 1994.
** Annualized.
+ Total return represents aggregate total return for the period indicated.
# Prior to October 17, 1994, Mellon Bank, N.A. served as the Fund's investment manager.
Effective October 17, 1994, The Dreyfus Corporation serves as the Fund's investment manager.
</TABLE>
Page 5
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS (CONTINUED)
DREYFUS DISCIPLINED STOCK FUND
FOR A CLASS R SHARE OUTSTANDING THROUGHOUT EACH YEAR.
YEAR YEAR YEAR YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED ENDED
10/31/94*## 10/31/93 10/31/92 10/31/91 10/31/90 10/31/89 10/31/88*
__________ ________ ________ ________ ________ ________ ________
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning
of year. . . . . . . . . . . $18.69 $17.21 $16.40 $12.41 $13.73 $11.08 $10.00
------ ------- ------ ------ ------ ------ ------
Income from investment operations:
Net investment income. . 0.26# 0.30 0.27 0.27 0.23 0.33 0.11
Net realized and unrealized gain/
(loss) on investments .25 2.56 1.33 4.04 (0.60) 2.62 0.97
------ ------- ------ ------ ------ ------ ------
Total from investment operations... .51 2.86 1.60 4.31 (0.37) 2.95 1.08
------ ------- ------ ------ ------ ------ ------
Less distributions:
Dividends from net
investment income. . . . (0.26) (0.31) (0.27) (0.27) (0.28) (0.30) --
Distributions from net
realized gains. . . . . . . (0.40) (1.07) (0.52) (0.05) (0.67) -- --
------ ------- ------ ------ ------ ------ ------
Total distributions. . . . (0.66) (1.38) (0.79) (0.32) (0.95) (0.30) --
------ ------- ------ ------ ------ ------ ------
Net asset value, end of year $18.54 $18.69 $17.21 $16.40 $12.41 $13.73 $11.08
====== ======= ====== ====== ======= ======= ======
Total return. . . . . . . . . . 2.82% 17.46% 10.06% 35.27% (3.09)% 27.12% 10.80%
====== ======= ====== ====== ======= ======= ======
Ratios to average net assets/
supplemental data:
Net assets,
end of year (in 000's)......... $239,069 $92,955 $43,742 $25,931 $9,517 $2,614 $1,619
Ratio of operating expenses to
average net assets. . . 0.90% 0.90% 0.90% 0.90% 0.82% 0.35% 0.35%**
Ratio of net investment income
to average net assets..... 1.54% 1.82% 1.73% 1.92% 2.22% 2.85% 2.58%
Portfolio turnover rate. . 106% 64% 84% 69% 76% 93% 42%
- - - -----------------------
* The Fund commenced operations on December 31, 1987.
The Fund commenced selling Investor Shares on April 6, 1994. Those
shares outstanding prior to April 4, 1994 were designated Trust Shares.
Effective as of October 17, 1994, Trust Shares were redesignated as
Class R shares.
** Annualized.
+ Annualized expense ratio before reimbursement of expenses by the
investment manager was .96% for the year ended October 31, 1994.
++ Total return represents aggregate total return for the period
indicated. For the years or period ended October 31, 1990, 1989, and
1988, the Manager waived a portion of its advisory fee amounting to
$.0322, $.1032, and $.0392 per share, respectively. For the years or
period ended October 31, 1993, 1992, 1991, 1990, 1989, and 1988, the
Manager reimbursed expenses of the Fund amounting to $.0627, $.0981,
$.1721, $.3329, $.7153 and $.6040 per share, respectively.
# Net investment income per share before reimbursement of expenses by
the investment manager was $0.25 for the year ended October 31, 1994.
## Prior to October 17, 1994, Mellon Bank, N.A. served as
the Fund's investment manager. Effective October 17, 1994, The Dreyfus
Corporation serves as the Fund's investment manager.
</TABLE>
Page 6
DESCRIPTION OF THE FUND
GENERAL
By this Prospectus, the Fund is offering Investor shares and Class R
shares. (Class R shares of the Fund were formerly called Trust Shares.)
Investor shares and Class R shares are identical, except as to the services
offered to and the expenses borne by each Class. Class R shares are sold
primarily to Banks acting on behalf of customers having a qualified trust or
investment account or relationship at such institution. Investor shares are
primarily sold to retail investors by the Distributor and by Agents that have
entered into a Selling Agreement with the Distributor. If shares of the Fund
are held in an account at a Bank or with an Agent, such Bank or Agent may
require you to place all Fund purchase, exchange and redemption orders
through them. All Banks and Agents have agreed to transmit transaction
requests to the Fund's transfer agent or to the Distributor. Distributor and
shareholder servicing paid by Investor shares will cause Investor shares to
have a higher expense ratio and pay lower dividends than Class R.
INVESTMENT OBJECTIVE
The Fund seeks investment returns (including capital appreciation and
income) consistently superior to the Standard and Poor's 500 Composite Stock
Price Index ("S&P 500") by investing in a broadly diversified list of equity
securities generated by the application of quantitative security selection
and risk control techniques. There can be no assurance that the Fund will
meet its stated investment objective.
MANAGEMENT POLICIES
Individual security selection is the foundation of the Fund's
investment approach. Consistency of returns which exceed the S&P 500 and
stability of the Fund's asset value relative to the S&P 500 are primary goals
of the investment process. Information from diverse sources is collected and
used to construct valuation models which are combined to form a comprehensive
computerized valuation ranking system identifying common stocks which appear
to be over or under valued. These models include measures of actual and
estimated earnings changes and relative value based on dividend discount
calculations, price to book, price to earnings and return on equity ratios.
The computerized ranking system incorporates information from the most recent
time period available to the system and categorizes individual securities
within each industry according to relative attractiveness. Dreyfus then
applies fundamental analysis to select the most attractive of the top-rated
securities and those issues that should be sold.
This investment process utilizes disciplined control of fund risk and
a process of rigorous security selection. Risk is managed by controlling
potential size, growth rate, financial condition and earnings variability.
The structure of the Fund is controlled so that characteristics such as
economic sector, industry exposure, growth, size, volatility and quality are
maintained similar to those of the S&P 500 at all times. Common stocks held
in the Fund, most but not all of which pay dividends, typically include a
broad range of investment characteristics. The Fund is not an index fund and
its investments are not limited to securities of issuers in the S&P 500.
Under normal circumstances, at least 65% of the Fund's total assets
will be invested in equity securities. The Fund also invests in high quality
money market instruments to meet liquidity needs in amounts not generally
expected to exceed 20%. Beyond that, Dreyfus will not attempt to time
movements in the market by raising substantial amounts of short-term reserves
for subsequent reinvestment.
The S&P 500 is composed of 500 common stocks, most of which are
traded on the New York Stock Exchange, chosen to reflect the industries of
the U.S. economy. The inclusion of a stock in the S&P 500 does not imply that
Standard and Poor's Ratings Group ("Standard & Poor's") believes the stock to
be an attractive or appropriate investment, nor is Standard & Poor's
affiliated with the Company or the Fund. "S&P 500" is a trademark of Standard
& Poor's.
Page 7
INVESTMENT TECHNIQUES
In connection with its investment objective and policies, the Fund
may employ, among others, the following investment techniques:
BORROWING. The Fund is authorized, within specified limits, to borrow
money for temporary administrative purposes and to pledge its assets in
connection with such borrowings.
SECURITIES LENDING. To increase return on Fund securities, the Fund
may lend its portfolio securities to broker-dealers and other institutional
investors pursuant to agreements requiring that the loans be continuously
secured by collateral equal at all times in value to at least the market
value of the securities loaned. There may be risks of delay in receiving
additional collateral or in recovering the securities loaned or even a loss
of rights to the collateral should the borrower of the securities fail
financially. However, loans are made only to borrowers deemed by Dreyfus to
be of good standing and when, in its judgment, the income to be earned from
the loan justifies the attendant risks.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements.
A repurchase agreement involves the purchase of a security by the Fund and a
simultaneous agreement (generally with a bank or broker-dealer) to repurchase
that security from the Fund at a specified price and date or upon demand.
This technique offers a method of earning income on idle cash. A risk
associated with repurchase agreements is the failure of the seller to
repurchase the securities as agreed, which may cause the Fund to suffer a
loss if the market value of such securities declines before they can be
liquidated on the open market. Repurchase agreements with a duration of more
than seven days are considered illiquid securities and are subject to the
associated limits discussed under "Certain Portfolio Securities _ Illiquid
Securities."
REVERSE REPURCHASE AGREEMENTS. The Fund may enter into reverse
repurchase agreements to meet redemption requests where the liquidation of
Fund securities is deemed by Dreyfus to be disadvantageous. Under a reverse
repurchase agreement, the Fund: (i) transfers possession of Fund securities
to a bank or broker-dealer in return for cash in an amount equal to a
percentage of the securities' market value; and (ii) agrees to repurchase the
securities at a future date by repaying the cash with interest. Cash or
liquid high-grade debt securities held by the Fund equal in value to the
repurchase price including any accrued interest will be maintained in a
segregated account while a reverse repurchase agreement is in effect.
WHEN-ISSUED SECURITIES AND DELAYED DELIVERY TRANSACTIONS. To secure
advantageous prices or yields, the Fund may purchase U.S. Government
Securities on a when-issued basis or may purchase or sell securities for
delayed delivery. In such transactions, delivery of the securities occurs
beyond the normal settlement periods, but no payment or delivery is made by
the Fund prior to the actual delivery or payment by the other party to the
transaction. The purchase of securities on a when-issued or delayed delivery
basis involves the risk that, as a result of an increase in yields available
in the marketplace, the value of the securities purchased will decline prior
to the settlement date. The sale of securities for delayed delivery involves
the risk that the prices available in the market on the delivery date may be g
reater than those obtained in the sale transaction. The Fund will establish a
segregated account consisting of cash, U.S. Government Securities or other
high-grade debt obligations in an amount equal to the amounts of its
when-issued and delayed delivery commitments.
MASTER/FEEDER OPTION. The Company may in the future seek to achieve
the Fund's investment objective by investing all of the Fund's net assets in
another investment company having the same investment objective and
substantially the same investment policies and restrictions as those
applicable to the Fund. Shareholders of the Fund will be given at least 30
days' prior notice of any such investment. Such investment would be made only
if the Directors determine it to be in the best interest of the Fund and its
shareholders. In making that determination, the Company's Directors will
consider, among other
Page 8
things, the benefits to shareholders and/or the opportunity to reduce costs
and achieve operational efficiencies. Although the Fund believes that the
directors will not approve an arrangement that is likely to result in higher
costs, no assurance is given that costs will be materially reduced if this
option is implemented.
CERTAIN PORTFOLIO SECURITIES
COMMERCIAL PAPER. The Fund may invest in commercial paper. These
instruments are short-term obligations issued by banks and corporations that
have maturities ranging from 2 to 270 days. Each instrument may be backed
only by the credit of the issuer or may be backed by some form of credit
enhancement, typically in the form of a guarantee by a commercial bank.
Commercial paper backed by guarantees of foreign banks may involve additional
risk due to the difficulty of obtaining and enforcing judgments against such
banks and the generally less restrictive regulations to which such banks are
subject. The Fund will only invest in commercial paper of U.S. and foreign
companies rated A-1 at the time of purchase by Standard & Poor's, Prime-1 by
Moody's Investors Service, Inc., F-1 by Fitch Investors Service, Inc., Duff 1
by Duff & Phelps, Inc., or A1 by IBCA, Inc.
GNMA CERTIFICATES. The Fund may invest in Government National
Mortgage Association ("GNMA") Certificates ("GNMA Certificates"). GNMA
Certificates are mortgage-backed securities representing part ownership of a
pool of mortgage loans. These loans are made by mortgage bankers, commercial
banks, savings and loan associations, and other lenders and are either
insured by the Federal Housing Administration or guaranteed by the Veterans
Administration. A "pool" or group of such mortgages is assembled and, after
being approved by GNMA, is offered to investors through securities dealers.
Once approved by GNMA, the timely payment of interest and principal on each
mortgage is guaranteed by the full faith and credit of the U.S. Government.
Although the mortgage loans in a pool underlying a GNMA Certificate will have
maturities of up to 30 years, the average life of a GNMA Certificate will be
substantially less because the mortgages will be subject to normal principal
amortization and also may be prepaid prior to maturity. Prepayment rates vary
widely and may be affected by changes in mortgage interest rates. In periods
of falling interest rates, the rate of prepayment on higher interest mortgage
rates tends to increase, thereby shortening the actual average life of the
GNMA Certificate. Conversely, when interest rates are rising, the rate of
prepayment tends to decrease, thereby lengthening the average life of the
GNMA Certificate. Reinvestment of prepayments may occur at higher or lower
rates than the original yield on the Certificates. Due to the prepayment
feature and the need to reinvest prepayments of principal at current rates,
GNMA Certificates with underlying mortgages bearing higher interest rates can
be less effective than typical non-callable bonds of similar maturities at
locking in yields during periods of declining interest rates, although they
may have comparable risks of decline in value during the periods of rising
interest rates.
ILLIQUID SECURITIES. The Fund will not knowingly invest more than 15%
of the value of its net assets in illiquid securities, including time
deposits and repurchase agreements having maturities longer than seven days.
Securities that have readily available market quotations are not deemed
illiquid for purposes of this limitation (irrespective of any legal or
contractual restrictions on resale.) The Fund may invest in commercial
obligations issued in reliance on the so-called "private placement" exemption
from registration afforded by Section 4(2) of the Securities Act of 1933, as
amended ("Section 4(2) paper"). The Fund may also purchase securities that
are not registered under the Securities Act of 1933, as amended, but that can
be sold to qualified institutional buyers in accordance with Rule 144A under
that Act ("Rule 144A securities"). Liquidity determinations with respect to
Section 4(2) paper and Rule 144A securities will be made by the Board of
Directors or by Dreyfus pursuant to guidelines established by the Board of
Directors. The Board or Dreyfus will consider availability of reliable price
information and other relevant information in making such determinations.
Section 4(2) paper is restricted as to disposition under the
Page 9
federal securities laws, and generally is sold to institutional investors,
such as the Fund, that agree that they are purchasing the paper for investment
and not with a view to public distribution. Any resale by the purchaser must
be pursuant to registration or an exemption therefrom. Section 4(2) paper
normally is resold to other institutional investors like the Fund through or
with the assistance of the issuer or investment dealers who make a market in
the Section 4(2) paper, thus providing liquidity. Rule 144A securities
generally must be sold to other qualified institutional buyers. If a
particular investment in Section 4(2) paper or Rule 144A securities is not
determined to be liquid, that investment will be included within the
percentage limitation on investment in illiquid securities. The ability to
sell Rule 144A securities to qualified institutional buyers is a recent
development and it is not possible to predict how this market will mature.
Investing in Rule 144A securities could have the effect of increasing the
level of Fund illiquidity to the extent that qualified institutional buyers
become, for a time, uninterested in purchasing these securities from the Fund
or other holder.
MORTGAGE PASS-THROUGH CERTIFICATES. The Fund may invest in mortgage
pass-through certificates. Mortgage pass-through certificates are issued by
governmental, government-related and private organizations and are backed by
pools of mortgage loans. These mortgage loans are made by lenders such as
savings and loan associations, mortgage bankers, commercial banks and others
to residential home buyers throughout the United States. The securities are
"pass-through" securities because they provide investors with monthly
payments of principal and interest which in effect are a "pass-through" of
the monthly payments made by the individual borrowers on the underlying
mortgage loans. The principal governmental issuer of such securities is the
GNMA which is a wholly-owned U.S. government corporation within the
Department of Housing and Urban Development. Government related issuers
include the Federal Home Loan Mortgage Corporation ("FHLMC"), and the Federal
National Mortgage Association ("FNMA"), both government-sponsored
corporations owned entirely by private stockholders. Commercial banks,
savings and loan institutions, private mortgage insurance companies, mortgage
bankers and other secondary market issuers also create pass-through pools of
conventional residential mortgage loans. Such issuers may be the originators
of the underlying mortgage loans as well as the guarantors of the
mortgage-related securities. The market value of mortgage-related securities
depends on, among other things, the level of interest rates, the
certificates' coupon rates and the payment history of underlying mortgage
loans.
OTHER INVESTMENT COMPANIES. The Fund may invest in securities issued
by other investment companies to the extent that such investments are
consistent with the Fund's investment objective and policies and permissible
under the Investment Company Act of 1940, as amended ("1940 Act"). As a
shareholder of another investment company, the Fund would bear, along with
other shareholders, its pro rata portion of the other investment company's
expenses, including advisory fees. These expenses would be in addition to the
advisory and other expenses that the Fund bears directly in connection with
its own operations.
U.S. GOVERNMENT SECURITIES. The Fund may invest in obligations issued
or guaranteed as to both principal and interest by the U.S. Government or
backed by the full faith and credit of the United States. In addition to
direct obligations of the U.S. Treasury, these include securities issued or
guaranteed by the Federal Housing Administration, Farmers Home
Administration, Export-Import Bank of the United States, Small Business
Administration, GNMA, General Services Administration and Maritime
Administration. Investments may also be made in U.S. Government obligations
that do not carry the full faith and credit guarantee, such as those issued
by the FNMA, FHLMC, or other instrumentalities.
VARIABLE AMOUNT MASTER DEMAND NOTES. The Fund may invest in variable
amount master demand notes. Variable amount master demand notes are unsecured
obligations that are redeemable upon demand and are typically unrated. These
instruments are issued pursuant to written agreements
Page 10
between their issuers and holders. The agreements permit the holders to
increase (subject to an agreed maximum) and the holders and issuers to
decrease the principal amount of the notes, and specify that the rate of
interest payable on the principal fluctuates according to an agreed-upon
formula. If an issuer of a variable amount master demand note were to default
on its payment obligation, the Fund might be unable to dispose of the note
because of the absence of a secondary market and might, for this or other
reasons, suffer a loss to the extent of the default. The Fund will only
invest in variable amount master demand notes issued by entities that
Dreyfus considers creditworthy.
PORTFOLIO TURNOVER. While securities are purchased for the Fund on
the basis of potential for capital appreciation and income and not for
short-term trading profits, the Fund's turnover rate may exceed 100%. A
portfolio turnover rate of 100% would occur, for example, if all the
securities held by the Fund were replaced once in a period of one year. A
higher rate of portfolio turnover involves correspondingly greater brokerage
commissions and other expenses that must be borne directly by the Fund and,
thus, indirectly by its shareholders. In addition, a high rate of portfolio
turnover may result in the realization of larger amounts of short-term
capital gains that, when distributed to the Fund's shareholders, are taxable
to them as ordinary income. Nevertheless, securities transactions for the
Fund will be based only upon investment considerations and will not be
limited by any other considerations when Dreyfus deems it appropriate to make
changes in the Fund's assets.
RISK FACTORS
LIMITING INVESTMENT RISKS. The Fund is subject to a number of
investment limitations. Certain limitations are matters of fundamental policy
and may not be changed without the affirmative vote of the holders of a
majority of the Fund's outstanding shares. The SAI describes all of the
Fund's fundamental and non-fundamental restrictions.
The investment objective, policies, restrictions, practices and
procedures of the Fund, unless otherwise specified, may be changed without
shareholder approval. If the Fund's investment objective, policies,
restrictions, practices or procedures change, shareholders should consider
whether the Fund remains an appropriate investment in light of the
shareholder's then-current position and needs.
In order to permit the sale of the Fund's shares in certain states,
the Fund may make commitments more restrictive than the investment policies
and restrictions described in this Prospectus and the SAI. Should the Fund
determine that any such commitment is no longer in the best interest of the
Fund, it may consider terminating sales of its shares in the states involved.
MANAGEMENT OF THE FUND
INVESTMENT MANAGER. Dreyfus, located at 200 Park Avenue, New York,
New York 10166, was formed in 1947. Dreyfus is a wholly-owned subsidiary of
Mellon Bank, which is a wholly-owned subsidiary of Mellon Bank Corporation
("Mellon"). As of January 31, 1995, Dreyfus managed or administered
approximately $70 billion in assets for more than 1.9 million investor
accounts nationwide.
Dreyfus serves as the Fund's investment manager. Dreyfus
supervises and assists in the overall management of the Fund's affairs under
an Investment Management Agreement with the Fund, subject to the overall
authority of the Company's Board of Directors in accordance with Maryland
law. Pursuant to the Investment Management Agreement, Dreyfus provides, or
arranges for the provision by one or more third parties of, investment
advisory, administrative, custody, fund accounting and transfer agency
services to the Fund. As the Fund's investment manager, Dreyfus manages the
Fund by making investment decisions based on the Fund's investment objective,
policies and restrictions.
The Fund is managed by Bert Mullins. Mr. Mullins has been employed by
Dreyfus as a portfolio manager since October 17, 1994. Mr. Mullins is a Vice
President and Senior Security Analyst for Mellon Bank. He has been with
Mellon Bank since 1966.
Page 11
Mellon is a publicly owned multibank holding company incorporated
under Pennsylvania law in 1971 and registered under the Bank Holding Company
Act of 1956, as amended. Mellon provides a comprehensive range of financial
products and services in domestic and selected international markets. Mellon
is among the twenty-five largest bank holding companies in the United States
based on total assets. Mellon's principal wholly-owned subsidiaries are
Mellon Bank, Mellon Bank (DE) National Association, Mellon Bank (MD), The
Boston Company, Inc., AFCO Credit Corporation and a number of companies known
as Mellon Financial Services Corporations. Through its subsidiaries,
including Dreyfus, Mellon managed approximately $201 billion in assets as of
September 30, 1994, including $76 billion in mutual fund assets. As of
September 30, 1994, Mellon, through various subsidiaries, provided
non-investment services, such as custodial or administration services, for
approximately $659 billion in assets, including approximately $108 billion in
mutual fund assets.
Under the Investment Management Agreement, the Fund has agreed to pay
Dreyfus a monthly fee at the annual rate of 0.90 of 1% of the value of the
Fund's average daily net assets. Dreyfus pays all of the Fund's expenses,
except brokerage fees, taxes, interest, fees and expenses of the
non-interested Directors (including counsel fees), Rule 12b-1 fees (if
applicable) and extraordinary expenses. Although Dreyfus does not pay for the
fees and expenses of the non-interested Directors (including counsel fees),
Dreyfus is contractually required to reduce its investment management fee in
an amount equal to the Fund's allocable share of such fees and expenses. In
order to compensate Dreyfus for paying virtually all of the Fund's expenses,
the Fund's investment management fee is higher than the investment advisory
fees paid by most investment companies. Most, if not all, such companies also
pay for additional non-investment advisory expenses that are not paid by such
companies' investment advisers. From time to time, Dreyfus may waive (either
voluntarily or pursuant to applicable state limitations) a portion of the
investment management fees payable by the Fund. From April 4, 1994, to
October 16, 1994, the Fund was advised by Mellon Bank under the Investment Man
agement Agreement. For the period from November 1, 1993 to April 3, 1994, the
Fund paid its investment adviser, Mellon Bank, 0.74% (annualized) of its
average daily net assets in investment advisory fees (net expenses
reimbursed), under the Fund's previous investment advisory contract (such
contract covered only the provision of investment advisory and certain
specified administrative services). For the period from April 4, 1994 through
the fiscal year ended October 31, 1994, the Fund paid Mellon Bank or Dreyfus
0.90% (annualized) of its average daily net assets in investment management
fees, less fees and expenses of the non-interested Directors (including
counsel fees).
For the fiscal year ended October 31, 1994, total operating expenses
(excluding Rule 12b-1 fees) (net of expenses reimbursed) of the Fund were
0.90% (annualized) of the average daily net assets of each class for both the
Investor Class and Class R. Without the reimbursements, operating expenses
would have been higher.
In addition, Investor shares may be subject to certain distribution
and service fees. See "Distribution Plan (Investor Shares only)."
Dreyfus may pay the Distributor for shareholder services from
Dreyfus' own assets, including past profits but not including the management
fee paid by the Fund. The Distributor may use part or all of such payments to
pay Agents in respect of these services.
Dreyfus is authorized to allocate purchase and sale orders for
portfolio securities to certain financial institutions, including, in the
case of agency transactions, financial institutions that are affiliated with
Dreyfus or Mellon Bank or that have sold shares of the Fund, if Dreyfus
believes that the quality of the transaction and the commission are
comparable to what they would be with other qualified brokerage firms. From
time to time, to the extent consistent with its investment objective, policies
and restrictions, the Fund may invest in securities of companies with which
Mellon Bank has a lending relationship.
Page 12
The Fund's distributor is Premier Mutual Fund Services, Inc. (the
"Distributor"). The Distributor is located at One Exchange Place, Boston,
Massachusetts 02109. The Distributor is a wholly-owned subsidiary of
Institutional Administration Services, Inc., a provider of mutual fund
administration services, the parent company of which is Boston Institutional
Group, Inc.
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT, AND
SUB-ADMINISTRATOR_Mellon Bank (One Mellon Bank Center, Pittsburgh,
Pennsylvania 15258) is the Fund's custodian and fund accountant. The Fund's
Transfer and Dividend Disbursing Agent is The Shareholder Services Group,
Inc. (the "Transfer Agent"), a subsidiary of First Data Corporation, One
American Express Plaza, Providence, Rhode Island 02903. Premier Mutual Fund
Services, Inc. is the Fund's sub-administrator and, pursuant to a
Sub-Administration Agreement with Dreyfus, provides various administrative
and corporate secretarial services to the Fund.
HOW TO BUY FUND SHARES
GENERAL_ Investor shares are offered to any investor and may be
purchased through the Distributor or Agents that have entered into Selling
Agreements with the Distributor.
Class R shares are sold primarily to Banks acting on behalf of
customers having a qualified trust or investment account or relationship at
such institution, or to customers who have received and hold shares of the
Fund distributed to them by virtue of such an account or relationship. In
addition, holders of Class R shares of the Fund who have held their shares
since April 4, 1994 may continue to purchase Class R shares of the Fund
whether or not they otherwise would be eligible to do so. A Retirement Plan
is a certain qualified or non-qualified employee benefit plan or other
program, including pension, profit-sharing and other deferred compensation
plans, whether established by corporations, partnerships, non-profit entities
or state and local governments ("Retirement Plan"). Class R shares may be
purchased for a Retirement Plan only by a custodian, trustee, investment
manager or other entity authorized to act on behalf of such Plan.
Institutions effecting transactions in Class R shares for the accounts of
their clients may charge their clients direct fees in connection with such
transactions.
Shares of the Fund are also available through a servicing network
associated with Mellon Bank, an affiliate of Dreyfus. For more information
about purchasing Fund shares through that network and a Prospectus, call
1-800-548-2868. Please read that Prospectus carefully. Exchange and
shareholder services, including the telephone purchase option and minimum and
maximum dollar amounts associated with such services, may vary depending upon
the network through which you purchase Fund shares.
Stock certificates are issued only upon your written request. No
certificates are issued for fractional shares. The Fund reserves the right to
reject any purchase order.
The minimum initial investment is $2,500, or $1,000 if you are a
client of an Agent which has made an aggregate minimum initial purchase for
its customers of $2,500. Subsequent investments must be at least $100.
However, the minimum initial investment for Dreyfus-sponsored Keogh Plans,
IRAs, SEP-IRAs and 403(b)(7) Plans with only one participant is $750, with no
minimum on subsequent purchases. Individuals who open an IRA also may open a
non-working spousal IRA with a minimum initial investment of $250. The
initial investment must be accompanied by the Fund's Account Application. For
full-time or part-time employees of Dreyfus or any of its affiliates or
subsidiaries, directors of Dreyfus, board members of a fund advised by
Dreyfus including members of the Company's board, or the spouse or minor
child of any of the foregoing, the minimum initial investment in $1,000. For
full-time or part-time employees of Dreyfus or any of its affiliates or
subsidiaries who elect to have a portion of their pay directly deposited into
their Fund account, the minimum initial investment is $50. The Fund reserves
the right to offer Fund shares without regard to minimum purchase
requirements to employees participating in certain qualified or non-qualified
employee benefit plans or other programs where contributions or
Page 13
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.
The Internal Revenue Code of 1986, as amended (the "Code"), imposes
various limitations on the amount that may be contributed to Retirement
Plans. These limitations apply with respect to participants at the plan level
and, therefore, do not directly affect the amount that may be invested in the
Fund by a Retirement Plan. Participants and plan sponsors should consult
their tax advisers for details.
You may purchase Fund shares by check or wire, or, with respect to
Investor shares only, through the Dreyfus TELETRANSFER Privilege described
below. Checks should be made payable to "The Dreyfus Family of Funds" or, if
for Dreyfus retirement plan accounts, to "The Dreyfus Trust Company,
Custodian." Payments to open new accounts which are mailed should be sent to
The Dreyfus Family of Funds, P.O. Box 9387, Providence, Rhode Island
02940-9387, together with your Account Application indicating which Class of
shares is being purchased. For subsequent investments, your Fund account
number should appear on the check and an investment slip should be enclosed
and sent to The Dreyfus Family of Funds, P.O. Box 105, Newark, New Jersey
07101-0105. For Dreyfus retirement plan accounts, both initial and subsequent
investments should be sent to The Dreyfus Trust Company, Custodian, P.O. Box
6427, Providence, Rhode Island 02940-6427. Neither initial nor subsequent
investments should be made by third party check. PURCHASE ORDERS MAY BE
DELIVERED IN PERSON ONLY TO A DREYFUS FINANCIAL CENTER. THESE ORDERS WILL BE
FORWARDED TO THE FUND AND WILL BE PROCESSED ONLY UPON RECEIPT THEREBY. FOR
THE LOCATION OF THE NEAREST DREYFUS FINANCIAL CENTER, PLEASE CALL ONE OF THE
TELEPHONE NUMBERS LISTED UNDER "GENERAL INFORMATION."
Wire payments may be made if your bank account is in a commercial
bank that is a member of the Federal Reserve System or any other bank having
a correspondent bank in New York City. Immediately available funds may be
transmitted by wire to The Bank of New York, together with the applicable
Class' DDA # as shown below, for purchase of Fund shares in your name:
DDA# 8900104244 Dreyfus Disciplined Stock Fund/Investor shares;
DDA# 8900104171 Dreyfus Disciplined Stock Fund/Class R shares.
The wire must include your Fund account number (for new accounts, your
Taxpayer Identification Number ("TIN") should be included instead), account
registration and dealer number, if applicable. If your initial purchase of
Fund shares is by wire, you should call 1-800-645-6561 after completing your
wire payment in order to obtain your Fund account number. Please include your
Fund account number on the Fund's Account Application and promptly mail the
Account Application to the Fund, as no redemptions will be permitted until
the Account Application is received. You may obtain further information about
remitting funds in this manner from your bank. All payments should be made
in U.S. dollars and, to avoid fees and delays, should be drawn only on U.S.
banks. A charge will be imposed if any check used for investment in your
account does not clear. The Fund makes available to certain large institutions
the ability to issue purchase instructions through compatible computer
facilities.
Subsequent investments also may be made by electronic transfer of
funds from an account maintained in a bank or other domestic financial
institution that is an Automated Clearing House ("ACH") member. You must
direct the institution to transmit immediately available funds through the
ACH System to The Bank of New York with instructions to credit your Fund
account. The instructions must specify your Fund account registration and
Fund account number PRECEDED BY THE DIGITS "1111."
The Distributor may pay dealers a fee of up to .5% of the amount
invested through such dealers in Fund shares by employees participating in
qualified or non-qualified employee benefit plans or other programs where (i)
the employers or affiliated employers maintaining such plans or programs have
a minimum of 250 employees eligible for participation in such plans or
programs or (ii) such plan's or program's aggregate investment in The Dreyfus
Family of Funds or certain other products made available by the
Page 14
Distributor to such plans or programs exceeds one million dollars
("Eligible Benefit Plans"). The determination of the number of employees
eligible for participation in a plan or program shall be made on the date
Fund shares are first purchased by or on behalf of employees participating in
such plan or program and on each subsequent January 1st. All present holdings
of shares of funds in the Dreyfus Family of Funds by Eligible Benefit Plans
will be aggregated to determine the fee payable with respect to each purchase
of Fund shares. The Distributor reserves the right to cease paying these fees
at any time. The Distributor will pay such fees from its own funds, other
than amounts received from the Fund, including past profits or any other
source available to it.
Federal regulations require that you provide a certified TIN upon
opening or reopening an account. See "Dividends, Other Distributions and
Taxes" and the Fund's Account Application for further information concerning
this requirement. Failure to furnish a certified TIN to the Fund could
subject you to a $50 penalty imposed by the Internal Revenue Service (the
"IRS").
NET ASSET VALUE ("NAV") _ An investment portfolio's NAV refers to
the worth of one share. The NAV for Investor shares and Class R shares is
computed by adding, with respect to such Class of shares, the value of the
Fund's investments, cash, and other assets attributable to that Class,
deducting liabilities of the Class and dividing the result by the number of
shares of that Class outstanding. The valuation of assets for determining NAV
for the Fund may be summarized as follows:
The portfolio securities of the Fund listed or traded on a stock
exchange, except as otherwise noted, are valued at the latest sale price. If
no sale is reported, the mean of the latest bid and asked prices is used.
Securities traded over-the-counter are priced at the mean of the latest bid
and asked prices but will be valued at the last sale price if required by
regulations of the SEC. When market quotations are not readily available,
securities and other assets are valued at fair value as determined in good
faith in accordance with procedures established by the Board of Directors.
Bonds are valued through valuations obtained from a commercial
pricing service or at the most recent mean of the bid and asked prices
provided by investment dealers in accordance with procedures established by
the Board of Directors.
Pursuant to a determination by the Board of Directors that such value
represents fair value, debt securities with maturities of 60 days or less
held by the Fund are valued at amortized cost. When a security is valued at
amortized cost, it is valued at its cost when purchased, and thereafter by
assuming a constant amortization to maturity of any discount or premium,
regardless of the impact of fluctuating interest rates on the market value of
the instrument.
NAV is determined on each day that the New York Stock Exchange
("NYSE") is open (a "business day"), as of the close of business of the
regular session of the NYSE (usually 4 p.m., Eastern Time). Investments and
requests to exchange or redeem shares received by the Fund in proper form
before the close of business on the NYSE (usually 4 p.m., Eastern Time) are
effective on, and will receive the share price determined on, that day
(except investments made by electronic funds transfer, which are effective two
business days after your call). Investment, exchange and redemption requests
received after the close of the NYSE are effective on and receive the share
price determined on the next business day.
The NAV of most shares of investment portfolios advised by Dreyfus
(other than money market funds) is published in leading newspapers daily. The
yield of most Dreyfus money market funds is published weekly in leading
financial publications and in many local newspapers. The NAV of any Dreyfus
fund may also be obtained by calling 1-800-645-6561.
The public offering price of Investor shares and Class R shares is
the net asset value per share of that Class.
DREYFUS TELETRANSFER PRIVILEGE (NOT APPLICABLE TO CLASS R SHARES) _
You may purchase Fund shares (minimum $500 and maximum $150,000 per day) by
telephone if you have checked the appro-
Page 15
priate box and supplied the necessary information on the Fund's Account
Application or have filed a Shareholder Services Form with the Transfer Agent.
The proceeds will be transferred between the bank account designated in one of
these documents and your Fund account. Only a bank account maintained in a
domestic financial institution which is an ACH member may be so designated.
The Fund may modify or terminate this Privilege at any time or charge a
service fee upon notice to shareholders. No such fee currently is
contemplated.
If you have selected the Dreyfus TELETRANSFER Privilege, you may
request a Dreyfus TELETRANSFER purchase of Investor shares by telephoning
1-800-221-4060 or, if calling from overseas, 1-401-455-3306.
SHAREHOLDER SERVICES
The services and privileges described under this heading may not be
available to clients of certain Agents and some Agents may impose certain
conditions on their clients which are different from those described in this
Prospectus. You should consult your Agent in this regard.
Fund Exchanges
You may purchase, in exchange for shares of a Class, shares of the
same class of certain other funds managed or administered by Dreyfus, to the
extent such shares are offered for sale in your state of residence. These
funds have different investment objectives which may be of interest to you.
If you desire to use this service, please call 1-800-645-6561 to determine if
it is available and whether any conditions are imposed on its use. WITH
RESPECT TO CLASS R SHARES HELD BY RETIREMENT PLANS, EXCHANGES MAY BE MADE
ONLY BETWEEN A SHAREHOLDER'S RETIREMENT PLAN ACCOUNT IN ONE FUND AND SUCH
SHAREHOLDER'S RETIREMENT PLAN ACCOUNT IN ANOTHER FUND.
To request an exchange, you or your Agent acting on your behalf must
give exchange instructions to the Transfer Agent in writing or by telephone.
Before any exchange, you must obtain and should review a copy of the current
prospectus of the fund into which the exchange is being made. Prospectuses
may be obtained by calling 1-800-645-6561. Except in the case of Personal
Retirement Plans, the shares being exchanged must have a current value of at
least $500; furthermore, when establishing a new account by exchange, the
shares being exchanged must have a value of at least the minimum initial
investment required for the fund into which the exchange is being made. The
ability to issue exchange instructions by telephone is given to all Fund
shareholders automatically, unless you check the relevant "No" box on the
Account Application, indicating that you specifically refuse this Privilege.
The Telephone Exchange Privilege may be established for an existing account
by written request, signed by all shareholders on the account, or by a
separate Shareholder Services Form, also available by calling 1-800-645-6561.
If you previously have established the Telephone Exchange Privilege, you may
telephone exchange instructions by calling 1-800-221-4060 or, if calling from
overseas, 1-401-455-3306. See "How to Redeem Fund Shares_Procedures." Upon
an exchange, the following shareholder services and privileges, as applicable
and where available, will be automatically carried over to the fund into
which the exchange is made: Telephone Exchange Privilege, Wire Redemption
Privilege, Telephone Redemption Privilege, TELETRANSFER Privilege and the
dividends and distributions payment option (except for Dividend Sweep)
selected by the investor.
Shares will be exchanged at the next determined NAV; however, a sales
load may be charged with respect to exchanges of Investor shares into funds
sold with a sales load. If you are exchanging Investor shares into a fund
that charges a sales load, you may qualify for share prices which do not
include the sales load or which reflect a reduced sales load, if the shares
of the fund from which you are exchanging were: (a) purchased with a sales
load, (b) acquired by a previous exchange from shares purchased with a sales
load, or (c) acquired through reinvestment of dividends or other
distributions paid with respect to the foregoing categories of shares. To
qualify, at the time of the exchange you must notify the Transfer
Page 16
Agent or your Agent must notify the Distributor. Any such qualification is
subject to confirmation of your holdings through a check of appropriate
records. See "Shareholder Services" in the SAI. No fees currently are charged
shareholders directly in connection with exchanges, although the Fund
reserves the right, upon not less than 60 days' written notice, to charge
shareholders a nominal fee in accordance with rules promulgated by the SEC.
The Fund reserves the right to reject any exchange request in whole or in
part. The availability of fund exchanges may be modified or terminated at any
time upon notice to shareholders.
The exchange of shares of one fund for shares of another is treated
for Federal income tax purposes as a sale of the shares given in exchange by
the shareholder and, therefore, an exchanging shareholder may realize, or an
exchange on behalf of a Retirement Plan which is not tax exempt may result
in, a taxable gain or loss.
DREYFUS AUTO-EXCHANGE PRIVILEGE
Dreyfus Auto-Exchange Privilege enables you to invest regularly (on a
semi-monthly, monthly, quarterly or annual basis), in exchange for shares of
the Fund, in shares of the same class of certain other funds in the Dreyfus
Family of Funds of which you are currently an investor. WITH RESPECT TO
CLASS R SHARES HELD BY RETIREMENT PLANS, EXCHANGES PURSUANT TO THE DREYFUS
AUTO-EXCHANGE PRIVILEGE MAY BE MADE ONLY BETWEEN A SHAREHOLDER'S RETIREMENT
PLAN ACCOUNT IN ONE FUND AND SUCH SHAREHOLDER'S RETIREMENT PLAN ACCOUNT IN
ANOTHER FUND. The amount you designate, which can be expressed either in
terms of a specific dollar or share amount ($100 minimum), will be exchanged
automatically on the first and/or fifteenth day of the month according to the
schedule you have selected. Shares will be exchanged at the then-current net
asset value; however a sales load may be charged with respect to exchanges of
Investor shares into funds sold with a sales load. The right to exercise this
Privilege may be modified or canceled by the Fund or the Transfer Agent. You
may modify or cancel your exercise of this Privilege at any time by mailing
written notification to The Dreyfus Family of Funds, P.O. Box 9671,
Providence, Rhode Island 02940-9671. The Fund may charge a service fee for
the use of this Privilege. No such fee currently is contemplated. The
exchange of shares of one fund for shares of another is treated for Federal
income tax purposes as a sale of the shares given in exchange by the
shareholder and, therefore, an exchanging shareholder may realize, or an
exchange on behalf of a Retirement Plan which is not tax exempt may result
in, a taxable gain or loss. For more information concerning this Privilege
and the funds in the Dreyfus Family of Funds eligible to participate in this
Privilege, or to obtain a Dreyfus Auto-Exchange Authorization Form, please
call toll free 1-800-645-6561.
DREYFUS-AUTOMATIC ASSET BUILDER
Dreyfus-AUTOMATIC Asset Builder permits you to purchase Fund shares
(minimum of $100 and maximum of $150,000 per transaction) at regular
intervals selected by you. Fund shares are purchased by transferring funds
from the bank account designated by you. At your option, the bank account
designated by you will be debited in the specified amount, and Fund shares
will be purchased, once a month, on either the first or fifteenth day, or
twice a month, on both days. Only an account maintained at a domestic
financial institution which is an ACH member may be so designated. To
establish a Dreyfus-AUTOMATIC Asset Builder account, you must file an
authorization form with the Transfer Agent. You may obtain the necessary
authorization by calling 1-800-645-6561 from the Distributor. You may cancel
your participation in this Privilege or change the amount of purchase at any
time by mailing written notification to The Dreyfus Family of Funds, P.O. Box
9671, Providence, Rhode Island 02940-9671, or, if to Dreyfus retirement plan
accounts to The Dreyfus Trust Company, Custodian, P.O. Box 6427, Providence,
Rhode Island 02940-6427, and the notification will be effective three
business days following receipt. The Fund may modify or terminate this
Privilege at any time or charge a service fee. No such fee currently is
contemplated.
Page 17
DREYFUS DIVIDEND OPTIONS
Dreyfus Dividend Sweep enables you to invest automatically dividends
or dividends and capital gain distributions, if any, paid by the Fund in
shares of the same class of certain other funds in the Dreyfus Family of
Funds of which you are an investor. Shares of the other fund will be
purchased at the then-current net asset value; however, a sales load may be
charged with respect to investments in shares of a fund sold with a sales
load. If you are investing in a fund that charges a sales load, you may
qualify for share prices which do not include the sales load or which reflect
a reduced sales load. See "Shareholder Services" in the SAI. Dreyfus Dividend
ACH permits you to transfer electronically on the payment date 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.
For more information concerning these privileges, or to request a
Dreyfus Dividend Options Form, please call toll free 1-800-645-6561. You may
cancel these privileges by mailing written notification to The Dreyfus Family
of Funds, P.O. Box 9671, Providence, Rhode Island 02940-9671. Enrollment in
or cancellation of these Privileges is effective three business days
following receipt. These Privileges are available only for existing accounts
and may not be used to open new accounts. Minimum subsequent investments do
not apply for Dreyfus Dividend Sweep. The Fund may modify or terminate these
Privileges at any time or charge a service fee. No such fee currently is
contemplated. Shares held under Keogh Plans, IRAs or other retirement plans
are not eligible for Dreyfus Dividend Sweep.
DREYFUS GOVERNMENT DIRECT DEPOSIT PRIVILEGE
Dreyfus Government Direct Deposit Privilege enables you to purchase
Fund shares (minimum of $100 and maximum of $50,000 per transaction) by
having Federal salary, Social Security, or certain veterans', military or
other payments from the Federal government automatically deposited into your
Fund account. You may deposit as much of such payments as you elect. You
should consider whether Direct Deposit of your entire payment into a fund
with fluctuating NAV, such as the Fund, may be appropriate for you. To enroll
in Dreyfus Government Direct Deposit, you must file with the Transfer Agent a
completed Direct Deposit Sign-Up Form for each type of payment that you
desire to include in this Privilege. The appropriate form may be obtained by
calling 1-800-645-6561. Death or legal incapacity will terminate your
participation in this Privilege. You may elect at any time to terminate your
participation by notifying in writing the appropriate Federal agency.
Further, the Fund may terminate your participation upon 30 days' notice to
you.
DREYFUS PAYROLL SAVINGS PLAN
Dreyfus Payroll Savings Plan permits you to purchase Fund shares
(minimum of $100 per transaction) automatically on a regular basis. Depending
upon the direct deposit program of your employer, you may have part or all of
your paycheck transferred to your existing Dreyfus account electronically
through the ACH system at each pay period. To establish a Dreyfus Payroll
Savings Plan account, you must file an authorization form with your
employer's payroll department. Your employer must complete the reverse side
of the form and return it to The Dreyfus Family of Funds, P.O. Box 9671,
Providence, Rhode Island 02940-9671. You may obtain the necessary
authorization form by calling 1-800-645-6561. You may change the amount of
purchase or cancel the authorization only by written notification to your
employer. It is the sole responsibility of the your employer, not the
Distributor, Dreyfus, the Fund, the Transfer Agent or any other person, to
arrange for transactions under the Dreyfus Payroll Savings Plan. The Fund may
modify or terminate this Privilege at any time or charge a service fee. No
such fee currently is contemplated. Shares held under Keogh Plans, IRAs or
other retirement plans are not eligible for this Privilege.
Page 18
AUTOMATIC WITHDRAWAL PLAN
The Automatic Withdrawal Plan permits you to request withdrawal of a
specified dollar amount (minimum of $50) on either a monthly or quarterly
basis if you have a $5,000 minimum account.
Particular Retirement Plans, including Dreyfus sponsored retirement
plans, may permit certain participants to establish an automatic withdrawal
plan from such Retirement Plans. Participants should consult their Retirement
Plan sponsor and tax adviser for details. Such a withdrawal plan is different
than the Automatic Withdrawal Plan. An application for the Automatic
Withdrawal Plan can be obtained by calling 1-800-645-6561. The Automatic
Withdrawal Plan may be ended at any time by the shareholder, the Fund or the
Transfer Agent. Shares for which certificates have been issued may not be
redeemed through the Automatic Withdrawal Plan.
RETIREMENT PLANS
The Fund offers a variety of pension and profit-sharing plans,
including Keogh Plans, IRAs, SEP-IRAs and IRA "Rollover Accounts," 401(k)
Salary Reduction Plans and 403(b)(7) Plans. Plan support services also are
available. You can obtain details on the various plans by calling the
following numbers toll free: for Keogh Plans, please call 1-800-358-5566;
for IRAs and IRA "Rollover Accounts," please call 1-800-645-6561; for
SEP-IRAs, 401(k) Salary Reduction Plans and 403(b)(7) Plans, please call
1-800-322-7880.
HOW TO REDEEM FUND SHARES
GENERAL-You may request redemption of your shares at any time. Redemption
requests should be transmitted to the Transfer Agent as described below. When
a request is received in proper form, the Fund will redeem the shares at the
next determined net asset value as described below. If you hold Fund shares
of more than one Class, any request for redemption must specify the Class of
shares being redeemed. If you fail to specify the Class of shares to be
redeemed or if you own fewer shares of the Class than specified to be
redeemed, the redemption request may be delayed until the Transfer Agent
receives further instructions from you or your Agent.
The Fund imposes no charges when shares are redeemed directly through
the Distributor. Agents or other institutions may charge their clients a
nominal fee for effecting redemptions of Fund shares. Any certificates
representing Fund shares being redeemed must be submitted with the redemption
request. The value of the shares redeemed may be more or less than their
original cost, depending upon the Fund's then-current NAV.
The Fund ordinarily will make payment for all shares redeemed within
seven days after receipt by the Transfer Agent of a redemption request in
proper form, except as provided by the rules of the SEC. HOWEVER, IF YOU HAVE
PURCHASED FUND SHARES BY CHECK, BY THE DREYFUS TELETRANSFER PRIVILEGE OR
THROUGH DREYFUS-AUTOMATIC ASSET BUILDER AND SUBSEQUENTLY SUBMIT A WRITTEN
REDEMPTION REQUEST TO THE DREYFUS TRANSFER AGENT, THE REDEMPTION PROCEEDS
WILL BE TRANSMITTED TO YOU PROMPTLY UPON BANK CLEARANCE OF YOUR PURCHASE
CHECK, DREYFUS TELETRANSFER PURCHASE OR DREYFUS-AUTOMATIC ASSET BUILDER
ORDER, WHICH MAY TAKE UP TO EIGHT BUSINESS DAYS OR MORE. IN ADDITION, THE
FUND WILL REJECT REQUESTS TO REDEEM SHARES BY WIRE OR TELEPHONE OR PURSUANT
TO THE DREYFUS TELETRANSFER PRIVILEGE FOR A PERIOD OF EIGHT BUSINESS DAYS
AFTER RECEIPT BY THE TRANSFER AGENT OF THE PURCHASE CHECK, THE DREYFUS
TELETRANSFER PURCHASE OR THE DREYFUS-AUTOMATIC ASSET BUILDER ORDER AGAINST
WHICH SUCH REDEMPTION IS REQUESTED. THESE PROCEDURES WILL NOT APPLY IF YOUR
SHARES WERE PURCHASED BY WIRE PAYMENT, OR IF YOU OTHERWISE HAVE A SUFFICIENT
COLLECTED BALANCE IN YOUR ACCOUNT TO COVER THE REDEMPTION REQUEST. PRIOR TO
THE TIME ANY REDEMPTION IS EFFECTIVE, DIVIDENDS ON SUCH SHARES WILL ACCRUE
AND BE PAYABLE, AND YOU WILL BE
Page 19
ENTITLED TO EXERCISE ALL OTHER RIGHTS OF BENEFICIAL OWNERSHIP. Fund shares
will not be redeemed until the Transfer Agent has received your Account
Application.
The Fund reserves the right to redeem your account at its option upon
not less than 45 days' written notice if the net asset value of your account
is $500 or less and remains so during the notice period.
PROCEDURES_You may redeem Fund shares by using the regular redemption
procedure through the Transfer Agent, the Wire Redemption Privilege, the
Telephone Redemption Privilege or, for Investor shares only, through the
Dreyfus TELETRANSFER Privilege. Other redemption procedures may be in effect
for clients of certain Agents and institutions. The Fund makes available to
certain large institutions the ability to issue redemption instructions
through compatible computer facilities.
You may redeem Fund shares by telephone if you have checked the
appropriate box on the Fund's Account Application or have filed a Shareholder
Services Form with the Transfer Agent. If you select the TELETRANSFER
Privilege or telephone exchange privilege, which is granted automatically
unless you refuse it, you authorize the Transfer Agent to act on telephone
instructions from any person representing himself or herself to be you, or a
representative of your Agent, and reasonably believed by the Transfer Agent
to be genuine. The Fund will require the Transfer Agent to employ reasonable
procedures, such as requiring a form of personal identification, to confirm
that instructions are genuine and, if it does not follow such procedures, the
Fund or the Transfer Agent may be liable for any losses due to unauthorized
or fraudulent instructions. Neither the Fund nor the Transfer Agent will be
liable for following telephone instructions reasonably believed to be genuine.
During times of drastic economic or market conditions, you may
experience difficulty in contacting the Transfer Agent by telephone to
request a redemption or an exchange of Fund shares. In such cases, you should
consider using the other redemption procedures described herein. Use of these
other redemption procedures may result in your redemption request being
processed at a later time than it would have been if telephone redemption had
been used. During the delay, the Fund's net asset value may fluctuate.
REGULAR REDEMPTION. Under the regular redemption procedure, you may
redeem your shares by written request mailed to The Dreyfus Family of Funds,
P.O. Box 9671, Providence, Rhode Island 02940-9671, or if for Dreyfus
retirement plan accounts to The Dreyfus Trust Company, Custodian, P.O. Box
6427, Providence, Rhode Island 02940-6427. REDEMPTION REQUESTS MAY BE
DELIVERED IN PERSON ONLY TO A DREYFUS FINANCIAL CENTER. THESE REQUESTS WILL
BE FORWARDED TO THE FUND AND WILL BE PROCESSED ONLY UPON RECEIPT THEREBY. FOR
THE LOCATION OF THE NEAREST FINANCIAL CENTER, PLEASE CALL THE TELEPHONE NUMBER
LISTED UNDER "GENERAL INFORMATION." Redemption requests must be signed by
each shareholder, including each owner of a joint account, and each signature
must be guaranteed. The Transfer Agent has adopted standards and procedures
pursuant to which signature-guarantees in proper form generally will be
accepted from domestic banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies
and savings associations, as well as from participants in the New York Stock
Exchange Medallion Signature Program, the Securities Transfer Agents
Medallion Program ("STAMP"), and the Stock Exchanges Medallion Program. For
more information with respect to signature-guarantees, please call one of the
telephone numbers listed under "General Information."
Redemption proceeds of at least $1,000 will be wired to any member
bank of the Federal Reserve System in accordance with a written
signature-guaranteed request.
WIRE REDEMPTION PRIVILEGE. You may request by wire or telephone that
redemption proceeds (minimum $1,000) be wired to your account at a bank which
is a member of the Federal Reserve System, or a correspondent bank if your
bank is not a member. To establish the Wire Redemption Privilege, you must
check the appropriate box and supply the necessary information on the Fund's
Account Application or file a Shareholder Services Form with the Transfer
Agent. You may direct that redemption proceeds be
Page 20
paid by check (maximum $150,000 per day) made out to the owners of record
and mailed to your address. Redemption proceeds of less than $1,000 will be
paid automatically by check. Holders of jointly registered Fund or bank
accounts may have redemption proceeds of only up to $250,000 wired within any
30-day period. You may telephone redemption requests by calling
1-800-221-4060 or, if calling from overseas, 1-401-455-3306. The Fund reserves
the right to refuse any redemption request, including requests made shortly
after a change of address, and may limit the amount involved or the number of
such requests. This Privilege may be modified or terminated at anytime by the
Transfer Agent or the Fund. The Fund's SAI sets forth instructions for
transmitting redemption requests by wire. Shares held under Keogh Plans, IRAs
or other retirement plans, and shares for which certificates have been issued,
are not eligible for this Privilege.
TELEPHONE REDEMPTION PRIVILEGE. You may redeem Fund shares (maximum
$150,000 per day) by telephone if you checked the appropriate box on the
Fund's Account Application or have filed a Shareholder Services Form with the
Transfer Agent. The redemption proceeds will be paid by check and mailed to
your address. You may telephone redemption instructions by calling
1-800-221-4060 or, if calling from overseas, 1-401-455-3306. The Fund
reserves the right to refuse any request made by telephone, including
requests made shortly after a change of address, and may limit the amount
involved or the number of such requests. This Privilege may be modified or
terminated at any time by the Transfer Agent or the Fund. Shares held under
Keogh Plans, IRAs or other retirement plans, and shares for which certificates
have been issued, are not eligible for this Privilege.
DREYFUS TELETRANSFER PRIVILEGE_INVESTOR SHARES. You may redeem Fund
shares (minimum $500 per day) by telephone if you have checked the
appropriate box and supplied the necessary information on the Fund's Account
Application or have filed a Shareholder Services Form with the Transfer
Agent. The proceeds will be transferred between your Fund account and the
bank account designated in one of these documents. Only such an account
maintained in a domestic financial institution which is an ACH member may be
so designated. Redemption proceeds will be on deposit in your account at an
ACH member bank ordinarily two days after receipt of the redemption request
or, at your request, paid by check (maximum $150,000 per day) and mailed to
your address. Holders of jointly registered Fund or bank accounts may redeem
through the Dreyfus TELETRANSFER Privilege for transfer to their bank account
only up to $250,000 within any 30-day period. The Fund reserves the right to
refuse any request made by telephone, including requests made shortly after a
change of address, and may limit the amount involved or the number of such
requests. The Fund may modify or terminate this Privilege at any time or
charge a service fee upon notice to shareholders. No such fee currently is
contemplated.
If you have selected the Dreyfus TELETRANSFER Privilege, you may
request a Dreyfus TELETRANSFER redemption of Fund shares by telephoning
1-800-221-4060 or, if calling from overseas, 1-401-455-3306. Shares held
under Keogh Plans, IRAs or other retirement plans, and shares issued in
certificate form, are not eligible for this Privilege.
DISTRIBUTION PLAN
(INVESTOR SHARES ONLY)
Investor shares are subject to a Distribution Plan (the "Plan")
adopted pursuant to Rule 12b-1 under the 1940 Act ("Rule 12b-1"). Investor
shares of the Fund bear some of the cost of selling those shares under the
Plan. The Plan allows the Fund to spend annually up to 0.25% of its average
daily net assets attributable to Investor shares to compensate Dreyfus
Service Corporation, an affiliate of Dreyfus, for shareholder servicing
activities and the Distributor for shareholder servicing activities and expens
es primarily intended to result in the sale of Investor shares of the Fund.
The Plan allows the Distributor to make payments from the Rule 12b-1 fees it
collects from the Fund to compensate Agents that have entered into Selling
Agreements ("Agreements") with the Distributor. Under the Agreements, the
Agents
Page 21
are obligated to provide distribution related services with regard to
the Fund and/or shareholder services to the Agent's clients that own Investor
shares of the Fund.
The Fund and the Distributor may suspend or reduce payments under the
Plan at any time, and payments are subject to the continuation of the Fund's
Plan and the Agreements described above. From time to time, the Agents, the
Distributor and the Fund may agree to voluntarily reduce the maximum fees
payable under the Plan. See the SAI for more details on the Plan.
Potential investors should read this Prospectus in light of the terms
governing Agreements with their Agents. An Agent entitled to receive
compensation for selling and servicing the Fund's shares may receive
different compensation with respect to one class of shares over another.
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
The Fund ordinarily declares and pays dividends from its net
investment income, if any, quarterly, and distributes net realized gains, if
any, on an annual basis, but it may make distributions on a more frequent
basis to comply with the distribution requirements of the Code, in all events
in a manner consistent with the provisions of the 1940 Act. The Fund will not
make distributions from net realized gains unless capital loss carryovers, if
any, have been utilized or have expired. Investors other than qualified
Retirement Plans may choose whether to receive dividends and other
distributions in cash or to reinvest them in additional Fund shares;
dividends and other distributions paid to qualified Retirement Plans are
reinvested automatically in additional Fund shares at NAV. All expenses are
accrued daily and deducted before declaration of dividends to investors.
Dividends paid by each Class will be calculated at the same time and in the
same manner and will be in the same amount, except that the expenses
attributable solely to a particular Class will be borne exclusively by that
Class. Investor shares will receive lower per share dividends than Class R
shares because of the higher expenses borne by the Investor shares. See
"Expense Summary."
It is expected that the Fund will qualify as a "regulated investment
company" under the Code so long as such qualification is in the best
interests of its shareholders. Such qualification will relieve the Fund of
any liability for Federal income tax to the extent its earnings are
distributed in accordance with applicable provisions of the Code.
Dividends derived from net investment income, together with
distributions from net realized short-term capital gains and all or a portion
of any gains realized from the sale or other disposition of certain market
discount bonds, paid by the Fund will be taxable to U.S. shareholders,
including certain non-qualified Retirement Plans, as ordinary income whether
received in cash or reinvested in Fund shares. Distributions from the Fund's
net realized long-term capital gains will be taxable to such shareholders as
long-term capital gains for Federal income tax purposes, regardless of how
long the shareholders have held their Fund shares and whether such
distributions are received in cash or reinvested in Fund shares. The net
capital gain of an individual generally will not be subject to Federal income
tax at a rate in excess of 28%. Dividends and other distributions also may be
subject to state and local taxes.
Dividends derived from net investment income, together with
distributions from net realized short-term capital gains and all or a portion
of any gains realized from the sale or other disposition of certain market
discount bonds, paid by the Fund to a foreign investor generally are subject
to U.S. withholding tax at the rate of 30%, unless the foreign investor
claims the benefit of a lower rate specified in a tax treaty. Distributions
from net realized long-term capital gains paid by the Fund to a foreign
investor, as well as the proceeds of any redemptions from a foreign
investor's account, regardless of the extent to which gain or loss may be
realized, generally will not be subject to U.S. withholding tax. However,
such distributions may be subject to backup withholding, as described below,
unless the foreign investor certifies his non-U.S. residency status.
Page 22
Notice as to the tax status of your dividends and other distributions
will be mailed to you annually. You also will receive periodic summaries of
your account which will include information as to dividends and distributions
from net realized, long-term capital gains, if any, paid during the year.
Dividends paid by the Fund to qualified Retirement Plans ordinarily
will not be subject to taxation until the proceeds are distributed from the
Retirement Plans. The Fund will not report to the IRS dividends paid to such
plans. Generally, distributions from qualified Retirement Plans, except those
representing returns of non-deductible contributions thereto, will be taxable
as ordinary income and, if made prior to the time the participant reaches age
591/2, generally will be subject to an additional tax equal to 10% of the
taxable portion of the distribution. If the distribution from such a
Retirement Plan (other than certain governmental or church plans) for any
taxable year following the year in which the participant reaches age 701/2 is
less than the "minimum required distribution" for that taxable year, an
excise tax equal to 50% of the deficiency may be imposed by the IRS. The
administrator, trustee or custodian of such a Retirement Plan will be
responsible for reporting distributions from such plans to the IRS. Moreover,
certain contributions to a qualified Retirement Plan in excess of the amounts
permitted by law may be subject to an excise tax.
With respect to individual investors and certain non-qualified
Retirement Plans, Federal regulations generally require the Fund to withhold
("backup withholding") and remit to the U.S. Treasury 31% of dividends,
distributions from net realized long-term capital gains and the proceeds of
any redemption, regardless of the extent to which gain or loss may be
realized, paid to a shareholder if such shareholder fails to certify either
that the TIN furnished in connection with opening an account is correct or
that such shareholder has not received notice from the IRS of being subject
to backup withholding as a result of a failure to properly report taxable
dividend or interest income on a Federal income tax return. Furthermore, the
IRS may notify the Fund to institute backup withholding if the IRS determines
a shareholder's TIN is incorrect or if a shareholder has failed to properly
report taxable dividend and interest income on a Federal income tax return.
A TIN is either the Social Security number or employer identification
number of the record owner of the account. Any tax withheld as a result of
backup withholding does not constitute an additional tax imposed on the
record owner of the account and may be claimed as a credit on the record
owner's Federal income tax return.
The Fund may be subject to a non-deductible 4% excise tax, measured
with respect to certain undistributed amounts of taxable investment income
and capital gains.
You should consult your tax advisers regarding specific questions as
to Federal, state or local taxes.
PERFORMANCE INFORMATION
For purposes of advertising, performance for each Class may be
calculated on the basis of average annual total return and/or total return.
These total return figures reflect changes in the price of the shares and
assume that any income dividends and/or capital gains distributions made by
the Fund during the measuring period were reinvested in shares of the same
Class. These figures also take into account any applicable service and
distribution fees. As a result, at any given time, the performance of the
Investor shares should be expected to be lower than that of Class R.
Performance for each Class will be calculated separately.
Average annual total return is calculated pursuant to a standardized
formula which assumes that an investment was purchased with an initial
payment of $1,000 and that the investment was redeemed at the end of a stated
period of time, after giving effect to the reinvestment of dividends and
other distributions during the period. The return is expressed as a
percentage rate which, if applied on a compounded annual basis, would result
in the redeemable value of the investment at the end of the period.
Advertisements
Page 23
of the Fund's performance will include the Fund's average annual total
return for one, five and ten year periods, or for shorter periods depending
upon the length of time during which the Fund has operated. Computations of
average annual total return for periods of less than one year represent an
annualization of the Fund's actual total return for the applicable period.
Total return is computed on a per share basis and assumes the
reinvestment of dividends and other distributions. Total return generally is
expressed as a percentage rate which is calculated by combining the income
and principal changes for a specified period and dividing by the NAV at the
beginning of the period. Advertisements may include the percentage rate of
total return or may include the value of a hypothetical investment at the end
of the period which assumes the application of the percentage rate of total
return. Total return also may be calculated by using the NAV at the beginning
of the period for Investor shares.
The Fund may also advertise the yield on a Class of shares. The
Fund's yield is calculated by dividing a Class of shares' annualized net
investment income per share during a recent 30-day (or one month) period by
the maximum public offering price per Class of such share on the last day of
that period. Since yields fluctuate, yield data cannot necessarily be used to
compare an investment in a Class of shares with bank deposits, savings
accounts, and similar investment alternatives which often provide an
agreed-upon or guaranteed fixed yield for a stated period of time.
Performance will vary from time to time and past results are not
necessarily representative of future results. You should remember that
performance is a function of portfolio management in selecting the type and
quality of portfolio securities and is affected by operating expenses.
Performance information, such as that described above, may not provide a
basis for comparison with other investments or other investment companies
using a different method of calculating performance.
The Fund may compare the performance of its shares with various
industry standards of performance including Lipper Analytical Services, Inc.
ratings, Standard and Poor's 500 Composite Stock Price Index, CDA
Technologies indexes, indexes created by Lehman Brothers, the Consumer Price
Index, and the Dow Jones Industrial Average. Performance rankings as reported
in CHANGING TIMES, BUSINESS WEEK, INSTITUTIONAL INVESTOR, THE WALL STREET
JOURNAL, IBC/DONOGHUE'S MONEY FUND REPORT, MUTUAL FUND FORECASTER, NO LOAD
INVESTOR, MONEY MAGAZINE, MORNINGSTAR MUTUAL FUND VALUES, U.S. NEWS AND WORLD
REPORT, FORBES, FORTUNE, BARRON'S and similar publications may also be used
in comparing the Fund's performance. Furthermore, the Fund may quote its
shares' total returns and yields in advertisements or in shareholder reports.
The Fund may also advertise non-standardized performance information, such as
total return for periods other than those required to be shown or cumulative
performance data. The Fund may advertise a quotation of yield or other
similar quotation demonstrating the income earned or distributions made by
the Fund.
GENERAL INFORMATION
The Company was incorporated in Maryland on August 6, 1987 under the
name The Laurel Funds, Inc., and changed its name to The Dreyfus/Laurel
Funds, Inc. on October 17, 1994. The Company is registered with the
Securities and Exchange Commission under the 1940 Act, as an open-end,
diversified management investment company. The Company has an authorized
capitalization of 25 billion shares of $0.001 par value stock with equal
voting rights. The Fund is a portfolio of the Company. The Fund's shares are
classified into two classes_Investor shares and Class R shares. The Company's
Articles of Incorporation permit the Board of Directors to create an
unlimited number of investment portfolios (each a "fund").
Each share (regardless of Class) has one vote. All shares of all
funds (and Classes thereof) vote together as a single class, except as to any
matter for which a separate vote of any fund or Class is required by
Page 24
the 1940 Act, and except as to any matter which affects the interests of one
or more particular funds or Classes, in which case only the shareholders of
the affected fund or Classes are entitled to vote, each as a separate class.
Only holders of Investor shares will be entitled to vote on matters submitted
to shareholders pertaining to the Distribution Plan relating to that Class.
At January 31, 1995, Mellon Bank, Dreyfus' parent, owned of record
through its direct and indirect subsidiaries more than 25% of the Company's
outstanding voting shares, and is deemed, under the 1940 Act, to be a
controlling shareholder.
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 Directors or the
appointment of auditors. However, pursuant to the Company's By-Laws, the
holders of at least 10% of the shares outstanding and entitled to vote may
require the Company to hold a special meeting of shareholders for purposes of
removing a Director from office and for any other purpose. Company
shareholders may remove a Director by the affirmative vote of a majority of
the Company's outstanding voting shares. In addition, the Board of Directors
will call a meeting of shareholders for the purpose of electing Directors if,
at any time, less than a majority of the Directors then holding office have
been elected by shareholders.
The Transfer Agent maintains a record of your ownership and will send
you confirmations and statements of account.
Shareholder inquiries may be made by writing to the Fund at 144 Glenn
Curtiss Boulevard, Uniondale, New York 11556-0144, or by calling toll free
1-800-645-6561.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND IN THE
FUND'S OFFICIAL SALES LITERATURE IN CONNECTION WITH THE OFFER OF THE FUND'S
SHARES, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER IN ANY STATE IN WHICH, OR TO ANY PERSON TO WHOM,
SUCH OFFERING MAY NOT LAWFULLY BE MADE.
Page 25
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Page 26
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Page 27
DREYFUS
Disciplined
Stock
Fund
Prospectus
Registration Mark
Copy Rights 1995 Dreyfus Service Corporation
328/728p2030195
- - - -----------------------------------------------------------------------------
PROSPECTUS MARCH 1, 1995
DREYFUS DISCIPLINED MIDCAP STOCK FUND
- - - ----------------------------------------------------------------------------
DREYFUS DISCIPLINED MIDCAP STOCK FUND (THE "FUND"), FORMERLY CALLED
THE "LAUREL MIDCAP STOCK FUND," IS A SEPARATE PORTFOLIO OF THE DREYFUS/LAUREL
FUNDS, INC., AN OPEN-END, DIVERSIFIED MANAGEMENT INVESTMENT COMPANY (THE
"COMPANY"), KNOWN AS A MUTUAL FUND. THE FUND SEEKS TOTAL INVESTMENT RETURNS
(INCLUDING CAPITAL APPRECIATION AND INCOME) WHICH CONSISTENTLY OUTPERFORM THE
STANDARD & POOR'S 400 MIDCAP INDEX.
BY THIS PROSPECTUS, THE FUND IS OFFERING INVESTOR SHARES AND CLASS R
SHARES. (CLASS R SHARES OF THE FUND WERE FORMERLY CALLED TRUST SHARES.)
INVESTOR SHARES AND CLASS R SHARES ARE IDENTICAL, EXCEPT AS TO THE SERVICES
OFFERED TO AND THE EXPENSES BORNE BY EACH CLASS. CLASS R SHARES ARE SOLD
PRIMARILY TO BANK TRUST DEPARTMENTS AND OTHER FINANCIAL SERVICE PROVIDERS
(INCLUDING MELLON BANK, N.A. AND ITS AFFILIATES) ("BANKS") ACTING ON BEHALF
OF CUSTOMERS HAVING A QUALIFIED TRUST OR INVESTMENT ACCOUNT OR RELATIONSHIP
AT SUCH INSTITUTION. INVESTOR SHARES ARE PRIMARILY SOLD TO RETAIL INVESTORS
BY THE FUND'S DISTRIBUTOR AND BY BANKS, SECURITIES BROKERS OR DEALERS AND
OTHER FINANCIAL INSTITUTIONS ("AGENTS") THAT HAVE ENTERED INTO A SELLING
AGREEMENT WITH THE FUND'S DISTRIBUTOR.
SHARES OF THE FUND ARE SOLD WITHOUT A SALES LOAD. INVESTOR SHARES OF
THE FUND ARE SUBJECT TO DISTRIBUTION AND SHAREHOLDER SERVICING FEES.
YOU CAN PURCHASE OR REDEEM INVESTOR SHARES BY TELEPHONE USING THE
DREYFUS TELETRANSFER PRIVILEGE.
THE DREYFUS CORPORATION SERVES AS THE FUND'S INVESTMENT MANAGER. THE
DREYFUS CORPORATION IS REFERRED TO AS "DREYFUS."
SHARES OF THE FUND ARE ALSO AVAILABLE THROUGH A SERVICING NETWORK
ASSOCIATED WITH MELLON BANK, N.A. ("MELLON BANK"), AN AFFILIATE OF DREYFUS.
EXCHANGE AND SHAREHOLDER SERVICES VARY DEPENDING UPON THE NETWORK THROUGH
WHICH YOU PURCHASE FUND SHARES. SEE "HOW TO BUY FUND SHARES."
THIS PROSPECTUS SETS FORTH CONCISELY INFORMATION ABOUT THE FUND THAT
YOU SHOULD KNOW BEFORE INVESTING. IT SHOULD BE READ CAREFULLY BEFORE YOU
INVEST AND RETAINED FOR FUTURE REFERENCE.
A STATEMENT OF ADDITIONAL INFORMATION ("SAI") DATED MARCH 1, 1995,
WHICH MAY BE REVISED FROM TIME TO TIME, PROVIDES A FURTHER DISCUSSION OF
CERTAIN AREAS IN THIS PROSPECTUS AND OTHER MATTERS WHICH MAY BE OF INTEREST
TO SOME INVESTORS. IT HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION ("SEC") AND IS INCORPORATED HEREIN BY REFERENCE. FOR A FREE COPY,
WRITE TO THE FUND AT 144 GLENN CURTISS BOULEVARD, UNIONDALE, NEW YORK
11556-0144, OR CALL 1-800-645-6561. WHEN TELEPHONING, ASK FOR OPERATOR 666.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
THE NET ASSET VALUE OF FUNDS OF THIS TYPE WILL FLUCTUATE FROM TIME TO TIME.
THE FEES TO WHICH THE FUND IS SUBJECT ARE SUMMARIZED IN THE "EXPENSE
SUMMARY" SECTION OF THE FUND'S PROSPECTUS. THE FUND PAYS MELLON BANK OR ITS
AFFILIATES TO BE ITS INVESTMENT MANAGER. MELLON BANK OR AN AFFILIATE MAY BE
PAID FOR PERFORMING OTHER SERVICES FOR THE FUND, SUCH AS CUSTODIAN, TRANSFER
AGENT OR FUND ACCOUNTANT SERVICES. THE FUND IS DISTRIBUTED BY PREMIER MUTUAL
FUND SERVICES, INC.
- - - --------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
- - - ---------------------------------------------------------------------------
TABLE OF CONTENTS
PAGE
EXPENSE SUMMARY................................. 4
FINANCIAL HIGHLIGHTS............................ 5
DESCRIPTION OF THE FUND......................... 7
MANAGEMENT OF THE FUND.......................... 12
HOW TO BUY FUND SHARES.......................... 14
SHAREHOLDER SERVICES............................ 17
HOW TO REDEEM FUND SHARES....................... 20
DISTRIBUTION PLAN (INVESTOR SHARES ONLY)........ 22
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES....... 23
PERFORMANCE INFORMATION......................... 24
GENERAL INFORMATION............................. 25
Page 2
This Page Intentionally Left Blank
Page 3
EXPENSE SUMMARY
<TABLE>
INVESTOR SHARES CLASS R SHARES
----------------- ---------------
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on Purchases................. none none
Maximum Sales Load Imposed on Reinvestments............. none none
Deferred Sales Load..................................... none none
Redemption Fee.......................................... none none
Exchange Fee............................................ none none
ESTIMATED ANNUAL FUND OPERATING EXPENSES:
(as a percentage of net assets)
Management Fee.......................................... 1.10% 1.10%
12b-1 Fee(1)............................................ .25% none
Other Expenses(2)........................................ .00% .00%
______ ______
Total Fund Operating Expenses......................... 1.35% 1.10%
EXAMPLE:
You would pay the following expenses
on a $1,000 investment, assuming (1) a 5% annual
return and (2) redemption at the end of each
time period: INVESTOR SHARES CLASS R SHARES
----------------- ----------------
1 Year $14 $11
3 Years $43 $35
5 Years N/A $61
10 Years N/A $134
- - - --------------------------
(1) See "Distribution Plan (Investor Shares Only)" for a description of the
Fund's Distribution Plan for the Investor Class.
(2) Does not include fees and expenses of the non-interested Directors
(including counsel). The investment manager is contractually required to
reduce its Management Fee in an amount equal to the Fund's allocable portion
of such fees and expenses, which are estimated to be .02% of the Fund's net
assets. (See "Management of the Fund.")
</TABLE>
- - - --------------------------------------------------------------------
THE AMOUNTS LISTED IN THE EXAMPLE SHOULD NOT BE CONSIDERED AS
REPRESENTATIVE OF FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS
THAN THOSE INDICATED. MOREOVER, WHILE THE EXAMPLE ASSUMES A 5% ANNUAL RETURN,
THE FUND'S ACTUAL PERFORMANCE WILL VARY AND MAY RESULT IN AN ACTUAL RETURN
GREATER OR LESS THAN 5%.
- - - ----------------------------------------------------------------------
The purpose of the foregoing table is to assist you in
understanding the various costs and expenses that investors will bear,
directly or indirectly, the payment of which will reduce investors' return on
an annual basis. Long-term investors in Investor shares could pay more in
12b-1 fees than the economic equivalent of paying the maximum front-end sales
charges applicable to mutual funds sold by members of the National
Association of Securities Dealers, Inc. The information in the foregoing
table does not reflect any fee waivers or expense reimbursement arrangements
that may be in effect. Certain Agents may charge their clients direct fees
for effecting transactions in Fund shares; such fees are not reflected in the
foregoing table. See "Management of the Fund," "How to Buy Fund Shares" and
"Distribution Plan (Investor Shares Only)."
The Fund understands that banks, brokers, dealers or other
financial institutions (including Mellon Bank and its affiliates)
(collectively "Agents") may charge fees to their clients who are owners of
the Fund's Investor shares for various services provided in connection with a
client's account. These fees would be in addition to any amounts received by
an Agent under its Selling Agreement ("Agreement") with Premier Mutual Fund
Services, Inc. (the "Distributor"). The Agreement requires each Agent to discl
ose to its clients any compensation payable to such Agent by the Distributor
and any other compensation payable by the client for various services
provided in connection with their accounts.
Page 4
FINANCIAL HIGHLIGHTS
The tables below are based upon a single Investor share or Class R
share outstanding throughout each fiscal year and should be read in
conjunction with the financial statements and related notes that appear in
the Fund's Annual Report dated October 31, 1994 which is incorporated by
reference in the SAI. The financial statements included in the Fund's Annual
Report for the year ended October 31, 1994 have been audited by KPMG Peat
Marwick LLP, independent accountants, whose report appears in the Fund's Annua
l Report. Further information about the Fund's performance is contained in
the Fund's Annual Report which may be obtained without charge.
<TABLE>
DREYFUS DISCIPLINED MIDCAP STOCK FUND
FOR AN INVESTOR SHARE OUTSTANDING FOR THE PERIOD.
Period
Ended
10/31/94*#
- - - ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $10.00
_______
Income from investment operations:
Net investment income 0.05
Net realized and unrealized loss on investments (0.26)
_______
Total from investment operations (0.21)
Less distributions:
Distributions from net investment income (0.04)
Net asset value, end of period $9.75
======
Total return ++ (2.06)%
======
Ratios to average net assets/supplemental data:
Net assets, end of period (000's) $54
Ratio of operating expenses to average net assets 1.40%+
Ratio of net investment income to average net assets 0.73%+
Portfolio turnover rate 83%
- - - ------------------------------------------------------------------------------------------------------------
* The Fund commenced selling Investor Shares on April 6, 1994.
+ Annualized.
++ Total return represents aggregate total return for the period
indicated.
# Prior to October 17, 1994, Mellon Bank, N.A. served as
the Fund's investment manager. Effective October 17, 1994, The Dreyfus
Corporation serves as the Fund's investment manager.
</TABLE>
Page 5
<TABLE>
FINANCIAL HIGHLIGHTS (CONTINUED)
DREYFUS DISCIPLINED MIDCAP STOCK FUND
FOR A CLASS R SHARE OUTSTANDING FOR THE PERIOD.
Period
Ended
10/31/94*#
- - - ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $10.00
____---
Income from investment operations:
Net investment income** 0.09
Net realized and unrealized loss on investments (0.27)
____---
Total from investment operations (0.18)
Less distributions:
Distributions from net investment income (0.06)
Net asset value, end of period $9.76
======
Total return ++ (1.77)%
========
Ratios to average net assets/supplemental data:
Net assets, end of period (000's) $18,169
Ratio of operating expenses to average net assets 1.16%+***
Ratio of net investment income to average net assets 0.98%+
Portfolio turnover rate 83%
- - - --------------------------------------------------------------------------------------------------------------
* The Fund commenced operations on November 12, 1993.
Any shares outstanding prior to April 4, 1994 were designated as Trust
Shares. Effective October 17, 1994, the Fund's Trust Shares were
redesignated as Class R Shares.
**Net investment income before reimbursement of expenses by the
investment adviser for the period ended October 31, 1994 was $0.06.
***Annualized expense ratio before voluntary reimbursement of expenses by
the investment adviser for the period ended October 31, 1994 was 1.53%.
+ Annualized.
++ Total return represents aggregate total return for the period indicated.
# Prior to October 17, 1994, Mellon Bank, N.A. served as
the Fund's investment manager. Effective October 17, 1994, The Dreyfus
Corporation serves as the Fund's investment manger.
</TABLE>
Page 6
DESCRIPTION OF THE FUND
GENERAL
By this Prospectus, the Fund is offering Investor shares and Class R
shares. (Class R shares of the Fund were formerly called Trust Shares.)
Investor shares and Class R shares are identical, except as to the services
offered to and the expenses borne by each Class. Class R shares are sold
primarily to Banks acting on behalf of customers having a qualified trust or
investment account or relationship at such institution. Investor shares are
primarily sold to retail investors by the Fund's Distributor and by Agents
that have entered into a Selling Agreement with the Fund's Distributor. If
shares of the Fund are held in an account at a Bank or with an Agent, such
Bank or Agent may require you to place all Fund purchase, exchange and
redemption orders through them. All Banks and Agents have agreed to transmit
transaction requests to the Fund's transfer agent or to the Fund's
Distributor. Distribution and shareholder services paid by Investor Class
will cause Investor Class to have a higher expense ratio and pay lower
dividends than Class R.
INVESTMENT OBJECTIVE
The Fund seeks total investment returns (including capital
appreciation and income) which consistently outperform the Standard & Poor's
400 MidCap Index ("S&P MidCap"). The objective is not fundamental. There can
be no assurance that the Fund will meet its stated investment objectives.
MANAGEMENT POLICIES
The Fund attempts to maintain a diversified holding in common stocks
of medium capitalization companies, firms with a market value between $200
million and $5 billion. It is Dreyfus' view that many medium-sized companies
are in fast-growing industries, offer superior earnings growth potential, and
are characterized by strong balance sheets and high returns on equity.
However, because the companies in this market are smaller, prices of their
stocks tend to be more volatile than stocks of companies with large
capitalizations. The Fund may also hold investments in large and small
capitalization companies, including emerging and cyclical growth companies.
Emerging and cyclical growth companies are firms which, while they may not
have a history of stable long-term growth, are nonetheless expected to
represent attractive investments.
Common stocks are selected for the Fund so that, in the aggregate,
the investment characteristics and risk profile of the Fund are similar to
the S&P MidCap. However while it may maintain aggregate investment
characteristics similar to the S&P MidCap, the Fund seeks to invest in common
stocks of companies which in the aggregate will provide a higher total return
than the S&P MidCap. The Fund is not an index midcap stock fund and its
investments are not limited to securities of issuers included in the S&P
MidCap.
Dreyfus utilizes computer techniques to track, and, if possible,
outperform the S&P MidCap. To construct the Fund, Dreyfus employs valuation
models designed to identify common stocks of companies that are undervalued
and should be purchased and retained by the Fund. Undervalued securities are
normally characterized by a relatively low price to earnings ratio (using
normalized earnings), a low ratio of market price to book value, or
underlying asset values that Dreyfus feels are not fully reflected in the
current market price. Once undervalued common stocks are identified, Dreyfus'
experienced investment analysts construct a fund, using the valuation models,
that in the aggregate resembles the S&P MidCap, but is weighted toward the
most attractive stocks. The computerized ranking system incorporates
information about the relevant criteria as of the most recent period for
which data are available to the system. Once ranked, the securities are
categorized by the system under the headings "buy," "sell" or "hold."
Dreyfus decides whether to buy, sell, or hold the security based principally
on the system's categorization, subject to modification based on subsequently
available or other specific relevant information about the security.
Page 7
Under normal circumstances, at least 65% of the Fund's total assets
will be invested in common stocks. The Fund may also invest in: (1)
obligations issued or guaranteed as to interest and principal by the U.S.
Government, its agencies and instrumentalities; (2) instruments of U.S. and
foreign banks, including certificates of deposit, banker's acceptances and
time deposits, and may include Eurodollar Certificates of Deposit ("ECDs"),
Yankee Certificates of Deposit ("Yankee CDs") and Eurodollar Time Deposits
("ETDs"); (3) corporate obligations rated at least Baa by Moody's Investors
Service, Inc. ("Moody's"), or BBB by Standard & Poor's Corporation ("Standard
& Poor's") rating services, or if unrated, of comparable quality as
determined by Dreyfus; (4) Eurodollar bonds and notes; (5) securities of
foreign companies evidenced by American Depository Receipts ("ADRs"); (6)
variable amount master demand notes; (7) repurchase agreements; (8)
when-issued transactions; and (9) commercial paper. The Fund may also utilize
securities lending and reverse repurchase agreements, and may enter into
option and futures contracts for hedging purposes, subject to certain
limitations.
Securities rated BBB by Standard & Poor's or Baa by Moody's are
considered by those rating agencies to be "investment grade" securities,
although Moody's considers securities rated Baa to have speculative
characteristics. Further, while bonds rated BBB by Standard & Poor's exhibit
adequate protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay interest
and principal for debt in this category than debt in higher rated categories.
The Fund will dispose in a prudent and orderly fashion of bonds whose ratings
drop below these minimum ratings.
The S&P MidCap is composed of 400 domestic common stocks chosen by
Standard and Poor's for market size, liquidity and industry group
representation. It is a market-weighted index (stock price times shares
outstanding), with each stock affecting the S&P MidCap in proportion to its
market value. The inclusion of a stock in the S&P MidCap does not imply that
Standard & Poor's believes the stock to be an attractive or appropriate
investment, nor is Standard & Poor's in any way affiliated with the Fund. The
S&P MidCap was created by Standard & Poor's to capture the performance of the
stocks that fall in the medium capitalization range. The medium
capitalization range of stocks was defined, at the original time of
screening, as between $200 million and $5 billion in market value. Any
middle-capitalization stocks already included in the Standard & Poor's 500
Composite Stock Price Index ("S&P 500") were excluded from candidacy for the
S&P MidCap. After removal of the 500 stocks, the MidCap candidate population
was reduced to 1,200 stocks. Standard & Poor's then subjected this smaller
population to a variety of screens and eventually the sample size was reduced
to the final 400 stocks. S&P screened the candidate population using the
following criteria: level of trading activity, or liquidity; market value;
industry group representation; and the level of controlling interest. A
limited percentage of the S&P MidCap may include Canadian securities. No
other foreign securities are eligible for inclusion.
INVESTMENT TECHNIQUES
In connection with its investment objective and policies, the Fund
may employ, among others, the following investment techniques:
BORROWING. The Fund is authorized, within specified limits, to borrow
money for temporary administrative purposes and to pledge its assets in
connection with such borrowings.
SECURITIES LENDING. To increase return on Fund securities, the Fund
may lend its portfolio securities to broker-dealers and other institutional
investors pursuant to agreements requiring that the loans be continuously
secured by collateral equal at all times in value to at least the market
value of the securities loaned. There may be risks of delay in receiving
additional collateral or in recovering the securities loaned or even a loss
of rights to the collateral should the borrower of the securities fail
financially. Securities loans, however, are made only to borrowers deemed by
Dreyfus to be of good standing and when, in its judgment, the income to be
earned from the loan justifies the attendant risks.
Page 8
WHEN-ISSUED SECURITIES AND DELAYED DELIVERY TRANSACTIONS. To secure
advantageous prices or yields, the Fund may purchase U.S. Government
Securities on a when-issued basis or may purchase or sell securities for
delayed delivery. In such transactions, delivery of the securities occurs
beyond the normal settlement periods, but no payment or delivery is made by
the Fund prior to the actual delivery or payment by the other party to the
transaction. The purchase of securities on a when-issued or delayed delivery
basis involves the risk that, as a result of an increase in yields available
in the marketplace, the value of the securities purchased will decline prior
to the settlement date. The sale of securities for delayed delivery involves
the risk that the prices available in the market on the delivery date may be g
reater than those obtained in the sale transaction. The Fund will establish a
segregated account consisting of cash, U.S. Government Securities or other
high-grade debt obligations in an amount equal to the amounts of its
when-issued and delayed delivery commitments.
MASTER/FEEDER OPTION. The Company may in the future seek to achieve
the Fund's investment objective by investing all of the Fund's net investable
assets in another investment company having the same investment objective and
substantially the same investment policies and restrictions as those
applicable to the Fund. Shareholders of the Fund will be given at least 30
days' prior notice of any such investment. Such investment would be made only
if the directors determine it to be in the best interest of the Fund and its
shareholders. In making that determination, the Company's directors will
consider, among other things, the benefits to shareholders and/or the
opportunity to reduce costs and achieve operational efficiencies. Although
the Fund believes that the directors will not approve an arrangement that is
likely to result in higher costs, no assurance is given that costs will be
materially reduced if this option is implemented.
FUTURES, OPTIONS AND OTHER DERIVATIVE INSTRUMENTS. The Fund may
attempt to reduce the overall level of investment risk of particular
securities and attempt to protect itself against adverse market movements by
investing in futures, options and other derivative instruments. These include
the purchase and writing of options on securities (including index options)
and options on foreign currencies and investing in futures contracts for the
purchase or sale of instruments based on financial indices, including
interest rate indices or indices of U.S. or foreign governments, equity or
fixed income securities ("futures contracts"), options on futures contracts,
forward contracts and swaps, and swap-related products such as equity index
swap contracts, interest rate swaps, currency swaps, caps, collars and floors.
The use of futures, options, forward contracts and swaps exposes the
Fund to additional investment risks and transaction costs. If Dreyfus
incorrectly analyzes market conditions or does not employ the appropriate
strategy with respect to these instruments, the Fund could be left in a less
favorable position than if such instruments had not been used. Additional
risks inherent in the use of futures, options, forward contracts and swaps
include: imperfect correlation between the price of futures, options and
forward contracts and movements in the prices of the securities or currencies
being hedged; the possible absence of a liquid secondary market for any
particular instrument at any time; and the possible need to defer closing out
certain hedged positions to avoid adverse tax consequences. The Fund may not
purchase put and call options that are traded on a national stock exchange in
an amount exceeding 5% of its net assets. Further information on the use of
futures, options and other derivative instruments, and the associated risks,
is contained in the SAI.
CERTAIN PORTFOLIO SECURITIES
AMERICAN DEPOSITORY RECEIPTS. The Fund may invest in U.S.
dollar-denominated ADRs. ADRs typically are issued by an American bank or
trust company and evidence ownership of underlying securities issued by
foreign companies. ADRs are traded in the United States on national
securities exchanges or in the over-the-counter market.
COMMERCIAL PAPER. The Fund may invest in commercial paper. These
instruments are short-term obligations issued by banks and corporations that
have maturities ranging from 2 to 270 days. Each
Page 9
instrument may be backed only by the credit of the issuer or may be backed by
some form of credit enhancement, typically in the form of a guarantee by a
commercial bank. Commercial paper backed by guarantees of foreign banks may
involve additional risk due to the difficulty of obtaining and enforcing
judgments against such banks and the generally less restrictive regulations to
which such banks are subject. The Fund will only invest in commercial paper
of U.S. and foreign companies rated A-1 at the time of purchase by Standard
& Poor's, Prime-1 by Moody's, F-1 by Fitch Investors Service, Inc., Duff 1
by Duff & Phelps, Inc., or A1 by IBCA, Inc.
ECDS, ETDS AND YANKEE CDS. The Fund may invest in ECDs, ETDs and
Yankee CDs. ECDs are U.S. dollar-denominated certificates of deposit issued
by foreign branches of domestic banks. ETDs are U.S. dollar-denominated time
deposits in a foreign branch of a U.S. bank or a foreign bank. Yankee CDs are
certificates of deposit issued by a U.S. branch of a foreign bank denominated
in U.S. dollars and held in the United States. ECDs, ETDs and Yankee CDs are
subject to somewhat different risks than are the obligations of domestic
banks. See "Foreign Securities."
EURODOLLAR BONDS AND NOTES. The Fund may invest in Eurodollar bonds
and notes. Eurodollar bonds and notes are obligations which pay principal and
interest in U.S. dollars held in banks outside the United States, primarily
in Europe. Investments in Eurodollar bonds and notes involve risks that
differ from investments in securities of domestic issuers. See "Foreign
Securities."
FOREIGN SECURITIES. The Fund may purchase securities of foreign
issuers and may invest in obligations of foreign branches of domestic banks
and domestic branches of foreign banks. Investment in foreign securities
presents certain risks, including those resulting from fluctuations in
currency exchange rates, revaluation of currencies, future political and
economic developments and the possible imposition of currency exchange
blockages or other foreign governmental laws or restrictions, reduced
availability of public information concerning issuers, and the fact that
foreign issuers are not generally subject to uniform accounting, auditing and
financial reporting standards or to other regulatory practices and
requirements comparable to those applicable to domestic issuers. Moreover,
securities of many foreign issuers may be less liquid and their prices more
volatile than those of comparable domestic issuers. In addition, with respect
to certain foreign countries, there is the possibility of expropriation,
confiscatory taxation and limitations on the use or removal of funds or other
assets of the Fund, including withholding of dividends. Foreign securities
may be subject to foreign government taxes that would reduce the yield on
such securities.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements.
A repurchase agreement involves the purchase of a security by the Fund and a
simultaneous agreement (generally with a bank or broker-dealer) to repurchase
that security from the Fund at a specified price and date or upon demand.
This technique offers a method of earning income on idle cash. A risk
associated with repurchase agreements is the failure of the seller to
repurchase the securities as agreed, which may cause the Fund to suffer a
loss if the market value of such securities declines before they can be
liquidated on the open market. Repurchase agreements with a duration of more
than seven days are considered illiquid securities and are subject to the
associated limits discussed under "Certain Portfolio Securities _ Illiquid
Securities."
REVERSE REPURCHASE AGREEMENTS. The Fund may enter into reverse
repurchase agreements to meet redemption requests where the liquidation of
fund securities is deemed by Dreyfus to be disadvantageous. Under a reverse
repurchase agreement, the Fund: (i) transfers possession of fund securities
to a bank or broker-dealer in return for cash in an amount equal to a
percentage of the securities' market value; and (ii) agrees to repurchase the
securities at a future date by repaying the cash with interest. Cash or
liquid high-grade debt securities held by the Fund equal in value to the
repurchase price including any accrued interest will be maintained in a
segregated account while a reverse repurchase agreement is in effect.
Page 10
ILLIQUID SECURITIES. The Fund will not knowingly invest more than 15%
of the value of its net assets in illiquid securities, including time
deposits and repurchase agreements having maturities longer than seven days.
Securities that have readily available market quotations are not deemed
illiquid for purposes of this limitation (irrespective of any legal or
contractual restrictions on resale.) The Fund may invest in commercial
obligations issued in reliance on the so-called "private placement" exemption
from registration afforded by Section 4(2) of the Securities Act of 1933, as
amended ("Section 4(2) paper"). The Fund may also purchase securities that
are not registered under the Securities Act of 1933, as amended, but that can
be sold to qualified institutional buyers in accordance with Rule 144A under
that Act ("Rule 144A securities"). Liquidity determinations with respect to
Section 4(2) paper and Rule 144A securities will be made by the Board of
Directors or by Dreyfus pursuant to guidelines established by the Board of
Directors. The Board or Dreyfus will consider availability of reliable price
information and other relevant information in making such determinations.
Section 4(2) paper is restricted as to disposition under the federal
securities laws, and generally is sold to institutional investors, such as
the Fund, that agree that they are purchasing the paper for investment and
not with a view to public distribution. Any resale by the purchaser must be
pursuant to registration or an exemption therefrom. Section 4(2) paper
normally is resold to other institutional investors like the Fund through or
with the assistance of the issuer or investment dealers who make a market in
the Section 4(2) paper, thus providing liquidity. Rule 144A securities
generally must be sold to other qualified institutional buyers. If a
particular investment in Section 4(2) paper or Rule 144A securities is not
determined to be liquid, that investment will be included within the
percentage limitation on investment in illiquid securities. The ability to
sell Rule 144A securities to qualified institutional buyers is a recent
development and it is not possible to predict how this market will mature.
Investing in Rule 144A securities could have the effect of increasing the
level of Fund illiquidity to the extent that qualified institutional buyers
become, for a time, uninterested in purchasing these securities from the Fund
or other holder.
OTHER INVESTMENT COMPANIES. The Fund may invest in securities issued
by other investment companies to the extent that such investments are
consistent with the Fund's investment objective and policies and permissible
under the Investment Company Act of 1940, as amended ("1940 Act"). As a
shareholder of another investment company, the Fund would bear, along with
other shareholders, its pro rata portion of the other investment company's
expenses, including advisory fees. These expenses would be in addition to the
advisory and other expenses that the Fund bears directly in connection with
its own operations.
U.S. GOVERNMENT SECURITIES. The Fund may invest in obligations issued
or guaranteed as to both principal and interest by the U.S. Government or
backed by the full faith and credit of the United States. In addition to
direct obligations of the U.S. Treasury, these include securities issued or
guaranteed by the Federal Housing Administration, Farmers Home
Administration, Export-Import Bank of the United States, Small Business
Administration, Government National Mortgage Association, General Services
Administration and Maritime Administration. Investments may also be made in
U.S. Government obligations that do not carry the full faith and credit
guarantee, such as those issued by the Federal National Mortgage Association,
the Federal Home Loan Mortgage Corporation, or other instrumentalities.
VARIABLE AMOUNT MASTER DEMAND NOTES. The Fund may invest in variable
amount master demand notes. Variable amount master demand notes are unsecured
obligations that are redeemable upon demand and are typically unrated. These
instruments are issued pursuant to written agreements between their issuers
and holders. The agreements permit the holders to increase (subject to an
agreed maximum) and the holders and issuers to decrease the principal amount
of the notes, and specify that the rate of interest payable on the principal
fluctuates according to an agreed-upon formula. If an issuer of a variable
amount master demand note were to default on its payment obligation, the Fund
might be
Page 11
unable to dispose of the note because of the absence of a secondary
market and might, for this or other reasons, suffer a loss to the extent of
the default. The Fund will only invest in variable amount master demand notes
issued only by entities that Dreyfus considers creditworthy.
PORTFOLIO TURNOVER. While securities are purchased for the Fund on
the basis of potential for capital appreciation and income and not for
short-term trading profits, the Fund's turnover rate may exceed 100%. A
portfolio turnover rate of 100% would occur, for example, if all the
securities held by the Fund were replaced once in a period of one year. A
higher rate of portfolio turnover involves correspondingly greater brokerage
commissions and other expenses that must be borne directly by the Fund and,
thus, indirectly by its shareholders. In addition, a high rate of portfolio
turnover may result in the realization of larger amounts of short-term
capital gains that, when distributed to the Fund's shareholders, are taxable
to them as ordinary income. Nevertheless, securities transactions for the
Fund will be based only upon investment considerations and will not be
limited by any other considerations when Dreyfus deems it appropriate to make
changes in the Fund's assets.
RISK FACTORS
LIMITING INVESTMENT RISKS. The Fund is subject to a number of
investment limitations. Certain limitations are matters of fundamental policy
and may not be changed without the affirmative vote of the holders of a
majority of the Fund's outstanding shares. The SAI describes all of the
Fund's fundamental and non-fundamental restrictions.
The investment objective, policies, restrictions, practices and
procedures of the Fund, unless otherwise specified, may be changed without
shareholder approval. If the Fund's investment objective, policies,
restrictions, practices or procedures change, shareholders should consider
whether the Fund remains an appropriate investment in light of the
shareholder's then-current position and needs.
In order to permit the sale of the Fund's shares in certain states,
the Fund may make commitments more restrictive than the investment policies
and restrictions described in this Prospectus and the SAI. Should the Fund
determine that any such commitment is no longer in the best interest of the
Fund, it may consider terminating sales of its shares in the states involved.
MANAGEMENT OF THE FUND
INVESTMENT MANAGER. Dreyfus, located at 200 Park Avenue, New York,
New York 10166, was formed in 1947. Dreyfus is a wholly-owned subsidiary of
Mellon Bank, which is a wholly-owned subsidiary of Mellon Bank Corporation
("Mellon"). As of January 31, 1995, Dreyfus managed or administered
approximately $70 billion in assets for more than 1.9 million investor
accounts nationwide.
Dreyfus serves as the Fund's investment manager. Dreyfus supervises
and assists in the overall management of the Fund's affairs under an
Investment Management Agreement with the Fund, subject to the overall
authority of the Company's Board of Directors in accordance with Maryland
law. Pursuant to the Investment Management Agreement, Dreyfus provides, or
arranges for the provision by one or more third parties of, investment
advisory, administrative, custody, fund accounting and transfer agency
services to the Fund. As the Fund's investment manager, Dreyfus manages the
Fund by making investment decisions based on the Fund's investment
objectives, policies and restrictions.
The Fund is managed by John O'Toole. Mr. O'Toole has managed the Fund
since its commencement of operations and has been employed by Dreyfus as
portfolio manager of the Fund since October 17, 1994. Mr. O'Toole is a Vice
President and a Portfolio Analyst for Mellon Bank and is also responsible for
the research and development of Mellon Equity Associates' asset allocation.
He has been with Mellon Bank since 1979.
Mellon is a publicly owned multibank holding company incorporated
under Pennsylvania law in 1971 and registered under the Bank Holding Company
Act of 1956, as amended. Mellon provides a com-
Page 12
prehensive range of financial products and services in domestic and selected
international markets. Mellon is among the twenty-five largest bank holding
companies in the United States based on total assets. Mellon's principal
wholly-owned subsidiaries are Mellon Bank, Mellon Bank (DE) National
Association, Mellon Bank (MD), The Boston Company, Inc., AFCO Credit
Corporation and a number of companies known as Mellon Financial Services
Corporations. Through its subsidiaries, including Dreyfus, Mellon managed
approximately $201 billion in assets as of September 30, 1994, including $76
billion in mutual fund assets. As of September 30, 1994, Mellon, through
various subsidiaries, provided non-investment services, such as custodial or
administration services, for approximately $659 billion in assets, including
approximately $108 billion in mutual fund assets.
Under the Investment Management Agreement, the Fund has agreed to pay
Dreyfus a monthly fee at the annual rate of 1.10% of the value of the Fund's
daily net assets. Dreyfus pays all of the Fund's expenses, except brokerage
fees, taxes, interest, fees and expenses of the non-interested Directors
(including counsel fees), Rule 12b-1 fees (if applicable) and extraordinary
expenses. Although Dreyfus does not pay for the fees and expenses of the
non-interested Directors (including counsel fees), Dreyfus is contractually
required to reduce its investment management fee in an amount equal to the
Fund's allocable share of such fees and expenses. In order to compensate
Dreyfus for paying virtually all of the Fund's expenses, the Fund's
investment management fee is higher than the investment advisory fees paid by
most investment companies. Most, if not all, such companies also pay for
additional non-investment advisory expenses that are not paid by such
companies' investment advisers. From time to time, Dreyfus may waive (either
voluntarily or pursuant to applicable state limitations) a portion of the
investment management fees payable by the Fund. From April 4, 1994, to
October 16, 1994, the Fund was advised by Mellon Bank under the Investment
Management Agreement. For the period from November 12, 1993 (commencement of
operations) to April 3, 1994, the Fund paid its investment adviser, Mellon
Bank, 0.04% (annualized) of its average daily net assets in investment
advisory fees (net of expenses reimbursed), under the Fund's previous
investment advisory contract (such contract covered only the provision of
investment advisory and certain specified administrative services). For the
period from April 4, 1994 through the fiscal year ended October 31, 1994, the
Fund paid Mellon Bank or Dreyfus 1.10% (annualized) of its average daily net
assets in investment management fees, less fees and expenses of the
non-interested Directors (including counsel fees).
For the fiscal year ended October 31, 1994, total operating expenses
(excluding Rule 12b-1 fees) (net of expenses reimbursed) of the Fund were
1.15% and 1.16% (annualized) of the average daily net assets of each class
for the Investor Class and Class R, respectively. Without the reimbursment,
operating expenses would have been higher.
In addition, Investor shares may be subject to certain distribution
fees. See "Distribution Plan (Investor Shares Only)."
Dreyfus may pay the Fund's distributor for shareholder services from
Dreyfus's own assets, including past profits but not including the management
fee paid by the Fund. The Fund's distributor may use part or all of such
payments to pay Agents in respect of these services.
Dreyfus is authorized to allocate purchase and sale orders for
portfolio securities to certain financial institutions, including, in the
case of agency transactions, financial institutions that are affiliated with
Dreyfus or Mellon Bank or that have sold shares of the Fund, if Dreyfus
believes that the quality of the transaction and the commission are
comparable to what they would be with other qualified brokerage firms. From
time to time, to the extent consistent with its investment objective, policies
and restrictions, the Fund may invest in securities of companies with which
Mellon Bank has a lending relationship.
The Fund's distributor is Premier Mutual Fund Services, Inc. (the
"Distributor"). The Distributor is located at One Exchange Place, Boston,
Massachusetts 02109. The Distributor is a wholly-owned sub-
Page 13
sidiary of Institutional Administration Services, Inc., a provider of mutual
fund administration services, the parent company of which is Boston
Institutional Group, Inc.
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT, AND
SUB-ADMINISTRATOR_Mellon Bank (One Mellon Bank Center, Pittsburgh,
Pennsylvania 15258) is the Fund's custodian and fund accountant. The Fund's tr
ansfer and dividend disbursing agent is The Shareholder Services Group, Inc.
(the "Transfer Agent"), a subsidiary of First Data Corporation, One American
Express Plaza, Providence, Rhode Island 02903. Premier Mutual Fund Services,
Inc. is the Fund's sub-administrator and, pursuant to a Sub-Administration
Agreement, provides various administrative and corporate secretarial services
to the Fund.
HOW TO BUY FUND SHARES
GENERAL _ Investor shares are offered to any investor and may be
purchased through the Distributor or Agents that have entered into Selling
Agreements with the Distributor.
Class R shares are sold primarily to Banks acting on behalf of
customers having a qualified trust or investment account or relationship at
such institution, or to customers who have received and hold shares of the
Fund distributed to them by virtue of such an account or relationship. In
addition, holders of Class R shares of the Fund who have held their shares
since April 4, 1994, may continue to purchase Class R shares of the Fund
whether or not they otherwise would be eligible to do so. A Retirement Plan
is a certain qualified or non-qualified employee benefit plan or other
program, including pension, profit-sharing and other deferred compensation
plans, whether established by corporations, partnerships, non-profit entities
or state and local governments ("Retirement Plan"). Class R shares may be
purchased for a Retirement Plan only by a custodian, trustee, investment
manager or other entity authorized to act on behalf of such Plan.
Institutions effecting transactions in Class R shares for the accounts of
their clients may charge their clients direct fees in connection with such
transactions.
Shares of the Fund are also available through a servicing network
associated with Mellon Bank, an affiliate of Dreyfus. For more information
about purchasing Fund shares through that network and a Prospectus, call
1-800-548-2868. Please read that Prospectus carefully. Exchange and
shareholder services, including the telephone purchase option and minimum and
maximum dollar amounts associated with such services, may vary depending upon
the network through which you purchase Fund shares.
Stock certificates are issued only upon your written request. No
certificates are issued for fractional shares. The Fund reserves the right to
reject any purchase order.
The minimum initial investment is $2,500, or $1,000 if you are a
client of an Agent which has made an aggregate minimum initial purchase for
its customers of $2,500. Subsequent investments must be at least $100.
However, the minimum initial investment for Dreyfus-sponsored Keogh Plans,
IRAs, SEP-IRAs and 403(b)(7) Plans with only one participant is $750, with no
minimum on subsequent purchases. Individuals who open an IRA also may open a
non-working spousal IRA with a minimum initial investment of $250. The
initial investment must be accompanied by the Fund's Account Application. For
full-time or part-time employees of Dreyfus or any of its affiliates or
subsidiaries, directors of Dreyfus, Board members of a fund advised by
Dreyfus including members of the Company's Board, or the spouse or minor
child of any of the foregoing, the minimum initial investment is $1,000. For
full-time or part-time employees of Dreyfus or any of its affiliates or
subsidiaries who elect to have a portion of their pay directly deposited into
their Fund account, the minimum initial investment is $50. The Fund reserves
the right to offer Fund shares without regard to minimum purchase
requirements to employees participating in certain qualified or non-qualified
employee benefit plans or other programs where contributions or account
information can be transmitted in a manner and form acceptable to the Fund.
The Fund reserves the right to vary further the initial and subsequent
investment minimum requirements at any time.
Page 14
The Internal Revenue Code of 1986, as amended (the "Code"), imposes
various limitations on the amount that may be contributed to Retirement
Plans. These limitations apply with respect to participants at the plan level
and, therefore, do not directly affect the amount that may be invested in the
Fund by a Retirement Plan. Participants and plan sponsors should consult
their tax advisers for details.
You may purchase Fund shares by check or wire, or, with respect to
Investor shares only, through the Dreyfus TELETRANSFER Privilege described
below. Checks should be made payable to "The Dreyfus Family of Funds" or, if
for Dreyfus retirement plan accounts, to "The Dreyfus Trust Company,
Custodian." Payments to open new accounts which are mailed should be sent to
The Dreyfus Family of Funds, P.O. Box 9387, Providence, Rhode Island
02940-9387, together with your Account Application indicating which Class of
shares is being purchased. For subsequent investments, your Fund account
number should appear on the check and an investment slip should be enclosed
and sent to The Dreyfus Family of Funds, P.O. Box 105, Newark, New Jersey
07101-0105. For Dreyfus retirement plan accounts, both initial and subsequent
investments should be sent to The Dreyfus Trust Company, Custodian, P.O. Box
6427, Providence, Rhode Island 02940-6427. Neither initial nor subsequent
investments should be made by third party check. PURCHASE ORDERS MAY BE
DELIVERED IN PERSON ONLY TO A DREYFUS FINANCIAL CENTER. THESE ORDERS WILL BE
FORWARDED TO THE FUND AND WILL BE PROCESSED ONLY UPON RECEIPT THEREBY. FOR
THE LOCATION OF THE NEAREST DREYFUS FINANCIAL CENTER, PLEASE CALL ONE OF THE
TELEPHONE NUMBERS LISTED UNDER "GENERAL INFORMATION."
Wire payments may be made if your bank account is in a commercial
bank that is a member of the Federal Reserve System or any other bank having
a correspondent bank in New York City. Immediately available funds may be
transmitted by wire to The Bank of New York, together with the applicable
Class' DDA # as shown below, for purchase of Fund shares in your name:
DDA# 8900104309 Dreyfus Disciplined Midcap Stock Fund/Investor
shares;
DDA# 8900227990 Dreyfus Disciplined Midcap Stock Fund/Class R shares.
The wire must include your Fund account number (for new accounts, your
Taxpayer Identification Number ("TIN") should be included instead), account
registration and dealer number, if applicable. If your initial purchase of
Fund shares is by wire, you should call 1-800-645-6561 after completing your
wire payment in order to obtain your Fund account number. Please include your
Fund account number on the Fund's Account Application and promptly mail the
Account Application to the Fund, as no redemptions will be permitted until
the Account Application is received. You may obtain further information about
remitting funds in this manner from your bank. All payments should be made in
U.S. dollars and, to avoid fees and delays, should be drawn only on U.S.
banks. A charge will be imposed if any check used for investment in your
account does not clear. The Fund makes available to certain large
institutions the ability to issue purchase instructions through compatible
computer facilities.
Subsequent investments also may be made by electronic transfer of
funds from an account maintained in a bank or other domestic financial
institution that is an Automated Clearing House ("ACH") member. You must
direct the institution to transmit immediately available funds through the
ACH System to The Bank of New York with instructions to credit your Fund
account. The instructions must specify your Fund account registration and
Fund account number PRECEDED BY THE DIGITS "1111."
The Distributor may pay dealers a fee of up to .5% of the amount
invested through such dealers in Fund shares by employees participating in
qualified or non-qualified employee benefit plans or other programs where (i)
the employers or affiliated employers maintaining such plans or programs have
a minimum of 250 employees eligible for participation in such plans or
programs or (ii) such plan's or program's aggregate investment in the Dreyfus
Family of Funds or certain other products made available by the Distributor
to such plans or programs exceeds one million dollars ("Eligible Benefit
Plans"). The determination of the number of employees eligible for
participation in a plan or program shall be made on the
Page 15
date Fund shares are first purchased by or on behalf of employees
participating in such plan or program and on each subsequent January 1st.
All present holdings of shares of funds in the Dreyfus Family of Funds by
Eligible Benefit Plans will be aggregated to determine the fee payable with
respect to each purchase of Fund shares. The Distributor reserves the right
to cease paying these fees at any time. The Distributor will pay such fees
from its own funds, other than amounts received from the Fund, including past
profits or any other source available to it.
Federal regulations require that you provide a certified TIN upon
opening or reopening an account. See "Dividends, Other Distributions and
Taxes" and the Fund's Account Application for further information concerning
this requirement. Failure to furnish a certified TIN to the Fund could
subject you to a $50 penalty imposed by the Internal Revenue Service (the
"IRS").
NET ASSET VALUE ("NAV") _ An investment portfolio's NAV refers to
the worth of one share. The NAV for Investor Class and Class R shares is
computed by adding, with respect to such Class of shares, the value of the
Fund's investments, cash, and other assets attributable to that Class,
deducting liabilities of the Class and dividing the result by the number of
shares of that Class outstanding. The valuation of assets for determining NAV
for the Fund may be summarized as follows:
The portfolio securities of the Fund listed or traded on a stock
exchange, except as otherwise noted, are valued at the latest sale price. If
no sale is reported, the mean of the latest bid and asked prices is used.
Securities traded over-the-counter are priced at the mean of the latest bid
and asked prices but will be valued at the last sale price if required by
regulations of the SEC. When market quotations are not readily available,
securities and other assets are valued at a fair value as determined in good
faith in accordance with procedures established by the Board of Directors.
Bonds are valued through valuations obtained from a commercial
pricing service or at the most recent mean of the bid and asked prices
provided by investment dealers in accordance with procedures established by
the Board of Directors.
Pursuant to a determination by the Board of Directors that such value
represents fair value, debt securities with maturities of 60 days or less
held by the Fund are valued at amortized cost. When a security is valued at
amortized cost, it is valued at its cost when purchased, and thereafter by
assuming a constant amortization to maturity of any discount or premium,
regardless of the impact of fluctuating interest rates on the market value of
the instrument.
NAV is determined on each day that the New York Stock Exchange
("NYSE") is open (a "business day"), as of the close of business of the
regular session of the NYSE (usually 4 p.m. Eastern Time). Investments and
requests to exchange or redeem shares received by the Fund in proper form
before the close of business on the NYSE (usually 4 p.m., Eastern Time) are
effective on, and will receive the price determined on, that day (except
investments made by electronic funds transfer, which are effective two busines
s days after your call). Investment, exchange and redemption requests
received after the close of the NYSE are effective on and receive the share
price determined on the next business day.
The NAV of most shares of investment portfolios advised by Dreyfus
(other than money market funds) is published in leading newspapers daily. The
yield of most Dreyfus money market funds is published weekly in leading
financial publications and in many local newspapers. The NAV of any Fund may
also be obtained by calling 1-800-645-6561.
The public offering price of Investor shares and Class R shares is
the NAV per share of that Class.
DREYFUS TELETRANSFER PRIVILEGE (NOT APPLICABLE TO CLASS R SHARES) _
You may purchase Fund shares (minimum $500 and maximum $150,000 per day) by
telephone if you have checked the appropriate box and supplied the necessary
information on the Fund's Account Application or have filed a Shareholder
Services Form with the Transfer Agent. The proceeds will be transferred
between the bank account designated in one of these documents and your Fund
account. Only a bank account maintained
Page 16
in a domestic financial institution which is an ACH member may be so
designated. The Fund may modify or terminate this Privilege at any time or
charge a service fee upon notice to shareholders. No such fee currently is
contemplated.
If you have selected the Dreyfus TELETRANSFER Privilege, you may
request a Dreyfus TELETRANSFER purchase of Investor shares by telephoning
1-800-221-4060 or, if calling from overseas, 1-401-455-3306.
SHAREHOLDER SERVICES
The services and privileges described under this heading may not be
available to clients of certain Agents and some Agents may impose certain
conditions on their clients which are different from those described in this
Prospectus. You should consult your Agent in this regard.
FUND EXCHANGES
You may purchase, in exchange for shares of a Class, shares of the
same class of certain other funds managed or administered by Dreyfus, to the
extent such shares are offered for sale in your state of residence. These
funds have different investment objectives which may be of interest to you.
If you desire to use this service, please call 1-800-645-6561 to determine if
it is available and whether any conditions are imposed on its use. WITH
RESPECT TO CLASS R SHARES HELD BY RETIREMENT PLANS, EXCHANGES MAY BE MADE
ONLY BETWEEN A SHAREHOLDER'S RETIREMENT PLAN ACCOUNT IN ONE FUND AND SUCH
SHAREHOLDER'S RETIREMENT PLAN ACCOUNT IN ANOTHER FUND.
To request an exchange, you or your Agent acting on your behalf must
give exchange instructions to the Transfer Agent in writing or by telephone.
Before any exchange, you must obtain and should review a copy of the current
prospectus of the fund into which the exchange is being made. Prospectuses
may be obtained by calling 1-800-645-6561. Except in the case of Personal
Retirement Plans, the shares being exchanged must have a current value of at
least $500; furthermore, when establishing a new account by exchange, the
shares being exchanged must have a value of at least the minimum initial
investment required for the fund into which the exchange is being made. The
ability to issue exchange instructions by telephone is given to all Fund
shareholders automatically, unless you check the relevant "No" box on the
Account Application, indicating that you specifically refuse this Privilege.
The Telephone Exchange Privilege may be established for an existing account
by written request, signed by all shareholders on the account, or by a
separate Shareholder Services Form, also available by calling 1-800-645-6561.
If you previously have established the Telephone Exchange Privilege, you may
telephone exchange instructions by calling 1-800-221-4060 or, if calling from
overseas, 1-401-455-3306. See "How to Redeem Fund Shares_Procedures." Upon
an exchange, the following shareholder services and privileges, as applicable
and where available, will be automatically carried over to the fund into
which the exchange is made: Telephone Exchange Privilege, Wire Redemption
Privilege, Telephone Redemption Privilege, TELETRANSFER Privilege and the
dividends and distributions payment option (except for Dividend Sweep)
selected by the investor.
Shares will be exchanged at the next determined NAV; however, a sales
load may be charged with respect to exchanges of Investor shares into funds
sold with a sales load. If you are exchanging Investor shares into a fund
that charges a sales load, you may qualify for share prices which do not
include the sales load or which reflect a reduced sales load, if the shares
of the fund from which you are exchanging were: (a) purchased with a sales
load, (b) acquired by a previous exchange from shares purchased with a sales
load, or (c) acquired through reinvestment of dividends or other
distributions paid with respect to the foregoing categories of shares. To
qualify, at the time of the exchange you must notify the Transfer Agent or
your Agent must notify the Distributor. Any such qualification is subject to
confirmation of your holdings through a check of appropriate records. See
"Shareholder Services" in the SAI. No fees currently are charged shareholders
directly in connection with exchanges, although the Fund reserves the right,
upon
Page 17
not less than 60 days' written notice, to charge shareholders a nominal
fee in accordance with rules promulgated by the SEC. The Fund reserves the
right to reject any exchange request in whole or in part. The availability of
fund exchanges may be modified or terminated at any time upon notice to
shareholders.
The exchange of shares of one fund for shares of another is treated
for Federal income tax purposes as a sale of the shares given in exchange by
the shareholder and, therefore, an exchanging shareholder may realize, or an
exchange on behalf of a Retirement Plan which is not tax exempt may result
in, a taxable gain or loss.
DREYFUS AUTO-EXCHANGE PRIVILEGE
Dreyfus Auto-Exchange Privilege enables you to invest regularly (on a
semi-monthly, monthly, quarterly or annual basis), in exchange for shares of
the Fund, in shares of the same class of certain other funds in the Dreyfus
Family of Funds of which you are currently an investor. WITH RESPECT TO CLASS
R SHARES HELD BY RETIREMENT PLANS, EXCHANGES PURSUANT TO THE DREYFUS
AUTO-EXCHANGE PRIVILEGE MAY BE MADE ONLY BETWEEN A SHAREHOLDER'S RETIREMENT
PLAN ACCOUNT IN ONE FUND AND SUCH SHAREHOLDER'S RETIREMENT PLAN ACCOUNT IN
ANOTHER FUND. The amount you designate, which can be expressed either in
terms of a specific dollar or share amount ($100 minimum), will be exchanged
automatically on the first and/or fifteenth day of the month according to the
schedule you have selected. Shares will be exchanged at the then-current net
asset value; however a sales load may be charged with respect to exchanges of
Investor shares into funds sold with a sales load. The right to exercise this
Privilege may be modified or canceled by the Fund or the Transfer Agent. You
may modify or cancel your exercise of this Privilege at any time by mailing
written notification to The Dreyfus Family of Funds, P.O. Box 9671,
Providence, Rhode Island 02940-9671. The Fund may charge a service fee for
the use of this Privilege. No such fee currently is contemplated. The
exchange of shares of one fund for shares of another is treated for Federal
income tax purposes as a sale of the shares given in exchange by the
shareholder and, therefore, an exchanging shareholder may realize, or an
exchange on behalf of a Retirement Plan which is not tax exempt may result
in, a taxable gain or loss. For more information concerning this Privilege
and the funds in the Dreyfus Family of Funds eligible to participate in this
Privilege, or to obtain a Dreyfus Auto-Exchange Authorization Form, please
call toll free 1-800-645-6561.
DREYFUS-AUTOMATIC ASSET BUILDER
Dreyfus-AUTOMATIC Asset Builder permits you to purchase Fund shares
(minimum of $100 and maximum of $150,000 per transaction) at regular
intervals selected by you. Fund shares are purchased by transferring funds
from the bank account designated by you. At your option, the bank account
designated by you will be debited in the specified amount, and Fund shares
will be purchased, once a month, on either the first or fifteenth day, or
twice a month, on both days. Only an account maintained at a domestic
financial institution which is an ACH member may be so designated. To
establish a Dreyfus-AUTOMATIC Asset Builder account, you must file an
authorization form with the Transfer Agent. You may obtain the necessary
authorization form by calling 1-800-645-6561. You may cancel your
participation in this Privilege or change the amount of purchase at any time
by mailing written notification to The Dreyfus Family of Funds, P.O. Box
9671, Providence, Rhode Island 02940-9671, or, if for Dreyfus retirement plan
accounts to The Dreyfus Trust Company, Custodian, P.O. Box 6427, Providence,
Rhode Island 02940-6427 and the notification will be effective three business
days following receipt. The Fund may modify or terminate this Privilege at
any time or charge a service fee. No such fee currently is contemplated.
DREYFUS DIVIDEND OPTIONS
Dreyfus Dividend Sweep enables you to invest automatically dividends
or dividends and capital gain distributions, if any, paid by the Fund in
shares of the same class of certain other funds in the Dreyfus Family of
Funds of which you are an investor. Shares of the other fund will be
purchased at the then-current NAV; however, a sales load may be charged with
respect to investments in shares of a fund sold with
Page 18
a sales load. If you are investing in a fund that charges a sales load, you
may qualify for share prices which do not include the sales load or which
reflect a reduced sales load. See "Shareholder Services" in the SAI. Dreyfus
Dividend ACH permits you to transfer electronically on the payment date
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.
For more information concerning these Privileges, or to request a
Dreyfus Dividend Options Form, please call toll free 1-800-645-6561. You may
cancel these Privileges by mailing written notification to The Dreyfus Family
of Funds, P.O. Box 9671, Providence, Rhode Island 02940-9671. Enrollment in
or cancellation of these Privileges is effective three business days
following receipt. These Privileges are available only for existing accounts
and may not be used to open new accounts. Minimum subsequent investments do
not apply for Dreyfus Dividend Sweep. The Fund may modify or terminate these
Privileges at any time or charge a service fee. No such fee currently is
contemplated. Shares held under Keogh Plans, IRAs or other retirement plans
are not eligible for Dreyfus Dividend Sweep.
DREYFUS GOVERNMENT DIRECT DEPOSIT PRIVILEGE
Dreyfus Government Direct Deposit Privilege enables you to purchase
Fund shares (minimum of $100 and maximum of $50,000 per transaction) by
having Federal salary, Social Security, or certain veterans', military or
other payments from the Federal government automatically deposited into your
Fund account. You may deposit as much of such payments as you elect. You
should consider whether Direct Deposit of your entire payment into a fund
with fluctuating NAV, such as the Fund, may be appropriate for you. To enroll
in Dreyfus Government Direct Deposit, you must file with the Transfer Agent a
completed Direct Deposit Sign-Up Form for each type of payment that you
desire to include in this Privilege. The appropriate form may be obtained by
calling 1-800-645-6561. Death or legal incapacity will terminate your
participation in this Privilege. You may elect at any time to terminate your
participation by notifying in writing the appropriate Federal agency.
Further, the Fund may terminate your participation upon 30 days' notice to
you.
DREYFUS PAYROLL SAVINGS PLAN
Dreyfus Payroll Savings Plan permits you to purchase Fund shares
(minimum of $100 per transaction) automatically on a regular basis. Depending
upon the direct deposit program of your employer, you may have part or all of
your paycheck transferred to your existing Dreyfus account electronically
through the ACH system at each pay period. To establish a Dreyfus Payroll
Savings Plan account, you must file an authorization form with your
employer's payroll department. Your employer must complete the reverse side
of the form and return it to The Dreyfus Family of Funds, P.O. Box 9671,
Providence, Rhode Island 02940-9671. You may obtain the necessary
authorization form by calling 1-800-645-6561. You may change the amount of
purchase or cancel the authorization only by written notification to your
employer. It is the sole responsibility of the your employer, not the
Distributor, Dreyfus, the Fund, the Transfer Agent or any other person, to
arrange for transactions under the Dreyfus Payroll Savings Plan. The Fund may
modify or terminate this Privilege at any time or charge a service fee. No
such fee currently is contemplated. Shares held under Keogh Plans, IRAs or
other retirement plans are not eligible for this Privilege.
AUTOMATIC WITHDRAWAL PLAN
The Automatic Withdrawal Plan permits you to request withdrawal of a
specified dollar amount (minimum of $50) on either a monthly or quarterly
basis if you have a $5,000 minimum account.
Particular Retirement Plans, including Dreyfus sponsored retirement
plans, may permit certain participants to establish an automatic withdrawal
plan from such Retirement Plans. Participants should consult their Retirement
Plan sponsor and tax adviser for details. Such a withdrawal plan is different
than the Automatic Withdrawal Plan. An application for the Automatic
Withdrawal Plan can be obtained by call-
Page 19
ing 1-800-645-6561. The Automatic Withdrawal Plan may be ended at any time by
the shareholder, the Fund or the Transfer Agent. Shares for which certificates
have been issued may not be redeemed through the Automatic Withdrawal Plan.
RETIREMENT PLANS
The Fund offers a variety of pension and profit-sharing plans,
including Keogh Plans, IRAs, SEP-IRAs and IRA "Rollover Accounts," 401(k)
Salary Reduction Plans and 403(b)(7) Plans. Plan support services also are
available. You can obtain details on the various plans by calling the
following numbers toll free: for Keogh Plans, please call 1-800-358-5566;
for IRAs and IRA "Rollover Accounts," please call 1-800-645-6561; for
SEP-IRAs, 401(k) Salary Reduction Plans and 403(b)(7) Plans, please call
1-800-322-7880.
HOW TO REDEEM FUND SHARES
GENERAL_You may request redemption of your shares at any time. Redemption
requests should be transmitted to the Transfer Agent as described below. When
a request is received in proper form, the Fund will redeem the shares at the
next determined NAV as described below. If you hold Fund shares of more than
one Class, any request for redemption must specify the Class of shares being
redeemed. If you fail to specify the Class of shares to be redeemed or if you
own fewer shares of the Class than specified to be redeemed, the redemption
request may be delayed until the Transfer Agent receives further instructions
from you or your Agent.
The Fund imposes no charges when shares are redeemed directly through
the Distributor. Agents or other institutions may charge their clients a
nominal fee for effecting redemptions of Fund shares. Any certificates
representing Fund shares being redeemed must be submitted with the redemption
request. The value of the shares redeemed may be more or less than their
original cost, depending upon the Fund's then-current NAV.
The Fund ordinarily will make payment for all shares redeemed within
seven days after receipt by the Transfer Agent of a redemption request in
proper form, except as provided by the rules of the SEC. HOWEVER, IF YOU HAVE
PURCHASED FUND SHARES BY CHECK, BY THE DREYFUS TELETRANSFER PRIVILEGE OR
THROUGH DREYFUS-AUTOMATIC ASSET BUILDER AND SUBSEQUENTLY SUBMIT A WRITTEN
REDEMPTION REQUEST TO THE TRANSFER AGENT, THE REDEMPTION PROCEEDS WILL BE
TRANSMITTED TO YOU PROMPTLY UPON BANK CLEARANCE OF YOUR PURCHASE CHECK,
DREYFUS TELETRANSFER PURCHASE OR DREYFUS-AUTOMATIC ASSET BUILDER ORDER, WHICH
MAY TAKE UP TO EIGHT BUSINESS DAYS OR MORE. IN ADDITION, THE FUND WILL REJECT
REQUESTS TO REDEEM SHARES BY WIRE OR TELEPHONE OR PURSUANT TO THE DREYFUS
TELETRANSFER PRIVILEGE FOR A PERIOD OF EIGHT BUSINESS DAYS AFTER RECEIPT BY
THE TRANSFER AGENT OF THE PURCHASE CHECK, THE DREYFUS TELETRANSFER PURCHASE
OR THE DREYFUS-AUTOMATIC ASSET BUILDER ORDER AGAINST WHICH SUCH REDEMPTION IS
REQUESTED. THESE PROCEDURES WILL NOT APPLY IF YOUR SHARES WERE PURCHASED BY
WIRE PAYMENT, OR IF YOU OTHERWISE HAVE A SUFFICIENT COLLECTED BALANCE IN YOUR
ACCOUNT TO COVER THE REDEMPTION REQUEST. PRIOR TO THE TIME ANY REDEMPTION IS
EFFECTIVE, DIVIDENDS ON SUCH SHARES WILL ACCRUE AND BE PAYABLE, AND YOU WILL
BE ENTITLED TO EXERCISE ALL OTHER RIGHTS OF BENEFICIAL OWNERSHIP. Fund shares
will not be redeemed until the Transfer Agent has received your Account
Application.
The Fund reserves the right to redeem your account at its option upon
not less than 45 days' written notice if the net asset value of your account
is $500 or less and remains so during the notice period.
PROCEDURES_You may redeem Fund shares by using the regular redemption
procedure through the Transfer Agent, the Wire Redemption Privilege, the
Telephone Redemption Privilege or, for Investor shares only, through the
Dreyfus TELETRANSFER Privilege. Other redemption procedures may be in effect
for clients of certain Agents and institutions. The Fund makes available to
certain large institutions the ability to issue redemption instructions
through compatible computer facilities.
Page 20
You may redeem Fund shares by telephone if you have checked the
appropriate box on the Fund's Account Application or have filed a shareholder
services Form with the Transfer Agent. If you select the TELETRANSFER
privilege or telephone exchange privilege, which is granted automatically
unless you refuse it, you authorize the Transfer Agent to act on telephone
instructions from any person representing himself or herself to be you, or a
representative of your Agent, and reasonably believed by the Transfer Agent
to be genuine. The Fund will require the Transfer Agent to employ reasonable
procedures, such as requiring a form of personal identification, to confirm
that instructions are genuine and, if it does not follow such procedures, the
Fund or the Transfer Agent may be liable for any losses due to unauthorized
or fraudulent instructions. Neither the Fund nor the Transfer Agent will be
liable for following telephone instructions reasonably believed to be genuine.
During times of drastic economic or market conditions, you may
experience difficulty in contacting the Transfer Agent by telephone to
request a redemption or an exchange of Fund shares. In such cases, you should
consider using the other redemption procedures described herein. Use of these
other redemption procedures may result in your redemption request being
processed at a later time than it would have been if telephone redemption had
been used. During the delay, the Fund's NAV may fluctuate.
REGULAR REDEMPTION. Under the regular redemption procedure, you may
redeem your shares by written request mailed to The Dreyfus Family of Funds,
P.O. Box 9671, Providence, Rhode Island 02940-9671 or if for Dreyfus
retirement plan accounts to The Dreyfus Trust Company, Custodian, P.O. Box
6427, Providence, Rhode Island 02940-6427. Redemption requests may be
delivered in person only to a Dreyfus Financial Center. These requests will
be forwarded to the Fund and will be processed only upon receipt thereby. For
the location of the nearest financial center, please call the telephone
number listed under "General Information." Redemption requests must be signed
by each shareholder, including each owner of a joint account, and each
signature must be guaranteed. The Transfer Agent has adopted standards and
procedures pursuant to which signature-guarantees in proper form generally
will be accepted from domestic banks, brokers, dealers, credit unions,
national securities exchanges, registered securities associations, clearing
agencies and savings associations, as well as from participants in the New
York Stock Exchange Medallion Signature Program, the Securities Transfer
Agents Medallion Program ("STAMP"), and the Stock Exchanges Medallion
Program. For more information with respect to signature-guarantees, please
call one of the telephone numbers listed under "General Information."
Redemption proceeds of at least $1,000 will be wired to any member
bank of the Federal Reserve System in accordance with a written
signature-guaranteed request.
WIRE REDEMPTION PRIVILEGE. You may request by wire or telephone that
redemption proceeds (minimum $1,000) be wired to your account at a bank which
is a member of the Federal Reserve System, or a correspondent bank if your
bank is not a member. To establish the Wire Redemption Privilege, you must
check the appropriate box and supply the necessary information on the Fund's
Account Application or file a Shareholder Services Form with the Transfer
Agent. You may direct that redemption proceeds be paid by check (maximum
$150,000 per day) made out to the owners of record and mailed to your
address. Redemption proceeds of less than $1,000 will be paid automatically
by check. Holders of jointly registered Fund or bank accounts may have
redemption proceeds of only up to $250,000 wired within any 30-day period.
You may telephone redemption requests by calling 1-800-221-4060 or, if
calling from overseas, 1-401-455-3306. The Fund reserves the right to refuse
any redemption request, including requests made shortly after a change of
address, and may limit the amount involved or the number of such requests.
This Privilege may be modified or terminated at anytime by the Transfer Agent
or the Fund. The Fund's SAI sets forth instructions for transmitting
redemption requests by wire. Shares held
Page 21
under Keogh Plans, IRAs or other retirement plans, and shares for which
certificates have been issued, are not eligible for this Privilege.
TELEPHONE REDEMPTION PRIVILEGE. You may redeem Fund shares (maximum
$150,000 per day) by telephone if you checked the appropriate box on the
Fund's Account Application or have filed a Shareholder Services Form with the
Transfer Agent. The redemption proceeds will be paid by check and mailed to
your address. You may telephone redemption instructions by calling
1-800-221-4060 or, if calling from overseas, 1-401-455-3306. The Fund
reserves the right to refuse any request made by telephone, including
requests made shortly after a change of address, and may limit the amount
involved or the number of such requests. This Privilege may be modified or
terminated at any time by the Transfer Agent or the Fund. Shares held under
Keogh Plans, IRAs or other retirement plans, and shares for which certificates
have been issued, are not eligible for this Privilege.
DREYFUS TELETRANSFER PRIVILEGE_INVESTOR SHARES. You may redeem Fund
shares (minimum $500 per day) by telephone if you have checked the
appropriate box and supplied the necessary information on the Fund's Account
Application or have filed a Shareholder Services Form with the Transfer
Agent. The proceeds will be transferred between your Fund account and the
bank account designated in one of these documents. Only such an account
maintained in a domestic financial institution which is an ACH member may be
so designated. Redemption proceeds will be on deposit in your account at an
ACH member bank ordinarily two days after receipt of the redemption request
or, at your request, paid by check (maximum $150,000 per day) and mailed to
your address. Holders of jointly registered Fund or bank accounts may redeem
through the Dreyfus TELETRANSFER Privilege for transfer to their bank account
only up to $250,000 within any 30-day period. The Fund reserves the right to
refuse any request made by telephone, including requests made shortly after a
change of address, and may limit the amount involved or the number of such
requests. The Fund may modify or terminate this Privilege at any time or
charge a service fee upon notice to shareholders. No such fee currently is
contemplated.
If you have selected the Dreyfus TELETRANSFER Privilege, you may
request a Dreyfus TELETRANSFER redemption of Fund shares by telephoning
1-800-221-4060 or, if calling from overseas, 1-401-455-3306. Shares held
under Keogh Plans, IRAs or other retirement plans, and shares issued in
certificate form, are not eligible for this Privilege.
DISTRIBUTION PLAN
(INVESTOR SHARES ONLY)
Investor shares are subject to a Distribution Plan (the "Plan")
adopted pursuant to Rule 12b-1 under the 1940 Act ("Rule 12b-1"). Investor
shares of the Fund bear some of the cost of selling those shares under the
Plan. The Plan allows the Fund to spend annually up to 0.25% of its average
daily net assets attributable to Investor shares to compensate Dreyfus
Service Corporation, an affiliate of Dreyfus, for shareholder servicing
activities and the Distributor for shareholder servicing activities and for
activities or expenses primarily intended to result in the sale of Investor
shares of the Fund. The Plan allows the Distributor to make payments from the
Rule 12b-1 fees it collects from the Fund to compensate Agents that have
entered into Selling Agreements ("Agreements") with the Distributor. Under
the Agreements, the Agents are obligated to provide distribution related
services with regard to the Fund and/or shareholder services to the Agent's
clients that own Investor shares of the Fund.
The Fund and the Distributor may suspend or reduce payments under the
Plan at any time, and payments are subject to the continuation of the Fund's
Plan and the Agreements described above. From time to time, the Agents, the
Distributor and the Fund may agree to voluntarily reduce the maximum fees
payable under the Plan. See the SAI for more details on the Plan.
Page 22
Potential investors should read this Prospectus in light of the terms
governing Agreements with their Agents. An Agent entitled to receive
compensation for selling and servicing the Fund's shares may receive
different compensation with respect to one class of shares over another.
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
The Fund declares and pays dividends from its net investment income,
if any, four times a year and distributes net realized gains, if any, once a
year, but it may make distributions on a more frequent basis to comply with
the distribution requirements of the Code, in all events in a manner
consistent with the provisions of the 1940 Act. The Fund will not make
distributions from net realized gains unless capital loss carryovers, if any,
have been utilized or have expired. Investors other than qualified Retirement
Plans may choose whether to receive dividends and other distributions in cash
or to reinvest them in additional Fund shares; dividends and other
distributions paid to qualified Retirement Plans are reinvested automatically
in additional Fund shares at NAV. All expenses are accrued daily and deducted
before declaration of dividends to investors. Dividends paid by each Class
will be calculated at the same time and in the same manner and will be in the
same amount, except that the expenses attributable solely to a particular
Class will be borne exclusively by that Class. Investor shares will receive
lower per share dividends than Class R shares because of the higher expenses
borne by the Investor Class. See "Expense Summary."
It is expected that the Fund will qualify as a "regulated investment
company" under the Code so long as such qualification is in the best
interests of its shareholders. Such qualification will relieve the Fund of
any liability for Federal income tax to the extent its earnings are
distributed in accordance with applicable provisions of the Code.
Dividends derived from net investment income, together with
distributions from net realized short-term capital gains and all or a portion
of any gains realized from the sale or other disposition of certain market
discount bonds, paid by the Fund will be taxable to U.S. shareholders,
including certain non-qualified Retirement Plans, as ordinary income whether
received in cash or reinvested in Fund shares. Distributions from the Fund's
net realized long-term capital gains will be taxable to such shareholders as
long-term capital gains for Federal income tax purposes, regardless of how
long the shareholders have held their Fund shares and whether such
distributions are received in cash or reinvested in Fund shares. The net
capital gain of an individual generally will not be subject to Federal income
tax at a rate in excess of 28%. Dividends and other distributions also may be
subject to state and local taxes.
Dividends derived from net investment income, together with
distributions from net realized short-term capital gains and all or a portion
of any gains realized from the sale or other disposition of certain market
discount bonds, paid by the Fund to a foreign investor generally are subject
to U.S. withholding tax at the rate of 30%, unless the foreign investor
claims the benefit of a lower rate specified in a tax treaty. Distributions
from net realized long-term capital gains paid by the Fund to a foreign
investor, as well as the proceeds of any redemptions from a foreign
investor's account, regardless of the extent to which gain or loss may be
realized, generally will not be subject to U.S. withholding tax. However,
such distributions may be subject to backup withholding, as described below,
unless the foreign investor certifies his non-U.S. residency status.
Notice as to the tax status of your dividends and other distributions
will be mailed to you annually. You also will receive periodic summaries of
your account which will include information as to dividends and distributions
from net realized, long-term capital gains, if any, paid during the year.
Dividends paid by the Fund to qualified Retirement Plans ordinarily
will not be subject to taxation until the proceeds are distributed from the
Retirement Plans. The Fund will not report to the IRS dividends paid to such
plans. Generally, distributions from qualified Retirement Plans, except those
representing returns of non-deductible contributions thereto, will be taxable
as ordinary income and, if made
Page 23
prior to the time the participant reaches age 59-1/2, generally will be
subject to an additional tax equal to 10% of the taxable portion of the
distribution. If the distribution from such a Retirement Plan (other than
certain governmental or church plans) for any taxable year following the year
in which the participant reaches age 70-1/2 is less than the "minimum required
distribution" for that taxable year, an excise tax equal to 50% of the
deficiency may be imposed by the IRS. The administrator, trustee or custodian
of such a Retirement Plan will be responsible for reporting distributions from
such plans to the IRS. Moreover, certain contributions to a qualified
Retirement Plan in excess of the amounts permitted by law may be subject to
an excise tax.
With respect to individual investors and certain non-qualified
Retirement Plans, Federal regulations generally require the Fund to withhold
("backup withholding") and remit to the U.S. Treasury 31% of dividends,
distributions from net realized long-term capital gains and the proceeds of
any redemption, regardless of the extent to which gain or loss may be
realized, paid to a shareholder if such shareholder fails to certify either
that the TIN furnished in connection with opening an account is correct or
that such shareholder has not received notice from the IRS of being subject
to backup withholding as a result of a failure to properly report taxable
dividend or interest income on a Federal income tax return. Furthermore, the
IRS may notify the Fund to institute backup withholding if the IRS determines
a shareholder's TIN is incorrect or if a shareholder has failed to properly
report taxable dividend and interest income on a Federal income tax return.
A TIN is either the Social Security number or employer identification
number of the record owner of the account. Any tax withheld as a result of
backup withholding does not constitute an additional tax imposed on the
record owner of the account and may be claimed as a credit on the record
owner's Federal income tax return.
The Fund may be subject to a non-deductible 4% excise tax, measured
with respect to certain undistributed amounts of taxable investment income
and capital gains.
You should consult your tax advisers regarding specific questions as
to Federal, state or local taxes.
PERFORMANCE INFORMATION
For purposes of advertising, performance for each Class may be
calculated on the basis of average annual total return and/or total return.
These total return figures reflect changes in the price of the shares and
assume that any income dividends and/or capital gains distributions made by
the Fund during the measuring period were reinvested in shares of the same
Class. These figures also take into account any applicable service and
distribution fees. As a result, at any given time, the performance of the
Investor Class should be expected to be lower than that of Class R.
Performance for each Class will be calculated separately.
Average annual total return is calculated pursuant to a standardized
formula which assumes that an investment was purchased with an initial
payment of $1,000 and that the investment was redeemed at the end of a stated
period of time, after giving effect to the reinvestment of dividends and
other distributions during the period. The return is expressed as a
percentage rate which, if applied on a compounded annual basis, would result
in the redeemable value of the investment at the end of the period. Advertisem
ents of the Fund's performance will include the Fund's average annual total
return for one, five and ten year periods, or for shorter periods depending
upon the length of time during which the Fund has operated. Computations of
average annual total return for periods of less than one year represent an
annualization of the Fund's actual total return for the applicable period.
Total return is computed on a per share basis and assumes the
reinvestment of dividends and other distributions. Total return generally is
expressed as a percentage rate which is calculated by combining
Page 24
the income and principal changes for a specified period and dividing by the
NAV (or maximum offering price in the case of Investor shares) per share at
the beginning of the period. Advertisements may include the percentage rate of
total return or may include the value of a hypothetical investment at the end
of the period which assumes the application of the percentage rate of total
return.
The Fund may also advertise the yield on a Class of shares. The
Fund's yield is calculated by dividing a Class of shares' annualized net
investment income per share during a recent 30-day (or one month) period by
the maximum public offering price per Class of such share on the last day of
that period. Since yields fluctuate, yield data cannot necessarily be used to
compare an investment in a Class of shares with bank deposits, savings
accounts, and similar investment alternatives which often provide an
agreed-upon or guaranteed fixed yield for a stated period of time.
Performance will vary from time to time and past results are not
necessarily representative of future results. You should remember that
performance is a function of portfolio management in selecting the type and
quality of portfolio securities and is affected by operating expenses.
Performance information, such as that described above, may not provide a
basis for comparison with other investments or other investment companies
using a different method of calculating performance.
The Fund may compare the performance of its shares with various
industry standards of performance including Lipper Analytical Services, Inc.
ratings, Standard and Poor's Midcap Stock Index, CDA Technologies Indexes,
indexes created by Lehman Brothers, the Consumer Price Index, and the Dow
Jones Industrial Average. Performance rankings as reported in CHANGING TIMES,
BUSINESS WEEK, INSTITUTIONAL INVESTOR, THE WALL STREET JOURNAL,
IBC/DONOGHUE'S MONEY FUND REPORT, MUTUAL FUND FORECASTER, NO LOAD INVESTOR,
MONEY MAGAZINE, MORNINGSTAR MUTUAL FUND VALUES, U.S. NEWS AND WORLD REPORT,
FORBES, FORTUNE, BARRON'S and similar publications may also be used in
comparing the Fund's performance. Furthermore, the Fund may quote its shares'
total returns and yields in advertisements or in shareholder reports. The
Fund may also advertise non-standardized performance information, such as
total return for periods other than those required to be shown or cumulative
performance data. The Fund may advertise a quotation of yield or other
similar quotation demonstrating the income earned or distributions made by
the Fund.
GENERAL INFORMATION
The Company was incorporated in Maryland on August 6, 1987 under the
name The Laurel Funds, Inc., and changed its name to The Dreyfus/Laurel
Funds, Inc. on October 17, 1994. The Company is registered with the
Securities and Exchange Commission under the 1940 Act, as an open-end,
diversified management investment company. The Company has an authorized
capitalization of 25 billion shares of $0.001 par value stock with equal
voting rights. The Fund is a portfolio of the Company. The Fund's shares are
classified into two classes_Investor Class and Class R. The Company's
Articles of Incorporation permit the Board of Directors to create an
unlimited number of investment portfolios (each a "fund").
Each share (regardless of Class) has one vote. All shares of all
funds (and Classes thereof) vote together as a single class, except as to any
matter for which a separate vote of any fund or Class is required by the 1940
Act, and except as to any matter which affects the interests of one or more
particular funds or Classes, in which case only the shareholders of the
affected fund or Classes are entitled to vote, each as a separate class. Only
holders of Investor shares will be entitled to vote on matters submitted to
shareholders pertaining to the Distribution Plan relating to that Class.
At January 31 1995, Mellon Bank, Dreyfus' parent, owned of record
through its direct and indirect subsidiaries more than 25% of the Company's
outstanding voting shares, and is deemed, under the 1940 Act, to be a
controlling shareholder.
Ppage 25
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 Directors or the
appointment of auditors. However, pursuant to the Company's By-Laws, the
holders of at least 10% of the shares outstanding and entitled to vote may
require the Company to hold a special meeting of shareholders for purposes of
removing a Director from office and for any other purpose. Company
shareholders may remove a Director by the affirmative vote of a majority of
the Company's outstanding voting shares. In addition, the Board of Directors
will call a meeting of shareholders for the purpose of electing Directors if,
at any time, less than a majority of the Directors then holding office have
been elected by shareholders.
The Transfer Agent maintains a record of your ownership and will send
you confirmations and statements of account.
Shareholder inquiries may be made by writing to the Fund at 144 Glenn
Curtiss Boulevard, Uniondale, New York 11556-0144, or by calling toll free
1-800-645-6561.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND IN THE
FUND'S OFFICIAL SALES LITERATURE IN CONNECTION WITH THE OFFER OF THE FUND'S
SHARES, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER IN ANY STATE IN WHICH, OR TO ANY PERSON TO WHOM,
SUCH OFFERING MAY NOT LAWFULLY BE MADE.
Page 26
[This Page Intentionally Left Blank]
Page 27
DREYFUS
Disciplined
Midcap
Stock Fund
Prospectus
(LIONM LOGO)
Registration Mark
Copy Rights 1995 Dreyfus Service Corporation
330/730p2030195
<PAGE>
PROSPECTUS
-----------
The DREYFUS
[Small box above fund name showing a lion's face]
FAMILY
of FUNDS
-----------
---
DREYFUS S&P 500 STOCK INDEX FUND
Investor and Class R Shares
---
MARCH 1, 1995
PROSPECTUS BEGINS ON PAGE 1
<PAGE>
PROSPECTUS
-------------------------------------
- - - --------------------------------------------------------------------------------
DREYFUS
S&P 500 STOCK
INDEX FUND
Investor and Class R Shares
March 1, 1995
DREYFUS S&P 500 STOCK INDEX FUND'S objective is to replicate the total
return of the Standard & Poor's 500 Composite Stock Price Index primarily
through investments in equity securities.
THIS PROSPECTUS describes the Dreyfus S&P 500 Stock Index Fund (the
"Fund"), a separate portfolio of The Dreyfus/Laurel Funds, Inc. (formerly The
Laurel Funds, Inc.), an open-end, diversified management investment company that
is part of The Dreyfus Family of Funds. This Prospectus describes two classes of
shares--Investor Shares and Class R Shares (collectively, the "Shares")--of the
Fund.
..............................................................................
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. ALL MUTUAL
FUND SHARES INVOLVE CERTAIN RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THE FEES TO WHICH THE FUND IS SUBJECT ARE SUMMARIZED IN THE "EXPENSE
SUMMARY" SECTION OF THE FUND'S PROSPECTUS. THE FUND PAYS MELLON BANK, N.A.
("MELLON BANK") OR ITS AFFILIATES TO BE ITS INVESTMENT MANAGER. MELLON BANK OR
AN AFFILIATE MAY BE PAID FOR PERFORMING OTHER SERVICES FOR THE FUND, SUCH AS
CUSTODIAN, TRANSFER AGENT OR FUND ACCOUNTANT SERVICES. THE FUND IS DISTRIBUTED
BY PREMIER MUTUAL FUND SERVICES, INC.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
................................... 1 ..........................................
- - - --------------------------------------------------------------------------------
<PAGE>
DREYFUS S&P 500 STOCK INDEX FUND
-------------------------------------
- - - --------------------------------------------------------------------------------
This Prospectus sets forth concisely the information about the Fund that a
prospective purchaser should consider before investing. Investors should read
this Prospectus and retain it for future reference. Additional information about
the Fund is contained in a Statement of Additional Information (the "SAI"),
which has been filed with the Securities and Exchange Commission (the "SEC") and
is available upon request without charge by calling or writing to The Dreyfus
Family of Funds. The SAI bears the same date as this Prospectus and is
incorporated by reference in its entirety into this Prospectus.
In addition to the Fund, The Dreyfus Family of Funds also offers other
funds that provide investment opportunities for you in the equity, fixed income
and money markets. For more information about these additional investment
opportunities, call 1-800-548-2868.
................................................................................
The Dreyfus Family of Funds
P.O. Box 9692
Providence, Rhode Island 02940-9830
..................................... 2 ........................................
- - - --------------------------------------------------------------------------------
<PAGE>
PROSPECTUS
-------------------------------------
- - - --------------------------------------------------------------------------------
- - - ------------------------------------------------------------
TABLE OF CONTENTS
- - - ------------------------------------------------------------
Page
----
Expense Summary................................................................5
Financial Highlights...........................................................6
Alternative Purchase Methods...................................................8
Investment Objective and Policies..............................................8
Other Investment Policies and Risk Factors.....................................9
HOW TO DO BUSINESS WITH US
Special Shareholder Services..................................................15
Investor Line.................................................................15
How to Invest in The Fund.....................................................15
By Mail.....................................................................16
By Telephone................................................................16
By Wire.....................................................................17
By Automatic Monthly Investments............................................17
By Direct Deposit...........................................................17
By In-Kind Purchases........................................................17
When Share Price is Determined..............................................18
Additional Information About Investments....................................18
How to Exchange Your Investment From One Fund to Another......................19
By Telephone................................................................19
By Mail.....................................................................19
Additional Information About Exchanges......................................19
How to Redeem Shares..........................................................20
By Telephone................................................................20
By Mail.....................................................................21
By Automated Withdrawal Program.............................................21
Redemption Proceeds.........................................................22
Additional Information About Redemptions....................................22
How to Use The Dreyfus Family of Funds in a
Tax-Qualified Retirement Plan...............................................23
How to Transfer an Investment to a
Dreyfus Family of Funds' Retirement Plan..................................23
....................................... 3 ......................................
- - - --------------------------------------------------------------------------------
<PAGE>
DREYFUS S&P 500 STOCK INDEX FUND
-------------------------------------
- - - --------------------------------------------------------------------------------
- - - ------------------------------------------------------------
TABLE OF CONTENTS(CONTINUED)
- - - ------------------------------------------------------------
OTHER INFORMATION Page
Share Price...................................................................23
Performance Advertising.......................................................24
Distributions.................................................................25
Taxes.........................................................................27
Other Services................................................................28
Further Information About The Fund............................................29
The Dreyfus/Laurel Funds, Inc...............................................29
Management..................................................................29
Distribution Plan (Investor Class Only).....................................32
................................................................................
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE FUND'S SAI
INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH THE OFFERING MADE BY THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND OR THE DISTRIBUTOR. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE FUND OR BY THE DISTRIBUTOR IN
ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT BE LAWFULLY MADE.
..................................... 4 ......................................
- - - --------------------------------------------------------------------------------
<PAGE>
PROSPECTUS
-------------------------------------
- - - --------------------------------------------------------------------------------
EXPENSE SUMMARY
The purpose of the following table is to help you understand the various costs
and expenses that you, as a Shareholder, will bear directly or indirectly in
connection with an investment in the Investor or Class R Shares of the Fund (See
"Management.")
- - - --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
R Investor Class
Shares Shares
</TABLE>
- - - --------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES
- - - --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Maximum Sales Load Imposed on Purchases none none
Maximum Sales Load Imposed on Reinvestments none none
Deferred Sales Load none none
Redemption Fee none none
Exchange Fee none none
</TABLE>
- - - --------------------------------------------------------------------------------
ESTIMATED ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF NET ASSETS)
- - - --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
Management Fee 0.40% 0.40%
12b-1 Fee* 0.25% none
Other Expenses** 0.00% 0.00%
----- -----
Total Fund Operating Expenses 0.65% 0.40%
</TABLE>
- - - --------------------------------------------------------------------------------
EXAMPLES
<TABLE>
<S> <C> <C> <C>
You would pay the following on 1 year $ 7 $ 4
a $1,000 investment, assuming (1) a 3 years 21 13
5% annual return and (2) redemption 5 years N/A 22
at the end of each time period: 10 years N/A 51
</TABLE>
- - - --------------------------------------------------------------------------------
* See "Distribution Plan (Investor Class Only)" for a description of the Fund's
Plan of Distribution for the Investor Class.
** Does not include fees and expenses of the non-interested Directors (including
counsel). The investment manager is contractually required to reduce its
Management Fee in an amount equal to the Fund's allocable portion of such
fees and expenses, which are estimated to be 0.02% of the Fund's net assets.
(See "Management.")
................................................................................
THE INFORMATION CONTAINED IN THE TABLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS
THAN THOSE SHOWN.
................................................................................
The Fund understands that banks, brokers, dealers or other financial
institutions (including Mellon Bank and its affiliates) (collectively "Agents")
may charge fees to their clients who are owners of the Fund's Investor Shares
for various services provided in connection with a client's account. These fees
would be in addition to any amounts received by an Agent under its Selling
Agreement ("Agreement") with Premier Mutual Fund Services, Inc. ("Premier"). The
Agreement requires each Agent to disclose to its clients any compensation
payable to such Agent by Premier and any other compensation payable by the
client for various services provided in connection with its account.
Long-term shareholders of Investor Shares could pay more in Rule 12b-1 fees
than the economic equivalent of the maximum front-end sales charges applicable
to mutual funds sold by members of the National Association of Securities
Dealers, Inc.
........................................ 5 ....................................
- - - --------------------------------------------------------------------------------
<PAGE>
DREYFUS S&P 500 STOCK INDEX FUND
-------------------------------------
- - - -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The tables below are based upon a single Investor Share or Class R Share
outstanding throughout each fiscal year or period ended October 31, and should
be read in conjunction with the financial statements and related notes that
appear in the Fund's Annual Report dated October 31, 1994, which is incorporated
by reference in the SAI. The financial statements included in the
- - - -------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------
DREYFUS S&P 500 STOCK INDEX FUND
FOR AN INVESTOR SHARE OUTSTANDING THROUGHOUT THE PERIOD.
- - - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD
ENDED
10/31/94*#
<S> <C>
Net asset value, beginning of period $ 9.78
-------
Income from investment operations:
Net investment income 0.17
Net realized and unrealized gain on investments 0.59
-------
Total from investment operations 0.76
Less distributions:
Distribution net investment income (0.13)
Net asset value, end of period $ 10.41
-------
Total return++ 7.86%
=======
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 381
Ratio of operating expenses to average net assets 0.65%**
Ratio of net investment income to average net assets 2.13%**
Portfolio turnover rate 13%
</TABLE>
- - - -------------------------------------------------------------------------------
<TABLE>
<S> <C>
* The Fund commenced selling Investor Shares on April 18, 1994.
++ Total return represents aggregate total return for the period indicated.
** Annualized.
# Prior to October 17, 1994, Mellon Bank, N.A. served as the Fund's
investment manager. Effective October 17, 1994, The Dreyfus Corporation
serves as the Fund's investment manager.
</TABLE>
- - - -------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------
....................................... 6 .....................................
- - - -------------------------------------------------------------------------------
<PAGE>
PROSPECTUS
-------------------------------------
- - - --------------------------------------------------------------------------------
Fund's Annual Report for the year ended October 31, 1994 have been audited by
KPMG Peat Marwick LLP, independent accountants, whose report appears in the
Fund's Annual Report. Further information about the Fund's performance is
contained in the Fund's Annual Report which may be obtained without charge.
- - - --------------------------------------------------------------------------------
- - - --------------------------------------------------------------------------------
- - - --------------------------------------------------------------------------------
DREYFUS S&P 500 STOCK INDEX FUND
FOR A CLASS R SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
- - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR PERIOD
ENDED ENDED
10/31/94* 10/31/93*
<S> <C> <C>
Net asset value, beginning of period $ 10.23 $ 10.00
----------- --------
Income from investment operations:
Net investment income 0.21# 0.01
Net realized and unrealized gain on investments 0.14 0.22
----------- --------
Total from investment operations 0.35 0.23
----------- --------
Less distributions:
Dividends from net investment income (0.16) --
Distributions from net capital gains (0.00)+ --
------------ --------
Total Distributions (0.16) --
------------ --------
Net asset value, end of period $ 10.42 $ 10.23
============ ========
Total Return++ 3.50% 2.30%
Ratios/Supplemental data:
Net assets, end of period ($000's) $ 123,944 $ 24,004
Net operating expenses to average net
assets 0.40%*** .40% **##
Net investment income to average net assets 2.38% 1.32% **
Portfolio turnover rate 13% 22% ###
</TABLE>
- - - --------------------------------------------------------------------------------
<TABLE>
<C> <S>
* The Fund commenced operations on September 30, 1993. The Fund commenced selling
Investor Shares on April 18, 1994. Those shares outstanding prior to April 4, 1994
were designated Trust Shares. Effective as of October 17, 1994, the Fund's Trust
Shares were redesignated Class R Shares.
** Annualized.
*** Annualized expense ratio before voluntary reimbursement of expenses by the
investment adviser for the year ended October 31, 1994 was 0.45%.
+ Amount represents less than $0.01.
++ Total return represents aggregate total return for the period indicated.
# Net investment income per share before reimbursement of expenses by the investment
adviser for the year ended October 31, 1994 was $0.21.
## For the period September 30, 1993 (commencement of operations) to October 31, 1993,
the investment adviser reimbursed expenses of the Fund amounting to $0.0103 per
share.
### Turnover calculation does not include in-kind purchases amounting to $22,472,311.
</TABLE>
- - - --------------------------------------------------------------------------------
- - - --------------------------------------------------------------------------------
....................................... 7 ......................................
- - - --------------------------------------------------------------------------------
<PAGE>
DREYFUS S&P 500 STOCK INDEX FUND
-------------------------------------
- - - --------------------------------------------------------------------------------
- - - ------------------------------------------------------------
DREYFUS S&P 500 STOCK INDEX FUND
- - - ------------------------------------------------------------
ALTERNATIVE PURCHASE METHODS
Investor Shares and Class R Shares are also offered through a servicing network
associated with The Dreyfus Corporation (the "Manager") pursuant to a separate
Prospectus. For more information and a Prospectus relating to shares offered
through that network, call 1-800-645-6561. Please read that Prospectus
carefully. Exchange and shareholder services vary depending upon the network
through which you purchase your Fund shares.
Holders of Class R Shares who have held their Shares since April 4, 1994,
may continue to purchase Class R Shares of the Fund whether or not they would
otherwise be eligible to do so.
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is to replicate the total return of the Standard
& Poor's 500 Composite Stock Price Index (the "S&P 500 Index" or the "Index")
primarily through investments in equity securities. See "OTHER INVESTMENT
POLICIES AND RISK FACTORS" on page 9 for a detailed description of risks and
other Fund investment policies. See "OTHER INVESTMENT POLICIES AND RISK FACTORS
- - - -- Limiting Risks" for a discussion of the Fund's investment limitations.
The Fund is not managed according to traditional methods of "active"
investment management, which involve the buying and selling of securities based
upon economic, financial and market analysis and investment judgment. Instead,
the Fund utilizes a "passive" investment approach, attempting to duplicate the
investment performance of the S&P 500 Index through statistical procedures.
The S&P 500 Index is composed of 500 common stocks that are selected by
Standard & Poor's ("Standard & Poor's" or "S&P") to capture best the price
performance of a large cross-section of the U.S. publicly traded stock market.
The 500 securities, most of which trade on the New York Stock Exchange ("NYSE"),
represent approximately 75% of the market value of all U.S. common stocks. Each
stock in the S&P 500 Index is weighted by its market capitalization. That is,
each security is weighted by its total market value relative to the total market
value of all the securities in the Index. Component stocks included in the S&P
500 Index are chosen with the aim of achieving a distribution at the index level
representative of the various components of the U.S. economy and therefore do
not represent the 500 largest companies. Aggregate market value and trading
activity are also considered in the selection process.
As the Fund's assets increase, the Fund expects to invest in all 500 stocks
in the S&P 500 Index in proportion to their weighting in the Index, except that
the Fund does not intend to
...................................... 8 .......................................
- - - --------------------------------------------------------------------------------
<PAGE>
PROSPECTUS
-------------------------------------
- - - --------------------------------------------------------------------------------
invest in Mellon Bank Corporation stock at this time. To the extent that the
size of the Fund does not permit it to invest in all 500 stocks in the Index,
the Fund will purchase a representative sample of stock from each industry
sector included in the Index in proportion to that industry's weighting in the
Index.
To the extent that the Fund seeks to replicate the S&P 500 Index using such
sampling techniques, a close correlation between the Fund's performance and the
performance of the Index is anticipated in both rising and falling markets. The
Fund attempts to achieve a correlation between the performance of its
investments and that of the Index of at least 0.95, before deduction of
expenses. A correlation of 1.00 would represent perfect correlation between Fund
and Index performance. It is anticipated that the correlation of the Fund's
performance to that of the Index will increase as the size of the Fund
increases. The Fund's ability to achieve significant correlation between Fund
and Index performance may be affected by changes in securities markets, changes
in the composition of the Index and the timing of purchases and redemptions of
Fund shares. The Manager monitors this correlation and reports periodically to
the Board of Directors. Should the Fund fail to achieve an appropriate level of
correlation, the Board will consider alternative arrangements.
Under normal circumstances, the Fund invests at least 95% of its total
assets in the common stocks included in the S&P 500 Index. To maintain
liquidity, the Fund may invest up to 5% of its assets in the following
instruments: U.S. Government securities, commercial paper, bank certificates of
deposit, bank demand and time deposits, repurchase agreements, reverse
repurchase agreements, when-issued transactions and variable amount master
demand notes. The Fund may also lend securities in an amount not to exceed
33 1/3% of its total assets. The Fund may also enter into futures contracts and
options to a limited extent. The Fund will invest in futures contracts or
options or money market instruments as part of a temporary defensive strategy,
such as decreasing the Fund's investment in common stocks to protect against
potential stock market declines. (See "OTHER INVESTMENT POLICIES AND RISK
FACTORS.")
OTHER INVESTMENT POLICIES AND RISK FACTORS
BORROWING. The Fund is authorized, within specified limits, to borrow
money for temporary administrative purposes and to pledge its assets in
connection with such borrowings.
COMMERCIAL PAPER. The Fund may invest in commercial paper. These
instruments are short-term obligations issued by banks and corporations that
have maturities ranging from 2 to 270 days. Each instrument may be backed only
by the credit of the issuer or may be backed by some form of credit enhancement,
typically in the form of a guarantee by a commercial bank. Commercial paper
backed by guarantees of foreign banks may involve additional risk due to the
....................................... 9 ......................................
- - - --------------------------------------------------------------------------------
<PAGE>
DREYFUS S&P 500 STOCK INDEX FUND
-------------------------------------
- - - --------------------------------------------------------------------------------
difficulty of obtaining and enforcing judgments against such banks and the
generally less restrictive regulations to which such banks are subject. The Fund
will only invest in commercial paper of U.S. and foreign companies rated A-1 at
the time of purchase by Standard & Poor's, Ratings Group Prime-1 by Moody's
Investors Service, Inc., F-1 by Fitch Investors Service, Inc., Duff 1 by Duff &
Phelps, Inc., or A1 by IBCA, Inc.
FUTURES, OPTIONS AND OTHER DERIVATIVE INSTRUMENTS. The Fund may attempt to
reduce the overall level of investment risk of particular securities and attempt
to protect the Fund against adverse market movements by investing in futures,
options and other derivative instruments. These include the purchase and writing
of options on securities (including index options) and options on foreign
currencies and investing in futures contracts for the purchase or sale of
instruments based on financial indices, including interest rate indices or
indices of U.S. or foreign governments, equity or fixed income securities
("futures contracts"), options on futures contracts, forward contracts and swaps
and swap-related products such as equity swap contracts, interest rate swaps,
currency swaps, caps, collars and floors.
The use of futures, options, forward contracts and swaps exposes the Fund
to additional investment risks and transaction costs. If the Manager incorrectly
analyzes market conditions or does not employ the appropriate strategy with
respect to these instruments, the Fund could be left in a less favorable
position. Additional risks inherent in the use of futures, options, forward
contracts and swaps include: imperfect correlation between the price of futures,
options and forward contracts and movements in the prices of the securities or
currencies being hedged; the possible absence of a liquid secondary market for
any particular instrument at any time; and the possible need to defer closing
out certain hedged positions to avoid adverse tax consequences. The Fund may not
purchase put and call options which are traded on a national stock exchange in
an amount exceeding 5% of its net assets. Further information on the use of
futures, options and other derivative instruments, and the associated risks is
contained in the SAI.
ILLIQUID SECURITIES. The Fund will not knowingly invest more than 15% of
the value of its net assets in illiquid securities, including time deposits and
repurchase agreements having maturities longer than seven days. Securities that
have readily available market quotations are not deemed illiquid for purposes of
this limitation (irrespective of any legal or contractual restrictions on
resale). The Fund may invest in commercial obligations issued in reliance on the
so-called "private placement" exemption from registration afforded by Section
4(2) of the Securities Act of 1933, as amended ("Section 4(2) paper"). The Fund
may also purchase securities that are not registered under the Securities Act of
1933, as amended, but which can be sold to qualified institutional buyers in
accordance with Rule 144A under that Act ("Rule 144A securities"). Liquidity
determinations with respect to Section 4(2) paper and Rule 144A
...................................... 10 ......................................
- - - --------------------------------------------------------------------------------
<PAGE>
PROSPECTUS
-------------------------------------
- - - --------------------------------------------------------------------------------
Securities will be made by the Board of Directors as required. The Board will
consider availability of reliable price information and other relevant
information in making such determinations. Section 4(2) paper is restricted as
to disposition under the federal securities laws, and generally is sold to
institutional investors such as the Fund that agree that they are purchasing the
paper for investment and not with a view to public distribution. Any resale by
the purchaser must be in an exempt transaction. Section 4(2) paper normally is
resold to other institutional investors like the Fund through or with the
assistance of the issuer or investment dealers who make a market in the Section
4(2) paper, thus providing liquidity. Rule 144A securities generally must be
sold to other qualified institutional buyers. If a particular investment in
Section 4(2) paper or Rule 144A securities is not determined to be liquid, that
investment will be included within the percentage limitation on investment in
illiquid securities. The ability to sell Rule 144A securities to qualified
institutional buyers is a recent development and it is not possible to predict
how this market will mature. Investing in Rule 144A securities could have the
effect of increasing the level of fund illiquidity to the extent that qualified
institutional buyers become, for a time, uninterested in purchasing these
securities.
OTHER INVESTMENT COMPANIES. The Fund may invest in securities issued by
other investment companies to the extent that such investments are consistent
with the Fund's investment objective and policies and permissible under the
Investment Company Act of 1940, as amended ("1940 Act"). As a shareholder of
another investment company, the Fund would bear, along with other shareholders,
its pro rata portion of the other investment company's expenses, including
advisory fees. These expenses would be in addition to the advisory and other
expenses that the Fund bears directly in connection with its own operations.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements. A
repurchase agreement involves the purchase of a security by the Fund and a
simultaneous agreement (generally with a bank or broker-dealer) to repurchase
that security from the Fund at a specified price and date or upon demand. This
technique offers a method of earning income on idle cash. A risk associated with
repurchase agreements is the failure of the seller to repurchase the securities
as agreed, which may cause the Fund to suffer a loss if the market value of such
securities declines before they can be liquidated on the open market. Repurchase
agreements with a duration of more than seven days are considered illiquid
securities and are subject to the limit stated above.
REVERSE REPURCHASE AGREEMENTS. The Fund may enter into reverse repurchase
agreements to meet redemption requests where the liquidation of Fund securities
is deemed by the Manager to be disadvantageous. Under a reverse repurchase
agreement, the Fund: (i) transfers possession of Fund securities to a bank or
broker-dealer in return for cash in an amount equal
...................................... 11 ......................................
- - - --------------------------------------------------------------------------------
<PAGE>
DREYFUS S&P 500 STOCK INDEX FUND
-------------------------------------
- - - --------------------------------------------------------------------------------
to a percentage of the securities' market value; and (ii) agrees to repurchase
the securities at a future date by repaying the cash with interest. Cash or
liquid high-grade debt securities held by the Fund equal in value to the
repurchase price including any accrued interest will be maintained in a
segregated account while a reverse repurchase agreement is in effect.
SECURITIES LENDING. To increase return on Fund securities, the Fund may
lend its portfolio securities to broker-dealers and other institutional
investors pursuant to agreements requiring that the loans be continuously
secured by collateral equal at all times in value to at least the market value
of the securities loaned. There may be risks of delay in receiving additional
collateral or in recovering the securities loaned or even a loss of rights to
the collateral should the borrower of the securities fail financially. However,
loans are made only to borrowers deemed by the Manager to be of good standing
and when, in its judgment, the income to be earned from the loan justifies the
attendant risks.
U.S. GOVERNMENT SECURITIES. The Fund may invest in obligations issued or
guaranteed as to both principal and interest by the U.S. Government or backed by
the full faith and credit of the United States. In addition to direct
obligations of the U.S. Treasury, these include securities issued or guaranteed
by the Federal Housing Administration, Farmers Home Administration,
Export-Import Bank of the United States, Small Business Administration,
Government National Mortgage Association, General Services Administration and
Maritime Administration. Investments may also be made in U.S. Government
obligations that do not carry the full faith and credit guarantee, such as those
issued by the Federal National Mortgage Association, the Federal Home Loan
Mortgage Corporation, or other instrumentalities.
VARIABLE AMOUNT MASTER DEMAND NOTES. The Fund may invest in variable
amount master demand notes. Variable amount master demand notes are unsecured
obligations that are redeemable upon demand and are typically unrated. These
instruments are issued pursuant to written agreements between their issuers and
holders. The agreements permit the holders to increase (subject to an agreed
maximum) and the holders and issuers to decrease the principal amount of the
notes, and specify that the rate of interest payable on the principal fluctuates
according to an agreed-upon formula. If an issuer of a variable amount master
demand note were to default on its payment obligation, the Fund might be unable
to dispose of the note because of the absence of a secondary market and might,
for this or other reasons, suffer a loss to the extent of the default. The Fund
will only invest in variable amount master demand notes issued by entities that
the Manager considers creditworthy.
WHEN-ISSUED SECURITIES AND DELAYED DELIVERY TRANSACTIONS. To secure
advantageous prices or yields, the Fund may purchase U.S. Government securities
on a when-issued basis or may purchase or sell securities for delayed delivery.
In such transactions, delivery of the
....................................... 12 .....................................
- - - --------------------------------------------------------------------------------
<PAGE>
PROSPECTUS
-------------------------------------
- - - --------------------------------------------------------------------------------
securities occurs beyond the normal settlement periods, but no payment or
delivery is made by the Fund prior to the actual delivery or payment by the
other party to the transaction. The purchase of securities on a when-issued or
delayed delivery basis involves the risk that, as a result of an increase in
yields available in the market place, the value of the securities purchased will
decline prior to the settlement date. The sale of securities for delayed
delivery involves the risk that the prices available in the market on the
delivery date may be greater than those obtained in the sale transactions. The
Fund will establish a segregated account consisting of cash, U.S. Government
securities or other high-grade debt obligations in an amount equal to the
amounts of its when-issued and delayed delivery commitments.
ADDITIONAL INFORMATION ABOUT THE S&P 500 STOCK INDEX. "Standard &
Poor's(R)", "S&P(R)", "S&P 500(R)", "Standard & Poor's 500", and "500" are
trademarks of McGraw-Hill, Inc. and have been licensed for use by The
Dreyfus/Laurel Funds, Inc. The Fund is not sponsored, endorsed, sold or promoted
by Standard & Poor's and Standard & Poor's makes no representation regarding the
advisability of investing in the Fund. S&P makes no representation or warranty,
express or implied, to the owners of the Fund or any member of the public
regarding the advisability of investing in securities generally or in the Fund
particularly or the ability of the S&P 500 Index to track general stock market
performance. S&P's only relationship to the The Dreyfus/Laurel Funds, Inc. is
the licensing of certain trademarks and trade names of S&P and of the S&P 500
Index which is determined, composed and calculated by S&P without regard to the
The Dreyfus/Laurel Funds, Inc. or the Fund. S&P has no obligation to take the
needs of the The Dreyfus/Laurel Funds, Inc. or the owners of the Fund into
consideration in determining, composing or calculating the S&P 500 Index. S&P is
not responsible for and has not participated in the determination of the prices
and amount of the Fund or the timing of the issuance or sale of the Fund or in
the determination or calculation of the equation by which the Fund is to be
converted into cash. S&P has no obligation or liability in connection with the
administration, marketing or trading of the Fund.
S&P DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE S&P 500
INDEX OR ANY DATA INCLUDED THEREIN AND S&P SHALL HAVE NO LIABILITY FOR ANY
ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. S&P MAKES NO WARRANTY, EXPRESS OR
IMPLIED, AS TO RESULTS TO BE OBTAINED BY THE FUND, OWNERS OF THE FUND, OR ANY
OTHER PERSON OR ENTITY FROM THE USE OF THE S&P 500 INDEX OR ANY DATA INCLUDED
THEREIN. S&P MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH
RESPECT TO THE S&P 500 INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY
OF THE FOREGOING, IN NO EVENT
...................................... 13.......................................
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DREYFUS S&P 500 STOCK INDEX FUND
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SHALL S&P HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR
CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE
POSSIBILITY OF SUCH DAMAGES.
MASTER/FEEDER OPTION. The Dreyfus/Laurel Funds, Inc. may in the future
seek to achieve the Fund's investment objective by investing all of the Fund's
assets in another investment company having the same investment objective and
substantially the same investment policies and restrictions as those applicable
to the Fund. Shareholders of the Fund will be given at least 30 days' prior
notice of any such investment. Such investment would be made only if the
Directors determine it to be in the best interest of the Fund and its
shareholders. In making that determination, the Directors will consider, among
other things, the benefits to shareholders and/or the opportunity to reduce
costs and achieve operational efficiencies. Although the Fund believes that the
Directors will not approve an arrangement that is likely to result in higher
costs, no assurance is given that costs will be materially reduced if this
option is implemented.
PORTFOLIO TURNOVER. While securities are purchased for the Fund on the
basis of potential for capital appreciation and not for short-term trading
profits, the Fund's turnover rate may exceed 100%. A portfolio turnover rate of
100% would occur, for example, if all the securities held by the Fund were
replaced once in the period of one year. A higher rate of portfolio turnover
involves correspondingly greater brokerage commissions and other expenses which
must be borne directly by the Fund and, thus, indirectly by its shareholders. In
addition, a high rate of portfolio turnover may result in the realization of
larger amounts of short-term capital gains which, when distributed to the Fund's
shareholders, are taxable to them as ordinary income. (See "Distributions" and
"Taxes.") Nevertheless, security transactions for the Fund will be based only
upon investment considerations and will not be limited by any other
considerations when the Manager deems it appropriate to make changes in the
Fund's assets.
LIMITING INVESTMENT RISKS. The Fund is subject to a number of investment
limitations. Certain limitations are matters of fundamental policy and may not
be changed without the affirmative vote of the holders of a majority of the
Fund's outstanding Shares. The SAI describes all of the Fund's fundamental and
non-fundamental restrictions.
The investment objective, policies, restrictions, practices and procedures
of the Fund, unless otherwise specified, may be changed without shareholder
approval. If the Fund's investment objective, policies, restrictions, practices
or procedures change, shareholders should consider whether the Fund remains an
appropriate investment in light of their then current position and needs.
In order to permit the sale of the Fund's Shares in certain states, the
Fund may make commitments more restrictive than the investment policies and
restrictions described in this
...................................... 14 ......................................
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PROSPECTUS
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Prospectus and the SAI. Should the Fund determine that any such commitment is no
longer in the best interests of the Fund, it may consider terminating sales of
its Shares in the states involved.
- - - ------------------------------------------------------------
HOW TO DO BUSINESS WITH US
- - - ------------------------------------------------------------
SPECIAL SHAREHOLDER SERVICES
You may establish one or more special services designed to provide an easy way
to do business with the Fund. By electing these services on your application or
by completing the appropriate forms, you may authorize:
- Investment by phone.
- Automatic monthly investments.
- Exchanges or redemptions by phone.
By electing the service which enables you to exchange and redeem by phone,
you agree to indemnify the Fund, its transfer agent and its investment manager
from any loss, claim or expense you may incur as a result of their acting on
such instruction. The Fund will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine. These include personal
identification procedures, recording of telephone conversations and providing
written confirmation of each transaction. A failure on the part of the Fund to
employ such procedures may subject it to liability for any loss due to
unauthorized or fraudulent instructions.
INVESTOR LINE
You may reach The Dreyfus Family of Funds by calling our Investor Line at
1-800-548-2868. If you call on a rotary phone during normal business hours (9
a.m. to 5 p.m., Eastern time), you will reach a Dreyfus Family of Funds
operator. If you call on a Touch-Tone phone, you will receive instructions on
how to: (1) request a current prospectus or information booklets about The
Dreyfus Family of Funds' investment portfolios and services, (2) listen to net
asset values, yields and total return figures, and (3) talk with a customer
service representative during normal business hours. For more information about
direct access using a Touch-Tone phone, please contact The Dreyfus Family of
Funds.
HOW TO INVEST IN THE FUND
Premier serves as the Fund's distributor. Premier is a wholly-owned subsidiary
of Institutional Administration Services, Inc., a provider of mutual fund
administration services, the parent company of which is Boston Institutional
Group, Inc. Premier also serves as the Fund's sub-
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DREYFUS S&P 500 STOCK INDEX FUND
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administrator and, pursuant to a Sub-Administration Agreement, provides various
administrative and corporate secretarial services to the Fund. Premier has
established various procedures for purchasing Class R and Investor Shares of the
Fund. Class R Shares are sold primarily to bank trust departments and other
financial service providers (including Mellon Bank and its affiliates) ("Banks")
acting on behalf of customers having a qualified trust or investment account or
relationship at such institution, or to customers who have received and hold
shares of the Fund distributed to them by virtue of such an account or
relationship. Investor Shares are primarily sold to retail investors by banks,
securities brokers or dealers and other financial institutions (including Mellon
Bank and its affiliates) ("Agents") that have entered into a Selling Agreement
with Premier. Once an investor has established an account, additional purchases
may, in certain cases, be made directly through the Fund's transfer agent. If
Shares of the Fund are held in an account at a Bank or with an Agent, such Bank
or Agent may require you to place all Fund purchase, exchange and redemption
orders through them. All Banks and Agents have agreed to transmit your
transaction requests to the Fund's transfer agent or to Premier. You may
diversify your investments by choosing a combination of investment portfolios
offered by The Dreyfus Family of Funds.
You may invest in the following ways:
BY MAIL.
Send your application and check or money order to The Dreyfus Family of
Funds, P.O. Box 9692, Providence, Rhode Island 02940-9830. Checks must be
payable in U.S. dollars and drawn on U.S. banks. When making subsequent
investments, enclose your check with the return remittance portion of the
confirmation of your previous investment. If the remittance portion is not
available, indicate on your check or a separate piece of paper your name,
address, the Fund and class of Shares of the Fund that you are buying and the
account number. Orders to purchase Shares are effective on the day the Fund
receives your check or money order. (See "When Share Price is Determined.")
BY TELEPHONE.
Once your account is open, you may make investments by telephone by calling
1-800-548-2868 if you have elected the service authorizing the Fund to draw on
your bank account by check when you call with instructions. Investments made by
phone in any one account must be in an amount of at least $100 and are effective
two days after your call. (See "When Share Price is Determined.")
...................................... 16 ......................................
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PROSPECTUS
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BY WIRE.
You may make your initial or subsequent investments in the Fund by wiring
funds. To do so:
(1) Instruct your bank to wire funds to MELLON BANK (ABA routing number
0430-0026-1).
(2) Be sure to specify on the wire:
(A) The Dreyfus Funds.
(B) The Fund name and the class of Shares of the Fund you are buying and
account number (if you have one).
(C) Your name.
(D) Your city and state.
In order for a wire purchase to be effective on the same day it is
received both the trading instructions and the wire must be received before 4
p.m., Eastern time. (See "When Share Price is Determined.")
BY AUTOMATIC MONTHLY INVESTMENTS.
Once your account is open, you may make investments automatically by
electing the Automatic Investment Program, the service authorizing the Fund to
draw on your bank account regularly by paper or electronic draft. Such
investments must be in amounts of not less than $100 in any one account. You
should inquire at your bank whether it will honor a preauthorized paper or
electronic draft. Contact the Fund if your bank requires additional
documentation. Call 1-800-548-2868 or write The Dreyfus Family of Funds, One
Exchange Place, Boston,
Massachusetts 02109 for more information about the Automatic Investment Program.
BY DIRECT DEPOSIT.
If your employer offers Direct Deposit, you may arrange to automatically
purchase Shares of the Fund (minimum $100) each pay period. Direct Deposit
investing may also be available to persons receiving regular payments from other
sources (including government pension or social security payments). Note that it
may not be appropriate to Direct Deposit your entire paycheck into the Fund
because it has a fluctuating net asset value per share ("NAV"). Call
1-800-548-2868 or write The Dreyfus Family of Funds, One Exchange Place, Boston,
Massachusetts 02109 for more information or a Direct Deposit authorization form.
BY IN-KIND PURCHASES.
If the following conditions are satisfied, the Fund may at its discretion,
permit you to purchase Shares through an "in-kind" exchange of securities you
hold. Any securities exchanged must meet the investment objective, policies and
limitations of the Fund, must have a readily
..................................... 17 .......................................
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DREYFUS S&P 500 STOCK INDEX FUND
-------------------------------------
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ascertainable market value, must be liquid and must not be subject to
restrictions on resale. The market value of any securities exchanged, plus any
cash, must be at least equal to $25,000. Shares purchased in exchange for
securities generally cannot be redeemed for fifteen days following the exchange
in order to allow time for the transfer to settle.
The basis of the exchange will depend upon the relative NAV of the Shares
purchased and securities exchanged. Securities accepted by the Fund will be
valued in the same manner as the Fund values its assets. Any interest earned on
the securities following their delivery to the Fund and prior to the exchange
will be considered in valuing the securities. All interest, dividends,
subscription or other rights attached to the securities become the property of
the Fund, along with the securities. Call 1-800-548-2868 or write The Dreyfus
Family of Funds, One Exchange Place, Boston, Massachusetts 02109 for more
information about "in-kind" purchases.
WHEN SHARE PRICE IS DETERMINED.
The price of your Shares is their NAV. NAV is determined at the close of
the New York Stock Exchange ("NYSE") on each day that the NYSE is open (a
"business day"). Investments and requests to exchange or redeem Shares received
by the Fund before the close of business on the NYSE (usually 4 p.m., Eastern
time) are effective on, and will receive the price determined on, that day
(except investments made by electronic funds transfer which are effective two
business days after your call). Investment, exchange and redemption requests
received after the close of the NYSE are effective on, and receive the Share
price determined on, the next business day.
ADDITIONAL INFORMATION ABOUT INVESTMENTS.
Once you have mailed or otherwise transmitted your investment instructions
to the Fund, they may not be modified or canceled. The Fund reserves the right
to reject any application or investment. The Fund reserves the right to make
exceptions to the minimum initial investment and account minimum amount from
time to time.
The minimum initial investment to establish a new account in the Fund is
$1,000, except for Individual Retirement Accounts ("IRAs"), retirement plans,
and Uniform Transfers (Gifts) to Minors Act accounts, for which the minimum
initial investment is $500. The Fund may suspend the offering of Shares of any
class of the Fund and reserves the right to vary initial and subsequent
investment minimums. Subsequent investments to purchase additional Shares in the
Fund must be in an amount of $100 or more.
The Fund intends, upon 60 days' prior notice, to involuntarily redeem
Shares in any account if the total value of the Shares is less than a specified
minimum unless you have established an automatic monthly investment to purchase
additional Shares. The Fund reserves
...................................... 18 ......................................
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PROSPECTUS
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the right to change such minimum from time to time. Any time the Shares of the
Fund held in an account have a value of less than $1,000 ($500 for Uniform
Gifts/Transfers to Minors Acts accounts), unless the deficiency amount is the
result of a decrease of the NAV, a notification may be sent advising you of the
need either to make an investment to bring the value of the Shares held in the
account up to $1,000 ($500) or to establish an automatic monthly investment to
purchase additional Shares. If the investment is not made or the automatic
monthly investment is not established within 60 days from the date of
notification, the Shares held in the account will be redeemed and the proceeds
from the redemption will be sent by check to your address of record.
The automatic redemption of Shares will not apply to IRAs, custodial
accounts under Section 403(b) of the Internal Revenue Code of 1986, as amended
(the "Code") ("403(b) accounts") and other types of tax-deferred retirement plan
accounts.
HOW TO EXCHANGE YOUR INVESTMENT
FROM ONE FUND TO ANOTHER
You may exchange your Fund Shares for shares of the same class of certain other
funds advised by the Manager and that were previously advised by Mellon Bank. As
noted below, exchanges from any one fund account may be limited in any one
calendar year. In addition, the Shares being exchanged and the Shares of the
fund being acquired must have a current value of at least $100 and otherwise
meet the minimum investment requirement of the fund being acquired. Call the
Investor Line for additional information and a prospectus describing other
investment portfolios offered by The Dreyfus Family of Funds.
BY TELEPHONE.
You may exchange your Shares by calling 1-800-548-2868 if you have
authorized the Fund to accept telephone instructions.
BY MAIL.
You may direct the Fund to exchange your Shares by writing to The Dreyfus
Family of Funds, P.O. Box 9692, Providence, Rhode Island 02940-9830. The request
should be signed by each person in whose name the Shares are registered. All
signatures should be exactly as the name appears in the registration. For
example, if an owner's name is registered as John Robert Jones, he should sign
that way and not as John R. Jones.
ADDITIONAL INFORMATION ABOUT EXCHANGES.
(1) In an exchange from one account to another account, the Shares being
sold and the new Shares being purchased must have a current value of at
least $100.
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DREYFUS S&P 500 STOCK INDEX FUND
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(2) Exchanges from any one fund account may be limited in any one calendar
year. The Fund reserves the right to make exceptions to an exchange
limitation from time to time. An exchange limitation will not apply to
the exchange of Shares of any of the funds exchanged pursuant to an
Automatic Withdrawal Program, and to Shares held in 403(b) accounts.
(3) The Shares being acquired must be qualified for sale in your state of
residence.
(4) If the Shares are represented by a negotiable stock certificate, the
certificate must be returned before the exchange can be effected.
(5) Once you have telephoned or mailed your exchange request, it is
irrevocable and may not be modified or canceled.
(6) An exchange is based on the next calculated NAV of each fund after
receipt of your exchange order.
(7) Shares may not be exchanged unless you have furnished the Fund with
your tax identification number, certified as prescribed by the Code and
regulations thereunder. (See "Taxes.")
(8) Exchange of Fund Shares is, for federal income tax purposes, a sale of
the Shares, on which you may realize a taxable gain or loss.
(9) If the request is made by a corporation, partnership, trust, fiduciary,
agent, estate, guardian, pension plan, profit sharing plan or
unincorporated association, the Fund may require evidence satisfactory
to it of the authority of the individual signing the request.
Shareholders will be given sixty days' notice prior to any material changes
in the exchange privilege.
HOW TO REDEEM SHARES
The Fund will redeem or "buy back" your Shares at any time at their NAV. (Before
redeeming, please read "Additional Information About Redemptions.") Your
redemption proceeds may be delayed if you have owned your Shares less than 10
days. (See "Redemption Proceeds.")
The Fund imposes no charges when Shares are redeemed. Agents or other
institutions may charge their clients a nominal fee for effecting redemptions of
Fund shares.
BY TELEPHONE.
If you have authorized the Fund to accept telephone instructions, you may
redeem your Shares by calling 1-800-548-2868. Once made, your telephone request
may not be modified or canceled. (Before calling, read "Additional Information
About Redemptions" and "When Share Price is Determined.")
...................................... 20 ......................................
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PROSPECTUS
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BY MAIL.
Your written instructions to redeem Shares may be in any one of the
following forms:
- A letter to The Dreyfus Family of Funds.
- An assignment form or stock power.
- An endorsement on the back of your negotiable stock certificate, if you
have one.
Once mailed to The Dreyfus Family of Funds, P.O. Box 9692, Providence,
Rhode Island 02940-9830, the redemption request is irrevocable and may not be
modified or canceled. A letter of instruction should state the number of Shares
or the dollar amount to be redeemed. The letter must include your account
number, and for redemptions in an amount in excess of $25,000, a signature
guarantee of each owner. The redemption request must be signed by each person in
whose name the Shares are registered. For example, in the case of joint
ownership, each owner must sign. All signatures should be exactly as the name
appears in the registration. If the owner's name appears in the registration as
John Robert Jones, he should sign that way and not as John R. Jones. Signature
guarantees can be obtained from commercial banks, credit unions if authorized by
state laws, savings and loans institutions, trust companies, members of a
recognized stock exchange, or from other eligible guarantors who are members of
the Securities Transfer Agents Medallion Program ("STAMP") or any other industry
recognized program approved by the Securities Transfer Association. (Before
writing, see "Additional Information About Redemptions.")
BY AUTOMATED WITHDRAWAL PROGRAM.
The Fund's Automated Withdrawal Program automatically redeems enough Shares
each month to provide you with a check for an amount which you specify (with a
minimum of $100). To set up an Automated Withdrawal Program, call the Fund at
1-800-548-2868 for instructions. Only shareholders with an account balance of
$10,000 or more may participate in this program. Shares will be redeemed on the
15th day or 30th day of each month or the next business day, and your check will
be mailed the next day. If your monthly checks exceed the dividends, interest
and capital appreciation on your Shares, the payments will deplete your
investment. Amounts paid to you by Automated Withdrawals are not a return on
your investment. They are derived from the redemption of Shares in your account,
and you must report on your income tax return any gains or losses that you
realize.
You may specify an Automated Withdrawal Program when you make your first
investment. If you would like to establish an Automated Withdrawal Program
thereafter, the request for the Automated Withdrawal Program must be signed by
all owners, with their signatures guaranteed.
................................... 21 .........................................
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DREYFUS S&P 500 STOCK INDEX FUND
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When you make your first investment you may request that Automated
Withdrawals be sent to an address other than the address of record. Thereafter,
a request to send Automated Withdrawals to an address other than the address of
record must be signed by all owners, with their signatures guaranteed.
The Fund may terminate the Automated Withdrawal Program at any time, upon
notice to you, and you likewise may terminate it or change the amount of the
Automated Withdrawal Program, by notice to the Fund in writing or by telephone.
Termination or change will become effective within five days following receipt
of your instructions. Your Automated Withdrawal Program plan may begin any time
after you have owned your Shares for 10 days.
REDEMPTION PROCEEDS.
Redemption proceeds may be sent to you:
BY MAIL. If your redemption check is mailed, it is usually mailed by the
second business day after receipt of your redemption request, but not later than
seven days afterwards. When a redemption occurs shortly after a recent purchase,
the Fund may hold the redemption proceeds beyond seven days but only until the
purchase check clears, which may take up to 10 days or more. No dividend is paid
on the redemption proceeds after the redemption and before the check is mailed.
If you anticipate redemptions soon after you purchase your Shares, you are
advised to wire funds to avoid delay.
BY WIRE AND ELECTRONIC FUNDS TRANSFER. You may authorize the Fund to
transmit redemption proceeds by wire or electronic funds transfer. Proceeds from
the redemption of Fund Shares will normally be transmitted on the first business
day, but not later than the seventh day, following the date of redemption. Your
bank usually will receive wired funds the day they are transmitted.
Electronically transferred funds will ordinarily be received within two business
days after transmission. Once the funds are transmitted, the time of receipt and
the availability of the funds are not within the Fund's control. If your bank
account changes, you must send a new "voided" check preprinted with the bank
registration with written instructions signed by all owners (with their
signatures guaranteed), including tax identification number.
ADDITIONAL INFORMATION ABOUT REDEMPTIONS.
(1) Redemptions specifying a certain date or price cannot be accepted and
will be returned.
(2) If the Shares being redeemed are represented by a negotiable stock
certificate, the certificate must be returned before the redemption can
be effected.
(3) All redemptions are made and the price is determined on the day when
all documentation is received in good order.
...................................... 22 ......................................
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PROSPECTUS
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(4) If the request to redeem is made by a corporation, partnership, trust,
fiduciary, agent, estate, guardian, pension plan, profit sharing plan,
or unincorporated association, the Fund may require evidence
satisfactory to it of the authority of the individual signing the
request. Please call or write the Fund for further information.
(5) A request to redeem Shares in an IRA or 403(b) account must be
accompanied by an IRS Form W4-P and a reason for withdrawal as
specified by the Internal Revenue Service.
HOW TO USE THE DREYFUS FAMILY OF FUNDS IN
A TAX-QUALIFIED RETIREMENT PLAN
The Dreyfus Family of Funds' investment portfolios are available for your
tax-deferred retirement plan. Call 1-800-548-2868 or write The Dreyfus Family of
Funds, P.O. Box 9692, Providence, Rhode Island 02940-9830 and request the
appropriate forms for:
- IRAs.
- 403(b) accounts for employees of public school systems and non-profit
organizations.
- Profit-sharing plans and pension plans for corporations and other
employers.
HOW TO TRANSFER AN INVESTMENT TO A DREYFUS FAMILY OF FUNDS' RETIREMENT
PLAN.
It is easy to transfer your tax-deferred plan to The Dreyfus Family of
Funds from another custodian. Call 1-800-548-2868 or write The Dreyfus Family
of Funds, P.O. Box 9692, Providence, Rhode Island 02940-9830 for a request to
transfer form. If you direct The Dreyfus Family of Funds to transfer funds from
an existing non-retirement Dreyfus Family of Funds account into a retirement
account, the Shares in your non-retirement account will be redeemed. The
redemption proceeds will be invested in your Dreyfus Family of Funds IRA or
other tax-qualified retirement plan. The redemption is a taxable event
resulting in a taxable gain or loss.
- - - ------------------------------------------------------------
OTHER INFORMATION
- - - ------------------------------------------------------------
SHARE PRICE
An investment portfolio's NAV refers to the worth of one Share. The NAV for
Investor and Class R Shares of the Fund is computed by adding with respect to
each class of Shares the value of all the class' investments, cash, and other
assets, deducting liabilities and dividing the result by the number of Shares of
that class outstanding. The valuation of assets for determining NAV for the Fund
may be summarized as follows:
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DREYFUS S&P 500 STOCK INDEX FUND
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The portfolio securities of the Fund, except as otherwise noted, listed or
traded on a stock exchange, are valued at the latest sale price. If no sale is
reported, the mean of the latest bid and asked prices is used. Securities traded
over-the-counter are priced at the mean of the latest bid and asked prices but
will be valued at the last sale price if required by regulations of the SEC.
When market quotations are not readily available, securities and other assets
are valued at fair value as determined in good faith in accordance with
procedures established by the Board of Directors.
Bonds are valued through valuations obtained from a commercial pricing
service or at the most recent mean of the bid and asked prices provided by
investment dealers in accordance with procedures established by the Board of
Directors.
Pursuant to a determination by The Dreyfus/Laurel Funds, Inc.'s Board of
Directors that such value represents fair value, the debt securities with
maturities of 60 days or less held by the Fund are valued at amortized cost.
When a security is valued at amortized cost, it is valued at its cost when
purchased, and thereafter by assuming a constant amortization to maturity of any
discount or premium, regardless of the impact of fluctuating interest rates on
the market value of the instrument.
The NAV of each class of shares of most of The Dreyfus Family of Funds'
investment portfolios (other than money market funds) is published in leading
newspapers daily. The yield of each class of shares of most of The Dreyfus
Family of Funds' money market funds is published weekly in leading financial
publications and in many local newspapers. The NAV of the Fund may also be
obtained by calling The Dreyfus Family of Funds.
PERFORMANCE ADVERTISING
From time to time, the Fund may advertise the yield and total return on a class
of Shares. Total return and yield figures are based on historical earnings and
are not intended to indicate future performance. The "total return" of a class
of Shares of the Fund may be calculated on an average annual total return basis
or a cumulative total return basis. Average annual total return refers to the
average annual compounded rates of return on a class of Shares over one-, five-,
and ten-year periods or the life of the Fund (as stated in the advertisement)
that would equate an initial amount invested at the beginning of a stated period
to the ending redeemable value of the investment, assuming the reinvestment of
all dividends and capital gains distributions. Cumulative total return reflects
the total percentage change in the value of the investment over the measuring
period, again assuming the reinvestment of all dividends and capital gains
distributions.
...................................... 24 ......................................
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The Fund's "yield" is calculated by dividing a class of Shares' annualized
net investment income per Share during a recent 30-day (or one month) period by
the maximum public offering price per class of such Share on the last day of
that period. Since yields fluctuate, yield data cannot necessarily be used to
compare an investment in a class of Shares with bank deposits, savings accounts,
and similar investment alternatives which often provide an agreed-upon or
guaranteed fixed yield for a stated period of time.
Total return and yield quotations will be computed separately for each
class of the Fund's Shares. Because of the difference in the fees and expenses
borne by Class R and Investor Shares of the Fund, the return and yield on Class
R Shares will generally be higher than the return and yield on Investor Shares.
Any fees charged by a Bank or Agent directly to its customers' account in
connection with investments in the Fund will not be included in calculations of
total return or yield. The Fund's annual report contains additional performance
information and is available upon request without charge from Premier or your
Bank or Agent.
The Fund may compare the performance of its Investor and Class R Shares
with various industry standards of performance including Lipper Analytical
Services, Inc. ratings, Standard & Poor's 500 Composite Stock Price Index, and
the Consumer Price Index. Performance rankings as reported in Changing Times,
Business Week, Institutional Investor, The Wall Street Journal, IBC/Donoghue's
Money Fund Report, Mutual Fund Forecaster, No Load Investor, Money Magazine,
Morningstar Mutual Fund Values, U.S. News and World Report, Forbes, Fortune,
Barron's and similar publications may also be used in comparing the Fund's
performance. Furthermore, the Fund may quote its Investor and Class R Shares'
total returns and yields in advertisements or in shareholder reports. The Fund
may also advertise non-standardized performance information, such as total
return for periods other than those required to be shown or cumulative
performance data. The Fund may advertise a quotation of yield or other similar
quotation demonstrating the income earned or distributions made by the Fund.
DISTRIBUTIONS
The Fund declares and pays dividends from its net investment income, if any,
four times yearly at the beginning of May, August, November and in mid-December
and distributes net realized gains, if any, on an annual basis. The Board of
Directors may elect not to distribute capital gains in whole or in part to take
advantage of capital loss carryovers.
Unless you choose to receive dividend and/or capital gain distributions in
cash, your distributions will be automatically reinvested in additional Shares
of the Fund at the NAV. You may change the method of receiving distributions at
any time by writing to the Fund. Checks which are sent to shareholders who have
requested distributions to be paid in cash and which
..................................... 25 .......................................
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<PAGE>
DREYFUS S&P 500 STOCK INDEX FUND
-------------------------------------
- - - --------------------------------------------------------------------------------
are subsequently returned by the United States Postal Service as not deliverable
or which remain uncashed for six months or more will be reinvested in additional
Fund Shares in the shareholder's account at the then current NAV. Subsequent
Fund distributions will be automatically reinvested in additional Fund Shares in
the shareholder's account.
Distributions paid by the Fund with respect to one class of Shares may be
greater or less per Share than those paid with respect to another class of
Shares due to the different expenses of the different classes.
Shares purchased on a day on which the Fund calculates its NAV will not
begin to accrue dividends until the following day. Redemption orders effected on
any particular day will receive all dividends declared through the day of
redemption.
You may elect to have distributions on Shares held in IRAs and 403(b)
accounts paid in cash only if you are at least 59 1/2 years old or are
permanently and totally disabled. Distribution checks normally are mailed within
seven days after the record date.
Any dividend and/or capital gain distribution paid by the Fund will reduce
each Share's NAV by the amount of the distribution. Shareholders are subject to
taxes with respect to any such distribution. At any given time, the value of the
Fund's Shares includes the undistributed net gains, if any, realized by the Fund
on the sale of portfolio securities, and undistributed dividends and interest
received, less the Fund's expenses. Because such gains and income are included
in the value of your Shares, when they are distributed the value of your Shares
is reduced by the amount of the distribution. Accordingly, if your distribution
is reinvested in additional Shares, the distribution has no effect on the value
of your investment; while you own more Shares, the value of each Share has been
reduced by the amount of the distribution. Likewise, if you take your
distribution in cash, the value of your Shares immediately after the
distribution plus the cash received is equal to the value of the Shares
immediately before the distribution. For example, if you own a Fund Share that
immediately before a distribution has a value of $10, including $2 in
undistributed dividends and capital gains realized by the Fund during the year,
and if the $2 is distributed, the value of the Share will decline to $8. If the
$2 is reinvested at $8 per Share, you will receive .250 Shares, so that, after
the distribution, you will have 1.250 Shares at $8 per Share, or $10, the same
as before.
....................................... 26 .....................................
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<PAGE>
PROSPECTUS
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TAXES
The Fund intends to continue to qualify for treatment as a regulated investment
company under the Code so that it will be relieved of federal income tax on that
part of its investment company taxable income (consisting generally of taxable
net investment income and net short-term capital gain) and net capital gain (the
excess of net long-term capital gain over net short-term capital loss) that is
distributed to its shareholders.
Dividends from the Fund's investment company taxable income are taxable to
you as ordinary income, to the extent of the Fund's earnings and profits.
Distributions by the Fund of net capital gain, when designated as such, are
taxable to you as long-term capital gains, regardless of the length of time you
have owned your Shares.
All or a portion of the dividends paid by the Fund may be eligible for the
dividends-received deduction allowed to corporations. The eligible portion may
not exceed the aggregate dividends received by the Fund from U.S. corporations.
However, dividends received by a corporate shareholder and deducted by it
pursuant to the dividends-received deduction are subject indirectly to the
alternative minimum tax.
Dividends and other distributions are taxable to you regardless of whether
they are received in cash or reinvested in additional Fund Shares, even if the
value of your Shares is below your cost. If you purchase Shares shortly before a
taxable distribution you must pay income taxes on the distribution, even though
the value of your investment (plus cash received, if any) remains the same. In
addition, the Share price at the time you purchase Shares may include unrealized
gains in the securities held in the Fund. If these portfolio securities are
subsequently sold and the gains are realized, they will, to the extent not
offset by capital losses, be paid to you as a capital gain distribution and will
be taxable to you.
Dividends paid by the Fund to qualified retirement plans ordinarily will
not be subject to taxation until the proceeds are distributed from the
retirement plans. The Fund will not report to the IRS dividends paid to such
plans. Generally, distributions from qualified retirement plans, except those
representing returns of non-deductible contributions thereto, will be taxable as
ordinary income and, if made prior to the time the participant reaches age
59 1/2, generally will be subject to an additional tax equal to 10% of the
taxable portion of the distribution. If the distribution from such a retirement
plan (other than certain governmental or church plans) for any taxable year
following the year in which the participant reaches age 70 1/2 is less than the
"minimum required distribution" for that taxable year, an excise tax equal to
50% of the deficiency may be imposed by the IRS. The administrator, trustee or
custodian of such a retirement plan will be responsible for reporting such
distributions from such plans to the IRS.
..................................... 27 .......................................
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DREYFUS S&P 500 STOCK INDEX FUND
-------------------------------------
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Moreover, certain contributions to a qualified retirement plan in excess of the
amounts permitted by law may be subject to an excise tax.
In January of each year, the Fund will send you a Form 1099-DIV notifying
you of the status for federal income tax purposes of your distributions for the
preceding year.
You must furnish the Fund with your taxpayer identification number ("TIN")
and state whether you are subject to withholding for prior under-reporting,
certified under penalties of perjury as prescribed by the Code and the
regulations thereunder. Unless previously furnished, investments received
without such a certification will be returned. The Fund is required to withhold
a portion of all dividends, capital gain distributions and redemption proceeds
payable to any individuals and certain other non-corporate shareholders who do
not provide the Fund with a correct TIN; withholding from dividends and capital
gain distributions also is required for such shareholders who otherwise are
subject to backup withholding.
The Fund will be subject to a 4% nondeductible excise tax to the extent it
fails to distribute by the end of any calendar year substantially all of its
taxable ordinary income for that year and capital gain net income for the
one-year period ending on October 31 of that year, plus certain other amounts.
The Fund expects to make such distributions as are necessary to avoid the
imposition of this tax.
The foregoing is only a summary of some of the important tax considerations
generally affecting the Fund and its shareholders. See the SAI for a further
discussion. There may be other Federal, state or local tax considerations
applicable to a particular investor. You therefore are urged to consult your own
tax adviser.
OTHER SERVICES
At least twice a year you will receive the financial statements of the Fund with
a summary of its investments and performance. The Fund will send you a
confirmation statement after every transaction (except with regard to the
reinvestment of dividends and other distributions) that affects your Fund
accounts. In addition, an account statement will be mailed to you quarterly or
monthly depending on the Fund's reporting schedule. You may also request a
statement of your account activity at any time. Carefully review such
confirmation statements and account statements and notify the Fund immediately
if there is an error. From time to time, to reduce expenses, only one copy of
the Fund's shareholder reports (such as the Fund's annual report) may be mailed
to your household. Please call The Dreyfus Family of Funds if you need
additional copies.
..................................... 28 .......................................
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<PAGE>
PROSPECTUS
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No later than January 31 of each year, the Fund will send you the following
reports, which you may use in completing your federal income tax return:
<TABLE>
<S> <C>
Form 1099-DIV Reports taxable distributions (and returns of
capital, if any) during the preceding year.
Form 1099-B Reports proceeds paid on redemptions during the
preceding year.
Form 1099-R Reports distributions from IRAs and 403(b) accounts
during the preceding year.
</TABLE>
At such time as prescribed by law, the Fund will send you a Form 5498,
which reports contributions to your IRA for the previous calendar year. In
addition, the Fund may send you other relevant tax-related forms.
FURTHER INFORMATION ABOUT THE FUND
THE DREYFUS/LAUREL FUNDS, INC.
The Laurel Funds, Inc. was incorporated in Maryland on August 6, 1987 and
changed its name to The Dreyfus/Laurel Funds, Inc. on October 17, 1994. The
Dreyfus/Laurel Funds, Inc. is registered with the SEC under the 1940 Act as a
diversified, open-end management investment company. The Dreyfus/Laurel Funds,
Inc. has an authorized capitalization of 25 billion Shares of $0.001 par value
stock with equal voting rights. The Articles of Incorporation permit the
Directors to create an unlimited number of investment portfolios (each a
"fund"). The Fund offered by this Prospectus currently issues two classes of
Shares designated "Investor" and "Class R" Shares.
Each Share (regardless of class) has one vote. All Shares of a fund (and
classes thereof) vote together as a single class, except as to any matter for
which a separate vote of any fund or class is required by the 1940 Act, and
except as to any matter which affects the interests of one or more particular
funds or classes, in which case only the shareholders of the affected fund or
class are entitled to vote, each as a separate class. At your written request,
the Fund will issue negotiable stock certificates.
At January 31, 1995, Mellon Bank Corporation, the Manager's parent, owned
of record through its direct and indirect subsidiaries more than 25% of The
Dreyfus/Laurel Funds, Inc.'s outstanding voting shares, and is deemed, under the
1940 Act, to be a controlling shareholder.
MANAGEMENT.
THE BOARD OF DIRECTORS. The business affairs of The Dreyfus/Laurel Funds,
Inc. are managed under the direction of its Directors. The SAI contains the
names and general background information concerning the Directors and officers
of The Dreyfus/Laurel Funds, Inc.
.................................... 29 ........................................
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<PAGE>
DREYFUS S&P 500 STOCK INDEX FUND
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INVESTMENT MANAGER. The Manager is located at 200 Park Avenue, New York,
New York 10166. As of January 31, 1995, the Manager managed or administered
approximately $70 billion in assets for more than 1.9 million investor accounts
nationwide. The Manager is a wholly-owned subsidiary of Mellon Bank, N.A. (One
Mellon Bank Center, Pittsburgh, Pennsylvania 15258), the Fund's prior investment
manager. Pursuant to an Investment Management Agreement, transferred from Mellon
Bank to the Manager effective as of October 17, 1994, the Manager provides, or
arranges for one or more third parties to provide, investment advisory,
administrative, custody, fund accounting and transfer agency services to the
Fund. As investment manager, the Manager manages the Fund by making investment
decisions based on the Fund's investment objective, policies and restrictions,
and is paid a fee.
Under the Investment Management Agreement, the Fund pays a fee computed
daily, and paid monthly, at the annual rate of .40% of the Fund's average daily
net assets less certain expenses. The Manager pays all of the expenses of the
Fund except brokerage fees, taxes, interest, fees and expenses of the
non-interested Directors (including counsel fees) and extraordinary expenses.
Although the Manager does not pay for the fees and expenses of the non-
interested Directors (including counsel fees), the Manager is contractually
required to reduce its investment management fee in an amount equal to the
Fund's allocable share of such expenses. In order to compensate the Manager for
paying virtually all of the Fund's expenses, the Fund's investment management
fee is higher than the investment advisory fees paid by most investment
companies. Most, if not all, such companies also pay for additional
non-investment advisory expenses that are not paid by such companies' investment
adviser. From time to time, the Manager may waive (either voluntarily or
pursuant to applicable state limitations) additional investment management fees
payable by the Fund. For the period from November 1, 1993 to April 3, 1994, the
Fund paid its investment adviser, Mellon Bank, 0.16% (annualized) of its average
daily net assets in investment advisory fees (net of expenses reimbursed), under
the Fund's previous investment advisory contract (such contract covered only the
provision of investment advisory and certain specified administrative services).
For the period from April 4, 1994 through the fiscal year ended October 31,
1994, the Fund paid Mellon Bank or the Manager 0.40% (annualized) of its average
daily net assets in investment management fees, less fees and expenses of the
non-interested Directors (including counsel fees).
For the fiscal year ended October 31, 1994, total operating expenses
(excluding Rule 12b-1 fees) (net of expenses reimbursed) of the Fund were 0.40%
(annualized) of the average daily net assets of each class for both the Investor
Class and Class R. Without the reimbursement, operating expenses would have been
higher.
.................................... 30 ........................................
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<PAGE>
PROSPECTUS
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The Manager is authorized to allocate purchase and sale orders for
portfolio securities to certain financial institutions, including, in the case
of agency transactions, financial institutions which are affiliated with the
Manager or which have sold Shares of the Fund, if the Manager believes that the
quality of the transaction and the commission are comparable to what they would
be with other qualified brokerage firms. From time to time, to the extent
consistent with its investment objectives policies and restrictions, the Fund
may invest in securities of companies with which Mellon Bank has a lending
relationship.
Mellon Bank is a subsidiary of Mellon Bank Corporation. At June 30, 1994
Mellon Bank Corporation was the 24th largest bank holding company in the United
States in terms of total assets. Through its bank subsidiaries, it operates 631
domestic retail banking locations including 432 branch offices. Mellon Bank
Corporation has 25 domestic representative offices. There are international
branches in Grand Cayman, British West Indies, and London, England, and two
international representative offices in Tokyo, Japan, and Hong Kong. Mellon Bank
has a banking subsidiary, Mellon Bank Canada, in Toronto. Mellon Bank is a
registered municipal securities dealer.
The Glass-Steagall Act of 1933 prohibits a national bank from engaging in
the business of issuing, underwriting, selling or distributing certain
securities. The activities of Mellon Bank and the Manager may raise issues under
these provisions. However, Mellon Bank has been advised by its counsel that
these activities are consistent with these statutory and regulatory obligations.
For more information on the Glass-Steagall Act of 1933, see "Federal Law
Affecting Mellon Bank" in the SAI.
OTHER SERVICE PROVIDERS. Under a Custody and Fund Accounting Agreement,
Mellon Bank acts as custodian and fund accountant, maintaining possession of the
Fund's investment securities and providing certain accounting and related
services.
The Shareholder Services Group, Inc., a subsidiary of First Data
Corporation, serves as transfer agent ("Transfer Agent") for the Fund's Shares.
The Transfer Agent is located at One American Express Plaza, Providence, Rhode
Island 02903.
Shares of the Fund are sold on a continuous basis by Premier, as the Fund's
sponsor and distributor. Premier is a registered broker-dealer with principal
offices at One Exchange Place, Boston, Massachusetts 02109. The Fund has entered
into a distribution agreement with Premier which provides that Premier has the
exclusive right to distribute Shares of the Fund. Premier may pay service and/or
distribution fees to Agents that assist customers in purchasing and servicing of
Shares of the Fund. (See "Distribution Plan (Investor Class Only.")
...................................... 31 ......................................
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DREYFUS S&P 500 STOCK INDEX FUND
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DISTRIBUTION PLAN (INVESTOR CLASS ONLY).
Investor Shares are subject to a Distribution Plan ("Plan") adopted
pursuant to Rule 12b-1 under the 1940 Act ("Rule 12b-1"). The Investor Shares of
the Fund bear some of the cost of selling those Shares under the Plan. The Plan
allows the Fund to spend annually up to 0.25% of its average daily net assets
attributable to Investor Class Shares to compensate Dreyfus Service Corporation,
an affiliate of the Manager, for shareholder servicing activities and Premier
for shareholder servicing activities and for activities or expenses primarily
intended to result in the sale of Investor Shares of the Fund. The Plan allows
Premier to make payments from the Rule 12b-1 fees it collects from the Fund to
compensate Agents that have entered into Selling Agreements ("Agreements") with
Premier. Under the Agreements, the Agents are obligated to provide distribution
related services with regard to the Fund and/or shareholder services to the
Agent's clients that own Investor Shares of the Fund.
The Fund and Premier may suspend or reduce payments under the Plan at any
time, and payments are subject to the continuation of the Fund's Plan and the
Agreements described above. From time to time, the Agents, Premier and the Fund
may agree to voluntarily reduce the maximum fees payable under the Plan. See the
SAI for more details on the Plan.
Potential investors should read this Prospectus in light of the terms
governing Agreements with their Agents. An Agent entitled to receive
compensation for selling and servicing the Fund's Shares may receive different
compensation with respect to one class of Shares over another.
....................................... 32 .....................................
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PROSPECTUS
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FOR MORE INFORMATION
- - - ------------------------------------------------------------
FUND INFORMATION AND PROSPECTUSES
Call 1-800-548-2868
Please read the prospectus before you invest or send money
TO INVEST, REDEEM AND EXCHANGE
Call 1-800-548-2868 (for overseas, call collect (401) 455-3476)
9:00 a.m. to 5:00 p.m., Eastern time
Monday through Friday
Or Write: The Dreyfus Family of Funds
P.O. Box 9692
Providence, Rhode Island 02940-9830
YIELD AND SHARE PRICE INFORMATION
1-800-548-2868
24 hours a day, 7 days a week
The Dreyfus Family of Funds
One Exchange Place
Boston, Massachusetts 02109
....................................... 33 .....................................
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<PAGE>
P R O S P E C T U S
Small box above fund name showing a lions face.
DREYFUS EQUITY INCOME FUND
INVESTOR AND CLASS R SHARES
MARCH 1, 1995
PROSPECTUS BEGINS ON PAGE 1
<PAGE>
P R O S P E C T U S
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Dreyfus Equity Income Fund
Investor and Class R Shares
March 1, 1995
DREYFUS EQUITY INCOME FUND seeks an above-average level of income along
with moderate long-term growth of income and principal by investing in a
diversified list of securities, resulting in a portfolio with a moderate level
of risk.
THIS PROSPECTUS describes the Dreyfus Equity Income Fund (the "Fund"), a
separate portfolio of The Dreyfus/Laurel Funds, Inc. (formerly The Laurel Funds,
Inc.), an open-end, diversified management investment company that is part of
The Dreyfus Family of Funds. This Prospectus describes two classes of
shares--Investor Shares and Class R Shares (collectively, the "Shares")--of the
Fund.
This Prospectus sets forth concisely the information about the Fund that a
prospective purchaser should consider before investing. Investors should read
this Prospectus and retain it for future reference. Additional information about
the Fund is contained in a Statement of Additional Information (the "SAI"),
which has been filed with the Securities and Exchange Commission (the
.....................................
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. ALL MUTUAL
FUND SHARES INVOLVE CERTAIN RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THE FEES TO WHICH THE FUND IS SUBJECT ARE SUMMARIZED IN THE "EXPENSE
SUMMARY" SECTION OF THE FUND'S PROSPECTUS. THE FUND PAYS MELLON BANK, N.A.
("MELLON BANK") OR ITS AFFILIATES TO BE ITS INVESTMENT MANAGER. MELLON BANK OR
AN AFFILIATE MAY BE PAID FOR PERFORMING OTHER SERVICES FOR THE FUND, SUCH AS
CUSTODIAN, TRANSFER AGENT OR FUND ACCOUNTANT SERVICES. THE FUND IS DISTRIBUTED
BY PREMIER MUTUAL FUND SERVICES, INC.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
....................... 1 .......................
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"SEC") and is available upon request without charge by calling or writing to The
Dreyfus Family of Funds. The SAI bears the same date as this Prospectus and is
incorporated by reference in its entirety into this Prospectus.
In addition to the Fund, The Dreyfus Family of Funds also offers other funds
that provide investment opportunities for you in the equity, fixed income and
money markets. For more information about these additional investment
opportunities, call 1-800-548-2868.
.....................................
The Dreyfus Family of Funds
P.O. Box 9692
Providence, Rhode Island 02940-9830
....................... 2 .......................
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<PAGE>
P R O S P E C T U S
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
Expense Summary....................................................... 5
Financial Highlights.................................................. 6
Alternative Purchase Methods.......................................... 8
Investment Objective and Policies..................................... 8
Other Investment Policies and Risk Factors............................ 8
HOW TO DO BUSINESS WITH US
Special Shareholder Services.......................................... 14
Investor Line......................................................... 15
How to Invest in The Fund............................................. 15
BY MAIL............................................................. 15
BY TELEPHONE........................................................ 16
BY WIRE............................................................. 16
BY AUTOMATIC MONTHLY INVESTMENTS.................................... 16
BY DIRECT DEPOSIT................................................... 17
BY IN-KIND PURCHASES................................................ 17
WHEN SHARE PRICE IS DETERMINED...................................... 17
ADDITIONAL INFORMATION ABOUT INVESTMENTS............................ 18
How to Exchange Your Investment From One Fund to Another.............. 19
BY TELEPHONE........................................................ 19
BY MAIL............................................................. 19
ADDITIONAL INFORMATION ABOUT EXCHANGES.............................. 19
How to Redeem Shares.................................................. 20
BY TELEPHONE........................................................ 20
BY MAIL............................................................. 20
BY AUTOMATED WITHDRAWAL PROGRAM..................................... 21
REDEMPTION PROCEEDS................................................. 21
ADDITIONAL INFORMATION ABOUT REDEMPTIONS............................ 22
How To Use The Dreyfus Family of Funds in a Tax-Qualified
Retirement Plan....................................................... 23
HOW TO TRANSFER AN INVESTMENT TO A DREYFUS FAMILY OF FUNDS'
RETIREMENT PLAN..................................................... 23
</TABLE>
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TABLE OF CONTENTS (CONTINUED)
<TABLE>
<S> <C><C>
OTHER INFORMATION
Share Price........................................................... 23
Performance Advertising............................................... 24
Distributions......................................................... 25
Taxes................................................................. 26
Other Services........................................................ 28
Further Information About The Fund.................................... 28
THE DREYFUS/LAUREL FUNDS, INC....................................... 28
MANAGEMENT.......................................................... 29
DISTRIBUTION PLAN (INVESTOR CLASS ONLY)............................. 31
</TABLE>
.....................................
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE FUND'S SAI
INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH THE OFFERING MADE BY THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND OR THE DISTRIBUTOR. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE FUND OR BY THE DISTRIBUTOR IN
ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT BE LAWFULLY MADE.
....................... 4 .......................
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EXPENSE SUMMARY
The purpose of the following table is to help you understand the various costs
and expenses that you, as a Shareholder, will bear directly or indirectly in
connection with an investment in the Investor or Class R Shares of the Fund (SEE
"MANAGEMENT.")
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Investor Class R
Shares Shares
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases none none
Maximum Sales Load Imposed on Reinvestments none none
Deferred Sales Load none none
Redemption Fee none none
Exchange Fee none none
ESTIMATED ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF NET ASSETS)
Management Fee 0.90% 0.90%
12b-1 Fee* 0.25% none
Other Expenses** 0.00% 0.00%
------- --------
Total Fund Operating Expenses 1.15% 0.90%
EXAMPLES
You would pay the following on a 1 year $ 12 $ 9
$1,000 investment, assuming (1) a 5% 3 years 37 29
annual return and (2) redemption at 5 years 63 50
the end of each time period: 10 years 140 111
<FN>
* SEE "DISTRIBUTION PLAN (INVESTOR CLASS ONLY)" FOR A DESCRIPTION OF
THE FUND'S PLAN OF DISTRIBUTION FOR THE INVESTOR CLASS.
** DOES NOT INCLUDE FEES AND EXPENSES OF THE NON-INTERESTED DIRECTORS
(INCLUDING COUNSEL). THE INVESTMENT MANAGER IS CONTRACTUALLY
REQUIRED TO REDUCE ITS MANAGEMENT FEE IN AN AMOUNT EQUAL TO THE
FUND'S ALLOCABLE PORTION OF SUCH FEES AND EXPENSES, WHICH ARE
ESTIMATED TO BE 0.02% OF THE FUND'S NET ASSETS. (See "Management of
the Fund".)
</TABLE>
.....................................
THE INFORMATION CONTAINED IN THE TABLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS
THAN THOSE SHOWN.
.....................................
The Fund understands that banks, brokers, dealers or other financial
institutions (including Mellon Bank and its affiliates) (collectively "Agents")
may charge fees to their clients who are owners of the Fund's Investor Shares
for various services provided in connection with a client's account. These fees
would be in addition to any amounts received by an Agent under its Selling
Agreement ("Agreement") with Premier Mutual Fund Services, Inc. ("Premier"). The
Agreement requires each Agent to disclose to its clients any compensation
payable to such Agent by Premier and any other compensation payable by the
client for various services provided in connection with its account.
Long-term shareholders of Investor Shares could pay more in Rule 12b-1 fees
than the economic equivalent of the maximum front-end sales charges applicable
to mutual funds sold by members of the National Association of Securities
Dealers, Inc.
....................... 5 .......................
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FINANCIAL HIGHLIGHTS
The tables below are based upon a single Investor or Class R Share outstanding
throughout each fiscal year or period ended October 31, and should be read in
conjunction with the financial Statements and related notes that appear in the
Fund's Annual Report for the period ended October 31, 1994, which is
incorporated by reference in the SAI. The financial statements included in the
Fund's Annual Report have been audited by KPMG Peat Marwick LLP, independent
accountants, whose report appears in the Fund's Annual Report. Further
information about the Fund's performance is contained in the Fund's Annual
Report, which may be obtained without charge.
<TABLE>
<CAPTION>
DREYFUS EQUITY INCOME FUND
FOR AN INVESTOR SHARE OUTSTANDING THROUGHOUT THE PERIOD.
Period
Ended
10/31/94*#
-------
<S> <C> <C>
Net asset value, beginning of period $10.00
-------
Income from investment operations:
Net investment income 0.03
Net realized and unrealized loss on investments (0.08)
-------
Total from investment operations (0.05)
-------
Net asset value, end of period $9.95
-------
-------
Total return++ (0.50)%
-------
-------
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $1
Ratio of operating expenses to average net assets 1.15 %+
Ratio of net investment income to average net assets 2.65 %+
Portfolio turnover rate 5 %
<FN>
* THE FUND COMMENCED OPERATIONS AND COMMENCED SELLING INVESTOR
SHARES ON SEPTEMBER 2, 1994.
+ ANNUALIZED.
++ TOTAL RETURN REPRESENTS AGGREGATE TOTAL RETURN FOR THE
PERIOD INDICATED.
# PRIOR TO OCTOBER 17, 1994, MELLON BANK, N.A., SERVED AS THE
FUND'S INVESTMENT MANAGER. EFFECTIVE OCTOBER 17, 1994, THE
DREYFUS CORPORATION SERVES AS THE FUND'S INVESTMENT
MANAGER.
</TABLE>
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<TABLE>
<CAPTION>
DREYFUS EQUITY INCOME FUND
FOR A CLASS R SHARE OUTSTANDING THROUGHOUT THE PERIOD.
Period
Ended
10/31/94*#
-------
<S> <C> <C>
Net asset value, beginning of period $10.00
-------
Income from investment operations:
Net investment income 0.05
Net realized and unrealized loss on investments (0.10)
-------
Total from investment operations (0.05)
-------
Net asset value, end of period $9.95
-------
-------
Total return++ (0.50)%
-------
-------
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $5,005
Ratio of operating expenses to average net assets 0.90 %+
Ratio of net investment income to average net assets 2.90 %+
Portfolio turnover rate 5 %
<FN>
* THE FUND COMMENCED OPERATIONS AND COMMENCED SELLING TRUST
SHARES ON SEPTEMBER 2, 1994. EFFECTIVE OCTOBER 17, 1994, THE
FUND'S TRUST SHARES WERE REDESIGNATED AS CLASS R SHARES.
+ ANNUALIZED.
++ TOTAL RETURN REPRESENTS AGGREGATE TOTAL RETURN FOR THE
PERIOD INDICATED.
# PRIOR TO OCTOBER 17, 1994, MELLON BANK, N.A., SERVED AS THE
FUND'S INVESTMENT MANAGER. EFFECTIVE OCTOBER 17, 1994, THE
DREYFUS CORPORATION SERVES AS THE FUND'S INVESTMENT
MANAGER.
</TABLE>
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DREYFUS EQUITY INCOME FUND
ALTERNATIVE PURCHASE METHODS
Investor Shares and Class R Shares are also offered through a servicing network
associated with The Dreyfus Corporation (the "Manager") pursuant to a separate
Prospectus. For more information and a Prospectus relating to Shares offered
through that network, call 1-800-645-6561. Please read that Prospectus
carefully. Exchange and shareholder services vary depending upon the network
through which you purchase your Fund Shares.
Holders of Class R Shares who have held their Shares since April 4, 1994,
may continue to purchase Class R Shares of the Fund whether or not they would
otherwise be eligible to do so.
INVESTMENT OBJECTIVE AND POLICIES
The Fund seeks an above-average level of income along with moderate long-term
growth of income and principal by investing in a diversified list of securities,
resulting in a portfolio with a moderate level of risk. There can be no
assurance that the Fund will meet its investment objective. SEE "OTHER
INVESTMENT POLICIES AND RISK FACTORS" below for a detailed description of risks
and other Fund investment policies. See "OTHER INVESTMENT POLICIES AND RISK
FACTORS--LIMITING INVESTMENT RISKS" for a discussion of the Fund's investment
limitations.
The Fund will normally invest approximately 85% of its total assets in
dividend-paying stocks; the remainder may be invested in convertible bonds,
preferred stocks, fixed income securities and commercial paper. The Fund may
also invest in (1) repurchase agreements, (2) reverse repurchase agreements, (3)
stock index futures and options contracts, (4) when-issued transactions and (5)
American Depository Receipts ("ADRs"). The Fund may invest in foreign
securities, which may include investment in developing countries. (SEE "OTHER
INVESTMENT POLICIES AND RISK FACTORS--FOREIGN SECURITIES.") The Fund may also
invest in fixed income obligations of domestic and foreign issuers that are
investment grade obligations. For a description of fixed-income ratings, please
see the SAI. (SEE "OTHER INVESTMENT POLICIES AND RISK-- FACTORS.")
OTHER INVESTMENT POLICIES AND RISK FACTORS
AMERICAN DEPOSITORY RECEIPTS. The Fund may invest in U.S. dollar-denominated
ADRs. ADRs typically are issued by an American bank or trust company and
evidence ownership of underlying securities issued by foreign companies. ADRs
are traded in the United States on national securities exchanges or in the
over-the-counter market. (SEE "FOREIGN SECURITIES.")
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BORROWING. The Fund is authorized, within specified limits, to borrow money
for temporary administrative purposes and to pledge its assets in connection
with such borrowings.
COMMERCIAL PAPER. The Fund may invest in commercial paper. These instruments
are short-term obligations issued by banks and corporations that have maturities
ranging from 2 to 270 days. Each instrument may be backed only by the credit of
the issuer or may be backed by some form of credit enhancement, typically in the
form of a guarantee by a commercial bank. Commercial paper backed by guarantees
of foreign banks may involve additional risk due to the difficulty of obtaining
and enforcing judgments against such banks and the generally less restrictive
regulations to which such banks are subject. The Fund will only invest in
commercial paper of U.S. and foreign companies rated A-1 at the time of purchase
by Standard & Poor's Ratings Group, Prime-1 by Moody's Investors Services, Inc.,
F-1 by Fitch Investors Service, Inc., Duff 1 by Duff & Phelps, Inc., or A1 by
IBCA, Inc.
CONVERTIBLE SECURITIES. The Fund may purchase convertible securities, which
are fixed-income securities such as bonds that may be converted at a stated
price within a specified period of time into a specified number of shares of
common stock of the same or a different issuer. Convertible securities are
senior to common stock in a corporation's capital structure, but usually are
subordinated to non-convertible debt securities. While providing a fixed-income
stream (generally higher in yield than the income derivable from a common stock
but lower than that afforded by a non-convertible debt security of similar
quality), a convertible security also affords an investor the opportunity,
through its conversion feature, to participate in the capital appreciation of
the common stock into which it is convertible. In general, the market value of a
convertible security is the higher of its "investment value" (i.e., its value as
a fixed-income security) or its "conversion value" (i.e., the value of the
underlying shares of common stock if the security is converted). As a
fixed-income security, the market value of a convertible security generally
increases when interest rates decline and generally decreases when interest
rates rise. However, the price of a convertible security also is influenced by
the market value of the security's underlying common stock. Thus, the price of a
convertible security generally increases as the market value of the underlying
stock increases, and generally decreases as the market value of the underlying
stock declines. Investments in convertible securities generally entail less risk
than investments in the common stock of the same issuer.
FIXED-INCOME SECURITIES. The Fund may invest in fixed-income securities to
achieve its investment objective. In periods of declining interest rates, the
Fund's yield (its income from portfolio investments over a stated period of
time) may tend to be higher than prevailing market rates, and in periods of
rising interest rates, the yield of the Fund may tend to be lower. Also when
interest rates are falling, the inflow of net new money to the Fund from the
continuous
....................... 9 .......................
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sales of its Shares will likely be invested in portfolio instruments producing
lower yield than the balance of the Fund's portfolio, thereby reducing the yield
of the Fund. In periods of rising interest rates, the opposite can be true. The
net asset value per share ("NAV") of the Fund investing in fixed-income
securities also may change as general levels of interest rates fluctuate. When
interest rates increase, the value of a portfolio of fixed-income securities can
be expected to decline. Conversely, when interest rates decline, the value of a
portfolio of fixed-income securities can be expected to increase.
FOREIGN SECURITIES. The Fund may purchase securities of foreign issuers and
may invest in obligations of foreign branches of domestic banks and domestic
branches of foreign banks. Investment in foreign securities presents certain
risks, including those resulting from fluctuations in currency exchange rates,
revaluation of currencies, future political and economic developments and the
possible imposition of currency exchange blockages or other foreign governmental
laws or restrictions, reduced availability of public information concerning
issuers, and the fact that foreign issuers are not generally subject to uniform
accounting, auditing and financial reporting standards or to other regulatory
practices and requirements comparable to those applicable to domestic issuers.
Moreover, securities of many foreign issuers may be less liquid and their prices
more volatile than those of securities of comparable domestic issuers. In
addition, with respect to certain foreign countries, there is the possibility of
expropriation, confiscatory taxation and limitations on the use or removal of
funds or other assets of the Fund, including withholding of dividends. Foreign
securities may be subject to foreign government taxes that would reduce the
yield on such securities.
FUTURES, OPTIONS AND OTHER DERIVATIVE INSTRUMENTS. The Fund may attempt to
reduce the overall level of investment risk of particular securities and attempt
to protect the Fund against adverse market movements by investing in futures,
options and other derivative instruments. These include the purchase and writing
of options on securities (including index options) and options on foreign
currencies and investing in futures contracts for the purchase or sale of
instruments based on financial indices, including interest rate indices or
indices of U.S. or foreign government, equity or fixed income securities
("futures contracts"), options on futures contracts, forward contracts and swaps
and swap-related products such as equity swap contracts, interest rate swaps,
currency swaps, caps, collars and floors.
The use of futures, options, forward contracts and swaps exposes the Fund to
additional investment risks and transaction costs. If the Manager incorrectly
analyzes market conditions or does not employ the appropriate strategy with
respect to these instruments, the Fund could be left in a less favorable
position. Additional risks inherent in the use of futures, options, forward
contracts and swaps include: imperfect correlation between the price of futures,
options and
....................... 10 .......................
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forward contracts and movements in the prices of the securities or currencies
being hedged; the possible absence of a liquid secondary market for any
particular instrument at any time; and the possible need to defer closing out
certain hedged positions to avoid adverse tax consequences. The Fund may not
purchase put and call options which are traded on a national stock exchange in
an amount exceeding 5% of its net assets. Further information on the use of
futures, options and other derivative instruments, and the associated risks is
contained in the SAI.
ILLIQUID SECURITIES. The Fund will not knowingly invest more than 15% of the
value of its net assets in illiquid securities, including time deposits and
repurchase agreements having maturities longer than seven days. Securities that
have readily available market quotations are not deemed illiquid for purposes of
this limitation (irrespective of any legal or contractual restrictions on
resale). The Fund may invest in commercial obligations issued in reliance on the
so-called "private placement" exemption from registration afforded by Section
4(2) of the Securities Act of 1933, as amended ("Section 4(2) paper"). The Fund
may also purchase securities that are not registered under the Securities Act of
1933, as amended, but which can be sold to qualified institutional buyers in
accordance with Rule 144A under that Act ("Rule 144A securities"). Liquidity
determinations with respect to Section 4(2) paper and Rule 144A securities will
be made by the Board of Directors as required. The Board will consider
availability of reliable price information and other relevant information in
making such determinations. Section 4(2) paper is restricted as to disposition
under the federal securities laws, and generally is sold to institutional
investors such as the Fund that agree that they are purchasing the paper for
investment and not with a view to public distribution. Any resale by the
purchaser must be in an exempt transaction. Section 4(2) paper normally is
resold to other institutional investors like the Fund through or with the
assistance of the issuer or investment dealers who make a market in the Section
4(2) paper, thus providing liquidity. Rule 144A securities generally must be
sold to other qualified institutional buyers. If a particular investment in
Section 4(2) paper or Rule 144A securities is not determined to be liquid, that
investment will be included within the percentage limitation on investment in
illiquid securities. The ability to sell Rule 144A securities to qualified
institutional buyers is a recent development and it is not possible to predict
how this market will mature. Investing in Rule 144A securities could have the
effect of increasing the level of fund illiquidity to the extent that qualified
institutional buyers become, for a time, uninterested in purchasing these
securities.
OTHER INVESTMENT COMPANIES. The Fund may invest in securities issued by
other investment companies to the extent that such investments are consistent
with the Fund's investment objective and policies and permissible under the
Investment Company Act of 1940, as amended (the "1940 Act"). As a shareholder of
another investment company, the Fund would
....................... 11 .......................
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bear, along with other shareholders, its pro rata portion of the other
investment company's expenses, including advisory fees. These expenses would be
in addition to the advisory and other expenses that the Fund bears directly in
connection with its own operations.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements. A
repurchase agreement involves the purchase of a security by the Fund and a
simultaneous agreement (generally with a bank or broker-dealer) to repurchase
that security from the Fund at a specified price and date or upon demand. This
technique offers a method of earning income on idle cash. A risk associated with
repurchase agreements is the failure of the seller to repurchase the securities
as agreed, which may cause the Fund to suffer a loss if the market value of such
securities declines before they can be liquidated on the open market. Repurchase
agreements with a duration of more than seven days are considered illiquid
securities and are subject to the limit stated above.
REVERSE REPURCHASE AGREEMENTS. The Fund may enter into reverse repurchase
agreements to meet redemption requests where the liquidation of Fund securities
is deemed by the Manager to be disadvantageous. Under a reverse repurchase
agreement, the Fund: (i) transfers possession of Fund securities to a bank or
broker-dealer in return for cash in an amount equal to a percentage of the
securities' market value; and (ii) agrees to repurchase the securities at a
future date by repaying the cash with interest. Cash or liquid high-grade debt
securities held by the Fund equal in value to the repurchase price including any
accrued interest will be maintained in a segregated account while a reverse
repurchase agreement is in effect.
SECURITIES LENDING. To increase return on Fund securities, the Fund may lend
its portfolio securities to broker-dealers and other institutional investors
pursuant to agreements requiring that the loans be continuously secured by
collateral equal at all times in value to at least the market value of the
securities loaned. There may be risks of delay in receiving additional
collateral or in recovering the securities loaned or even a loss of rights to
the collateral should the borrower of the securities fail financially. However,
loans are made only to borrowers deemed by the Manager to be of good standing
and when, in its judgment, the income to be earned from the loan justifies the
attendant risks.
U.S. GOVERNMENT SECURITIES. The Fund may invest in obligations issued or
guaranteed as to both principal and interest by the U.S. Government or backed by
the full faith and credit of the United States. In addition to direct
obligations of the U.S. Treasury, these include securities issued or guaranteed
by the Federal Housing Administration, Farmers Home Administration,
Export-Import Bank of the United States, Small Business Administration,
Government National Mortgage Association, General Services Administration and
Maritime Administration. Investments
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may also be made in U.S. Government obligations that do not carry the full faith
and credit guarantee, such as those issued by the Federal National Mortgage
Association, the Federal Home Loan Mortgage Corporation, or other
instrumentalities.
WHEN-ISSUED SECURITIES AND DELAYED DELIVERY TRANSACTIONS. To secure
advantageous prices or yields, the Fund may purchase U.S. Government securities
on a when-issued basis or may purchase or sell securities for delayed delivery.
In such transactions, delivery of the securities occurs beyond the normal
settlement periods, but no payment or delivery is made by the Fund prior to the
actual delivery or payment by the other party to the transaction. The purchase
of securities on a when-issued or delayed delivery basis involves the risk that,
as a result of an increase in yields available in the market place, the value of
the securities purchased will decline prior to the settlement date. The sale of
securities for delayed delivery involves the risk that the prices available in
the market on the delivery date may be greater than those obtained in the sale
transactions. The Fund will establish a segregated account consisting of cash,
U.S. Government securities or other high-grade debt obligations in an amount
equal to the amounts of its when-issued and delayed delivery commitments.
MASTER/FEEDER OPTION. The Dreyfus/Laurel Funds, Inc. may in the future seek
to achieve the Fund's investment objective by investing all of the Fund's assets
in another investment company having the same investment objective and
substantially the same investment policies and restrictions as those applicable
to the Fund. Shareholders of the Fund will be given at least 30 days' prior
notice of any such investment. Such investment would be made only if the
Directors determine it to be in the best interest of the Fund and its
shareholders. In making that determination, the Directors will consider, among
other things, the benefits to shareholders and/ or the opportunity to reduce
costs and achieve operational efficiencies. Although the Fund believes that the
Directors will not approve an arrangement that is likely to result in higher
costs, no assurance is given that costs will be materially reduced if this
option is implemented.
PORTFOLIO TURNOVER. While securities are purchased for the Fund on the basis
of potential for income and capital appreciation and not for short-term trading
profits, the Fund's turnover rate may exceed 100%. A portfolio turnover rate of
100% would occur, for example, if all the securities held by the Fund were
replaced once in a period of one year. A higher rate of portfolio turnover
involves correspondingly greater brokerage commissions and other expenses which
must be borne directly by the Fund and, thus, indirectly by its shareholders. In
addition, a high rate of portfolio turnover may result in the realization of
larger amounts of short-term capital gains which, when distributed to the Fund's
shareholders, are taxable to them as ordinary income. (SEE
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"DISTRIBUTIONS" and "TAXES.") Nevertheless, security transactions for the Fund
will be based only upon investment considerations and will not be limited by any
other considerations when the Manager deems it appropriate to make changes in
the Fund's assets.
LIMITING INVESTMENT RISKS. The Fund is subject to a number of investment
limitations. Certain limitations are matters of fundamental policy and may not
be changed without the affirmative vote of the holders of a majority of the
Fund's outstanding Shares. The SAI describes all of the Fund's fundamental and
non-fundamental restrictions.
The investment objective, policies, restrictions, practices and procedures
of the Fund, unless otherwise specified, may be changed without shareholder
approval. If the Fund's investment objective, policies, restrictions, practices
or procedures change, shareholders should consider whether the Fund remains an
appropriate investment in light of their then current position and needs.
In order to permit the sale of the Fund's Shares in certain states, the Fund
may make commitments more restrictive than the investment policies and
restrictions described in this Prospectus and the SAI. Should the Fund determine
that any such commitment is no longer in the best interests of the Fund, it may
consider terminating sales of its Shares in the states involved.
- - - ------------------------------------------------
HOW TO DO BUSINESS WITH US
SPECIAL SHAREHOLDER SERVICES
You may establish one or more special services designed to provide an easy way
to do business with the Fund. By electing these services on your application or
by completing the appropriate forms, you may authorize:
- INVESTMENT BY PHONE.
- AUTOMATIC MONTHLY INVESTMENTS.
- EXCHANGES OR REDEMPTIONS BY PHONE.
By electing the service which enables you to exchange and redeem by phone,
you agree to indemnify the Fund, its transfer agent and its investment manager
from any loss, claim or expense you may incur as a result of their acting on
such instructions. The Fund will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine. These include personal
identification procedures, recording of telephone conversations and
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providing written confirmation of each transaction. A failure on the part of the
Fund to employ such procedures may subject it to liability for any loss due to
unauthorized or fraudulent instructions.
INVESTOR LINE
You may reach The Dreyfus Family of Funds by calling our Investor Line at
1-800-548-2868. If you call on a rotary phone during normal business hours (9
a.m. to 5 p.m., Eastern time), you will reach a Dreyfus Family of Funds
operator. If you call on a Touch-Tone phone, you will receive instructions on
how to: (1) request a current prospectus or information booklets about The
Dreyfus Family of Funds' investment portfolios and services, (2) listen to net
asset values, yields and total return figures, and (3) talk with a customer
service representative during normal business hours. For more information about
direct access using a Touch-Tone phone, please contact The Dreyfus Family of
Funds.
HOW TO INVEST IN THE FUND
Premier serves as the Fund's distributor. Premier is a wholly-owned subsidiary
of Institutional Administration Services, Inc., a provider of mutual fund
administration services, the parent company of which is Boston Institutional
Group, Inc. Premier also serves as the Fund's sub-administrator and, pursuant to
a Sub-Administration Agreement, provides various administrative and corporate
secretarial services to the Fund. Premier has established various procedures for
purchasing Class R and Investor Shares of the Fund. Class R Shares are sold
primarily to bank trust departments and other financial service providers
(including Mellon Bank and its affiliates) ("Banks") acting on behalf of
customers having a qualified trust or investment account or relationship at such
institution, or to customers who have received and hold shares of the Fund
distributed to them by virtue of such an account or relationship. Investor
Shares are primarily sold to retail investors by banks, securities brokers or
dealers and other financial institutions (including Mellon Bank and its
affiliates) ("Agents") that have entered into a Selling Agreement with Premier.
Once an investor has established an account, additional purchases may, in
certain cases, be made directly through the Fund's transfer agent. If Shares of
the Fund are held in an account at a Bank or with an Agent, such Bank or Agent
may require you to place all Fund purchase, exchange and redemption orders
through them. All Banks and Agents have agreed to transmit your transaction
requests to the Fund's transfer agent or to Premier. You may diversify your
investments by choosing a combination of investment portfolios offered by The
Dreyfus Family of Funds.
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You may invest in the following ways:
BY MAIL.
Send your application and check or money order to The Dreyfus Family of
Funds, P.O. Box 9692, Providence, Rhode Island 02940-9830. Checks must be
payable in U.S. dollars and drawn on U.S. banks. When making subsequent
investments, enclose your check with the return remittance portion of the
confirmation of your previous investment. If the remittance portion is not
available, indicate on your check or a separate piece of paper your name,
address, the Fund and class of Shares of the Fund that you are buying and the
account number. Orders to purchase Shares are effective on the day the Fund
receives your check or money order. (SEE "WHEN SHARE PRICE IS DETERMINED.")
BY TELEPHONE.
Once your account is open, you may make investments by telephone by calling
1-800-548-2868 if you have elected the service authorizing the Fund to draw on
your bank account by check when you call with instructions. Investments made by
phone in any one account must be in an amount of at least $100 and are effective
two days after your call. (SEE "WHEN SHARE PRICE IS DETERMINED.")
BY WIRE.
You may make your initial or subsequent investments in the Fund by wiring
funds. To do so:
(1) Instruct your bank to wire funds to MELLON BANK. (ABA routing number
0430-0026-1).
(2) Be sure to specify on the wire:
(A) The Dreyfus Funds.
(B) The Fund name and the class of Shares of the Fund you are buying and
account number (if you have one).
(C) Your name.
(D) Your city and state.
In order for a wire purchase to be effective on the same day it is received
both the trading instructions and the wire must be received before 4 p.m.,
Eastern time. (SEE "WHEN SHARE PRICE IS DETERMINED.")
BY AUTOMATIC MONTHLY INVESTMENTS.
Once your account is open, you may make investments automatically by
electing the Automatic Investment Program, the service authorizing the Fund to
draw on your bank account regularly by paper or electronic draft. Such
investments must be in amounts of not less than
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$100 in any one account. You should inquire at your bank whether it will honor a
preauthorized paper or electronic draft. Contact the Fund if your bank requires
additional documentation. Call 1-800-548-2868 or write The Dreyfus Family of
Funds, One Exchange Place, Boston, Massachusetts 02109 for more information
about the Automatic Investment Program.
BY DIRECT DEPOSIT.
If your employer offers Direct Deposit, you may arrange to automatically
purchase Shares of the Fund (minimum $100) each pay period. Direct Deposit
investing may also be available to persons receiving regular payments from other
sources (including government pension or social security payments). Note that it
may not be appropriate to Direct Deposit your entire paycheck into the Fund
because it has a fluctuating NAV. Call 1-800-548-2868 or write The Dreyfus
Family of Funds, One Exchange Place, Boston, Massachusetts 02109 for more
information or a Direct Deposit authorization form.
BY IN-KIND PURCHASES.
If the following conditions are satisfied, the Fund may at its discretion,
permit you to purchase Shares through an "in-kind" exchange of securities you
hold. Any securities exchanged must meet the investment objective, policies and
limitations of the Fund, must have a readily ascertainable market value, must be
liquid and must not be subject to restrictions on resale. The market value of
any securities exchanged, plus any cash, must be at least equal to $25,000.
Shares purchased in exchange for securities generally cannot be redeemed for
fifteen days following the exchange in order to allow time for the transfer to
settle.
The basis of the exchange will depend upon the relative NAV of the Shares
purchased and securities exchanged. Securities accepted by the Fund will be
valued in the same manner as the Fund values its assets. Any interest earned on
the securities following their delivery to the Fund and prior to the exchange
will be considered in valuing the securities. All interest, dividends,
subscription or other rights attached to the securities becomes the property of
the Fund, along with the securities. Call 1-800-548-2868 or write The Dreyfus
Family of Funds, One Exchange Place, Boston, Massachusetts 02109 for more
information about "in-kind" purchases.
WHEN SHARE PRICE IS DETERMINED.
The price of your Shares is their NAV. NAV is determined at the close of the
New York Stock Exchange ("NYSE") on each day that the NYSE is open (a "business
day"). Investments and requests to exchange or redeem Shares received by the
Fund before the close of business on the NYSE (usually 4 p.m., Eastern time) are
effective on, and will receive the price determined on, that day (except
investments made by electronic funds transfer which are effective two
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business days after your call). Investment, exchange or redemption requests
received after the close of the NYSE are effective on, and receive the Share
price determined on, the next business day.
ADDITIONAL INFORMATION ABOUT INVESTMENTS.
Once you have mailed or otherwise transmitted your investment instructions
to the Fund, they may not be modified or canceled. The Fund reserves the right
to reject any application or investment. The Fund reserves the right to make
exceptions to the minimum initial investment and account minimum amount from
time to time.
The minimum initial investment to establish a new account in the Fund is
$1,000, except for Individual Retirement Accounts ("IRAs"), retirement plans,
and Uniform Transfers (Gifts) to Minors Act accounts, for which the minimum
initial investment is $500. The Fund may suspend the offering of Shares of any
class of the Fund and reserves the right to vary initial and subsequent
investment minimums. Subsequent investments to purchase additional Shares in the
Fund must be in an amount of $100 or more.
The Fund intends, upon 60 days' prior notice, to involuntarily redeem Shares
in any account if the total value of the Shares is less than a specified minimum
unless you have established an automatic monthly investment to purchase
additional Shares. The Fund reserves the right to change such minimum from time
to time. Any time the Shares of the Fund held in an account have a value of less
than $1,000 ($500 for Uniform Gifts/Transfers to Minors Acts accounts), unless
the deficiency amount is the result of a decrease in the NAV, a notification may
be sent advising you of the need either to make an investment to bring the value
of the Shares held in the account up to $1,000 ($500) or to establish an
automatic monthly investment to purchase additional Shares. If the investment is
not made or the automatic monthly investment is not established within 60 days
from the date of notification, the Shares held in the account will be redeemed
and the proceeds from the redemption will be sent by check to your address of
record.
The automatic redemption of Shares will not apply to IRAs, custodial
accounts under Section 403(b) of the Internal Revenue Code of 1986, as amended
(the "Code") ("403(b) accounts") and other types of tax-deferred retirement plan
accounts.
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HOW TO EXCHANGE YOUR INVESTMENT
FROM ONE FUND TO ANOTHER
You may exchange your Fund Shares for shares of the same class of certain other
funds advised by the Manager and that were previously advised by Mellon Bank. As
noted below, exchanges from any one fund account may be limited in any one
calendar year. In addition, the Shares being exchanged and the shares of the
fund being acquired must have a current value of at least $100 and otherwise
meet the minimum investment requirement of the fund being acquired. Call the
Investor Line for additional information and a prospectus describing other
investment portfolios offered by The Dreyfus Family of Funds.
BY TELEPHONE.
You may exchange your Shares by calling 1-800-548-2868 if you have
authorized the Fund to accept telephone instructions.
BY MAIL.
You may direct The Dreyfus Family of Funds to exchange your Shares by
writing to The Dreyfus Family of Funds, P.O. Box 9692, Providence, Rhode Island
02940-9830. The request should be signed by each person in whose name the Shares
are registered. All signatures should be exactly as the name appears in the
registration; for example, if an owner's name is registered as John Robert
Jones, he should sign that way and not as John R. Jones.
ADDITIONAL INFORMATION ABOUT EXCHANGES.
(1) In an exchange from one account to another account, the Shares being
sold and the new shares being purchased must have a current value of at
least $100.
(2) Exchanges from any one fund account may be limited in any one calendar
year. The Fund reserves the right to make exceptions to an exchange
limitation from time to time. An exchange limitation will not apply to
the exchange of the Shares of any of the funds exchanged pursuant to an
Automatic Withdrawal Program, and to Shares held in 403(b) accounts.
(3) The Shares being acquired must be qualified for sale in your state of
residence.
(4) If the Shares are represented by a negotiable stock certificate, the
certificate must be returned before the exchange can be effected.
(5) Once you have telephoned or mailed your exchange request, it is
irrevocable and may not be modified or canceled.
(6) An exchange is based on the next calculated NAV of each fund after
receipt of your exchange order.
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(7) Shares may not be exchanged unless you have furnished the Fund with your
taxpayer identification number, certified as prescribed by the Code and
regulations thereunder. (SEE "TAXES.")
(8) Exchange of Fund Shares is, for Federal income tax purposes, a sale of
the Shares on which you may realize a taxable gain or loss.
(9) If the request is made by a corporation, partnership, trust, fiduciary,
agent, estate, guardian, pension plan, profit sharing plan or
unincorporated association, the Fund may require evidence satisfactory
to it of the authority of the individual signing the request.
Shareholders will be given sixty days' notice prior to any material changes
in the exchange privilege.
HOW TO REDEEM SHARES
The Fund will redeem or "buy back" your Shares at any time at their NAV. (BEFORE
REDEEMING, PLEASE READ "ADDITIONAL INFORMATION ABOUT REDEMPTIONS.") Your
redemption proceeds may be delayed if you have owned your Shares less than 10
days. (SEE "REDEMPTION PROCEEDS.") The Fund imposes no charges when Shares are
redeemed. Agents or other institutions may charge their clients a nominal fee
for effecting redemptions of Fund Shares.
BY TELEPHONE.
If you have authorized the Fund to accept telephone instructions, you may
redeem your Shares by calling 1-800-548-2868. Once made, your telephone request
may not be modified or canceled. (BEFORE CALLING, READ "ADDITIONAL INFORMATION
ABOUT REDEMPTIONS" AND "WHEN SHARE PRICE IS DETERMINED.")
BY MAIL.
Your written instructions to redeem Shares may be in any one of the
following forms:
- A LETTER TO THE DREYFUS FAMILY OF FUNDS.
- AN ASSIGNMENT FORM OR STOCK POWER.
- AN ENDORSEMENT ON THE BACK OF YOUR NEGOTIABLE STOCK CERTIFICATE, IF YOU
HAVE ONE.
Once mailed to The Dreyfus Family of Funds, P.O. Box 9692, Providence, Rhode
Island 02940-9830, the redemption request is irrevocable and may not be modified
or canceled. A letter of instruction should state the number of Shares or the
dollar amount to be redeemed. The letter must include your account number, and
for redemptions in an amount in excess of $25,000, a signature guarantee of each
owner. The redemption request must be signed by each person in whose name the
Shares are registered; for example, in the case of joint ownership, each owner
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must sign. All signatures should be exactly as the name appears in the
registration. If the owner's name appears in the registration as John Robert
Jones, he should sign that way and not as John R. Jones. Signature guarantees
can be obtained from commercial banks, credit unions if authorized by state
laws, savings and loans institutions, trust companies, members of a recognized
stock exchange, or from other eligible guarantors who are members of the
Securities Transfer Agents Medallion Program ("STAMP") or any other industry
recognized program approved by the Securities Transfer Association. (BEFORE
WRITING, SEE "ADDITIONAL INFORMATION ABOUT REDEMPTIONS.")
BY AUTOMATED WITHDRAWAL PROGRAM.
The Fund's Automated Withdrawal Program automatically redeems enough Shares
each month to provide you with a check for an amount which you specify (with a
minimum of $100). To set up an Automated Withdrawal Program, call the Fund at
1-800-548-2868 for instructions. Only shareholders with an account balance of
$10,000 or more may participate in this program. Shares will be redeemed on the
15th day or 30th day of each month or the next business day, and your check will
be mailed the next day. If your monthly checks exceed the dividends, interest
and capital appreciation on your Shares, the payments will deplete your
investment. Amounts paid to you by Automated Withdrawals are not a return on
your investment. They are derived from the redemption of Shares in your account,
and you must report on your income tax return any gains or losses that you
realize.
You may specify an Automated Withdrawal Program when you make your first
investment. If you would like to establish an Automated Withdrawal Program
thereafter, the request for the Automated Withdrawal Program must be signed by
all owners, with their signatures guaranteed.
When you make your first investment you may request that Automated
Withdrawals be sent to an address other than the address of record. Thereafter,
a request to send Automated Withdrawals to an address other than the address of
record must be signed by all owners, with their signatures guaranteed.
The Fund may terminate the Automated Withdrawal Program at any time, upon
notice to you, and you likewise may terminate it or change the amount of the
Automated Withdrawal Program, by notice to the Fund in writing or by telephone.
Termination or change will become effective within five days following receipt
of your instructions. Your Automated Withdrawal Program plan may begin any time
after you have owned your Shares for 10 days.
REDEMPTION PROCEEDS.
Redemption proceeds may be sent to you:
BY MAIL. If your redemption check is mailed, it is usually mailed by the
second business day after receipt of your redemption request, but not later than
seven days afterwards. When a
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redemption occurs shortly after a recent purchase, the Fund may hold the
redemption proceeds beyond seven days but only until the purchase check clears,
which may take up to 10 days or more. No dividend is paid on the redemption
proceeds after the redemption and before the check is mailed. If you anticipate
redemptions soon after you purchase your Shares, you are advised to wire funds
to avoid delay.
BY WIRE AND ELECTRONIC FUNDS TRANSFER. You may authorize the Fund to
transmit redemption proceeds by wire or electronic funds transfer. Proceeds from
the redemption of Fund Shares will normally be transmitted on the first business
day, but not later than the seventh day, following the date of redemption. Your
bank usually will receive wired funds the day they are transmitted.
Electronically transferred funds will ordinarily be received within two business
days after transmission. Once the funds are transmitted, the time of receipt and
the availability of the funds are not within the Fund's control. If your bank
account changes, you must send a new "voided" check preprinted with the bank
registration with written instructions signed by all owners (with their
signatures guaranteed), including tax identification number.
ADDITIONAL INFORMATION ABOUT REDEMPTIONS.
(1) Redemptions specifying a certain date or price cannot be accepted and
will be returned.
(2) If the Shares being redeemed are represented by a negotiable stock
certificate, the certificate must be returned before the redemption can
be effected.
(3) All redemptions are made and the price is determined on the day when all
documentation is received in good order.
(4) If the request to redeem is made by a corporation, partnership, trust,
fiduciary, agent, estate, guardian, pension plan, profit sharing plan,
or unincorporated association, the Fund may require evidence
satisfactory to it of the authority of the individual signing the
request. Please call or write the Fund for further information.
(5) A request to redeem Shares in an IRA or 403(b) account must be
accompanied by an IRS Form W4-P and a reason for withdrawal as specified
by the Internal Revenue Service.
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HOW TO USE THE DREYFUS FAMILY OF FUNDS
IN A TAX-QUALIFIED RETIREMENT PLAN
The Dreyfus Family of Funds' investment portfolios are available for your
tax-deferred retirement plan. Call 1-800-548-2868 or write The Dreyfus Family of
Funds, P.O. Box 9692, Providence, Rhode Island 02940-9830 and request the
appropriate forms for:
- IRAS.
- 403(B) ACCOUNTS FOR EMPLOYEES OF PUBLIC SCHOOL SYSTEMS AND NON-PROFIT
ORGANIZATIONS.
- PROFIT-SHARING PLANS AND PENSION PLANS FOR CORPORATIONS AND OTHER
EMPLOYERS.
HOW TO TRANSFER AN INVESTMENT TO A DREYFUS FAMILY OF FUNDS' RETIREMENT PLAN.
It is easy to transfer your tax-deferred plan to The Dreyfus Family of Funds
from another custodian. Call 1-800-548-2868 or write The Dreyfus Family of
Funds, P.O. Box 9692, Providence, Rhode Island 02940-9830 for a request to
transfer form. If you direct The Dreyfus Family of Funds to transfer funds from
an existing non-retirement Dreyfus Family of Funds account into a retirement
account, the Shares in your non-retirement account will be redeemed. The
redemption proceeds will be invested in your Dreyfus Family of Funds IRA or
other tax-qualified retirement plan. The redemption is a taxable event resulting
in a taxable gain or loss.
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OTHER INFORMATION
SHARE PRICE
An investment portfolio's NAV refers to the worth of one Share. The NAV for
Investor and Class R Shares of the Fund is computed by adding, with respect to
each class of Shares, the value of all the class' investments, cash, and other
assets, deducting liabilities and dividing the result by the number of Shares of
that class outstanding. The valuation of assets for determining NAV for the Fund
may be summarized as follows:
The portfolio securities of the Fund, except as otherwise noted, listed or
traded on a stock exchange, are valued at the latest sale price. If no sale is
reported, the mean of the latest bid and asked prices is used. Securities traded
over-the-counter are priced at the mean of the latest bid and asked prices but
will be valued at the last sale price if required by regulations of the SEC.
International securities traded principally over-the-counter and international
securities listed on an exchange are valued on the basis of the last sale price.
When market quotations are not readily available, securities and other assets
are valued at fair value as determined in good faith in accordance with
procedures established by the Board of Directors.
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Bonds are valued through valuations obtained from a commercial pricing
service or at the most recent mean of the bid and asked prices provided by
investment dealers in accordance with procedures established by the Board of
Directors.
Pursuant to a determination by The Dreyfus/Laurel Funds, Inc.'s Board of
Directors that such value represents fair value, the debt securities with
maturities of 60 days or less held by the Fund are valued at amortized cost.
When a security is valued at amortized cost, it is valued at its cost when
purchased, and thereafter by assuming a constant amortization to maturity of any
discount or premium, regardless of the impact of fluctuating interest rates on
the market value of the instrument.
The NAV of many of The Dreyfus Family of Funds' investment portfolios (other
than money market funds), is published in leading newspapers daily. The yield of
each class of Shares of most of The Dreyfus Family of Funds' money market funds
is published weekly in leading financial publications and in many local
newspapers. The NAV of the Fund may also be obtained by calling The Dreyfus
Family of Funds.
PERFORMANCE ADVERTISING
From time to time, the Fund may advertise the yield and total return on a class
of Shares. TOTAL RETURN AND YIELD FIGURES ARE BASED ON HISTORICAL EARNINGS AND
ARE NOT INTENDED TO INDICATE FUTURE PERFORMANCE. The "total return" of a class
of Shares of the Fund may be calculated on an average annual total return basis
or a cumulative total return basis. Average annual total return refers to the
average annual compounded rates of return on a class of Shares over one-, five-,
and ten-year periods or the life of the Fund (as stated in the advertisement)
that would equate an initial amount invested at the beginning of a stated period
to the ending redeemable value of the investment, assuming the reinvestment of
all dividends and capital gains distributions. Cumulative total return reflects
the total percentage change in the value of the investment over the measuring
period, again assuming the reinvestment of all dividends and capital gains
distributions.
The Fund's "yield" is calculated by dividing a class of Shares' annualized
net investment income per Share during a recent 30-day (or one month) period by
the maximum public offering price per class of such Share on the last day of
that period. Since yields fluctuate, yield data cannot necessarily be used to
compare an investment in a class of Shares with bank deposits, savings accounts,
and similar investment alternatives which often provide an agreed-upon or
guaranteed fixed yield for a stated period of time.
Total return and yield quotations will be computed separately for each class
of the Fund's Shares. Because of the difference in the fees and expenses borne
by Class R and Investor Shares
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of the Fund, the return and yield on Class R Shares will generally be higher
than the return and yield on Investor Shares. Any fees charged by a Bank or
Agent directly to its customers' account in connection with investments in the
Fund will not be included in calculations of total return or yield. The Fund's
annual report contains additional performance information and is available upon
request without charge from Premier or your Bank or Agent.
The Fund may compare the performance of its Investor and Class R Shares with
various industry standards of performance including Lipper Analytical Services,
Inc. ratings, Standard & Poor's 500 Composite Stock Price Index, Standard &
Poor's Midcap Stock Index, CDA Technologies indexes, indexes created by Lehman
Brothers, the Consumer Price Index, and the Dow Jones Industrial Average.
Performance rankings as reported in CHANGING TIMES, BUSINESS WEEK, INSTITUTIONAL
INVESTOR, THE WALL STREET JOURNAL, MUTUAL FUND FORECASTER, NO LOAD INVESTOR,
MONEY MAGAZINE, MORNINGSTAR MUTUAL FUND VALUES, U.S. NEWS AND WORLD REPORT,
FORBES, FORTUNE, BARRON'S and similar publications may also be used in comparing
the Fund's performance. Furthermore, the Fund may quote its Investor and Class R
Shares' total returns and yields in advertisements or in shareholder reports.
The Fund may also advertise non-standardized performance information, such as
total return for periods other than those required to be shown or cumulative
performance data. The Fund may advertise a quotation of yield or other similar
quotation demonstrating the income earned or distributions made by the Fund.
DISTRIBUTIONS
The Fund declares and pays dividends (on the first business day of the following
month) four times yearly, at the beginning of May, August, November, and in
mid-December, from its net investment income, if any, and distributes any net
realized gains, if any, on an annual basis. The Board of Directors may elect not
to distribute capital gains in whole or in part to take advantage of capital
loss carryovers.
Unless you choose to receive dividend and/or capital gain distributions in
cash, your distributions will be automatically reinvested in additional Shares
of the Fund at the NAV. You may change the method of receiving distributions at
any time by writing to the Fund. Checks which are sent to shareholders who have
requested distributions to be paid in cash and which are subsequently returned
by the United States Postal Service as not deliverable or which remain uncashed
for six months or more will be reinvested in additional Fund Shares in the
shareholder's account at the then current NAV. Subsequent Fund distributions
will be automatically reinvested in additional Fund Shares in the shareholder's
account.
Distributions paid by the Fund with respect to one class of Shares may be
greater or less per Share than those paid with respect to another class of
Shares due to the different expenses of the different classes.
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Shares purchased on a day on which the Fund calculates its NAV will not
begin to accrue dividends until the following day. Redemption orders effected on
any particular day will receive all dividends declared through the day of
redemption.
You may elect to have distributions on Shares held in an IRA and 403(b)
account paid in cash only if you are at least 59 1/2 years old or are
permanently and totally disabled. Distribution checks normally are mailed within
seven days after the record date.
Any dividend and/or capital gain distribution paid by the Fund will reduce
each Share's NAV by the amount of the distribution. Shareholders are subject to
taxes with respect to any such distribution. At any given time, the value of the
Fund's Shares includes the undistributed net gains, if any, realized by the Fund
on the sale of portfolio securities, and undistributed dividends and interest
received, less the Fund's expenses. Because such gains and income are included
in the value of your Shares, when they are distributed the value of your Shares
is reduced by the amount of the distribution. Accordingly, if your distribution
is reinvested in additional Shares, the distribution has no effect on the value
of your investment; while you own more Shares, the value of each Share has been
reduced by the amount of the distribution. Likewise, if you take your
distribution in cash, the value of your Shares immediately after the
distribution plus the cash received is equal to the value of the Shares
immediately before the distribution. For example, if you own a Fund Share that
immediately before a distribution has a value of $10, including $2 in
undistributed dividends and capital gains realized by the Fund during the year,
and if the $2 is distributed, the value of the Share will decline to $8. If the
$2 is reinvested at $8 per Share, you will receive .250 Shares, so that, after
the distribution, you will have 1.250 Shares at $8 per Share, or $10, the same
as before.
TAXES
The Fund intends to qualify for treatment as a regulated investment company
under the Code so that it will be relieved of Federal income tax on that part of
its investment company taxable income (consisting generally of taxable net
investment income, net short-term capital gain) and net capital gain (the excess
of net long-term capital gain over net short-term capital loss) that is
distributed to its shareholders.
Dividends from the Fund's investment company taxable income are taxable to
you as ordinary income, to the extent of the Fund's earnings and profits.
Distributions by the Fund of net capital gain, when designated as such, are
taxable to you as long-term capital gains, regardless of the length of time you
have owned your Shares.
All or a portion of the dividends paid by the Fund may be eligible for the
dividends-received deduction allowed to corporations. The eligible portion may
not exceed the aggregate
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dividends received by the Fund from U.S. corporations. However, dividends
received by a corporate shareholder and deducted by it pursuant to the
dividends-received deduction are subject indirectly to the alternative minimum
tax.
Dividends and other distributions are taxable to you regardless of whether
they are received in cash or reinvested in additional Fund Shares, even if the
value of your Shares is below your cost. If you purchase Shares shortly before a
taxable distribution, you must pay income taxes on the distribution, even though
the value of your investment (plus cash received, if any) remains the same. In
addition, the Share price at the time you purchase Shares may include unrealized
gains in the securities held in the Fund. If these portfolio securities are
subsequently sold and the gains are realized, they will, to the extent not
offset by capital losses, be paid to you as a capital gain distribution and will
be taxable to you.
Dividends paid by the Fund to qualified retirement plans ordinarily will not
be subject to taxation until the proceeds are distributed from the retirement
plans. The Fund will not report to the IRS dividends paid to such plans.
Generally, distributions from qualified retirement plans, except those
representing returns of non-deductible contributions thereto, will be taxable as
ordinary income and, if made prior to the time the participant reaches age
59 1/2, generally will be subject to an additional tax equal to 10% of the
taxable portion of the distribution. If the distribution from such a retirement
plan (other than certain governmental or church plans) for any taxable year
following the year in which the participant reachs age 70 1/2 is less than the
"minimum required distribution" for that taxable year, an excise tax equal to
50% of the deficiency may be imposed by the IRS. The administrator, trustee or
custodian of such a retirement plan will be responsible for reporting such
distributions from such plans to the IRS. Moreover, certain contributions to a
qualified retirement plan in excess of the amounts permitted by law may be
subject to an excise tax.
In January of each year, the Fund will send you a Form 1099-DIV notifying
you of the status for Federal income tax purposes of your distributions for the
preceding year.
You must furnish the Fund with your taxpayer identification number ("TIN")
and state whether you are subject to withholding for prior under-reporting,
certified under penalties of perjury as prescribed by the Code and the
regulations thereunder. Unless previously furnished, investments received
without such a certification will be returned. The Fund is required to withhold
a portion of all dividends, capital gain distributions and redemption proceeds
payable to any individuals and certain other non-corporate shareholders who do
not provide the Fund with a correct TIN; withholding from dividends and capital
gain distributions also is required for such shareholders who otherwise are
subject to backup withholding.
The Fund will be subject to a 4% nondeductible excise tax to the extent it
fails to distribute by the end of any calendar year substantially all of its
taxable ordinary income for that
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year and capital gain net income for the one-year period ending on October 31 of
that year, plus certain other amounts. The Fund expects to make such
distributions as are necessary to avoid the imposition of this tax.
The foregoing is only a summary of some of the important tax considerations
generally affecting the Fund and its shareholders; see the SAI for a further
discussion. There may be other Federal, state or local tax considerations
applicable to a particular investor. You therefore are urged to consult your own
tax adviser.
OTHER SERVICES
At least twice a year you will receive the financial statements of the Fund with
a summary of its investments and performance. The Fund will send you a
confirmation statement after every transaction (except with regard to the
reinvestment of dividends and other distributions) that affects your Fund
account. In addition, an account statement will be mailed to you quarterly or
monthly depending on the Fund's reporting schedule. You may also request a
statement of your account activity at any time. Carefully review such
confirmation statements and account statements and notify the Fund immediately
if there is an error. From time to time, to reduce expenses, only one copy of
the Fund's shareholder reports (such as the Fund's annual report) may be mailed
to your household. Please call the Fund if you need additional copies.
No later than January 31 of each year, the Fund will send you the following
reports, which you may use in completing your Federal income tax return:
Form 1099-DIV Reports taxable distributions (and returns of capital, if any)
during the preceding year.
Form 1099-B Reports proceeds paid on redemptions during the preceding year.
Form 1099-R Reports distributions from IRAs and 403(b) accounts during the
preceding year.
At such time as prescribed by law, the Fund will send you a Form 5498, which
reports contributions to your IRA for the previous calendar year. In addition,
The Fund may send you other relevant tax-related forms.
FURTHER INFORMATION ABOUT THE FUNDS
THE DREYFUS/LAUREL FUNDS, INC.
The Laurel Funds, Inc. was incorporated in Maryland on August 6, 1987 and
changed its name to The Dreyfus/Laurel Funds, Inc. on October 17, 1994. The
Dreyfus/Laurel Funds, Inc. is registered with the SEC under the 1940 Act as a
diversified, open-end management investment company. The Dreyfus/Laurel Funds,
Inc. has an authorized capitalization of 25 billion Shares of
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$0.001 par value stock with equal voting rights. The Articles of Incorporation
permit the Directors to create an unlimited number of investment portfolios
(each a "fund"). The Fund offered by this Prospectus currently issues two
classes of Shares designated "Investor" and "Class R" Shares.
Each Share (regardless of class) has one vote. All Shares of a fund (and
classes thereof) vote together as a single class, except as to any matter for
which a separate vote of any fund or class is required by the 1940 Act, and
except as to any matter which affects the interests of one or more particular
funds or classes, in which case only the shareholders of the affected fund or
class are entitled to vote, each as a separate class. At your written request,
the Fund will issue negotiable stock certificates.
At January 31, 1995, Mellon Bank Corporation, the Manager's parent, owned of
record through its direct and indirect subsidiaries more than 25% of The
Dreyfus/Laurel Funds, Inc.'s outstanding voting Shares, and is deemed, under the
1940 Act, to be a controlling shareholder.
MANAGEMENT.
THE BOARD OF DIRECTORS. The business affairs of The Dreyfus/Laurel Funds,
Inc. are managed under the direction of its Directors. The SAI contains the
names and general background information concerning the Directors and officers
of The Dreyfus/Laurel Funds, Inc.
INVESTMENT MANAGER. The Manager is located at 200 Park Avenue, New York, New
York 10166. As of January 31, 1995, the Manager managed or administered
approximately $70 billion in assets for more than 1.9 million investor accounts
nationwide. The Manager is a wholly-owned subsidiary of Mellon Bank, N.A. (One
Mellon Bank Center, Pittsburgh, Pennsylvania 15258) ("Mellon Bank"), the Fund's
prior investment manager. Pursuant to an Investment Management Agreement,
transferred from Mellon Bank to the Manager effective as of October 17, 1994,
the Manager provides or arranges for one or more third parties to provide
investment advisory, administrative, custody, fund accounting and transfer
agency services to the Fund. As investment manager, the Manager manages the Fund
by making investment decisions based on the Fund's investment objective,
policies and restrictions, and is paid a fee.
Under the Investment Management Agreement, the Fund pays a fee computed
daily, and paid monthly, at the annual rate of .90% of the Fund's average daily
net assets less certain expenses described below. The Manager pays all of the
expenses of the Fund except brokerage fees, taxes, interest, fees and expenses
of the non-interested Directors (including counsel fees) and extraordinary
expenses. Although the Manager does not pay for the fees and expenses of the
non-interested Directors (including counsel fees), the Manager is contractually
required to reduce its investment management fee in an amount equal to the
Fund's allocable share of such expenses. In order to compensate the Manager for
paying virtually all of the Fund's expenses, the Fund's investment management
fee is higher than the investment advisory fees paid by most investment
companies. Most, if not all, such companies also pay for additional
non-investment
....................... 29 .......................
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<PAGE>
D R E Y F U S E Q U I T Y I N C O M E F U N D
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- - - --------------------------------------------------------------------------------
advisory expenses that are not paid by such companies' investment adviser. From
time to time, the Manager may waive (either voluntarily or pursuant to
applicable state limitations) additional investment management fees payable by
the Fund. For the period from September 2, 1994 (commencement of operations)
through the fiscal year ended October 31, 1994, the Fund paid Mellon Bank or the
Manager 0.90% (annualized) of its average daily net assets in investment
management fees, less fees and expenses of the non-interested Directors
(including counsel fees).
For the fiscal year ended October 31, 1994, total operating expenses
(excluding Rule 12b-1 fees) of the Fund were 0.90% (annualized) of the average
daily net assets of each class for both the Investor Class and Class R.
The Manager is authorized to allocate purchase and sale orders for portfolio
securities to certain financial institutions, including, in the case of agency
transactions, financial institutions which are affiliated with the Manager or
which have sold Shares of the Fund, if the Manager believes that the quality of
the transaction and the commission are comparable to what they would be with
other qualified brokerage firms. From time to time, to the extent consistent
with its investment objective, policies and restrictions, the Fund may invest in
securities of companies with which Mellon Bank has a lending relationship.
Mellon Bank is a subsidiary of Mellon Bank Corporation. At June 30, 1994,
Mellon Bank Corporation was the 24th largest bank holding company in the United
States in terms of total assets. Through its bank subsidiaries, it operates 631
domestic retail banking locations including 432 branch offices. Mellon Bank
Corporation has 25 domestic representative offices. There are international
branches in Grand Cayman, British West Indies, and London, England, and two
international representative offices in Tokyo, Japan, and Hong Kong. Mellon Bank
has a banking subsidiary, Mellon Bank Canada, in Toronto. Mellon Bank is a
registered municipal securities dealer.
The Glass-Steagall Act of 1933 prohibits a national bank from engaging in
the business of issuing, underwriting, selling or distributing certain
securities. The activities of Mellon Bank and the Manager may raise issues under
these provisions. However, Mellon Bank has been advised by its counsel that
these activities are consistent with these statutory and regulatory obligations.
For more information on the Glass-Steagall Act of 1933, SEE "FEDERAL LAW
AFFECTING MELLON BANK" in the SAI.
The Fund's portfolio manager is Bert Mullins. Mr. Mullins is a Vice
President and Senior Security Analyst for Mellon Bank. Mr. Mullins is a
portfolio manager at the Manager and has been employed by the Manager since
October 17, 1994. He has been employed by Mellon Bank since 1966.
....................... 30 .......................
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<PAGE>
P R O S P E C T U S
-------------------------------------------------------------------
- - - --------------------------------------------------------------------------------
OTHER SERVICE PROVIDERS.
Under a Custody and Fund Accounting Agreement, Mellon Bank acts as custodian
and fund accountant, maintaining possession of the Fund's investment securities
and providing certain accounting and related services.
The Shareholder Services Group, Inc., a subsidiary of First Data
Corporation, serves as transfer agent ("Transfer Agent") for the Fund's Shares.
The Transfer Agent is located at One American Express Plaza, Providence, Rhode
Island 02903.
Shares of the Fund are sold on a continuous basis by Premier, as the Fund's
sponsor and distributor. Premier is a registered broker-dealer with principal
offices at One Exchange Place, Boston, Massachusetts 02109. The Fund has entered
into a distribution agreement with Premier which provides that Premier has the
exclusive right to distribute Shares of the Fund. Premier may pay service and/or
distribution fees to Agents that assist customers in purchasing and servicing of
Shares of the Funds. (SEE "DISTRIBUTION PLAN (INVESTOR CLASS ONLY.)")
DISTRIBUTION PLAN (INVESTOR CLASS ONLY).
Investor Class Shares are subject to a Distribution Plan ("Plan") adopted
pursuant to Rule 12b-1 under the 1940 Act ("Rule 12b-1"). The Investor Shares of
the Fund bear some of the cost of selling those Shares under the Plan. The Plan
allows the Fund to spend annually up to 0.25% of its average daily net assets
attributable to Investor Shares to compensate Dreyfus Service Corporation, an
affiliate of the Manager, for shareholder servicing activities and Premier for
shareholder servicing activities and for activities or expenses primarily
intended to result in the sale of Investor Shares of the Fund. The Plan allows
Premier to make payments from the Rule 12b-1 fees it collects from the Fund to
compensate Agents that have entered into Selling Agreements ("Agreements") with
Premier. Under the Agreements, the Agents are obligated to provide distribution
related services with regard to the Fund and/or shareholder services to the
Agent's clients that own Investor Shares of the Fund.
The Fund and Premier may suspend or reduce payments under the Plan at any
time, and payments are subject to the continuation of the Fund's Plan and the
Agreements described above. From time to time, the Agents, Premier and the Fund
may agree to voluntarily reduce the maximum fees payable under the Plan. See the
SAI for more details on the Plan.
Potential investors should read this Prospectus in light of the terms
governing Agreements with their Agents. An Agent entitled to receive
compensation for selling and servicing the Fund's Shares may receive different
compensation with respect to one class of Shares over another.
....................... 31 .......................
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<PAGE>
D R E Y F U S E Q U I T Y I N C O M E F U N D
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- - - --------------------------------------------------------------------------------
- - - ------------------------------------------------
FOR MORE INFORMATION
FUND INFORMATION AND PROSPECTUSES
Call 1-800-548-2868
Please read the prospectus before you invest or send money.
TO INVEST, REDEEM AND EXCHANGE
Call 1-800-548-2868 (for overseas, call collect (401) 455-3476)
9:00 a.m. to 5:00 p.m., Eastern time
Monday through Friday
Or Write: The Dreyfus Family of Funds
P.O. Box 9692
Providence, Rhode Island 02940-9830
YIELD AND SHARE PRICE INFORMATION
1-800-548-2868
24 hours a day, 7 days a week
The Dreyfus Family of Funds
One Exchange Place
Boston, Massachusetts 02109
....................... 32 .......................
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<PAGE>
El1124
- - - --------------------------------------------------------------------------
PROSPECTUS March 1, 1995
Dreyfus European Fund
- - - ---------------------------------------------------------------------------
DREYFUS EUROPEAN FUND (the "Fund"), formerly called the "Laurel
European Fund," is a separate portfolio of The Dreyfus/Laurel Funds, Inc., an
open-end, diversified management investment company (the "Company"), known as
a mutual fund. The Fund's objective is to outperform the Morgan Stanley
Capital International Europe Index (the "Benchmark") in the medium to long
term by allocating the Fund's assets among the Western European countries and
industry sectors represented in the Benchmark.
By this Prospectus, the Fund is offering Investor shares and
Class R shares. (Class R shares of the Fund were formerly called Trust
Shares.) Investor shares and Class R shares are identical, except as to the
services offered to and the expenses borne by each Class. Class R shares are
sold primarily to bank trust departments and other financial service
providers (including Mellon Bank, N.A. and its affiliates) ("Banks") acting
on behalf of customers having a qualified trust or investment account or
relationship at such institution. Investor shares are primarily sold to
retail investors by the Fund's distributor and by banks, securities brokers
or dealers and other financial institutions ("Agents") that have entered into
a Selling Agreement with the Fund's distributor.
Shares of the Fund are sold without a sales load. Investor shares
of the Fund are subject to distribution and shareholder servicing fees.
You can purchase or redeem Investor shares by telephone using the
Dreyfus TELETRANSFER Privilege.
The Dreyfus Corporation serves as the Fund's investment manager.
The Dreyfus Corporation is referred to as "Dreyfus."
Shares of the Fund are also available through a servicing network
associated with Mellon Bank, N.A. ("Mellon Bank"), an affiliate of Dreyfus.
Exchange and shareholder services vary depending upon the network through
which you purchase Fund shares. See "How to Buy Fund Shares."
This Prospectus sets forth concisely information about the Fund
that you should know before investing. It should be read carefully before you
invest and retained for future reference.
A Statement of Additional Information ("SAI") dated March 1,
1995, which may be revised from time to time, provides a further discussion
of certain areas in this Prospectus and other matters which may be of
interest to some investors. It has been filed with the Securities and
Exchange Commission ("SEC") and is incorporated herein by reference. For a
free copy, write to the Fund at 144 Glenn Curtiss Boulevard, Uniondale, New
York 11556-0144, or call 1-800-645-6561. When telephoning, ask for Operator
666.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
AGENCY. THE NET ASSET VALUE OF FUNDS OF THIS TYPE WILL FLUCTUATE FROM TIME TO
TIME.
THE FEES TO WHICH THE FUND IS SUBJECT ARE SUMMARIZED IN THE
"EXPENSE SUMMARY" SECTION OF THE FUND'S PROSPECTUS. THE FUND PAYS MELLON BANK
OR ITS AFFILIATES TO BE ITS INVESTMENT MANAGER. MELLON BANK OR AN AFFILIATE
MAY BE PAID FOR PERFORMING OTHER SERVICES FOR THE FUND, SUCH AS CUSTODIAN,
TRANSFER AGENT OR FUND ACCOUNTANT SERVICES. THE FUND IS DISTRIBUTED BY
PREMIER MUTUAL FUND SERVICES, INC.
- - - ---------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
- - - ---------------------------------------------------------------------------
TABLE OF CONTENTS
Expense Summary.................................... 4
Financial Highlights............................... 5
Description of the Fund............................ 7
Management of the Fund............................. 12
How to Buy Fund Shares............................. 14
Shareholder Services............................... 17
How to Redeem Fund Shares.......................... 20
Distribution Plan (Investor Shares Only)........... 23
Dividends, Other Distributions and Taxes........... 23
Performance Information............................ 24
General Information................................ 25
Page 2
[This Page Intentionally Left Blank]
Page 3
<TABLE>
Expense Summary
Investor Shares Class R Shares
----------------- ---------------
<S> <C> <C>
Shareholder Transaction Expenses:
Maximum Sales Load Imposed on Purchases . . . . . . . . . . . . . none none
Maximum Sales Load Imposed on Reinvestments . . . . . . . . . . . . none none
Deferred Sales Load . . . . . . . . . . . . . . . . . . . . . . . . none none
Redemption Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . none none
Exchange Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . none none
Estimated Annual Fund Operating Expenses:
(as a percentage of net assets)
Management Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.75% 1.75%
12b-1 Fee(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.25% none
Other Expenses(2) . . . . . . . . . . . . . . . . . . . . . . . . . . 0.00% 0.00%
______ ______
Total Fund Operating Expenses . . . . . . . . . . . . . . . . . . . 2.00% 1.75%
Example:
You would pay the following expenses
on a $1,000 investment, assuming (1) a 5% annual
return and (2) redemption at the end of each
time period: Investor Shares Class R Shares
----------------- ---------------
1 Year $20 $18
3 Years $63 $54
5 Years N/A $94
10 Years N/A $204
- - - ----------------
(1) See "Distribution Plan (Investor Shares Only)" for a description of the
Fund's Distribution Plan for the Investor Class.
(2) Does not include fees and expenses of the non-interested Directors
(including counsel). The investment manager is contractually required to
reduce its Management Fee in an amount equal to the Fund's allocable portion
of such fees and expenses, which are estimated to be .02% of the Fund's net
assets. (See "Management of the Fund.")
</TABLE>
- - - ---------------------------------------------------------------------------
The amounts listed in the example should not be considered as
representative of future expenses and actual
expenses may be greater or less than those indicated. Moreover, while the
example assumes a 5% annual return, the Fund's actual performance will vary
and may result in an actual return greater or less than 5%.
- - - ----------------------------------------------------------------------------
The purpose of the foregoing table is to assist you in
understanding the various costs and expenses that investors will bear,
directly or indirectly, the payment of which will reduce investors' return on
an annual basis. Long-term investors in Investor shares could pay more in
12b-1 fees than the economic equivalent of paying the maximum front-end sales
charges applicable to mutual funds sold by members of the National
Association of Securities Dealers, Inc.. The information in the foregoing
table does not reflect any fee waivers or expense reimbursement arrangements
that may be in effect. Certain Agents may charge their clients direct fees
for effecting transactions in Fund shares; such fees are not reflected in the
foregoing table. See "Management of the Fund," "How to Buy Fund Shares" and
"Distribution Plan (Investor Shares Only)."
The Fund understands that banks, brokers, dealers or other
financial institutions (including Mellon Bank and its affiliates)
(collectively "Agents") may charge fees to their clients who are owners of
the Fund's Investor shares for various services provided in connection with a
client's account. These fees would be in addition to any amounts received by
an Agent under its Selling Agreement ("Agreement") with Premier Mutual Fund
Services, Inc. (the "Distributor"). The Agreement requires each Agent to discl
ose to its clients any compensation payable to such Agent by the Distributor
and any other compensation payable by the client for various services
provided in connection with their accounts.
Page 4
FINANCIAL HIGHLIGHTS
The tables below are based upon a single Investor Share or Class
R Share outstanding through each fiscal year and should be read in
conjunction with the financial statements and related notes that appear in
the Fund's Annual Report dated October 31, 1994 which is incorporated by
reference in the SAI and have been audited by KPMG Peat Marwick LLP,
independent accountants, whose report appears in the Fund's Annual Report.
Further information about the Fund's performance is contained in the Fund's
Annual Report which may be obtained without charge.
<TABLE>
DREYFUS EUROPEAN FUND
For an Investor Share outstanding throughout the period.
PERIOD
ENDED
10/31/94*++#
- - - --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $11.78
-------
Income from investment operations:
Net investment income 0.05
Net realized and unrealized gain on investments 0.67
-------
Total from investment operations 0.72
Less distributions:
Distributions from net investment income -_
-------
Total distributions -_
-------
Net asset value, end of period $12.50
======
Total return + 6.11%
=======
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 48
Ratio of operating expenses to average net assets 2.00%**
Ratio of net investment income to average net assets 0.73%**
Portfolio turnover rate 46%
- - - ------------------------------------------------------------------------------------------------------------
* The Fund commenced selling Investor Shares on April 14, 1994.
** Annualized.
+ Total return represents aggregate total return for the period indicated.
++ Per share amounts have been calculated using the monthly average share
method, which more appropriately presents the per share data for the
period since the use of the undistributed method does not accord with
results of operations.
# Prior to October 17, 1994, Mellon Bank, N.A. served as the Fund's
investment manager. Effective October 17, 1994, The
Dreyfus Corporation serves as the Fund's investment manager.
</TABLE>
Page 5
<TABLE>
DREYFUS EUROPEAN FUND
For a Class R Share outstanding throughout each year or period.
YEAR YEAR YEAR YEAR YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
10/31/94*(1)## 10/31/93+ 10/31/92+ 10/31/91+ 10/31/90+ 10/31/89+ 10/31/88+ 10/31/87*+
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
year $12.70 $10.96 $11.12 $11.01 $9.30 $9.22 $8.93 $10.00
------ ------ ------ ------ ----- ------ ----- ------
Income from investment
operations:
Net investment income/(loss) 0.12++ 0.11 0.12 (0.02) 0.21 (0.13) (0.58) (0.01)
Net realized and unrealized
gain/(loss) on investments 0.63 1.73 (0.10) 0.57 1.53 0.21 1.10 (1.06)
------ ------ ------ ------ ----- ------ ----- ------
Total from investment
operations 0.75 1.84 0.02 0.55 1.74 0.08 0.52 (1.07)
------ ------ ------ ------ ----- ------ ----- ------
Less distributions:
Distributions from net
investment income (0.12) (0.10) -_ (0.08) (0.03) -_ -- -_
Distributions from net realized
capital gains (0.83) -- (0.18) (0.36) -_ -_ -_ -_
Distributions from capital -_ -_ -_ -- -- -_ (0.23) --
------ ------ ------ ------ ----- ------ ----- ------
Total Distributions (0.95) (0.10) (0.18) (0.44) (0.03) -- (0.23) -_
------ ------ ------ ------ ----- ------ ----- ------
Net asset value,
end of year $12.50 $12.70 $10.96 $11.12 $11.01 $9.30 $9.22 $8.93
===== ====== ====== ====== ====== ====== ====== ======
Total return +++ 5.97% 16.88% 0.16% 5.12% 18.73% 0.87% 5.73%(2) (10.70)%(2)
===== ====== ====== ====== ====== ====== ====== ======
Ratios to average net assets/
supplemental data:
Net assets, end of year
(in 000's) $10,797 $10,481 $15,648 $17,204 $14,643 $12,174 $1,116 $1,768
Ratio of operating expenses to
average net assets 1.75%# 1.83%# 1.57%# 1.67% 1.52% 4.75%# 7.27%# 2.62%**#
Ratio of net investment income
to average net assets 0.98% 0.59%# 0.92%# (0.16)% 1.96% (1.68)%# (4.67)%# (0.06)%**#
Portfolio turnover rate 46% 12% 7% 5% 16% 69% 102% 99%
- - - ------------------------------------------------------------------------------------------------------------------------------
* The Fund commenced operations on January 5, 1987. On April 14,
1994, the Fund commenced selling Investor Shares. Those shares in existence
prior to April 4, 1994 were designated Trust Shares. On October 17, 1994 the
Fund's Trust Shares were reclassified as Class R Shares. The Fund has had the
following investment advisers: CCF International Finance Corporation (January
5, 1987 to October 31, 1993); Mellon Bank, N.A. (November 1, 1993 to October
16, 1994); and The Dreyfus Corporation (October 17, 1994 to present).
** Annualized.
+ Audited by Tait, Weller &Baker, Certified Public Accountants.
++ Net investment income before expenses reimbursed by the investment
adviser was $0.09 for the year ended October 31, 1994.
+++ Total return represents aggregate total for the periods indicated.
# For the year ended October 31, 1994, the ratio of operating expenses
to average net assets before reimbursement of expenses by the investment
adviser was 2.02%. For the years or period ended October 31, 1993, 1992,
1989, 1988 and 1987, the ratio of operating expenses and the ratio of net
investment income to average net assets on an annualized basis before
reimbursement of expenses by CCF International Finance Corp. and Capstone
Asset Management Company were 2.41% and 0.01%; 1.82% and 0.67%;
5.42% and (3.00%); 7.27% and (4.67%); and 5.28% and (2.72%), respectively.
## Prior to October 17, 1994, Mellon Bank, N.A. served as the Fund's
investment manager. Effective October 17, 1994, The
Dreyfus Corporation serves as the Fund's investment manager.
(1) Per share amounts have been calculated using the monthly average share
method, which more appropriately represents the per share data for the period
since the use of the undistributed method does not accord with results of operations.
(2) Unaudited.
</TABLE>
Page 6
DESCRIPTION OF THE FUND
GENERAL
By this Prospectus, the Fund is offering Investor shares and
Class R shares. (Class R shares of the Fund were formerly called Trust
Shares.) Investor shares and Class R shares are identical, except as to the
services offered to and the expenses borne by each Class. Class R shares are
sold primarily to Banks acting on behalf of customers having a qualified
trust or investment account or relationship at such institution. Investor
shares are primarily sold to retail investors by the Fund's Distributor and by
Agents that have entered into a Selling Agreement with the Fund's
Distributor. If shares of the Fund are held in an account at a Bank or with
an Agent, such Bank or Agent may require you to place all Fund purchase,
exchange and redemption orders through them. All Banks and Agents have agreed
to transmit transaction requests to the Fund's transfer agent or to the
Fund's Distributor. Distribution and shareholder services paid by Investor
shares will cause Investor shares to have a higher expense ratio and pay
lower dividends than Class R.
The Fund is the successor, through an acquisition of assets and
assumption of liabilities, to the Capstone European Fund ("Capstone
European"), formerly a series of the Capstone International Series Trust.
Pursuant to the transfer of assets and liabilities of Capstone European to
the Fund which occurred on November 1, 1993, holders of Capstone European
shares received a share of the Fund for each Capstone European share held by
them. Capstone European had substantially the same investment objective, and
substantially the same policies and restrictions as the Fund and was managed
by CCF International Finance Corp., a wholly-owned subsidiary of Credit
Commercial de France ("CCF').
INVESTMENT OBJECTIVE
The Fund's objective is to outperform the Morgan Stanley Capital
International Europe Index (the "Benchmark") in the medium to long term by
allocating the Fund's assets among the Western European countries and
industry sectors represented in the Benchmark. There can be no assurance that
the Fund will meet its investment objective.
MANAGEMENT POLICIES
The Benchmark is a diversified, capitalization-weighted index of
equity securities of companies located in Austria, Belgium, Denmark, Finland,
France, Germany, Italy, The Netherlands, Norway, Spain, Sweden, Switzerland,
and the United Kingdom. Stocks in the Benchmark are selected to represent
proportionally each country and each major industrial sector within each
country. Each stock in the Benchmark is weighted according to its market
value as a percentage of the total market value of all stock in the Benchmark.
The investment process utilized by the Fund's sub-adviser, S.A.M.
Finance, S.A. ("CCF S.A.M.") in structuring the Fund has three basic
components: (1) country/industry sector allocation, (2) stock selection, and
(3) fund construction. These components employ a combination of quantitative
research using proprietary financial models and fundamental research from
specialists in London, Paris, Geneva and Milan.
Country/industry sector allocation is determined simultaneously
by a unique valuation model developed by CCF S.A.M. which puts stock market
behavior in each country and sector into a macroeconomic and financial
perspective. In its analysis and correlation process, the model gives
consideration to such factors as growth prospects, expected levels of
inflation and interest rates, competitive position, return on investment and
raw material costs. The end result of this country/industry sector allocation
process is an estimate of the potential excess return available from each
sector in each country. This enables a homogeneous analysis to be carried out
on a two-dimensional (i.e., country and sector) basis.
Page 7
CCF S.A.M.'s stock selection process employs a security ranking
system based on quantitative analysis. Some 1,000 stocks are ranked into
quintiles depending on their exposure to thirteen different indicators (e.g.,
price/earnings ratio, price/book value ratio, yield, and volatility of
earnings) grouped in four basic categories: value, growth, financial
structure, and predictability. CCF S.A.M.'s buy/sell discipline is a
strictly-controlled function of this ranking process; only issues from the
first quintiles are purchased, and those falling into the bottom two
quintiles are sold. The Fund will typically contain 75-85 issues from the
1,000 stock universe.
Using the output from its country/industry sector allocation and
stock selection processes, CCF S.A.M. employs the BARRA Equity Model for fund
construction. This model attempts to create an optimal fund and control fund
risk.
In no event will the Fund purchase securities which would cause
more than 25% of the market value of the Fund's total assets to be invested
in securities of one or more issuers having their principal business
activities in the same industry. This limit does not apply with respect to
the Fund's investments in securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities. The Fund has a non-fundamental
investment limitation which provides that in no event will it purchase securit
ies which would cause more than 25% of the market value of its total assets
to be invested in securities issued or guaranteed by a single Western
European government or its agencies and instrumentalities.
Under normal circumstances, the Fund expects to be fully invested
in securities of issuers of the Western European countries included in the
Benchmark, except for such amounts as are needed to meet short-term cash
needs and redemptions and amounts pending investment. These amounts may be
held as cash or temporarily invested in high quality short-term debt
instruments of the U.S. or foreign governments, their agencies and
instrumentalities and repurchase agreements. The Fund may occasionally invest
in forward foreign currency exchange contracts, futures contracts and options
on foreign currencies, currency indices, futures contracts, and securities
indices to adjust its risk exposure relative to the Benchmark. The Fund may
also invest in commercial paper and may lend fund securities at this time.
The Fund does not intend to lend fund securities at this time. Under unusual
circumstances, such as drastic political or economic changes, severe social
unrest or acts of war, the Fund may be primarily invested in securities of
U.S. companies, and securities of the U.S. Government, its agencies,
instrumentalities and municipalities.
INVESTMENT TECHNIQUES
In connection with its investment objective and policies, the
Fund may employ, among others, the following investment techniques:
BORROWING. The Fund is authorized, within specified limits, to
borrow money for temporary administrative purposes and to pledge its assets
in connection with such borrowings.
SECURITIES LENDING. To increase return on Fund securities, the
Fund may lend its portfolio securities to broker-dealers and other
institutional investors pursuant to agreements requiring that the loans be
continuously secured by collateral equal at all times in value to at least
the market value of the securities loaned. There may be risks of delay in
receiving additional collateral or in recovering the securities loaned or
even a loss of rights to the collateral should the borrower of the securities
fail financially. Securities loans, however, are made only to borrowers
deemed by Dreyfus or CCF S.A.M. to be of good standing and when, in its
judgment, the income to be earned from the loan justifies the attendant
risks.
WHEN-ISSUED SECURITIES AND DELAY DELIVERY TRANSACTIONS. To secure
advantageous prices or yields, the Fund may purchase U.S. Government
Securities on a when-issued basis or may purchase or sell securities for
delayed delivery. In such transactions, delivery of the securities occurs
beyond the
Page 8
normal settlement periods, but no payment or delivery is made by the Fund
prior to the actual delivery or payment by the other party to the
transaction. The purchase of securities on a when-issued or delayed delivery
basis involves the risk that, as a result of an increase in yields available
in the marketplace, the value of the securities purchased will decline prior
to the settlement date. The sale of securities for delayed delivery involves
the risk that the prices available in the market on the delivery date may be g
reater than those obtained in the sale transaction. The Fund will establish a
segregated account consisting of cash, U.S. Government Securities or other
high-grade debt obligations in an amount equal to the amounts of its
when-issued and delayed delivery commitments.
MASTER/FEEDER OPTION. The Company may in the future seek to
achieve the Fund's investment objective by investing all of the Fund's net
investable assets in another investment company having the same investment
objective and substantially the same investment policies and restrictions as
those applicable to the Fund. Shareholders of the Fund will be given at least
30 days' prior notice of any such investment. Such investment would be made
only if the Directors determine it to be in the best interest of the Fund and
its shareholders. In making that determination, the Company's Directors will
consider, among other things, the benefits to shareholders and/or the
opportunity to reduce costs and achieve operational efficiencies. Although
the Fund believes that the Directors will not approve an arrangement that is
likely to result in higher costs, no assurance is given that costs will be
materially reduced if this option is implemented.
CURRENCY EXCHANGE TRANSACTIONS. The Fund may engage in currency
exchange transactions. Generally, the Fund's foreign currency exchange
transactions will be conducted on a spot basis at the spot rate then
prevailing for purchasing or selling currencies in the foreign exchange
market. The Fund may, to a limited extent, deal in forward foreign currency
exchange contracts involving currencies of the different countries in which
it will invest as a hedge against possible variations in the foreign exchange
rates between these currencies. This is accomplished through contractual
agreements to purchase or sell a specified currency at a specified future
date (up to one year) and price set at the time of the contract. The Fund's
dealings in forward foreign currency exchange contracts are limited to
hedging involving either specific transactions or portfolio positions.
Transaction hedging is the purchase or sale of forward foreign currency
exchange contracts with respect to specific receivables (including dividends)
or payables of the Fund accruing in connection with the ownership, purchase
and sale of its portfolio securities and the sale and redemption of Shares of
the Fund. Position hedging is the sale of forward foreign currency exchange
contracts with respect to portfolio security positions denominated or quoted
in such foreign currency. The Fund will not enter into or maintain a position
in such contracts if their consummation would obligate the Fund to deliver an
amount of foreign currency greater than the value of the Fund's assets denomin
ated or quoted in, or currency convertible into, such currency.
FUTURES, OPTIONS AND OTHER DERIVATIVE INSTRUMENTS. The Fund may
attempt to reduce the overall level of investment risk of particular
securities and attempt to protect itself against adverse market movements by
investing in futures, options and other derivative instruments. These include
the purchase and writing of options on securities (including index options)
and options on foreign currencies and investing in futures contracts for the
purchase or sale of instruments based on financial indices, including
interest rate indices or indices of U.S. or foreign governments, equity or
fixed income securities ("futures contracts"), options on futures contracts,
forward contracts and swaps, and swap-related products such as equity index
swap contracts, interest rate swaps, currency swaps, caps, collars and floors.
The use of futures, options, forward contracts and swaps exposes
the Fund to additional investment risks and transaction costs. If Dreyfus or
CCF S.A.M. incorrectly analyzes market conditions or does not employ the
appropriate strategy with respect to these instruments, the Fund could be
left in
Page 9
a less favorable position. Additional risks inherent in the use of
futures, options, forward contracts and swaps include: imperfect correlation
between the price of futures, options and forward contracts and movements in
the prices of the securities or currencies being hedged; the possible absence
of a liquid secondary market for any particular instrument at any time; and
the possible need to defer closing out certain hedged positions to avoid
adverse tax consequences. The Fund may not purchase put and call options that
are traded on a national stock exchange in an amount exceeding 5% of its net
assets. Further information on the use of futures, options and other
derivative instruments, and the associated risks, is contained in the SAI.
The Fund may purchase and write call and put options on foreign
currencies for the purpose of hedging against changes in future currency
exchange rates. Call options convey the right to buy the underlying currency
at a price which is expected to be lower than the spot price of the currency
at the time the option expires. Put options convey the right to sell the
underlying currency at a price which is anticipated to be higher than the
spot price of the currency at the time the option expires. Currency options
traded on U.S. or other exchanges may be subject to position limits which may
limit the ability of the Fund to reduce foreign currency risk using such
options. Further, there may be an imperfect correlation between the change in
a spot price of a foreign currency and the prices of futures and options
contracts. Over-the-counter options differ from traded options in that they
are two-party contracts with price and other terms negotiated between buyer
and seller and generally do not have as much market liquidity as
exchange-traded options.
CERTAIN PORTFOLIO SECURITIES
COMMERCIAL PAPER. The Fund may invest in commercial paper. These
instruments are short-term obligations issued by banks and corporations that
have maturities ranging from 2 to 270 days. Each instrument may be backed
only by the credit of the issuer or may be backed by some form of credit
enhancement, typically in the form of a guarantee by a commercial bank.
Commercial paper backed by guarantees of foreign banks may involve additional
risk due to the difficulty of obtaining and enforcing judgments against such
banks and the generally less restrictive regulations to which such banks are
subject. The Fund will only invest in commercial paper of U.S. and foreign
companies rated A-1 at the time of purchase by Standard & Poor's Ratings
Group, Prime-1 by Moody's Investors Service, Inc., F-1 by Fitch Investors
Service, Inc., Duff 1 by Duff & Phelps, Inc., or A1 by IBCA, Inc.
FOREIGN SECURITIES. The Fund may purchase securities of foreign
issuers and may invest in obligations of foreign branches of domestic banks
and domestic branches of foreign banks. Investment in foreign securities
presents certain risks, including those resulting from fluctuations in
currency exchange rates, revaluation of currencies, future political and
economic developments and the possible imposition of currency exchange
blockages or other foreign governmental laws or restrictions, reduced
availability of public information concerning issuers, and the fact that
foreign issuers are not generally subject to uniform accounting, auditing and
financial reporting standards or to other regulatory practices and
requirements comparable to those applicable to domestic issuers. The net
asset value of the Fund's shares generally will fluctuate. Moreover, securitie
s of many foreign issuers may be less liquid and their prices more volatile
than those of comparable domestic issuers. In addition, with respect to
certain foreign countries, there is the possibility of expropriation,
confiscatory taxation and limitations on the use or removal of funds or other
assets of the Fund, including withholding of dividends. Foreign securities
may be subject to foreign government taxes that would reduce the yield on
such securities.
ILLIQUID SECURITIES. The Fund will not knowingly invest more than
15% of the value of its net assets in illiquid securities, including time
deposits and repurchase agreements having maturities longer than seven days.
Securities that have readily available market quotations are not deemed
illiquid for purposes of this limitation (irrespective of any legal or
contractual restrictions on resale). The Fund may
page 10
invest in commercial obligations issued in reliance on the so-called "private
placement" exemption from registration afforded by Section 4(2) of the
Securities Act of 1933, as amended ("Section 4(2) paper"). The Fund may also
purchase securities that are not registered under the Securities Act of 1933,
as amended, but that can be sold to qualified institutional buyers in
accordance with Rule 144A under that Act ("Rule 144A securities"). Liquidity
determinations with respect to Section 4(2) paper and Rule 144A securities
will be made by the Board of Directors or by Dreyfus pursuant to guidelines
established by the Board of Directors. The Board or Dreyfus will consider
availability of reliable price information and other relevant information in
making such determinations. Section 4(2) paper is restricted as to disposition
under the federal securities laws, and generally is sold to institutional
investors, such as the Fund, that agree that they are purchasing the paper for
investment and not with a view to public distribution. Any resale by the
purchaser must be pursuant to registration or an exemption therefrom. Section
4(2) paper normally is resold to other institutional investors like the Fund
through or with the assistance of the issuer or investment dealers who make a
market in the Section 4(2) paper, thus providing liquidity. Rule 144A
securities generally must be sold to other qualified institutional buyers. If
a particular investment in Section 4(2) paper or Rule 144A securities is not
determined to be liquid, that investment will be included within the
percentage limitation on investment in illiquid securities. The ability to
sell Rule 144A securities to qualified institutional buyers is a recent
development and it is not possible to predict how this market will mature.
Investing in Rule 144A securities could have the effect of increasing the
level of Fund illiquidity to the extent that qualified institutional buyers
become, for a time, uninterested in purchasing these securities.
OTHER INVESTMENT COMPANIES. The Fund may invest in securities
issued by other investment companies to the extent that such investments are
consistent with the Fund's investment objective and policies and permissible
under the Investment Company Act of 1940, as amended ("1940 Act"). As a
shareholder of another investment company, the Fund would bear, along with
other shareholders, its pro rata portion of the other investment company's
expenses, including advisory fees. These expenses would be in addition to the
advisory and other expenses that the Fund bears directly in connection with
its own operations.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase
agreements. A repurchase agreement involves the purchase of a security by the
Fund and a simultaneous agreement (generally with a bank or broker-dealer) to
repurchase that security from the Fund at a specified price and date or upon
demand. This technique offers a method of earning income on idle cash. A risk
associated with repurchase agreements is the failure of the seller to
repurchase the securities as agreed, which may cause the Fund to suffer a
loss if the market value of such securities declines before they can be
liquidated on the open market. Repurchase agreements with a duration of more
than seven days are considered illiquid securities and are subject to the
associated limits discussed under "CERTAIN PORTFOLIO SECURITIES_ILLIQUID
SECURITIES."
U.S. GOVERNMENT SECURITIES. The Fund may invest in obligations
issued or guaranteed as to both principal and interest by the U.S. Government
or backed by the full faith and credit of the United States. In addition to
direct obligations of the U.S. Treasury, these include securities issued or
guaranteed by the Federal Housing Administration, Farmers Home
Administration, Export-Import Bank of the United States, Small Business
Administration, Government National Mortgage Association, General Services
Administration and Maritime Administration. Investments may also be made in
U.S. Government obligations that do not carry the full faith and credit
guarantee, such as those issued by the Federal National Mortgage Association,
the Federal Home Loan Mortgage Corporation, or other instrumentalities.
PORTFOLIO TURNOVER. While securities are purchased for the Fund
on the basis of potential for outperforming the Benchmark and not for
short-term trading profits, the Fund's turnover rate may exceed
Page 11
100%. A portfolio turnover rate of 100% would occur, for example, if all the
securities held by the Fund were replaced once in a period of one year. A
higher rate of portfolio turnover involves correspondingly greater brokerage
commissions and other expenses that must be borne directly by the Fund and,
thus, indirectly by its shareholders. In addition, a high rate of portfolio
turnover may result in the realization of larger amounts of short-term
capital gains that, when distributed to the Fund's shareholders, are taxable
to them as ordinary income. Nevertheless, securities transactions for the
Fund will be based only upon investment considerations and will not be
limited by any other considerations when Dreyfus or CCF S.A.M. deems it
appropriate to make changes in the Fund's assets.
RISK FACTORS
LIMITING INVESTMENT RISKS. The Fund is subject to a number of
investment limitations. Certain limitations are matters of fundamental policy
and may not be changed without the affirmative vote of the holders of a
majority of the Fund's outstanding shares. The SAI describes all of the
Fund's fundamental and non-fundamental restrictions.
The investment objective, policies, restrictions, practices and
procedures of the Fund, unless otherwise specified, may be changed without
shareholder approval. If the Fund's investment objective, policies,
restrictions, practices or procedures change, shareholders should consider
whether the Fund remains an appropriate investment in light of the
shareholder's then-current position and needs.
In order to permit the sale of the Fund's shares in certain
states, the Fund may make commitments more restrictive than the investment
policies and restrictions described in this Prospectus and the SAI. Should
the Fund determine that any such commitment is no longer in the best interest
of the Fund, it may consider terminating sales of its shares in the states
involved.
MANAGEMENT OF THE FUND
INVESTMENT MANAGER. Dreyfus, located at 200 Park Avenue, New
York, New York 10166, was formed in 1947. Dreyfus is a wholly-owned
subsidiary of Mellon Bank, which is a wholly-owned subsidiary of Mellon Bank
Corporation ("Mellon"). As of January 31, 1995, Dreyfus managed or
administered approximately $70 billion in assets for more than 1.9 million
investor accounts nationwide.
Dreyfus serves as the Fund's investment manager. Dreyfus
supervises and assists in the overall management of the Fund's affairs under
an Investment Management Agreement with the Fund, subject to the overall
authority of the Company's Board of Directors in accordance with Maryland
law. Pursuant to the Investment Management Agreement, Dreyfus provides, or
arranges for the provision by one or more third parties of, investment
advisory, administrative, custody, fund accounting and transfer agency
services to the Fund. As the Fund's investment manager, Dreyfus manages the
Fund by making investment decisions based on the Fund's investment objective,
policies and restrictions.
Mellon is a publicly owned multibank holding company incorporated
under Pennsylvania law in 1971 and registered under the Bank Holding Company
Act of 1956, as amended. Mellon provides a comprehensive range of financial
products and services in domestic and selected international markets. Mellon
is among the twenty-five largest bank holding companies in the United States
based on total assets. Mellon's principal wholly-owned subsidiaries are
Mellon Bank, Mellon Bank (DE) National Association, Mellon Bank (MD), The
Boston Company, Inc., AFCO Credit Corporation and a number of companies known
as Mellon Financial Services Corporations. Through its subsidiaries,
including Dreyfus, Mellon managed approximately $201 billion in assets as of
September 30, 1994, including $76 billion in mutual fund assets. As of
September 30, 1994, Mellon, through various subsidiaries, provided
non-investment services, such as custodial or administration services, for
approximately $659 billion in assets, including approximately $108 billion in
mutual fund assets.
Under the Investment Management Agreement, the Fund has agreed to
pay Dreyfus a monthly fee at the annual rate of 1.75% of the value of the
Fund's daily net assets. Dreyfus pays all of the Fund's
Page 12
expenses, except brokerage fees, taxes, interest, fees and expenses of the
non-interested Directors (including counsel fees), Rule 12b-1 fees (if
applicable) and extraordinary expenses. Although Dreyfus does not pay for the
fees and expenses of the non-interested Directors (including counsel fees),
Dreyfus is contractually required to reduce its investment management fee in
an amount equal to the Fund's allocable share of such fees and expenses. In
order to compensate Dreyfus for paying virtually all of the Fund's expenses,
the Fund's investment management fee is higher than the investment advisory
fees paid by most investment companies. Most, if not all, such companies also
pay for additional non-investment advisory expenses that are not paid by such
companies' investment advisers. From time to time, Dreyfus may waive (either
voluntarily or pursuant to applicable state limitations) a portion of the
investment management fees payable by the Fund. From April 4, 1994, to
October 16, 1994, the Fund was advised by Mellon Bank under the Investment
Management Agreement. For the period from November 1, 1993 to April 3, 1994,
the Fund paid its investment adviser, Mellon Bank, 0.36% (annualized) of its
average daily net assets in investment advisory fees (net of expenses
reimbursed), under the Fund's previous investment advisory contract (such
contract covered only the provision of investment advisory and certain
specified administrative services). For the period from April 4, 1994 through
the fiscal year ended October 31, 1994, the Fund paid Mellon Bank or Dreyfus
1.75% (annualized) of its average daily net assets in investment management
fees, less fees and expenses of the non-interested Directors (including
counsel fees).
For the fiscal year ended October 31, 1994, total operating
expenses (excluding Rule 12b-1 fees) (net of expenses reimbursed) of the Fund
were 1.75% (annualized) of the average daily net assets of each class for
both the Investor Class and Class R. Without the reimbursements, operating
expenses would have been higher.
CCF S.A.M. (115 Avenue des Champs-Elysees, Paris, France 75008)
provides investment advice and portfolio management services to the Fund in
its capacity as sub-adviser to the Fund. A wholly- owned subsidiary of CCF,
CCF S.A.M. is a French corporation organized in 1989, and has been a
registered investment adviser since February, 1993. CCF was founded nearly a
century ago in 1894, and is one of Europe's largest commercial banks with 370
offices in France as well as 40 others around the world of which 10 are
located in European countries. CCF's European investment management business
dates back to 1945 and it currently manages over $30 billion divided between
210 open-end mutual funds and over 100 commingled investment portfolios out
of offices in Paris, London, Geneva, Milan and Tokyo. CCF S.A.M. specializes
in active quantitative asset management based on a structured investment
process. CCF S.A.M.'s offices are located in Paris, France and it currently
advises $2 billion in assets worldwide.
The Fund is managed by Catherine Adibi of CCF S.A.M. Ms. Adibi
has managed the Fund since 1989. From 1988-1989, Ms. Adibi was a journalist
with Le Revenue Francais, an economics and finance journal. Ms. Adibi
attended Universite Paris XIII (France) (MBA Finance).
Pursuant to the sub-advisory agreement among the Company, CCF
S.A.M., and Dreyfus, CCF S.A.M. receives an annual fee equal to .60% of the
Fund's average daily net assets. Payment of the fee is the obligation of
Dreyfus and not of the Fund.
For the fiscal year ended October 31, 1994, Dreyfus or Mellon
Bank paid CCF S.A.M. advisory fees of .60% of average daily net assets.
In addition, Investor shares may be subject to certain
distribution fees. See "Distribution Plan (Invesor Shares Only)."
Dreyfus may pay the Fund's distributor for distribution services
from Dreyfus's own assets, including past profits but not including the
management fee paid by the Fund. The Fund's distributor may use part or all
of such payments to pay Agents in respect of these services.
Page 13
Dreyfus is authorized to allocate purchase and sale orders for
portfolio securities to certain financial institutions, including, in the
case of agency transactions, financial institutions that are affiliated with
Dreyfus or Mellon Bank or that have sold shares of the Fund, if Dreyfus
believes that the quality of the transaction and the commission are
comparable to what they would be with other qualified brokerage firms. From
time to time, to the extent consistent with its investment objective,
policies and restrictions, the Fund may invest in securities of companies
with which Mellon Bank has a lending relationship.
The Fund's distributor is Premier Mutual Fund Services, Inc. (the
"Distributor"). The Distributor is located at One Exchange Place, Boston,
Massachusetts 02109. The Distributor is a wholly-owned subsidiary of
Institutional Administration Services, Inc., a provider of mutual fund
administration services, the parent company of which is Boston Institutional
Group, Inc.
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT, AND
SUB-ADMINISTRATOR_Boston Safe Deposit and Trust Company (One Boston Place,
Boston, MA 02109) ("Boston Safe") an indirect wholly-owned subsidiary of
Mellon, serves as the Fund's custodian and fund accountant. As custodian,
Boston Safe maintains possession of the Fund's investment securities and
provides portfolio recordkeeping services. Boston Safe is authorized to
deposit securities in securities depositories or to use the service of
subcustodians.
The Fund's Transfer and Dividend Disbursing Agent is The
Shareholder Services Group, Inc. (the "Transfer Agent"), a subsidiary of
First Data Corporation, One American Express Plaza, Providence, Rhode Island
02903. Premier Mutual Fund Services, Inc. serves as the Fund's
sub-administrator and, pursuant to a Sub-Administrator Agreement, provides
various administrative and corporate secretarial services to the Fund.
HOW TO BUY FUND SHARES
GENERAL_Investor shares are offered to any investor and may be
purchased through the Distributor or Agents that have entered into Selling
Agreements with the Distributor.
Class R shares are sold primarily to Banks acting on behalf of
customers having a qualified trust or investment account or relationship at
such institution, or to customers who have received and hold shares of the
Fund distributed to them by virtue of such an account or relationship. In
addition, holders of Class R shares of the Fund who have held their shares
since April 4, 1994 may continue to purchase Class R shares of the Fund
whether or not they otherwise would be eligible to do so. A Retirement Plan
is a certain qualified or non-qualified employee benefit plan or other
program, including pension, profit-sharing and other deferred compensation
plans, whether established by corporations, partnerships, non-profit entities
or state and local governments ("Retirement Plan"). Class R shares may be
purchased for a Retirement Plan only by a custodian, trustee, investment
manager or other entity authorized to act on behalf of such Plan.
Institutions effecting transactions in Class R shares for the accounts of
their clients may charge their clients direct fees in connection with such
transactions.
Shares of the Fund are also available through a servicing network
associated with Mellon Bank, an affiliate of Dreyfus. For more information
about purchasing Fund shares through that network and a Prospectus, call
1-800-548-2868. Please read that Prospectus carefully. Exchange and
shareholder services, including the telephone purchase option and minimum and
maximum dollar amounts associated with such services, may vary depending upon
the network through which you purchase Fund shares.
Stock certificates are issued only upon your written request. No
certificates are issued for fractional shares. The Fund reserves the right to
reject any purchase order.
The minimum initial investment is $2,500, or $1,000 if you are a
client of an Agent which has made an aggregate minimum initial purchase for
its customers of $2,500. Subsequent investments must be at least $100.
However, the minimum initial investment for Dreyfus-sponsored Keogh Plans,
Page 14
IRAs, SEP-IRAs and 403(b)(7) Plans with only one participant is $750, with no
minimum on subsequent purchases. Individuals who open an IRA also may open a
non-working spousal IRA with a minimum initial investment of $250. The
initial investment must be accompanied by the Fund's Account Application. For
full-time or part-time employees of Dreyfus or any of its affiliates or
subsidiaries, directors of Dreyfus, Board members of a fund advised by
Dreyfus including members of the Company's Board, or the spouse or minor
child of any of the foregoing, the minimum initial investment is $1,000. For
full-time or part-time employees of Dreyfus or any of its affiliates or
subsidiaries who elect to have a portion of their pay directly deposited into
their Fund account, the minimum initial investment is $50. The Fund reserves
the right to offer Fund shares without regard to minimum purchase
requirements to employees participating in certain qualified or non-qualified
employee benefit plans or other programs where contributions or account
information can be transmitted in a manner and form acceptable to the Fund.
The Fund reserves the right to vary further the initial and subsequent
investment minimum requirements at any time.
The Internal Revenue Code of 1986, as amended (the "Code"),
imposes various limitations on the amount that may be contributed to
Retirement Plans. These limitations apply with respect to participants at the
plan level and, therefore, do not directly affect the amount that may be
invested in the Fund by a Retirement Plan. Participants and plan sponsors
should consult their tax advisers for details.
You may purchase Fund shares by check or wire, or, with respect
to Investor shares only, through the Dreyfus TELETRANSFER Privilege described
below. Checks should be made payable to "The Dreyfus Family of Funds" or, if
for Dreyfus retirement plan accounts, to "The Dreyfus Trust Company,
Custodian." Payments to open new accounts which are mailed should be sent to
The Dreyfus Family of Funds, P.O. Box 9387, Providence, Rhode Island
02940-9387, together with your Account Application indicating which Class of
shares is being purchased. For subsequent investments, your Fund account
number should appear on the check and an investment slip should be enclosed
and sent to The Dreyfus Family of Funds, P.O. Box 105, Newark, New Jersey
07101-0105. For Dreyfus retirement plan accounts, both initial and subsequent
investments should be sent to The Dreyfus Trust Company, Custodian, P.O. Box
6427, Providence, Rhode Island 02940-6427. Neither initial nor subsequent
investments should be made by third party check. PURCHASE ORDERS MAY BE
DELIVERED IN PERSON ONLY TO A DREYFUS FINANCIAL CENTER. THESE ORDERS WILL BE
FORWARDED TO THE FUND AND WILL BE PROCESSED ONLY UPON RECEIPT THEREBY. FOR
THE LOCATION OF THE NEAREST DREYFUS FINANCIAL CENTER, PLEASE CALL ONE OF THE
TELEPHONE NUMBERS LISTED UNDER "GENERAL INFORMATION."
Wire payments may be made if your bank account is in a commercial
bank that is a member of the Federal Reserve System or any other bank having
a correspondent bank in New York City. Immediately available funds may be
transmitted by wire to The Bank of New York, together with the applicable
Class' DDA # as shown below, for purchase of Fund shares in your name:
DDA# 8900104201 Dreyfus European Fund/Investor shares;
DDA# 8900227834 Dreyfus European Fund/Class R shares.
The wire must include your Fund account number (for new accounts,
your Taxpayer Identification Number ("TIN") should be included instead),
account registration and dealer number, if applicable. If your initial
purchase of Fund shares is by wire, you should call 1-800-645-6561 after
completing your wire payment in order to obtain your Fund account number.
Please include your Fund account number on the Fund's Account Application and
promptly mail the Account Application to the Fund, as no redemptions will be
permitted until the Account Application is received. You may obtain further
information about remitting funds in this manner from your bank. All payments
should be made in U.S. dollars and, to avoid fees and delays, should be drawn
only on U.S. banks. A charge will be imposed if any check used for investment
in your account does not clear. The Fund makes available to certain large
institutions the ability to issue purchase instructions through compatible
computer facilities.
Page 15
Subsequent investments also may be made by electronic transfer of
funds from an account maintained in a bank or other domestic financial
institution that is an Automated Clearing House ("ACH") member. You must
direct the institution to transmit immediately available funds through the
ACH system to The Bank of New York with instructions to credit your Fund
account. The instructions must specify your Fund account registration and
Fund account number PRECEDED BY THE DIGITS "1111."
The Distributor may pay dealers a fee of up to .5% of the amount
invested through such dealers in Fund shares by employees participating in
qualified or non-qualified employee benefit plans or other programs where (i)
the employers or affiliated employers maintaining such plans or programs have
a minimum of 250 employees eligible for participation in such plans or
programs or (ii) such plan's or program's aggregate investment in the Dreyfus
Family of Funds or certain other products made available by the Distributor
to such plans or programs exceeds one million dollars ("Eligible Benefit
Plans"). The determination of the number of employees eligible for
participation in a plan or program shall be made on the date Fund shares are
first purchased by or on behalf of employees participating in such plan or
program and on each subsequent January 1st. All present holdings of shares of
funds in the Dreyfus Family of Funds by Eligible Benefit Plans will be
aggregated to determine the fee payable with respect to each purchase of Fund
shares. The Distributor reserves the right to cease paying these fees at any
time. The Distributor will pay such fees from its own funds, other than
amounts received from the Fund, including past profits or any other source
available to it.
Federal regulations require that you provide a certified TIN upon
opening or reopening an account. See "Dividends, Other Distributions and
Taxes" and the Fund's Account Application for further information concerning
this requirement. Failure to furnish a certified TIN to the Fund could
subject you to a $50 penalty imposed by the Internal Revenue Service (the
"IRS").
NET ASSET VALUE ("NAV")_An investment portfolio's NAV refers to
the worth of one share. The NAV for Investor shares and Class R shares is
computed by adding, with respect to such Class of shares, the value of the
Fund's investments, cash, and other assets attributable to that Class,
deducting liabilities of the Class and dividing the result by the number of
shares of that Class outstanding. The valuation of assets for determining NAV
for the Fund may be summarized as follows:
Equity securities of the Fund listed or traded on a stock
exchange, except as otherwise noted, are valued at the latest sale price. If
no sale is reported, the current bid is used. An equity security which is
listed or traded on more than one exchange is valued at the quotation on the
exchange determined to be the primary market for such security by CCF S.A.M.
All other equity securities not so traded are valued at the last sales price
prior to the time of valuation.
Bonds are valued through valuations obtained from a commercial
pricing service or at the most recent mean of the bid and asked prices
provided by investment dealers in accordance with procedures established by
the Board of Directors.
For purposes of determining the Fund's net asset value, all
assets and liabilities initially expressed in foreign currency values will be
converted into U.S. dollar values at the mean between the bid and offered
quotations of such currencies against U.S. dollars as last quoted by any
recognized dealer. If an event were to occur after the value of a portfolio
instrument was so established but before the net asset value per share is
determined which is likely to materially change the net asset value, then the
portfolio instrument would be valued using fair value considerations
established by the Company's Board of Directors. Because of the need to
obtain prices as of the close of trading of the Western European exchanges,
the calculation of net asset value does not take place contemporaneously with
the determination of the prices of the majority of the Fund's securities.
NAV is determined on each day that the New York Stock Exchange
("NYSE") is open (a "business day"), as of the close of business of the
regular session of the NYSE (usually 4 p.m. Eastern Time). Investments and
requests to exchange or redeem shares received by the Fund in proper form
before
Page 16
the close of business on the NYSE (usually 4 p.m., Eastern Time) are
effective on, and will receive the price determined on, that day (except
investments made by electronic funds transfer, which are effective two busines
s days after your call). Investment, exchange and redemption requests
received after the close of the NYSE are effective on and receive the share
price determined on the next business day.
The NAV of most shares of investment portfolios (other than money
market funds) advised by Dreyfus is published in leading newspapers daily.
The yield of most Dreyfus money market funds is published weekly in leading
financial publications and in many local newspapers. The NAV of any Fund may
also be obtained by calling 1-800-645-6561.
The public offering price of Investor shares and Class R shares
is the NAV per share of that Class.
DREYFUS TELETRANSFER PRIVILEGE (NOT APPLICABLE TO CLASS R SHARES)_
You may purchase Fund shares (minimum $500 and maximum $150,000 per day) by
telephone if you have checked the appropriate box and supplied the necessary
information on the Fund's Account Application or have filed a Shareholder
Services Form with the Transfer Agent. The proceeds will be transferred
between the bank account designated in one of these documents and your Fund
account. Only a bank account maintained in a domestic financial institution
which is an ACH member may be so designated. The Fund may modify or terminate
this privilege at any time or charge a service fee upon notice to
shareholders. No such fee currently is contemplated.
If you have selected the Dreyfus TELETRANSFER Privilege, you may
request a Dreyfus TELETRANSFER purchase of Investor shares by telephoning
1-800-221-4060 or, if calling from overseas, 1-401-455-3306.
SHAREHOLDER SERVICES
The services and privileges described under this heading may not
be available to clients of certain Agents and some Agents may impose certain
conditions on their clients which are different from those described in this
Prospectus. You should consult your Agent in this regard.
FUND EXCHANGES
You may purchase, in exchange for shares of a Class, shares of
the same class of certain other funds managed or administered by Dreyfus, to
the extent such shares are offered for sale in your state of residence. These
funds have different investment objectives which may be of interest to you.
If you desire to use this service, please call 1-800-645-6561 to determine if
it is available and whether any conditions are imposed on its use. WITH
RESPECT TO CLASS R SHARES HELD BY RETIREMENT PLANS, EXCHANGES MAY BE MADE
ONLY BETWEEN A SHAREHOLDER'S RETIREMENT PLAN ACCOUNT IN ONE FUND AND SUCH
SHAREHOLDER'S RETIREMENT PLAN ACCOUNT IN ANOTHER FUND.
To request an exchange, you or your Agent acting on your behalf
must give exchange instructions to the Transfer Agent in writing or by
telephone. Before any exchange, you must obtain and should review a copy of
the current prospectus of the fund into which the exchange is being made.
Prospectuses may be obtained by calling 1-800-645-6561. Except in the case of
Personal Retirement Plans, the shares being exchanged must have a current
value of at least $500; furthermore, when establishing a new account by
exchange, the shares being exchanged must have a value of at least the
minimum initial investment required for the fund into which the exchange is
being made. The ability to issue exchange instructions by telephone is given
to all Fund shareholders automatically, unless you check the relevant "No"
box on the Account Application, indicating that you specifically refuse this
Privilege. The Telephone Exchange Privilege may be established for an
existing account by written request, signed by all shareholders on the
account, or by a separate Shareholder Services Form, also available by
calling 1-800-645-6561. If you previously have established the Telephone
Exchange Privilege, you may telephone exchange instructions by calling
1-800-221-4060 or, if calling from overseas, 1-401-455-3306. See "How to
Redeem Fund Shares_Procedures." Upon an exchange, the following shareholder
services and privileges, as applicable and where available, will be
automatically car-
Page 17
ried over to the fund into which the exchange is made: Telephone Exchange
Privilege, Wire Redemption Privilege, Telephone Redemption Privilege,
TELETRANSFER Privilege and the dividends and distributions payment
option (except for Dividend Sweep) selected by the investor.
Shares will be exchanged at the next determined NAV; however, a
sales load may be charged with respect to exchanges of Investor shares into
funds sold with a sales load. If you are exchanging Investor shares into a
fund that charges a sales load, you may qualify for share prices which do not
include the sales load or which reflect a reduced sales load, if the shares
of the fund from which you are exchanging were: (a) purchased with a sales
load, (b) acquired by a previous exchange from shares purchased with a sales
load, or (c) acquired through reinvestment of dividends or other
distributions paid with respect to the foregoing categories of shares. To
qualify, at the time of the exchange you must notify the Transfer Agent or
your Agent must notify the Distributor. Any such qualification is subject to
confirmation of your holdings through a check of appropriate records. See
"Shareholder Services" in the SAI. No fees currently are charged shareholders
directly in connection with exchanges, although the Fund reserves the right,
upon not less than 60 days' written notice, to charge shareholders a nominal
fee in accordance with rules promulgated by the SEC. The Fund reserves the
right to reject any exchange request in whole or in part. The availability of
fund exchanges may be modified or terminated at any time upon notice to
shareholders.
The exchange of shares of one fund for shares of another is
treated for Federal income tax purposes as a sale of the shares given in
exchange by the shareholder and, therefore, an exchanging shareholder may
realize, or an exchange on behalf of a Retirement Plan which is not tax
exempt may result in, a taxable gain or loss.
DREYFUS AUTO-EXCHANGE PRIVILEGE
Dreyfus Auto-Exchange Privilege enables you to invest regularly
(on a semi-monthly, monthly, quarterly or annual basis), in exchange for
shares of the Fund, in shares of the same class of certain other funds in the
Dreyfus Family of Funds of which you are currently an investor. WITH RESPECT
TO CLASS R SHARES HELD BY RETIREMENT PLANS, EXCHANGES PURSUANT TO THE DREYFUS
AUTO-EXCHANGE PRIVILEGE MAY BE MADE ONLY BETWEEN A SHAREHOLDER'S RETIREMENT
PLAN ACCOUNT IN ONE FUND AND SUCH SHAREHOLDER'S RETIREMENT PLAN ACCOUNT IN
ANOTHER FUND. The amount you designate, which can be expressed either in
terms of a specific dollar or share amount ($100 minimum), will be exchanged
automatically on the first and/or fifteenth day of the month according to the
schedule you have selected. Shares will be exchanged at the then-current NAV;
however a sales load may be charged with respect to exchanges of Investor
shares into funds sold with a sales load. The right to exercise this
Privilege may be modified or canceled by the Fund or the Transfer Agent. You
may modify or cancel your exercise of this Privilege at any time by mailing
written notification to The Dreyfus Family of Funds, P.O. Box 9671,
Providence, Rhode Island 02940-9671. The Fund may charge a service fee for
the use of this Privilege. No such fee currently is contemplated. The
exchange of shares of one fund for shares of another is treated for Federal
income tax purposes as a sale of the shares given in exchange by the
shareholder and, therefore, an exchanging shareholder may realize, or an
exchange on behalf of a Retirement Plan which is not tax exempt may result
in, a taxable gain or loss. For more information concerning this Privilege
and the funds in the Dreyfus Family of Funds eligible to participate in this
Privilege, or to obtain a Dreyfus Auto-Exchange Authorization Form, please
call toll free 1-800-645-6561.
DREYFUS-AUTOMATIC ASSET BUILDER
Dreyfus-AUTOMATIC Asset Builder permits you to purchase Fund
shares (minimum of $100 and maximum of $150,000 per transaction) at regular
intervals selected by you. Fund shares are purchased by transferring funds
from the bank account designated by you. At your option, the bank account
designated by you will be debited in the specified amount, and Fund shares
will be purchased, once a
Page 18
month, on either the first or fifteenth day, or twice a month, on both days.
Only an account maintained at a domestic financial institution which is an
ACH member may be so designated. To establish a Dreyfus-AUTOMATIC Asset
Builder account, you must file an authorization form with the Transfer Agent.
You may obtain the necessary authorization form by calling 1-800-645-6561.
You may cancel your participation in this Privilege or change the amount of
purchase at any time by mailing written notification to The Dreyfus Family of
Funds, P.O. Box 9671, Providence, Rhode Island 02940-9671, or, if to Dreyfus
retirement plan accounts to The Dreyfus Trust Company, Custodian, P.O. Box
6427, Providence, Rhode Island, 02940-6427 and the notification will be
effective three business days following receipt. The Fund may modify or
terminate this Privilege at any time or charge a service fee. No such fee
currently is contemplated.
DREYFUS DIVIDEND OPTIONS
Dreyfus Dividend Sweep enables you to invest automatically
dividends or dividends and capital gain distributions, if any, paid by the
Fund in shares of the same class of certain other funds in the Dreyfus Family
of Funds of which you are an investor. Shares of the other fund will be
purchased at the then-current net asset value; however, a sales load may be
charged with respect to investments in shares of a fund sold with a sales
load. If you are investing in a fund that charges a sales load, you may qualif
y for share prices which do not include the sales load or which reflect a
reduced sales load. See "Shareholder Services" in the SAI. Dreyfus Dividend
ACH permits you to transfer electronically on the payment date 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.
For more information concerning these Privileges, or to request a
Dreyfus Dividend Options Form, please call toll free 1-800-645-6561. You may
cancel these Privileges by mailing written notification to The Dreyfus Family
of Funds, P.O. Box 9671, Providence, Rhode Island 02940-9671. Enrollment in
or cancellation of these Privileges is effective three business days
following receipt. These Privileges are available only for existing accounts
and may not be used to open new accounts. Minimum subsequent investments do
not apply for Dreyfus Dividend Sweep. The Fund may modify or terminate these
Privileges at any time or charge a service fee. No such fee currently is
contemplated. Shares held under Keogh Plans, IRAs or other retirement plans
are not eligible for Dreyfus Dividend Sweep.
DREYFUS GOVERNMENT DIRECT DEPOSIT PRIVILEGE
Dreyfus Government Direct Deposit Privilege enables you to
purchase Fund shares (minimum of $100 and maximum of $50,000 per transaction)
by having Federal salary, Social Security, or certain veterans', military or
other payments from the Federal government automatically deposited into your
Fund account. You may deposit as much of such payments as you elect. You
should consider whether Direct Deposit of your entire payment into a fund
with fluctuating NAV, such as the Fund, may be appropriate for you. To enroll
in Dreyfus Government Direct Deposit, you must file with the Transfer Agent a
completed Direct Deposit Sign-Up Form for each type of payment that you
desire to include in this Privilege. The appropriate form may be obtained by
calling 1-800-645-6561. Death or legal incapacity will terminate your
participation in this Privilege. You may elect at any time to terminate your
participation by notifying in writing the appropriate Federal agency.
Further, the Fund may terminate your participation upon 30 days' notice to
you.
DREYFUS PAYROLL SAVINGS PLAN
Dreyfus Payroll Savings Plan permits you to purchase Fund shares
(minimum of $100 per transaction) automatically on a regular basis. Depending
upon the direct deposit program of your employer, you may have part or all of
your paycheck transferred to your existing Dreyfus account electroni-
Page 19
cally through the ACH system at each pay period. To establish a Dreyfus
Payroll Savings Plan account, you must file an authorization form with your
employer's payroll department. Your employer must complete the reverse side
of the form and return it to The Dreyfus Family of Funds, P.O. Box 9671,
Providence, Rhode Island 02940-9671. You may obtain the necessary
authorization form by calling 1-800-645-6561. You may change the amount of
purchase or cancel the authorization only by written notification to your
employer. It is the sole responsibility of the your employer, not the
Distributor, Dreyfus, the Fund, the Transfer Agent or any other person, to
arrange for transactions under the Dreyfus Payroll Savings Plan. The Fund may
modify or terminate this Privilege at any time or charge a service fee. No
such fee currently is contemplated. Shares held under Keogh Plans, IRAs or
other retirement plans are not eligible for this Privilege.
AUTOMATIC WITHDRAWAL PLAN
The Automatic Withdrawal Plan permits you to request withdrawal
of a specified dollar amount (minimum of $50) on a monthly or quarterly basis
if you have a $5,000 minimum account.
Particular Retirement Plans, including Dreyfus sponsored
retirement plans, may permit certain participants to establish an automatic
withdrawal plan from such Retirement Plans. Participants should consult their
Retirement Plan sponsor and tax adviser for details. Such a withdrawal plan
is different than the Automatic Withdrawal Plan. An application for the
Automatic Withdrawal Plan can be obtained by calling 1-800-645-6561. The
Automatic Withdrawal Plan may be ended at any time by the shareholder, the Fun
d or the Transfer Agent. Shares for which certificates have been issued may
not be redeemed through the Automatic Withdrawal Plan.
RETIREMENT PLANS
The Fund offers a variety of pension and profit-sharing plans,
including Keogh Plans, IRAs, SEP-IRAs and IRA "Rollover Accounts," 401(k)
Salary Reduction Plans and 403(b)(7) Plans. Plan support services also are
available. You can obtain details on the various plans by calling the
following numbers toll free: for Keogh Plans, please call 1-800-358-5566; for
IRAs and IRA "Rollover Accounts," please call 1-800-645-6561; for SEP-IRAs,
401(k) Salary Reduction Plans and 403(b)(7) Plans, please call 1-800-322-7880.
HOW TO REDEEM FUND SHARES
GENERAL_You may request redemption of your shares at any time.
Redemption requests should be transmitted to the Transfer Agent as described
below. When a request is received in proper form, the Fund will redeem the
shares at the next determined NAV as described below. If you hold Fund shares
of more than one Class, any request for redemption must specify the Class of
shares being redeemed. If you fail to specify the Class of shares to be
redeemed or if you own fewer shares of the Class than specified to be
redeemed, the redemption request may be delayed until the Transfer Agent
receives further instructions from you or your Agent.
The Fund imposes no charges when shares are redeemed directly
through the Distributor. Agents or other institutions may charge their
clients a nominal fee for effecting redemptions of Fund shares. Any
certificates representing Fund shares being redeemed must be submitted with
the redemption request. The value of the shares redeemed may be more or less
than their original cost, depending upon the Fund's then-current NAV.
The Fund ordinarily will make payment for all shares redeemed
within seven days after receipt by the Transfer Agent of a redemption request
in proper form, except as provided by the rules of the SEC. HOWEVER, IF YOU
HAVE PURCHASED FUND SHARES BY CHECK, BY THE DREYFUS TELETRANSFER PRIVILEGE OR
THROUGH DREYFUS-AUTOMATIC ASSET BUILDER AND SUBSEQUENTLY SUBMIT A WRITTEN
REDEMPTION REQUEST TO THE TRANSFER AGENT, THE REDEMPTION PROCEEDS WILL BE
TRANSMITTED TO YOU PROMPTLY UPON BANK CLEARANCE OF YOUR PURCHASE CHECK,
DREYFUS TELETRANSFER PURCHASE OR
Page 20
DREYFUS-AUTOMATIC ASSET BUILDER ORDER, WHICH MAY TAKE UP TO EIGHT BUSINESS
DAYS OR MORE. IN ADDITION, THE FUND WILL REJECT REQUESTS TO REDEEM SHARES BY
WIRE OR TELEPHONE OR PURSUANT TO THE DREYFUS TELETRANSFER PRIVILEGE FOR A
PERIOD OF EIGHT BUSINESS DAYS AFTER RECEIPT BY THE TRANSFER AGENT OF THE
PURCHASE CHECK, THE DREYFUS TELETRANSFER PURCHASE OR THE DREYFUS-AUTOMATIC
ASSET BUILDER ORDER AGAINST WHICH SUCH REDEMPTION IS REQUESTED. THESE
PROCEDURES WILL NOT APPLY IF YOUR SHARES WERE PURCHASED BY WIRE PAYMENT, OR
IF YOU OTHERWISE HAVE A SUFFICIENT COLLECTED BALANCE IN YOUR ACCOUNT TO COVER
THE REDEMPTION REQUEST. PRIOR TO THE TIME ANY REDEMPTION IS EFFECTIVE,
DIVIDENDS ON SUCH SHARES WILL ACCRUE AND BE PAYABLE, AND YOU WILL
BE ENTITLED TO EXERCISE ALL OTHER RIGHTS OF BENEFICIAL OWNERSHIP. Fund shares
will not be redeemed until the Transfer Agent has received your Account
Application.
The Fund reserves the right to redeem your account at its option
upon not less than 45 days' written notice if the net asset value of your
account is $500 or less and remains so during the notice period.
PROCEDURES_You may redeem Fund shares by using the regular
redemption procedure through the Transfer Agent, the Wire Redemption
Privilege, the Telephone Redemption Privilege or, for Investor shares only,
through the Dreyfus TELETRANSFER Privilege. Other redemption procedures may
be in effect for clients of certain Agents and institutions. The Fund makes
available to certain large institutions the ability to issue redemption
instructions through compatible computer facilities.
You may redeem Fund shares by telephone if you have checked the
appropriate box on the Fund's Account Application or have filed a Shareholder
Services Form with the Transfer Agent. If you select the TELETRANSFER Privileg
e or telephone exchange privilege, which is granted automatically unless you
refuse it, you authorize the Transfer Agent to act on telephone instructions
from any person representing himself or herself to be you, or a
representative of your Agent, and reasonably believed by the Transfer Agent
to be genuine. The Fund will require the Transfer Agent to employ reasonable
procedures, such as requiring a form of personal identification, to confirm
that instructions are genuine and, if it does not follow such procedures, the
Fund or the Transfer Agent may be liable for any losses due to unauthorized
or fraudulent instructions. Neither the Fund nor the Transfer Agent will be
liable for following telephone instructions reasonably believed to be genuine.
During times of drastic economic or market conditions, you may
experience difficulty in contacting the Transfer Agent by telephone to
request a redemption or an exchange of Fund shares. In such cases, you should
consider using the other redemption procedures described herein. Use of these
other redemption procedures may result in your redemption request being
processed at a later time than it would have been if telephone redemption had
been used. During the delay, the Fund's NAV may fluctuate.
REGULAR REDEMPTION. Under the regular redemption procedure, you
may redeem your shares by written request mailed to The Dreyfus Family of
Funds, P.O. Box 9671, Providence, Rhode Island 02940-9671, or, if for Dreyfus
retirement plan accounts to The Dreyfus Trust Company, Custodian, P.O. Box
6427, Providence, Rhode Island 02940-6427. Redemption requests may be
delivered in person only to a Dreyfus Financial Center. These requests will
be forwarded to the Fund and will be processed only upon receipt thereby. For
the location of the nearest Dreyfus Financial Center, please call the
telephone number listed under "General Information." Redemption requests must
be signed by each shareholder, including each owner of a joint account, and
each signature must be guaranteed. The Transfer Agent has adopted standards
and procedures pursuant to which signature-guarantees in proper form
generally will be accepted from domestic banks, brokers, dealers, credit
unions, national securities exchanges, registered securities associations, cle
aring agencies and savings associations, as well as from participants in the
New York Stock Exchange Medallion Signature Program, the Securities Transfer
Agents Medallion Program ("STAMP"), and the Stock Exchanges Medallion
Program. For more information with respect to signature-guarantees, please
call one of the telephone numbers listed under "General Information."
Page 21
Redemption proceeds of at least $1,000 will be wired to any
member bank of the Federal Reserve System in accordance with a written
signature-guaranteed request.
WIRE REDEMPTION PRIVILEGE. You may request by wire or telephone
that redemption proceeds (minimum $1,000) be wired to your account at a bank
which is a member of the Federal Reserve System, or a correspondent bank if
your bank is not a member. To establish the Wire Redemption Privilege, you
must check the appropriate box and supply the necessary information on the
Fund's Account Application or file a Shareholder Services Form with the
Transfer Agent. You may direct that redemption proceeds be paid by check
(maximum $150,000 per day) made out to the owners of record and mailed to
your address. Redemption proceeds of less than $1,000 will be paid
automatically by check. Holders of jointly registered Fund or bank accounts
may have redemption proceeds of only up to $250,000 wired within any 30-day
period. You may telephone redemption requests by calling 1-800-221-4060 or,
if calling from overseas, 1-401-455-3306. The Fund reserves the right to
refuse any redemption request, including requests made shortly after a change
of address, and may limit the amount involved or the number of such requests.
This Privilege may be modified or terminated at anytime by the Transfer Agent
or the Fund. The Fund's SAI sets forth instructions for transmitting
redemption requests by wire. Shares held under Keogh Plans, IRAs or other
retirement plans, and shares for which certificates have been issued, are not
eligible for this Privilege.
TELEPHONE REDEMPTION PRIVILEGE. You may redeem Fund shares
(maximum $150,000 per day) by telephone if you have checked the appropriate
box on the Fund's Account Application or have filed a Shareholder Services
Form with the Transfer Agent. The redemption proceeds will be paid by check
and mailed to your address. You may telephone redemption instructions by
calling 1-800-221-4060 or, if calling from overseas, 1-401-455-3306. The Fund
reserves the right to refuse any request made by telephone, including
requests made shortly after a change of address, and may limit the amount
involved or the number of such requests. This Privilege may be modified or
terminated at any time by the Transfer Agent or the Fund. Shares held under
Keogh Plans, IRAs or other retirement plans, and shares for which
certificates have been issued, are not eligible for this Privilege.
DREYFUS TELETRANSFER PRIVILEGE_INVESTOR SHARES. You may redeem
Fund shares (minimum $500 per day) by telephone if you have checked the
appropriate box and supplied the necessary information on the Fund's Account
Application or have filed a Shareholder Services Form with the Transfer
Agent. The proceeds will be transferred between your Fund account and the
bank account designated in one of these documents. Only such an account
maintained in a domestic financial institution which is an ACH member may be
so designated. Redemption proceeds will be on deposit in your account at an
ACH member bank ordinarily two days after receipt of the redemption request
or, at your request, paid by check (maximum $150,000 per day) and mailed to
your address. Holders of jointly registered Fund or bank accounts may redeem
through the Dreyfus TELETRANSFER Privilege for transfer to their bank account
only up to $250,000 within any 30-day period. The Fund reserves the right to
refuse any request made by telephone, including requests made shortly after a
change of address, and may limit the amount involved or the number of such
requests. The Fund may modify or terminate this Privilege at any time or
charge a service fee upon notice to shareholders. No such fee currently is
contemplated.
If you have selected the Dreyfus TELETRANSFER Privilege, you may
request a Dreyfus TELETRANSFER redemption of Fund shares by telephoning
1-800-221-4060 or, if calling from overseas, 1-401-455-3306. Shares held
under Keogh Plans, IRAs or other retirement plans, and shares issued in
certificate form, are not eligible for this Privilege.
Page 22
DISTRIBUTION PLAN
(INVESTOR SHARES ONLY)
Investor shares are subject to a Distribution Plan (the "Plan")
adopted pursuant to Rule 12b-1 under the 1940 Act ("Rule 12b-1"). The
Investor shares of the Fund bear some of the cost of selling those shares
under the Plan. The Plan allows the Fund to spend annually up to 0.25% of its
average daily net assets attributable to Investor shares to compensate
Dreyfus Service Corporation, an affiliate of Dreyfus, for shareholder
servicing activities and the Distributor for shareholder servicing activities
and for activities or expenses primarily intended to result in the sale of
Investor shares of the Fund. The Plan allows the Distributor to make payments
from the Rule 12b-1 fees it collects from the Fund to compensate Agents that
have entered into Selling Agreements ("Agreements") with the Distributor.
Under the Agreements, the Agents are obligated to provide distribution
related services with regard to the Fund and/or shareholder services to the
Agent's clients that own Investor shares of the Fund.
The Fund and the Distributor may suspend or reduce payments under
the Plan at any time, and payments are subject to the continuation of the
Fund's Plan and the Agreements described above. From time to time, the
Agents, the Distributor and the Fund may agree to voluntarily reduce the
maximum fees payable under the Plan. See the SAI for more details on the
Plan.
Potential investors should read this Prospectus in light of the
terms governing Agreements with their Agents. An Agent entitled to receive
compensation for selling and servicing the Fund's shares may receive
different compensation with respect to one class of shares over another.
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
The Fund ordinarily declares and pays dividends from its net
investment income and distributes net realized gains, if any, once a year,
but it may make distributions on a more frequent basis to comply with the
distribution requirements of the Code, in all events in a manner consistent
with the provisions of the 1940 Act. The Fund will not make distributions
from net realized gains unless capital loss carryovers, if any, have been
utilized or have expired. Investors other than qualified Retirement Plans may
choose whether to receive dividends and other distributions in cash or to
reinvest them in additional Fund shares; dividends and other distributions
paid to qualified Retirement Plans are reinvested automatically in additional
Fund shares at NAV. All expenses are accrued daily and deducted before
declaration of dividends to investors. Dividends paid by each Class will be
calculated at the same time and in the same manner and will be in the same
amount, except that the expenses attributable solely to a particular Class
will be borne exclusively by that Class. Investor shares will receive lower
per share dividends than Class R shares because of the higher expenses borne
by the Investor shares. See "Expense Summary."
It is expected that the Fund will qualify as a "regulated
investment company" under the Code so long as such qualification is in the
best interests of its shareholders. Such qualification will relieve the Fund
of any liability for Federal income tax to the extent its earnings are
distributed in accordance with applicable provisions of the Code.
Dividends derived from net investment income, together with
distributions from net realized short-term capital gains and all or a portion
of any gains realized from the sale or other disposition of certain market
discount bonds, paid by the Fund will be taxable to U.S. shareholders,
including certain non-qualified Retirement Plans, as ordinary income whether
received in cash or reinvested in Fund shares. Distributions from the Fund's
net realized long-term capital gains will be taxable to such shareholders as
long-term capital gains for Federal income tax purposes, regardless of how
long the shareholders have held their Fund shares and whether such
distributions are received in cash or reinvested in Fund shares. The net
capital gain of an individual generally will not be subject to Federal income
tax at a rate in excess of 28%. Dividends and other distributions also may be
subject to state and local taxes.
Page 23
Dividends derived from net investment income, together with
distributions from net realized short-term capital gains and all or a portion
of any gains realized from the sale or other disposition of certain market
discount bonds, paid by the Fund to a foreign investor generally are subject
to U.S. withholding tax at the rate of 30%, unless the foreign investor
claims the benefit of a lower rate specified in a tax treaty. Distributions
from net realized long-term capital gains paid by the Fund to a foreign
investor, as well as the proceeds of any redemptions from a foreign
investor's account, regardless of the extent to which gain or loss may be
realized, generally will not be subject to U.S. withholding tax. However,
such distributions may be subject to backup withholding, as described below,
unless the foreign investor certifies his non-U.S. residency status.
Notice as to the tax status of your dividends and other
distributions will be mailed to you annually. You also will receive periodic
summaries of your account which will include information as to dividends and
distributions from net realized, long-term capital gains, if any, paid during
the year.
Dividends paid by the Fund to qualified Retirement Plans
ordinarily will not be subject to taxation until the proceeds are distributed
from the Retirement Plans. The Fund will not report to the IRS dividends paid
to such plans. Generally, distributions from qualified Retirement Plans,
except those representing returns of non-deductible contributions thereto,
will be taxable as ordinary income and, if made prior to the time the
participant reaches age 59-1/2, generally will be subject to an additional tax
equal to 10% of the taxable portion of the distribution. If the distribution
from such a Retirement Plan (other than certain governmental or church plans)
for any taxable year following the year in which the participant reaches age
701/2 is less than the "minimum required distribution" for that taxable year,
an excise tax equal to 50% of the deficiency may be imposed by the IRS. The
administrator, trustee or custodian of such a Retirement Plan will be
responsible for reporting distributions from such plans to the IRS. Moreover,
certain contributions to a qualified Retirement Plan in excess of the amounts
permitted by law may be subject to an excise tax.
With respect to individual investors and certain non-qualified
Retirement Plans, Federal regulations generally require the Fund to withhold
("backup withholding") and remit to the U.S. Treasury 31% of dividends,
distributions from net realized long-term capital gains and the proceeds of
any redemption, regardless of the extent to which gain or loss may be
realized, paid to a shareholder if such shareholder fails to certify either
that the TIN furnished in connection with opening an account is correct or
that such shareholder has not received notice from the IRS of being subject
to backup withholding as a result of a failure to properly report taxable
dividend or interest income on a Federal income tax return. Furthermore, the
IRS may notify the Fund to institute backup withholding if the IRS determines
a shareholder's TIN is incorrect or if a shareholder has failed to properly
report taxable dividend and interest income on a Federal income tax return.
A TIN is either the Social Security number or employer
identification number of the record owner of the account. Any tax withheld as
a result of backup withholding does not constitute an additional tax imposed
on the record owner of the account and may be claimed as a credit on the
record owner's Federal income tax return.
The Fund may be subject to a non-deductible 4% excise tax,
measured with respect to certain undistributed amounts of taxable investment
income and capital gains.
You should consult your tax advisers regarding specific questions
as to Federal, state or local taxes.
PERFORMANCE INFORMATION
For purposes of advertising, performance for each Class may be
calculated on the basis of average annual total return and/or total return.
These total return figures reflect changes in the price of the shares and
assume that any income dividends and/or capital gains distributions made by
the Fund during the measuring period were reinvested in shares of the same
Class. These figures also take into
Page 24
account any applicable service and distribution fees. As a result, at any
given time, the performance of the Investor shares should be expected to be
lower than that of Class R. Performance for each Class will be calculated
separately.
Average annual total return is calculated pursuant to a
standardized formula which assumes that an investment was purchased with an
initial payment of $1,000 and that the investment was redeemed at the end of
a stated period of time, after giving effect to the reinvestment of dividends
and other distributions during the period. The return is expressed as a
percentage rate which, if applied on a compounded annual basis, would result
in the redeemable value of the investment at the end of the period.
Advertisements of the Fund's performance will include the Fund's average
annual total return for one, five and ten year periods, or for shorter
periods depending upon the length of time during which the Fund has operated.
Computations of average annual total return for periods of less than one year
represent an annualization of the Fund's actual total return for the
applicable period.
Total return is computed on a per share basis and assumes the
reinvestment of dividends and other distributions. Total return generally is
expressed as a percentage rate which is calculated by combining the income
and principal changes for a specified period and dividing by the NAV at the
beginning of the period. Advertisements may include the percentage rate of
total return or may include the value of a hypothetical investment at the end
of the period which assumes the application of the percentage rate of total
return.
The Fund may also advertise the yield on a Class of shares. The
Fund's yield is calculated by dividing a Class of shares' annualized net
investment income per share during a recent 30-day (or one month) period by
the maximum public offering price per Class of such share on the last day of
that period. Since yields fluctuate, yield data cannot necessarily be used to
compare an investment in a Class of shares with bank deposits, savings
accounts, and similar investment alternatives which often provide an agreed-up
on or guaranteed fixed yield for a stated period of time.
Performance will vary from time to time and past results are not
necessarily representative of future results. You should remember that
performance is a function of portfolio management in selecting the type and
quality of portfolio securities and is affected by operating expenses.
Performance information, such as that described above, may not provide a
basis for comparison with other investments or other investment companies
using a different method of calculating performance.
The Fund may compare the performance of its shares with various
industry standards of performance including Lipper Analytical Services, Inc.
ratings, Morgan Stanley Capital International Europe Index, CDA Technologies
Indexes, the Consumer Price Index, and the Dow Jones Industrial Average.
Performance rankings as reported in CHANGING TIMES, BUSINESS WEEK,
INSTITUTIONAL INVESTOR, THE WALL STREET JOURNAL, IBC/DONOGHUE'S MONEY FUND
REPORT, MUTUAL FUND FORECASTER, NO LOAD INVESTOR, MONEY MAGAZINE, MORNINGSTAR
MUTUAL FUND VALUES, U.S. NEWS AND WORLD REPORT, FORBES, FORTUNE, BARRON'S and
similar publications may also be used in comparing the Fund's performance.
Furthermore, the Fund may quote its shares' total returns and yields in
advertisements or in shareholder reports. The Fund may also advertise
non-standardized performance information, such as total return for periods
other than those required to be shown or cumulative performance data. The
Fund may advertise a quotation of yield or other similar quotation
demonstrating the income earned or distributions made by the Fund.
GENERAL INFORMATION
The Company was incorporated in Maryland on August 6, 1987 under
the name The Laurel Funds, Inc., and changed its name to The Dreyfus/Laurel
Funds, Inc. on October 17, 1994. The Company is registered with the
Securities and Exchange Commission under the 1940 Act, as an open-end,
diversified management investment company. The Company has an authorized
capitalization of
Page 25
25 billion shares of $0.001 par value stock with equal voting rights. The
Fund is a portfolio of the Company. The Fund's shares are classified into two
classes_Investor shares and Class R shares. The Company's Articles of
Incorporation permit the Board of Directors to create an unlimited number of
investment portfolios (each a "fund").
Each share (regardless of Class) has one vote. All shares of all
funds (and Classes thereof) vote together as a single Class, except as to any
matter for which a separate vote of any fund or Class is required by the 1940
Act, and except as to any matter which affects the interests of one or more
particular funds or Classes, in which case only the shareholders of the
affected fund or Classes are entitled to vote, each as a separate class. Only
holders of Investor shares will be entitled to vote on matters submitted to
shareholders pertaining to the Distribution Plan relating to that Class.
At January 31, 1995, Mellon Bank, Dreyfus' parent, owned of
record through its direct and indirect subsidiaries more than 25% of the
Company's outstanding voting shares, and is deemed, under the 1940 Act, to be
a controlling shareholder.
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
Directors or the appointment of auditors. However, pursuant to the Company's
By-Laws, the holders of at least 10% of the shares outstanding and entitled
to vote may require the Company to hold a special meeting of shareholders for
purposes of removing a Director from office and for any other purpose.
Company shareholders may remove a Director by the affirmative vote of a
majority of the Company's outstanding voting shares. In addition, the Board
of Directors will call a meeting of shareholders for the purpose of electing
Directors if, at any time, less than a majority of the Directors then holding
office have been elected by shareholders.
The Transfer Agent maintains a record of your ownership and will
send you confirmations and statements of account.
Shareholder inquiries may be made by writing to the Fund at 144
Glenn Curtiss Boulevard, Uniondale, New York 11556-0144, or by calling toll
free 1-800-645-6561.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE
ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND IN THE
FUND'S OFFICIAL SALES LITERATURE IN CONNECTION WITH THE OFFER OF THE FUND'S
SHARES, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER IN ANY STATE IN WHICH, OR TO ANY PERSON TO WHOM,
SUCH OFFERING MAY NOT LAWFULLY BE MADE.
Page 26
[This Page Intentionally Left Blank]
Page 27
European Fund
Prospectus
(LION LOGO)
Registration Mark
Copy Rights 1995 Dreyfus Service Corporation
308/708p2030195
<PAGE>
PROSPECTUS
-----------
THE DREYFUS
[Small box above fund name showing a lion's face]
FAMILY
OF FUNDS
-----------
---
DREYFUS BOND MARKET INDEX FUND
Investor and Class R Shares
---
MARCH 1, 1995
PROSPECTUS BEGINS ON PAGE 1
<PAGE>
PROSPECTUS
-------------------------------------
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DREYFUS BOND MARKET INDEX FUND
Investor and Class R Shares
March 1, 1995
DREYFUS BOND MARKET INDEX FUND seeks to replicate the total return of the
Lehman Brothers Government/Corporate Bond Index.
THIS PROSPECTUS describes the Dreyfus Bond Market Index Fund (the "Fund"),
The Dreyfus/Laurel Funds, Inc. (formerly a separate portfolio of The Laurel
Funds, Inc.), an open-end, diversified management investment company that is
part of The Dreyfus Family of Funds. This Prospectus describes two classes of
shares--Investor Shares and Class R Shares (collectively, the "Shares")--of the
Fund.
...............................................................................
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. ALL MUTUAL
FUND SHARES INVOLVE CERTAIN RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THE FEES TO WHICH THE FUND IS SUBJECT ARE SUMMARIZED IN THE "EXPENSE
SUMMARY" SECTION OF THE FUND'S PROSPECTUS. THE FUND PAYS MELLON BANK, N.A.
("MELLON BANK") OR ITS AFFILIATES TO BE ITS INVESTMENT MANAGER. MELLON BANK OR
AN AFFILIATE MAY BE PAID FOR PERFORMING OTHER SERVICES FOR THE FUND, SUCH AS
CUSTODIAN, TRANSFER AGENT OR FUND ACCOUNTANT SERVICES. THE FUND IS DISTRIBUTED
BY PREMIER MUTUAL FUND SERVICES, INC.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
....................................... 1 .....................................
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<PAGE>
DREYFUS BOND MARKET INDEX FUND
-------------------------------------
- - - --------------------------------------------------------------------------------
This Prospectus sets forth concisely the information about the Fund that a
prospective purchaser should consider before investing. Investors should read
this Prospectus and retain it for future reference. Additional information about
the Fund is contained in a Statement of Additional Information (the "SAI"),
which has been filed with the Securities and Exchange Commission (the "SEC") and
is available upon request without charge by calling or writing to The Dreyfus
Family of Funds. The SAI bears the same date as this Prospectus and is
incorporated by reference in its entirety into this Prospectus.
In addition to the Fund, The Dreyfus Family of Funds also offers other
funds that provide investment opportunities for you in the equity, fixed income
and money markets. For more information about these additional investment
opportunities, call 1-800-548-2868.
...............................................................................
The Dreyfus Family of Funds
P.O. Box 9692
Providence, Rhode Island 02940-9830
....................................... 2 .....................................
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<PAGE>
PROSPECTUS
-------------------------------------
- - - --------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
Expense Summary................................................................5
Financial Highlights...........................................................6
Investment Objective and Policies..............................................8
Other Investment Policies and Risk Factors.....................................9
HOW TO DO BUSINESS WITH US
Special Shareholder Services..................................................16
Investor Line.................................................................16
How to Invest in The Fund.....................................................17
By Mail.....................................................................17
By Telephone................................................................18
By Wire.....................................................................18
By Automatic Monthly Investments............................................18
By Direct Deposit...........................................................18
By In-Kind Purchases........................................................19
When Share Price is Determined..............................................19
Additional Information About Investments....................................19
How to Exchange Your Investment From One Fund to Another......................20
By Telephone................................................................20
By Mail.....................................................................20
Additional Information About Exchanges......................................21
How to Redeem Shares..........................................................21
By Telephone................................................................22
By Mail.....................................................................22
By Automated Withdrawal Program.............................................22
Redemption Proceeds.........................................................23
Additional Information About Redemptions....................................24
How to Use The Dreyfus Family of Funds in a Tax-Qualified
Retirement Plan.............................................................24
How to Transfer an Investment to a Dreyfus Family of Funds'
Retirement Plan..........................................................24
....................................... 3 ....................................
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<PAGE>
DREYFUS BOND MARKET INDEX FUND
-------------------------------------
- - - --------------------------------------------------------------------------------
TABLE OF CONTENTS (CONTINUED)
OTHER INFORMATION
Share Price...................................................................25
Performance Advertising.......................................................25
Distributions.................................................................27
Taxes.........................................................................28
Other Services................................................................29
Further Information About The Fund............................................30
The Dreyfus/Laurel Funds, Inc...............................................30
Management..................................................................30
Distribution Plan (Investor Class Only).....................................33
...............................................................................
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE FUND'S SAI
INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH THE OFFERING MADE BY THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND OR THE DISTRIBUTOR. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE FUND OR BY THE DISTRIBUTOR IN
ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT BE LAWFULLY MADE.
....................................... 4 ....................................
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<PAGE>
PROSPECTUS
-------------------------------------
- - - --------------------------------------------------------------------------------
EXPENSE SUMMARY
The purpose of the following table is to help you understand the various costs
and expenses that you, as a Shareholder, will bear directly or indirectly in
connection with an investment in the Investor or Class R Shares of the Fund.
(See "Management.")
- - - --------------------------------------------------------------------------------
- - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Investor Class R
Shares Shares
<S> <C> <C>
- - - --------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases none none
Maximum Sales Load Imposed on Reinvestments none none
Deferred Sales Load none none
Redemption Fee none none
Exchange Fee none none
- - - --------------------------------------------------------------------------------
ESTIMATED ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF NET ASSETS)
Management Fee 0.40% 0.40%
12b-1 Fees* 0.25% none
Other Expenses** 0.00% 0.00%
----- -----
Total Fund Operating Expenses 0.65% 0.40%
- - - --------------------------------------------------------------------------------
EXAMPLES
You would pay the following on 1 year $ 7 $ 4
a $1,000 investment, assuming (1) a 3 years 21 13
5% annual return and (2) redemption 5 years N/A 22
at the end of each time period: 10 years N/A 51
- - - --------------------------------------------------------------------------------
- - - --------------------------------------------------------------------------------
<FN>
* See "Distribution Plan (Investor Class Only)" for a description of the
Fund's Plan of Distribution for the Investor Class.
** Does not include fees and expenses of the non-interested Directors
(including counsel). The investment manager is contractually required to
reduce its Management Fee in an amount equal to the Fund's allocable portion
of such fees and expenses, which are estimated to be 0.02% of the Fund's net
assets. (See "Management.")
</TABLE>
...............................................................................
THE INFORMATION CONTAINED IN THE TABLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS
THAN THOSE SHOWN.
...............................................................................
The Fund understands that banks, brokers, dealers or other financial
institutions (including Mellon Bank and its affiliates) (collectively "Agents")
may charge fees to their clients who are owners of the Fund's Investor Shares
for various services provided in connection with a client's account. These fees
would be in addition to any amounts received by an Agent under its Selling
Agreement ("Agreement") with Premier Mutual Fund Services, Inc. ("Premier"). The
Agreement requires each Agent to disclose to its clients any compensation
payable to such Agent by Premier and any other compensation payable by the
client for various services provided in connection with its account.
Long-term shareholders of Investor Shares could pay more in Rule 12b-1 fees
than the economic equivalent of the maximum front-end sales charges applicable
to mutual funds sold by members of the National Association of Securities
Dealers, Inc.
....................................... 5 .....................................
- - - --------------------------------------------------------------------------------
<PAGE>
DREYFUS BOND MARKET INDEX FUND
-------------------------------------
- - - --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The following financial information for Investor Shares and Class R Shares has
been derived from the financial statements which have been audited by KPMG Peat
Marwick LLP, the independent auditors for The Dreyfus/Laurel Funds, Inc., that
appear in the Fund's annual report for the period ended October 31, 1994, which
is incorporated by reference in the SAI. Further information about the Fund's
performance is contained in the Fund's Annual Report which may be obtained
without charge.
- - - --------------------------------------------------------------------------------
- - - --------------------------------------------------------------------------------
- - - --------------------------------------------------------------------------------
DREYFUS BOND MARKET INDEX FUND
FOR AN INVESTOR SHARE OUTSTANDING THROUGHOUT THE PERIOD.
- - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD
ENDED
10/31/94*#
<S> <C>
Net asset value, beginning of period $ 9.44
-------
Income from investment operations:
Net investment income 0.24
Net realized and unrealized loss on investments (0.28)
-------
Total from investment operations (0.04)
Less distributions:
Distributions from net investment income (0.25)
-------
Net asset value, end of period $ 9.15
=======
Total return++ (0.46)%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 38
Ratio of operating expenses to average net assets 0.65%+
Ratio of net investment income to average net assets 4.81%+
Portfolio turnover rate 188%
<FN>
- - - --------------------------------------------------------------------------------
* The Fund commenced selling Investor Shares on April 28, 1994.
+ Annualized.
++ Total return represents aggregate total return for the period
indicated.
# Prior to October 17, 1994, Mellon Bank, N.A. served as the Fund's
investment manager.
Effective October 17, 1994, The Dreyfus Corporation serves as the Fund's
investment manager.
- - - --------------------------------------------------------------------------------
- - - --------------------------------------------------------------------------------
....................................... 6 .....................................
- - - --------------------------------------------------------------------------------
<PAGE>
PROSPECTUS
-------------------------------------
- - - --------------------------------------------------------------------------------
- - - --------------------------------------------------------------------------------
- - - --------------------------------------------------------------------------------
- - - --------------------------------------------------------------------------------
DREYFUS BOND MARKET INDEX FUND
FOR A CLASS R SHARE OUTSTANDING THROUGHOUT THE PERIOD.
- - - --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PERIOD
ENDED
10/31/94*#
<S> <C>
Net asset value, beginning of period $ 10.00
-------
Income from investment operations:
Net investment income** 0.49
Net realized and unrealized loss on investments (0.85)
-------
Total from investment operations (0.36)
Less distributions:
Distributions from net investment income (0.49)
-------
Net asset value, end of period $ 9.15
=======
Total return++ (3.68)%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 4,464
Ratio of operating expenses to average net assets*** 0.40%+
Ratio of net investment income to average net assets 5.05%+
Portfolio turnover rate 188%
- - - --------------------------------------------------------------------------------
<FN>
* The Fund commenced operations on November 30, 1993. Effective April
28, 1994, the Fund began selling Investor Shares and the shares
existing prior to April 28, 1994, were designated Trust Shares. On
October 17, 1994, Trust Shares were redesignated as Class R Shares.
** Net investment income before reimbursement of expenses by the
investment adviser for the period ended October 31, 1994 was
$.39 per share.
*** Annualized expense ratio before reimbursement of expenses by the
investment adviser for the period ended October 31, 1994 was 1.41%.
+ Annualized.
++ Total return represents aggregate total return for the period
indicated.
# Prior to October 17, 1994, Mellon Bank, N.A. served as the Fund's
investment manager. Effective October 17, 1994, The Dreyfus Corporation
serves as the Fund's investment manager.
</TABLE>
- - - --------------------------------------------------------------------------------
- - - --------------------------------------------------------------------------------
....................................... 7 .....................................
- - - --------------------------------------------------------------------------------
<PAGE>
DREYFUS BOND MARKET INDEX FUND
-------------------------------------
- - - --------------------------------------------------------------------------------
- - - ------------------------------------------------------------
DREYFUS BOND MARKET INDEX FUND
INVESTMENT OBJECTIVE AND POLICIES
The Fund seeks to replicate the total return of the Lehman Brothers
Government/Corporate Bond Index (the "Index"). There can be no assurance that
the Fund will meet its investment objective. See "OTHER INVESTMENT POLICIES AND
RISK FACTORS" on page 9 for a detailed description of risks and other Fund
investment policies. See "OTHER INVESTMENT POLICIES AND RISK FACTORS -- Limiting
Investments Risks" for a discussion of the Fund's investment limitations.
The Fund is not managed according to traditional methods of "active"
investment management, which involve the buying and selling of securities based
upon economic, financial and market analysis and investment judgment. Instead,
the Fund utilizes a "passive" investment approach, attempting to duplicate the
investment performance of the Index through the use of statistical procedures.
The Index is intended to measure the performance of the domestic fixed-rate
investment grade debt market. The Index is composed of (i) all public
obligations of the U.S. Government, its agencies and instrumentalities
(excluding "flower" bonds and pass-through issues such as GNMA Certificates) and
(ii) all publicly issued, fixed-rate, nonconvertible, investment grade,
dollar-denominated, SEC-registered obligations of domestic corporations, foreign
governments and supranational organizations. All non-U.S. Government issues in
the Index are rated at least Baa by Moody's Investors Service, Inc. ("Moody's")
BBB by Standard & Poor's Ratings Group ("Standard & Poor's") or, if unrated by
Moody's or Standard & Poor's, BBB by Fitch Investors Service, Inc. ("Fitch"). As
of November 30, 1994, 4,130 issues were included in the Index, representing
$2.768 trillion in market value. U.S. Treasury and agency issues represented
77.2% of the total market value, with corporate issues representing the balance
of 22.8%. The average maturity of the Index was 9.3 years. The inclusion of a
security in the Index does not imply that Lehman Brothers believes the security
to be an attractive investment, nor is Lehman Brothers affiliated with the Fund.
Because of the large number of issues included in the Index, the Fund
cannot invest in all such issues. Instead, the Fund holds a representative
sample of the securities in the Index, selecting one or two issues to represent
an entire "class" or type of securities in the Index. At a minimum, the Fund
seeks to hold securities which reflect the weighting of the major asset classes
in the Index -- U.S. Treasury and agency issues and corporate issues. As the
Fund's assets increase, these classes will be further delineated along the lines
of sector, term-to-maturity,
....................................... 8 .....................................
- - - --------------------------------------------------------------------------------
<PAGE>
PROSPECTUS
-------------------------------------
- - - --------------------------------------------------------------------------------
coupon and credit rating. This sampling technique is expected to be an effective
means of substantially duplicating the income and capital returns provided by
the securities comprising the Index. As the Fund grows, the correlation between
the performance of the Fund and the Index is expected to be .95 or higher. A
correlation of 1.00 would indicate perfect correlation.
Securities rated BBB by Standard & Poor's or Baa by Moody's are considered
by those rating agencies to be "investment grade" securities, although Moody's
considers securities rated Baa to have speculative characteristics. Further,
while bonds rated BBB by Standard & Poor's exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and principal for debt in
this category than debt in higher rated categories. The Fund will dispose in a
prudent and orderly fashion of bonds whose ratings drop below these minimum
ratings.
The Fund invests 80% or more of its total assets in securities included in
the Index. The Fund may purchase such securities on a when-issued or
delayed-delivery basis. For the purpose of maintaining liquidity, the Fund may
invest up to 20% of its assets in: (1) U.S. Treasury bills, notes and bonds; (2)
other obligations issued or guaranteed as to interest and principal by the U.S.
Government, its agencies and instrumentalities; (3) instruments of U.S. and
foreign banks, including certificates of deposit, banker's acceptances, time
deposits and Eurodollar Certificates of Deposit ("ECDs"), Yankee Certificates of
Deposit ("Yankee CDs") and Eurodollar Time Deposits ("ETDs"); (5) commercial
paper; (6) floating rate securities; (7) variable amount master demand notes;
(8) repurchase agreements; (9) reverse repurchase agreements; (10) when-issued
transactions; and (11) Eurodollar bonds and notes. The Fund may lend securities
in an amount not to exceed 33 1/3% of its total assets. The Fund may also enter
into futures contracts and options to a limited extent. The Fund will invest in
futures contracts or options or money market instruments as part of a temporary
defensive strategy, such as lowering the Fund's investment in securities
comprising the Index to protect against potential market declines. (See "OTHER
INVESTMENT POLICIES AND RISK FACTORS.")
OTHER INVESTMENT POLICIES AND RISK FACTORS
BORROWING. The Fund is authorized, within specified limits, to borrow
money for temporary administrative purposes and to pledge its assets in
connection with such borrowings.
COMMERCIAL PAPER. The Fund may invest in commercial paper. These
instruments are short-term obligations issued by banks and corporations that
have maturities ranging from 2 to 270 days. Each instrument may be backed only
by the credit of the issuer or may be backed by some form of credit enhancement,
typically in the form of a guarantee by a commercial bank. Commercial paper
backed by guarantees of foreign banks may involve additional risk due to the
....................................... 9 .....................................
- - - --------------------------------------------------------------------------------
<PAGE>
DREYFUS BOND MARKET INDEX FUND
-------------------------------------
- - - --------------------------------------------------------------------------------
difficulty of obtaining and enforcing judgments against such banks and the
generally less restrictive regulations to which such banks are subject. A Fund
will only invest in commercial paper of U.S. and foreign companies rated A-1 at
the time of purchase by Standard & Poor's, Prime-1 by Moody's, F-1 by Fitch,
Duff 1 by Duff & Phelps, Inc. or A1 by IBCA, Inc.
ECDS, ETDS AND YANKEE CDS. The Fund may invest in ECDs, ETDs and Yankee
CDs. ECDs are U.S. dollar-denominated certificates of deposit issued by foreign
branches of domestic banks. ETDs are U.S. dollar-denominated time deposits in a
foreign branch of a U.S. bank or a foreign bank. Yankee CDs are certificates of
deposit issued by a U.S. branch of a foreign bank denominated in U.S. dollars
and held in the United States. ECDs, ETDs and Yankee CDs are subject to somewhat
different risks than are the obligations of domestic banks. (See "Foreign
Securities.")
EURODOLLAR BONDS AND NOTES. The Fund may invest in Eurodollar bonds and
notes. Eurodollar bonds and notes are obligations which pay principal and
interest in U.S. dollars held in banks outside the United States, primarily in
Europe. Investments in Eurodollar bonds and notes involve risks that differ from
investments in securities of domestic issuers. (See "Foreign Securities.")
FIXED INCOME SECURITIES. The Fund may invest in fixed-income securities to
achieve its investment objective. In periods of declining interest rates, the
Fund's yield (its income from portfolio investments over a stated period of
time) may tend to be higher than prevailing market rates, and in periods of
rising interest rates, the yield of the Fund may tend to be lower. Also when
interest rates are falling, the inflow of net new money to the Fund from the
continuous sales of its Shares will likely be invested in portfolio instruments
producing lower yield than the balance of the Fund's portfolio, thereby reducing
the yield of the Fund. In periods of rising interest rates, the opposite can be
true. The net asset value ("NAV") of the Fund investing in fixed-income
securities also may change as general levels of interest rates fluctuate. When
interest rates increase, the value of a portfolio of fixed-income securities can
be expected to decline. Conversely, when interest rates decline, the value of a
portfolio of fixed-income securities can be expected to increase.
FLOATING RATE SECURITIES. The Fund may invest in floating rate securities.
A floating rate security provides for the automatic adjustment of its interest
whenever a specified interest rate changes. Interest rates on these securities
are ordinarily tied to, and are a percentage of, a widely recognized interest
rate, such as the yield on 90-day U.S. Treasury bills or the prime rate of a
specified bank. These rates may change as often as twice daily. Generally,
changes in interest rates will have a smaller effect on the market value of
floating rate securities than on the market value of comparable fixed income
obligations. Thus, investing in variable and floating rate
...................................... 10 .....................................
- - - --------------------------------------------------------------------------------
<PAGE>
PROSPECTUS
-------------------------------------
- - - --------------------------------------------------------------------------------
securities generally allows less opportunity for capital appreciation and
depreciation than investing in comparable fixed income securities.
FOREIGN SECURITIES. The Fund may purchase securities of foreign issuers
and may invest in obligations of foreign branches of domestic banks and domestic
branches of foreign banks. Investment in foreign securities presents certain
risks, including those resulting from fluctuations in currency exchange rates,
revaluation of currencies, future political and economic developments and the
possible imposition of currency exchange blockages or other foreign governmental
laws or restrictions, reduced availability of public information concerning
issuers, and the fact that foreign issuers are not generally subject to uniform
accounting, auditing and financial reporting standards or to other regulatory
practices and requirements comparable to those applicable to domestic issuers.
Moreover, securities of many foreign issuers may be less liquid and their prices
more volatile than those of comparable domestic issuers. In addition, with
respect to certain foreign countries, there is the possibility of expropriation,
confiscatory taxation and limitations on the use or removal of funds or other
assets of the Fund, including withholding of dividends. Foreign securities may
be subject to foreign government taxes that would reduce the yield on such
securities.
FUTURES, OPTIONS AND OTHER DERIVATIVE INSTRUMENTS. The Fund may attempt to
reduce the overall level of investment risk of particular securities and attempt
to protect the Fund against adverse market movements by investing in futures,
options and other derivative instruments. These include the purchase and writing
of options on securities (including index options) and options on foreign
currencies and investing in futures contracts for the purchase or sale of
instruments based on financial indices, including interest rate indices or
indices of U.S. or foreign governments, equity or fixed income securities
("futures contracts"), options on futures contracts, forward contracts and swaps
and swap-related products such as equity swap contracts, interest rate swaps,
currency swaps, caps, collars and floors.
The use of futures, options, forward contracts and swaps exposes the Fund
to additional investment risks and transaction costs. If The Dreyfus Corporation
(the "Manager") incorrectly analyzes market conditions or does not employ the
appropriate strategy with respect to these instruments, the Fund could be left
in a less favorable position. Additional risks inherent in the use of futures,
options, forward contracts and swaps include: imperfect correlation between the
price of futures, options and forward contracts and movements in the prices of
the securities or currencies being hedged; the possible absence of a liquid
secondary market for any particular instrument at any time; and the possible
need to defer closing out certain hedged positions to avoid adverse tax
consequences. The Fund may not purchase put and call options which are traded on
a national stock exchange in an amount exceeding 5% of its net assets. Further
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information on the use of futures, options and other derivative instruments, and
the associated risks is contained in the SAI.
GNMA CERTIFICATES. The Fund may invest in Government National Mortgage
Association ("GNMA") Certificates. GNMA Certificates are mortgage-backed
securities representing part ownership of a pool of mortgage loans. These loans
are made by mortgage bankers, commercial banks, savings and loan associations,
and other lenders and are either insured by the Federal Housing Administration
or guaranteed by the Veterans Administration. A "pool" or group of such
mortgages is assembled and, after being approved by GNMA, is offered to
investors through securities dealers. Once approved by GNMA, the timely payment
of interest and principal on each mortgage is guaranteed by the full faith and
credit of the U.S. Government. Although the mortgage loans in a pool underlying
a GNMA Certificate will have maturities of up to 30 years, the average life of a
GNMA Certificate will be substantially less because the mortgages will be
subject to normal principal amortization and also may be prepaid prior to
maturity. Prepayment rates vary widely and may be affected by changes in
mortgage interest rates. In periods of falling interest rates, the rate of
prepayment on higher interest mortgage rates tends to increase, thereby
shortening the actual average life of the GNMA Certificate. Conversely, when
interest rates are rising, the rate of prepayment tends to decrease, thereby
lengthening the average life of the GNMA Certificate. Reinvestment of
prepayments may occur at higher or lower rates than the original yield on the
certificates. Due to the prepayment feature and the need to reinvest prepayments
of principal at current rates, GNMA Certificates with underlying mortgages
bearing higher interest rates can be less effective than typical non-callable
bonds of similar maturities at locking in yields during periods of declining
interest rates, although they may have comparable risks of decline in value
during periods of rising interest rates.
ILLIQUID SECURITIES. The Fund will not knowingly invest more than 15% of
the value of its net assets in illiquid securities, including time deposits and
repurchase agreements having maturities longer than seven days. Securities that
have readily available market quotations are not deemed illiquid for purposes of
this limitation (irrespective of any legal or contractual restrictions on
resale). The Fund may invest in commercial obligations issued in reliance on the
so-called "private placement" exemption from registration afforded by Section
4(2) of the Securities Act of 1933, as amended ("Section 4(2) paper"). The Fund
may also purchase securities that are not registered under the Securities Act of
1933, as amended, but which can be sold to qualified institutional buyers in
accordance with Rule 144A under that Act ("Rule 144A securities"). Liquidity
determinations with respect to Section 4(2) paper and Rule 144A securities will
be made by the Board of Directors as required. The Board will consider
availability of reliable price information and other relevant information in
making such determinations.
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Section 4(2) paper is restricted as to disposition under the federal securities
laws, and generally is sold to institutional investors such as the Fund that
agree that they are purchasing the paper for investment and not with a view to
public distribution. Any resale by the purchaser must be in an exempt
transaction. Section 4(2) paper normally is resold to other institutional
investors like the Fund through or with the assistance of the issuer or
investment dealers who make a market in the Section 4(2) paper, thus providing
liquidity. Rule 144A securities generally must be sold to other qualified
institutional buyers. If a particular investment in Section 4(2) paper or Rule
144A securities is not determined to be liquid, that investment will be included
within the percentage limitation on investment in illiquid securities. The
ability to sell Rule 144A securities to qualified institutional buyers is a
recent development and it is not possible to predict how this market will
mature. Investing in Rule 144A securities could have the effect of increasing
the level of fund illiquidity to the extent that qualified institutional buyers
become, for a time, uninterested in purchasing these securities.
OTHER INVESTMENT COMPANIES. The Fund may invest in securities issued by
other investment companies to the extent that such investments are consistent
with the Fund's investment objective and policies and permissible under the
Investment Company Act of 1940, as amended (the "1940 Act"). As a shareholder of
another investment company, the Fund would bear, along with other shareholders,
its pro rata portion of the other investment company's expenses, including
advisory fees. These expenses would be in addition to the advisory and other
expenses that the Fund bears directly in connection with its own operations.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements. A
repurchase agreement involves the purchase of a security by the Fund and a
simultaneous agreement (generally with a bank or broker-dealer) to repurchase
that security from the Fund at a specified price and date or upon demand. This
technique offers a method of earning income on idle cash. A risk associated with
repurchase agreements is the failure of the seller to repurchase the securities
as agreed, which may cause the Fund to suffer a loss if the market value of such
securities declines before they can be liquidated on the open market. Repurchase
agreements with a duration of more than seven days are considered illiquid
securities and are subject to the limit stated above.
REVERSE REPURCHASE AGREEMENTS. The Fund may enter into reverse repurchase
agreements to meet redemption requests where the liquidation of Fund securities
is deemed by the Manager to be disadvantageous. Under a reverse repurchase
agreement, the Fund: (i) transfers possession of Fund securities to a bank or
broker-dealer in return for cash in an amount equal to a percentage of the
securities' market value; and (ii) agrees to repurchase the securities at a
future date by repaying the cash with interest. Cash or liquid high-grade debt
securities held by
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the Fund equal in value to the repurchase price including any accrued interest
will be maintained in a segregated account while a reverse repurchase agreement
is in effect.
SECURITIES LENDING. To increase return on Fund securities, the Fund may
lend its portfolio securities to broker-dealers and other institutional
investors pursuant to agreements requiring that the loans be continuously
secured by collateral equal at all times in value to at least the market value
of the securities loaned. There may be risks of delay in receiving additional
collateral or in recovering the securities loaned or even a loss of rights to
the collateral should the borrower of the securities fail financially. However,
loans are made only to borrowers deemed by the Manager to be of good standing
and when, in its judgment, the income to be earned from the loan justifies the
attendant risks.
U.S. GOVERNMENT SECURITIES. The Fund may invest in obligations issued or
guaranteed as to both principal and interest by the U.S. Government or backed by
the full faith and credit of the United States. In addition to direct
obligations of the U.S. Treasury, these include securities issued or guaranteed
by the Federal Housing Administration, Farmers Home Administration,
Export-Import Bank of the United States, Small Business Administration,
Government National Mortgage Association, General Services Administration and
Maritime Administration. Investments may also be made in U.S. Government
obligations that do not carry the full faith and credit guarantee, such as those
issued by the Federal National Mortgage Association, the Federal Home Loan
Mortgage Corporation, or other instrumentalities.
VARIABLE AMOUNT MASTER DEMAND NOTES. The Fund may invest in Variable
Amount Master Demand Notes. Variable amount master demand notes are unsecured
obligations that are redeemable upon demand and are typically unrated. These
instruments are issued pursuant to written agreements between their issuers and
holders. The agreements permit the holders to increase (subject to an agreed
maximum) and the holders and issuers to decrease the principal amount of the
notes, and specify that the rate of interest payable on the principal fluctuates
according to an agreed-upon formula. If an issuer of a variable amount master
demand note were to default on its payment obligation, the Fund might be unable
to dispose of the note because of the absence of a secondary market and might,
for this or other reasons, suffer a loss to the extent of the default. The Fund
will only invest in variable amount master demand notes issued by entities that
the Manager considers creditworthy.
WHEN-ISSUED SECURITIES AND DELAYED DELIVERY TRANSACTIONS. To secure
advantageous prices or yields, the Fund may purchase U.S. Government securities
on a when-issued basis or may purchase or sell securities for delayed delivery.
In such transactions, delivery of the securities occurs beyond the normal
settlement periods, but no payment or delivery is made by the Fund prior to the
actual delivery or payment by the other party to the transaction. The
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purchase of securities on a when-issued or delayed delivery basis involves the
risk that, as a result of an increase in yields available in the marketplace,
the value of the securities purchased will decline prior to the settlement date.
The sale of securities for delayed delivery involves the risk that the prices
available in the market on the delivery date may be greater than those obtained
in the sale transactions. The Fund will establish a segregated account
consisting of cash, U.S. Government securities or other high-grade debt
obligations in an amount equal to the amounts of its when-issued and delayed
delivery commitments.
MASTER/FEEDER OPTION. The Dreyfus/Laurel Funds, Inc. may in the future
seek to achieve the Fund's investment objective by investing all of the Fund's
assets in another investment company having the same investment objective and
substantially the same investment policies and restrictions as those applicable
to the Fund. Shareholders of the Fund will be given at least 30 days' prior
notice of any such investment. Such investment would be made only if the
Directors determine it to be in the best interest of the Fund and its
shareholders. In making that determination, the Directors will consider, among
other things, the benefits to shareholders and/or the opportunity to reduce
costs and achieve operational efficiencies. Although the Fund believes that the
Directors will not approve an arrangement that is likely to result in higher
costs, no assurance is given that costs will be materially reduced if this
option is implemented.
PORTFOLIO TURNOVER. While securities are purchased for the Fund on the
basis of the Fund's objective of replicating the total return of the Index, and
not for short term trading profits, the Fund's turnover rate may exceed 100%. A
portfolio turnover rate of 100% would occur, for example, if all the securities
held by the Fund were replaced once in a period of one year. A higher rate of
portfolio turnover involves correspondingly greater brokerage commissions and
other expenses which must be borne directly by the Fund and, thus, indirectly by
its shareholders. In addition, a high rate of portfolio turnover may result in
the realization of larger amounts of short-term capital gains which, when
distributed to the Fund's shareholders, are taxable to them as ordinary income.
(See "Distributions" and "Taxes.") Nevertheless, security transactions for the
Fund will be based only upon investment considerations and will not be limited
by any other considerations when the Manager deems it appropriate to make
changes in the Fund's assets.
LIMITING INVESTMENT RISKS. The Fund is subject to a number of investment
limitations. Certain limitations are matters of fundamental policy and may not
be changed without the affirmative vote of the holders of a majority of the
Fund's outstanding Shares. The SAI describes all of the Fund's fundamental and
non-fundamental restrictions.
The investment objective, policies, restrictions, practices and procedures
of the Fund, unless otherwise specified, may be changed without Shareholder
approval. If the Fund's
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DREYFUS BOND MARKET INDEX FUND
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investment objective, policies, restrictions, practices or procedures change,
Shareholders should consider whether the Fund remains an appropriate investment
in light of their then current position and needs.
In order to permit the sale of the Fund's Shares in certain states, the
Fund may make commitments more restrictive than the investment policies and
restrictions described in this Prospectus and the SAI. Should the Fund determine
that any such commitment is no longer in the best interests of the Fund, it may
consider terminating sales of its Shares in the states involved.
HOW TO DO BUSINESS WITH US
SPECIAL SHAREHOLDER SERVICES
You may establish one or more special services designed to provide an easy way
to do business with the Fund. By electing these services on your application or
by completing the appropriate forms, you may authorize:
- Investment by phone.
- Automatic monthly investments.
- Exchanges or redemptions by phone.
By electing the service which enables you to exchange and redeem by phone,
you agree to indemnify the Fund, its transfer agent and its investment manager
from any loss, claim or expense you may incur as a result of their acting on
such instruction. The Fund will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine. These include personal
identification procedures, recording of telephone conversations and providing
written confirmation of each transaction. A failure on the part of the Fund to
employ such procedures may subject it to liability for any loss due to
unauthorized or fraudulent instructions.
INVESTOR LINE
You may reach The Dreyfus Family of Funds by calling our Investor Line at
1-800-548-2868. If you call on a rotary phone during normal business hours (9
a.m. to 5 p.m., Eastern time), you will reach a Dreyfus Family of Funds
operator. If you call on a Touch-Tone phone, you will receive instructions on
how to: (1) request a current prospectus or information booklets about The
Dreyfus Family of Funds' investment portfolios and services, (2) listen to NAV,
yields and total return figures, and (3) talk with a customer service
representative during normal business hours.
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For more information about direct access using a Touch-Tone phone, please
contact The Dreyfus Family of Funds.
HOW TO INVEST IN THE FUND
Premier serves as the Fund's distributor. Premier is a wholly-owned subsidiary
of Institutional Administration Services, Inc., a provider of mutual fund
administration services, the parent company of which is Boston Institutional
Group, Inc. Premier also serves as the Fund's sub-administrator and, pursuant to
a Sub-Administration Agreement, provides various administrative and corporate
secretarial services to the Fund.
Premier has established various procedures for purchasing Class R and
Investor Shares of the Fund. Class R Shares are sold primarily to bank trust
departments and other financial service providers (including Mellon Bank and its
affiliates) ("Banks") acting on behalf of customers having a qualified trust or
investment account or relationship at such institution, or to customers who have
received and hold shares of the Fund distributed to them by virtue of such an
account or relationship. Holders of Class R Shares who have held their shares
since April 4, 1994 may continue to purchase Class R Shares of the Fund whether
or not they would otherwise be eligible to do so. Investor Shares are primarily
sold to retail investors by banks, securities brokers or dealers and other
financial institutions (including Mellon Bank and its affiliates) ("Agents")
that have entered into a Selling Agreement with Premier. Once an investor has
established an account, additional purchases may, in certain cases, be made
directly through the Fund's transfer agent. If Shares of the Fund are held in an
account at a Bank or with an Agent, such Bank or Agent may require you to place
all Fund purchase, exchange and redemption orders through them. All Banks and
Agents have agreed to transmit your transaction requests to the Fund's transfer
agent or to Premier. You may diversify your investments by choosing a
combination of investment portfolios offered by The Dreyfus Family of Funds.
You may invest in the following ways:
BY MAIL.
Send your application and check or money order to The Dreyfus Family of
Funds, P.O. Box 9692, Providence, Rhode Island 02940-9830. Checks must be
payable in U.S. dollars and drawn on U.S. banks. When making subsequent
investments, enclose your check with the return remittance portion of the
confirmation of your previous investment. If the remittance portion is not
available, indicate on your check or a separate piece of paper your name,
address, the Fund and class of Shares of the Fund that you are buying and the
account number. Orders to purchase Shares are effective on the day the Fund
receives your check or money order. (See "When Share Price is Determined.")
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DREYFUS BOND MARKET INDEX FUND
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BY TELEPHONE.
Once your account is open, you may make investments by telephone by calling
1-800-548-2868 if you have elected the service authorizing the Fund to draw on
your bank account by check when you call with instructions. Investments made by
phone in any one account must be in an amount of at least $100 and are effective
two days after your call. (See "When Share Price is Determined.")
BY WIRE.
You may make your initial or subsequent investments in the Fund by wiring
funds. To do so:
(1) Instruct your bank to wire funds to MELLON BANK (ABA routing
number 0430-0026-1).
(2) Be sure to specify on the wire:
(A) The Dreyfus Funds.
(B) The Fund name and the class of Shares of the Fund you are buying
and account number (if you have one).
(C) Your name.
(D) Your city and state.
In order for a wire purchase to be effective on the same day it is received
both the trading instructions and the wire must be received before 4 p.m.,
Eastern time. (See "When Share Price is Determined.")
BY AUTOMATIC MONTHLY INVESTMENTS.
Once your account is open, you may make investments automatically by
electing the Automatic Investment Program, the service authorizing the Fund to
draw on your bank account regularly by paper or electronic draft. Such
investments must be in amounts of not less than $100 in any one account. You
should inquire at your bank whether it will honor a preauthorized paper or
electronic draft. Contact the Fund if your bank requires additional
documentation. Call 1-800-548-2868 or write The Dreyfus Family of Funds at One
Exchange Place, Boston, Massachusetts 02109 for more information about the
Automatic Investment Program.
BY DIRECT DEPOSIT.
If your employer offers Direct Deposit, you may arrange to automatically
purchase Shares of the Fund (minimum $100) each pay period. Direct Deposit
investing may also be available to persons receiving regular payments from other
sources (including government pension or social security payments). Note that it
may not be appropriate to Direct Deposit your entire paycheck into the Fund
because it has a fluctuating NAV. Call 1-800-548-2868 or write The
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Dreyfus Family of Funds at One Exchange Place, Boston, Massachusetts 02109 for
more information or a Direct Deposit authorization form.
BY IN-KIND PURCHASES.
If the following conditions are satisfied, the Fund may at its discretion,
permit you to purchase Shares through an "in-kind" exchange of securities you
hold. Any securities exchanged must meet the investment objective, policies and
limitations of the Fund, must have a readily ascertainable market value, must be
liquid and must not be subject to restrictions on resale. The market value of
any securities exchanged, plus any cash, must be at least equal to $25,000.
Shares purchased in exchange for securities generally cannot be redeemed for
fifteen days following the exchange in order to allow time for the transfer to
settle.
The basis of the exchange will depend upon the relative NAV of the Shares
purchased and securities exchanged. Securities accepted by the Fund will be
valued in the same manner as the Fund values its assets. Any interest earned on
the securities following their delivery to the Fund and prior to the exchange
will be considered in valuing the securities. All interest, dividends,
subscription or other rights attached to the securities become the property of
the Fund, along with the securities. Call 1-800-548-2868 or write The Dreyfus
Family of Funds at One Exchange Place, Boston, Massachusetts 02109 for more
information about "in-kind" purchases.
WHEN SHARE PRICE IS DETERMINED.
The price of your Shares is their NAV. NAV is determined at the close of
the New York Stock Exchange ("NYSE") on each day that the NYSE is open (a
"business day"). Investments and requests to exchange or redeem Shares received
by the Fund before the close of business on the NYSE (usually 4 p.m., Eastern
time) are effective on, and will receive the price determined on, that day
(except investments made by electronic funds transfer which are effective two
business days after your call). Investment, exchange and redemption requests
received after the close of the NYSE, are effective on, and receive the Share
price determined on the next business day.
ADDITIONAL INFORMATION ABOUT INVESTMENTS.
Once you have mailed or otherwise transmitted your investment instructions
to the Fund, it may not be modified or canceled. The Fund reserves the right to
reject any application or investment. The Fund reserves the right to make
exceptions to the minimum initial investment and account minimum amount from
time to time.
The minimum initial investment to establish a new account in the Fund is
$1,000, except for Individual Retirement Accounts ("IRAs"), retirement plans,
and Uniform Transfers (Gifts) to Minors Act accounts, for which the minimum
initial investment is $500. The Fund may
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DREYFUS BOND MARKET INDEX FUND
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suspend the offering of Shares of any class of the Fund and reserves the right
to vary initial and subsequent investment minimums. Subsequent investments to
purchase additional Shares in the Fund must be in an amount of $100 or more.
The Fund intends, upon 60 days' prior notice, to involuntarily redeem
Shares in any account if the total value of the Shares is less than a specified
minimum unless you have established an automatic monthly investment to purchase
additional Shares. The Fund reserves the right to change such minimum from time
to time. Any time the Shares of the Fund held in an account have a value of less
than $1,000 ($500 for Uniform Gifts/Transfers to Minors Acts accounts), unless
the deficiency amount is the result of a decrease in the NAV, a notification may
be sent advising you of the need to either make an investment to bring the value
of the Shares held in the account up to $1,000 ($500) or to establish an
automatic monthly investment to purchase additional Shares. If the investment is
not made or the automatic monthly investment is not established within 60 days
from the date of notification, the Shares held in the account will be redeemed
and the proceeds from the redemption will be sent by check to your address of
record.
The automatic redemption of Shares will not apply to IRAs, custodial
accounts under Section 403(b) of the Internal Revenue Code of 1986, as amended
(the "Code") ("403(b) accounts") and other types of tax-deferred retirement plan
accounts.
HOW TO EXCHANGE YOUR INVESTMENT
FROM ONE FUND TO ANOTHER
You may exchange your Fund Shares for shares of the same class of certain other
funds advised by the Manager and that were previously advised by Mellon Bank. As
noted below, exchanges from any one fund account may be limited in any one
calendar year. In addition, the Shares being exchanged and the Shares of the
fund being acquired must have a current value of at least $100 and otherwise
meet the minimum investment requirement of the fund being acquired. Call the
Investor Line for additional information and a prospectus describing other
investment portfolios offered by The Dreyfus Family of Funds.
BY TELEPHONE.
You may exchange your Shares by calling 1-800-548-2868 if you have
authorized the Fund to accept telephone instructions.
BY MAIL.
You may direct the Fund to exchange your Shares by writing to The Dreyfus
Family of Funds, P.O. Box 9692, Providence, Rhode Island 02940-9830. The request
should be signed by each person in whose name the Shares are registered. All
signatures should be exactly as the
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name appears in the registration; for example, if an owner's name is registered
as John Robert Jones, he should sign that way and not as John R. Jones.
ADDITIONAL INFORMATION ABOUT EXCHANGES.
(1) In an exchange from one account to another account, the Shares being
sold and the new Shares being purchased must have a current value of at
least $100.
(2) Exchanges from any one fund account may be limited in any one calendar
year. The Fund reserves the right to make exceptions to an exchange
limitation from time to time. An exchange limitation will not apply to
the exchange of Shares of any of the funds exchanged pursuant to an
Automatic Withdrawal Program, and to Shares held in 403(b) accounts.
(3) The Shares being acquired must be qualified for sale in your state of
residence.
(4) If the Shares are represented by a negotiable stock certificate, the
certificate must be returned before the exchange can be effected.
(5) Once you have telephoned or mailed your exchange request, it is
irrevocable and may not be modified or canceled.
(6) An exchange is based on the next calculated NAV of each Fund after
receipt of your exchange order.
(7) Shares may not be exchanged unless you have furnished the Fund with
your tax identification number, certified as prescribed by the Code.
(See "Taxes.")
(8) Exchange of Fund Shares is, for federal income tax purposes, a sale of
the Shares, on which you may realize a taxable gain or loss.
(9) If the request is made by a corporation, partnership, trust, fiduciary,
agent, estate, guardian, pension plan, profit sharing plan or
unincorporated association, the Fund may require evidence satisfactory
to it of the authority of the individual signing the request.
Shareholders will be given sixty days' notice prior to any material changes
in the exchange privilege.
HOW TO REDEEM SHARES
The Fund will redeem or "buy back" your Shares at any time at their NAV. (Before
redeeming, please read "Additional Information About Redemptions.") Your
redemption proceeds may be delayed if you have owned your Shares less than 10
days. (See "Redemption Proceeds.") The Fund imposes no charges when shares are
redeemed. Agents or other institutions may charge their clients a nominal fee
for effecting redemptions of Fund Shares.
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BY TELEPHONE.
If you have authorized the Fund to accept telephone instructions, you may
redeem your Shares by calling 1-800-548-2868. Once made, your telephone request
may not be modified or canceled. (Before calling, read "Additional Information
About Redemptions" and "When Share Price is Determined.")
BY MAIL.
Your written instructions to redeem Shares may be in any one of the
following forms:
- A letter to The Dreyfus Family of Funds.
- An assignment form or stock power.
- An endorsement on the back of your negotiable stock certificate, if you
have one.
Once mailed to The Dreyfus Family of Funds at P.O. Box 9692, Providence,
Rhode Island 02940-9830, the redemption request is irrevocable and may not be
modified or canceled. A letter of instruction should state the number of Shares
or the dollar amount to be redeemed. The letter must include your account
number, and for redemptions in an amount in excess of $25,000, a signature
guarantee of each owner. The redemption request must be signed by each person in
whose name the Shares are registered; for example, in the case of joint
ownership, each owner must sign. All signatures should be exactly as the name
appears in the registration. If the owner's name appears in the registration as
John Robert Jones, he should sign that way and not as John R. Jones. Signature
guarantees can be obtained from commercial banks, credit unions if authorized by
state laws, savings and loans institutions, trust companies, members of a
recognized stock exchange, or from other eligible guarantors who are members of
the Securities Transfer Agents Medallion Program ("STAMP") or any other industry
recognized program approved by the Securities Transfer Association. (Before
writing, see "Additional Information About Redemptions.")
BY AUTOMATED WITHDRAWAL PROGRAM.
The Fund's Automated Withdrawal Program automatically redeems enough Shares
each month to provide you with a check for an amount which you specify (with a
minimum of $100). To set up an Automated Withdrawal Program, call the Fund at
1-800-548-2868 for instructions. Only shareholders with an account balance of
$10,000 or more may participate in this program. Shares will be redeemed on the
15th day or 30th day of each month or the next business day, and your check will
be mailed the next day. If your monthly checks exceed the dividends, interest
and capital appreciation on your Shares, the payments will deplete your
investment. Amounts
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paid to you by Automated Withdrawals are not a return on your investment. They
are derived from the redemption of Shares in your account, and you must report
on your income tax return any gains or losses that you realize.
You may specify an Automated Withdrawal Program when you make your first
investment. If you would like to establish an Automated Withdrawal Program
thereafter, the request for the Automated Withdrawal Program must be signed by
all owners, with their signatures guaranteed.
When you make your first investment you may request that Automated
Withdrawals be sent to an address other than the address of record. Thereafter,
a request to send Automated Withdrawals to an address other than the address of
record must be signed by all owners, with their signatures guaranteed.
The Fund may terminate the Automated Withdrawal Program at any time, upon
notice to you, and you likewise may terminate it or change the amount of the
Automated Withdrawal Program, by notice to the Fund in writing or by telephone.
Termination or change will become effective within five days following receipt
of your instructions. Your Automated Withdrawal Program plan may begin any time
after you have owned your Shares for 10 days.
REDEMPTION PROCEEDS.
Redemption proceeds may be sent to you:
BY MAIL. If your redemption check is mailed, it is usually mailed by the
second business day after receipt of your redemption request, but not later than
seven days afterwards. When a redemption occurs shortly after a recent purchase,
the Fund may hold the redemption proceeds beyond seven days but only until the
purchase check clears, which may take up to 10 days or more. No dividend is paid
on the redemption proceeds after the redemption and before the check is mailed.
If you anticipate redemptions soon after you purchase your Shares, you are
advised to wire funds to avoid delay.
BY WIRE AND ELECTRONIC FUNDS TRANSFER. You may authorize the Fund to
transmit redemption proceeds by wire or electronic funds transfer. Proceeds from
the redemption of Fund Shares will normally be transmitted on the first business
day, but not later than the seventh day, following the date of redemption. Your
bank usually will receive wired funds the day they are transmitted.
Electronically transferred funds will ordinarily be received within two business
days after transmission. Once the funds are transmitted, the time of receipt and
the availability of the funds are not within the Fund's control. If your bank
account changes, you must send a new "voided" check preprinted with the bank
registration with written instructions signed by all owners (with their
signatures guaranteed), including tax identification number.
...................................... 23 .....................................
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<PAGE>
DREYFUS BOND MARKET INDEX FUND
-------------------------------------
- - - --------------------------------------------------------------------------------
ADDITIONAL INFORMATION ABOUT REDEMPTIONS.
(1) Redemptions specifying a certain date or price cannot be accepted and
will be returned.
(2) If the Shares being redeemed are represented by a negotiable stock
certificate, the certificate must be returned before the redemption can
be effected.
(3) All redemptions are made and the price is determined on the day when
all documentation is received in good order.
(4) If the request to redeem is made by a corporation, partnership, trust,
fiduciary, agent, estate, guardian, pension plan, profit sharing plan,
or unincorporated association, the Fund may require evidence
satisfactory to it of the authority of the individual signing the
request. Please call or write the Fund for further information.
(5) A request to redeem Shares in an IRA or 403(b) account must be
accompanied by an IRS Form W4-P and a reason for withdrawal as
specified by the Internal Revenue Service.
HOW TO USE THE DREYFUS FAMILY OF FUNDS IN
A TAX-QUALIFIED RETIREMENT PLAN
The Dreyfus Family of Funds' investment portfolios are available for your
tax-deferred retirement plan. Call 1-800-548-2868 or write The Dreyfus Family of
Funds at P.O. Box 9692, Providence, Rhode Island 02940-9830 and request the
appropriate forms for:
- IRAs.
- 403(b) accounts for employees of public school systems and non-profit
organizations.
- Profit-sharing plans and pension plans for corporations and other
employers.
HOW TO TRANSFER AN INVESTMENT TO A DREYFUS FAMILY OF FUNDS' RETIREMENT
PLAN.
It is easy to transfer your tax-deferred plan to The Dreyfus Family of
Funds from another custodian. Call 1-800-548-2868 or write The Dreyfus Family of
Funds at P.O. Box 9692, Providence, Rhode Island 02940-9830 for a request to
transfer form. If you direct The Dreyfus Family of Funds to transfer funds from
an existing non-retirement Dreyfus Family of Funds account into a retirement
account, the Shares in your non-retirement account will be redeemed. The
redemption proceeds will be invested in your Dreyfus Family of Funds IRA or
other tax-qualified retirement plan. The redemption is a taxable event resulting
in a taxable gain or loss.
...................................... 24 .....................................
- - - --------------------------------------------------------------------------------
<PAGE>
PROSPECTUS
-------------------------------------
- - - --------------------------------------------------------------------------------
- - - ------------------------------------------------------------
OTHER INFORMATION
SHARE PRICE
An investment portfolio's NAV refers to the worth of one Share. The NAV for
Investor and Class R Shares of the Fund is computed by adding with respect to
each class of Shares the value of all the class' investments, cash, and other
assets, deducting liabilities and dividing the result by the number of Shares of
that class outstanding. The valuation of assets for determining NAV for the Fund
may be summarized as follows:
The portfolio securities of the Fund, except as otherwise noted, listed or
traded on a stock exchange, are valued at the latest sale price. If no sale is
reported, the mean of the latest bid and asked prices is used. Securities traded
over-the-counter are priced at the mean of the latest bid and asked prices but
will be valued at the last sale price if required by regulations of the SEC.
When market quotations are not readily available, securities and other assets
are valued at fair value as determined in good faith in accordance with
procedures established by the Board of Directors.
Bonds are valued through valuations obtained from a commercial pricing
service or at the most recent mean of the bid and asked prices provided by
investment dealers in accordance with procedures established by the Board of
Directors.
Pursuant to a determination by The Dreyfus/Laurel Funds, Inc.'s Board of
Directors that such value represents fair value, the debt securities with
maturities of 60 days or less held by the Fund are valued at amortized cost.
When a security is valued at amortized cost, it is valued at its cost when
purchased, and thereafter by assuming a constant amortization to maturity of any
discount or premium, regardless of the impact of fluctuating interest rates on
the market value of the instrument.
The NAV of each class of Shares of most of The Dreyfus Family of Funds'
investment portfolios (other than money market funds) is published in leading
newspapers daily. The yield of each class of Shares of most of The Dreyfus
Family of Funds' money market funds is published weekly in leading financial
publications and in many local newspapers. The NAV of the Fund may also be
obtained by calling The Dreyfus Family of Funds.
PERFORMANCE ADVERTISING
From time to time, the Fund may advertise the yield and total return on a class
of Shares. Total return and yield figures are based on historical earnings and
are not intended to indicate future performance. The "total return" of a class
of Shares of the Fund may be calculated on an average annual total return basis
or a cumulative total return basis. Average annual total return
...................................... 25 .....................................
- - - --------------------------------------------------------------------------------
<PAGE>
DREYFUS BOND MARKET INDEX FUND
-------------------------------------
- - - --------------------------------------------------------------------------------
refers to the average annual compounded rates of return on a class of Shares
over one-, five-, and ten-year periods or the life of the Fund (as stated in the
advertisement) that would equate an initial amount invested at the beginning of
a stated period to the ending redeemable value of the investment, assuming the
reinvestment of all dividends and capital gains distributions. Cumulative total
return reflects the total percentage change in the value of the investment over
the measuring period, again assuming the reinvestment of all dividends and
capital gains distributions.
The Fund's "yield" is calculated by dividing a class of Shares' annualized
net investment income per Share during a recent 30-day (or one month) period by
the maximum public offering price per class of such Share on the last day of
that period. Since yields fluctuate, yield data cannot necessarily be used to
compare an investment in a class of Shares with bank deposits, savings accounts,
and similar investment alternatives which often provide an agreed-upon or
guaranteed fixed yield for a stated period of time.
Total return and yield quotations will be computed separately for each
class of the Fund's Shares. Because of the difference in the fees and expenses
borne by Class R and Investor Shares of the Fund, the return and yield on Class
R Shares will generally be higher than the return and yield on Investor Shares.
Any fees charged by a Bank or Agent directly to its customers' account in
connection with investments in the Fund will not be included in calculations of
total return or yield. The Fund's semi-annual report contains additional
performance information and is available upon request without charge from the
Fund's distributor or your Bank or Agent.
The Fund may compare the performance of its Investor and Class R Shares
with various industry standards of performance including Lipper Analytical
Services, Inc. ratings, Lehman Brothers Government/Corporate Bond Index, CDA
Technologies indexes, other indexes created by Lehman Brothers, the Consumer
Price Index, and the Dow Jones Industrial Average. Performance rankings as
reported in Changing Times, Business Week, Institutional Investor, The Wall
Street Journal, IBC/Donoghue's Money Fund Report, Mutual Fund Forecaster, No
Load Investor, Money Magazine, Morningstar Mutual Fund Values, U.S. News and
World Report, Forbes, Fortune, Barron's and similar publications may also be
used in comparing the Fund's performance. Furthermore, the Fund may quote its
Investor and Class R Shares' total returns and yields in advertisements or in
shareholder reports. The Fund may also advertise non-standardized performance
information, such as total return for periods other than those required to be
shown or cumulative performance data. The Fund may advertise a quotation of
yield or other similar quotation demonstrating the income earned or
distributions made by the Fund.
...................................... 26 .....................................
- - - --------------------------------------------------------------------------------
<PAGE>
PROSPECTUS
-------------------------------------
- - - --------------------------------------------------------------------------------
DISTRIBUTIONS
The Fund declares daily and pays monthly (on the first business day of the
following month) dividends from its net investment income, if any, and
distributes net realized gains, if any, on an annual basis. The Board of
Directors may elect not to distribute capital gains in whole or in part to take
advantage of capital loss carryovers.
Unless you choose to receive dividend and/or capital gain distributions in
cash, your distributions will be automatically reinvested in additional Shares
of the Fund at the NAV. You may change the method of receiving distributions at
any time by writing to the Fund. Checks which are sent to shareholders who have
requested distributions to be paid in cash and which are subsequently returned
by the United States Postal Service as not deliverable or which remain uncashed
for six months or more will be reinvested in additional Fund Shares in the
shareholder's account at the then current NAV. Subsequent Fund distributions
will be automatically reinvested in additional Fund Shares in the shareholder's
account.
Distributions paid by the Fund with respect to one class of Shares may be
greater or less per Share than those paid with respect to another class of
Shares due to the different expenses of the different classes.
Shares purchased on a day on which the Fund calculates its NAV will not
begin to accrue dividends until the following day. Redemption orders effected on
any particular day will receive all dividends declared through the day of
redemption.
You may elect to have distributions on Shares held in IRAs and 403(b)
accounts paid in cash only if you are at least 59 1/2 years old or are
permanently and totally disabled. Distribution checks normally are mailed within
seven days after the record date.
Any dividend and/or capital gain distribution paid by the Fund will reduce
each Share's NAV by the amount of the distribution. Shareholders are subject to
taxes with respect to any such distribution. At any given time, the value of the
Fund's Shares includes the undistributed net gains, if any, realized by the Fund
on the sale of portfolio securities, and undistributed dividends and interest
received, less the Fund's expenses. Because such gains and income are included
in the value of your Shares, when they are distributed the value of your Shares
is reduced by the amount of the distribution. Accordingly, if your distribution
is reinvested in additional Shares, the distribution has no effect on the value
of your investment; while you own more Shares, the value of each Share has been
reduced by the amount of the distribution. Likewise, if you take your
distribution in cash, the value of your Shares immediately after the
distribution plus the cash received is equal to the value of the Shares
immediately before the distribution. For example, if you own a Fund Share that
immediately before a distribution has a value of $10, including $2 in
undistributed dividends and capital gains realized by the Fund
...................................... 27 .....................................
- - - --------------------------------------------------------------------------------
<PAGE>
DREYFUS BOND MARKET INDEX FUND
-------------------------------------
- - - --------------------------------------------------------------------------------
during the year, and if the $2 is distributed, the value of the Share will
decline to $8. If the $2 is reinvested at $8 per Share, you will receive .250
Shares, so that, after the distribution, you will have 1.250 Shares at $8 per
Share, or $10, the same as before.
TAXES
The Fund intends to qualify for treatment as a regulated investment company
under the Code so that it will be relieved of federal income tax on that part of
its investment company taxable income (consisting generally of taxable net
investment income and net short-term capital gain) and net capital gain (the
excess of net long-term capital gain over net short-term capital loss) that is
distributed to its shareholders.
Dividends from the Fund's investment company taxable income are taxable to
you as ordinary income, to the extent of the Fund's earnings and profits.
Distributions by the Fund of net capital gain, when designated as such, are
taxable to you as long-term capital gains, regardless of the length of time you
have owned your Shares.
Dividends and other distributions are taxable to you regardless of whether
they are received in cash or reinvested in additional Fund Shares, even if the
value of your Shares is below your cost. If you purchase Shares shortly before a
taxable distribution you must pay income taxes on the distribution, even though
the value of your investment (plus cash received, if any) remains the same. In
addition, the Share price at the time you purchase Shares may include unrealized
gains in the securities held in the Fund. If these portfolio securities are
subsequently sold and the gains are realized, they will, to the extent not
offset by capital losses, be paid to you as a capital gain distribution and will
be taxable to you.
Dividends paid by the Fund to qualified retirement plans ordinarily will
not be subject to taxation until the proceeds are distributed from the
retirement plans. The Fund will not report to the IRS dividends paid to such
plans. Generally, distributions from qualified retirement plans, except those
representing returns of non-deductible contributions thereto, will be taxable as
ordinary income and, if made prior to the time the participant reaches age
59 1/2, generally will be subject to an additional tax equal to 10% of the
taxable portion of the distribution. If the distribution from such a retirement
plan (other than certain governmental or church plans) for any taxable year
following the year in which the participant reaches age 70 1/2 is less than the
"minimum required distribution" for that taxable year, an excise tax equal to
50% of the deficiency may be imposed by the IRS. The administrator, trustee or
custodian of such a retirement plan will be responsible for reporting such
distributions from such plans to the IRS. Moreover, certain contributions to a
qualified retirement plan in excess of the amounts permitted by law may be
subject to an excise tax.
...................................... 28 ....................................
- - - --------------------------------------------------------------------------------
<PAGE>
PROSPECTUS
-------------------------------------
- - - --------------------------------------------------------------------------------
In January of each year, the Fund will send you a Form 1099-DIV notifying
you of the status for federal income tax purposes of your distributions for the
preceding year.
You must furnish the Fund with your taxpayer identification number ("TIN")
and state whether you are subject to withholding for prior under-reporting,
certified under penalties of perjury as prescribed by the Code and the
regulations thereunder. Unless previously furnished, investments received
without such a certification will be returned. The Fund is required to withhold
a portion of all dividends, capital gain distributions and redemption proceeds
payable to any individuals and certain other non-corporate shareholders who do
not provide the Fund with a correct TIN; withholding from dividends and capital
gain distributions also is required for such shareholders who otherwise are
subject to backup withholding.
The Fund will be subject to a 4% nondeductible excise tax to the extent it
fails to distribute by the end of any calendar year substantially all of its
taxable ordinary income for that year and capital gain net income for the
one-year period ending on October 31 of that year, plus certain other amounts.
The Fund expects to make such distributions as are necessary to avoid the
imposition of this tax.
The foregoing is only a summary of some of the important tax considerations
generally affecting the Fund and its shareholders; see the SAI for a further
discussion. There may be other Federal, state or local tax considerations
applicable to a particular investor. You therefore are urged to consult your own
tax adviser.
OTHER SERVICES
At least twice a year you will receive the financial statements of the Fund with
a summary of its investments and performance. The Fund will send you a
confirmation statement after every transaction (except with respect to the
reinvestment of dividends and other distributions) that affects your Fund
account. In addition, an account statement will be mailed to you quarterly or
monthly depending on the Fund's reporting schedule. You may also request a
statement of your account activity at any time. Carefully review such
confirmation statements and account statements and notify the Fund immediately
if there is an error. From time to time, to reduce expenses, only one copy of
the Fund's shareholder reports (such as the Fund's annual report) may be mailed
to your household. Please call The Dreyfus Family of Funds if you need
additional copies.
...................................... 29 .....................................
- - - --------------------------------------------------------------------------------
<PAGE>
DREYFUS BOND MARKET INDEX FUND
-------------------------------------
- - - --------------------------------------------------------------------------------
No later than January 31 of each year, the Fund will send you the following
reports, which you may use in completing your Federal income tax return:
Form 1099-DIV Reports taxable distributions (and returns of capital, if
any) during the preceding year.
Form 1099-B Reports proceeds paid on redemptions during the preceding
year.
Form 1099-R Reports distributions from IRAs and 403(b) accounts during
the preceding year.
At such time as prescribed by law, the Fund will send you a Form 5498,
which reports contributions to your IRA for the previous calendar year. In
addition, the Fund may send you other relevant tax-related forms.
FURTHER INFORMATION ABOUT THE FUND
THE DREYFUS/LAUREL FUNDS, INC.
The Laurel Funds, Inc. was incorporated in Maryland on August 6, 1987 and
changed its name to The Dreyfus/Laurel Funds, Inc. on October 17, 1994. The
Dreyfus/Laurel Funds, Inc. is registered with the SEC under the 1940 Act as a
diversified, open-end management investment company. The Dreyfus/Laurel Funds,
Inc. has an authorized capitalization of 25 billion Shares of $0.001 par value
stock with equal voting rights. The Articles of Incorporation permit the
Directors to create an unlimited number of investment portfolios (each a
"Fund"). The Fund offered by this Prospectus currently issues two classes of
Shares designated "Investor" and "Class R" Shares.
Each Share (regardless of class) has one vote. All Shares of a fund (and
classes thereof) vote together as a single class, except as to any matter for
which a separate vote of any Fund or class is required by the 1940 Act, and
except as to any matter which affects the interests of one or more particular
funds or classes, in which case only the shareholders of the affected fund or
class are entitled to vote, each as a separate class. At your written request,
the Fund will issue negotiable stock certificates.
At January 31, 1995, Mellon Bank Corporation, the Manager's parent, owned
of record through its direct and indirect subsidiaries more than 25% of The
Dreyfus/Laurel Funds, Inc.'s outstanding voting shares, and is deemed, under the
1940 Act, to be a controlling shareholder.
MANAGEMENT.
THE BOARD OF DIRECTORS. The business affairs of The Dreyfus/Laurel Funds,
Inc. are managed under the direction of its Directors. The SAI contains the
names and general background information concerning the Directors and officers
of The Dreyfus/Laurel Funds, Inc.
...................................... 30 .....................................
- - - --------------------------------------------------------------------------------
<PAGE>
PROSPECTUS
-------------------------------------
- - - --------------------------------------------------------------------------------
INVESTMENT MANAGER. The Manager is located at 200 Park Avenue, New York,
New York 10166. As of January 31, 1995, the Manager managed or administered
approximately $70 billion in assets for more than 1.9 million investor accounts
nationwide. The Manager is a wholly-owned subsidiary of Mellon Bank (One Mellon
Bank Center, Pittsburgh, Pennsylvania 15258), the Fund's prior investment
manager. Pursuant to an Investment Management Agreement, transferred from Mellon
Bank to the Manager effective as of October 17, 1994, the Manager provides, or
arranges for one or more third parties to provide investment advisory,
administrative, custody, fund accounting and transfer agency services to the
Fund. As investment manager, the Manager manages the Fund by making investment
decisions based on the Fund's investment objective, policies and restrictions,
and is paid a fee.
Under the Investment Management Agreement, the Fund pays a fee computed
daily, and paid monthly, at the annual rate of .40% of the Fund's average daily
net assets less certain expenses described below. The Manager pays all of the
expenses of the Fund except brokerage fees, taxes, interest, fees and expenses
of the non-interested Directors (including counsel fees) and extraordinary
expenses. Although the Manager does not pay for the fees and expenses of the
non-interested Directors (including counsel fees), the Manager is contractually
required to reduce its investment management fee in an amount equal to the
Fund's allocable share of such expenses. In order to compensate the Manager for
paying virtually all of the Fund's expenses, the Fund's investment management
fee is higher than the investment advisory fees paid by most investment
companies. Most if not all, such companies also pay for additional non-
investment advisory expenses that are not paid by such companies' investment
advisers. From time to time, the Manager may waive (either voluntarily or
pursuant to applicable state limitations) additional investment management fees
payable by the Fund. For the period from November 30, 1993 (commencement of
operations) to April 3, 1994, the Fund paid its investment adviser, Mellon Bank,
0.00% (annualized) of its average daily net assets in investment advisory fees
(net of expenses reimbursed), under the Fund's previous investment advisory
contract (such contract covered only the provision of investment advisory and
certain specified administrative services). For the period from April 4, 1994
through the fiscal year ended October 31, 1994, the Fund paid Mellon Bank or the
Manager 0.40% (annualized) of its average daily net assets in investment
management fees, less fees and expenses of the non-interested Directors
(including counsel fees).
For the fiscal year ended October 31, 1994, total operating expenses
(excluding Rule 12b-1 fees) (net of expenses reimbursed) of the Fund were 0.40%
(annualized) of the average daily net assets of each class for both the Investor
Class and Class R. Without the reimbursement, operating expenses would have been
higher.
...................................... 31 .....................................
- - - --------------------------------------------------------------------------------
<PAGE>
DREYFUS BOND MARKET INDEX FUND
-------------------------------------
- - - --------------------------------------------------------------------------------
The Manager is authorized to allocate purchase and sale orders for
portfolio securities to certain financial institutions, including, in the case
of agency transactions, financial institutions which are affiliated with the
Manager or which have sold Shares of the Fund, if the Manager believes that the
quality of the transaction and the commission are comparable to what they would
be with other qualified brokerage firms. From time to time, to the extent
consistent with its investment objective, policies and restrictions, the Fund
may invest in securities of companies with which Mellon Bank has a lending
relationship.
Mellon Bank is a subsidiary of Mellon Bank Corporation. At June 30, 1994,
Mellon Bank Corporation was the 24th largest bank holding company in the United
States in terms of total assets. Through its bank subsidiaries, it operates 631
domestic retail banking locations including 432 branch offices. Mellon Bank
Corporation has 25 domestic representative offices. There are international
branches in Grand Cayman, British West Indies, and London, England, and two
international representative offices in Tokyo, Japan and Hong Kong. Mellon Bank
has a banking subsidiary, Mellon Bank Canada, in Toronto. Mellon Bank is a
registered municipal securities dealer.
The Fund's portfolio manager is Laurie Carroll. Ms. Carroll is a Senior
Vice President and portfolio manager at Mellon Bank. Ms. Carroll is a portfolio
manager at the Manager and has been employed by the Manager since October 17,
1994. Ms. Carroll has been employed by Mellon Bank since 1986.
The Glass-Steagall Act of 1933 prohibits a national bank from engaging in
the business of issuing, underwriting, selling or distributing certain
securities. The activities of Mellon Bank and the Manager may raise issues under
these provisions. However, Mellon Bank has been advised by its counsel that
these activities are consistent with these statutory and regulatory obligations.
For more information on the Glass-Steagall Act of 1933, see "Federal Law
Affecting Mellon Bank" in the SAI.
Under a Custody and Fund Accounting Agreement, Mellon Bank acts as
custodian and fund accountant, maintaining possession of the Fund's investment
securities and providing certain accounting and related services.
The Shareholder Services Group, Inc., a subsidiary of First Data
Corporation, serves as transfer agent ("Transfer Agent") for the Fund's shares.
The Transfer Agent is located at One American Express Plaza, Providence, Rhode
Island 02903.
OTHER SERVICE PROVIDERS. Shares of the Fund are sold on a continuous basis
by Premier as the Fund's sponsor and distributor. Premier is a registered
broker-dealer with principal offices at One Exchange Place, Boston,
Massachusetts 02109. The Fund has entered into a distribution agreement with
Premier which provides that Premier has the exclusive right to distribute Shares
...................................... 32 .....................................
- - - --------------------------------------------------------------------------------
<PAGE>
PROSPECTUS
-------------------------------------
- - - --------------------------------------------------------------------------------
of the Fund. Premier may pay service and/or distribution fees to Agents that
assist customers in purchasing and servicing of Shares of the Fund. (See
"Distribution Plan (Investor Class Only).")
DISTRIBUTION PLAN (INVESTOR CLASS ONLY).
Investor Class Shares are subject to a Distribution Plan ("Plan") adopted
pursuant to Rule 12b-1 under the 1940 Act ("Rule 12b-1"). The Investor Class
Shares of the Fund bear some of the cost of selling those Shares under the Plan.
The Plan allows the Fund to spend annually up to 0.25% of its average daily net
assets attributable to Investor Class Shares to compensate Dreyfus Service
Corporation, an affiliate of the Manager, for shareholder servicing activities
and Premier for shareholder servicing activities and for activities or expenses
primarily intended to result in the sale of Investor Class Shares of the Fund.
The Plan allows Premier to make payments from the Rule 12b-1 fees it collects
from the Fund to compensate Agents that have entered into Selling Agreements
("Agreements") with Premier. Under the Agreements, the Agents are obligated to
provide distribution related services with regard to the Fund and/or shareholder
services to the Agent's clients that own Investor Class Shares of the Fund.
The Fund and Premier may suspend or reduce payments under the Plan at any
time, and payments are subject to the continuation of the Fund's Plan and the
Agreements described above. From time to time, the Agents, Premier and the Fund
may agree to voluntarily reduce the maximum fees payable under the Plan. See the
SAI for more details on the Plan.
Potential investors should read this Prospectus in light of the terms
governing Agreements with their Agents. An Agent entitled to receive
compensation for selling and servicing the Fund's Shares may receive different
compensation with respect to one class of Shares over another.
...................................... 33 .....................................
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<PAGE>
DREYFUS BOND MARKET INDEX FUND
-------------------------------------
- - - --------------------------------------------------------------------------------
- - - ------------------------------------------------------------
FOR MORE INFORMATION
FUND INFORMATION AND PROSPECTUSES
Call 1-800-548-2868
Please read the prospectus before you invest or send money
TO INVEST, REDEEM AND EXCHANGE
Call 1-800-548-2868 (for overseas, call collect (401) 455-3476)
9:00 a.m. to 5:00 p.m., Eastern time
Monday through Friday
Or Write: The Dreyfus Family of Funds
P.O. Box 9692
Providence, Rhode Island 02940-9830
YIELD AND SHARE PRICE INFORMATION
1-800-548-2868
24 hours a day, 7 days a week
The Dreyfus Family of Funds
One Exchange Place
Boston, Massachusetts 02109
...................................... 34 .....................................
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<PAGE>
TEST
TEST
TEST
TEST
<PAGE>
PROSPECTUS
-------------------------------------
- - - --------------------------------------------------------------------------------
[TEST PAGE]
........................................................................
- - - --------------------------------------------------------------------------------
1
<PAGE>
BOND MARKET INDEX FUND
-------------------------------------
- - - --------------------------------------------------------------------------------
[TEST PAGE]
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- - - --------------------------------------------------------------------------------
2
<PAGE>
PROSPECTUS
-------------------------------------
- - - --------------------------------------------------------------------------------
[TEST PAGE]
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3
<PAGE>
PROSPECTUS
-------------------------------------
- - - --------------------------------------------------------------------------------
- - - --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
AS OF DECEMBER 31, 1993
<TABLE>
<CAPTION>
% of Market
Portfolio Shares Value ($)
<S> <C> <C> <C> <C>
- - - ------------------------------------------------------------------------------------------------------------
4.6%
-------------------------------------------------------------------------
COMMERCIAL PAPER
MISCELLANEOUS 4.6%
40,727,000 Associates Corp. of North America,
3.250%, 01/03/94 (Cost
$40,727,000)........................ 40,727,000
------------
U.S. GOVERNMENT &
AGENCIES 2.3%
19,985,000 U.S. Treasury Note, 4.250%, 12/31/95
(Cost $19,992,807).................. 19,985,000
------------
COLLATERALIZED MORTGAGE
OBLIGATIONS 2.6%
283,109 Federal Home Loan Mortgage Corp.,
02/15/08............................ 1,627,878
6,841,421 General Electric Capital Mortgage
Services, Inc. 1991-5 Series A
(PTA), 8.500%, 09/25/06............. 6,909,835
13,619,000 Westinghouse Electric Corp., 7.750%,
04/15/96............................ 14,197,808
------------
TOTAL COLLATERALIZED MORTGAGE
OBLIGATIONS
(Cost $23,093,027).................. 22,735,521
------------
FOREIGN GOVERNMENT &
AGENCIES 33.3%
4,640,000 Argentina Bonos del Tesoro, Floating
Rate Fond, LIBOR, 3.250%,
05/31/96............................ 4,491,856
25,526,500 Bank of Ayudhya Bill of Exchange,
03/07/94............................ 985,713
22,990,800 Bank of Ayudhya Treasury Bill,
01/27/94............................ 894,871
32,052,670 Certificados de la Tesoreria,
02/17/94............................ 10,176,697
68,459,080 Certificados de la Tesoreria,
01/27/94............................ 21,866,046
32,448,630 Certificados de la Tesoreria,
04/28/94............................ 10,087,844
32,080,310 Certificados de la Tesoreria,
03/17/94............................ 10,101,129
38,599,920 Government of New Zealand Treasury
Bill, 09/21/94...................... 20,844,276
247,000,000 Kingdom of Denmark, 9.250%,
08/10/95............................ 38,044,455
120,000,000 Kingdom of Denmark, 9.750%,
02/10/95............................ 18,306,686
8,000,000 Kingdom of Spain, 9.000%, 05/22/96.... 9,608,352
20,000,000 Kingdom of Spain, 10.750%, 05/22/95... 23,758,090
13,750,000 Province of Saskatchewan, 9.000%,
09/17/96............................ 11,328,731
24,200,000 Republic of Ireland, 7.000%,
03/15/94............................ 34,034,934
</TABLE>
The accompanying notes are an integral part of the financial
statements.
------------
9
<PAGE>
- - - --------------------------------------------------------------------------------
SCUDDER GROWTH AND INCOME FUND
<TABLE>
<S> <C> <C> <C> <C>
29,000,000 Republic of Ireland, 9.000%,
07/30/96............................ 43,688,719
1,500,000 Republic of Ireland, 9.500%,
04/30/95............................ 2,212,243
21,000,000 United Kingdom Treasury Bond, 8.750%,
09/01/97............................ 34,254,403
------------
TOTAL FOREIGN GOVERNMENT & AGENCIES
(Cost $298,437,398)................. 294,685,045
------------
</TABLE>
The accompanying notes are an integral part of the financial
statements.
------------
10
PROSPECTUS
Dreyfus/Laurel Prime Money Market Fund
Dreyfus/Laurel Tax-Exempt Money Market Fund
Dreyfus/Laurel U.S. Treasury Money Market Fund
Investor and Class R Shares
March 1, 1995
THIS PROSPECTUS describes the three investment portfolios listed on the
following page (each a "Fund") of The Dreyfus/Laurel Funds, Inc. (formerly
the Laurel Funds, Inc.), an open-end, diversified management investment
company that is part of The Dreyfus Family of Funds. This Prospectus de-
scribes two classes of shares--Investor Shares and Class R Shares (collec-
tively, the "Shares")--of the Fund.
THE DREYFUS/LAUREL PRIME MONEY MARKET FUND seeks a high level of current
income consistent with stability of principal by investing in high-grade
money market instruments.
THE DREYFUS/LAUREL TAX-EXEMPT MONEY MARKET FUND seeks income exempt from
federal income tax consistent with stability of principal by investing in
tax-exempt municipal obligations.
THE DREYFUS/LAUREL U.S. TREASURY MONEY MARKET FUND seeks a high level of
current income consistent with stability of principal by investing in di-
rect obligations of the U.S. Treasury and repurchase agreements secured by
such obligations.
The Dreyfus/Laurel Prime Money Market Fund, Tax-Exempt Money Market Fund
and U.S. Treasury Money Market Fund (the "Money Market Funds") seek to
maintain a stable net asset value ("NAV") of $1.00 per share. Investments
in these Money Market Funds are neither insured nor guaranteed by the U.S.
Government and there can be no assurance that these Money Market Funds
will be able to maintain a stable net asset value of $1.00 per share.
This Prospectus sets forth concisely the information about each Fund that
a prospective purchaser should consider before investing. Investors should
read this Prospectus and retain it for future reference. Additional infor-
mation about each Fund is contained in a Statement of Additional Informa-
tion (the "SAI"), which has been filed with the Securities and Exchange
Commission (the "SEC") and is available upon request without charge by
calling or writing to The Dreyfus Family of Funds. The SAI bears the same
date as the Prospectus and is incorporated by reference in its entirety
into this Prospectus.
In addition to these Funds, The Dreyfus Family of Funds also offers other
funds that provide investment opportunities for you in the equity, fixed
income and money markets. For more information about these additional in-
vestment opportunities, call 1-800-548-2868.
The Dreyfus Family of Funds
P.O. Box 9692
Providence, Rhode Island 02940-9830
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, OR THE U.S. GOVERNMENT, AND ARE NOT FEDERALLY IN-
SURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE
BOARD OR ANY OTHER AGENCY. ALL MUTUAL FUND SHARES INVOLVE CERTAIN RISKS.
THERE CAN BE NO ASSURANCE THAT THE DREYFUS/LAUREL PRIME MONEY MARKET FUND,
THE DREYFUS/LAUREL TAX-EXEMPT MONEY MARKET FUND OR THE DREYFUS/LAUREL U.S.
TREASURY MONEY MARKET FUND WILL BE ABLE TO MAINTAIN A STABLE NET ASSET
VALUE OF $1.00 PER SHARE.
THE FEES TO WHICH EACH FUND IS SUBJECT ARE SUMMARIZED IN THE "EXPENSE SUM-
MARY" SECTION OF THE FUNDS' PROSPECTUS. THE FUNDS PAY MELLON BANK, N.A.
("MELLON BANK") OR ITS AFFILIATES TO BE THEIR INVESTMENT ADVISER. MELLON
BANK OR AN AFFILIATE MAY BE PAID FOR PERFORMING OTHER SERVICES FOR THE
FUNDS, SUCH AS CUSTODIAN, TRANSFER AGENT OR FUND ACCOUNTANT SERVICES. THE
FUNDS ARE DISTRIBUTED BY PREMIER MUTUAL FUND SERVICES, INC. ("PREMIER").
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTA-
TION TO THE CONTRARY IS A CRIMINAL OFFENSE.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
Expense Summary 5
Financial Highlights 6
Investment Objective and Policies 14
Other Investment Policies and Risk Factors 16
HOW TO DO BUSINESS WITH US
Special Shareholder Services 25
Investor Line 25
How to Invest in The Funds 25
By Mail 26
By Telephone 26
By Wire 26
By Automatic Monthly Investments 27
By Direct Deposit 27
By In-Kind Purchases 27
When Share Price is Determined 28
Additional Information About Investments 28
How to Exchange Your Investment From One Fund to Another 29
By Telephone 29
By Mail 29
Additional Information About Exchanges 29
How to Redeem Fund Shares 30
By Telephone 30
By Mail 30
By Automated Withdrawal Program 31
By Check Writing 31
Redemption Proceeds 32
Additional Information About Redemptions 33
How To Use The Dreyfus Family of Funds in a Tax-Qualified
Retirement Plan 33
How to Transfer an Investment to a Dreyfus Family of Funds'
Retirement Plan 33
OTHER INFORMATION
Share Price 34
Performance Advertising 34
Distributions 35
Taxes 36
Other Services 38
Further Information About The Funds 38
The Dreyfus/Laurel Funds, Inc. 38
Management 39
Investor Shares' Distribution Plan 41
</TABLE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REP-
RESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE FUNDS' SAI INCOR-
PORATED HEREIN BY REFERENCE, IN CONNECTION WITH THE OFFERING MADE BY THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUNDS OR THEIR DIS-
TRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE FUNDS OR
BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT BE
LAWFULLY MADE.
EXPENSE SUMMARY
The purpose of the following table is to help you understand the various
costs and expenses that you, as a Shareholder, will bear directly or indi-
rectly in connection with an investment in the Investor or Class R Shares
of the Money Market Funds. (See "Management.")
<TABLE>
<CAPTION>
Investor Class R
Shares Shares
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases none none
Maximum Sales Load Imposed on Reinvestments none none
Deferred Sales Load none none
Redemption Fee none none
Exchange Fee none none
ESTIMATED ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF NET ASSETS)
Management Fee 0.50% 0.50%
12b-1 Fees* 0.20% none
Other Expenses ** 0.00% 0.00%
Total Fund Operating Expenses 0.70% 0.50%
EXAMPLES
You would pay the following on 1 year $ 7 $ 5
a $1,000 investment, assuming (1) a 3 years 22 16
5% annual return and (2) redemption 5 years N/A 28
at the end of each time period: 10 years N/A 63
<FN>
* See "Investor Shares' Distribution Plan" for a description of each
Fund's Plan of Distribution for the Investor Class.
** Does not include fees and expenses of the non-interested directors
(including counsel). The investment manager is contractually required
to reduce its Management Fee in an amount equal to the Fund's alloca-
ble portion of such fees and expenses, which are estimated to be
0.02% of the Fund's net assets (See "Management.")
THE INFORMATION CONTAINED IN THE TABLE SHOULD NOT BE CONSIDERED A REPRE-
SENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS
THAN THOSE SHOWN.
The Dreyfus/Laurel Funds, Inc. understands that banks, brokers, dealers or
other financial institutions (including Mellon Bank and its affiliates)
(collectively "Agents") may charge fees to their clients who are owners of
the Fund's Investor Shares for various services provided in connection
with a client's account. These fees would be in addition to any amounts
received by an Agent under its Selling Agreement ("Agreement") with Pre-
mier Mutual Fund Services, Inc. ("Premier"). The Agreement requires each
Agent to disclose to its clients any compensation payable to such Agent by
Premier and any other compensation payable by the client for various ser-
vices provided in connection with
its account.
Long-term shareholders of Investor Shares could pay more in Rule 12b-1
fees than the economic equivalent of the maximum front-end sales charges
applicable to mutual funds sold by members of the National Association of
Securities Dealers, Inc.
FINANCIAL HIGHLIGHTS
The following financial information for Investor and Class R Shares has
been derived from the financial statements which have been audited by KPMG
Peat Marwick LLP, the independent auditors for The Dreyfus/ Laurel Funds,
Inc., for the indicated years or period ended October 31, whose reports
accompany such financial statements that appear in the Fund's Annual Re-
port dated October 31, 1994 and which are incorporated by reference in the
SAI. Further information about the Fund's performance is contained in the
Fund's Annual Report, which may be obtained without charge.
DREYFUS/LAUREL PRIME MONEY MARKET FUND
FOR AN INVESTOR SHARE OUTSTANDING THROUGHOUT THE PERIOD.
</TABLE>
<TABLE>
<CAPTION>
Period
Ended
10/31/94*
<S> <C> <C>
Net asset value, beginning of period $ 1.00
Income from investment operations:
Net investment income 0.0211
Less distributions:
Dividends from net investment income (0.0211)
Net asset value, end of period $ 1.00
Total return+ 2.14%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 3,611
Ratio of operating expenses to average net
assets 0.71%#
Ratio of net investment income to average net
assets 3.31%#
<FN>
* The Fund commenced selling Investor Shares on April 6, 1994.
+ Total return represents aggregate total return for the period indicated.
# Annualized.
</TABLE>
DREYFUS/LAUREL PRIME MONEY MARKET FUND
FOR A CLASS R SHARE OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.
<TABLE>
<CAPTION>
Year Year Year
Ended Ended Ended
10/31/94* 10/31/93 10/31/92
<S> <C> <C> <C>
Net asset value, beginning of year $ 1.00 $ 1.00 $ 1.00
Income from investment operations:
Net investment income 0.0344+ 0.0280 0.0385
Less distributions:
Dividends from net investment income (0.0344) (0.0280) (0.0385)
Net asset value, end of year $ 1.00 $ 1.00 $ 1.00
Total return++ 3.52% 2.84% 3.92%
Ratios to average net assets/supplemental data:
Net assets, end of year (in 000's) $124,754 $103,760 $ 91,848
Ratio of operating expenses to average net assets 0.51%+++ 0.50%** 0.50%**
Ratio of net investment income to average
net assets 3.51% 2.80% 3.88%
<FN>
* The Fund commenced operations on November 18, 1987. The Fund commenced
selling Investor Shares on April 6, 1994. Those shares outstanding
prior to April 4, 1994 were designated Trust Shares. Effective as of
October 17, 1994, the Fund's Trust Shares were redesignated Class R
Shares.
** For the years or period ended October 31, 1992, 1991, 1990, 1989 and
1988, the investment adviser waived all or a portion of its advisory
fee amounting to $0.0007, $0.0010, $0.0038, $0.0043 and $0.0045 per
share, respectively. For the years or period ended October 31, 1993,
1992, 1991, 1990, 1989 and 1988, the investment adviser reimbursed
expenses of the Fund amounting to $0.0036, $0.0027, $0.0018, $0.0026,
$0.0062 and $0.3952 per share, respectively.
+ Net investment income before expenses reimbursed by the investment ad-
viser for the year ended October 31, 1994 was $0.0331.
++ Total return represents aggregate total return for the periods indi-
cated.
+++ Annualized operating expense ratio before expenses reimbursed by the
investment adviser for the year ended October 31, 1994 was 0.64%.
</TABLE>
DREYFUS/LAUREL PRIME MONEY MARKET FUND (CONTINUED)
FOR A CLASS R SHARE OUTSTANDING THROUGHOUT EACH YEAR.
<TABLE>
<CAPTION>
Year Year Year Period
Ended Ended Ended Ended
10/31/91 10/31/90 10/31/89 10/31/88*
<S> <C> <C> <C> <C>
Net asset value, beginning of year $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment operations:
Net investment income 0.0621 0.0820 0.0667 0.0601
Less distributions:
Dividends from net investment
income (0.0621) (0.0820) (0.0667) (0.0601)
Net asset value, end of year $ 1.00 $ 1.00 $ 1.00 $ 1.00
Total return++ 6.39% 8.55% 7.95% 6.18%
Ratios to average net assets/
supplemental data:
Net assets, end of year (in 000's) $105,329 $ 93,366 $ 92,257 $ 530
Ratio of operating expenses to
average net assets 0.50%** 0.16%** 0.00%** 0.60%#**
Ratio of net investment income to
average net assets 6.13% 8.21% 8.97% 6.69%#
<FN>
* The Fund commenced operations on November 18, 1987. The Fund com-
menced selling Investor Shares on April 6, 1994. Those shares out-
standing prior to April 4, 1994 were designated Trust Shares. Effec-
tive as of October 17, 1994, the Fund's Trust Shares were redesig-
nated Class R Shares.
** For the years or period ended October 31, 1992, 1991, 1990, 1989 and
1988, the investment adviser waived all or a portion of its advisory
fee amounting to $0.0007, $0.0010, $0.0038, $0.0043 and $0.0045 per
share, respectively. For the years or period ended October 31, 1993,
1992, 1991, 1990, 1989 and 1988, the investment adviser reimbursed
expenses of the Fund amounting to $0.0036, $0.0027, $0.0018, $0.0026,
$0.0062 and $0.3952 per share, respectively.
++ Total return represents aggregate total return for the periods indi-
cated.
# Annualized.
</TABLE>
FINANCIAL HIGHLIGHTS
The following financial information for Investor and Class R Shares has
been derived from the financial statements which have been audited by KPMG
Peat Marwick LLP, the independent auditors for The Dreyfus/Laurel Funds,
Inc., for the indicated years or period ended October 31, whose reports
accompany such financial statements that appear in the Fund's Annual Re-
port dated October 31, 1994 and which are incorporated by reference in the
SAI.
DREYFUS/LAUREL TAX-EXEMPT MONEY MARKET FUND
FOR AN INVESTOR SHARE OUTSTANDING THROUGHOUT THE PERIOD.
<TABLE>
<CAPTION>
Period
Ended
10/31/94*
<S> <C> <C>
Net asset value, beginning of period $ 1.00
Income from investment operations:
Net investment income 0.0113
Less distributions:
Dividends from net investment income (0.0122)
Net asset value, end of period $ 1.00
Total return+ 1.23%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 1,161
Ratio of operating expenses to average net assets 0.70%#
Ratio of net investment income to average net assets 2.11%#
<FN>
* The Fund commenced selling Investor Shares on April 20, 1994.
+ Total return represents aggregate total return for the period indicated.
# Annualized.
</TABLE>
DREYFUS/LAUREL TAX-EXEMPT MONEY MARKET FUND
FOR A CLASS R SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
Year Year
Ended Ended
10/31/94* 10/31/93
<S> <C> <C>
Net asset value, beginning of year $ 1.00 $ 1.00
Income from investment operations:
Net investment income 0.0228+ 0.0208
Less distributions:
Dividends from net investment income (0.0228) (0.0208)
Net asset value, end of year $ 1.00 $ 1.00
Total return++ 2.29% 2.10%
Ratios to average net assets/supplemental data:
Net assets, end of year (in 000's) $205,105 $187,830
Ratio of operating expenses to average net assets 0.51%+++ 0.50%**
Ratio of net investment income to average net assets 2.30% 2.08%
<FN>
* The Fund commenced operations on December 10, 1987. The Fund commenced
selling Investor Shares on April 20, 1994. Those shares in existence
prior to April 4, 1994 were designated Trust Shares. Effective as of
October 17, 1994, the Fund's Trust Shares were reclassified as Class R
Shares.
** For the period ended October 31, 1988, the investment adviser waived a
portion of its advisory fee amounting to $0.0040 per share. For the
years or period ended October 31, 1993, 1992, 1991, 1990, 1989 and
1988, the investment adviser reimbursed expenses of the Fund amounting
to $0.0024, $0.0029, $0.0036, $0.0052, $0.0044 and $0.0031 per share,
respectively.
+ Net investment income before expenses reimbursed by the investment ad-
viser for the year ended October 31, 1994 was $0.0218.
++ Total return represents aggregate total return for the periods indi-
cated.
+++ Annualized operating expense ratio before expenses reimbursed by the
investment adviser for the year ended October 31, 1994 was 0.61%.
# Annualized.
</TABLE>
<TABLE>
<CAPTION>
Year Year Year Year Year
Ended Ended Ended Ended Ended
10/31/92 10/31/91 10/31/90 10/31/89 10/31/88*
<S> <C> <C> <C> <C>
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
0.0291 0.0291 0.0454 0.0564 0.0592
(0.0291) (0.0291) (0.0454) (0.0564) (0.0592)
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
2.94% 2.94% 4.64% 5.79% 6.08%
$184,719 $184,719 $152,260 $ 88,247 $ 56,224
0.50%** 0.50%** 0.50%** 0.55%** 0.70%**#
2.90% 2.90% 4.49% 5.66% 5.95%#
</TABLE>
FINANCIAL HIGHLIGHTS
The following financial information for Investor and Class R Shares has
been derived from the financial statements which have been audited by KPMG
Peat Marwick, the independent auditors for The Dreyfus/Laurel Funds, Inc.,
for the indicated years or period ended October 31, whose reports accom-
pany such financial statements that appear in the Fund's Annual Report
dated December 31, 1994 and which are incorporated by reference in the
SAI.
DREYFUS/LAUREL U.S. TREASURY MONEY MARKET FUND
FOR AN INVESTOR SHARE OUTSTANDING THROUGHOUT THE PERIOD.
<TABLE>
<CAPTION>
Period
Ended
10/31/94*
<S> <C> <C>
Net asset value, beginning of period $ 1.00
Income from investment operations:
Net investment income 0.0185
Less distributions:
Dividends from net investment income (0.0195)
Net asset value, end of period $ 1.00
Total return+ 1.96%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 1,324
Ratio of operating expenses to average net assets 0.70%#
Ratio of net investment income to average net assets 3.42%#
<FN>
* The Fund commenced selling Investor Shares on April 18, 1994.
+ Total return represents aggregate total return for the period indicated.
# Annualized.
</TABLE>
DREYFUS/LAUREL U.S. TREASURY MONEY MARKET FUND
FOR A CLASS R SHARE OUTSTANDING THROUGHOUT EACH YEAR.
<TABLE>
<CAPTION>
Year Year Year Period
Ended Ended Ended Ended
10/31/94* 10/31/93 10/31/92 10/31/91*
<S> <C> <C> <C> <C>
Net asset value, beginning of year $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment operations:
Net investment income 0.0331+ 0.0274 0.0367 0.0424
Less distributions:
Dividends from net investment
income (0.0331) (0.0274) (0.0367) (0.0424)
Net asset value, end of year $ 1.00 $ 1.00 $ 1.00 $ 1.00
Total return++ 3.37% 2.77% 3.73% 4.32%
Ratios to average net assets/
supplemental data:
Net assets, end of year (in 000's) $228,797 $ 69,785 $ 69,187 45,998
Ratio of operating expenses to
average net assets 0.50%+++ 0.50%** 0.50%** 0.34%#**
Ratio of net investment income to
average net assets 3.62% 2.74% 3.63% 5.55%#
<FN>
* The Fund commenced operations on February 4, 1991. The Fund commenced
selling Investor Shares on April 18, 1994. Those shares outstanding
prior to April 4, 1994 were designated as Trust Shares. Effective as
of October 17, 1994, the Fund's Trust Shares were redesignated as
Class R Shares.
** For the period ended October 31, 1991, the investment adviser waived
a portion of its advisory fee amounting to $0.0010 per share. For the
years or period ended October 31, 1993, 1992 and 1991, the investment
adviser reimbursed expenses of the Fund amounting to $0.0040, $0.0040
and $0.0048 per share, respectively.
+ Net investment income before expenses reimbursed by the investment ad-
viser for the year ended October 31, 1994 was $0.0323.
++ Total return represents aggregate total return for the periods indi-
cated.
+++ Annualized expense ratio before expenses reimbursed by the investment
adviser for the year ended October 31, 1994 was 0.59%.
# Annualized.
</TABLE>
DREYFUS/LAUREL PRIME MONEY MARKET FUND
INVESTMENT OBJECTIVE AND POLICIES
Dreyfus/Laurel Prime Money Market Fund seeks a high level of current in-
come consistent with stability of principal by investing in high-grade
money market instruments. There can be no assurance that the Dreyfus/Lau-
rel Prime Money Market Fund will meet its stated investment objective. See
"OTHER INVESTMENT POLICIES AND RISK FACTORS" for a detailed description of
risks and other Fund investment policies. See "OTHER INVESTMENT POLICIES
AND RISK FACTORS -- Limiting Investment Risks" for a discussion of the
Fund's investment limitations.
The instruments in which Dreyfus/Laurel Prime Money Market Fund invests
include (1) U.S. Treasury bills, notes and bonds; (2) other obligations
issued or guaranteed as to interest and principal by the U.S. Government,
its agencies and instrumentalities; (3) instruments of U.S. and foreign
banks, including certificates of deposit, banker's acceptances, and time
deposits, and may include Eurodollar Certificates of Deposit ("ECDs"),
Yankee Certificates of Deposit ("Yankee CDs"), and Eurodollar Time Depos-
its ("ETDs"); (4) commercial paper of U.S. and foreign companies; (5) cor-
porate obligations; (6) mortgage-related securities backed by U.S. Govern-
ment agencies or instrumentalities; (7) variable amount master demand
notes; (8) floating rate notes; and (9) repurchase agreements. The Dreyfu-
s/Laurel Prime Money Market Fund also may utilize reverse repurchase
agreements. (See "OTHER INVESTMENT POLICIES AND RISK FACTORS.")
DREYFUS/LAUREL TAX-EXEMPT MONEY MARKET FUND
INVESTMENT OBJECTIVE AND POLICIES
Dreyfus/Laurel Tax-Exempt Money Market Fund seeks income exempt from fed-
eral income tax consistent with stability of principal by investing in
tax-exempt municipal obligations. There can be no assurance that the Drey-
fus/Laurel Tax-Exempt Money Market Fund will meet its stated investment
objective. See "OTHER INVESTMENT POLICIES AND RISK FACTORS" for a detailed
description of risks and other Fund investment policies. See "OTHER IN-
VESTMENT POLICIES AND RISK FACTORS -- Limiting Investment Risks" for dis-
cussion of the Fund's investment limitations.
Dreyfus/Laurel Tax-Exempt Money Market Fund intends to invest 100%, and
has adopted a policy requiring that it invest at least 80%, of its total
assets in municipal obligations. Debt obligations the interest on which is
a "tax preference item" for purposes of the alternative minimum tax are
not counted toward meeting the 80% test.
TYPES OF MUNICIPAL SECURITIES. Municipal securities are obligations is-
sued by or on behalf of states, territories and possessions of the United
States and their political subdivisions, agencies, and instrumentalities,
the interest from which is, in the opinion of bond counsel, exempt from
regular federal income tax. The municipal securities in which Dreyfus/Lau-
rel Tax-Exempt Money Market Fund may invest include: (1) municipal notes,
including tax anticipation and revenue anticipation notes, bond anticipa-
tion notes, construction loan notes and tax-exempt commercial paper; (2)
short-term municipal bonds, including general obligation bonds, revenue
bonds, industrial revenue bonds and private activity bonds; and (3) munic-
ipal leases.
Dreyfus/Laurel Tax-Exempt Money Market Fund may purchase certain municipal
securities, including certain industrial development bonds and bonds is-
sued after August 7, 1986 to finance "private activities," the interest on
which may constitute a "tax preference item" for purposes of the alterna-
tive minimum tax, even though the interest will continue to be fully tax-
exempt for federal income tax purposes. However, the Dreyfus/Laurel Tax-
Exempt Money Market Fund has no current intention of investing in such mu-
nicipal securities. (See "Taxes.")
YIELD FACTORS AND RATINGS. Yields on municipal securities are dependent
on a variety of factors, including the general conditions of the money
market and of the municipal bond and municipal note markets, the size of a
particular offering, the maturity of the obligation and the rating of the
issue. The achievement of the Dreyfus/Laurel Tax-Exempt Money Market
Fund's investment objective is dependent in part on the continuing ability
of the issuers of the municipal securities in which Dreyfus/Laurel Tax-
Exempt Money Market Fund invests to meet their obligations for the payment
of principal and interest when due. Obligations of issuers of municipal
securities are subject to the provisions of bankruptcy, insolvency and
other laws affecting the rights and remedies of creditors. The possibility
exists, therefore, that, as a result of litigation or other conditions,
the ability of any issuer to pay, when due, the principal of and interest
on its municipal securities may be materially affected.
All of the Dreyfus/Laurel Tax-Exempt Money Market Fund's municipal securi-
ties, including municipal leases, at the time of purchase must present
minimal credit risks and either be backed by the full faith and credit of
the United States or be of high quality as determined in accordance with
procedures adopted by the Board of Directors.
ADDITIONAL INFORMATION. The Dreyfus/Laurel Tax-Exempt Money Market Fund
may invest more than 25% of its assets in industrial development bonds, in
participation interests therein issued by banks and in municipal securi-
ties and other obligations guaranteed by the U.S. Government, its agencies
or instrumentalities. A participation interest gives the Dreyfus/Laurel
Tax-Exempt Money Market Fund an undivided interest in a municipal bond
owned by a bank and generally is backed by the bank's irrevocable letter
of credit or guarantee.
TAXABLE INVESTMENTS. The Dreyfus/Laurel Tax-Exempt Money Market Fund will
attempt to invest 100% of its net assets in municipal securities, the in-
terest on which, in the opinion of bond counsel, is exempt from regular
federal income tax. The Dreyfus/Laurel Tax-Exempt Money Market Fund also
may under certain circumstances invest up to 20% of the value of its net
assets in certain securities the interest income on which is subject to
federal income tax.
The Dreyfus/Laurel Tax-Exempt Money Market Fund may invest in any of the
following taxable instruments: (1) U.S. Treasury bills, notes and bonds;
(2) other obligations issued or guaranteed as to interest and principal by
the U.S. Government, its agencies and instrumentalities; (3) instruments
of U.S. and foreign banks, including certificates of deposit, banker's ac-
ceptances and time deposits, and may include "ECDs", "Yankee CDs" and Eu-
rodollar Time Deposits ("ETDs"); (4) commercial paper of U.S and foreign
companies; (5) corporate obligations; (6) mortgage-related securities
backed by U.S. Government agencies or instrumentalities; (7) variable
amount master demand notes; (8) floating rate notes; and (9) repurchase
agreements. The Fund also may utilize reverse repurchase agreements. (See
"OTHER INVESTMENT POLICIES AND RISK FACTORS.")
DREYFUS/LAUREL U.S. TREASURY MONEY MARKET FUND
INVESTMENT OBJECTIVE AND POLICIES
Dreyfus/Laurel U.S. Treasury Money Market Fund seeks a high level of cur-
rent income consistent with stability of principal by investing in direct
obligations of the U.S. Treasury and repurchase agreements secured by such
obligations. There can be no assurance that the Dreyfus/Laurel U.S. Trea-
sury Money Market Fund will meet its stated investment objective. See
"OTHER INVESTMENT POLICIES AND RISK FACTORS" below for a detailed descrip-
tion of risks and other Fund investment policies. See "OTHER INVESTMENT
POLICIES AND RISK FACTORS -- Limiting Investment Risks" for discussion of
the Fund's investment limitations.
The Dreyfus/Laurel U.S. Treasury Money Market Fund invests only in direct
obligations of the U.S. Treasury, such as Treasury bills, notes and bonds,
with remaining maturities of 397 days or less, and in repurchase agree-
ments of duration of 397 days or less secured by direct obligations of the
U.S. Treasury.
OTHER INVESTMENT POLICIES AND RISK FACTORS
BORROWING. Each Fund is authorized, within specified limits, to borrow
money for temporary administrative purposes and to pledge its assets in
connection with such borrowings.
COMMERCIAL PAPER. The Dreyfus/Laurel Prime Money Market and Dreyfus/Lau-
rel Tax-Exempt Money Market Funds may invest in commercial paper. These
instruments are short-term obligations issued by banks and corporations
that have maturities ranging from 2 to 270 days. Each instrument may be
backed only by the credit of the issuer or may be backed by some form of
credit enhancement, typically in the form of a guarantee by a commercial
bank. Commercial paper backed by guarantees of foreign banks may involve
additional risk due to the difficulty of obtaining and enforcing judgments
against such banks and the generally less restrictive regulations to which
such banks are subject. A Fund will only invest in commercial paper of
U.S. and foreign companies rated A-1 at the time of purchase by Standard &
Poor's Ratings Group, Prime-1 by Moody's Investors Service, Inc.
("Moody's"), F-1 by Fitch's Investor Service, Inc., Duff 1 by Duff &
Phelps, Inc. or A1 by IBCA, Inc.
ECDS, ETDS AND YANKEE CDS. The Dreyfus/Laurel Prime Money Market and
Dreyfus/Laurel Tax-Exempt Money Market Funds may invest in ECDs, ETDs and
Yankee CDs. ECDs are U.S. dollar- denominated certificates of deposit is-
sued by foreign branches of domestic banks. ETDs are U.S. dollar- denomi-
nated time deposits in a foreign branch of a U.S. bank or a foreign bank.
Yankee CDs are certificates of deposit issued by a U.S. branch of a for-
eign bank denominated in U.S. dollars and held in the United States. ECDs,
ETDs and Yankee CDs are subject to somewhat different risks than are the
obligations of domestic banks. (See "Foreign Securities.")
EURODOLLAR BONDS AND NOTES. The Dreyfus/Laurel Prime Money Market Fund
may invest in Eurodollar bonds and notes. Eurodollar bonds and notes are
obligations which pay principal and interest in U.S. dollars held in banks
outside the United States, primarily in Europe. Investments in Eurodollar
bonds and notes involve risks that differ from investments in securities
of domestic issuers. (See "Foreign Securities.")
FLOATING RATE SECURITIES. The Dreyfus/Laurel Prime Money Market and Drey-
fus/Laurel Tax- Exempt Money Market Funds may invest in floating rate se-
curities. A floating rate security provides for the automatic adjustment
of its interest whenever a specified interest rate changes. Interest rates
on these securities are ordinarily tied to, and are a percentage of, a
widely recognized interest rate, such as the yield on 90-day U.S. Treasury
bills or the prime rate of a specified bank. These rates may change as
often as twice daily. Generally, changes in interest rates will have a
smaller effect on the market value of floating rate securities than on the
market value of comparable fixed income obligations. Thus, investing in
variable and floating rate securities generally allows less opportunity
for capital appreciation and depreciation than investing in comparable
fixed income securities.
FOREIGN SECURITIES. The Dreyfus/Laurel Prime Money Market and Dreyfu-
s/Laurel Tax-Exempt Money Market Funds may purchase securities of foreign
issuers and may invest in obligations of foreign branches of domestic
banks and domestic branches of foreign banks. Investment in foreign secu-
rities presents certain risks, including those resulting from fluctuations
in currency exchange rates, revaluation of currencies, future political
and economic developments and the possible imposition of currency exchange
blockages or other foreign governmental laws or restrictions, reduced
availability of public information concerning issuers, and the fact that
foreign issuers are not generally subject to uniform accounting, auditing
and financial reporting standards or to other regulatory practices and re-
quirements comparable to those applicable to domestic issuers. Moreover,
securities of many foreign issuers may be less liquid and their prices
more volatile than those of comparable domestic issuers. In addition, with
respect to certain foreign countries, there is the possibility of expro-
priation, confiscatory taxation and limitations on the use or removal of
funds or other assets of a Fund, including withholding of dividends. For-
eign securities may be subject to foreign government taxes that would re-
duce the yield on such securities.
GNMA CERTIFICATES. The Dreyfus/Laurel Prime Money Market and Dreyfus/Lau-
rel Tax-Exempt Money Market Funds may invest in Government National Mort-
gage Association ("GNMA") Certificates ("GNMA Certificates"). GNMA Certif-
icates are mortgage-backed securities representing part ownership of a
pool of mortgage loans. These loans are made by mortgage bankers, commer-
cial banks, savings and loan associations, and other lenders and are ei-
ther insured by the Federal Housing Administration or guaranteed by the
Veterans Administration. A "pool" or group of such mortgages is assembled
and, after being approved by GNMA, is offered to investors through securi-
ties dealers. Once approved by GNMA, the timely payment of interest and
principal on each mortgage is guaranteed by the full faith and credit of
the U.S. Government. Although the mortgage loans in a pool underlying a
GNMA Certificate will have maturities of up to 30 years, the average life
of a GNMA Certificate will be substantially less because the mortgages
will be subject to normal principal amortization and also may be prepaid
prior to maturity. Prepayment rates vary widely and may be affected by
changes in mortgage interest rates. In periods of falling interest rates,
the rate of prepayment on higher interest mortgage rates tends to in-
crease, thereby shortening the actual average life of the GNMA Certifi-
cate. Conversely, when interest rates are rising, the rate of prepayment
tends to decrease, thereby lengthening the average life of the GNMA Cer-
tificate. Reinvestment of payments may occur at higher or lower rates than
the original yield on the GNMA Certificates. Due to the prepayment feature
and the need to reinvest prepayments of principal at current rates, GNMA
Certificates with underlying mortgages bearing higher interest rates can
be less effective than typical non-callable bonds of similar maturities at
locking in yields during periods of declining interest rates, although
they may have comparable risks of decline in value during periods of ris-
ing interest rates.
ILLIQUID SECURITIES. Each Fund will not knowingly invest more than 10% of
the value of its net assets in illiquid securities, including time depos-
its and repurchase agreements having maturities longer than seven days.
Securities that have readily available market quotations are not deemed
illiquid for purposes of this limitation (irrespective of any legal or
contractual restrictions on resale). A Fund may invest in commercial obli-
gations issued in reliance on the so-called "private placement" exemption
from registration afforded by Section 4(2) of the Securities Act of 1933,
as amended ("Section 4(2) paper"). A Fund may also purchase securities
that are not registered under the Securities Act of 1933, as amended, but
which can be sold to qualified institutional buyers in accordance with
Rule 144A under that Act ("Rule 144A securities"). Liquidity determina-
tions with respect to Section 4(2) paper and Rule 144A Securities will be
made by the Board of Directors as required. The Board will consider avail-
ability of reliable price information and other relevant information in
making such determinations. Section 4(2) paper is restricted as to dispo-
sition under the federal securities laws, and generally is sold to insti-
tutional investors such as the Fund that agree that they are purchasing
the paper for investment and not with a view to public distribution. Any
resale by the purchaser must be in an exempt transaction. Section 4(2)
paper normally is resold to other institutional investors like the Fund
through or with the assistance of the issuer or investment dealers who
make a market in the Section 4(2) paper, thus providing liquidity. Rule
144A securities generally must be sold to other qualified institutional
buyers. If a particular investment in Section 4(2) paper or Rule 144A se-
curities is not determined to be liquid, that investment will be included
within the percentage limitation on investment in illiquid securities. The
ability to sell Rule 144A securities to qualified institutional buyers is
a recent development and it is not possible to predict how this market
will mature. Investing in Rule 144A securities could have the effect of
increasing the level of fund illiquidity to the extent that qualified in-
stitutional buyers become, for a time, uninterested in purchasing these
securities.
MORTGAGE PASS-THROUGH CERTIFICATES. The Dreyfus/Laurel Prime Money Market
and Dreyfus/Laurel Tax-Exempt Money Market Funds may invest in Mortgage
Pass-Through Certificates. Mortgage pass-through certificates are issued
by governmental, government-related and private organizations and are
backed by pools of mortgage loans. These mortgage loans are made by lend-
ers such as savings and loan associations, mortgage bankers, commercial
banks and others to residential home buyers throughout the United States.
The securities are "pass-through" securities because they provide inves-
tors with monthly payments of principal and interest which in effect are a
"pass-through" of the monthly payments made by the individual borrowers on
the underlying mortgage loans. The principal governmental issuer of such
securities is the GNMA, which is a wholly-owned U.S. government corpora-
tion within the Department of Housing and Urban Development. Government
related issuers include the Federal Home Loan Mortgage Corporation
("FHLMC") and the Federal National Mortgage Association ("FNMA"), both
government-sponsored corporations owned entirely by private stockholders.
Commercial banks, savings and loan institutions, private mortgage insur-
ance companies, mortgage bankers and other secondary market issuers also
create pass-through pools of conventional residential mortgage loans. Such
issuers may be the originators of the underlying mortgage loans as well as
the guarantors of the mortgage-related securities. The market value of
mortgage-related securities depends on, among other things, the level of
interest rates, the certificates' coupon rates and the payment history of
underlying mortgage loans. For further information, see the SAI.
MUNICIPAL LEASES. The Dreyfus/Laurel Tax-Exempt Money Market Fund may in-
vest in municipal leases. Municipal leases frequently have special risks
not normally associated with general obligation or revenue bonds. Leases
and installment purchase or conditional sale contracts (which normally
provide for title to the leased asset to pass eventually to the government
issuer) have evolved as a means for governmental issuers to acquire prop-
erty and equipment without meeting the constitutional and statutory re-
quirements for the issuance of debt. The debt-issuance limitations of many
state constitutions and statutes are deemed to be inapplicable because of
the inclusion in many leases or contracts of "non- appropriation" clauses
that provide that the governmental issuer has no obligation to make future
payments under the lease or contract unless money is appropriated for such
purpose by the appropriate legislative body on a yearly or other periodic
basis. To reduce these risks, the Dreyfus/Laurel Tax- Exempt Money Market
Fund will only purchase municipal leases subject to a non-appropriation
clause when the payment of principal and accrued interest is backed by an
unconditional irrevocable letter of credit or guarantee of a bank.
The Dreyfus/Laurel Tax-Exempt Money Market Fund proposes to purchase mu-
nicipal lease obligations principally from banks, equipment vendors or
other parties that have entered into an agreement with the Dreyfus/Laurel
Tax-Exempt Money Market Fund providing that such party will remarket the
municipal lease obligations on certain conditions (described below) within
seven days after demand by the Dreyfus/Laurel Tax-Exempt Money Market
Fund. (Such agreements are referred to as "remarketing agreements" and the
party that agrees to remarket or repurchase a municipal lease obligation
is referred to as a "remarketing party.") The agreement will provide for a
remarketing price equal to the principal balance on the obligation as de-
termined pursuant to the terms of the remarketing agreement as of the re-
purchase date (plus accrued interest). The Funds' investment manager, The
Dreyfus Corporation ("Dreyfus"), anticipates that, in most cases, the re-
marketing agreement will also provide for the seller of the municipal
lease obligation or the remarketing party to service it for a servicing
fee. The conditions to the Dreyfus/Laurel Tax-Exempt Money Market Fund's
right to require the remarketing party to purchase or remarket the obliga-
tion are that the Dreyfus/Laurel Tax-Exempt Money Market Fund must certify
at the time of remarketing that (1) payments of principal and interest
under the municipal lease obligation are current and the Dreyfus/Laurel
Tax-Exempt Money Market Fund has no knowledge of any default thereunder by
the governmental issuer, (2) such remarketing is necessary in the sole
opinion of a designated officer of the Dreyfus/Laurel Tax-Exempt Money
Market Fund to meet the Fund's liquidity needs, and (3) the governmental
issuer has not notified the Dreyfus/Laurel Tax-Exempt Money Market Fund of
termination of the underlying lease.
The remarketing agreement described above requires the remarketing party
to purchase (or market to a third party) municipal lease obligations of
the Dreyfus/Laurel Tax-Exempt Money Market Fund under certain conditions
to provide liquidity if share redemptions of the Dreyfus/Laurel Tax-Exempt
Money Market Fund exceed purchases of Dreyfus/Laurel Tax-Exempt Money Mar-
ket Fund shares. The Dreyfus/Laurel Tax-Exempt Money Market Fund will only
enter into remarketing agreements with banks, equipment vendors or other
responsible parties (such as insurance companies, broker-dealers and other
financial institutions) that in Dreyfus' opinion are capable of meeting
their obligations to the Fund. Dreyfus will regularly monitor the ability
of remarketing parties to meet their obligation to the Dreyfus/Laurel Tax-
Exempt Money Market Fund. The Dreyfus/Laurel Tax-Exempt Money Market Fund
will enter into remarketing agreements covering at least 75% in the prin-
cipal amount of the municipal lease obligations in its Fund. The Dreyfu-
s/Laurel Tax-Exempt Money Market Fund will not enter into remarketing
agreements with any one remarketing party in excess of 5% of its total as-
sets. Remarketing agreements with broker-dealers may require an exemptive
order under the Investment Company Act of 1940, as amended (the "1940
Act"). The Dreyfus/Laurel Tax-Exempt Money Market Fund will not enter into
such agreements with broker-dealers prior to the issuance of such an order
in interpretation of the SEC that such an order is not required. There can
be no assurance that such an order or interpretation will be granted.
The "remarketing" feature of the agreement entitles the remarketing party
to attempt to resell the Dreyfus/Laurel Tax-Exempt Money Market Fund's mu-
nicipal lease obligation within seven days after demand from the Fund;
however, the remarketing party will be obligated to repurchase the munici-
pal lease obligation for its own account at the end of the seven-day pe-
riod if such obligation has not been resold. The remarketing agreement
will often be entered into with the party who has sold a municipal lease
obligation to the Dreyfus/Laurel Tax-Exempt Money Market Fund, but remar-
keting agreements may also be entered into with a separate remarketing
party of the same type that meets the credit and other criteria listed
above. Up to 25% of the Dreyfus/Laurel Tax-Exempt Money Market Fund's mu-
nicipal lease obligations may not be covered by remarketing agreements.
The Dreyfus/Laurel Tax-Exempt Money Market Fund, however, will not invest
in municipal lease obligations that are not subject to remarketing agree-
ments if, as a result of such investment, more than 10% of its total as-
sets would be invested in illiquid securities such as (1) municipal lease
obligations not subject to remarketing agreements and not deemed by Drey-
fus at the time of purchase to be at least of comparable quality to rated
municipal debt obligations, or (2) other illiquid assets such as securi-
ties restricted as to resale under federal or state securities laws. For
purposes of the preceding sentence, a municipal lease obligation that is
backed by an irrevocable bank letter of credit or an insurance policy, is-
sued by a bank or issuer deemed by Dreyfus to be of high quality and mini-
mal credit risk, will not be deemed to be "illiquid" solely because the
underlying municipal lease obligation is unrated, if Dreyfus determines
that such municipal lease obligation is readily marketable because it is
backed by such letter of credit or insurance policy.
As used within this section, high quality means that the municipal lease
obligation meets all of the following criteria: (1) the underlying equip-
ment is for an essential governmental function; (2) the municipality has a
documented history of stable financial operations and timely payments of
principal and interest on its municipal debt or lease obligation; (3) the
lease/purchase agreement contains proper terms and conditions to protect
against non-appropriation, substitution of equipment and other more gen-
eral risks associated with the purchase of securities; (4) the equipment
underlying the lease was leased in a proper and legal manner; and (5) the
equipment underlying the lease was leased from a reputable equipment ven-
dor. A letter of credit or insurance policy would generally provide that
the issuer of the letter of credit or insurance policy would pay the out-
standing principal balance of the municipal lease obligations plus any ac-
crued but unpaid interest upon non-appropriation or default by the govern-
mental lessee. However, the terms of each letter of credit or insurance
policy may vary significantly and would affect the degree to which such
protections increase the liquidity of a particular municipal lease obliga-
tion.
OTHER INVESTMENT COMPANIES. Each Fund may invest in securities issued by
other investment companies to the extent that such investments are consis-
tent with the Fund's investment objective and policies and permissible
under the 1940 Act. As a shareholder of another investment company, a Fund
would bear, along with other shareholders, its pro rata portion of the
other investment company's expenses, including advisory fees. These ex-
penses would be in addition to the advisory and other expenses that the
Fund bears directly in connection with its own operations.
REPURCHASE AGREEMENTS. Each Fund may enter into repurchase agreements. A
repurchase agreement involves the purchase of a security by a Fund and a
simultaneous agreement (generally with a bank or broker-dealer) to repur-
chase that security from a Fund at a specified price and date or upon de-
mand. This technique offers a method of earning income on idle cash. A
risk associated with repurchase agreements is the failure of the seller to
repurchase the securities as agreed, which may cause a Fund to suffer a
loss if the market value of such securities declines before they can be
liquidated on the open market. Repurchase agreements with a duration of
more than seven days are considered illiquid securities and are subject to
the limit stated above.
REVERSE REPURCHASE AGREEMENTS. The Dreyfus/Laurel Prime Money Market and
Dreyfus/Laurel Tax-Exempt Money Market Funds may enter into reverse repur-
chase agreements to meet redemption requests where the liquidation of fund
securities is deemed by Dreyfus to be disadvantageous. Under a reverse re-
purchase agreement, a Fund: (i) transfers possession of fund securities to
a bank or broker-dealer in return for cash in an amount equal to a per-
centage of the securities' market value; and (ii) agrees to repurchase the
securities at a future date by repaying the cash with interest. Cash or
liquid high-grade debt securities held by the Fund equal in value to the
repurchase price including any accrued interest will be maintained in a
segregated account while a reverse repurchase agreement is in effect.
SECURITIES LENDING. To increase return on fund securities, each Fund may
lend its portfolio securities to broker-dealers and other institutional
investors pursuant to agreements requiring that the loans be continuously
secured by collateral equal at all times in value to at least the market
value of the securities loaned. There may be risks of delay in receiving
additional collateral or in recovering the securities loaned or even a
loss of rights to the collateral should the borrower of the securities
fail financially. However, loans are made only to borrowers deemed by
Dreyfus to be of good standing and when, in its judgment, the income to be
earned from the loan justifies the attendant risks.
STAND-BY COMMITMENTS. The Dreyfus/Laurel Tax-Exempt Money Market Fund's
investments may include "stand-by commitments," which are rights to resell
municipal securities at specified periods prior to their maturity dates to
the seller or to some third party at an agreed-upon price or yield. Stand-
by commitments may involve certain expenses and risks, including the in-
ability of the issuer of the commitment to pay for the securities at the
time the commitment is exercised, non-marketability of the commitment, and
differences between the maturity of the commitment.
U.S. GOVERNMENT SECURITIES. Each Fund may invest in obligations issued or
guaranteed as to both principal and interest by the U.S. Government or
backed by the full faith and credit of the United States. In addition to
direct obligations of the U.S. Treasury, these include securities issued
or guaranteed by the Federal Housing Administration, Farmers Home Adminis-
tration, Export-Import Bank of the United States, Small Business Adminis-
tration, GNMA, Federal National Mortgage Association, General Services Ad-
ministration and Maritime Administration. Investments may also be made in
U.S. Government obligations that do not carry the full faith and credit
guarantee, such as those issued by the FNMA, the FHLMC, or other instru-
mentalities.
VARIABLE AMOUNT MASTER DEMAND NOTES. The Dreyfus/Laurel Prime Money Mar-
ket Fund may invest in Variable Amount Master Demand Notes. Variable
amount master demand notes are unsecured obligations that are redeemable
upon demand and are typically unrated. These instruments are issued pursu-
ant to written agreements between their issuers and holders. The agree-
ments permit the holders to increase (subject to an agreed maximum) and
the holders and issuers to decrease the principal amount of the notes, and
specify that the rate of interest payable on the principal fluctuates ac-
cording to an agreed-upon formula. If an issuer of a variable amount mas-
ter demand note were to default on its payment obligation, a Fund might be
unable to dispose of the note because of the absence of a secondary market
and might, for this or other reasons, suffer a loss to the extent of the
default. A Fund will only invest in variable amount master demand notes
issued only by entities that Dreyfus considers creditworthy.
VARIABLE RATE OBLIGATIONS. The Dreyfus/Laurel Tax-Exempt Money Market
Fund may invest in variable rate obligations whose interest rates are ad-
justed either at predesignated periodic intervals or whenever there is a
change in the market rate to which the security's interest rate is tied.
The adjustments minimize changes in the market value of the obligation
and, accordingly, enhance the ability of the Dreyfus/Laurel Tax-Exempt
Money Market Fund to maintain a stable NAV. The Dreyfus/Laurel Tax-Exempt
Money Market Fund may also purchase participation interests in variable
rate securities such as industrial development bonds backed by letters of
credit or insured or guaranteed by financial institutions, such as banks,
or insurance companies, whose credit quality ratings are judged by Dreyfus
to be comparable in quality to the two highest quality ratings of Moody's
or Standard & Poor's.
WHEN ISSUED SECURITIES AND DELAYED DELIVERY TRANSACTIONS. To secure ad-
vantageous prices or yields, each Fund may purchase U.S. Government secu-
rities on a when-issued basis or may purchase or sell securities for de-
layed delivery. In such transactions, delivery of the securities occurs
beyond the normal settlement periods, but no payment or delivery is made
by a Fund prior to the actual delivery or payment by the other party to
the transaction. The purchase of securities on a when-issued or delayed
delivery basis involves the risk that, as a result of an increase in
yields available in the market place, the value of the securities pur-
chased will decline prior to the settlement date. The sale of securities
for delayed delivery involves the risk that the prices available in the
market on the delivery date may be greater than those obtained in the sale
transactions. Each Fund will establish a segregated account consisting of
cash, U.S. Government securities or other high-grade debt obligations in
an amount equal to the amounts of its when-issued and delayed delivery
commitments.
MASTER/FEEDER OPTION. The Dreyfus/Laurel Funds, Inc. may in the future
seek to achieve a Fund's investment objective by investing all of a Fund's
assets in another investment company having the same investment objective
and substantially the same investment policies and restrictions as those
applicable to the Fund. Shareholders of the Fund will be given at least 30
days' prior notice of any such investment. Such investment would be made
only if the directors determine it to be in the best interest of the Fund
and its shareholders. In making that determination, the directors will
consider, among other things, the benefits to shareholders and/or the op-
portunity to reduce costs and achieve operational efficiencies. Although
the Funds believe that the directors will not approve an arrangement that
is likely to result in higher costs, no assurance is given that costs will
be materially reduced if this option is implemented.
LIMITING INVESTMENT RISKS. Each Fund is subject to a number of investment
limitations. Certain limitations are matters of fundamental policy and may
not be changed without the affirmative vote of the holders of a majority
of each Fund's outstanding Shares. The SAI describes all of a Fund's fun-
damental and non-fundamental restrictions.
The investment objective, policies, restrictions, practices and procedures
of a Fund, unless otherwise specified, may be changed without shareholder
approval. If a Fund's investment objective, policies, restrictions, prac-
tices or procedures change, shareholders should consider whether the Fund
remains an appropriate investment in light of their then current position
and needs.
In order to permit the sale of a Fund's Shares in certain states, a Fund
may make commitments more restrictive than the investment policies and re-
strictions described in this Prospectus and the SAI. Should a Fund deter-
mine that any such commitment is no longer in the best interests of the
Fund, it may consider terminating sales of its Shares in the states in-
volved.
HOW TO DO BUSINESS WITH US
SPECIAL SHAREHOLDER SERVICES
You may establish one or more special services designed to provide an easy
way to do business with the Funds. By electing these services on your ap-
plication or by completing the appropriate forms, you may authorize:
* Investment by phone.
* Automatic monthly investments.
* Exchanges or redemptions by phone.
By electing the service which enables you to exchange and redeem by phone,
you agree to indemnify the Fund, its transfer agent and its investment
manager from any loss, claim or expense you may incur as a result of their
acting on such instruction. The Funds will employ reasonable procedures to
confirm that instructions communicated by telephone are genuine. These in-
clude personal identification procedures, recording of telephone conversa-
tions and providing written confirmation of each transaction. A failure on
the part of the Fund to employ such procedures may subject it to liability
for any loss due to unauthorized or fraudulent instructions.
INVESTOR LINE
You may reach The Dreyfus Family of Funds by calling our Investor Line at
1-800-548-2868. If you call on a rotary phone during normal business hours
(9 a.m. to 5 p.m., Eastern time), you will reach a Dreyfus Family of Funds
operator. If you call on a Touch-Tone phone, you will receive instructions
on how to: (1) request a current prospectus or information booklets about
The Dreyfus Family of Funds' investment portfolios and services, (2) lis-
ten to NAVs, yields and total return figures, and (3) talk with a customer
service representative during normal business hours. For more information
about direct access using a Touch-Tone phone, please contact The Dreyfus
Family of Funds.
HOW TO INVEST IN THE FUNDS
Premier serves as the Funds' distributor. Premier is a wholly-owned sub-
sidiary of Institutional Administration Services, Inc., a provider of mu-
tual fund administration services, the parent company of which is Boston
Institutional Group, Inc. Premier also serves as the Funds' sub-
administrator and, pursuant to a Sub-Administration Agreement, provides
various administrative and corporate secretarial services to the Funds.
Premier has established various procedures for purchasing Class R and In-
vestor Shares of a Fund. Class R Shares are sold primarily to bank trust
departments and other financial service providers (including Mellon Bank
and its affiliates) ("Banks") acting on behalf of customers having a qual-
ified trust or investment account or relationship at such institution, or
to customers who have received and hold shares of the Fund distributed to
them by virtue of such an account or relationship. Holders of Class R
Shares who have held their shares since April 4, 1994 may continue to pur-
chase Class R Shares of the Funds whether or not they would otherwise be
eligible to do so. Investor Shares are primarily sold to retail investors
by Premier and by banks, securities brokers or dealers and other financial
institutions (including Mellon Bank and its affiliates) ("Agents") that
have entered into a Selling Agreement with Premier. Once an investor has
established an account, additional purchases may, in certain cases, be
made directly through a Fund's transfer agent. If Shares of a Fund are
held in an account at a Bank or with an Agent, such Bank or Agent may re-
quire you to place all Fund purchase, exchange and redemption orders
through them. All Banks and Agents have agreed to transmit your transac-
tion requests to the Fund's transfer agent or to Premier. You may diver-
sify your investments by choosing a combination of investment portfolios
offered by The Dreyfus Family of Funds.
You may invest in the following ways:
BY MAIL.
Send your application and check or money order to The Dreyfus Family of
Funds, P.O. Box 9692, Providence, Rhode Island 02940-9830. Checks must be
payable in U.S. dollars and drawn on U.S. banks. When making subsequent
investments, enclose your check with the return remittance portion of the
confirmation of your previous investment. If the remittance portion is not
available, indicate on your check or a separate piece of paper your name,
address, the Fund and class of Shares of such Fund that you are buying and
the account number. Orders to purchase Shares are effective on the day the
Fund receives your check or money order. (See "When Share Price is Deter-
mined.")
BY TELEPHONE.
Once your account is open, you may make investments by telephone by call-
ing 1-800-548-2868 if you have elected the service authorizing the Funds
to draw on your bank account by check when you call with instructions. In-
vestments made by phone in any one account must be in an amount of at
least $100 and are effective two days after your call. (See "When Share
Price is Determined.")
BY WIRE.
You may make your initial or subsequent investments in the Funds by wiring
funds. To do so:
(1) Instruct your bank to wire funds to MELLON BANK (ABA routing number
0430-0026-1.)
(2) Be sure to specify on the wire:
(A) The Dreyfus Funds.
(B) The Fund name and the class of Shares of such Fund you are buying and
account number (if you have one).
(C) Your name.
(D) Your city and state.
In order for a wire purchase to be effective on the same day it is re-
ceived both the trading instructions and the wire must be received before
4 p.m., Eastern time. (See "When Share Price is Determined.")
BY AUTOMATIC MONTHLY INVESTMENTS.
Once your account is open, you may make investments automatically by
electing the Automatic Investment Program, the service authorizing a Fund
to draw on your bank account regularly by paper or electronic draft. Such
investments must be in amounts of not less than $100 in any one account.
You should inquire at your bank whether it will honor a preauthorized
paper or electronic draft. Contact the Funds if your bank requires addi-
tional documentation. Call 1-800-548-2868 or write The Dreyfus Family of
Funds at One Exchange Place, Boston Massachusetts 02109 for more informa-
tion about the Automatic Investment Program.
BY DIRECT DEPOSIT.
If your employer offers Direct Deposit, you may arrange to automatically
purchase Shares of a Fund (minimum $100) each pay period. Direct Deposit
investing may also be available to persons receiving regular payments from
other sources (including government pension or social security payments).
Call 1-800-548-2868 or write The Dreyfus Family of Funds at One Exchange
Place, Boston Massachusetts 02109 for more information or a Direct Deposit
authorization form.
BY IN-KIND PURCHASES.
If the following conditions are satisfied, the Funds may at their discre-
tion, permit you to purchase Shares through an "in-kind" exchange of secu-
rities you hold. Any securities exchanged must meet the investment objec-
tive, policies and limitations of the respective Fund, must have a readily
ascertainable market value, must be liquid and must not be subject to re-
strictions on resale. The market value of any securities exchanged, plus
any cash, must be at least equal to $25,000. Shares purchased in exchange
for securities generally cannot be redeemed for fifteen days following the
exchange in order to allow time for the transfer to settle.
The basis of the exchange will depend upon the relative NAV of the Shares
purchased and securities exchanged. Securities accepted by a Fund will be
valued in the same manner as the Fund values its assets. Any interest
earned on the securities following their delivery to the Funds and prior
to the exchange will be considered in valuing the securities. All inter-
est, dividends, subscription or other rights attached to the securities
become the property of the Funds, along with the securities. Call 1-800-
548-2868 or write The Dreyfus Family of Funds at One Exchange Place, Bos-
ton, Massachusetts 02109 for more information about "in-kind" purchases.
WHEN SHARE PRICE IS DETERMINED.
The price of your Shares is their net asset value ("NAV"). NAV is deter-
mined on each day that the New York Stock Exchange ("NYSE") is open (a
"business day"). Investments and requests to exchange or redeem Shares re-
ceived by a Fund before 4 p.m., Eastern time, are effective on, and will
receive the price next determined on, that business day (except invest-
ments made by electronic funds transfer which are effective two business
days after your call). The NAV of each Fund is calculated two times each
business day, at 12 noon and 4 p.m., Eastern time. Investment, exchange or
redemption requests received after 4 p.m. Eastern time, for Money Market
Funds, are effective on, and receive the first Share price determined on
the next business day.
ADDITIONAL INFORMATION ABOUT INVESTMENTS.
Once you have mailed or otherwise transmitted your investment instructions
to a Fund, it may not be modified or canceled. The Funds reserve the right
to reject any application or investment. The Funds reserve the right to
make exceptions to the minimum initial investment and account minimum
amount from time to time.
The minimum initial investment to establish a new account in a Fund is
$1,000, except for Individual Retirement Accounts ("IRAs"), retirement
plans, and Uniform Transfers (Gifts) to Minors Act accounts, for which the
minimum initial investment is $500. The Funds may suspend the offering of
Shares of any class of any Fund and reserve the right to vary initial and
subsequent investment minimums. Subsequent investments to purchase addi-
tional Shares in a Fund must be in an amount of $100 or more.
The Funds intend, upon 60 days' prior notice, to involuntarily redeem
Shares in any account if the total value of the Shares is less than a
specified minimum unless you have established an automatic monthly invest-
ment to purchase additional Shares. The Funds reserve the right to change
such minimum from time to time. Any time the Shares of a Fund held in an
account have a value of less than $1,000 ($500 for Uniform Gifts/Transfers
to Minors Acts accounts), unless the deficiency amount is the result of a
decrease in the NAV per share, a notification may be sent advising you of
the need to either make an investment to bring the value of the Shares
held in the account up to $1,000 ($500) or to establish an automatic
monthly investment to purchase additional Shares. If the investment is not
made or the automatic monthly investment is not established within 60 days
from the date of notification, the Shares held in the account will be re-
deemed and the proceeds from the redemption will be sent by check to your
address of record.
The automatic redemption of Shares will not apply to IRAs, custodial ac-
counts under Section 403(b) of the Internal Revenue Code of 1986, as
amended (the "Code") ("403(b) accounts") and other types of tax-deferred
retirement plan accounts.
HOW TO EXCHANGE YOUR INVESTMENT
FROM ONE FUND TO ANOTHER
You may exchange your Shares from one Fund for Shares of the same class of
certain other funds advised by Dreyfus and that were previously advised by
Mellon Bank. As noted below, exchanges from any one Fund account may be
limited in any one calendar year. In addition, the Shares being exchanged
and the Shares of each fund being acquired must have a current value of at
least $100 and otherwise meet the minimum investment requirement of the
fund being acquired. Call the Investor Line for additional information and
a prospectus describing other investment portfolios offered by The Dreyfus
Family of Funds.
BY TELEPHONE.
You may exchange your Shares by calling 1-800-548-2868 if you have autho-
rized the Funds to accept telephone instructions.
BY MAIL.
You may direct the Funds to exchange your Shares by writing to The Dreyfus
Family of Funds, P.O. Box 9692, Providence, Rhode Island, 02940-9830. The
request should be signed by each person in whose name the Shares are reg-
istered. All signatures should be exactly as the name appears in the reg-
istration; for example, if an owner's name is registered as John Robert
Jones, he should sign that way and not as John R. Jones.
ADDITIONAL INFORMATION ABOUT EXCHANGES.
(1) In an exchange from one account to another account, the Shares being
sold and the new Shares being purchased must have a current value of
at least $100. A limited exception to this policy will permit an owner
of Shares of a Money Market Fund to establish an automatic monthly ex-
change, the Automatic Withdrawal Program, from such Money Market Fund
to certain other Funds offered by The Dreyfus Family of Funds in an
amount of $100 or more. To set up an Automatic Withdrawal Program,
call The Dreyfus Family of Funds at 1-800-548- 2868 for instructions.
(2) Exchanges from any one Fund account may be limited in any one calendar
year. The Funds reserve the right to make exceptions to an exchange
limitation from time to time. An exchange limitation will not apply to
the exchange of Shares of a Money Market Fund, the Shares of any of
the funds exchanged pursuant to an Automatic Withdrawal Program, and
to Shares held in 403(b) accounts.
(3) The Shares being acquired must be qualified for sale in your state of
residence.
(4) If the Shares are represented by a negotiable stock certificate, the
certificate must be returned before the exchange can be effected.
(5) Once you have telephoned or mailed your exchange request, it is irre-
vocable and may not be modified or canceled.
(6) An exchange is based on the next calculated NAV of each Fund after re-
ceipt of your exchange order.
(7) Shares may not be exchanged unless you have furnished the Funds with
your tax identification number, certified as prescribed by the Inter-
nal Revenue Code and Regulations. (See "Taxes.")
(8) Exchange of non-money market fund Shares is, for federal income tax
purposes, a sale of the Shares, on which you may realize a taxable
gain or loss.
(9) If the request is made by a corporation, partnership, trust, fidu-
ciary, agent, estate, guardian, pension plan, profit sharing plan or
unincorporated association, the Funds may require evidence satisfac-
tory to it of the authority of the individual signing the request.
Shareholders will be given sixty days' notice prior to any material
changes in the exchange privilege.
HOW TO REDEEM FUND SHARES
The Funds will redeem or "buy back" your Shares at any time at their NAV.
(Before redeeming, please read "Additional Information About Redemp-
tions.") Your redemption proceeds may be delayed if you have owned your
Shares less than 10 days. (See "Redemption Proceeds.") The Funds impose no
charges when Shares are redeemed. Agents or other institutions may charge
their clients a nominal fee for effecting redemptions of Fund Shares.
BY TELEPHONE.
If you have authorized the Funds to accept telephone instructions, you may
redeem your Shares by calling 1-800-548-2868. Once made, your telephone
request may not be modified or canceled. (Before calling, read "Additional
Information About Redemptions," and "When Share Price is Determined.")
BY MAIL.
Your written instructions to redeem Shares may be in any one of the fol-
lowing forms:
* A letter to the Funds.
* An assignment form or stock power.
* An endorsement on the back of your negotiable stock certificate, if you
have one.
Once mailed to The Dreyfus Family of Funds at P.O. Box 9692, Providence,
Rhode Island 02940- 9830, the redemption request is irrevocable and may
not be modified or canceled. A letter of instruction should state the num-
ber of Shares or the dollar amount to be redeemed. The letter must include
your account number, and for redemptions in an amount in excess of
$25,000, a signature guarantee of each owner. The redemption request must
be signed by each person in whose name the Shares are registered; for ex-
ample, in the case of joint ownership, each owner must sign. All signa-
tures should be exactly as the name appears in the registration. If the
owner's name appears in the registration as John Robert Jones, he should
sign that way and not as John R. Jones. Signature guarantees can be ob-
tained from commercial banks, credit unions if authorized by state laws,
savings and loans institutions, trust companies, members of a recognized
stock exchange, or from other eligible guarantors who are members of the
Securities Transfer Agents Medallion Program ("STAMP") or any other indus-
try recognized program approved by the Securities Transfer Association.
(Before writing, see "Additional Information About Redemptions.")
BY AUTOMATED WITHDRAWAL PROGRAM.
The Funds' Automated Withdrawal Program automatically redeems enough
Shares each month to provide you with a check for an amount which you
specify (with a minimum of $100). To set up an Automated Withdrawal Pro-
gram, call The Dreyfus Family of Funds at 1-800-548-2868 for instructions.
Only shareholders with a Fund account balance of $10,000 or more may par-
ticipate in this program. Shares will be redeemed on the 15th day or 30th
day of each month or the next business day, and your check will be mailed
the next day. If your monthly checks exceed the dividends, interest and
capital appreciation on your Shares, the payments will deplete your in-
vestment. Amounts paid to you by Automated Withdrawals are not a return on
your investment. They are derived from the redemption of Shares in your
account, and you must report on your income tax return any gains or losses
that you realize.
You may specify an Automated Withdrawal Program when you make your first
investment. If you would like to establish an Automated Withdrawal Program
thereafter, the request for the Automated Withdrawal Program must be
signed by all owners, with their signatures guaranteed.
When you make your first investment you may request that Automated With-
drawals be sent to an address other than the address of record. Thereaf-
ter, a request to send Automated Withdrawals to an address other than the
address of record must be signed by all owners, with their signatures
guaranteed.
The Funds may terminate the Automated Withdrawal Program at any time, upon
notice to you, and you likewise may terminate it or change the amount of
the Automated Withdrawal Program, by notice to the Funds in writing or by
telephone. Termination or change will become effective within five days
following receipt of your instruction. Your Automated Withdrawal Program
plan may begin any time after you have owned your Shares for 10 days.
BY CHECK WRITING.
You may redeem Shares of each Money Market Fund by writing a draft
("check") against your account balance. (Shares held in certificate form
may not be redeemed by check.) There is no limit on the number of checks
you can write, but they must be for at least $250. When checks are pre-
sented, the Funds will redeem a sufficient number of Shares from your ac-
count to pay the check amount. You will continue to receive dividends on
all Shares until your check is presented for payment.
If you want to add Check Writing to an existing Money Market Fund account,
call 1-800-548-2868 or write to The Dreyfus Family of Funds at P.O. Box
9692, Providence, Rhode Island 02940-9830. For a new Money Market Fund ac-
count, you may elect Check Writing on your purchase application. You will
receive an initial supply of checks usually within 10 days after your ac-
count has been established and your completed signature card is on file
with the Funds. Check Writing is not available for any account held in the
Funds sponsored IRA or 403(b) account.
Checks must be signed in accordance with the instructions you furnished on
your signature card. In all situations, including joint accounts, only one
signature is necessary unless you indicated otherwise on the card. The
Funds will return checks that do not carry all required signatures or that
contain other irregularities.
The Funds will also return checks drawn on insufficient funds or on funds
from investments made by check or draft within the previous 10 days unless
the Funds have previously received proof that the investment check or
draft has been paid. The Funds will not be liable for any loss or expenses
associated with returned checks.
You may request a stop payment on any check and the Funds will attempt to
carry out your request. The Funds cannot guarantee that such efforts will
be effective.
REDEMPTION PROCEEDS.
Redemption proceeds may be sent to you:
BY MAIL. If your redemption check is mailed, it is usually mailed by the
second business day after receipt of your redemption request, but not
later than seven days afterwards. When a redemption occurs shortly after a
recent purchase, the Funds may hold the redemption proceeds beyond seven
days but only until the purchase check clears, which may take up to 10
days or more. No dividend is paid on the redemption proceeds after the re-
demption and before the check is mailed. If you anticipate redemptions
soon after you purchase your Shares, you are advised to wire funds to
avoid delay.
BY WIRE AND ELECTRONIC FUNDS TRANSFER. You may authorize the Funds to
transmit redemption proceeds by wire or electronic funds transfer. Pro-
ceeds from the redemption of Fund Shares will normally be transmitted on
the first business day, but not later than the seventh day, following the
date of redemption. Your bank usually will receive wired funds the day
they are transmitted. Electronically transferred funds will ordinarily be
received within two business days after transmission. Once the funds are
transmitted, the time of receipt and the availability of the funds are not
within the Funds' control. If your bank account changes, you must send a
new "voided" check preprinted with the bank registration with written in-
structions signed by all owners (with their signatures guaranteed), in-
cluding tax identification number.
ADDITIONAL INFORMATION ABOUT REDEMPTIONS.
(1) Redemptions specifying a certain date or price cannot be accepted and
will be returned.
(2) If the Shares being redeemed are represented by a negotiable stock
certificate, the certificate must be returned before the redemption
can be effected.
(3) All redemptions are made and the price is determined on the day when
all documentation is received in good order.
(4) If the request to redeem is made by a corporation, partnership, trust,
fiduciary, agent, estate, guardian, pension plan, profit sharing plan,
or unincorporated association, the Funds may require evidence satis-
factory to it of the authority of the individual signing the request.
Please call or write the Funds for further information.
(5) A request to redeem Shares in an IRAs or 403(b) account must be accom-
panied by an IRS Form W4-P and a reason for withdrawal as specified by
the Internal Revenue Service.
HOW TO USE THE DREYFUS FAMILY OF FUNDS
IN A TAX-QUALIFIED RETIREMENT PLAN
The Dreyfus Family of Funds' investment portfolios are available for your
tax-deferred retirement plan. Investment in the Dreyfus/Laurel Tax-Exempt
Money Market Fund would not be appropriate for a tax- deferred retirement
plan. Call 1-800-548-2868 or write The Dreyfus Family of Funds at P.O. Box
9692, Providence, Rhode Island 02940-9830 and request the appropriate
forms for:
* IRAs.
* 403(b) accounts for employees of public school systems and non-profit
organizations.
* Profit-sharing plans and pension plans for corporations and other em-
ployers.
HOW TO TRANSFER AN INVESTMENT TO A DREYFUS FAMILY OF FUNDS'
RETIREMENT PLAN.
It is easy to transfer your tax-deferred plan to The Dreyfus Family of
Funds from another custodian. Call 1-800-548-2868 or write The Dreyfus
Family of Funds at P.O. Box 9692, Providence, Rhode Island 02940-9830 for
a request to transfer form. If you direct The Dreyfus Family of Funds to
transfer funds from an existing non-retirement Dreyfus Family of Funds ac-
count into a retirement account, the Shares in your non-retirement account
will be redeemed. The redemption proceeds will be invested in your Dreyfus
Family of Funds IRA or other tax-qualified retirement plan. The redemption
is a taxable event resulting in a taxable gain or loss.
OTHER INFORMATION
SHARE PRICE
An investment portfolio's NAV refers to the worth of one Share. The NAV
for Investor and Class R Shares of a Money Market Fund is calculated on
the basis of amortized cost, which involves initially valuing a portfolio
instrument at its cost and thereafter assuming a constant amortization to
maturity of any discount or premium, regardless of the impact of fluctuat-
ing interest rates on the market value of the instrument. Each Money Mar-
ket Fund intends to maintain a constant NAV of $1.00 per share, although
there is no assurance that this can be done on a continuing basis.
The yield of most classes of Shares of the Money Market Funds are pub-
lished weekly in leading financial publications and daily in many local
newspapers.
PERFORMANCE ADVERTISING
From time to time, a Fund may advertise the yield and total return on a
class of Shares. The Dreyfus/Laurel Tax-Exempt Money Market Fund may ad-
vertise tax-equivalent yields. Total return, yield and the tax equivalent
yield figures are based on historical earnings and are not intended to in-
dicate future performance. The "total return" of a class of Shares of a
Fund may be calculated on an average annual total return basis or a cumu-
lative total return basis. Average annual total return refers to the aver-
age annual compounded rates of return on a class of Shares over one-,
five-, and ten-year periods or the life of the Fund (as stated in the ad-
vertisement) that would equate an initial amount invested at the beginning
of a stated period to the ending redeemable value of the investment, as-
suming the reinvestment of all dividends and capital gains distributions.
Cumulative total return reflects the total percentage change in the value
of the investment over the measuring period, again assuming the reinvest-
ment of all dividends and capital gains distributions.
The "yield" of a class of Shares in a Money Market Fund refers to the in-
come generated by an investment in such class over a seven-day period
identified in the advertisement. This income is then "annualized." That
is, the amount of income generated by the investment during that week is
assumed to be generated each week over a 52-week period and is shown as a
percentage of the investment. The "effective yield" is calculated simi-
larly, but, when annualized, the income earned by an investment in a class
of Shares in a Money Market Fund is assumed to be reinvested. The "effec-
tive yield" will be slightly higher than the "yield" because of the com-
pounding effect of this assumed reinvestment. The tax-equivalent yield of
a the Dreyfus/Laurel Tax-Exempt Money Market Fund shows the level of tax-
able yield needed to produce an after-tax equivalent to such fund's tax-
free yield. This is done by increasing a class's yield by the amount nec-
essary to reflect the payment of federal income tax (and state income tax,
if applicable) at a stated tax rate.
Total return and yield quotations will be computed separately for each
class of a Fund's Shares. Because of the difference in the fees and ex-
penses borne by Class R and Investor Shares of each Fund, the return and
yield on Class R Shares will generally be higher than the return and yield
on Investor Shares. Any fees charged by a Bank or Agent directly to its
customers' account in connection with investments in the Fund will not be
included in calculations of total return or yield. Each Fund's annual re-
port contains additional performance information and is available upon re-
quest without charge from the Fund's distributor or your Bank or Agent.
A Fund may compare the performance of its Investor and Class R Shares with
various industry standards of performance including Lipper Analytical Ser-
vices, Inc. ratings, and the Consumer Price Index. Performance rankings as
reported in Changing Times, Business Week, Institutional Investor, The
Wall Street Journal, IBC/Donoghue's Money Fund Report, Mutual Fund Fore-
caster, No Load Investor, Money Magazine, Morningstar Mutual Fund Values,
U.S. News and World Report, Forbes, Fortune, Barron's, Financial Planning,
Financial Planning on Wall Street, Certified Financial Planner Today, In-
vestment Advisor, Kiplinger's, Smart Money, and similar publications may
also be used in comparing the Fund's performance. Furthermore, a Fund may
quote its Investor and Class R Shares' total returns and yields in adver-
tisements or in shareholder reports. A Fund may also advertise non- stan-
dardized performance information, such as total return for periods other
than those required to be shown or cumulative performance data. A Fund may
advertise a quotation of yield or other similar quotation demonstrating
the income earned or distributions made by the Fund.
DISTRIBUTIONS
Each Fund declares daily and pays monthly (on the 20th day or next busi-
ness day if the 20th falls on a Saturday, Sunday or national holiday) div-
idends from its net investment income, if any. Each Fund does not expect
to realize any long-term capital gains or losses, and does not anticipate
payment of any capital gain distribution.
Unless you choose to receive dividend and/or capital gain distributions in
cash, your distributions will be automatically reinvested in additional
Shares of the distributing Fund at the NAV. You may change the method of
receiving distributions at any time by writing to the Funds. Checks which
are sent to shareholders who have requested distributions to be paid in
cash and which are subsequently returned by the United States Postal Ser-
vice as not deliverable or which remain uncashed for six months or more
will be reinvested in additional Fund Shares in the shareholder's account
at the then current NAV. Subsequent Fund distributions will be automati-
cally reinvested in additional Fund Shares in the shareholder's account.
Distributions paid by a Fund with respect to one class of Shares may be
greater or less per Share than those paid with respect to another class of
Shares due to the different expenses of the different classes. Shares pur-
chased on a day on which a Fund calculates its NAV will not begin to ac-
crue dividends until the following day. Redemption orders effected on any
particular day will receive all dividends declared through the day of re-
demption. However, if as a shareholder of a Fund you follow the special
wire purchase and redemption procedures outlined under "How to Invest in
The Funds" and "How to Redeem Shares," you may receive the dividend de-
clared on the day of purchase if the purchase order is received prior to
12:00 noon, Eastern time, and the immediately available funds are received
by the Fund's custodian by 4:00 p.m., Eastern time. You will not receive
the dividends declared on the day of redemption if the redemption order is
placed prior to 12:00 noon, Eastern time.
You may elect to have distributions on Shares held in IRAs and 403(b) ac-
counts paid in cash only if you are at least 59 1/2 years old or are per-
manently and totally disabled. Distribution checks normally are mailed
within seven days after the record date.
TAXES
Each Fund intends to continue to qualify for treatment as a regulated in-
vestment company under the Code so that it will be relieved of federal in-
come tax on that part of its investment company taxable income (consisting
generally of taxable net investment income and net short-term capital
gain) and net capital gain (the excess of net long-term capital gain over
net short-term capital loss) that is distributed to its shareholders. In
addition, the Dreyfus/Laurel Tax-Exempt Money Market Fund intends to con-
tinue to qualify to pay "exempt-interest" dividends, which requires, among
other things, that at the close of each quarter of its taxable year at
least 50% of the value of its total assets must consist of municipal secu-
rities.
Dividends from a Fund's investment company taxable income are taxable to
you as ordinary income, to the extent of the Fund's earnings and profits.
Distributions by the Dreyfus/Laurel Tax-Exempt Money Market Fund that are
designated by it as "exempt-interest dividends" generally may be excluded
by you from your gross income. Distributions by a Fund (including the
Dreyfus/Laurel Tax-Exempt Money Market Fund) of net capital gain, when
designated as such, are taxable to you as long-term capital gains, regard-
less of the length of time you have owned your Shares. The Funds are not
expected to realize long-term capital gains.
Interest on indebtedness incurred or continued to purchase or carry Shares
of the Dreyfus/Laurel Tax-Exempt Money Market Fund will not be deductible
for federal income tax purposes to the extent that Fund's distributions
consist of exempt-interest dividends. Although it has no current intention
to do so, the Dreyfus/Laurel Tax-Exempt Money Market Fund may invest in
"private activity bonds," the interest on which is treated as a tax pref-
erence item for shareholders in determining their liability for the alter-
native minimum tax. Proposals may be introduced before Congress for the
purpose of restricting or eliminating the federal income tax exemption for
interest on municipal securities. If such a proposal were enacted, the
availability of such securities for investment by the Dreyfus/Laurel Tax-
Exempt Money Market Fund and the value of its portfolio would be affected.
In such event, that Fund would reevaluate its investment objective and
policies.
Dividends and other distributions are taxable to you regardless of whether
they are received in cash or reinvested in additional Fund Shares, even if
the value of your Shares is below your cost. If you purchase Shares
shortly before a taxable distribution (i.e., any distribution other than
an exempt-interest dividend paid by the Dreyfus/Laurel Tax-Exempt Money
Market Fund), you must pay income taxes on the distribution, even though
the value of your investment (plus cash received, if any) remains the
same. In addition, the Share price at the time you purchase Shares may in-
clude unrealized gains in the securities held in the Fund. If these port-
folio securities are subsequently sold and the gains are realized, they
will, to the extent not offset by capital losses, be paid to you as a cap-
ital gain distribution and will be taxable to you.
In January of each year, the Funds will send you a Form 1099-DIV notifying
you of the status for federal income tax purposes of your distributions
for the preceding year. The Funds also will advise shareholders of the
percentage, if any, of the dividends paid by the Dreyfus/Laurel Tax-Exempt
Money Market Fund that are exempt from federal income tax and the portion,
if any, of those dividends that is a tax preference item for purposes of
the alternative minimum tax.
You must furnish the Funds with your taxpayer identification number
("TIN") and state whether you are subject to withholding for prior under-
reporting, certified under penalties of perjury as prescribed by the Code
and the regulations thereunder. Unless previously furnished, investments
received without such a certification will be returned. Each Fund is re-
quired to withhold a portion of all dividends, capital gain distributions
and redemption proceeds payable to any individuals and certain other non-
corporate shareholders who do not provide the Fund with a correct TIN;
withholding from dividends and capital gain distributions also is required
for such shareholders who otherwise are subject to backup withholding.
Each Fund will be subject to a 4% nondeductible excise tax to the extent
it fails to distribute by the end of any calendar year substantially all
of its taxable ordinary income for that year and capital gain net income
for the one-year period ending on October 31 of that year, plus certain
other amounts. Each Fund expects to make such distributions as are neces-
sary to avoid the imposition of this tax.
The foregoing is only a summary of some of the important tax consider-
ations generally affecting each Fund and its shareholders; see the SAI for
a further discussion. There may be other federal, state or local tax con-
siderations applicable to a particular investor; for example, the Dreyfu-
s/Laurel Tax- Exempt Money Market Fund's dividends may be wholly or partly
taxable under state and/or local laws. You therefore are urged to consult
your own tax adviser.
OTHER SERVICES
At least twice a year you will receive the financial statements of each
Fund with a summary of its investments and performance. In addition, an
account statement will be mailed to you quarterly or monthly depending on
the Fund's reporting schedule. You may also request a statement of your
account activity at any time. Carefully review such confirmation state-
ments and account statements and notify the Funds immediately if there is
an error. From time to time, to reduce expenses, only one copy of a Fund's
shareholder reports (such as a Fund's annual report) may be mailed to your
household. Please call The Dreyfus Family of Funds if you need additional
copies.
No later than January 31 of each year, the Funds will send you the follow-
ing reports, which you may use in completing your federal income tax re-
turn:
Form 1099-DIV Reports taxable distributions (and returns of capital, if
any) during the preceding year.
Form 1099-R Reports distributions from IRAs and 403(b) accounts during
the preceding year.
At such time as prescribed by law, the Funds will send you a Form 5498,
which reports contributions to your IRA for the previous calendar year. In
addition, the Funds may send you other relevant tax-related forms.
FURTHER INFORMATION ABOUT THE FUNDS
THE DREYFUS/LAUREL FUNDS, INC.
The Laurel Funds, Inc. was incorporated in Maryland on August 6, 1987 and
changed its name to The Dreyfus/Laurel Funds, Inc. on October 17, 1994.
The Dreyfus/Laurel Funds, Inc. is registered with the SEC under the 1940
Act as a diversified, open-end management investment company. The Dreyfu-
s/Laurel Funds, Inc. has an authorized capitalization of 25 billion Shares
of $0.001 par value stock with equal voting rights. The Articles of Incor-
poration permit the Directors to create an unlimited number of investment
portfolios (each a "fund"). Each of the Funds offered by this Prospectus
currently issues two classes of Shares designated "Investor" and "Class R"
Shares.
Each Share (regardless of class) has one vote. All Shares of a Fund (and
classes thereof) vote together as a single class, except as to any matter
for which a separate vote of any fund or class is required by the 1940
Act, and except as to any matter which affects the interests of one or
more particular funds or classes, in which case only the shareholders of
the affected fund or class are entitled to vote, each as a separate class.
At your written request, the Funds will issue negotiable stock certifi-
cates.
At January 31, 1995, Mellon Bank Corporation, the investment manager's
parent, owned of record through its direct and indirect subsidiaries more
than 25% of The Dreyfus/Laurel Funds, Inc.'s outstanding voting shares,
and is deemed, under the 1940 Act, to be a controlling shareholder.
MANAGEMENT.
THE BOARD OF DIRECTORS. The business affairs of The Dreyfus/Laurel Funds,
Inc. are managed under the direction of its Directors. The SAI contains
the names and general background information concerning the Directors and
officers of The Dreyfus/Laurel Funds, Inc.
INVESTMENT MANAGER. Dreyfus is located at 200 Park Avenue, New York, New
York 10166. As of January 31, 1995, Dreyfus managed or administered ap-
proximately $70 billion in assets for more than 1.9 million investor ac-
counts nationwide. Dreyfus is a wholly-owned subsidiary of Mellon Bank
(One Mellon Bank Center, Pittsburgh, Pennsylvania 15258), the Funds' prior
investment manager. Pursuant to an Investment Management Agreement trans-
ferred from Mellon Bank to the Dreyfus effective as of October 17, 1994,
Dreyfus provides, or arranges for the provision by one or more third par-
ties of investment advisory, administrative, custody, fund accounting and
transfer agency services to the Fund. As investment manager, Dreyfus man-
ages each Fund by making investment decisions based on each Fund's invest-
ment objectives, policies and restrictions.
Under the Investment Management Agreement, each Fund pays a fee computed
daily, and paid monthly, at the annual rate of 0.50% each Fund's average
daily net assets less certain expenses as described below.
Dreyfus pays all of the expenses of each Fund except brokerage fees,
taxes, interest, fees, and expenses of the non-interested Directors (in-
cluding counsel fees) and extraordinary expenses. Although Dreyfus does
not pay for the fees and expenses of the non-interested Directors (includ-
ing counsel fees), Dreyfus is contractually required to reduce its invest-
ment management fee in an amount equal to each Fund's allocable share of
such expenses. In order to compensate Dreyfus for paying virtually all of
a Fund's expenses, each Fund's investment management fee is higher than
the investment advisory fees paid by most investment companies. Most if
not all, such companies also pay for additional non- investment advisory
expenses that are not paid by such companies' investment advisers. From
time to time, Dreyfus may waive (either voluntarily or pursuant to appli-
cable state limitations) additional investment management fees payable by
a Fund. For the period from November 1, 1993 to April 3, 1994, the Prime
Money Market Fund, the U.S. Treasury Money Market Fund and the Tax-Exempt
Money Market Fund paid its investment adviser, Mellon Bank, 0.19%, 0.13%,
and 0.32%, respectively (annualized) of its average daily net assets in
investment advisory fees (net of expenses reimbursed), under the Fund's
previous investment advisory contract (such contract covered only the pro-
vision of investment advisory and certain specified administrative ser-
vices). For the period from April 4, 1994 through the fiscal year ended
October 31, 1994, each Fund paid Mellon Bank or the Manager 0.50% (annual-
ized) of its average daily net assets in investment management fees, less
fees and expenses of the non-interested Directors (including counsel
fees).
For the fiscal year ended October 31, 1994, total operating expenses (ex-
cluding Rule 12b-1 fees) (net of expenses reimbursed) of the Prime Money
Market Fund were 0.51% (annualized) of the average daily net assets of
each class for both the Investor Class and Class R. For the fiscal year
ended October 31, 1994, total operating expenses (excluding Rule 12b-1
fees) (net of expenses reimbursed) of the U.S. Treasury Money Market Fund
were 0.50% (annualized) of the average daily net assets of each class for
both the Investor Class and Class R. For the fiscal year ended October 31,
1994, total operating expenses (excluding Rule 12b-1 fees) (net of ex-
penses reimbursed) of the Tax-Exempt Money Market Fund were 0.50% and
0.51% (annualized) of the average daily net assets of each class for the
Investor Class and Class R, respectively. Without the reimbursement, oper-
ating expenses would have been higher.
Dreyfus is authorized to allocate purchase and sale orders for portfolio
securities to certain financial institutions, including, in the case of
agency transactions, financial institutions which are affiliated with
Dreyfus or which have sold Shares of a Fund, if Dreyfus believes that the
quality of the transaction and the commission are comparable to what they
would be with other qualified brokerage firms. From time to time, to the
extent consistent with its investment objective, policies and restric-
tions, a Fund may invest in securities of companies with which Mellon Bank
has a lending relationship.
Mellon Bank is a subsidiary of Mellon Bank Corporation. At June 30, 1994,
Mellon Bank Corporation was the 24th largest bank holding company in the
United States in terms of total assets. Through its bank subsidiaries, it
operates 631 domestic retail banking locations including 432 branch of-
fices. Mellon Bank Corporation has 25 domestic representative offices.
There are international branches in Grand Cayman, British West Indies, and
London, England, and two international representative offices in Tokyo,
Japan and Hong Kong. Mellon Bank has a banking subsidiary, Mellon Bank
Canada, in Toronto. Mellon Bank is a registered municipal securities
dealer.
The Glass-Steagall Act of 1933 prohibits a national bank from engaging in
the business of issuing, underwriting, selling or distributing certain se-
curities. The activities of Mellon Bank and Dreyfus may raise issues under
these provisions. However, Mellon Bank has been advised by its counsel
that these activities are consistent with these statutory and regulatory
obligations. For more information on the Glass-Steagall Act of 1933, see
"Federal Law Affecting Mellon Bank" in the SAI.
OTHER SERVICE PROVIDERS. Under a Custody and Fund Accounting Agreement,
Mellon Bank acts as custodian and fund accountant, maintaining possession
of each Fund's investment securities and providing certain accounting and
related services.
The Shareholder Services Group, Inc. a subsidiary of First Data Corpora-
tion, serves as transfer agent ("Transfer Agent") for each Fund's shares.
The Transfer Agent is located at One American Express Plaza, Providence,
Rhode Island 02903.
Shares of each Fund are sold on a continuous basis by Premier as each
Fund's sponsor and distributor. Premier is a registered broker-dealer with
principal offices at One Exchange Place, Boston, Massachusetts 02109. The
Funds have entered into a distribution agreement with Premier which pro-
vides that Premier has the exclusive right to distribute Shares of the
Funds. Premier may pay service and/or distribution fees to Agents that as-
sist customers in purchasing and servicing of Shares of the Funds. (See
"Investor Shares' Distribution Plan.")
INVESTOR SHARES' DISTRIBUTION PLAN.
The Investor Shares of each Fund are subject to a Distribution Plan
("Plan") adopted pursuant to Rule 12b-1 under the 1940 Act ("Rule 12b-1").
The Investor Shares of the Funds bear some of the cost of selling these
Shares under the Plan. The Plan allows each Money Market Fund to spend an-
nually up to 0.25% of the average daily net assets attributable to Inves-
tor Shares to compensate Dreyfus Service Corporation, an affiliate of
Dreyfus, for shareholder servicing activities and Premier for shareholder
servicing activities and for activities or expenses primarily intended to
result in the sale of Investor Shares of a Fund. The Plan allows Premier
to make payments from the Rule 12b-1 fees it collects from a Fund to com-
pensate Agents that have entered into Shareholder Servicing and Sales Sup-
port Agreements ("Agreements") with Premier. Under the Agreements, the
Agents are obligated to provide distribution related services with regard
to the Funds and/or shareholder services to the Agent's clients that own
Investor Shares of a Fund.
The Funds and Premier may suspend or reduce payments under the Plan at any
time, and payments are subject to the continuation of a Fund's Plan and
the Agreements described above. From time to time, the Agents, Premier and
the Funds may agree to voluntarily reduce the maximum fees payable under
the Plan. See the SAI for more details on the Plan.
Potential investors should read this Prospectus in light of the terms gov-
erning Agreements with their Agents. An Agent entitled to receive compen-
sation for selling and servicing a Fund's Shares may receive different
compensation with respect to one class of Shares over another.
FOR MORE INFORMATION
FUND INFORMATION AND PROSPECTUSES
Call 1-800-548-2868
Please read the prospectus before you invest or send money
TO INVEST, REDEEM AND EXCHANGE
Call 1-800-548-2868 (for overseas, call collect (401) 455-3476)
9:00 a.m. to 5:00 p.m., Eastern time
Monday through Friday
Or Write: The Dreyfus Family of Funds
P.O. Box 9692
Providence, Rhode Island 02940-9830
YIELD AND SHARE PRICE INFORMATION
1-800-548-2868
24 hours a day, 7 days a week
The Dreyfus Family of Funds
One Exchange Place
Boston, Massachusetts 02109
<PAGE>
PROSPECTUS
-----------
THE
DREYFUS
[Small box above fund name showing a lion's face]
FAMILY
OF FUNDS
-----------
---
DREYFUS/LAUREL INSTITUTIONAL PRIME MONEY MARKET FUND
DREYFUS/LAUREL INSTITUTIONAL GOVERNMENT MONEY MARKET FUND
DREYFUS/LAUREL INSTITUTIONAL U.S. TREASURY MONEY MARKET FUND
DREYFUS/LAUREL INSTITUTIONAL U.S. TREASURY ONLY MONEY MARKET FUND
DREYFUS/LAUREL INSTITUTIONAL SHORT-TERM BOND FUND
---
MARCH 1, 1995
PROSPECTUS BEGINS ON PAGE 1
<PAGE>
PROSPECTUS
-------------------------------------
- - - --------------------------------------------------------------------------------
Dreyfus/Laurel Institutional Prime Money Market Fund
Dreyfus/Laurel Institutional Government Money Market Fund
Dreyfus/Laurel Institutional U.S. Treasury Money Market Fund
Dreyfus/Laurel U.S. Treasury Only Money Market Fund
Dreyfus/Laurel Institutional Short-Term Bond Fund
Class I, Class II and Class III Shares
March 1, 1995
THIS PROSPECTUS describes the following five investment portfolios managed by
The Dreyfus Corporation ("Dreyfus"): The Dreyfus/Laurel Institutional Prime
Money Market Fund, The Dreyfus/Laurel Institutional Government Money Market
Fund, The Dreyfus/Laurel Institutional U.S. Treasury Money Market Fund, The
Dreyfus/Laurel Institutional U.S. Treasury Only Money Market Fund and The
Dreyfus/Laurel Institutional Short-Term Bond Fund (each a "Fund," collectively,
the "Institutional Funds" or "Funds"). The Institutional Funds are separate
investment portfolios of The Dreyfus/Laurel Funds, Inc. (formerly The Laurel
Funds, Inc.), an open-end, diversified management investment company that is
part of The Dreyfus Family of Funds. This Prospectus describes three classes of
Shares--Class I, Class II and Class III Shares (collectively, the "Shares")--of
the Institutional Funds.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, OR THE U.S. GOVERNMENT, AND ARE NOT FEDERALLY INSURED BY
THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY
OTHER AGENCY. ALL MUTUAL FUND SHARES INVOLVE CERTAIN RISKS. THERE CAN BE NO
ASSURANCE THAT THE DREYFUS/LAUREL INSTITUTIONAL U.S. TREASURY MONEY MARKET FUND,
THE DREYFUS/LAUREL INSTITUTIONAL PRIME MONEY MARKET FUND, THE DREYFUS/LAUREL
INSTITUTIONAL GOVERNMENT MONEY MARKET FUND AND THE DREYFUS/LAUREL INSTITUTIONAL
U.S. TREASURY ONLY MONEY MARKET FUND WILL BE ABLE TO MAINTAIN A STABLE NET ASSET
VALUE OF $1.00 PER SHARE.
THE FEES TO WHICH EACH FUND IS SUBJECT ARE SUMMARIZED IN THE "EXPENSE
SUMMARY" SECTION OF THE FUNDS' PROSPECTUS. THE FUNDS PAY MELLON BANK, N.A.
("MELLON BANK") OR ITS AFFILIATES TO BE THEIR INVESTMENT ADVISER. MELLON BANK OR
AN AFFILIATE MAY BE PAID FOR PERFORMING OTHER SERVICES FOR THE FUNDS, SUCH AS
CUSTODIAN, TRANSFER AGENT OR FUND ACCOUNTANT SERVICES. THE FUNDS ARE DISTRIBUTED
BY PREMIER MUTUAL FUND SERVICES, INC. ("PREMIER").
<R/>
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACH OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
........................................1....................................
- - - --------------------------------------------------------------------------------
<PAGE>
PROSPECTUS
-------------------------------------
- - - --------------------------------------------------------------------------------
This Prospectus sets forth concisely the information about the Institutional
Funds that a prospective purchaser should consider before investing. Investors
should read this Prospectus and retain it for future reference. Additional
information about the Institutional Funds is contained in a Statement of
Additional Information (the "SAI"), which has been filed with the Securities and
Exchange Commission (the "SEC") and is available upon request without charge by
calling or writing to The Dreyfus Family of Funds. The SAI bears the same date
as the Prospectus and is incorporated by reference in its entirety into this
Prospectus.
In addition to these Institutional Funds, The Dreyfus Family of Funds also
offers other retail oriented funds that provide investment opportunities in the
equity, fixed income and money markets. For more information about these
additional retail investment opportunities, call 1-800-548-2868.
The Dreyfus/Laurel Institutional U.S. Treasury Money Market Fund, Dreyfus/Laurel
Institutional Prime Money Market Fund. Dreyfus/Laurel Institutional Government
Money Market Fund and Dreyfus/Laurel Institutional U.S. Treasury Only Money
Market Fund (collectively, the "Money Market Funds") seek to maintain a stable
net asset value of $1.00 per Share. Investments in a Money Market Fund are
neither insured nor guaranteed by the U.S. Government and there can be no
assurance that any Money Market Fund will be able to maintain a stable net asset
value of $1.00 per Share.
<R/>
The Dreyfus Family of Funds
P.O. Box 9692
Providence, Rhode Island 02940-9830
......................................2.....................................
- - - --------------------------------------------------------------------------------
<PAGE>
PROSPECTUS
-------------------------------------
- - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- - - ------------------------------------
TABLE OF CONTENTS
- - - ------------------------------------
Page
<S> <C> <C>
Expense Summary................................................................ 5
Financial Highlights........................................................... 7
Investment Objective and Policies............................................. 16
Other Investment Policies and Risk Factors.................................... 18
HOW TO DO BUSINESS WITH US
How to Invest in The Institutional Funds...................................... 24
Initial Investments........................................................... 24
Opening an Account............................................................ 25
By Wire..................................................................... 26
By Electric-Check........................................................... 26
Transactions By Telephone................................................... 26
By In-Kind Purchases........................................................ 27
When Share Price is Determined.............................................. 27
Additional Information About Investments.................................... 28
How to Exchange Your Investment From One Fund to Another...................... 28
How to Redeem Shares.......................................................... 28
By Wire..................................................................... 28
By Electric-Check........................................................... 29
By Mail..................................................................... 29
How To Use The Dreyfus Family of Funds in a Tax-Qualified
Retirement Plan............................................................. 30
How to Transfer an Investment to a Dreyfus Family of Funds'
Retirement Plan........................................................... 30
</TABLE>
................................. 3 ..................................
- - - --------------------------------------------------------------------------------
<PAGE>
PROSPECTUS
-------------------------------------
- - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- - - ------------------------------------
TABLE OF CONTENTS (CONTINUED)
- - - ------------------------------------
OTHER INFORMATION
<S> <C>
Share Price............................................................... 30
Performance Advertising................................................... 31
Distributions............................................................. 33
Taxes..................................................................... 34
Other Services............................................................ 35
Further Information About The Funds....................................... 36
The Dreyfus/Laurel Funds, Inc........................................... 36
Management.............................................................. 36
The Shareholder Servicing Plans......................................... 39
</TABLE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE FUNDS' SAI
INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH THE OFFERING MADE BY THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUNDS OR THEIR DISTRIBUTOR. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE FUNDS OR BY THE DISTRIBUTOR IN
ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT BE LAWFULLY MADE.
................................ 4 .....................................
- - - --------------------------------------------------------------------------------
<PAGE>
PROSPECTUS
-------------------------------------
- - - --------------------------------------------------------------------------------
<TABLE>
EXPENSE SUMMARY
The purpose of the following table is to help you understand the various costs
and expenses that you, as a Shareholder, will bear directly or indirectly in
connection with an investment in the Class I, Class II or Class III Shares of
the Dreyfus/Laurel Institutional Prime Money Market, Dreyfus/Laurel
Institutional Government Money Market, Dreyfus/Laurel Institutional U.S.
Treasury Money Market and Dreyfus/Laurel Institutional U.S. Treasury Only Money
Market Funds. (See "Management.")
- - - ----------------------------------------------------------------------------------------------
- - - ----------------------------------------------------------------------------------------------
<CAPTION>
Class Class
Class I II III
Shares Shares Shares
- - - ----------------------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES
<S> <C> <C> <C>
Maximum Sales Load Imposed on Purchases none none none
Maximum Sales Load Imposed on Reinvestments none none none
Deferred Sales Load none none none
Redemption Fee none none none
Exchange Fee none none none
</TABLE>
<TABLE>
- - - ----------------------------------------------------------------------------------------------
ESTIMATED ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF NET ASSETS)
<S> <C> <C> <C>
Management Fee 0.15% 0.15% 0.15%
Shareholder Servicing Fee* 0.15% 0.05% none
Other Expenses** 0.00% 0.00% 0.00%
----- ----- -----
Total Fund Operating Expenses 0.30% 0.20% 0.15%
</TABLE>
<TABLE>
- - - ----------------------------------------------------------------------------------------------
EXAMPLES
<S> <C> <C> <C> <C>
You would pay the following on 1 year $ 3 $ 2 $ 2
a $1,000 investment, assuming (1) a 3 years 10 6 5
5% annual return and (2) redemption 5 years 17 11 8
at the end of each time period: 10 years 38 26 19
- - - ----------------------------------------------------------------------------------------------
- - - ----------------------------------------------------------------------------------------------
<FN>
* See "The Shareholder Servicing Plans" for a description of the Funds'
shareholder servicing plans for Classes I and II.
** Does not include fees and expenses of the non-interested Directors
(including counsel). The investment manager is contractually required to
reduce its Management Fee in an amount equal to a Fund's allocable portion
of such fees and expenses, which are estimated to be 0.02% of a Fund's net
assets (See "Management.")
</TABLE>
THE INFORMATION CONTAINED IN THE TABLE SHOULD NOT BE CONSIDERED A REPRESENTATION
OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS THAN THOSE
SHOWN.
The Fund understands that banks, brokers, dealers or other financial
institutions (including Mellon Bank and its affiliates) (collectively "Agents")
may charge fees to their clients who are owners of the Funds' Class I, II or III
Shares for various services provided in connection with a client's account.
These fees would be in addition to any amounts received by an Agent under its
Selling Agreement ("Agreement") with Premier Mutual Fund Services, Inc.
("Premier"). The Agreement requires each Agent to disclose to its clients any
compensation payable to such Agent by Premier and any other compensation payable
by the client for various services provided in connection with its account.
Long-term shareholders of Class I or II Shares could pay more in Shareholder
Servicing Fees than the economic equivalent of the maximum front-end sales
charges applicable to mutual funds sold by members of the National Association
of Securities Dealers, Inc. (the "NASD").
.................................... 5 ...................................
- - - --------------------------------------------------------------------------------
<PAGE>
PROSPECTUS
-------------------------------------
- - - --------------------------------------------------------------------------------
<TABLE>
EXPENSE SUMMARY
The purpose of the following table is to help you understand the various costs
and expenses that you, as a Shareholder, will bear directly or indirectly in
connection with an investment in the Class I, Class II or Class III Shares of
the Dreyfus/Laurel Institutional Short-Term Bond Fund. (See "Management.")
- - - ---------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------
<CAPTION>
Class Class
Class I II III
Shares Shares Shares
- - - ---------------------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES
<S> <C> <C> <C>
Maximum Sales Load Imposed on Purchases none none none
Maximum Sales Load Imposed on Reinvestments none none none
Deferred Sales Load none none none
Redemption Fee none none none
Exchange Fee none none none
</TABLE>
<TABLE>
- - - ---------------------------------------------------------------------------------------------
ESTIMATED ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF NET ASSETS)
<S> <C> <C> <C>
Management Fee 0.20% 0.20% 0.20%
Shareholder Servicing Fee* 0.15% 0.05% none
Other Expenses** 0.00% 0.00% 0.00%
----- ----- -----
Total Fund Operating Expenses 0.35% 0.25% 0.20%
</TABLE>
<TABLE>
- - - ---------------------------------------------------------------------------------------------
EXAMPLES
<S> <C> <C> <C> <C>
You would pay the following on 1 year $ 4 $ 3 $ 2
a $1,000 investment, assuming (1) a 3 years 11 8 6
5% annual return and (2) redemption 5 years N/A N/A N/A
at the end of each time period: 10 years N/A N/A N/A
- - - ---------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------
<FN>
* See "The Shareholder Servicing Plans" for a description of the Funds'
shareholder servicing plans for Classes I and II.
** Does not include fees and expenses of the non-interested directors
(including counsel). The investment manager is contractually required to
reduce its Management Fee in an amount equal to the Fund's allocable
portion of such fees and expenses, which are estimated to be 0.02% of the
Fund's net assets (See "Management.")
</TABLE>
THE INFORMATION CONTAINED IN THE TABLE SHOULD NOT BE CONSIDERED A REPRESENTATION
OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS THAN THOSE
SHOWN.
The Dreyfus/Laurel Funds, Inc. understands that banks, brokers, dealers or other
financial institutions (including Mellon Bank and its affiliates) (collectively
"Agents") may charge fees to their clients who are owners of the Fund's Class I,
II or III Shares for various services provided in connection with a client's
account. These fees would be in addition to any amounts received by an Agent
under its Shareholder Servicing and Sales Support Agreements ("Agreements") with
Premier. The Agreement requires each Agent to disclose to its clients any
compensation payable to such Agent by Premier and any other compensation payable
by the client for various services provided in connection with their accounts.
Long-term shareholders of Class I or II shares could pay more in Shareholder
Servicing Fees than the economic equivalent of the maximum front-end sales
charge applicable to mutual funds sold by members of the NASD.
.................................... 6 ...................................
- - - --------------------------------------------------------------------------------
<PAGE>
PROSPECTUS
-------------------------------------
- - - --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The following financial information has been derived from the financial
statements which have been audited by KPMG Peat Marwick LLP, the independent
auditors for the Fund for the indicated years or period ended October 31, whose
reports accompany such financial statements that appear in the Fund's Annual
Report and which are incorporated by reference in the SAI. Financial information
is not provided in connection with the Class II and Class III Shares of the
Dreyfus/Laurel Institutional Prime Money Market Fund which were not offered as
of fiscal year end October 31, 1994.
- - - --------------------------------------------------------------------------------
- - - --------------------------------------------------------------------------------
DREYFUS/LAUREL
INSTITUTIONAL PRIME MONEY MARKET FUND
<TABLE>
FOR A CLASS I SHARE OUTSTANDING THROUGHOUT EACH YEAR.
- - - -------------------------------------------------------------------------------------------
<CAPTION>
YEAR YEAR YEAR
ENDED ENDED ENDED
10/31/94# 10/31/93 10/31/92
<S> <C> <C> <C>
Net asset value, beginning of year $1.0000 $ 1.0000 $ 1.0000
-------- -------- --------
Income from investment operations:
Net investment income+++ 0.0349 0.0300 0.0401
-------- -------- --------
Less distributions:
Distributions from net
investment income (0.0349) (0.0300) (0.0401)
-------- -------- --------
Net asset value, end of year $1.0000 $ 1.0000 $ 1.0000
-------- -------- --------
Total Return++ 3.67% 3.04% 4.09%
======== ======== ========
Ratios to average net assets/
Supplemental Data:
Net assets, end of year (000's) $681,781 $824,080 $950,322
Ratio of operating expenses to average
net assets 0.29% 0.27% 0.29%
Ratio of net investment income to
average net assets 3.58% 2.99% 4.04%
- - - -------------------------------------------------------------------------------------------
<FN>
* The Fund commenced operations on April 15, 1988.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated.
+++ For the years ended October 31, 1993, 1992, 1991, 1989 and 1988, the investment
adviser reimbursed expenses of $0.00005, $0.0001, $0.0007, $0.0022, $0.0044 and
$0.0018 per share, respectively. For the period ended October 31, 1988, the
investment adviser waived a portion of its advisory fee amounting to $0.0006 per
share.
# Prior to October 17, 1994, Mellon Bank, N.A. served as the Fund's investment manager.
Effective October 17, 1994, The Dreyfus Corporation serves as the Fund's investment
manager.
</TABLE>
..................................... 7 ....................................
- - - --------------------------------------------------------------------------------
<PAGE>
PROSPECTUS
-------------------------------------
- - - --------------------------------------------------------------------------------
- - - --------------------------------------------------------------------------------
DREYFUS/LAUREL
INSTITUTIONAL PRIME MONEY MARKET FUND (CONTINUED)
<TABLE>
FOR A CLASS I SHARE OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.
- - - ------------------------------------------------------------------------------------------------
<CAPTION>
YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED
10/31/91 10/31/90 10/31/89 10/31/88*
<S> <C> <C> <C> <C>
Net asset value, beginning of
year $1.0000 $1.0000 $1.0000 $1.0000
-------- -------- ------- --------
Income from investment
operations:
Net investment income+++ 0.0641 0.0810 0.0897 0.0405
-------- -------- ------- -------
Less distributions:
Distributions from net
investment income (0.0641) (0.0810) (0.0897) (0.0405)
-------- -------- -------- --------
Net asset value, end of year $1.0000 $1.0000 $1.0000 $1.0000
-------- -------- ------- ---------
Total Return++ 6.60% 8.41% 9.35% 4.12%
======== ======== ======== ==========
Ratios to average net assets/
Supplemental Data:
Net assets, end of year
(000's) $943,636 $360,534 $97,366 $181,525
Ratio of operating expenses to
average net assets 0.30% 0.28% 0.30% 0.30%+
Ratio of net investment income
to average net assets 6.22% 8.07% 8.74% 7.82%+
- - - ------------------------------------------------------------------------------------------------
<FN>
* The Fund commenced operations on April 15, 1988.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated.
+++ For the years ended October 31, 1993, 1992, 1991, 1989 and 1988, the investment adviser
reimbursed expenses of $0.00005, $0.0001, $0.0007, $0.0022, $0.0044 and $0.0018 per share,
respectively. For the period ended October 31, 1988, the investment adviser waived a
portion of its advisory fee amounting to $0.0006 per share.
</TABLE>
................................... 8 ..................................
- - - --------------------------------------------------------------------------------
<PAGE>
PROSPECTUS
-------------------------------------
- - - --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The following financial information has been derived from the financial
statements which have been audited by KPMG Peat Marwick LLP, the independent
auditors for the Fund, for the indicated year or period ended October 31, whose
reports accompany such financial statements that appear in the Fund's Annual
Report and which are incorporated by reference in the SAI. Financial information
is not provided in connection with the Class II and Class III shares of the
Dreyfus/Laurel Institutional Government Money Market Fund which were not offered
as of fiscal year end October 31, 1994.
- - - --------------------------------------------------------------------------------
- - - --------------------------------------------------------------------------------
DREYFUS/LAUREL
INSTITUTIONAL GOVERNMENT MONEY MARKET FUND
<TABLE>
FOR A CLASS I SHARE OUTSTANDING THROUGHOUT EACH YEAR.
- - - ---------------------------------------------------------------------------------------------------------
<CAPTION>
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
10/31/94# 10/31/93 10/31/92 10/31/91
<S> <C> <C> <C> <C>
Net asset value, beginning of year $1.0000 $1.0000 $1.0000 $1.0000
------- ------- ------- -------
Income from investment operations:
Net investment income+++ 0.0356 0.0293 0.0385 0.0619
------- ------- ------- -------
Less distributions:
Distributions from net
investment income (0.0356) (0.0293) (0.0385) (0.0619)
------- ------- ------- -------
Net asset value, end of year $1.0000 $1.0000 $1.0000 $1.0000
------- ------- ------- -------
Total Return++ 3.63% 2.97% 3.92% 6.36%
======= ======= ======= =======
Ratios to average net
assets/Supplemental Data:
Net assets, end of year (000's) $470,007 $406,690 $391,364 $308,136
Ratio of operating expenses to
average net assets 0.30% 0.30% 0.30% 0.30%
Ratio of net investment income
to average net assets 3.60% 2.93% 3.82% 6.00%
- - - ---------------------------------------------------------------------------------------------------------
<FN>
* The Fund commenced operations on October 8, 1987.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated.
+++ For the years ended October 31, 1993, 1992, 1991, 1990, 1989, 1988 and 1987, the investment adviser
reimbursed expenses of $0.00001, $0.0004, $0.0014, $0.0035, $0.0037 $0.0016 and $0.0001 per share,
respectively. For the period ended October 31, 1987, the investment adviser waived its advisory fee
amounting to $0.0001 per share.
# Prior to October 17, 1994, Mellon Bank, N.A. served as the Fund's investment manager. Effective
October 17, 1994, The Dreyfus Corporation serves as the Fund's investment manager.
</TABLE>
..................................... 9 ....................................
- - - --------------------------------------------------------------------------------
<PAGE>
PROSPECTUS
-------------------------------------
- - - --------------------------------------------------------------------------------
- - - --------------------------------------------------------------------------------
DREYFUS/LAUREL
INSTITUTIONAL GOVERNMENT MONEY MARKET FUND (CONTINUED)
<TABLE>
FOR A CLASS I SHARE OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.
- - - ---------------------------------------------------------------------------------------------------------
<CAPTION>
YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED
10/31/90 10/31/89 10/31/88 10/31/87*
<S> <C> <C> <C> <C>
Net asset value, beginning of year $1.0000 $1.0000 $1.0000 $1.0000
------- ------- -------- -------
Income from investment operations:
Net investment income+++ 0.0796 0.0874 0.0692 0.0043
------- ------- -------- -------
Less distributions:
Distributions from net
investment income (0.0796) (0.0874) (0.0692) (0.0043)
------- ------- -------- -------
Net asset value, end of year $1.0000 $1.0000 $1.0000 $1.0000
------- ------- -------- --------
Total Return++ 8.26% 9.10% 7.15% 0.43%
======= ======= ======== ========
Ratios to average net
assets/Supplemental Data:
Net assets, end of year (000's) $84,283 $66,077 $147,430 $490,875
Ratio of operating expenses to
average net assets 0.30% 0.30% 0.30% 0.30%+
Ratio of net investment income
to average net assets 8.03% 8.63% 6.70% 6.53%+
- - - ---------------------------------------------------------------------------------------------------------
<FN>
* The Fund commenced operations on October 8, 1987.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated.
+++ For the years ended October 31, 1993, 1992, 1991, 1990, 1989, 1988 and 1987, the investment adviser
reimbursed expenses of $0.00001, $0.0004, $0.0014, $0.0035, $0.0037 $0.0016 and $0.0001 per share,
respectively. For the period ended October 31, 1987, the investment adviser waived its advisory fee
amounting to $0.0001 per share.
</TABLE>
...................................... 10 ...................................
- - - --------------------------------------------------------------------------------
<PAGE>
PROSPECTUS
-------------------------------------
- - - --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The following financial information has been derived from the financial
statements which have been audited by KPMG Peat Marwick LLP, the independent
auditors for the Fund, for the indicated year or period ended October 31, whose
reports accompany such financial statements that appear in the Fund's Annual
Report and which are incorporated by reference in the SAI. Financial information
is not provided in connection with the Class II and Class III Shares of the
Dreyfus/Laurel Institutional U.S. Treasury Money Market Fund which were not
offered as of fiscal year end October 31, 1994.
- - - --------------------------------------------------------------------------------
DREYFUS/LAUREL
INSTITUTIONAL U.S. TREASURY MONEY MARKET FUND
<TABLE>
FOR A CLASS I SHARE OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD
- - - ---------------------------------------------------------------------------------------------
<CAPTION>
YEAR YEAR PERIOD
ENDED ENDED ENDED
10/31/94# 10/31/93 10/31/92
<S> <C> <C> <C>
Net asset value, beginning of year $1.0000 $1.0000 $1.0000
-------- -------- --------
Income from investment operations:
Net investment income+++ 0.0351** 0.0287 0.0381
-------- -------- --------
Less distributions:
Distributions from net investment income (0.0351) (0.0287) (0.0381)
-------- -------- --------
Net asset value, end of year $1.0000 $1.0000 $1.0000
-------- -------- --------
Total return++ 3.55% 2.91% 3.88%
======== ======== ========
Ratios to average net assets/Supplemental data:
Net assets, end of year (in 000's) $586,778 $500,653 $666,378
Ratio of operating expenses to average net
assets 0.30%*** 0.30% 0.30%
Ratio of net investment income to average net
assets 3.55% 2.87% 3.81%
- - - ---------------------------------------------------------------------------------------------
<FN>
* The Fund commenced operations on December 22, 1988.
** Net investment income before reimbursement of expenses by the
investment manager for the year ended October 31, 1994 was $0.0350
per share.
*** Annualized expense ratio before reimbursement of expenses by investment
manager for the year ended October 31, 1994 was 0.31%.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated.
+++ For the years ended October 31, 1993, 1992, 1991, 1990 and 1989 the
investment adviser reimbursed expenses of $0.0004, $0.0003, $0.0008,
$0.0023 and $0.0028 per share, respectively. For the period ended
October 31, 1989, the investment adviser waived a portion of its
advisory fee amounting to $0.0005 per share.
# Prior to October 17, 1994, Mellon Bank, N.A. served as the Fund's
investment manager.
Effective October 17, 1994, The Dreyfus Corporation serves as the Fund's
investment manager.
</TABLE>
......................................11.....................................
- - - --------------------------------------------------------------------------------
<PAGE>
PROSPECTUS
-------------------------------------
- - - --------------------------------------------------------------------------------
- - - --------------------------------------------------------------------------------
DREYFUS/LAUREL
INSTITUTIONAL U.S. TREASURY MONEY MARKET FUND (CONTINUED)
<TABLE>
FOR A CLASS I SHARE OUTSTANDING THROUGHOUT EACH YEAR
- - - ---------------------------------------------------------------------------------------------
<CAPTION>
YEAR YEAR YEAR
ENDED ENDED ENDED
10/31/91 10/31/90 10/31/89*
<S> <C> <C> <C>
Net asset value, beginning of year $1.0000 $1.0000 $1.0000
-------- -------- -------
Income from investment operations:
Net investment income+++ 0.0620 0.0793 0.0761
-------- -------- -------
Less distributions:
Distributions from net investment income (0.0620) (0.0793) (0.0761)
-------- -------- -------
Net asset value, end of year $1.0000 $1.0000 $1.0000
-------- -------- -------
Total return++ 6.39% 8.23% 7.88%
======== ======== =======
Ratios to average net assets/Supplemental data:
Net assets, end of year (in 000's) $452,333 $270,664 $80,135
Ratio of operating expenses to average net
assets 0.30% 0.30% 0.30%+
Ration of net investment income to average
net
assets 6.04% 8.08% 8.83%+
- - - ---------------------------------------------------------------------------------------------
<FN>
* The Fund commenced operations on December 22, 1988.
** Net investment income before reimbursement of expenses by the
investment manager for the year ended October 31, 1994 was $0.0350
per share.
*** Annualized expense ratio before reimbursement of expenses by investment
manager for
the year ended October 31, 1994 was 0.31%.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated.
+++ For the years ended October 31, 1993, 1992, 1991, 1990 and 1989 the
investment adviser
reimbursed expenses of $0.0004, $0.0003, $0.0008, $0.0023 and $0.0028 per
share, respectively. For the period ended October 31, 1989, the
investment adviser waived a portion of its advisory fee amounting to
$0.0005 per share.
</TABLE>
......................................12.....................................
- - - --------------------------------------------------------------------------------
<PAGE>
PROSPECTUS
-------------------------------------
- - - --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The following financial information has been derived from the financial
statements which have been audited by KPMG Peat Marwick LLP, the independent
auditors for the Fund for the indicated years or period ended October 31, whose
reports accompany such financial statements that appear in the Fund's Annual
Report and which are incorporated by reference in the SAI. Financial information
is not provided in connection with the Class I Shares of the Dreyfus/Laurel
Institutional U.S. Treasury Only Money Market Fund which were not offered as of
fiscal year end October 31, 1994.
- - - --------------------------------------------------------------------------------
DREYFUS/LAUREL
INSTITUTIONAL U.S. TREASURY ONLY MONEY MARKET FUND
<TABLE>
FOR A CLASS II SHARE OUTSTANDING THROUGHOUT EACH YEAR
- - - --------------------------------------------------------------------------------------------
<CAPTION>
YEAR YEAR PERIOD
ENDED ENDED ENDED
10/31/94# 10/31/93 10/31/92*
<S> <C> <C> <C>
Net asset value, beginning of year $1.0000 $1.0000 $1.0000
------- ------- -------
Income from investment operations:
Net investment income+++ 0.0348** 0.0287 0.0251
------- ------- -------
Less distributions:
Distributions from net investment
income (0.0348) (0.0287) (0.0251)
------- ------- -------
Net asset value, end of year $1.0000 $1.0000 $1.0000
------- ------- -------
Total Return++ 3.53% 2.90% 2.54%
======= ======= =======
Ratios to average net
assets/Supplemental
Data:
Net assets, end of year (in 000's) $30,301 $64,922 $43,782
Ratio of operating expenses to
average net assets 0.19%*** 0.20% 0.20%+
Ratio of net investment income to
average net assets 3.47% 2.86% 3.22%+
- - - --------------------------------------------------------------------------------------------
<FN>
* The Fund commenced operations on January 22, 1992.
** Net investment income before reimbursement of expenses by the investment manager for
the year ended October 31, 1994, was $0.0331 per share.
*** Operating expense ratio before reimbursement of expenses by investment manager for
the year ended October 31, 1994 was 0.35%.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated.
+++ For the years ended October 31, 1993 and the period ended October 31, 1992 the
investment adviser reimbursed a portion of the expenses amounting to $0.0031 and
$0.0060 per share, respectively.
# Prior to October 17, 1994, Mellon Bank, N.A. served as the Fund's investment manager.
Effective October 17, 1994, The Dreyfus Corporation serves as the Fund's investment
manager.
</TABLE>
......................................13.....................................
- - - --------------------------------------------------------------------------------
<PAGE>
PROSPECTUS
-------------------------------------
- - - --------------------------------------------------------------------------------
- - - --------------------------------------------------------------------------------
DREYFUS/LAUREL
INSTITUTIONAL U.S. TREASURY ONLY MONEY MARKET FUND
<TABLE>
FOR A CLASS III SHARE OUTSTANDING THROUGHOUT THE PERIOD.
- - - ----------------------------------------------------------------------------------------
<CAPTION>
PERIOD
ENDED
10/31/94*#
<S> <C>
Net asset value, beginning of period $1.0000
-------
Income from investment operations:
Net investment income 0.0193
-------
Less distributions:
Distributions from net investment income (0.0193)
--------
Net asset value, end of period $1.0000
--------
Total Return++ 1.97%
========
Ratios to average net assets/Supplemental Data:
Net assets, end of period (in 000's) $30,700
Ratio of operating expenses to average net assets 0.17%+
Ratio of net investment income to average net assets 3.50%+
- - - ----------------------------------------------------------------------------------------
<FN>
* The Fund commenced selling Class III Shares on May 12, 1994.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated.
# Prior to October 17, 1994, Mellon Bank, N.A. served as the Fund's investment
manager. Effective October 17, 1994, The Dreyfus Corporation serves as the Fund's
investment manager.
</TABLE>
......................................14.....................................
- - - --------------------------------------------------------------------------------
<PAGE>
PROSPECTUS
-------------------------------------
- - - --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The following financial information has been derived from the financial
statements which have been audited by KPMG Peat Marwick LLP, the independent
auditors for the Fund for the period ended October 31, 1994, whose reports
accompany such financial statements that appear in each Fund's Annual Report and
which is incorporated by reference in the SAI. Financial information is not
provided in connection with the Class II and III Shares of the Dreyfus/Laurel
Institutional Short-Term Bond Fund which were not offered as of fiscal year end
October 31, 1994.
- - - --------------------------------------------------------------------------------
DREYFUS/LAUREL
INSTITUTIONAL SHORT-TERM BOND FUND
<TABLE>
FOR A CLASS I SHARE OUTSTANDING THROUGHOUT THE PERIOD.
- - - ----------------------------------------------------------------------------------------
<CAPTION>
PERIOD
ENDED
10/31/94*#
<S> <C>
Net asset value, beginning of period $10.00
------
Income from investment operations:
Net investment income+ 0.40
Net realized and unrealized loss on investments (0.12)
------
Total from investment operations 0.28
Distributions:
Distributions from net investment income (0.40)
------
Net asset value, end of period $9.88
------
Total Return++ 2.82%
======
Ratios to average net assets/Supplemental Data:
Net assets, end of period (in 000's) $5,099
Ratio of operating expenses to average net assets+++ 0.21%**
Ratio of net investment income to average net assets 4.07%**
Portfolio turnover rate 216%
- - - ----------------------------------------------------------------------------------------
<FN>
* The Fund commenced operations on November 5, 1993.
** Annualized.
+ Net investment income per share before reimbursement of expenses by the
investment manager for the period ended October 31, 1994 was $0.34 per
share.
++ Total return represents aggregate total return for the periods indicated.
+++ Annualized expense ratio before reimbursement of expenses by the
investment adviser was 0.80% for the period ended October 31, 1994.
# Prior to October 17, 1994, Mellon Bank, N.A. served as the Fund's investment
manager. Effective October 17, 1994, The Dreyfus Corporation serves as
the Fund's investment manager.
</TABLE>
......................................15.....................................
- - - --------------------------------------------------------------------------------
<PAGE>
PROSPECTUS
-------------------------------------
- - - --------------------------------------------------------------------------------
- - - ------------------------------------------------------------
INSTITUTIONAL FUNDS
INVESTMENT OBJECTIVE AND POLICIES
Described below are the investment objective and policies of each Institutional
Fund. There can be no assurance that a Fund will meet its stated investment
objective. See "OTHER INVESTMENT POLICIES AND RISK FACTORS" on page 18 for a
detailed description of risks and other Fund investment policies.
THE DREYFUS/LAUREL INSTITUTIONAL U.S. TREASURY MONEY MARKET FUND seeks a
high level of current income consistent with stability of principal and
conservative investment risk by investing in direct obligations of the U.S.
Treasury and repurchase agreements secured by such obligations. The objective is
not fundamental and the Fund also employs other non-fundamental policies.
Fundamental and non-fundamental policies, and restrictions on amending those
policies are included in the SAI.
The DREYFUS/LAUREL Institutional U.S. Treasury Money Market Fund invests
only in direct obligations of the U.S. Treasury, such as Treasury bills, notes
and bonds, with remaining maturities of 397 days or less, and in repurchase
agreements secured by direct obligations of the U.S. Treasury.
THE DREYFUS/LAUREL INSTITUTIONAL PRIME MONEY MARKET FUND seeks a high level
of current income consistent with stability of principal by investing in high
grade money market instruments. The objective is not fundamental and the Fund
also employs other non-fundamental policies. Fundamental and non-fundamental
policies, and restrictions on amending those policies are included in the SAI.
The instruments in which the DREYFUS/LAUREL Institutional Prime Money Market
Fund invests include: (1) U.S. Treasury bills, notes and bonds; (2) other
obligations issued or guaranteed as to interest and principal by the U.S.
Government, its agencies and instrumentalities; (3) instruments of U.S. and
foreign banks, including certificates of deposit, banker's acceptances, and time
deposits, and may include Eurodollar Certificates of Deposit ("ECDs"), Yankee
Certificates of Deposit ("Yankee CDs"), and Eurodollar Time Deposits ("ETDs");
(4) commercial paper of U.S. and foreign companies; (5) corporate obligations;
(6) mortgage-related securities backed by U.S. Government agencies or
instrumentalities; (7) variable amount master demand notes; and (8) repurchase
agreements. The DREYFUS/LAUREL Institutional Prime Money Market Fund also may
utilize reverse repurchase agreements. (See "OTHER INVESTMENT POLICIES AND RISK
FACTORS.")
......................................16.....................................
- - - --------------------------------------------------------------------------------
<PAGE>
PROSPECTUS
-------------------------------------
- - - --------------------------------------------------------------------------------
THE DREYFUS/LAUREL INSTITUTIONAL GOVERNMENT MONEY MARKET FUND seeks a high
level of current income consistent with stability of principal and conservative
investment risk by investing principally in high grade money market instruments
issued or guaranteed by the U.S. Government and its agencies and
instrumentalities. The objective is not fundamental and the Fund also employs
other non-fundamental policies. Fundamental and non-fundamental policies, and
restrictions on amending those policies are included in the SAI.
During normal market conditions, the Fund will invest at least 65% of its
total assets in securities issued or guaranteed by the U.S. Government and its
agencies and instrumentalities. The Dreyfus/Laurel Institutional Government
Money Market Fund may invest in: (1) U.S. Treasury bills, notes and bonds and
other obligations issued or guaranteed as to principal and interest by the U.S.
Government and its agencies and instrumentalities; (2) mortgage-related
securities backed by U.S. Government agencies or instrumentalities; and (3)
repurchase agreements.
THE DREYFUS/LAUREL INSTITUTIONAL U.S. TREASURY ONLY MONEY MARKET FUND seeks
a high level of current income consistent with stability of principal and
conservative investment risk by investing only in U.S. Treasury bills, notes,
and bonds. The objective is not fundamental and the fund also employs other
non-fundamental policies. Fundamental and non-fundamental policies, and
restrictions on amending those policies are included in the SAI.
THE MONEY MARKET FUNDS.
Each Money Market Fund expects to maintain, but does not guarantee, a net
asset value of $1.00 per Share by valuing its portfolio securities at amortized
cost. In order to use the amortized cost method, each Fund must maintain a
dollar-weighted average portfolio maturity of 90 days or less and invest only in
U.S. dollar-denominated securities with remaining maturities of 397 days or less
and which are determined to be of high quality with minimal credit risk in
accordance with procedures adopted by the board of directors. In determining
whether a security is of high quality with minimal credit risk, The Dreyfus
Corporation ("Dreyfus") must consider whether the security is rated by
nationally recognized statistical rating organizations ("NRSROs") in accordance
with requirements of these procedures (See the SAI for a description of NRSROs).
These procedures are reasonably designed to assure that the prices determined by
the amortized cost valuation will approximate the current market value of each
Fund's securities.
THE DREYFUS/LAUREL INSTITUTIONAL SHORT-TERM BOND FUND seeks a high level of
current income by investing primarily in investment grade bonds rated at least A
by Moody's Investors Service, Inc. ("Moody's"), Standard & Poor's Ratings Group
("Standard & Poor's") or Fitch
.....................................17.....................................
- - - --------------------------------------------------------------------------------
<PAGE>
PROSPECTUS
-------------------------------------
- - - --------------------------------------------------------------------------------
Investors Service, Inc. ("Fitch") with remaining maturities of three years or
less. During normal market conditions, the Fund will have a total
dollar-weighted average maturity of more than one year but less than three years
and will invest at least 65% of its total assets in bonds. The objective is not
fundamental and the Fund also employs other non-fundamental policies.
Fundamental and non-fundamental policies, and restrictions on amending those
policies are included in the SAI.
Other instruments in which the Fund may invest include: (1) U.S. Treasury
bills, notes and bonds; (2) other obligations issued or guaranteed as to
interest and principal by the U.S. Government, its agencies and
instrumentalities; (3) instruments of U.S. and foreign banks, including
certificates of deposit, banker's acceptances and time deposits, and may include
ECDs, Yankee CDs and ETDs; (4) commercial paper of U.S. and foreign companies,
rated A-1 at the time of purchase by Standard & Poor's, Prime-1 by Moody's, F-1
by Fitch, Duff 1 by Duff & Phelps, Inc., or A1 by IBCA, Inc.; (5) corporate
obligations; (6) mortgage-related securities backed by U.S. Government agencies
or instrumentalities; and (7) repurchase agreements. See the SAI for a
description of the above ratings.
The Fund may enter into reverse repurchase agreements but does not intend to
invest more than 5% of its total assets in reverse repurchase agreements. The
Fund may also enter into futures contracts and options thereon for hedging
purposes. The Fund may invest in securities issued by other investment
companies, consistent with the Fund's investment objective and policies. For
additional information concerning certain of the Fund investment practices, see
the SAI.
OTHER INVESTMENT POLICIES AND RISK FACTORS
PORTFOLIO TURNOVER. Although securities are purchased for the
Dreyfus/Laurel Institutional Short-Term Bond Fund on the basis of potential for
investment income and not for short-term trading profits, the portfolio turnover
rate of the Dreyfus/Laurel Institutional Short-Term Bond Fund has exceeded 100%
and may exceed 100% in the future. A portfolio turnover rate of 100% would
occur, for example, if all the securities held by the Dreyfus/Laurel
Institutional Short-Term Bond Fund were replaced once in a period of one year.
If the Dreyfus/Laurel Institutional Short-Term Bond Fund's portfolio turnover
rate exceeds 100%, it may result in higher brokerage costs and possible tax
consequences for the Fund and its shareholders. (See "Distributions" and
"Taxes.") Nevertheless, security transactions for the Dreyfus/Laurel
Institutional Short-Term Bond Fund will be based only upon investment
considerations and will not be limited by any other considerations when Dreyfus
deems it appropriate to make changes in the Dreyfus/Laurel Institutional
Short-Term Bond Fund's assets.
......................................18.....................................
- - - --------------------------------------------------------------------------------
<PAGE>
PROSPECTUS
-------------------------------------
- - - --------------------------------------------------------------------------------
BANK INSTRUMENTS. The Dreyfus/Laurel Institutional Short-Term Bond,
Dreyfus/Laurel Institutional Prime Money Market and Dreyfus/Laurel Institutional
Government Money Market Funds may purchase bank instruments. Bank instruments
consist mainly of certificates of deposit, time deposits and bankers'
acceptances.
BORROWINGS. When a Fund borrows money, the net asset value of a Share may
be subject to greater fluctuation until the borrowing is paid off. Each Fund
(except the Dreyfus/Laurel Institutional U.S. Treasury Only Money Market Fund)
may enter into reverse repurchase agreements Reverse repurchase agreements may
be considered to be borrowings. When a Fund invests in a reverse repurchase
agreement, it sells a Fund security to another party, such as a bank or
broker-dealer, in return for cash, and agrees to buy the security back at a
future date and price. Reverse repurchase agreements may be used to provide cash
to satisfy unusually heavy redemption requests without having to sell portfolio
securities, or for other temporary or emergency purposes.
COMMERCIAL INSTRUMENTS. Commercial instruments consist of short-term U.S.
dollar-denominated obligations issued by domestic corporations or issued in the
U.S. by foreign corporations and foreign commercial banks. Investments by the
Dreyfus/Laurel Institutional Short-Term Bond, Dreyfus/Laurel Institutional Prime
Money Market and Dreyfus/Laurel Institutional Government Money Market Funds in
commercial paper will consist of issues rated in a manner consistent with such
Funds' investment policies and objectives. In addition, each aforementioned Fund
may acquire unrated commercial paper and corporate bonds that are determined by
Dreyfus at the time of purchase to be of comparable quality to rated instruments
that may be acquired by such Fund.
FOREIGN SECURITIES. The Dreyfus/Laurel Institutional Short-Term Bond,
Dreyfus/Laurel Institutional Prime Money Market and Dreyfus/Laurel Institutional
Government Money Market Funds may purchase securities of foreign issuers and may
invest in obligations of foreign branches of domestic banks and domestic
branches of foreign banks. Investments in foreign securities present certain
risks, including those resulting from fluctuations in currency exchange rates,
revaluation of currencies, future political and economic developments and the
possible imposition of currency exchange blockages or other foreign governmental
laws or restrictions, reduced availability of public information concerning
issuers, and the fact that foreign issuers are not generally subject to uniform
accounting, auditing and financial reporting standards or to other regulatory
practices and requirements comparable to those applicable to domestic issuers.
Moreover, securities of many foreign issuers may be less liquid and their prices
more volatile
......................................19.....................................
- - - --------------------------------------------------------------------------------
<PAGE>
PROSPECTUS
-------------------------------------
- - - --------------------------------------------------------------------------------
than those of securities of comparable domestic issuers. In addition, with
respect to certain foreign countries, there is the possibility of expropriation,
confiscatory taxation and limitations on the use or removal of funds or other
assets of a Fund, including withholding of dividends. Foreign securities may be
subject to foreign government taxes that would reduce the yield on such
securities.
FUTURES, OPTIONS AND OTHER DERIVATIVE INSTRUMENTS. The Dreyfus/Laurel
Institutional Short-Term Bond Fund may attempt to reduce the overall level of
investment risk of particular securities and attempt to protect the Fund against
adverse market movements by investing in futures, options and other derivative
instruments. These include the purchase and writing of options on securities
(including index options) and options on foreign currencies and investing in
futures contracts for the purchase or sale of instruments based on financial
indices, including interest rate indices or indices of U.S. or foreign
government, equity or fixed income securities ("futures contracts"), options on
futures contracts, forward contracts and swaps and swap-related products such as
equity swap contracts, interest rate swaps, currency swaps, caps, collars and
floors. The use of futures, options, forward contracts and swaps exposes the
Dreyfus/Laurel Institutional Short-Term Bond Fund to additional investment risks
and transaction costs. If Dreyfus incorrectly analyzes market conditions or does
not employ the appropriate strategy with respect to these instruments, the
Dreyfus/Laurel Institutional Short-Term Bond Fund could be left in a less
favorable position. Additional risks inherent in the use of futures, options,
forward contracts and swaps include: imperfect correlation between the price of
futures, options and forward contracts and movements in the prices of the
securities or currencies being hedged; the possible absence of a liquid
secondary market for any particular instrument at any time; and the possible
need to defer closing out certain hedged positions to avoid adverse tax
consequences. The Dreyfus/Laurel Institutional Short-Term Bond Fund may not
purchase put and call options which are traded on a national stock exchange in
an amount exceeding 5% of its net assets. Further information on the use of
futures, options and other derivative instruments, and the associated risks is
contained in the SAI.
ILLIQUID SECURITIES. Each of the Money Market Funds will not knowingly
invest more than 10%, and the Dreyfus/Laurel Institutional Short-Term Bond Fund
will not knowingly invest more than 15%, of the value of its net assets in
illiquid securities, including time deposits and repurchase agreements having
maturities longer than seven days. Securities that have readily available market
quotations are not deemed illiquid for purposes of this limitation (irrespective
of any legal or contractual restrictions on resale). A Fund may invest in
commercial obligations issued in reliance on the so-called "private placement"
exemption from registration afforded by Section 4(2) of the Securities Act of
1933, as amended ("Section 4(2) paper"). A Fund may also
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purchase securities that are not registered under the Securities Act of 1933, as
amended, but which can be sold to qualified institutional buyers in accordance
with Rule 144A under that Act ("Rule 144A securities"). Liquidity determinations
with respect to Section 4(2) paper and Rule 144A securities will be made by the
Board of Directors as required. The Board will consider availability of reliable
price information and other relevant information in making such determinations.
Section 4(2) paper is restricted as to disposition under the federal securities
laws, and generally is sold to institutional investors such as a Fund that
agrees that they are purchasing the paper for investment and not with a view to
public distribution Any resale by the purchaser must be in an exempt
transaction. Section 4(2) paper normally is resold to other institutional
investors like a Fund through or with the assistance of the issuer or investment
dealers who make a market in the Section 4(2) paper, thus providing liquidity.
Rule 144A securities generally must be sold to other qualified institutional
buyers. If a particular investment in Section 4(2) paper or Rule 144A Securities
is not determined to be liquid, that investment will be included within the
percentage limitation on investment in illiquid securities. The ability to sell
Rule 144A securities to qualified institutional buyers is a recent development
and it is not possible to predict how this market will mature. Investing in Rule
144A securities could have the effect of increasing the level of fund
illiquidity to the extent that qualified institutional buyers become, for a
time, uninterested in purchasing these securities.
MONEY MARKET INSTRUMENTS. Each Fund may invest in money market instruments.
The term "money market instruments" refers to instruments with remaining
maturities of thirteen months or less. Money market instruments may include,
among other instruments, certain U.S. Treasury obligations, U.S. Government
obligations, bank instruments, commercial instruments, repurchase agreements and
municipal securities.
MORTGAGE PASS-THROUGH CERTIFICATES. The Dreyfus/Laurel Institutional
Short-Term Bond Fund may invest in mortgage pass-through certificates. Mortgage
pass-through certificates are issued by governmental, government-related and
private organizations and are backed by pools of mortgage loans. These mortgage
loans are made by lenders such as savings and loan associations, mortgage
bankers, commercial banks and others to residential home buyers throughout the
United States. The securities are "pass-through" securities because they provide
investors with monthly payments of principal and interest which in effect are a
"pass-through" of the monthly payments made by the individual borrowers on the
underlying mortgage loans. The principal governmental issuer of such securities
is the Government National Mortgage Association ("GNMA"), which is a
wholly-owned U.S. government corporation within the Department of Housing and
Urban Development. Government related issuers include the Federal Home Loan
Mortgage Corporation ("FHLMC") and the Federal National Mortgage Association
("FNMA"),
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both government-sponsored corporations owned entirely by private stockholders.
Commercial banks, savings and loan institutions, private mortgage insurance
companies, mortgage bankers and other secondary market issuers also create
pass-through pools of conventional residential mortgage loans. Such issuers may
be the originators of the underlying mortgage loans as well as the guarantors of
the mortgage-related securities. The market value of mortgage-related securities
depends on, among other things, the level of interest rates, the certificates'
coupon rates and the payment history of underlying mortgage loans. For further
information, see the SAI.
OTHER INVESTMENT COMPANIES. Each Fund may invest in securities issued by
other investment companies to the extent that such investments are consistent
with its respective investment objective and policies and permissible under the
1940 Act. As a shareholder of another investment company, a Fund would bear,
along with other shareholders, its pro rata portion of the other investment
company's expenses, including advisory fees. These expenses would be in addition
to the advisory and other expenses that the Fund bears directly in connection
with its own operations.
REPURCHASE AGREEMENTS. Each Fund (except the Dreyfus/Laurel Institutional
U.S. Treasury Only Money Market Fund) may enter into repurchase agreements. A
repurchase agreement involves the purchase of a security by a Fund and a
simultaneous agreement (generally with a bank or broker-dealer) to repurchase
that security from such Fund at a specified price and date or upon demand. This
technique offers a method of earning income on idle cash. A risk associated with
repurchase agreements is the failure of the seller to repurchase the securities
as agreed, which may cause the Fund to suffer a loss if the market value of such
securities declines before they can be liquidated on the open market. Repurchase
agreements with a duration of more than seven days are considered illiquid
securities and are subject to the limit stated above.
REVERSE REPURCHASE AGREEMENTS. The Dreyfus/Laurel Institutional Prime Money
Market and Dreyfus/Laurel Institutional Short-Term Bond Funds may enter into
reverse repurchase agreements to meet redemption requests where the liquidation
of Fund securities is deemed by Dreyfus to be disadvantageous. Under a reverse
repurchase agreement, a Fund: (i) transfers possession of Fund securities to a
bank or broker-dealer in return for cash in an amount equal to a percentage of
the securities' market value; and (ii) agrees to repurchase the securities at a
future date by repaying the cash with interest. Cash or liquid high-grade debt
securities held by the Fund equal in value to the repurchase price including any
accrued interest will be maintained in a segregated account while a reverse
repurchase agreement is in effect.
SECURITIES LENDING. To increase return on Fund securities, each Fund may
lend its portfolio securities to broker-dealers and other institutional
investors pursuant to agreements requiring that the loans be continuously
secured by collateral equal at all times in value to at least
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the market value of the securities loaned. There may be risks of delay in
receiving additional collateral or in recovering the securities loaned or even a
loss of rights in the collateral should the borrower of the securities fail
financially. However, loans are made only to borrowers deemed by Dreyfus to be
of good standing and when, in its judgment, the income to be earned from the
loan justifies the attendant risks.
U.S. GOVERNMENT OBLIGATIONS. Each Fund may invest in U.S. Government
obligations consistent with such Fund's investment objective and policies. U.S.
Government obligations consist of marketable securities and instruments issued
or guaranteed by the U.S. Government or any of its agencies, authorities or
instrumentalities. Direct obligations are issued by the U.S. Treasury and
include all U.S. Treasury instruments (i.e., bills, notes and bonds).
Obligations of U.S. Government agencies, authorities and instrumentalities are
issued by government-sponsored agencies and enterprises acting under authority
of Congress. Although obligations of federal agencies, authorities and
instrumentalities are not debts of the U.S. Treasury, in some cases payment of
interest and principal on such obligations is guaranteed by the U.S. Government,
e.g., Government National Mortgage Association certificates; in other cases
payment of interest and principal are not guaranteed, e.g., obligations of the
Federal Home Loan Bank System and the Federal Farm Credit Bank. No assurances
can be given that the U.S. Government would provide financial support to
government-sponsored instrumentalities if it is not obligated to do so by law.
VARIABLE AMOUNT MASTER DEMAND NOTES. The Dreyfus/Laurel Institutional
Short-Term Bond, Dreyfus/Laurel Institutional Prime Money Market and
Dreyfus/Laurel Institutional Government Money Market Funds may invest in
variable amount master demand notes. Variable amount master demand notes are
unsecured obligations that are redeemable upon demand and are typically unrated.
These instruments are issued pursuant to written agreements between their
issuers and holders. The agreements permit the holders to increase (subject to
an agreed maximum) and the holders and issuers to decrease the principal amount
of the notes, and specify that the rate of interest payable on the principal
fluctuates according to an agreed-upon formula. If an issuer of a variable
amount master demand note were to default on its payment obligation, a Fund
might be unable to dispose of the note because of the absence of a secondary
market and might, for this or other reasons, suffer a loss to the extent of the
default. Each Fund will invest in variable amount master demand notes issued by
entities that Dreyfus considers creditworthy.
WHEN-ISSUED, DELAYED DELIVERY AND FORWARD COMMITMENT SECURITIES. Each Fund
may purchase when-issued, delayed delivery and forward commitment securities.
The purchase of new issues of securities on a "when-issued," "delayed delivery"
or "forward commitment"
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basis occurs when the payment and delivery for securities takes place at a
future date. Because actual payment for and delivery of such securities
generally take place 15 to 45 days after the purchase date, purchasers of such
securities bear the risk that interest rates on debt securities at the time of
delivery may be higher or lower than those contracted for on the security
purchased.
LIMITING INVESTMENT RISKS. Each Fund is subject to a number of investment
limitations. Certain limitations are matters of fundamental policy and may not
be changed without the affirmative vote of the holders of a majority of a Fund's
outstanding Shares. The SAI describes each of the Funds' fundamental and
non-fundamental investment restrictions.
The investment objective, policies, restrictions, practices and procedures
of each Fund, unless otherwise specified, may be changed without shareholder
approval. If a Fund's investment objective, policies, restrictions, practices or
procedures change, shareholders should consider whether such Fund remains an
appropriate investment in light of their then current position and needs.
In order to permit the sale of a Fund's Shares in certain states, the Fund
may make commitments more restrictive than the investment policies and
restrictions described in this Prospectus and the SAI. Should a Fund determine
that any such commitment is no longer in the best interests of the Fund, it may
consider terminating sales of its Shares in the states involved.
MASTER/FEEDER OPTION. The Dreyfus/Laurel Funds, Inc. may in the future seek
to achieve a Fund's investment objective by investing all of the Fund's assets
in another investment company having the same investment objective and
substantially the same investment policies and restrictions as those applicable
to such Fund. Shareholders of each Fund will be given at least 30 days' prior
notice of any such investment. Such investment would be made only if the
Directors determine it to be in the best interest of a Fund and its
shareholders. In making that determination, the Directors will consider, among
other things, the benefits to shareholders and/or the opportunity to reduce
costs and achieve operational efficiencies. Although the Funds believe that the
Directors will not approve an arrangement that is likely to result in higher
costs, no assurance is given that costs will be materially reduced if this
option is implemented.
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HOW TO DO BUSINESS WITH US
HOW TO INVEST IN THE INSTITUTIONAL FUNDS
INITIAL INVESTMENTS
Except as noted below, the minimum initial investment to establish a new account
in each Institutional Fund is: (i) $100,000 for Class I Shares, (ii) $10 million
for Class II Shares, and
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(iii) $25 million for Class III Shares. If an Institutional Fund account balance
falls below the minimum due to redemptions or exchanges, each Institutional Fund
reserves the right to close the account and either send a check for the amount
of the redemption to the address of record or wire the proceeds to the bank
account of record, unless the deficiency is the result of a decrease in the net
asset value per share. An investor will be notified if the minimum balance is
not being maintained and will be allowed 60 days to make additional investments
before the account is closed.
In order to accommodate the transfer of assets by plan directors from other
investment options, multi-participant employee retirement plans converting to
the Funds will be allowed 90 days to meet the minimum initial investment
requirement. In addition, each Institutional Fund reserves the right to make
other exceptions to the minimum initial investment and account minimum amount
from time to time.
OPENING AN ACCOUNT
You may open an account over the telephone by calling the Transfer Agent at
1-800-344-1007, and by following the procedures for the wiring of funds
described below (See "By Wire.") If you open an account by telephone, you must
complete an Account Application and return it to the Transfer Agent prior to
redeeming any Shares held in the account. Please send the completed Account
Application to the Transfer Agent at:
The Dreyfus Family of Funds
P.O. Box 9692
Providence, Rhode Island 02940-9830
You may also open an account by sending a completed Account Application
along with a check to the Transfer Agent. Please make the check payable to "The
Dreyfus Family of Funds" in U.S. funds, or include sufficient bank account
information and authorization for the initial investment to be deducted from
your checking account. Please call the Transfer Agent with any questions you may
have regarding the Account Application or any of the options offered by a Fund;
a customer service agent will be glad to assist you.
Once you have established an account with a Fund by completing an Account
Application and returning it with the minimum initial investment to the Transfer
Agent, you may purchase and sell Shares of a Fund using a variety of methods.
Each Fund requires a completed and signed Account Application for each new
account, regardless of the investment method. A redemption order will not be
deemed in proper form until the completed Account Application is on file.
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BY WIRE.
Investors purchasing Shares by wire transfer must notify the Transfer Agent
by calling 1-800-344-1007. Please be prepared to provide a telephone number and
name of someone to contact at the bank originating your wire. In order for a
wire purchase to be processed on the same day it is received, both the
instructions and the wire must be received by the Transfer Agent before 4 p.m.
Eastern time. ("See "Distributions.") Instruct the bank wiring the funds to send
the wire to:
Mellon Bank, N.A.
ABA No: 0430-0026-1
Account No: 179-5765
For Credit To: Dreyfus/Laurel Institutional Funds Deposit
Further Credit To: Your name; Dreyfus/Laurel Funds account number
BY ELECTRIC-CHECK.
By completing the appropriate section of the Account Application, you may
purchase Shares over the telephone by calling the Transfer Agent at
1-800-344-1007 and specifying the amount you would like to invest in a class of
Shares of a Fund. An electronic funds transfer ("Electric-Check") will then be
sent to your bank and the specified amount will automatically be withdrawn from
your pre-designated checking account and invested in your Fund account two
business days after your phone call.
Because Electric-Checks are similar to paper checks, requests for funds can
be refused by financial institutions. Accordingly, a Fund may withhold the
proceeds of Fund redemption of Shares purchased with Electric-Check until it is
reasonably satisfied that the Electric-Check has been collected (normally up to
10 days).
TRANSACTIONS BY TELEPHONE.
When you invest, exchange or redeem by phone, you agree to indemnify the
Fund, its Transfer Agent and its investment manager from any loss, claim or
expense you may incur as a result of their acting on such instruction. The Funds
will employ reasonable procedures to confirm that instructions communicated by
telephone are genuine. These include personal identification procedures,
recording of telephone conversations and providing written confirmation of each
transaction. A failure on the part of a Fund to employ such procedures may
subject it to liability for any loss due to unauthorized or fraudulent
instructions.
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BY IN-KIND PURCHASES.
If the following conditions are satisfied, the Funds may at their
discretion, permit you to purchase Shares through an "in-kind" exchange of
securities you hold. Any securities exchanged must meet the investment
objective, policies and limitations of the respective Fund, must have a readily
ascertainable market value, must be liquid and must not be subject to
restrictions on resale. The market value of any securities exchanged, plus any
cash, must be at least equal to the account minimums for initial investments.
Shares purchased in exchange for securities generally cannot be redeemed for
fifteen days following the exchange in order to allow time for the transfer to
settle. In-kind purchases will normally result in recognition of gain or loss on
the exchanged securities for federal tax purposes.
The basis of the exchange will depend upon the relative net asset values of
the Shares purchased and securities exchanged. Securities accepted by the Funds
will be valued in the same manner as the Funds value their assets. Any interest
earned on the securities following their delivery to the Funds and prior to the
exchange will be considered in valuing the securities. All interest, dividends,
subscription or other rights attached to the securities become the property of
the Fund, along with the securities. Please contact the Transfer Agent for
additional information.
WHEN SHARE PRICE IS DETERMINED.
The price of your Shares is their net asset value ("NAV"). NAV is determined
on each day that the New York Stock Exchange ("NYSE") is open (a "business
day"). Investments and requests to exchange or redeem Shares received by the
Dreyfus/Laurel Institutional Short-Term Bond Fund before the close of business
on the NYSE (usually 4 p.m., Eastern time) are effective on, and will receive
the share price determined, that day (except investments made by Electric-Check
which are effective two business days after your call). Investments and requests
to exchange or redeem Shares received by a Money Market Fund before 4 p.m.,
Eastern time are effective on, and will receive the Share price next determined,
that day (except investments made by Electric-Check which are effective two
business days after your call). The net asset values of the Money Market Funds
are calculated three times each business day at noon, 3 p.m. and 4 p.m., Eastern
time. Redemption requests received after: (i) the close of the NYSE for the
Dreyfus/Laurel Institutional Short-Term Bond Fund, or (ii) 4 p.m., Eastern time,
for the Money Market Funds, are effective on, and receive the first Share price
determined on, the next business day.
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ADDITIONAL INFORMATION ABOUT INVESTMENTS.
Once you have mailed or otherwise transmitted your investment instructions
to a Fund, they may not be modified or canceled. The Funds reserve the right to
reject any application or investment. At your written request, the Funds will
issue negotiable stock certificates.
HOW TO EXCHANGE YOUR INVESTMENT
FROM ONE FUND TO ANOTHER
If you have accounts in more than one Institutional Fund which have identical
Shareholder information, you may exchange Shares of one Institutional Fund for
Shares of the same class of certain other Institutional Funds advised by Dreyfus
and that were previously advised by Mellon Bank, provided you satisfy the
minimum investment requirement. You can make an exchange by calling the Transfer
Agent at 1-800-344-1007. Shares are exchanged on the basis of relative net asset
values per Share. The exchange privilege may be modified by Dreyfus upon 60
days' notice to Shareholders and is available only in states where exchanges are
legal.
HOW TO REDEEM SHARES
Fund Shares may be redeemed on any business day. Shares may not be redeemed from
an account unless a completed and signed Account Application is on file with the
Transfer Agent. Redemption orders received by the Transfer Agent will be
processed at the price determined as described under "When Share Price is
Determined."
When a redemption order is received and processed by the Transfer Agent,
payment of all cleared Shares will ordinarily be made to the shareholder on the
following business day and must be made within seven days. Payment for Shares
that were purchased by a check, bank draft, or by Electric-Check may be withheld
for up to 10 days to assure that the check has been honored.
Dreyfus reserves the right to pay any portion of redemption requests in
excess of $250,000 in readily marketable securities from a Fund. In this case,
the shareholder may incur brokerage charges on the sale of the securities.
Dreyfus reserves the right to suspend redemptions or postpone payments should
"emergency conditions," as determined by the SEC or described in the Investment
Company Act of 1940, as amended ("1940 Act"), exist.
BY WIRE.
By pre-arrangement with the Transfer Agent, proceeds from a redemption will
be wired to a shareholder's account at a domestic commercial bank that is a
member of the Federal Reserve System. Payment will normally be made on the same
business day that a redemption order is effective.
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BY ELECTRIC-CHECK.
Investors who have authorized the Transfer Agent to accept telephone trading
for their accounts may call the Transfer Agent at 1-800-344-1007 to place
redemption orders. If you have authorized the redemption of Shares by electronic
funds transfer, an Electric-Check should ordinarily be credited to your bank
account two business days after the redemption request is processed.
Because funds from Electric-Checks are processed in a manner similar to
paper checks, they may not be available for immediate withdrawal from your bank
account. The availability of these funds is determined by the policies of your
financial institution, which should be consulted with any questions concerning
this redemption method.
BY MAIL.
Your written instructions to redeem Shares may be in any one of the
following forms:
- A letter to the Funds.
- An assignment form or stock power.
- An endorsement on the back of your negotiable stock certificate, if you
have one.
Once mailed to the Funds, the redemption request is irrevocable and may not
be modified or canceled. A letter of instruction should state the number of
Shares or the dollar amount to be redeemed. The letter must include your account
number and for redemptions in an amount in excess of $25,000, a signature
guarantee of each owner. The redemption request must be signed by each person in
whose name the Shares are registered; for example, in the case of joint
ownership, each owner must sign. All signatures should be exactly as the name
appears in the registration. If the owner's name appears in the registration as
John Robert Jones, he should sign that way and not as John R. Jones. Signature
guarantees can be obtained from commercial banks, Credit Unions if authorized by
state laws, savings and loan institutions, trust companies, members of a
recognized stock exchange, or from other eligible guarantors who are members of
the Securities Transfer Agents Medallion Program ("STAMP") or any other industry
recognized program approved by the Securities Transfer Association.
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HOW TO USE THE DREYFUS FAMILY OF FUNDS
IN A TAX-QUALIFIED RETIREMENT PLAN
The Dreyfus Family of Funds' investment portfolios are available for your
tax-deferred retirement plan. Call 1-800-548-2868 or write The Dreyfus Family of
Funds at P.O. Box 9692, Providence, Rhode Island 02940-9830 and request the
appropriate forms for:
- IRAs.
- 403(b) accounts for employees of public school systems and non-profit
organizations.
- Profit-sharing plans and pension plans for corporations and other
employers.
HOW TO TRANSFER AN INVESTMENT TO A DREYFUS FAMILY OF FUNDS' RETIREMENT PLAN.
It is easy to transfer your tax-deferred plan to The Dreyfus Family of Funds
from another company or custodian. Call the Transfer Agent for a request to
transfer form. If you direct The Dreyfus Family of Funds to transfer funds from
an existing non-retirement Dreyfus Family of Funds account into a retirement
account, the Shares in your non-retirement account will be redeemed. The
redemption proceeds will be invested in your Dreyfus Family of Funds Individual
Retirement Account ("IRA") or other tax-qualified retirement plan. The
redemption is a taxable event resulting in a taxable gain or loss.
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OTHER INFORMATION
SHARE PRICE
An investment portfolio's NAV refers to the worth of one Share. The NAV for the
Class I, Class II and Class III Shares of a Money Market Fund is calculated on
the basis of amortized cost, which involves initially valuing a portfolio
instrument at its cost and thereafter assuming a constant amortization to
maturity of any discount or premium, regardless of the impact of fluctuating
interest rates on the market value of the instrument. Each Money Market Fund
intends to maintain a constant NAV of $1.00 per Share, although there is no
assurance that this can be done on a continuing basis. The NAV for Class I,
Class II and Class III Shares of the Dreyfus/Laurel Institutional Short-Term
Bond Fund is computed by adding, with respect to each class of Shares, the value
of all the class' investments, cash, and other assets, deducting liabilities and
dividing the result by the number of Shares of that class outstanding. The
valuation of assets for
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determining NAV for the Dreyfus/Laurel Institutional Short-Term Bond Fund may be
summarized as follows:
The portfolio securities of the Dreyfus/Laurel Institutional Short-Term Bond
Fund, except as otherwise noted, listed or traded on a stock exchange, are
valued at the latest sale price. If no sale is reported, the mean of the latest
bid and asked prices is used. Securities traded over-the-counter are priced at
the mean of the latest bid and asked prices but will be valued at the last sale
price if required by regulations of the Securities and Exchange Commission. When
market quotations are not readily available, securities and other assets are
valued at fair value as determined in good faith in accordance with procedures
established by the Board of Directors.
Bonds are valued through valuations obtained from a commercial pricing service
or at the most recent mean of the bid and asked prices provided by investment
dealers in accordance with procedures established by the Board of Directors.
Pursuant to a determination by The Dreyfus/Laurel Funds, Inc.'s Board of
Directors that such value represents fair value, debt securities with maturities
of 60 days or less held by the Dreyfus/Laurel Institutional Short-Term Bond
Funds are valued at amortized cost.
The NAV of certain classes of Shares of the Dreyfus/Laurel Institutional
Short-Term Bond Fund are published in leading newspapers daily. The yield of
certain classes of Shares of the Money Market Funds are published weekly in
leading financial publications and daily in many local newspapers. The NAVs of
the Dreyfus/Laurel Institutional Short-Term Bond Fund's classes may also be
obtained by calling The Dreyfus Family of Funds.
PERFORMANCE ADVERTISING
From time to time, an Institutional Fund may advertise the yield and total
return on a class of Shares. Total return and yield figures are based on
historical earnings and are not intended to indicate future performance. The
"total return" of a class of Shares of a Fund may be calculated on an average
annual total return basis or a cumulative total return basis. Average annual
total return refers to the average annual compounded rates of return on a class
of Shares over one-, five-, and ten-year periods or the life of the Fund (as
stated in the advertisement) that would equate an initial amount invested at the
beginning of a stated period to the ending redeemable value of the investment,
assuming the reinvestment of all dividends and capital gains distributions.
Cumulative total return reflects the total percentage change in the value of the
investment over the measuring period, again assuming the reinvestment of all
dividends and capital gains distributions.
The "yield" of a class of Shares in a Money Market Fund refers to the income
generated by an investment in such class over a seven-day period identified in
the advertisement. This income is
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then "annualized." That is, the amount of income generated by the investment
during that week is assumed to be generated each week over a 52-week period and
is shown as a percentage of the investment. The "effective yield" is calculated
similarly, but, when annualized, the income earned by an investment in a class
of Shares in a Money Market Fund is assumed to be reinvested. The "effective
yield" will be slightly higher than the "yield" because of the compounding
effect of this assumed reinvestment. With respect to the Dreyfus/Laurel
Institutional Short-Term Bond Fund, "yield" is calculated by dividing a class of
Shares' annualized net investment income per Share during a recent 30-day (or
one month) period by the maximum public offering price per class of such Share
on the last day of that period. Since yields fluctuate, yield date cannot
necessarily be used to compare an investment in a class of Shares with bank
deposits, savings accounts, and similar investment alternatives which often
provide an agreed-upon or guaranteed fixed yield for a stated period of time.
Total return and yield quotations will be computed separately for each class
of a Fund's Shares. Because of the difference in the fees and expenses borne by
Class I, Class II and Class III Shares of a Fund, the return and yield on Class
III Shares will generally be higher than the return and yield on Class II
Shares, and the return and yield on Class III and Class II Shares will generally
be higher than the return and yield on Class I Shares. Any fees charged by an
Agent directly to its customers' account in connection with investments in a
Fund will not be included in calculations of total return or yield. The
Dreyfus/Laurel Institutional Short-Term Bond Fund's annual report contains
additional performance information and is available upon request without charge
from Premier or your Agent.
A Fund may compare the performance of its Class I, Class II and Class III
Shares with various industry standards of performance including Lipper
Analytical Services, Inc. ratings, and the Consumer Price Index. Performance
rankings as reported in Changing Times, Business Week, Institutional Investor,
The Wall Street Journal, IBC/Donoghue's Money Fund Report, Mutual Fund
Forecaster, No Load Investor, Money Magazine, Morningstar Mutual Fund Values,
U.S. News and World Report, Forbes, Fortune, Barron's, Financial Planning,
Financial Planning on Wall Street, Certified Financial Planner Today, Investment
Advisor, Kiplinger's, Smart Money, and similar publications may also be used in
comparing a Fund's performance. Furthermore, a Fund may quote its Shares'
returns or yields in advertisements or in shareholder reports. The
Dreyfus/Laurel Institutional Short-Term Bond Fund may also advertise
non-standardized performance information, such as total return for periods other
than those required to be shown, or cumulative performance data and may
advertise a quotation of yield or other similar quotations demonstrating the
income earned or distributions made by the Fund.
......................................32.....................................
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DISTRIBUTIONS
Each Fund declares daily and pays monthly (on the first business day of the
following month) dividends from its net investment income, if any. The
Dreyfus/Laurel Institutional Short-Term Bond Fund distributes net realized
gains, if any, on an annual basis. The Money Market Funds do not expect to
realize any long-term capital gains or losses and do not anticipate payment of
any capital gain distribution. The Board of Directors may elect not to
distribute capital gains in whole or in part to take advantage of capital loss
carryovers. Shares begin accruing dividends on the day the purchase order for
the Shares is effected and continue to accrue dividends through the day before
such Shares are redeemed if the instructions to purchase or redeem Shares (and
immediately available funds with respect to a purchase order) are received by
the Transfer Agent prior to: (i) noon, Eastern time for the Dreyfus/Laurel
Institutional U.S. Treasury Only Money Market Fund; (ii) 1 p.m., Eastern time
for the Dreyfus/Laurel Institutional U.S. Treasury Money Market Fund; (iii) 3
p.m., Eastern time for the Dreyfus/Laurel Institutional Prime Money Market Fund
and the Dreyfus/Laurel Institutional Government Money Market Fund; and (iv) 4
p.m., Eastern time for the Dreyfus/Laurel Institutional Short-Term Bond Fund.
Dividends begin accruing on Shares on the next business day with regard to
purchase orders effected after the relevant times set forth above. Shares
purchased on a day on which the Dreyfus/Laurel Institutional Short-Term Bond
Fund calculates its NAV will not begin to accrue dividends until the following
day. Redemption orders of that Fund effected on any particular day will receive
all dividends declared through the day of redemption.
Unless you choose to receive dividend and/or capital gain distributions in
cash, your distributions will be automatically reinvested in additional Shares
of the distributing Fund at the NAV. You may change the method of receiving
distributions at any time by writing to the Funds. Checks which are sent to
shareholders who have requested distributions to be paid in cash and which are
subsequently returned by the United States Postal Service as not deliverable or
which remain uncashed for six months or more will be reinvested in additional
Fund shares in the shareholder's account at the then current NAV. Subsequent
Fund distributions will be automatically reinvested in additional Fund shares in
the shareholder's account.
Distributions paid by a Fund with respect to one class of Shares may be
greater or less per Share than those paid with respect to another class of
Shares due to the different expenses of the different classes.
You may elect to have distributions on Shares held in IRAs and 403(b)
accounts paid in cash only if you are at least 59 1/2 years old or are
permanently and totally disabled. Distribution checks normally are mailed within
seven days after the record date.
.......................................33....................................
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Any dividend and/or capital gain distribution paid by the Dreyfus/Laurel
Institutional Short-Term Bond Fund will reduce the NAV of each of that Fund's
Shares' by the amount of the distribution. Shareholders are subject to taxes
with respect to any such distribution.
TAXES
Each Fund intends to qualify, or to continue to qualify, for treatment as a
regulated investment company under the Code so that it will be relieved of
federal income tax on that part of its investment company taxable income
(consisting generally of net investment income and net short-term capital gain)
and net capital gain (the excess of net long-term capital gain over net
short-term capital loss) that is distributed to its shareholders.
Dividends from a Fund's investment company taxable income are taxable to you
as ordinary income, to the extent of the Fund's earnings and profits.
Distributions by a Fund of net capital gain, when designated as such, are
taxable to you as long-term capital gains, regardless of the length of time you
have owned your Shares. None of the dividends paid by any of the Funds will be
eligible for the dividends-received deduction allowed to corporations.
Dividends and other distributions are taxable to you regardless of whether
they are received in cash or reinvested in additional Fund shares, even if the
value of your Shares is below your cost. If you purchase Shares shortly before a
taxable distribution, you must pay income taxes on the distribution, even though
the value of your investment (plus cash received, if any) remains the same. In
addition, the Share price at the time you purchase Shares may include unrealized
gains in the securities held in the Fund. If these portfolios securities are
subsequently sold and the gains are realized, they will, to the extent not
offset by capital losses, be paid to you as a capital gain distribution and will
be taxable to you. (See Distributions.")
In January of each year, your Fund will send you a Form 1099-DIV notifying
you of the status for federal income tax purposes of your distributions for the
preceding year.
You must furnish your Fund with your taxpayer identification number ("TIN")
and state whether you are subject to withholding for prior under-reporting,
certified under penalties of perjury as prescribed by the Internal Revenue Code
and the regulations thereunder. Unless previously furnished, investments
received without such a certification will be returned. Each Fund is required to
withhold a portion of all dividends, capital gain distributions and redemption
proceeds payable to any individuals and certain non-corporate shareholders who
do not provide the Fund with a correct TIN; withholding from dividends and
capital gain distributions also is required for such shareholders who otherwise
are subject to backup withholding.
Each Fund will be subject to a 4% nondeductible excise tax to the extent it
fails to distribute by the end of any calendar year substantially all of its
ordinary income for that year and capital
......................................34.....................................
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PROSPECTUS
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gains net income for the one-year period ending October 31 of that year, plus
certain other amounts. Each Fund expects to make such distributions as are
necessary to avoid the imposition of this tax.
The foregoing is only a summary of some of the important tax considerations
generally affecting each Fund and its shareholders; see the SAI for a further
discussion. There may be other federal, state or local tax considerations
applicable to a particular investor. You therefore should consult your own tax
adviser.
OTHER SERVICES
At least twice a year you will receive financial statements of each Fund in
which you own shares, with a summary of its investments and performance. Your
Fund will send you a confirmation statement after every transaction (except with
regard to Money Market Fund transactions and the reinvestment of dividends and
other distributions) that affects your Fund account. In addition, an account
statement will be mailed to you monthly. You may also request a statement of
your account activity at any time. Carefully review such confirmation statements
and account statements and notify your Fund immediately if there is an error.
From time to time, to reduce expenses, only one copy of a Fund's shareholder
reports (such as a Fund's annual report) may be mailed to your household even if
you have more than one account. Please call The Dreyfus Family of Funds if you
need additional copies.
No later than January 31 of each year, your Fund will send you the following
reports, which you may use in completing your federal income tax return:
<TABLE>
<S> <C>
Form 1099-DIV Reports taxable distributions (and returns of
capital, if any) during the preceding year.
Form 1099-B Reports proceeds paid on redemptions during the
preceding year (for the Dreyfus/Laurel Institutional
Short-Term Bond Fund's non-retirement plan
accounts).
Form 1099-R Reports distributions from IRAs and 403(b) accounts
during the preceding year.
</TABLE>
At such time as prescribed by law, your Fund will send you a Form 5498,
which reports contributions to your IRA for the previous calendar year. In
addition, your Fund may send you other relevant tax-related forms.
....................................35.......................................
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PROSPECTUS
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FURTHER INFORMATION ABOUT THE FUNDS
THE DREYFUS/LAUREL FUNDS, INC.
The Laurel Funds, Inc. was incorporated in Maryland on August 6, 1987 and
changed its name to The Dreyfus/Laurel Funds, Inc. on October 17, 1994. The
Dreyfus/Laurel Funds, Inc. is registered with the SEC under the 1940 Act as a
diversified, open-end management investment company. The Dreyfus/Laurel Funds,
Inc. has an authorized capitalization of 25 billion shares of $0.001 par value
stock with equal voting rights. The Articles of Incorporation permit the
Directors to create an unlimited number of investment portfolios (each a
"Fund"). Each Fund offered by this Prospectus issues three classes of
Shares--Class I, Class II and Class III Shares.
The Dreyfus/Laurel Funds, Inc. shares have non-cumulative voting rights,
which means that the holders of more than 50% of the shares voting for the
election of Directors can elect 100% of the Directors if they choose to do so.
In such event, the holders of the remaining shares will not be able to elect any
Directors. Each Share has one vote with respect to matters upon which a
Shareholder vote is required. All shares of a fund (and any classes thereof)
vote together as a single class, except as to any matter for which a separate
vote of any fund or class is required by the 1940 Act, and except as to any
matter which affects the interests of one or more particular funds or class, in
which case only the shareholders of the affected fund or class are entitled to
vote, each as a separate class. At your written request, The Dreyfus/Laurel
Funds, Inc. will issue negotiable stock certificates.
As of January 31, 1995, Mellon Bank Corporation, the investment manager's
parent, owned of record through its direct and indirect subsidiaries more than
25% of The Dreyfus/Laurel Funds, Inc.'s outstanding voting Shares and is deemed,
under the 1940 Act, to be a controlling shareholder.
MANAGEMENT.
THE BOARD OF DIRECTORS. The business affairs of The Dreyfus/Laurel Funds,
Inc. are managed under the direction of its Directors. The SAI contains the
names and general background information concerning the Directors and officers
of The Dreyfus/Laurel Funds, Inc.
INVESTMENT MANAGER. Dreyfus is located at 200 Park Avenue, New York, New
York 10166. As of January 31, 1995, Dreyfus managed or administered
approximately $70 billion in assets for more than 1.9 million investor accounts
nationwide. Dreyfus is a wholly-owned subsidiary of Mellon Bank, N.A. (One
Mellon Bank Center, Pittsburgh, PA 15258), the Funds' prior investment manager.
Pursuant to an Investment Management Agreement transferred from Mellon Bank to
Dreyfus effective as of October 17, 1994, Dreyfus provides, or arranges for the
provision by one or more third parties of investment advisory, administrative,
custody, fund accounting and
......................................36.....................................
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PROSPECTUS
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transfer agency services to each Fund. As investment manager, Dreyfus manages
each Fund by making investment decisions based on such Fund's investment
objectives, policies and restrictions.
Under the Investment Management Agreement, each Fund pays a fee computed
daily, and paid monthly, at the annual rate of 0.15% of each Money Market Fund's
and 0.20% of the Dreyfus/Laurel Institutional Short-Term Bond Fund's average
daily net assets less certain expenses described below. Dreyfus pays all of the
expenses of each Fund except brokerage fees, taxes, interest, fees, expenses of
the non-interested Directors (including counsel fees) and extraordinary
expenses. Although Dreyfus does not pay for the fees and expenses of the non-
interested Directors (including counsel fees), Dreyfus is contractually required
to reduce its investment management fee in an amount equal to each Fund's
allocable Share of such expenses. In order to compensate Dreyfus for paying
virtually all of the Fund's expenses, the Fund's investment management fee is
higher than the investment advisory fees paid by most investment companies. Most
if not all, such companies also pay for additional non-investment advisory
expenses that are not paid by such companies' investment advisers. From time to
time, Dreyfus may waive (either voluntarily or pursuant to applicable state
limitations) additional investment management fees payable by the Fund. For the
period from November 1, 1993 to April 3, 1994, the Institutional Prime Money
Market Fund, the Institutional Government Money Market Fund, the Institutional
U.S. Treasury Money Market Fund, the Institutional U.S. Treasury Only Money
Market Fund, and the Institutional Short-Term Bond Fund paid its investment
adviser, Mellon Bank, 0.20%, 0.20%, 0.19%, 0.00%, and 0.00%, respectively
(annualized) of its average daily net assets in investment advisory fees (net of
expenses reimbursed), under the Fund's previous investment advisory contract
(such contract covered only the provision of investment advisory and certain
specified administrative services). For the period from April 4, 1994 through
the fiscal year ended October 31, 1994, the Institutional Prime Money Market
Fund, the Institutional Government Money Market Fund, the Institutional U.S.
Treasury Money Market Fund, the Institutional U.S. Treasury Only Money Market
Fund, and the Institutional Short-Term Bond Fund paid Mellon Bank or the Manager
0.15%, 0.15%, 0.15%, 0.15% and 0.20%, respectively (annualized) of its average
daily net assets in investment management fees, less fees and expenses of the
non-interested Directors (including counsel fees). Without the reimbursements,
operating expenses would have been higher.
For the fiscal year ended October 31, 1994, total operating expenses
(excluding Rule 12b-1 fees) (net of expenses reimbursed) of Class I of the
Institutional Prime Money Market Fund, the Institutional Government Money Market
Fund, and Institutional U.S. Treasury Money Market Fund were 0.14%, 0.15%, and
0.15%, respectively (annualized) of the average daily net assets of
......................................37.....................................
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PROSPECTUS
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each Fund. For the fiscal year ended October 31, 1994, total operating expenses
(excluding Rule 12b-1 fees) (net of expenses reimbursed) of the Institutional
U.S. Treasury Only Money Market Fund were 0.14% and 0.17% (annualized) of the
average daily net assets of each class for Class II and Class III, respectively.
For the fiscal year ended October 31, 1994, total operating expenses of Class I
(excluding Rule 12b-1 fees) (net of expenses reimbursed) of the Institutional
Short-Term Bond Fund were 0.11% (annualized) of the Fund's average daily net
assets.
Dreyfus is authorized to allocate purchase and sale orders for portfolio
securities to certain financial institutions, including, in the case of agency
transactions, financial institutions which are affiliated with Dreyfus or which
have sold Shares of the Fund, if Dreyfus believes that the quality of the
transaction and the commission are comparable to what they would be with other
qualified brokerage firms. From time to time, to the extent consistent with its
investment objectives policies and restrictions, a Fund may invest in securities
of companies with which Mellon Bank has a lending relationship.
Mellon Bank is a subsidiary of Mellon Bank Corporation. At June 30, 1994
Mellon Bank Corporation was the 24th largest bank holding company in the United
States in terms of total assets. Through its bank subsidiaries, it operates 631
domestic retail banking locations including 432 branch offices. Mellon Bank
Corporation has 25 domestic representative offices. There are international
branches in Grand Cayman, British West Indies, and London, England, and two
international representative offices in Tokyo, Japan and Hong Kong. Mellon Bank
has a banking subsidiary, Mellon Bank Canada, in Toronto. Mellon Bank is a
registered municipal securities dealer.
Laurie Carroll has managed the Dreyfus/Laurel Institutional Short-Term Bond
Fund since inception in November 1993. Ms. Carroll is a portfolio manager at
Dreyfus and has been employed by Dreyfus since October 17, 1994. Ms. Carroll has
been employed by Mellon Bank since 1986 and is a Senior Vice President at Mellon
Bank.
The Glass-Steagall Act of 1933 prohibits a national bank from engaging in
the business of issuing, underwriting, selling or distributing certain
securities. The activities of Mellon Bank and Dreyfus may raise issues under
these provisions. However, Mellon Bank has been advised by its counsel that
these activities are consistent with these statutory and regulatory obligations.
For more information on the Glass-Steagall Act of 1933, see "Federal Law
Affecting Mellon Bank" in the SAI.
................................38................................
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<PAGE>
PROSPECTUS
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OTHER SERVICE PROVIDERS. Under a Custody and Fund Accounting Agreement,
Mellon Bank acts as custodian and fund accountant, maintaining possession of
each Fund's investment securities and providing certain accounting and related
services.
The Shareholder Services Group, Inc., a subsidiary of First Data
Corporation, serves as transfer agent ("Transfer Agent") for each Fund's Shares.
The Transfer Agent is located at One American Express Plaza, Providence, Rhode
Island 02903.
Shares of the Funds are sold on a continuous basis by Premier, as each
Fund's sponsor and distributor. Premier is a registered broker-dealer with
principal offices at One Exchange Place, Boston, Massachusetts 02109. Premier is
a wholly-owned subsidiary of Institutional Administration Services, Inc., a
provider of mutual fund administration services, the parent company of which is
Boston Institutional Group, Inc. The Funds have entered into a distribution
agreement with Premier which provides that Premier has the exclusive right to
distribute Shares of each Fund.
THE SHAREHOLDER SERVICING PLANS.
The Class I and Class II Shares of each Fund are subject to a shareholder
servicing plan. Each Fund's shareholder servicing plans (each a "Plan,"
collectively the "Plans") permit the Fund to compensate certain banks, brokers,
dealers or other financial institutions (including Mellon Bank and its
affiliates) (collectively "Agents") that have entered into Selling Agreements
("Agreements") with The Dreyfus/Laurel Funds, Inc. Payments under each Fund's
Plans are calculated daily and paid monthly at a rate or rates set from time to
time by a Fund, provided that the annual rate may not exceed: (i) 0.15% of the
average daily net asset value of the Class I Shares, or (ii) 0.05% of the
average daily net asset value of the Class II Shares.
The fees payable under a Plan are used primarily to compensate or reimburse
Agents for shareholder services provided, and related expenses incurred by such
Agents. The shareholder services provided by Agents may include: (i) aggregating
and processing purchase and redemption requests for Class I or Class II Shares
from their customers and transmitting net purchase and redemption orders to the
distributor or Transfer Agent; (ii) providing customers with a service that
invests the assets of their accounts in Class I or Class II Shares pursuant to
specific or pre-authorized instructions; (iii) processing dividend and
distribution payments from a Fund on behalf of customers; (iv) providing
information periodically to customers showing their positions in Class I or
Class II Shares; (v) arranging for bank wires; and (vi) providing general
shareholder liaison services.
The Dreyfus/Laurel Funds, Inc. may suspend or reduce payments under a Plan
at any time, and payments are subject to the continuation of each Fund's Plans
and the Agreements described
....................................39.....................................
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<PAGE>
PROSPECTUS
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above. From time to time, the Agents and The Dreyfus/Laurel Funds, Inc. may
agree to voluntarily reduce the maximum fees payable under a Plan. See the SAI
for more details on the Plans.
The Dreyfus/Laurel Funds, Inc. understands that Agents may charge fees to
their clients who are owners of a Fund's Class I or Class II Shares for various
services provided in connection with a client's account. These fees would be in
addition to any amounts received by an Agent under its Agreement with The
Dreyfus/Laurel Funds, Inc. The Agreement requires each Agent to disclose to
their clients any compensation payable to such Agent by The Dreyfus/Laurel
Funds, Inc. and any other compensation payable by the client for various
services provided in connection with their accounts. Potential investors should
read this Prospectus in light of the terms governing their accounts with their
Agents. An Agent entitled to receive compensation for servicing a Fund's Shares
may receive different compensation with respect to one class of Shares over
another.
......................................40..................................
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<PAGE>
PROSPECTUS
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- - - ------------------------------------------------------------
FOR MORE INFORMATION
FUND INFORMATION AND PROSPECTUSES
Call 1-800-344-1007
Please read the prospectus before you invest or send money
TO INVEST, REDEEM AND EXCHANGE
Call 1-800-344-1007 (for overseas, call collect (401) 455-3476)
9:00 a.m. to 5:00 p.m., Eastern time
Monday through Friday
Or Write: The Dreyfus Family of Funds
P.O. Box 9692
Providence, Rhode Island 02940-9830
YIELD AND SHARE PRICE INFORMATION
1-800-344-1007
24 hours a day, 7 days a week
The Dreyfus Family of Funds
One Exchange Place
Boston, Massachusetts 02109
......................................41..................................
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PROSPECTUS
Premier Balanced Fund
Class A and Class R Shares
March 1, 1995
PREMIER BALANCED FUND seeks to outperform a hybrid index, 60% of which is
the Standard & Poor's 500 Composite Stock Price Index and 40% of which is
the Lehman Brothers Intermediate Bond Index, by investing in common stocks
and bonds in proportions consistent with their expected returns and risks
as determined by the Fund's investment manager, The Dreyfus Corporation
(the "Manager").
THIS PROSPECTUS describes Premier Balanced Fund (the "Fund"), a separate
portfolio of The Dreyfus/Laurel Funds, Inc. (formerly The Laurel Funds,
Inc.), an open-end, diversified management investment company that is part
of The Premier Family of Funds. This Prospectus describes two classes of
shares--Class A Shares and Class R Shares (collectively, the "Shares")--of
the Fund.
This Prospectus sets forth concisely the information about the Fund that a
prospective purchaser should consider before investing. Investors should
read this Prospectus and retain it for future reference. The Fund offers
you four methods of purchasing Fund Shares, but only Class A and Class R
Shares are offered by this Prospectus. See "Alternative Purchase Methods."
Additional information about the Fund is contained in a Statement of Addi-
tional Information (the "SAI"), which has been filed with the Securities
and Exchange Commission (the "SEC") and is available upon request without
charge by calling or writing to The Premier Family of Funds. The SAI bears
the same date as the Prospectus and is incorporated by reference in its
entirety into this Prospectus.
In addition to the Fund, The Premier Family of Funds also offers other
funds that provide investment opportunities for you in the equity and
fixed income markets. For more information about these additional invest-
ment opportunities, call 1-800-548-2868.
The Premier Family of Funds
P.O. Box 9692
Providence, Rhode Island 02940-9830
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DE-
POSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
AGENCY. ALL MUTUAL FUND SHARES INVOLVE CERTAIN RISKS, INCLUDING THE POSSI-
BLE LOSS OF PRINCIPAL.
THE FEES TO WHICH THE FUND IS SUBJECT ARE SUMMARIZED IN THE "EXPENSE SUM-
MARY" SECTION OF THE FUND'S PROSPECTUS. THE FUND PAYS MELLON BANK, N.A.
("MELLON BANK") OR ITS AFFILIATES TO BE ITS INVESTMENT MANAGER. MELLON
BANK OR AN AFFILIATE MAY BE PAID FOR PERFORMING OTHER SERVICES FOR THE
FUND, SUCH AS CUSTODIAN, TRANSFER AGENT OR FUND ACCOUNTANT SERVICES. THE
FUND IS DISTRIBUTED BY PREMIER MUTUAL FUND SERVICES, INC.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SE-
CURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
Expense Summary 5
Financial Highlights 7
Alternative Purchase Methods 9
Investment Objective and Policies 11
Other Investment Policies and Risk Factors 14
HOW TO DO BUSINESS WITH US
Special Shareholder Services 20
Investor Line 20
How to Buy Fund Shares 21
By Mail 21
By Telephone 22
By Wire 22
By Automatic Monthly Investments 22
By Direct Deposit 22
By In-Kind Purchases 23
Offering Price 23
When Share Price is Determined 25
Additional Information About Investments 26
How to Exchange Your Investment From One Fund to Another 26
By Telephone 27
By Mail 27
Additional Information About Exchanges 27
How to Redeem Fund Shares 28
By Telephone 30
By Mail 30
By Automated Withdrawal Program 31
Redemption Proceeds 31
Additional Information About Redemptions 32
How To Use The Premier Family of Funds in a Tax-Qualified
Retirement Plan 32
How to Transfer an Investment to a Premier Family of Funds'
Retirement Plan 32
OTHER INFORMATION
Share Price 33
Performance Advertising 34
Distributions 35
Taxes 36
Other Services 37
Further Information About The Fund 38
The Dreyfus/Laurel Funds, Inc. 38
Management 38
Distribution Plans (Class A Plan and Class B and C Plans) 40
</TABLE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REP-
RESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE FUND'S SAI INCOR-
PORATED HEREIN BY REFERENCE, IN CONNECTION WITH THE OFFERING MADE BY THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND OR THE DISTRIBU-
TOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE FUND OR BY THE
DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT BE LAWFULLY
MADE.
EXPENSE SUMMARY
<TABLE>
<CAPTION>
Class A Class B Class C Class R
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) 4.50% none none none
Maximum Deferred Sales Charge Imposed on
Redemptions (as a percentage of the amount
subject to charge) none 4.00% 1.00% none
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average daily net assets)
Management Fee 1.00% 1.00% 1.00% 1.00%
12b-1 Fee* 0.25% 1.00% 1.00% none
Other Expenses** 0.04% 0.00% 0.00% 0.04%
Total Fund Operating Expenses 1.29% 2.00% 2.00% 1.04%
EXAMPLES
You would pay the following expenses 1 year $ 58 $ 60/20+ $ 30/20+ $ 11
on a $1,000 investment, assuming (1) a 3 years $ 84 $ 93/63+ $ 63 $ 33
5% annual return and (2) except where 5 years $113 $128/108+ $108 $ 57
noted, redemption at the end of each 10 years $194 $195 $233 $127
time period:
<FN>
* See "Distribution Plans (Class A Plan and Class B and C Plans)" for a
description of the Fund's Distribution Plans for Class A, B and C
Shares.
** Does not include fees and expenses of the non-interested Directors (in-
cluding counsel). The investment manager is contractually required to
reduce its Management Fee in an amount equal to the Fund's allocable
portion of such fees and expenses, which are estimated to be 0.02% of
the Fund's net assets. See "Further Information About the Fund--
Management."
+ Assuming no redemption of Shares.
</TABLE>
THE INFORMATION CONTAINED IN THE TABLE SHOULD NOT BE CONSIDERED A REPRE-
SENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS
THAN THOSE SHOWN.
The purpose of the foregoing table is to assist you in understanding the
various costs and expenses that investors will bear, directly or indi-
rectly, the payment of which will reduce investors' return on an annual
basis. Long-term investors in Class A, B or C Shares could pay more in
12b-1 fees than the economic equivalent of paying the maximum front-end
sales charges applicable to mutual funds sold by members of the National
Association of Securities Dealers, Inc. ("NASD"). The information in the
foregoing table does not reflect any fee waivers or expense reimbursement
arrangements that may be in effect. Certain Agents (as defined herein) may
charge their clients direct fees for effecting transactions in Fund
Shares; such fees are not reflected in the foregoing table. See "Further
Information About the Fund--Management," "How to Buy Fund Shares" and
"Distribution Plans (Class A Plan and Class B and C Plans.)"
The Fund understands that banks, brokers, dealers or other financial in-
stitutions (including Mellon Bank and its affiliates) (collectively
"Agents") may charge fees to their clients who are owners of the Fund's
Class A, B or C Shares for various services provided in connection with a
client's account. These fees would be in addition to any amounts received
by an Agent under its Selling Agreement ("Agreement") with Premier Mutual
Fund Services, Inc. ("Premier"). The Agreement requires each Agent to dis-
close to its clients any compensation payable to such Agent by Premier and
any other compensation payable by the client for various services provided
in connection with their accounts.
FINANCIAL HIGHLIGHTS
The tables below are based upon a single Class A Share or Class R Share
outstanding throughout each fiscal year or period ended October 31 and
should be read in conjunction with the financial statements and related
notes that appear in the Fund's Annual Report dated October 31, 1994,
which is incorporated by reference in the SAI. The financial statements
included in the Fund's Annual Report for the period ended October 31, 1994
have been audited by KPMG Peat Marwick LLP, independent accountants, whose
report appears in the Fund's Annual Report. Further information about the
Fund's performance is contained in the Fund's Annual Report which may be
obtained without charge.
PREMIER BALANCED FUND
FOR A CLASS A SHARE OUTSTANDING THROUGHOUT THE PERIOD.
<TABLE>
<CAPTION>
Period
Ended
10/31/94*#
<S> <C> <C>
Net asset value, beginning of period $ 9.73
Income from investment operations:
Net investment income 0.11**
Net realized and unrealized gain on investments 0.34
Total from investment operations 0.45
Less Distributions:
Distributions from net investment income (0.10)
Net asset value, end of period $10.08
Total return+ 4.68%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $1,798
Ratio of operating expenses to average net assets 1.29%++
Ratio of net investment income to average net assets 1.98%++
Portfolio turnover rate 83%
<FN>
* The Fund commenced selling Investor Shares on April 14, 1994. On Octo-
ber 17, 1994, the Investor Shares were redesignated Class A Shares.
** The amount shown in this caption for each share outstanding throughout
the period may not accord with the change in the aggregate gains and
losses in the portfolio securities for the period because of the timing
of purchases and withdrawals of shares in relation to the fluctuating
market values of the portfolio.
+ Total return represents aggregate total return for the period indi-
cated.
++ Annualized.
# Prior to October 17, 1994, Mellon Bank, N.A. served as the Fund's in-
vestment manager. Effective October 17, 1994, The Dreyfus Corporation
serves as the Fund's investment manager.
</TABLE>
PREMIER BALANCED FUND
FOR A CLASS R SHARE OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.
<TABLE>
<CAPTION>
Year Period
Ended Ended
10/31/94## 10/31/93*
<S> <C> <C>
Net asset value, beginning of period $ 10.18 $ 10.00
Income from investment operations:
Net investment income 0.20** 0.02
Net realized and unrealized gain/(loss) on
investments (0.13) 0.16
Total from investment operations 0.07 0.18
Less distributions:
Dividends from net investment income (0.16) --
Net asset value, end of period $ 10.09 $ 10.18
Total return+ .68% 1.80%
Ratios/Supplemental data:
Net assets, end of period (000 omitted) $75,726 $28,904
Ratio of operating expenses to average net
assets+ 1.04%++*** 1.15%#++
Ratio of net investment income to average daily
net assets+ 2.23% 1.96%++
Portfolio turnover rate 83% --
<FN>
* The Fund commenced operations on September 15, 1993. On April 14,
1994, the Fund began selling Investor Shares. Those shares outstanding
prior to April 14, 1994 were redesignated as Trust Shares. On October
17, 1994, Trust Shares were designated as Class R Shares.
** Net investment income before reimbursement of expenses by the invest-
ment adviser for the year ended October 31, 1994 was $0.2031.
*** Annualized expense ratio before voluntary reimbursement of expenses by
the investment adviser for the year ended October 31, 1994 was 1.09%.
+ Total return represents aggregate total return for the periods indi-
cated.
++ Annualized.
# For the period September 15, 1993 (commencement of operations) to Oc-
tober 31, 1993, the adviser reimbursed expenses of the Fund amounting
to $0.0109.
## Prior to October 17, 1994, Mellon Bank, N.A. served as the Fund's in-
vestment manager. Effective October 17, 1994, The Dreyfus Corporation
serves as the Fund's investment manager.
</TABLE>
Additional classes of Shares--designated Class B and Class C--have been
added to the previously existing Class A (formerly Investor Class) and
Class R (formerly Trust Class) Shares of the Fund. Class A and Class R
Shares are offered by this Prospectus. Class B and Class C Shares are of-
fered through a servicing network associated with the Manager pursuant to
a separate Prospectus. Class A and Class R Shares are also offered through
that network pursuant to a separate Prospectus. For more information call
1-800-645-6561. Please read that Prospectus carefully. Exchange and share-
holder services vary depending upon the network through which you purchase
Fund Shares. See "How to Buy Fund Shares."
PREMIER BALANCED FUND
ALTERNATIVE PURCHASE METHODS
The Fund offers you four methods of purchasing Fund Shares, but only Class
A and Class R Shares are offered by this Prospectus. You may choose the
class of Shares for which you are eligible that best suits your needs,
given the amount of your purchase, the length of time you expect to hold
your Shares and any other relevant circumstances. Each Fund Share repre-
sents an identical pro rata interest in the Fund's investment portfolio.
Class A Shares are sold at net asset value per share ("NAV") plus a maxi-
mum initial sales charge of 4.50% of the public offering price imposed at
the time of purchase. The initial sales charge may be reduced or waived
for certain purchases. See "How to Buy Fund Shares--Offering Price--Class
A Shares." These Shares are subject to an annual 12b-1 fee at the rate of
0.25 of 1% of the value of the average daily net assets of Class A. See
"Distribution Plan--Class A."
Class A Shares (and Class B and Class C Shares described below) are prima-
rily sold to retail investors by Agents that have entered into Selling
Agreements with Premier, except that full-time or part- time employees or
directors of the Manager or any of its affiliates or subsidiaries, 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 Premier. Subsequent purchases may be sent
directly to the Transfer Agent or your Agent.
Class R Shares generally may not be purchased directly by individuals, al-
though eligible institutions may purchase Class R Shares for accounts
maintained by individuals. Class R Shares are sold at NAV primarily to
bank trust departments and other financial service providers (including
Mellon Bank and its affiliates) acting on behalf of customers having a
qualified trust or investment account or similar relationship at such in-
stitution. Holders of Class R Shares of the Fund who have held their
Shares since April 4, 1994, may continue to purchase Class R Shares of the
Fund, whether or not they would otherwise be eligible to do so. Class R
Shares may be purchased for a retirement plan only by a custodian,
trustee, investment manager or other entity authorized to act on behalf of
such Plan. Institutions effecting transactions in Class R Shares for the
accounts of their clients may charge their clients direct fees in connec-
tion with such transactions.
In addition to the classes of Shares offered by this Prospectus, the Fund
offers two other classes of Shares designated Class B and Class C avail-
able, together with the Shares offered by this Prospectus, through a ser-
vicing network associated with the Manager. For more information and a
Prospectus relating to shares offered through that network, call 1-800-
645-6561. Please read that Prospectus carefully. Exchange and shareholder
services vary depending upon the network through which you purchase Fund
Shares.
Class B Shares are sold at NAV with no initial sales charge at the time of
purchase; as a result, the entire purchase price is immediately invested
in the Fund. Class B Shares are subject to a maximum 4% Contingent De-
ferred Sales Charge ("CDSC"), which is assessed only if you redeem Class B
Shares within six years of purchase. See "How to Buy Fund Shares--Offering
Price--Class B Shares" and "How to Redeem Fund Shares--Contingent Deferred
Sales Charge--Class B Shares." These Shares also are subject to an annual
distribution fee at the rate of 0.75 of 1% of the value of the average
daily net assets of Class B. In addition, Class B Shares are subject to an
annual service fee at the rate of 0.25 of 1% of the value of the average
daily net assets of Class B. See "Distribution and Service Plans--Class B
and C." The distribution fee paid by Class B will cause such class to have
a higher expense ratio and to pay lower dividends than Class A. Approxi-
mately six years after the date of purchase, Class B Shares automatically
will convert to Class A Shares based on the relative NAV for Shares of
each such class, and will no longer be subject to the distribution fee.
(Such conversion is subject to suspension by the Fund's Board of Directors
if adverse tax consequences might result.) 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 rein-
vestment of dividends and distributions.
Class C Shares are subject to a 1.00% CDSC, which is assessed only if a
shareholder redeems Class C Shares within one year of purchase. See "How
to Redeem Fund Shares--Contingent Deferred Sales Charge--Class C Shares."
These shares also are subject to an annual distribution fee at the rate of
0.75 of 1% of the value of the average daily net assets of Class C. Class
C Shares are also subject to an annual service fee at the rate of 0.25% of
1% of the value of the average daily net assets of Class C. See "Distribu-
tion and Service Plans--Class B and C." The distribution fee paid by Class
C will cause such class to have a higher expense ratio and to pay lower
dividends than Class A.
The decision as to which class of Shares is more beneficial to an investor
depends on the amount and the intended length of his or her investment. An
investor should consider whether, during the anticipated life of his or
her investment in the Fund, the accumulated distribution fee and CDSC, if
any, on Class B or Class C Shares would be less than the initial sales
charge on Class A Shares purchased at the same time, and to what extent,
if any, such differential would be offset by the return of Class A Shares.
Additionally, investors qualifying for reduced initial sales charges who
expect to maintain their investment for an extended period of time might
consider purchasing Class A Shares because the accumulated continuing dis-
tribution fees on Class B or Class C Shares may exceed the initial sales
charge on Class A Shares during the life of the investment. Finally, an
investor should consider the effect of the CDSC period and any conversion
rights of the classes in the context of his or her investment time frame.
For example, while Class C Shares have a shorter CDSC period than Class B
Shares, Class C Shares do not have a conversion feature and, therefore,
are subject to an ongoing distribution fee. Thus, Class B Shares may be
more attractive than Class C Shares to investors with longer term invest-
ment outlooks. Generally, Class A Shares may be more appropriate for in-
vestors who invest $1,000,000 or more in Fund Shares, but will not be ap-
propriate for investors who invest less than $50,000 in Fund Shares.
INVESTMENT OBJECTIVE AND POLICIES
The Fund seeks to outperform a hybrid index, 60% of which is the Standard
& Poor's 500 Composite Stock Price Index ("S&P 500") and 40% of which is
the Lehman Brothers Intermediate Bond Index ("Intermediate Index"), by in-
vesting in common stocks and bonds in proportions consistent with their
expected returns and risks as determined by the Manager. There can be no
assurance that the Fund will meet its stated objective. See "OTHER INVEST-
MENT POLICIES AND RISK FACTORS" on page 14 for a detailed description of
risks and other Fund investment policies. See "OTHER INVESTMENT POLICIES
AND RISK FACTORS -- Limiting Investment Risks" for a discussion of the
Fund's investment limitations.
To outperform the hybrid index, the Manager first employs a disciplined
valuation methodology to the return and risks of common stocks and bonds.
The Manager considers various factors in determining the relative attrac-
tiveness of investing in common stocks and bonds. The attractiveness of an
investment in common stocks is evaluated using a dividend-discount valua-
tion model designed to estimate the expected return of a broad universe of
stocks based upon earnings forecasts for those companies. The expected
bond return is the yield to maturity of the Lehman Brothers Government
Corporate Bond Index.
After developing the expected return and risks of each asset class, the
Manager utilizes computer models designed to identify imbalances in the
pricing of common stocks and bonds. The Manager then invests the Fund's
assets in common stocks and bonds in proportions intended to exploit the
perceived imbalances. Under normal circumstances, the Fund's total assets
are allocated approximately 60% to common stocks and 40% to bonds. These
percentages may vary by 20%, as deemed advisable by the Manager. Alloca-
tion of assets among common stocks and bonds permits the Fund to exhibit
less risk than a fund consisting entirely of common stocks.
Common stocks are selected so that, in the aggregate, the investment char-
acteristics and risk profile of the equity portion of the Fund are similar
to the S&P 500. These characteristics include such measures as dividend
yield (before expenses), price-to-earnings ratio, "beta" (relative vola-
tility), return on equity, and market price-to-book value ratio. However,
while it may maintain aggregate investment characteristics similar to the
S&P 500, the Fund seeks to invest in individual common stocks which to-
gether will provide a higher total return than the S&P 500. The Fund will
not be operated as an index fund, and the Fund's equity portion will not
be limited to stocks included in the S&P 500. Individual security selec-
tion is the foundation upon which the Manager seeks to implement the in-
vestment objective and policies of the equity portion of the Fund. The
Manager collects information from diverse sources from which the Manager
constructs and combines valuation models into a computerized comprehensive
valuation ranking system identifying common stocks that are undervalued
and should be purchased or retained by the Fund. These models include mea-
sures of changes in earnings and relative value based on present and his-
torical price-to-earnings ratios, as well as dividend discount calcula-
tions. Once the ranking of common stocks is complete, the Manager's expe-
rienced investment analysts construct the right component of the Fund to
resemble in the aggregate the S&P 500 Index, but weighted toward the most
attractive stocks as determined by the valuation models.
The bond portion of the Fund normally is invested in U.S. dollar-
denominated fixed income obligations of domestic and foreign issuers. The
Fund's dollar-weighted average maturity may not exceed ten years. Invest-
ment selections are based on fundamental economic, market, and other fac-
tors leading to valuation by sector, maturity, and quality. The Fund in-
vests in investment grade bonds rated at least Baa by Moody's Investors
Service, Inc. ("Moody's") or BBB by Standard & Poor's Ratings Group
("Standard & Poor's"), or if unrated, of comparable quality as determined
by the Manager. The Fund will, in a prudent and orderly fashion, sell
bonds whose ratings drop below these minimum ratings. Securities rated BBB
by Standard & Poor's or Baa by Moody's are considered by those rating
agencies to be "investment grade" securities, although Moody's considers
securities rated Baa to have speculative characteristics. Furthermore,
while bonds rated BBB by Standard & Poor's exhibit adequate protection pa-
rameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and principal for
debt in this category than debt in higher rated categories. Investment in
foreign obligations may be affected by governmental action in the issuer's
country of domicile. Examples of such governmental actions would be the
imposition of currency controls, interest limitations, seizure of assets,
or the declaration of a moratorium. In addition, evidences of ownership of
the Fund's securities may be held outside the United States and the Fund
may be subject to the risks associated with the holding of such property
overseas. See "OTHER INVESTMENT POLICIES AND RISK FACTORS -- Foreign Secu-
rities."
To implement a particular allocation strategy or for liquidity purposes,
other instruments in which the Fund may also invest are: (1) U.S. Treasury
bills, notes and bonds; (2) other obligations issued or guaranteed as to
interest and principal by the U.S. Government, its agencies and instrumen-
talities; (3) mortgage-related securities backed by the U.S. Government,
its agencies and instrumentalities; (4) corporate obligations rated at
least Baa by Moody's or BBB by Standard & Poor's, or if unrated, of compa-
rable quality as determined by the Manager; (5) instruments of U.S. and
foreign banks, including certificates of deposit, bankers' acceptances and
time deposits, and may include Eurodollar Certificates of Deposit
("ECDs"), Yankee Certificates of Deposit ("Yankee CDs") and Eurodollar
Time Deposits ("ETDs"); (6) foreign securities evidenced by American De-
pository Receipts ("ADRs"); (7) Eurodollar bonds and notes; (8) when-
issued transactions; (9) repurchase agreements; and (10) commercial paper.
(See "OTHER INVESTMENT POLICIES AND RISK FACTORS.")
The Fund may utilize securities lending and reverse repurchase agreements.
It may also enter into option and futures contracts for hedging purposes,
subject to certain limitations. (See "OTHER INVESTMENT POLICIES AND RISK
FACTORS.")
The S&P 500 is composed of 500 common stocks which are chosen by Standard
& Poor's to best capture the price performance of a large cross-section of
the U.S. publicly traded stock market. The S&P 500 is structured to ap-
proximate the general distribution of industries in the U.S. economy. The
inclusion of a stock in the S&P 500 does not imply that Standard & Poor's
believes the stock to be an attractive or appropriate investment, nor is
Standard & Poor's in any way affiliated with the Fund. The 500 securities,
most of which trade on the New York Stock Exchange ("NYSE"), represent ap-
proximately 75% of the market value of all U.S. common stocks. Each stock
in the S&P 500 is weighted by its market capitalization. That is, each se-
curity is weighted by its total market value relative to the total market
values of all the securities in the S&P 500. Component stocks included in
the S&P 500 are chosen with the aim of achieving a distribution at the
index level representative of the various components of the U.S. economy
and therefore do not represent the 500 largest companies. Aggregate market
value and trading activity are also considered in the selection process. A
limited percentage of the S&P 500 may include foreign securities.
The Intermediate Index is an index established by Lehman Brothers, Inc.
which includes fixed rate debt issues rated investment grade or higher by
Moody's, Standard & Poor's, or Fitch Investors Service, Inc. ("Fitch").
All issues have at least one year to maturity and an outstanding par value
of at least $100 million for U.S. Government issues and $50 million for
all others. The Intermediate Index includes bonds with maturities of up to
ten years.
The Lehman Brothers Government/Corporate Bond Index is a combination of
the Lehman Brothers Corporate Bond, Government Bond, and Yankee Bond Indi-
ces. The Corporate Bond Index includes public, fixed rate, non-convertible
investment grade domestic corporate debt. Issues included in this index
are rated at least Baa by Moody's or BBB by Standard & Poor's or, in the
case of bonds unrated by Moody's or Standard & Poor's, at least BBB by
Fitch. Collateralized mortgage obligations are not included in the Corpo-
rate Bond Index. The Yankee Bond Index includes U.S. dollar denominated,
SEC registered, public, non-convertible debt issued or guaranteed by for-
eign sovereign governments, foreign municipalities, foreign governmental
agencies, or international agencies. The Government Bond Index is a combi-
nation of the Treasury Bond Index and the Agency Bond Index. The Treasury
Bond Index includes public obligations of the U.S. Treasury; flower bonds
and foreign-targeted bonds are excluded. The Agency Bond Index includes
publicly issued debt of agencies of the U.S. Government, quasi-federal
corporations, and corporate debt guaranteed by the U.S. Government.
Mortgage-backed securities are not included in the Agency Index.
OTHER INVESTMENT POLICIES AND RISK FACTORS
AMERICAN DEPOSITORY RECEIPTS. The Fund may invest in U.S. dollar-
denominated ADRs. ADRs typically are issued by an American bank or trust
company and evidence ownership of underlying securities issued by foreign
companies. ADRs are traded in the United States on national securities ex-
changes or in the over-the-counter market. (See "Foreign Securities.")
BORROWING. The Fund is authorized, within specified limits, to borrow
money for temporary administrative purposes and to pledge its assets in
connection with such borrowings.
COMMERCIAL PAPER. The Fund may invest in commercial paper. These instru-
ments are short- term obligations issued by banks and corporations that
have maturities ranging from 2 to 270 days. Each instrument may be backed
only by the credit of the issuer or may be backed by some form of credit
enhancement, typically in the form of a guarantee by a commercial bank.
Commercial paper backed by guarantees of foreign banks may involve addi-
tional risk due to the difficulty of obtaining and enforcing judgments
against such banks and the generally less restrictive regulations to which
such banks are subject. The Fund will only invest in commercial paper of
U.S. and foreign companies rated A-1 at the time of purchase by Standard &
Poor's, Prime-1 by Moody's, F-1 by Fitch, Duff 1 by Duff & Phelps, Inc. or
A1 by IBCA, Inc.
ECDS, ETDS AND YANKEE CDS. The Fund may invest in ECDs, ETDs and Yankee
CDs. ECDs are U.S. dollar-denominated certificates of deposit issued by
foreign branches of domestic banks. ETDs are U.S. dollar-denominated time
deposits in a foreign branch of a U.S. bank or a foreign bank. Yankee CDs
are certificates of deposit issued by a U.S. branch of a foreign bank de-
nominated in U.S. dollars and held in the United States. ECDs, ETDs and
Yankee CDs are subject to somewhat different risks than are the obliga-
tions of domestic banks. (See "Foreign Securities.")
EURODOLLAR BONDS AND NOTES. The Fund may invest in Eurodollar bonds and
notes. Eurodollar bonds and notes are obligations which pay principal and
interest in U.S. dollars held in banks outside the United States, prima-
rily in Europe. Investments in Eurodollar bonds and notes involve risks
that differ from investments in securities of domestic issuers. (See "For-
eign Securities.")
FIXED-INCOME SECURITIES. The Fund may invest in fixed-income securities
to achieve its investment objective. In periods of declining interest
rates, the Fund's yield (its income from portfolio investments over a
stated period of time) may tend to be higher than prevailing market rates,
and in periods of rising interest rates, the yield of the Fund may tend to
be lower. Also when interest rates are falling, the inflow of net new
money to the Fund from the continuous sales of its shares will likely be
invested in portfolio instruments producing lower yield than the balance
of the Fund's portfolio, thereby reducing the yield of the Fund. In peri-
ods of rising interest rates, the opposite can be true. The NAV of the
Fund investing in fixed-income securities also may change as general lev-
els of interest rates fluctuate. When interest rates increase, the value
of a portfolio of fixed-income securities can be expected to decline. Con-
versely, when interest rates decline, the value of a portfolio of fixed-
income securities can be expected to increase.
FOREIGN SECURITIES. The Fund may purchase securities of foreign issuers
and may invest in obligations of foreign branches of domestic banks and
domestic branches of foreign banks. Investment in foreign securities pre-
sents certain risks, including those resulting from fluctuations in cur-
rency exchange rates, revaluation of currencies, future political and eco-
nomic developments and the possible imposition of currency exchange block-
ages or other foreign governmental laws or restrictions, reduced
availability of public information concerning issuers, and the fact that
foreign issuers are not generally subject to uniform accounting, auditing
and financial reporting standards or to other regulatory practices and re-
quirements comparable to those applicable to domestic issuers. Moreover,
securities of many foreign issuers may be less liquid and their prices
more volatile than those of comparable domestic issuers. In addition, with
respect to certain foreign countries, there is the possibility of expro-
priation, confiscatory taxation and limitations on the use or removal of
funds or other assets of the Fund, including withholding of dividends.
Foreign securities may be subject to foreign government taxes that would
reduce the yield on such securities.
FUTURES, OPTIONS AND OTHER DERIVATIVE INSTRUMENTS. The Fund may attempt
to reduce the overall level of investment risk of particular securities
and attempt to protect the Fund against adverse market movements by in-
vesting in futures, options and other derivative instruments. These in-
clude the purchase and writing of options on securities (including index
options) and options on foreign currencies and investing in futures con-
tracts for the purchase or sale of instruments based on financial indices,
including interest rate indices or indices of U.S. or foreign governments,
equity or fixed income securities ("futures contracts"), options on fu-
tures contracts, forward contracts and swaps and swap- related products
such as equity swap contracts, interest rate swaps, currency swaps, caps,
collars and floors.
The use of futures, options, forward contracts and swaps exposes the Fund
to additional investment risks and transaction costs. If the Manager in-
correctly analyzes market conditions or does not employ the appropriate
strategy with respect to these instruments, the Fund could be left in a
less favorable position. Additional risks inherent in the use of futures,
options, forward contracts and swaps include: imperfect correlation be-
tween the price of futures, options and forward contracts and movements in
the prices of the securities or currencies being hedged; the possible ab-
sence of a liquid secondary market for any particular instrument at any
time; and the possible need to defer closing out certain hedged positions
to avoid adverse tax consequences. The Fund may not purchase put and call
options which are traded on a national stock exchange in an amount exceed-
ing 5% of its net assets. Further information on the use of futures, op-
tions and other derivative instruments, and the associated risks is con-
tained in the SAI.
GNMA CERTIFICATES. The Fund may invest in Government National Mortgage
Association ("GNMA") Certificates ("GNMA Certificates"). GNMA Certificates
are mortgage-backed securities representing part ownership of a pool of
mortgage loans. These loans are made by mortgage bankers, commercial
banks, savings and loan associations, and other lenders and are either in-
sured by the Federal Housing Administration or guaranteed by the Veterans
Administration. A "pool" or group of such mortgages is assembled and,
after being approved by GNMA, is offered to investors through securities
dealers. Once approved by GNMA, the timely payment of interest and princi-
pal on each mortgage is guaranteed by the full faith and credit of the
U.S. Government. Although the mortgage loans in a pool underlying a GNMA
Certificate will have maturities of up to 30 years, the average life of a
GNMA Certificate will be substantially less because the mortgages will be
subject to normal principal amortization and also may be prepaid prior to
maturity. Prepayment rates vary widely and may be affected by changes in
mortgage interest rates. In period of falling interest rates, the rate of
prepayment on higher interest mortgage rates tends to increase, thereby
shortening the actual average life of the GNMA Certificate. Conversely,
when interest rates are rising, the rate of prepayment tends to decrease,
thereby lengthening the average life of the GNMA Certificate. Reinvestment
of prepayments may occur at higher or lower rates than the original yield
on the certificates. Due to the prepayment feature and the need to rein-
vest prepayments of principal at current rates, GNMA Certificates with un-
derlying mortgages bearing higher interest rates can be less effective
than typical non-callable bonds of similar maturities at locking in yields
during periods of declining interest rates, although they may have compa-
rable risks of decline in value during periods of rising interest rates.
ILLIQUID SECURITIES. The Fund will not knowingly invest more than 15% of
the value of its net assets in illiquid securities, including time depos-
its and repurchase agreements having maturities longer than seven days.
Securities that have readily available market quotations are not deemed
illiquid for purposes of this limitation (irrespective of any legal or
contractual restrictions on resale). The Fund may invest in commercial ob-
ligations issued in reliance on the so-called "private placement" exemp-
tion from registration afforded by Section 4(2) of the Securities Act of
1933, as amended ("Section 4(2) paper"). The Fund may also purchase secu-
rities that are not registered under the Securities Act of 1933, as
amended, but which can be sold to qualified institutional buyers in accor-
dance with Rule 144A under that Act ("Rule 144A securities"). Section 4(2)
paper is restricted as to disposition under the federal securities laws,
and generally is sold to institutional investors such as the Fund that
agree that they are purchasing the paper for investment and not with a
view to public distribution. Any resale by the purchaser must be in an ex-
empt transaction. Liquidity determinations with respect to Section 4(2)
paper and Rule 144A Securities will be made by the Board of Directors when
required. The Board will consider availability of reliable price informa-
tion and other relevant information in making such determinations. Section
4(2) paper normally is resold to other institutional investors like the
Fund through or with the assistance of the issuer or investment dealers
who make a market in the Section 4(2) paper, thus providing liquidity.
Rule 144A securities generally must be sold to other qualified institu-
tional buyers. If a particular investment in Section 4(2) paper or Rule
144A securities is not determined to be liquid, that investment will be
included within the percentage limitation on investment in illiquid secu-
rities. The ability to sell Rule 144A securities to qualified institu-
tional buyers is a recent development and it is not possible to predict
how this market will mature. Investing in Rule 144A securities could have
the effect of increasing the level of fund illiquidity to the extent that
qualified institutional buyers become, for a time, uninterested in pur-
chasing these securities.
MORTGAGE PASS-THROUGH CERTIFICATES. The Fund may invest in mortgage pass-
through certificates. Mortgage pass-through certificates are issued by
governmental, government-related and private organizations and are backed
by pools of mortgage loans. These mortgage loans are made by lenders such
as savings and loan associations, mortgage bankers, commercial banks and
others to residential home buyers throughout the United States. The secu-
rities are "pass-through" securities because they provide investors with
monthly payments of principal and interest which in effect are a "pass-
through" of the monthly payments made by the individual borrowers on the
underlying mortgage loans. The principal governmental issuer of such secu-
rities is the GNMA, which is a wholly-owned U.S. government corporation
within the Department of Housing and Urban Development. Government related
issuers include the Federal Home Loan Mortgage Corporation ("FHLMC"), and
the Federal National Mortgage Association ("FNMA"), both government-
sponsored corporations owned entirely by private stockholders. Commercial
banks, savings and loan institutions, private mortgage insurance compa-
nies, mortgage bankers and other secondary market issuers also create
pass-through pools of conventional residential mortgage loans. Such issu-
ers may be the originators of the underlying mortgage loans as well as the
guarantors of the mortgage-related securities. The market value of
mortgage-related securities depends on, among other things, the level of
interest rates, the certificates' coupon rates and the payment history of
underlying mortgage loans. For further information, see the SAI.
OTHER INVESTMENT COMPANIES. The Fund may invest in securities issued by
other investment companies to the extent that such investments are consis-
tent with the Fund's investment objective and policies and permissible
under the Investment Company Act of 1940, as amended (the "1940 Act"). As
a shareholder of another investment company, the Fund would bear, along
with other shareholders, its pro rata portion of the other investment com-
pany's expenses, including advisory fees. These expenses would be in addi-
tion to the advisory and other expenses that the Fund bears directly in
connection with its own operations.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements. A
repurchase agreement involves the purchase of a security by the Fund and a
simultaneous agreement (generally with a bank or broker-dealer) to repur-
chase that security from the Fund at a specified price and date or upon
demand. This technique offers a method of earning income on idle cash. A
risk associated with repurchase agreements is the failure of the seller to
repurchase the securities as agreed, which may cause the Fund to suffer a
loss if the market value of such securities declines before they can be
liquidated on the open market. Repurchase agreements with a duration of
more than seven days are considered illiquid securities and are subject to
the limit stated above.
REVERSE REPURCHASE AGREEMENTS. The Fund may enter into reverse repurchase
agreements to meet redemption requests where the liquidation of fund secu-
rities is deemed by the Manager to be disadvantageous. Under a reverse re-
purchase agreement, the Fund: (i) transfers possession of fund securities
to a bank or broker-dealer in return for cash in an amount equal to a per-
centage of the securities' market value; and (ii) agrees to repurchase the
securities at a future date by repaying the cash with interest. Cash or
liquid high-grade debt securities held by the Fund equal in value to the
repurchase price including any accrued interest will be maintained in a
segregated account while a reverse repurchase agreement is in effect.
SECURITIES LENDING. To increase return on fund securities, the Fund may
lend its portfolio securities to broker-dealers and other institutional
investors pursuant to agreements requiring that the loans be continuously
secured by collateral equal at all times in value to at least the market
value of the securities loaned. There may be risks of delay in receiving
additional collateral or in recovering the securities loaned or even a
loss of rights to the collateral should the borrower of the securities
fail financially. However, loans are made only to borrowers deemed by the
Manager to be of good standing and when, in its judgment, the income to be
earned from the loan justifies the attendant risks.
U.S. GOVERNMENT SECURITIES. The Fund may invest in obligations issued or
guaranteed as to both principal and interest by the U.S. Government or
backed by the full faith and credit of the United States. In addition to
direct obligations of the U.S. Treasury, these include securities issued
or guaranteed by the Federal Housing Administration, Farmers Home Adminis-
tration, Export-Import Bank of the United States, Small Business Adminis-
tration, Government National Mortgage Association, General Services Admin-
istration and Maritime Administration. Investments may also be made in
U.S. Government obligations that do not carry the full faith and credit
guarantee, such as those issued by the Federal National Mortgage Associa-
tion, the Federal Home Loan Mortgage Corporation, or other instrumentali-
ties.
VARIABLE AMOUNT MASTER DEMAND NOTES. The Fund may invest in variable
amount master demand notes. Variable amount master demand notes are unse-
cured obligations that are redeemable upon demand and are typically un-
rated. These instruments are issued pursuant to written agreements between
their issuers and holders. The agreements permit the holders to increase
(subject to an agreed maximum) and the holders and issuers to decrease the
principal amount of the notes, and specify that the rate of interest pay-
able on the principal fluctuates according to an agreed-upon formula. If
an issuer of a variable amount master demand note were to default on its
payment obligation, the Fund might be unable to dispose of the note be-
cause of the absence of a secondary market and might, for this or other
reasons, suffer a loss to the extent of the default. The Fund will only
invest in variable amount master demand notes issued only by entities that
the Manager considers creditworthy.
WHEN-ISSUED SECURITIES AND DELAYED DELIVERY TRANSACTIONS. To secure ad-
vantageous prices or yields, the Fund may purchase U.S. Government securi-
ties on a when-issued basis or may purchase or sell securities for delayed
delivery. In such transactions, delivery of the securities occurs beyond
the normal settlement periods, but no payment or delivery is made by the
Fund prior to the actual delivery or payment by the other party to the
transaction. The purchase of securities on a when-issued or delayed deliv-
ery basis involves the risk that, as a result of an increase in yields
available in the market- place, the value of the securities purchased will
decline prior to the settlement date. The sale of securities for delayed
delivery involves the risk that the prices available in the market on the
delivery date may be greater than those obtained in the sale transactions.
The Fund will establish a segregated account consisting of cash, U.S. Gov-
ernment securities or other high-grade debt obligations in an amount equal
to the amounts of its when-issued and delayed delivery commitments.
MASTER/FEEDER OPTION. The Dreyfus/Laurel Funds, Inc. in the future may
seek to achieve the Fund's investment objective by investing all of the
Fund's assets in another investment company having the same investment ob-
jective and substantially the same investment policies and restrictions as
those applicable to the Fund. Shareholders of the Fund will be given at
least 30 days' prior notice of any such investment. Such investment would
be made only if the Directors determine it to be in the best interest of
the Fund and its shareholders. In making that determination, the Directors
will consider, among other things, the benefits to shareholders and/or the
opportunity to reduce costs and achieve operational efficiencies. Although
the Fund believes that the Directors will not approve an arrangement that
is likely to result in higher costs, no assurance is given that costs will
be materially reduced if this option is implemented.
PORTFOLIO TURNOVER. While securities are purchased for the Fund on the
basis of potential for capital appreciation and income and not for short-
term trading profits, the Fund's turnover rate may exceed 100%. A portfo-
lio turnover rate of 100% would occur, for example, if all the securities
held by the Fund were replaced once in a period of one year. A higher rate
of portfolio turnover involves correspondingly greater brokerage commis-
sions and other expenses which must be borne directly by the Fund and,
thus, indirectly by its shareholders. In addition, a high rate of portfo-
lio turnover may result in the realization of larger amounts of short-term
capital gains which, when distributed to the Fund's shareholders, are tax-
able to them as ordinary income. (See "Distributions" and "Taxes.") Never-
theless, security transactions for the Fund will be based only upon in-
vestment considerations and will not be limited by any other consider-
ations when the Manager deems it appropriate to make changes in the Fund's
assets.
LIMITING INVESTMENT RISKS. The Fund is subject to a number of investment
limitations. Certain limitations are matters of fundamental policy and may
not be changed without the affirmative vote of the holders of a majority
of the Fund's outstanding Shares. The SAI describes all of the Fund's fun-
damental and non-fundamental restrictions.
The investment objective, policies, restrictions, practices and procedures
of the Fund, unless otherwise specified, may be changed without share-
holder approval. If the Fund's investment objective, policies, restric-
tions, practices or procedures change, shareholders should consider
whether the Fund remains an appropriate investment in light of their then
current position and needs.
In order to permit the sale of the Fund's Shares in certain states, the
Fund may make commitments more restrictive than the investment policies
and restrictions described in this Prospectus and the SAI. Should the Fund
determine that any such commitment is no longer in the best interests of
the Fund, it may consider terminating sales of its Shares in the states
involved.
HOW TO DO BUSINESS WITH US
SPECIAL SHAREHOLDER SERVICES
You may establish one or more special services designed to provide an easy
way to do business with the Fund. By electing these services on your ap-
plication or by completing the appropriate forms, you may authorize:
* Investment by phone.
* Automatic monthly investments.
* Exchanges or redemptions by phone.
By electing the service which enables you to exchange and redeem by phone,
you agree to indemnify the Fund, its transfer agent and its investment
manager from any loss, claim or expense you may incur as a result of their
acting on such instruction. The Fund will employ reasonable procedures to
confirm that instructions communicated by telephone are genuine. These in-
clude personal identification procedures, recording of telephone conversa-
tions and providing written confirmation of each transaction. A failure on
the part of the Fund to employ such procedures may subject it to liability
for any loss due to unauthorized or fraudulent instructions.
INVESTOR LINE
You may reach The Premier Family of Funds by calling our Investor Line at
1-800-548-2868. If you call on a rotary phone during normal business hours
(9 a.m. to 5 p.m., Eastern time), you will reach a Premier Family of Funds
operator. If you call on a Touch-Tone phone, you will receive instructions
on how to: (1) request a current prospectus or information booklets about
The Premier Family of Funds' investment portfolios and services, (2) lis-
ten to NAVs, yields and total return figures, and (3) talk with a customer
service representative during normal business hours. For more information
about direct access using a Touch-Tone phone, please contact The Premier
Family of Funds.
HOW TO BUY FUND SHARES
Premier serves as the Fund's distributor. Premier is a wholly-owned sub-
sidiary of Institutional Administration Services, Inc., a provider of mu-
tual fund administration services, the parent company of which is Boston
Institutional Group, Inc. Premier also serves as the Fund's sub-
administrator and, pursuant to a Sub-Administration Agreement, provides
various administrative and corporate secretarial services to the Fund.
Premier has established various procedures for purchasing Class R and
Class A Shares of the Fund. Class R Shares are sold primarily to bank
trust departments and other financial service providers (including Mellon
Bank and its affiliates) ("Banks") acting on behalf of customers having a
qualified trust or investment account or relationship at such institution,
or to customers who have received and hold shares of the Fund distributed
to them by virtue of such an account or relationship. Class A Shares are
primarily sold to retail investors by similar banks, securities brokers or
dealers and other financial institutions (including Mellon Bank and its
affiliates) ("Agents") that have entered into a Selling Agreement with
Premier, except that full-time or part-time employees or directors of the
Manager or any of its affiliates or subsidiaries, 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 Premier. Once an investor has established an account, ad-
ditional purchases may, in certain cases, be made directly through the
Fund's transfer agent. If Shares of the Fund are held in an account at a
Bank or with an Agent, such Bank or Agent may require you to place all
Fund purchase, exchange and redemption orders through them. All Banks and
Agents have agreed to transmit your transaction requests to the Fund's
transfer agent or to Premier. You may diversify your investments by choos-
ing a combination of investment portfolios offered by The Premier Family
of Funds.
You may invest in the following ways:
BY MAIL.
Send your application and check or money order to The Premier Family of
Funds, P.O. Box 9692, Providence, Rhode Island 02940-9830. Checks must be
payable in U.S. dollars and drawn on U.S. banks. When making subsequent
investments, enclose your check with the return remittance portion of the
confirmation of your previous investment. If the remittance portion is not
available, indicate on your check or a separate piece of paper your name,
address, the Fund and class of Shares of the Fund that you are buying and
the account number. Orders to purchase Shares are effective on the day the
Fund receives your check or money order. (See "When Share Price is Deter-
mined.")
BY TELEPHONE.
Once your account is open, you may make investments by telephone by call-
ing 1-800-548-2868 if you have elected the service authorizing the Fund to
draw on your bank account by check when you call with instructions. In-
vestments made by phone in any one account must be in an amount of at
least $100 and are effective two days after your call. (See "When Share
Price is Determined.")
BY WIRE.
You may make your initial or subsequent investments in the Fund by wiring
funds. To do so:
(1) Instruct your bank to wire funds to MELLON BANK (ABA routing number
0430-0026-1.)
(2) Be sure to specify on the wire:
(A) The Premier Funds.
(B) The Fund name and the class of Shares of the Fund you are buying and
account number (if you have one).
(C) Your name.
(D) Your city and state.
In order for a wire purchase to be effective on the same day it is re-
ceived both the trading instructions and the wire must be received before
4 p.m., Eastern time. (See "When Share Price is Determined.")
BY AUTOMATIC MONTHLY INVESTMENTS.
Once your account is open, you may make investments automatically by
electing the Automatic Investment Program, the service authorizing the
Fund to draw on your bank account regularly by paper or electronic draft.
Such investments must be in amounts of not less than $100 in any one ac-
count. You should inquire at your bank whether it will honor a preautho-
rized paper or electronic draft. Contact the Fund if your bank requires
additional documentation. Call 1-800-548-2868 or write The Premier Family
of Funds at One Exchange Place, Boston, Massachusetts 02109 for more in-
formation about the Automatic Investment Program.
BY DIRECT DEPOSIT.
If your employer offers Direct Deposit, you may arrange to automatically
purchase Shares of the Fund (minimum $100) each pay period. Direct Deposit
investing may also be available to persons receiving regular payments from
other sources (including government pension or social security payments).
Note that it may not be appropriate to Direct Deposit your entire paycheck
into the Fund because it has a fluctuating NAV. Call 1-800-548-2868 or
write The Premier Family of Funds at One Exchange Place, Boston, Massachu-
setts 02109 for more information or a Direct Deposit authorization form.
BY IN-KIND PURCHASES.
If the following conditions are satisfied, the Fund may at its discretion,
permit you to purchase shares through an "in-kind" exchange of securities
you hold. Any securities exchanged must meet the investment objective,
policies and limitations of the Fund, must have a readily ascertainable
market value, must be liquid and must not be subject to restrictions on
resale. The market value of any securities exchanged, plus any cash, must
be at least equal to $25,000. Shares purchased in exchange for securities
generally cannot be redeemed for fifteen days following the exchange in
order to allow time for the transfer to settle.
The basis of the exchange will depend upon the relative NAV of the Shares
purchased and securities exchanged. Securities accepted by the Fund will
be valued in the same manner as the Fund values its assets. Any interest
earned on the securities following their delivery to the Fund and prior to
the exchange will be considered in valuing the securities. All interest,
dividends, subscription or other rights attached to the securities become
the property of the Fund, along with the securities. Call 1-800- 548-2868
or write The Premier Family of Funds at One Exchange Place, Boston, Massa-
chusetts 02109 for more information about "in-kind" purchases.
OFFERING PRICE.
CLASS A SHARES. The public offering price of Class A Shares is the NAV of
that class plus a sales load as shown below:
<TABLE>
<CAPTION>
Total Sales Load
Dealers'
As a % of As a % of Net Reallowance
Offering Price Asset Value as a % of
Amount of Transaction Per Share Per Share Offering Price
<S> <C> <C> <C>
Less than $50,000 4.50 4.70 4.25
$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
</TABLE>
There is no initial sales charge on purchases of $1,000,000 or more of
Class A Shares. However, if you purchase Class A Shares without an initial
sales charge as part of an investment of at least $1,000,000 and redeem
all or a portion of those Shares within two years after purchase, a CDSC
of 1.00% will be imposed at the time of redemption. The terms contained in
the section of the Fund's Prospectus entitled "How to Redeem Fund Shares--
Contingent Deferred Sales Charge--Class B Shares" (other than the amount
of the CDSC and its time periods) are applicable to the Class A Shares
subject to a CDSC. Letter of Intent and Right of Accumulation apply to
such purchases of Class A Shares.
Full-time employees of NASD member firms and full-time employees of other
financial institutions which have entered into an agreement with Premier
pertaining to the sale of Fund Shares (or which otherwise have a brokerage
related or clearing arrangement with an NASD member firm or financial in-
stitution 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 NAV, provided
that they have furnished Premier 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 NAV. In addition, Class A Shares are offered
at NAV to full-time or part-time employees or directors of the Manager or
any of its affiliates of subsidiaries, 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 will be offered at NAV without a sales load to employees
participating in certain eligible benefit plans. Class A Shares may be
purchased at NAV through certain broker-dealers and other financial insti-
tutions which have entered into an agreement with Premier, which includes
a requirement that such Shares be sold for the benefit of clients partici-
pating in a "wrap account" or a similar program under which such clients
pay a fee to such broker-dealer or other financial institution. Holders of
accounts with Class A Shares of the Fund as of December 19, 1994, may also
purchase additional Class A Shares of the Fund in the same account at NAV.
The dealer reallowance may be changed from time to time but will remain
the same for all dealers. Premier, at its expense, may provide additional
promotional incentives to dealers that sell shares of funds advised by the
Manager which are sold with a sales load, such as Class A Shares. In some
instances, those incentives may be offered only to certain dealers who
have sold or may sell significant amounts of shares. Dealers receive a
larger percentage of the sales load from Premier than they receive for
selling most other funds.
CLASS R SHARES. The public offering price for Class R Shares is the NAV
of that class.
CLASS B SHARES. The public offering price for Class B Shares is the NAV
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 Fund Shares--Contingent Deferred Sales
Charge--Class B Shares." Premier compensates certain Agents for selling
Class B Shares at the time of purchase from Premier's own assets. The pro-
ceeds of the CDSC and the distribution fee, in part, are used to defray
these expenses.
CLASS C SHARES. The public offering price for Class C Shares is the NAV
of that Class. No initial sales charge is imposed at the time of purchase.
A CDSC, however, is imposed on redemptions of Class C Shares made within
the first year of purchase. See "How to Redeem Fund Shares--Contingent De-
ferred Sales Charge--Class C Shares."
RIGHT OF ACCUMULATION--CLASS A SHARES. Reduced sales loads apply to any
purchase of Class A Shares, shares of other funds in The Premier Family of
Funds, shares of certain other funds advised by the Manager which are sold
with a sales load, and shares acquired by a previous exchange of such
shares (hereinafter referred to as "Eligible Funds"), by you and any re-
lated "purchaser" as defined in the SAI, where the aggregate investment,
including such purchase, is $50,000 or more. If, for example, you previ-
ously purchased and still hold Class A Shares, or shares of any other Eli-
gible Fund or combination thereof, with an aggregate current market value
of $40,000 and subsequently purchase Class A Shares or shares of an Eligi-
ble 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 cur-
rent 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 purchase you or your
Agent must notify Premier 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.
LETTER OF INTENT--CLASS A SHARES. By signing a Letter of Intent form,
available from Premier, you become eligible for the reduced sales load ap-
plicable 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 re-
leased 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 spec-
ified, 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 purhcase Class A Shares, you must indicate your in-
tention to do so under a Letter of Intent.
WHEN SHARE PRICE IS DETERMINED.
NAV is determined at the close of the New York Stock Exchange ("NYSE") on
each day that the NYSE is open (a "business day"). Investments and re-
quests to exchange or redeem Shares received by the Fund before the close
of business on the NYSE (usually 4 p.m., Eastern time) are effective on,
and will receive the price determined on, that day (except investments
made by electronic funds transfer which are effective two business days
after your call). Investment, exchange and redemption requests received
after the close of the NYSE are effective on, and receive the Share price
determined on, the next business day.
ADDITIONAL INFORMATION ABOUT INVESTMENTS.
Once you have mailed or otherwise transmitted your investment instructions
to the Fund, it may not be modified or canceled. The Fund reserves the
right to reject any application or investment. The Fund reserves the right
to make exceptions to the minimum initial investment and account minimum
amount from time to time.
The minimum initial investment to establish a new account in the Fund is
$1,000, except for Individual Retirement Accounts ("IRAs"), retirement
plans, and Uniform Transfers (Gifts) to Minors Act accounts, for which the
minimum initial investment is $500. The Fund may suspend the offering of
Shares of any class of the Fund and reserves the right to vary initial and
subsequent investment minimums. Subsequent investments to purchase addi-
tional Shares in the Fund must be in an amount of $100 or more.
The Fund intends, upon 60 days' prior notice, to involuntarily redeem
Shares in any account if the total value of the Shares is less than a
specified minimum unless you have established an automatic monthly invest-
ment to purchase additional Shares. The Fund reserves the right to change
such minimum from time to time. Any time the Shares of the Fund held in an
account have a value of less than $1,000 ($500 for Uniform Gifts/Transfers
to Minors Acts accounts), unless the deficiency amount is the result of a
decrease in the net asset value per share, a notification may be sent ad-
vising you of the need either to make an investment to bring the value of
the Shares held in the account up to $1,000 ($500) or to establish an au-
tomatic monthly investment to purchase additional Shares. If the invest-
ment is not made or the automatic monthly investment is not established
within 60 days from the date of notification, the Shares held in the ac-
count will be redeemed and the proceeds from the redemption will be sent
by check to your address of record.
The automatic redemption of Shares will not apply to IRAs, custodial ac-
counts under Section 403(b) of the Internal Revenue Code of 1986, as
amended (the "Code") ("403(b) accounts") and other types of tax-deferred
retirement plan accounts.
HOW TO EXCHANGE YOUR INVESTMENT
FROM ONE FUND TO ANOTHER
You may exchange your Fund Shares for shares of the same class of certain
other funds advised by the Manager and that were previously advised by
Mellon Bank. As noted below, exchanges from any one fund account may be
limited in any one calendar year. In addition, the Shares being exchanged
and the shares of the fund being acquired must have a current value of at
least $100 and otherwise meet the minimum investment requirement of the
fund being acquired. Call the Investor Line for additional information and
a prospectus describing other investment portfolios offered by The Premier
Family of Funds.
Shares will be exchanged at the next determined NAV; however, a sales load
may be charged with respect to exchanges of Class A Shares into funds sold
with a sales load. No CDSC will be imposed on Class B or C Shares at the
time of an exchange; however, Class B or C Shares acquired through an ex-
change will be subject to the higher CDSC applicable to the exchanged or
acquired shares. The CDSC applicable on redemption of the acquired Class B
or C Shares will be calculated from the date of the initial purchase of
the Class B or C Shares exchanged, as the case may be. If you are exchang-
ing Class A Shares into a fund that charges a sales load, you may qualify
for share prices which do not include the sales load or which reflect a
reduced sales load, if the shares of the fund from which you are exchang-
ing were: (a) purchased with a sales load, (b) acquired by a previous ex-
change from shares purchased with a sales load, or (c) acquired through
reinvestment of dividends or distributions paid with respect to the fore-
going categories of shares. To qualify, at the time of the exchange your
Agent must notify Premier. Any such qualification is subject to confirma-
tion of your holdings through a check of appropriate records. No fees cur-
rently are charged shareholders directly in connection with exchanges, al-
though the Fund reserves the right, upon not less than 60 days' written
notice, to charge shareholders a nominal fee in accordance with rules pro-
mulgated by the SEC. The Fund reserves the right to reject any exchange
request in whole or in part.
BY TELEPHONE.
You may exchange your Shares by calling 1-800-548-2868 if you have autho-
rized the Fund to accept telephone instructions.
BY MAIL.
You may direct the Fund to exchange your Shares by writing to The Premier
Family of Funds, P.O. Box 9692, Providence, Rhode Island 02940-9830. The
request should be signed by each person in whose name the Shares are reg-
istered. All signatures should be exactly as the name appears in the reg-
istration. For example, if an owner's name is registered as John Robert
Jones, he should sign that way and not as John R. Jones.
ADDITIONAL INFORMATION ABOUT EXCHANGES.
(1) In an exchange from one account to another account, the Shares being
sold and the new shares being purchased must have a current value of
at least $100.
(2) Exchanges from any one fund account may be limited in any one calendar
year. The Fund reserves the right to make exceptions to an exchange
limitation from time to time. An exchange limitation will not apply to
the exchange of shares of any of the funds exchanged pursuant to an
Automatic Withdrawal Program, and to Shares held in 403(b) accounts.
(3) The Shares being acquired must be qualified for sale in your state of
residence.
(4) If the Shares are represented by a negotiable stock certificate, the
certificate must be returned before the exchange can be effected.
(5) Once you have telephoned or mailed your exchange request, it is irre-
vocable and may not be modified or canceled.
(6) An exchange is based on the next calculated NAV of each fund after re-
ceipt of your exchange order.
(7) Shares may not be exchanged unless you have furnished the Fund with
your tax identification number, certified as prescribed by the Code.
(See "Taxes.")
(8) Exchange of Fund Shares is, for federal income tax purposes, a sale of
the Shares, on which you may realize a taxable gain or loss.
(9) If the request is made by a corporation, partnership, trust, fidu-
ciary, agent, estate, guardian, pension plan, profit sharing plan or
unincorporated association, the Fund may require evidence satisfactory
to it of the authority of the individual signing the request.
Shareholders will be given sixty days' notice prior to any material
changes in the exchange privilege.
HOW TO REDEEM FUND SHARES
The Fund will redeem or "buy back" your Shares at any time at their NAV.
(Before redeeming, please read "Additional Information About Redemp-
tions.") Your redemption proceeds may be delayed if you have owned your
Shares less than 10 days. (See "Redemption Proceeds.")
If an investor fails to specify the class of Shares to be redeemed or if
he or she owns fewer Shares of the class than specified to be redeemed,
the redemption request may be delayed until the Transfer Agent receives
further instructions from the investor or his or her Agent.
The Fund imposes no charges (other than any applicable CDSC) when Shares
are redeemed directly through Premier. Agents or other institutions may
charge their clients a nominal fee for effecting redemptions of Fund
Shares.
CONTINGENT DEFERRED SALES CHARGE--CLASS B SHARES. A CDSC payable to Pre-
mier is imposed on any redemption of Class B Shares which reduces the cur-
rent NAV of your Class B Shares to an amount which is lower than the dol-
lar 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 NAV of the Class B Shares redeemed does not exceed (i)
the current NAV of Class B Shares acquired through reinvestment of divi-
dends or capital gain distributions, plus (ii) increases in the NAV of
your Class B Shares above the dollar amount of all your payments for the
purchase of Class B Shares held by you at the time of redemption.
If the aggregate value of Class B Shares redeemed has declined below their
original cost as a result of the Fund's performance, a CDSC may be applied
to the then-current NAV 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 pur-
chase 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:
<TABLE>
<CAPTION>
CDSC as a
% of Amount
Year Since Invested or
Purchase Payment Redemption
Was Made Proceeds
<S> <C> <C>
First 4.00
Second 4.00
Third 3.00
Fourth 3.00
Fifth 2.00
Sixth 1.00
</TABLE>
In determining whether a CDSC is applicable to a redemption, the calcula-
tion 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 distribu-
tions; then of amounts representing the increase in NAV of Class B Shares
above the total amount of payments for the purchase of Class B Shares made
during the preceding six years; then of amounts representing the cost of
Shares purchased six years prior to the redemption; and finally, of
amounts representing the cost of Shares held for the longest period of
time within the applicable six-year period.
For example, assume an investor purchased 100 Shares at $10 a 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 his or her investment. As-
suming at the time of the redemption the NAV 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 rein-
vested 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 1.00% payable
to Premier is imposed on any redemption of Class C Shares within one year
of the date of purchase. The basis for calculating the payment of any such
CDSC will be the method used in calculating the CDSC for Class B Shares.
See "Contingent Deferred Sales Charge--Class B Shares" above.
WAIVER OF CDSC. The CDSC applicable to Class B and Class C Shares will 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 certain eligi-
ble benefit plans, (c) redemptions as a result of a combination of any in-
vestment company with the Fund by merger, acquisition of assets or other-
wise, (d) a distribution following retirement under a tax-deferred retire-
ment 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) re-
demptions by such shareholders as the SEC or its staff may permit. If the
Fund's Directors determine to discontinue the waiver of the CDSC, the dis-
closure in the Fund's Prospectus 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
at the time of the purchase of such Shares.
To qualify for a waiver of the CDSC, at the time of redemption an investor
must notify the Transfer Agent or his or her Agent must notify Premier.
Any such qualification is subject to confirmation of the investor's enti-
tlement.
BY TELEPHONE.
If you have authorized the Fund to accept telephone instructions, you may
redeem your Shares by calling 1-800-548-2868. Once made, your telephone
request may not be modified or canceled. (Before calling, read "Additional
Information About Redemptions" and "When Share Price is Determined.")
BY MAIL.
Your written instructions to redeem Shares may be in any one of the fol-
lowing forms:
* A letter to The Premier Family of Funds.
* An assignment form or stock power.
* An endorsement on the back of your negotiable stock certificate, if you
have one.
Once mailed to The Premier Family of Funds at P.O. Box 9692, Providence,
Rhode Island 02940- 9830, the redemption request is irrevocable and may
not be modified or canceled. A letter of instruction should state the num-
ber of Shares or the dollar amount to be redeemed. The letter must include
your account number, and, for redemptions in an amount in excess of
$25,000, a signature guarantee of each owner. The redemption request must
be signed by each person in whose name the Shares are registered. For ex-
ample, in the case of joint ownership, each owner must sign. All signa-
tures should be exactly as the name appears in the registration. If the
owner's name appears in the registration as John Robert Jones, he should
sign that way and not as John R. Jones. Signature guarantees can be ob-
tained from commercial banks, credit unions if authorized by state laws,
savings and loans institutions, trust companies, members of a recognized
stock exchange, or from other eligible guarantors who are members of the
Securities Transfer Agents Medallion Program ("STAMP") or any other indus-
try recognized program approved by the Securities Transfer Association.
(Before writing, see "Additional Information About Redemptions.")
BY AUTOMATED WITHDRAWAL PROGRAM.
The Fund's Automated Withdrawal Program automatically redeems enough
Shares each month to provide you with a check for an amount which you
specify (with a minimum of $100). To set up an Automated Withdrawal Pro-
gram, call the Fund at 1-800-548-2868 for instructions. Only shareholders
with an account balance of $10,000 or more may participate in this pro-
gram. Shares will be redeemed on the 15th day or 30th day of each month or
the next business day, and your check will be mailed the next day. If your
monthly checks exceed the dividends, interest and capital appreciation on
your Shares, the payments will deplete your investment. Amounts paid to
you by Automated Withdrawals are not a return on your investment. They are
derived from the redemption of Shares in your account, and you must report
on your income tax return any gains or losses that you realize.
You may specify an Automated Withdrawal Program when you make your first
investment. If you would like to establish an Automated Withdrawal Program
thereafter, the request for the Automated Withdrawal Program must be
signed by all owners, with their signatures guaranteed.
When you make your first investment you may request that Automated With-
drawals be sent to an address other than the address of record. Thereaf-
ter, a request to send Automated Withdrawals to an address other than the
address of record must be signed by all owners, with their signatures
guaranteed.
The Fund may terminate the Automated Withdrawal Program at any time, upon
notice to you, and you likewise may terminate it or change the amount of
the Automated Withdrawal Program, by notice to the Fund in writing or by
telephone. Termination or change will become effective within five days
following receipt of your instructions. Your Automated Withdrawal Program
plan may begin any time after you have owned your Shares for 10 days.
REDEMPTION PROCEEDS.
Redemption proceeds may be sent to you:
BY MAIL. If your redemption check is mailed, it is usually mailed by the
second business day after receipt of your redemption request, but not
later than seven days afterwards. When a redemption occurs shortly after a
recent purchase, the Fund may hold the redemption proceeds beyond seven
days but only until the purchase check clears, which may take up to 10
days or more. No dividend is paid on the redemption proceeds after the re-
demption and before the check is mailed. If you anticipate redemptions
soon after you purchase your Shares, you are advised to wire funds to
avoid delay.
BY WIRE AND ELECTRONIC FUNDS TRANSFER. You may authorize the Fund to
transmit redemption proceeds by wire or electronic funds transfer. Pro-
ceeds from the redemption of Fund Shares will normally be transmitted on
the first business day, but not later than the seventh day, following the
date of redemption. Your bank usually will receive wired funds the day
they are transmitted. Electronically transferred funds will ordinarily be
received within two business days after transmission. Once the funds are
transmitted, the time of receipt and the availability of the funds are not
within the Fund's control. If your bank account changes, you must send a
new "voided" check preprinted with the bank registration with written in-
structions signed by all owners (with their signatures guaranteed), in-
cluding tax identification number.
ADDITIONAL INFORMATION ABOUT REDEMPTIONS.
(1) Redemptions specifying a certain date or price cannot be accepted and
will be returned.
(2) If the Shares being redeemed are represented by a negotiable stock
certificate, the certificate must be returned before the redemption
can be effected.
(3) All redemptions are made and the price is determined on the day when
all documentation is received in good order.
(4) If the request to redeem is made by a corporation, partnership, trust,
fiduciary, agent, estate, guardian, pension plan, profit sharing plan,
or unincorporated association, the Fund may require evidence satisfac-
tory to it of the authority of the individual signing the request.
Please call or write the Fund for further information.
(5) A request to redeem Shares in an IRA or 403(b) account must be accom-
panied by an IRS Form W4-P and a reason for withdrawal as specified by
the Internal Revenue Service.
HOW TO USE THE PREMIER FAMILY OF FUNDS
IN A TAX-QUALIFIED RETIREMENT PLAN
The Premier Family of Funds' investment portfolios are available for your
tax-deferred retirement plan. Call 1-800-548-2868 or write The Premier
Family of Funds at P.O. Box 9692, Providence, Rhode Island 02940-9830 and
request the appropriate forms for:
* IRAs.
* 403(b) accounts for employees of public school systems and non-profit
organizations.
* Profit-sharing plans and pension plans for corporations and other em-
ployers.
HOW TO TRANSFER AN INVESTMENT TO A PREMIER FAMILY OF FUNDS'
RETIREMENT PLAN.
It is easy to transfer your tax-deferred plan to The Premier Family of
Funds from another custodian. Call 1-800-548-2868 or write The Premier
Family of Funds at P.O. Box 9692, Providence, Rhode Island 02940-9830 for
a request to transfer form. If you direct The Premier Family of Funds to
transfer funds from an existing non-retirement Premier Family of Funds ac-
count into a retirement account, the Shares in your non-retirement account
will be redeemed. The redemption proceeds will be invested in your Premier
Family of Funds IRA or other tax-qualified retirement plan. The redemption
is a taxable event resulting in a taxable gain or loss.
OTHER INFORMATION
SHARE PRICE
An investment portfolio's NAV refers to the worth of one Share. The NAV
for Class A and Class R Shares of the Fund is computed by adding, with re-
spect to each class of Shares, the value of all the class' investments,
cash, and other assets, deducting liabilities and dividing the result by
the number of Shares of that class outstanding. The valuation of assets
for determining NAV for the Fund may be summarized as follows:
The portfolio securities of the Fund, except as otherwise noted, listed or
traded on a stock exchange, are valued at the latest sale price. If no
sale is reported, the mean of the latest bid and asked prices is used. Se-
curities traded over-the-counter are priced at the mean of the latest bid
and asked prices but will be valued at the last sale price if required by
regulations of the SEC. When market quotations are not readily available,
securities and other assets are valued at fair value as determined in good
faith in accordance with procedures established by the Board of Directors.
Bonds are valued through valuations obtained from a commercial pricing
service or at the most recent mean of the bid and asked prices provided by
investment dealers in accordance with procedures established by the Board
of Directors.
Pursuant to a determination by The Dreyfus/Laurel Funds, Inc.'s Board of
Directors that such value represents fair value, the debt securities with
maturities of 60 days or less held by the Fund are valued at amortized
cost. When a security is valued at amortized cost, it is valued at its
cost when purchased, and thereafter by assuming a constant amortization to
maturity of any discount or premium, regardless of the impact of fluctuat-
ing interest rates on the market value of the instrument.
The NAV of many of The Premier Family of Funds' investment portfolios is
published in leading newspapers daily. The NAV of the Fund may also be ob-
tained by calling The Premier Family of Funds.
PERFORMANCE ADVERTISING
From time to time, the Fund may advertise the yield and total return on a
class of Shares. Total return and yield figures are based on historical
earnings and are not intended to indicate future performance. The "total
return" of a class of Shares of the Fund may be calculated on an average
annual total return basis or a cumulative total return basis. Average an-
nual total return refers to the average annual compounded rates of return
on a class of Shares over one-, five-, and ten-year periods or the life of
the Fund (as stated in the advertisement) that would equate an initial
amount invested at the beginning of a stated period to the ending redeem-
able value of the investment, assuming the reinvestment of all dividends
and capital gains distributions. Cumulative total return reflects the
total percentage change in the value of the investment over the measuring
period, again assuming the reinvestment of all dividends and capital gains
distributions.
The Fund's "yield" is calculated by dividing a class of Shares' annualized
net investment income per Share during a recent 30-day (or one month) pe-
riod by the maximum public offering price per class of such Share on the
last day of that period. Since yields fluctuate, yield data cannot neces-
sarily be used to compare an investment in a class of Shares with bank de-
posits, savings accounts, and similar investment alternatives which often
provide an agreed-upon or guaranteed fixed yield for a stated period of
time.
Total return and yield quotations will be computed separately for each
class of the Fund's Shares. Because of the difference in the fees and ex-
penses borne by Class R and Class A Shares of the Fund, the return and
yield on Class R Shares will generally be higher than the return and yield
on Class A Shares. Any fees charged by a Bank or Agent directly to its
customers' account in connection with investments in the Fund will not be
included in calculations of total return or yield. The Fund's annual re-
port contains additional performance information and is available upon re-
quest without charge from Premier or your Bank or Agent.
The Fund may compare the performance of its Class A and Class R Shares
with various industry standards of performance including Lipper Analytical
Services, Inc. ratings, Standard & Poor's 500 Composite Stock Price Index,
Lehman Brothers Intermediate Bond Index, CDA Technologies indexes, other
indexes created by Lehman Brothers, the Consumer Price Index, and the Dow
Jones Industrial Average. Performance rankings as reported in Changing
Times, Business Week, Institutional Investor, The Wall Street Journal, IB-
C/Donoghue's Money Fund Report, Mutual Fund Forecaster, No Load Investor,
Money Magazine, Morningstar Mutual Fund Values, U.S. News and World Re-
port, Forbes, Fortune, Barron's and similar publications may also be used
in comparing the Fund's performance. Furthermore, the Fund may quote its
Class A and Class R Shares' total returns and yields in advertisements or
in shareholder reports. The Fund may also advertise non-standardized per-
formance information, such as total return for periods other than those
required to be shown or cumulative performance data. The Fund may adver-
tise a quotation of yield or other similar quotation demonstrating the in-
come earned or distributions made by the Fund.
DISTRIBUTIONS
The Fund declares and pays dividends from its net investment income, if
any, four times yearly at the beginning of May, August, November and in
mid-December and distributes net realized gains, if any, on an annual
basis. The Board of Directors may elect not to distribute capital gains in
whole or in part to take advantage of capital loss carryovers.
Unless you choose to receive dividend and/or capital gain distributions in
cash, your distributions will be automatically reinvested in additional
Shares of the Fund at the NAV. You may change the method of receiving dis-
tributions at any time by writing to the Fund. Checks which are sent to
shareholders who have requested distributions to be paid in cash and which
are subsequently returned by the United States Postal Service as not de-
liverable or which remain uncashed for six months or more will be rein-
vested in additional Fund Shares in the shareholder's account at the then
current NAV. Subsequent Fund distributions will be automatically rein-
vested in additional Fund Shares in the shareholder's account.
Distributions paid by the Fund with respect to one class of Shares may be
greater or less per Share than those paid with respect to another class of
Shares due to the different expenses of the different classes.
Shares purchased on a day on which the Fund calculates its NAV will not
begin to accrue dividends until the following day. Redemption orders ef-
fected on any particular day will receive all dividends declared through
the day of redemption.
You may elect to have distributions on Shares held in IRAs and 403(b) ac-
counts paid in cash only if you are at least 59 1/2 years old or are per-
manently and totally disabled. Distribution checks normally are mailed
within seven days after the record date.
Any dividend and/or capital gain distribution paid by the Fund will reduce
each Share's NAV by the amount of the distribution. Shareholders are sub-
ject to taxes with respect to any such distribution. At any given time,
the value of the Fund's Shares includes the undistributed net gains, if
any, realized by the Fund on the sale of portfolio securities, and undis-
tributed dividends and interest received, less the Fund's expenses. Be-
cause such gains and income are included in the value of your Shares, when
they are distributed the value of your Shares is reduced by the amount of
the distribution. Accordingly, if your distribution is reinvested in addi-
tional Shares, the distribution has no effect on the value of your invest-
ment; while you own more Shares, the value of each Share has been reduced
by the amount of the distribution. Likewise, if you take your distribution
in cash, the value of your Shares immediately after the distribution plus
the cash received is equal to the value of the Shares immediately before
the distribution. For example, if you own a Fund Share that immediately
before a distribution has a value of $10, including $2 in undistributed
dividends and capital gains realized by the Fund during the year, and if
the $2 is distributed, the value of the Share will decline to $8. If the
$2 is reinvested at $8 per Share, you will receive .250 Shares, so that,
after the distribution, you will have 1.250 Shares at $8 per Share, or
$10, the same as before.
TAXES
The Fund intends to continue to qualify for treatment as a regulated in-
vestment company under the Code so that it will be relieved of federal in-
come tax on that part of its investment company taxable income (consisting
generally of taxable net investment income and net short-term capital
gain) and net capital gain (the excess of net long-term capital gain over
net short-term capital loss) that is distributed to its shareholders.
Dividends from the Fund's investment company taxable income are taxable to
you as ordinary income, to the extent of the Fund's earnings and profits.
Distributions by the Fund of net capital gain, when designated as such,
are taxable to you as long-term capital gains, regardless of the length of
time you have owned your Shares.
A portion of the dividends paid by the Fund may be eligible for the
dividends-received deduction allowed to corporations. The eligible portion
may not exceed the aggregate dividends received by the Fund from U.S. cor-
porations. However, dividends received by a corporate shareholder and de-
ducted by it pursuant to the dividends-received deduction are subject in-
directly to the alternative minimum tax. No dividends paid by the Fund are
expected to be eligible for this deduction.
Dividends and other distributions are taxable to you regardless of whether
they are received in cash or reinvested in additional Fund Shares, even if
the value of your Shares is below your cost. If you purchase Shares
shortly before a taxable distribution you must pay income taxes on the
distribution, even though the value of your investment (plus cash re-
ceived, if any) remains the same. In addition, the Share price at the time
you purchase Shares may include unrealized gains in the securities held in
the Fund. If these portfolio securities are subsequently sold and the
gains are realized, they will, to the extent not offset by capital losses,
be paid to you as a capital gain distribution and will be taxable to you.
In January of each year, the Fund will send you a Form 1099-DIV notifying
you of the status for federal income tax purposes of your distributions
for the preceding year.
Dividends paid by the Fund to qualified retirement plans ordinarily will
not be subject to taxation until the proceeds are distributed from the re-
tirement plans. The Fund will not report to the IRS dividends paid to such
plans. Generally, distributions from qualified retirement plans, except
those representing returns of non-deductible contributions thereto, will
be taxable as ordinary income and, if made prior to the time the partici-
pant reaches age 59 1/2 , generally will be subject to an additional tax
equal to 10% of the taxable portion of the distribution. If the distribu-
tion from such a retirement plan (other than certain governmental or
church plans) for any taxable year following the year in which the partic-
ipant reaches age 70 1/2 is less than the "minimum required distribution"
for that taxable year, an excise tax equal to 50% of the deficiency may be
imposed by the IRS. The administrator, trustee or custodian of such a re-
tirement plan will be responsible for reporting such distributions from
such plans to the IRS. Moreover, certain contributions to a qualified re-
tirement plan in excess of the amounts permitted by law may be subject to
an excise tax.
You must furnish the Fund with your taxpayer identification number ("TIN")
and state whether you are subject to withholding for prior under-
reporting, certified under penalties of perjury as prescribed by the Code
and the regulations thereunder. Unless previously furnished, investments
received without such a certification will be returned. The Fund is re-
quired to withhold a portion of all dividends, capital gain distributions
and redemption proceeds payable to any individuals and certain other non-
corporate shareholders who do not provide the Fund with a correct TIN;
withholding from dividends and capital gain distributions also is required
for such shareholders who otherwise are subject to backup withholding.
The Fund will be subject to a 4% nondeductible excise tax to the extent it
fails to distribute by the end of any calendar year substantially all of
its taxable ordinary income for that year and capital gain net income for
the one-year period ending on October 31 of that year plus certain other
amounts. The Fund expects to make such distributions as are necessary to
avoid the imposition of this tax.
The foregoing is only a summary of some of the important tax consider-
ations generally affecting the Fund and its shareholders. See the SAI for
a further discussion. There may be other federal, state or local tax con-
siderations applicable to a particular investor. You therefore are urged
to consult your own tax adviser.
OTHER SERVICES
At least twice a year you will receive the financial statements of the
Fund with a summary of its investments and performance. The Fund will send
you a confirmation statement after every transaction (except with regard
to the reinvestment of dividends and other distributions) that affects
your Fund account. In addition, an account statement will be mailed to you
quarterly or monthly depending on the Fund's reporting schedule. You may
also request a statement of your account activity at any time. Carefully
review such confirmation statements and account statements and notify the
Fund immediately if there is an error. From time to time, to reduce ex-
penses, only one copy of the Fund's shareholder reports (such as the
Fund's annual report) may be mailed to your household. Please call the
Fund if you need additional copies.
No later than January 31 of each year, The Premier Family of Funds will
send you the following reports, which you may use in completing your fed-
eral income tax return:
Form 1099-DIV Reports taxable distributions (and returns of capital, if
any) during the preceding year.
Form 1099-B Reports proceeds paid on redemptions during the preceding
year.
Form 1099-R Reports distributions from IRAs and 403(b) accounts during
the preceding year.
At such time as prescribed by law, the Fund will send you a Form 5498,
which reports contributions to your IRA for the previous calendar year. In
addition, the Fund may send you other relevant tax-related forms.
FURTHER INFORMATION ABOUT THE FUND
THE DREYFUS/LAUREL FUNDS, INC.
The Laurel Funds, Inc. was incorporated in Maryland on August 6, 1987 and
changed its name to The Dreyfus/Laurel Funds, Inc. on October 17, 1994.
The Dreyfus/Laurel Funds, Inc. is registered with the SEC under the 1940
Act as a diversified, open-end management investment company. The Dreyfu-
s/Laurel Funds, Inc. has an authorized capitalization of 25 billion Shares
of $0.001 par value stock with equal voting rights. The Articles of Incor-
poration permit the Directors to create an unlimited number of investment
portfolios (each a "fund"). The Directors of The Dreyfus/Laurel Funds,
Inc. have authorized Shares of the Fund to be issued in four classes--
Class A, Class R, Class B and Class C.
Each Share (regardless of class) has one vote. All shares of a Fund (and
classes thereof) vote together as a single class, except as to any matter
for which a separate vote of any fund or class is required by the 1940
Act, and except as to any matter which affects the interests of one or
more particular funds or classes, in which case only the shareholders of
the affected fund or class are entitled to vote, each as a separate class.
At your written request, the Fund will issue negotiable stock certifi-
cates.
At January 31, 1995, Mellon Bank Corporation, the Manager's parent, owned
of record through its direct and indirect subsidiaries more than 25% of
The Dreyfus/Laurel Funds, Inc.'s outstanding voting shares, and is deemed,
under the 1940 Act, to be a controlling shareholder.
MANAGEMENT.
THE BOARD OF DIRECTORS. The business affairs of The Dreyfus/Laurel Funds,
Inc. are managed under the direction of its Directors. The SAI contains
the names and general background information concerning the Directors and
Officers of The Dreyfus/Laurel Funds, Inc.
INVESTMENT MANAGER. The Manager is located at 200 Park Avenue, New York,
New York 10166. As of January 31, 1995, the Manager managed or adminis-
tered approximately $70 billion in assets for more than 1.9 million inves-
tor accounts nationwide. The Manager is a wholly-owned subsidiary of Mel-
lon Bank, N.A. (One Mellon Bank Center, Pittsburgh, Pennsylvania 15258),
the Fund's prior investment manager. Pursuant to an Investment Management
Agreement, transferred from Mellon Bank to the Manager effective as of Oc-
tober 17, 1994, the Manager provides, or arranges for one or more third
parties to provide, investment advisory, administrative, custody, fund ac-
counting and transfer agency services to the Fund. As investment manager,
the Manager manages the Fund by making investment decisions based on the
Fund's investment objective, policies and restrictions, and is paid a fee.
Under the Investment Management Agreement, the Fund pays a fee computed
daily, and paid monthly, at the annual rate of 1.00% of the Fund's average
daily net assets less certain expenses described below. The Manager pays
all of the expenses of the Fund except brokerage fees, taxes, interest,
fees and expenses of the non-interested Directors (including counsel fees)
and extraordinary expenses. Although the Manager does not pay for the fees
and expenses of the non-interested Directors (including counsel fees), the
Manager is contractually required to reduce its investment management fee
in an amount equal to the Fund's allocable share of such expenses. In
order to compensate the Manager for paying virtually all of the Fund's ex-
penses, the Fund's investment management fee is higher than the investment
advisory fees paid by most investment companies. Most, if not all, such
companies also pay for additional non-investment advisory expenses that
are not paid by such companies' investment advisers. From time to time,
the Manager may waive (either voluntarily or pursuant to applicable state
limitations) additional investment management fees payable by the Fund.
For the period from November 30, 1993 (commencement of operations) to
April 3, 1994, the Fund paid its investment adviser, Mellon Bank, 0.77%
(annualized) of its average daily net assets in investment advisory fees
(net of expenses reimbursed), under the Fund's previous investment advi-
sory contract (such contract covered only the provision of investment ad-
visory and certain specified administrative services). Without the reim-
bursement, expenses would have been higher. For the period from April 4,
1994 through the fiscal year ended October 31, 1994, the Fund paid Mellon
Bank or the Manager 1.00% (annualized) of its average daily net assets in
investment management fees, less fees and expenses of the non-interested
Directors (including counsel fees).
The Manager is authorized to allocate purchase and sale orders for portfo-
lio securities to certain financial institutions, including, in the case
of agency transactions, financial institutions which are affiliated with
the Manager or which have sold Shares of the Fund, if the Manager believes
that the quality of the transaction and the commission are comparable to
what they would be with other qualified brokerage firms. From time to
time, to the extent consistent with its investment objective, policies and
restrictions, the Fund may invest in securities of companies with which
Mellon Bank has a lending relationship.
Mellon Bank is a subsidiary of Mellon Bank Corporation. At June 30, 1994
Mellon Bank Corporation was the 24th largest bank holding company in the
United States in terms of total assets. Through its bank subsidiaries, it
operates 631 domestic retail banking locations including 432 branch of-
fices. Mellon Bank Corporation has 25 domestic representative offices.
There are international branches in Grand Cayman, British West Indies, and
London, England, and two international representative offices in Tokyo,
Japan and Hong Kong. Mellon Bank has a banking subsidiary, Mellon Bank
Canada, in Toronto. Mellon Bank is a registered municipal securities
dealer.
The fixed income portion of the Fund is managed by Laurie Carroll. Ms.
Carroll is a Senior Vice President and portfolio manager at Mellon Bank.
Ms. Carroll is a portfolio manager at the Manager and has been employed by
the Manager since October 17, 1994. Ms. Carroll has been employed by Mel-
lon Bank since 1986. The equity portion of the Fund is managed by Ron
Gala. Mr. Gala is a portfolio manager at the Manager and has been employed
by the Manager since October 17, 1994. Mr. Gala is Vice President and
Portfolio Manager for Mellon Bank and is a Portfolio Manager for Mellon
Equity Associates. Mr. Gala is also responsible for Mellon Equity Associ-
ate's asset allocation. Mr. Gala has been employed by Mellon Bank in vari-
ous capacities since 1982.
The Glass-Steagall Act of 1933 prohibits a national bank from engaging in
the business of issuing, underwriting, selling or distributing certain se-
curities. The activities of Mellon Bank and the Manager may raise issues
under these provisions. However, Mellon Bank has been advised by its coun-
sel that these activities are consistent with these statutory and regula-
tory obligations. For more information on the Glass-Steagall Act of 1933,
see "Federal Law Affecting Mellon Bank" in the SAI.
OTHER SERVICE PROVIDERS. Under a Custody and Fund Accounting Agreement,
Mellon Bank acts as custodian and fund accountant, maintaining possession
of the Fund's investment securities and providing certain accounting and
related services.
The Shareholder Services Group, Inc., a subsidiary of First Data Corpora-
tion, serves as transfer agent ("Transfer Agent") for the Fund's Shares.
The Transfer Agent is located at One American Express Plaza, Providence,
Rhode Island 02903.
Shares of the Fund are sold on a continuous basis by Premier, as the
Fund's sponsor and distributor. Premier is a registered broker-dealer with
principal offices at One Exchange Place, Boston, Massachusetts 02109. The
Fund has entered into a distribution agreement with Premier which provides
that Premier has the exclusive right to distribute Shares of the Fund.
Premier may pay service and/or distribution fees to Agents that assist
customers in purchasing and servicing of Shares of the Fund. (See "Distri-
bution Plans (Class A Plan and Class B and C Plans).")
DISTRIBUTION PLANS (CLASS A PLAN AND CLASS B AND C PLAN).
Class A Shares are subject to a Distribution Plan adopted pursuant to Rule
12b-1 under the 1940 Act ("Rule 12b-1"). Class B and C Shares are subject
to a Distribution Plan and a Service Plan, each adopted pursuant to Rule
12b-1. Potential investors should read this Prospectus in light of the
terms governing Agreements with their Agents. An Agent entitled to receive
compensation for selling and servicing the Fund's Shares may receive dif-
ferent compensation with respect to one class of Shares over another.
DISTRIBUTION PLAN--CLASS A. The holders of the Class A Shares of the Fund
bear some of the cost of selling those shares under the Distribution Plan
(the "Plan"). The Plan allows the Fund to spend annually up to 0.25% of
its average daily net assets attributable to Class A Shares to compensate
Dreyfus Service Corporation, an affiliate of the Manager, for shareholder
servicing activities and Premier for shareholder servicing activities and
for activities or expenses primarily intended to result in the sale of
Class A Shares of the Fund. The Plan allows Premier to make payments from
the Rule 12b-1 fees it collects from the Fund to compensate Agents that
have entered into Selling Agreements ("Agreements") with Premier. Under
the Agreements, the Agents are obligated to provide distribution related
services with regard to the Fund and/or shareholder services to the
Agent's clients that own Class A Shares of the Fund.
The Fund and Premier may suspend or reduce payments under the Plan at any
time, and payments are subject to the continuation of the Fund's Plan and
the Agreements described above. From time to time, the Agents, Premier and
the Fund may agree to voluntarily reduce the maximum fees payable under
the Plan. See the SAI for more details on the Plan.
DISTRIBUTION AND SERVICE PLANS--CLASS B AND C. Under a Distribution Plan
adopted pursuant to Rule 12b-1, the Fund pays Premier for distributing the
Fund's Class B and C Shares, at an aggregate annual rate of .75 of 1% of
the value of the average daily net assets of Class B and C. Under a Ser-
vice Plan adopted pursuant to Rule 12b-1, the Fund pays Dreyfus Service
Corporation or Premier for the provision of certain services to the hold-
ers of Class B and C Shares a fee at the annual rate of .25 of 1% of the
value of the average daily net assets of Class B and C. The services pro-
vided may include personal services relating to shareholder accounts, such
as answering shareholder inquiries regarding the Fund and providing re-
ports and other information, and providing services related to the mainte-
nance of such shareholder accounts. With regard to such services, each
Agent is required to disclose to its clients any compensation payable to
it by the Fund and any other compensation payable by its clients in con-
nection with the investment of their assets in Class B and C Shares. Pre-
mier may pay one or more Agents in respect of distribution and other ser-
vices for these classes of shares. Premier determines the amounts, if any,
to be paid to Agents under the Distribution and Service Plans and the
basis on which such payments are made. The fees payable under the Distri-
bution and Service Plans are payable without regard to actual expenses in-
curred.
FOR MORE INFORMATION
FUND INFORMATION AND PROSPECTUSES
Call 1-800-548-2868
Please read the prospectus before you invest or send money
TO INVEST, REDEEM AND EXCHANGE
Call 1-800-548-2868 (for overseas, call collect (401) 455-3476)
9:00 a.m. to 5:00 p.m., Eastern time
Monday through Friday
Or Write: The Premier Family of Funds
P.O. Box 9692
Providence, Rhode Island 02940-9830
YIELD AND SHARE PRICE INFORMATION
1-800-548-2868
24 hours a day, 7 days a week
The Premier Family of Funds
One Exchange Place
Boston, Massachusetts 02109
<PAGE>
P R O S P E C T U S
Small box above fund name showing a lions face.
PREMIER SMALL COMPANY STOCK FUND
CLASS A AND CLASS R SHARES
MARCH 1, 1995
PROSPECTUS BEGINS ON PAGE 1
<PAGE>
P R O S P E C T U S
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Premier Small Company Stock Fund
Class A and Class R Shares
March 1, 1995
PREMIER SMALL COMPANY STOCK FUND seeks to consistently exceed the total
return performance of the Russell 2500 Stock Index while maintaining a similar
level of risk.
THIS PROSPECTUS describes the Premier Small Company Stock Fund (the "Fund"),
a separate portfolio of The Dreyfus/Laurel Funds, Inc. (formerly The Laurel
Funds, Inc.), an open-end, diversified management investment company that is
part of The Premier Family of Funds. This Prospectus describes two classes of
Shares--Class A Shares and Class R Shares (collectively, the "Shares")--of the
Fund.
This Prospectus sets forth concisely the information about the Fund that a
prospective purchaser should consider before investing. Investors should read
this Prospectus and retain it for future reference. The Fund offers you four
methods of purchasing Fund Shares, but only Class A and Class R Shares are
offered by this Prospectus. SEE "ALTERNATIVE PURCHASE METHODS." Additional
information about the Fund is contained in a Statement of Additional Information
(the
.....................................
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. ALL MUTUAL
FUND SHARES INVOLVE CERTAIN RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THE FEES TO WHICH THE FUND IS SUBJECT ARE SUMMARIZED IN THE "EXPENSE
SUMMARY" SECTION OF THE FUND'S PROSPECTUS. THE FUND PAYS MELLON BANK, N.A.
("MELLON BANK") OR ITS AFFILIATES TO BE ITS INVESTMENT MANAGER. MELLON BANK OR
AN AFFILIATE MAY BE PAID FOR PERFORMING OTHER SERVICES FOR THE FUND, SUCH AS
CUSTODIAN, TRANSFER AGENT OR FUND ACCOUNTANT SERVICES. THE FUND IS DISTRIBUTED
BY PREMIER MUTUAL FUND SERVICES, INC.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
....................... 1 .......................
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P R E M I E R S M A L L C O M P A N Y S T O C K F U N D
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"SAI"), which has been filed with the Securities and Exchange Commission (the
"SEC") and is available upon request without charge by calling or writing to The
Premier Family of Funds. The SAI bears the same date as this Prospectus and is
incorporated by reference in its entirety into this Prospectus.
In addition to the Fund, The Premier Family of Funds also offers other funds
that provide investment opportunities for you in the equity and fixed income
markets. For more information about these additional investment opportunities,
call 1-800-548-2868.
.....................................
The Premier Family of Funds
P.O. Box 9692
Providence, Rhode Island 02940-9830
....................... 2 .......................
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<PAGE>
P R O S P E C T U S
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
Expense Summary........................................ 5
Financial Highlights................................... 7
Alternative Purchase Methods........................... 9
Investment Objective and Policies...................... 11
Other Investment Policies and Risk Factors............. 12
HOW TO DO BUSINESS WITH US
Special Shareholder Services........................... 17
Investor Line.......................................... 17
How to Buy Fund Shares................................. 17
BY MAIL............................................... 18
BY TELEPHONE.......................................... 18
BY WIRE............................................... 19
BY AUTOMATIC MONTHLY INVESTMENTS...................... 19
BY DIRECT DEPOSIT..................................... 19
BY IN-KIND PURCHASES.................................. 19
WHEN SHARE PRICE IS DETERMINED........................ 23
ADDITIONAL INFORMATION ABOUT INVESTMENTS.............. 23
How to Exchange Your Investment From One Fund to
Another............................................... 24
BY TELEPHONE.......................................... 24
BY MAIL............................................... 24
ADDITIONAL INFORMATION ABOUT EXCHANGES................ 25
How to Redeem Fund Shares.............................. 25
BY TELEPHONE.......................................... 28
BY MAIL............................................... 28
BY AUTOMATED WITHDRAWAL PROGRAM....................... 28
REDEMPTION PROCEEDS................................... 29
ADDITIONAL INFORMATION ABOUT REDEMPTIONS.............. 30
How To Use The Premier Family of Funds in a
Tax-Qualified Retirement Plan......................... 30
HOW TO TRANSFER AN INVESTMENT TO A PREMIER FAMILY OF
FUNDS' RETIREMENT PLAN............................... 30
</TABLE>
....................... 3 .......................
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P R E M I E R S M A L L C O M P A N Y S T O C K F U N D
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TABLE OF CONTENTS (CONTINUED)
<TABLE>
<S> <C> <C>
OTHER INFORMATION
Share Price............................................ 31
Performance Advertising................................ 31
Distributions.......................................... 33
Taxes.................................................. 34
Other Services......................................... 35
Further Information About The Fund..................... 36
THE DREYFUS/LAUREL FUNDS, INC......................... 36
MANAGEMENT............................................ 36
OTHER SERVICE PROVIDERS............................... 38
DISTRIBUTION PLANS (CLASS A PLAN AND CLASS B AND CLASS
C PLANS)............................................. 38
</TABLE>
.....................................
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE FUND'S SAI
INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH THE OFFERING MADE BY THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE PREMIER FAMILY OF FUNDS OR THE
DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE PREMIER
FAMILY OF FUNDS OR BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING
MAY NOT BE LAWFULLY MADE.
....................... 4 .......................
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<PAGE>
P R O S P E C T U S
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EXPENSE SUMMARY
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS R
<S> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
MAXIMUM SALES LOAD IMPOSED ON PURCHASES
(AS A PERCENTAGE OF OFFERING PRICE) 4.50% NONE NONE NONE
MAXIMUM DEFERRED SALES CHARGE IMPOSED ON
REDEMPTIONS (AS A PERCENTAGE OF THE AMOUNT SUBJECT
TO CHARGE) NONE 4.00% 1.00% NONE
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF NET ASSETS)
MANAGEMENT FEE 1.25% 1.25% 1.25% 1.25%
12B-1 FEE* 0.25% 1.00% 1.00% NONE
OTHER EXPENSES** 0.00% 0.00% 0.00% 0.00%
------- --------- -------- -------
TOTAL FUND OPERATING EXPENSES 1.50% 2.25% 2.25% 1.25%
EXAMPLES
YOU WOULD PAY THE FOLLOWING EXPENSES ON A
$1,000 INVESTMENT, ASSUMING (1) A 5% 1 YEAR $ 60 $ 63/23+ $33/23+ $ 13
ANNUAL RETURN AND (2) EXCEPT WHERE NOTED, 3 YEARS 90 100/70+ 70 40
REDEMPTION AT THE END OF EACH TIME 5 YEARS 123 140/120+ 120 69
PERIOD: 10 YEARS 216 231/221 258 151
<FN>
* SEE "DISTRIBUTION PLANS (CLASS A PLAN AND CLASS B AND C PLANS)" FOR A DESCRIPTION OF THE
FUND'S DISTRIBUTION PLANS FOR CLASS A, B AND C SHARES.
** DOES NOT INCLUDE FEES AND EXPENSES OF THE NON-INTERESTED DIRECTORS (INCLUDING COUNSEL). THE
INVESTMENT MANAGER IS CONTRACTUALLY REQUIRED TO REDUCE ITS MANAGEMENT FEE IN AN AMOUNT EQUAL
TO THE FUND'S ALLOCABLE PORTION OF SUCH FEES AND EXPENSES, WHICH ARE ESTIMATED TO BE .02% OF
THE FUND'S NET ASSETS. SEE "FURTHER INFORMATION ABOUT THE FUND--MANAGEMENT."
+ ASSUMING NO REDEMPTION OF SHARES.
</TABLE>
.....................................
THE INFORMATION CONTAINED IN THE TABLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS
THAN THOSE SHOWN.
.....................................
The purpose of the foregoing table is to assist you in understanding the
various costs and expenses that investors will bear, directly or indirectly, the
payment of which will reduce investors' return on an annual basis. Long-term
investors in Class A, B or C Shares could pay more in 12b-1 fees than the
economic equivalent of paying the maximum front-end sales charges applicable to
mutual funds sold by members of the National Association of Securities Dealers,
Inc. ("NASD"). The information in the foregoing table does not reflect any fee
waivers or expense reimbursement arrangements that may be in effect. Certain
Agents (as defined herein) may charge their clients direct fees for effecting
transactions in Fund Shares; such fees are not reflected in the foregoing table.
SEE "FURTHER INFORMATION ABOUT THE FUND--MANAGEMENT," "HOW TO BUY FUND SHARES"
and "DISTRIBUTION PLANS (CLASS A PLAN AND CLASS B AND C PLANS)."
....................... 5 .......................
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The Fund understands that banks, brokers, dealers or other financial
institutions (including Mellon Bank and its affiliates) (collectively "Agents")
may charge fees to their clients who are owners of the Fund's Class A, B or C
Shares for various services provided in connection with a client's account.
These fees would be in addition to any amounts received by an Agent under its
Selling Agreement ("Agreement") with Premier Mutual Fund Services, Inc.
("Premier"). The Agreement requires each Agent to disclose to its clients any
compensation payable to such Agent by Premier and any other compensation payable
by the client for various services provided in connection with their accounts.
....................... 6 .......................
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<PAGE>
P R O S P E C T U S
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FINANCIAL HIGHLIGHTS
The tables below are based upon a single Class A or Class R Share outstanding
throughout the period and should be read in conjunction with the financial
statements and related notes that appear in the Fund's Annual Report dated
October 31, 1994 which is incorporated by reference in the SAI. The financial
statements included in the Fund's Annual Report for the year ended October 31,
1994 have been audited by KPMG Peat Marwick LLP, independent accountants whose
report appears in the Fund's Annual Report.
<TABLE>
<CAPTION>
PREMIER SMALL COMPANY STOCK FUND
FOR A CLASS A SHARE OUTSTANDING THROUGHOUT THE
PERIOD.
Period
Ended
10/31/94*#
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
-------
INCOME FROM INVESTMENT OPERATIONS:
NET INVESTMENT INCOME 0.01
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS 0.06
-------
TOTAL FROM INVESTMENT OPERATIONS 0.07
-------
NET ASSET VALUE, END OF PERIOD $10.07
-------
-------
TOTAL RETURN++ 0.70 %
-------
-------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL
DATA:
NET ASSETS, END OF PERIOD (IN 000'S) $60
RATIO OF OPERATING EXPENSES TO AVERAGE
NET ASSETS 1.50 %+
RATIO OF NET INVESTMENT INCOME TO AVERAGE
NET ASSETS 0.83 %+
PORTFOLIO TURNOVER RATE 8 %
<FN>
* THE FUND COMMENCED OPERATIONS AND COMMENCED
SELLING CLASS A SHARES ON SEPTEMBER 2, 1994.
EFFECTIVE OCTOBER 17, 1994, THE FUND'S INVESTOR
SHARES WERE REDESIGNATED AS CLASS A SHARES.
+ ANNUALIZED.
++ TOTAL RETURN REPRESENTS AGGREGATE TOTAL RETURN
FOR THE PERIOD INDICATED.
# PRIOR TO OCTOBER 17, 1994, MELLON BANK, N.A.
SERVED AS THE FUND'S INVESTMENT MANAGER.
EFFECTIVE OCTOBER 17, 1994, THE DREYFUS
CORPORATION SERVES AS THE FUND'S INVESTMENT
MANAGER.
</TABLE>
....................... 7 .......................
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<TABLE>
<CAPTION>
PREMIER SMALL COMPANY STOCK FUND
FOR A CLASS R SHARE OUTSTANDING THROUGHOUT THE
PERIOD.
Period
Ended
10/31/94*#
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
-------
INCOME FROM INVESTMENT OPERATIONS:
NET INVESTMENT INCOME 0.02
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS 0.05
-------
TOTAL FROM INVESTMENT OPERATIONS 0.07
-------
NET ASSET VALUE, END OF PERIOD $10.07
-------
-------
TOTAL RETURN++ 0.70 %
-------
-------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL
DATA:
NET ASSETS, END OF PERIOD (IN 000'S) $10,747
RATIO OF OPERATING EXPENSES TO AVERAGE
NET ASSETS 1.25 %+
RATIO OF NET INVESTMENT INCOME TO AVERAGE
NET ASSETS 1.08 %+
PORTFOLIO TURNOVER RATE 8 %
<FN>
* THE FUND COMMENCED OPERATIONS AND COMMENCED
SELLING TRUST SHARES ON SEPTEMBER 2, 1994.
EFFECTIVE OCTOBER 17, 1994, THE FUND'S TRUST
SHARES WERE REDESIGNATED AS CLASS R SHARES.
+ ANNUALIZED.
++ TOTAL RETURN REPRESENTS AGGREGATE TOTAL RETURN
FOR THE PERIOD INDICATED.
# PRIOR TO OCTOBER 17, 1994, MELLON BANK, N.A.
SERVED AS THE FUND'S INVESTMENT MANAGER.
EFFECTIVE OCTOBER 17, 1994, THE DREYFUS
CORPORATION SERVES AS THE FUND'S INVESTMENT
MANAGER.
</TABLE>
Additional classes of shares--designated Class B and Class C--have been
added to the previously existing Class A (formerly Investor Class) and Class R
(formerly Trust Class) Shares of the Fund. Class A and Class R Shares are
offered by this Prospectus. Class B and Class C Shares are offered through a
servicing network associated with The Dreyfus Corporation (the "Manager")
pursuant to a separate Prospectus. Class A Shares are also offered through that
network pursuant to a separate Prospectus. For more information call
1-800-645-6561. Please read that Prospectus carefully. Exchange and shareholder
services vary depending upon the network through which you purchase Fund Shares.
See "HOW TO BUY FUND SHARES."
....................... 8 .......................
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<PAGE>
P R O S P E C T U S
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ALTERNATIVE PURCHASE METHODS
The Fund offers you four methods of purchasing Fund Shares, but only Class A and
Class R Shares are offered by this Prospectus. You may choose the class of
Shares for which you are eligible that best suits your needs, given the amount
of your purchase, the length of time you expect to hold your Shares and any
other relevant circumstances. Each Fund Share represents an identical pro rata
interest in the Fund's investment portfolio.
Class A Shares are sold at net asset value per share ("NAV") plus a maximum
initial sales charge of 4.50% of the public offering price imposed at the time
of purchase. The initial sales charge may be reduced or waived for certain
purchases. See "HOW TO BUY FUND SHARES--CLASS A SHARES." These Shares are
subject to an annual 12b-1 fee at the rate of 0.25 of 1% of the value of the
average daily net assets of Class A. See "DISTRIBUTION PLAN--CLASS A."
Class A Shares (and Class B and Class C Shares described below) are
primarily sold to retail investors by Agents that have entered into Selling
Agreements with Premier, except that full-time or part-time employees or
directors of the Manager or any of its affiliates or subsidiaries, 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 Premier. Subsequent purchases may be sent directly to the
Transfer Agent or your Agent.
Class R Shares generally may not be purchased directly by individuals,
although eligible institutions may purchase Class R Shares for accounts
maintained by individuals. Class R Shares are sold at NAV primarily to bank
trust departments and other financial service providers (including Mellon Bank
and its affiliates) acting on behalf of customers having a qualified trust or
investment account or similar relationship at such institution. Holders of Class
R Shares of the Fund who have held their Shares since April 4, 1994, may
continue to purchase Class R Shares of that Fund, whether or not they would
otherwise be eligible to do so. Class R Shares may be purchased for a retirement
plan only by a custodian, trustee, investment manager or other entity authorized
to act on behalf of such Plan. Institutions effecting transactions in Class R
Shares for the accounts of their clients may charge their clients direct fees in
connection with such transactions.
In addition to the classes of Shares offered by this Prospectus, the Fund
offers two other classes of Shares designated Class B and Class C available,
together with the Class A Shares offered by this Prospectus, through a servicing
network associated with the Manager. For more information and a Prospectus
relating to shares offered through that network, call 1-800-645-6561. Please
read that Prospectus carefully. Exchange and shareholder services vary depending
upon the network through which you purchase Fund Shares.
Class B Shares are sold at NAV with no initial sales charge at the time of
purchase; as a result, the entire purchase price is immediately invested in the
Fund. Class B Shares are subject
....................... 9 .......................
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to a maximum 4% Contingent Deferred Sales Charge ("CDSC"), which is assessed
only if you redeem Class B shares within six years of purchase. See "HOW TO BUY
FUND SHARES--CLASS B SHARES" and "HOW TO REDEEM FUND SHARES--CONTINGENT DEFERRED
SALES CHARGE--CLASS B SHARES." These Shares also are subject to an annual
distribution fee at the rate of 0.75 of 1% of the value of the average daily net
assets of Class B. In addition, Class B Shares are subject to an annual service
fee at the rate of 0.25 of 1% of the value of the average daily net assets of
Class B. See "DISTRIBUTION AND SERVICE PLANS--CLASS B AND C." The distribution
fee paid by Class B will cause such class to have a higher expense ratio and to
pay lower dividends than Class A. Approximately six years after the date of
purchase, Class B Shares automatically will convert to Class A Shares based on
the relative NAV for Shares of each such class, and will no longer be subject to
the distribution fee. (Such conversion is subject to suspension by the Fund's
Board of Directors if adverse tax consequences might result.) 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 are subject to a 1% CDSC, which is assessed only if a
shareholder redeems Class C Shares within one year of purchase. See "HOW TO
REDEEM FUND SHARES--CLASS C SHARES." These Shares also are subject to an annual
distribution fee at the rate of 0.75 of 1% of the value of the average daily net
assets of Class C. Class C Shares are also subject to an annual service fee at
the rate of 0.25 of 1% of the value of the average daily net assets of Class C.
See "DISTRIBUTION PLANS--CLASS B AND C." The distribution fee paid by Class C
will cause such class to have a higher expense ratio and to pay lower dividends
than Class A.
The decision as to which class of Shares is more beneficial to an investor
depends on the amount and the intended length of his or her investment. An
investor should consider whether, during the anticipated life of his or her
investment in the Fund, the accumulated distribution fee and CDSC, if any, on
Class B or Class C Shares would be less than the initial sales charge on Class A
Shares purchased at the same time, and to what extent, if any, such differential
would be offset by the return of Class A Shares. Additionally, investors
qualifying for reduced initial sales charges who expect to maintain their
investment for an extended period of time might consider purchasing Class A
Shares because the accumulated continuing distribution fees on Class B or Class
C Shares may exceed the initial sales charge on Class A Shares during the life
of the investment. Finally, an investor should consider the effect of the CDSC
period and any conversion rights of the classes in the context of his or her
investment time frame. For example, while Class C Shares have a shorter CDSC
period than Class B Shares, Class C Shares do not have a
....................... 10 .......................
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<PAGE>
P R O S P E C T U S
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conversion feature and, therefore, are subject to an ongoing distribution fee.
Thus, Class B Shares may be more attractive than Class C Shares to investors
with longer term investment outlooks. Generally, Class A Shares may be more
appropriate for investors who invest $1,000,000 or more in Fund Shares, but will
not be appropriate for investors who invest less than $50,000 in Fund Shares.
INVESTMENT OBJECTIVE AND POLICIES
The Fund seeks to consistently exceed the total return performance of the
Russell 2500 Stock Index while maintaining a similar level of risk. There can be
no assurance that the Fund will meet its investment objective. SEE "OTHER
INVESTMENT POLICIES AND RISK FACTORS" on page 12 for a detailed description of
risks and other Fund investment policies. See "OTHER INVESTMENT POLICIES AND
RISK FACTORS--LIMITING INVESTMENT RISKS" for a discussion of the Fund's
investment limitations.
The Fund pursues its investment objective by investing in a portfolio of
small to medium sized, primarily domestic companies which offer above-average
growth potential. Small to medium sized companies will include those U.S. stocks
with market capitalization generally ranging in value from $100 million to $1.5
billion. Investments in small to medium sized companies may involve greater
risks because these companies generally have a limited track record and often
experience higher price volatility. The Fund will normally invest at least 65%
of its total assets in small to medium sized domestic companies. The Fund may
also invest in (1) securities of foreign companies, (2) American Depository
Receipts, (3) stock index futures and options contracts, (4) repurchase
agreements, (5) reverse repurchase agreements, (6) when-issued transactions, (7)
commercial paper and (8) initial public offerings. The Fund may for defensive
measures invest in foreign securities, which may include investment in
developing countries. (SEE "OTHER INVESTMENT POLICIES AND RISK FACTORS--FOREIGN
SECURITIES.")
The Russell 2500-TM- Index, published by Frank Russell Company, is comprised
of the bottom 500 companies in the Russell 1000-Registered Trademark- Index, as
ranked by total market capitalization, and all 2,000 stocks in the Russell
2000-Registered Trademark- Index. The Russell 1000-Registered Trademark- Index
consists of the 1,000 largest companies in the Russell
3000-Registered Trademark- Index. The Russell 2000-Registered Trademark- Index
consists of the smallest 2,000 companies in the Russell
3000-Registered Trademark- Index, representing approximately 10% of the Russell
3000-Registered Trademark- Index total market capitalization. Russell
3000-Registered Trademark- Index is composed of 3,000 large U.S. companies, as
determined by market capitalization. Market capitalization of the stocks
contained in the Russell 2500-TM- Index typically range from $100 million to
$1.5 billion.
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OTHER INVESTMENT POLICIES AND RISK FACTORS
AMERICAN DEPOSITORY RECEIPTS. The Fund may invest in U.S. dollar-denominated
ADRs. ADRs typically are issued by an American bank or trust company and
evidence ownership of underlying securities issued by foreign companies. ADRs
are traded in the United States on national securities exchanges or in the
over-the-counter market. (SEE "FOREIGN SECURITIES.")
BORROWING. The Fund is authorized, within specified limits, to borrow money
for temporary administrative purposes and to pledge its assets in connection
with such borrowings.
COMMERCIAL PAPER. The Fund may invest in commercial paper. These instruments
are short-term obligations issued by banks and corporations that have maturities
ranging from 2 to 270 days. Each instrument may be backed only by the credit of
the issuer or may be backed by some form of credit enhancement, typically in the
form of a guarantee by a commercial bank. Commercial paper backed by guarantees
of foreign banks may involve additional risk due to the difficulty of obtaining
and enforcing judgments against such banks and the generally less restrictive
regulations to which such banks are subject. The Fund will only invest in
commercial paper of U.S. and foreign companies rated A-1 at the time of purchase
by Standard & Poor's Ratings Group, Prime-1 by Moody's Investors Service, Inc.,
F-1 by Fitch Investors Service, Inc., Duff 1 by Duff & Phelps, Inc. or A1 by
IBCA, Inc.
FOREIGN SECURITIES. The Fund may purchase securities of foreign issuers and
may invest in obligations of foreign branches of domestic banks and domestic
branches of foreign banks. Investment in foreign securities presents certain
risks, including those resulting from fluctuations in currency exchange rates,
revaluation of currencies, future political and economic developments and the
possible imposition of currency exchange blockages or other foreign governmental
laws or restrictions, reduced availability of public information concerning
issuers, and the fact that foreign issuers are not generally subject to uniform
accounting, auditing and financial reporting standards or to other regulatory
practices and requirements comparable to those applicable to domestic issuers.
Moreover, securities of many foreign issuers may be less liquid and their prices
more volatile than those of comparable domestic issuers. In addition, with
respect to certain foreign countries, there is the possibility of expropriation,
confiscatory taxation and limitations on the use or removal of funds or other
assets of the Fund, including withholding of dividends. Foreign securities may
be subject to foreign government taxes that would reduce the yield on such
securities.
FUTURES, OPTIONS AND OTHER DERIVATIVE INSTRUMENTS. The Fund may attempt to
reduce the overall level of investment risk of particular securities and attempt
to protect the Fund against adverse market movements by investing in futures,
options and other derivative instruments.
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These include the purchase and writing of options on securities (including index
options) and options on foreign currencies and investing in futures contracts
for the purchase or sale of instruments based on financial indices, including
interest rate indices or indices of U.S. or foreign governments, equity or fixed
income securities ("futures contracts"), options on futures contracts, forward
contracts and swaps and swap-related products such as equity swap contracts,
interest rate swaps, currency swaps, caps, collars and floors.
The use of futures, options, forward contracts and swaps exposes the Fund to
additional investment risks and transaction costs. If the Manager incorrectly
analyzes market conditions or does not employ the appropriate strategy with
respect to these instruments, the Fund could be left in a less favorable
position. Additional risks inherent in the use of futures, options, forward
contracts and swaps include: imperfect correlation between the price of futures,
options and forward contracts and movements in the prices of the securities or
currencies being hedged; the possible absence of a liquid secondary market for
any particular instrument at any time; and the possible need to defer closing
out certain hedged positions to avoid adverse tax consequences. The Fund may not
purchase put and call options which are traded on a national stock exchange in
an amount exceeding 5% of its net assets. Further information on the use of
futures, options and other derivative instruments, and the associated risks is
contained in the SAI.
ILLIQUID SECURITIES. The Fund will not knowingly invest more than 15% of the
value of its net assets in illiquid securities, including time deposits and
repurchase agreements having maturities longer than seven days. Securities that
have readily available market quotations are not deemed illiquid for purposes of
this limitation (irrespective of any legal or contractual restrictions on
resale). The Fund may invest in commercial obligations issued in reliance on the
so-called "private placement" exemption from registration afforded by Section
4(2) of the Securities Act of 1933, as amended ("Section 4(2) paper"). The Fund
may also purchase securities that are not registered under the Securities Act of
1933, as amended, but which can be sold to qualified institutional buyers in
accordance with Rule 144A under that Act ("Rule 144A securities"). Liquidity
determinations with respect to Section 4(2) paper and Rule 144A securities will
be made by the Board of Directors as required. The Board will consider
availability of reliable price information and other relevant information in
making such determinations. Section 4(2) paper is restricted as to disposition
under the federal securities laws, and generally is sold to institutional
investors such as the Fund that agree that they are purchasing the paper for
investment and not with a view to public distribution. Any resale by the
purchaser must be in an exempt transaction. Section 4(2) paper normally is
resold to other institutional investors like the Fund through or with the
assistance of the issuer or investment dealers who make a market in the Section
4(2) paper, thus providing liquidity. Rule 144A securities generally must be
sold to other qualified institutional buyers. If a particular investment in
Section 4(2) paper or Rule 144A securities is
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not determined to be liquid, that investment will be included within the
percentage limitation on investment in illiquid securities. The ability to sell
Rule 144A securities to qualified institutional buyers is a recent development
and it is not possible to predict how this market will mature. Investing in Rule
144A securities could have the effect of increasing the level of Fund
illiquidity to the extent that qualified institutional buyers become, for a
time, uninterested in purchasing these securities.
INITIAL PUBLIC OFFERINGS ("IPOS"). The Fund may invest in IPOs, a
corporation's first offering of stock to the public. Shares are given a market
value reflecting expectations for the corporation's future growth. Special rules
of the NASD apply to the distribution of IPOs. Corporations offering IPOs
generally have a limited track record and may involve greater risk.
OTHER INVESTMENT COMPANIES. The Fund may invest in securities issued by
other investment companies to the extent that such investments are consistent
with the Fund's investment objective and policies and permissible under the
Investment Company Act of 1940, as amended ("1940 Act"). As a shareholder of
another investment company, the Fund would bear, along with other shareholders,
its pro rata portion of the other investment company's expenses, including
advisory fees. These expenses would be in addition to the advisory and other
expenses that the Fund bears directly in connection with its own operations.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements. A
repurchase agreement involves the purchase of a security by the Fund and a
simultaneous agreement (generally with a bank or broker-dealer) to repurchase
that security from the Fund at a specified price and date or upon demand. This
technique offers a method of earning income on idle cash. A risk associated with
repurchase agreements is the failure of the seller to repurchase the securities
as agreed, which may cause the Fund to suffer a loss if the market value of such
securities declines before they can be liquidated on the open market. Repurchase
agreements with a duration of more than seven days are considered illiquid
securities and are subject to the limit stated above.
REVERSE REPURCHASE AGREEMENTS. The Fund may enter into reverse repurchase
agreements to meet redemption requests where the liquidation of Fund securities
is deemed by the Manager to be disadvantageous. Under a reverse repurchase
agreement, the Fund: (i) transfers possession of fund securities to a bank or
broker-dealer in return for cash in an amount equal to a percentage of the
securities' market value; and (ii) agrees to repurchase the securities at a
future date by repaying the cash with interest. Cash or liquid high-grade debt
securities held by the Fund equal in value to the repurchase price including any
accrued interest will be maintained in a segregated account while a reverse
repurchase agreement is in effect.
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SECURITIES LENDING. To increase return on Fund securities, the Fund may lend
its portfolio securities to broker-dealers and other institutional investors
pursuant to agreements requiring that the loans be continuously secured by
collateral equal at all times in value to at least the market value of the
securities loaned. There may be risks of delay in receiving additional
collateral or in recovering the securities loaned or even a loss of rights to
the collateral should the borrower of the securities fail financially. However,
loans are made only to borrowers deemed by the Manager to be of good standing
and when, in its judgment, the income to be earned from the loan justifies the
attendant risks.
U.S. GOVERNMENT SECURITIES. The Fund may invest in obligations issued or
guaranteed as to both principal and interest by the U.S. Government or backed by
the full faith and credit of the United States. In addition to direct
obligations of the U.S. Treasury, these include securities issued or guaranteed
by the Federal Housing Administration, Farmers Home Administration,
Export-Import Bank of the United States, Small Business Administration,
Government National Mortgage Association, General Services Administration and
Maritime Administration. Investments may also be made in U.S. Government
obligations that do not carry the full faith and credit guarantee, such as those
issued by the Federal National Mortgage Association, the Federal Home Loan
Mortgage Corporation, or other instrumentalities.
WHEN-ISSUED SECURITIES AND DELAYED DELIVERY TRANSACTIONS. To secure
advantageous prices or yields, the Fund may purchase U.S. Government securities
on a when-issued basis or may purchase or sell securities for delayed delivery.
In such transactions, delivery of the securities occurs beyond the normal
settlement periods, but no payment or delivery is made by the Fund prior to the
actual delivery or payment by the other party to the transaction. The purchase
of securities on a when-issued or delayed delivery basis involves the risk that,
as a result of an increase in yields available in the marketplace, the value of
the securities purchased will decline prior to the settlement date. The sale of
securities for delayed delivery involves the risk that the prices available in
the market on the delivery date may be greater than those obtained in the sale
transaction. The Fund will establish a segregated account consisting of cash,
U.S. Government securities or other high-grade debt obligations in an amount
equal to the amounts of its when-issued and delayed delivery commitments.
MASTER/FEEDER OPTION. The Dreyfus/Laurel Funds, Inc. may in the future seek
to achieve the Fund's investment objective by investing all of the Fund's assets
in another investment company having the same investment objective and
substantially the same investment policies and restrictions as those applicable
to the Fund. Shareholders of the Fund will be given at least 30 days' prior
notice of any such investment. Such investment would be made only if the
Directors determine it to be in the best interest of the Fund and its
shareholders. In making that
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determination, the Directors will consider, among other things, the benefits to
shareholders and/ or the opportunity to reduce costs and achieve operational
efficiencies. Although the Fund believes that the Directors will not approve an
arrangement that is likely to result in higher costs, no assurance is given that
costs will be materially reduced if this option is implemented.
PORTFOLIO TURNOVER. While securities are purchased for the Fund on the basis
of potential for capital appreciation and income and not for short-term trading
profits, the Fund's turnover rate may exceed 100%. A portfolio turnover rate of
100% would occur, for example, if all the securities held by the Fund were
replaced once in a period of one year. A higher rate of portfolio turnover
involves correspondingly greater brokerage commissions and other expenses which
must be borne directly by the Fund and, thus, indirectly by its shareholders. In
addition, a high rate of portfolio turnover may result in the realization of
larger amounts of short-term capital gains which, when distributed to the Fund's
shareholders, are taxable to them as ordinary income. (SEE "DISTRIBUTIONS" AND
"TAXES.") Nevertheless, security transactions for the Fund will be based only
upon investment considerations and will not be limited by any other
considerations when the Manager deems it appropriate to make changes in the
Fund's assets.
LIMITING INVESTMENT RISKS. The Fund is subject to a number of investment
limitations. Certain limitations are matters of fundamental policy and may not
be changed without the affirmative vote of the holders of a majority of the
Fund's outstanding Shares. The SAI describes all of the Fund's fundamental and
non-fundamental restrictions.
The investment objective, policies, restrictions, practices and procedures
of the Fund, unless otherwise specified, may be changed without shareholder
approval. If the Fund's investment objective, policies, restrictions, practices
or procedures change, shareholders should consider whether the Fund remains an
appropriate investment in light of their then current position and needs.
In order to permit the sale of the Fund's Shares in certain states, the Fund
may make commitments more restrictive than the investment policies and
restrictions described in this Prospectus and the SAI. Should the Fund determine
that any such commitment is no longer in the best interests of the Fund, it may
consider terminating sales of its Shares in the states involved.
....................... 16 .......................
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HOW TO DO BUSINESS WITH US
SPECIAL SHAREHOLDER SERVICES
You may establish one or more special services designed to provide an easy way
to do business with the Fund. By electing these services on your application or
by completing the appropriate forms, you may authorize:
- INVESTMENT BY PHONE.
- AUTOMATIC MONTHLY INVESTMENTS.
- EXCHANGES OR REDEMPTIONS BY PHONE.
By electing the service which enables you to exchange and redeem by phone,
you agree to indemnify the Fund, its transfer agent and its investment manager
from any loss, claim or expense you may incur as a result of their acting on
such instructions. The Fund will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine. These include personal
identification procedures, recording of telephone conversations and providing
written confirmation of each transaction. A failure on the part of the Fund to
employ such procedures may subject it to liability for any loss due to
unauthorized or fraudulent instructions.
INVESTOR LINE
You may reach The Premier Family of Funds by calling our Investor Line at
1-800-548-2868. If you call on a rotary phone during normal business hours (9
a.m. to 5 p.m., Eastern time), you will reach a Premier Family of Funds
operator. If you call on a Touch-Tone phone, you will receive instructions on
how to: (1) request a current prospectus or information booklets about The
Premier Family of Funds' investment portfolios and services, (2) listen to net
asset values, yields and total return figures, and (3) talk with a customer
service representative during normal business hours. For more information about
direct access using a Touch-Tone phone, please contact The Premier Family of
Funds.
HOW TO BUY FUND SHARES
Premier serves as the Fund's distributor. Premier is a wholly-owned subsidiary
of Institutional Administration Services, Inc., a provider of mutual fund
administration services, the parent company of which is Boston Institutional
Group, Inc. Premier also serves as the Fund's sub-administrator and, pursuant to
a Sub-Administration Agreement, provides various administrative and corporate
secretarial services to the Fund.
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Premier has established various procedures for purchasing Class R and Class
A Shares of the Fund. Class R Shares are sold primarily to bank trust
departments and other financial service providers (including Mellon Bank and its
affiliates) ("Banks") acting on behalf of customers having a qualified trust or
investment account or relationship at such institution, or to customers who have
received and hold shares of the Fund distributed to them by virtue of such an
account or relationship. Class A Shares are primarily sold to retail investors
by banks, securities brokers or dealers and other financial institutions
(including Mellon Bank and its affiliates) ("Agents") that have entered into
Selling Agreements with Premier, except that full-time or part-time employees or
directors of the Manager or any of its affiliates or subsidiaries, 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 Premier. Once an investor has established an account,
additional purchases may, in certain cases, be made directly through the Fund's
transfer agent. If Shares of the Fund are held in an account at a Bank or with
an Agent, such Bank or Agent may require you to place all Fund purchase,
exchange and redemption orders through them. All Banks and Agents have agreed to
transmit your transaction requests to the Fund's transfer agent or to Premier.
You may diversify your investments by choosing a combination of investment
portfolios offered by The Premier Family of Funds.
You may invest in the following ways:
BY MAIL.
Send your application and check or money order to The Premier Family of
Funds, P.O. Box 9692, Providence, Rhode Island 02940-9830. Checks must be
payable in U.S. dollars and drawn on U.S. banks. When making subsequent
investments, enclose your check with the return remittance portion of the
confirmation of your previous investment. If the remittance portion is not
available, indicate on your check or a separate piece of paper your name,
address, the Fund and class of Shares of the Fund that you are buying and the
account number. Orders to purchase Shares are effective on the day the Fund
receives your check or money order. (SEE "WHEN SHARE PRICE IS DETERMINED.")
BY TELEPHONE.
Once your account is open, you may make investments by telephone by calling
1-800-548-2868 if you have elected the service authorizing the Fund to draw on
your bank account by check when you call with instructions. Investments made by
phone in any one account must be in an amount of at least $100 and are effective
two days after your call. (SEE "WHEN SHARE PRICE IS DETERMINED.")
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BY WIRE.
You may make your initial or subsequent investments in the Fund by wiring
funds.
To do so:
(1) Instruct your bank to wire funds to MELLON BANK (ABA routing number
0430-0026-1);
(2) Be sure to specify on the wire:
(A) The Premier Funds.
(B) The Fund name and the class of Shares of the Fund you are buying and
account number (if you have one).
(C) Your name.
(D) Your city and state.
In order for a wire purchase to be effective on the same day it is received
both the trading instructions and the wire must be received before 4 p.m.,
Eastern time. (SEE "WHEN SHARE PRICE IS DETERMINED.")
BY AUTOMATIC MONTHLY INVESTMENTS.
Once your account is open, you may make investments automatically by
electing the Automatic Investment Program, the service authorizing the Fund to
draw on your bank account regularly by paper or electronic draft. Such
investments must be in amounts of not less than $100 in any one account. You
should inquire at your bank whether it will honor a preauthorized paper or
electronic draft. Contact the Fund if your bank requires additional
documentation. Call 1-800-548-2868 or write The Premier Family of Funds, One
Exchange Place, Boston, Massachusetts 02109 for more information about the
Automatic Investment Program.
BY DIRECT DEPOSIT.
If your employer offers Direct Deposit, you may arrange to automatically
purchase Shares of the Fund (minimum $100) each pay period. Direct Deposit
investing may also be available to persons receiving regular payments from other
sources (including government pension or social security payments). Note that it
may not be appropriate to Direct Deposit your entire paycheck into the Fund
because it has a fluctuating NAV. Call 1-800-548-2868 or write The Premier
Family of Funds, One Exchange Place, Boston, Massachusetts 02109 for more
information or a Direct Deposit authorization form.
BY IN-KIND PURCHASES.
If the following conditions are satisfied, the Fund may at its discretion,
permit you to purchase Shares through an "in-kind" exchange of securities you
hold. Any securities exchanged must meet the investment objective, policies and
limitations of the Fund, must have a readily ascertainable market value, must be
liquid and must not be subject to restrictions on resale. The
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market value of any securities exchanged, plus any cash, must be at least equal
to $25,000. Shares purchased in exchange for securities generally cannot be
redeemed for fifteen days following the exchange in order to allow time for the
transfer to settle.
The basis of the exchange will depend upon the relative NAV of the Shares
purchased and securities exchanged. Securities accepted by the Fund will be
valued in the same manner as the Fund values its assets. Any interest earned on
the securities following their delivery to the Fund and prior to the exchange
will be considered in valuing the securities. All interest, dividends,
subscription or other rights attached to the securities becomes the property of
the Fund, along with the securities. Call 1-800-548-2868 or write The Premier
Family of Funds, One Exchange Place, Boston, Massachusetts 02109 for more
information about "in-kind" purchases.
OFFERING PRICE.
CLASS A SHARES. The public offering price of Class A Shares is the NAV of
that class plus a sales load as shown below:
<TABLE>
<CAPTION>
Total Sales Load
---------------------------------
Dealers'
Reallowance
As a % of As a % of as a
Offering Net Asset % of
Price Value Offering
Amount of Transaction Per Share Per Share Price
----------------------------------- --------- --------- -----------
<S> <C> <C> <C>
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
$250,00 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
</TABLE>
There is no initial sales charge on purchases of $1,000,000 or more of Class
A Shares. However, if you purchase Class A Shares without an initial sales
charge as part of an investment of at least $1,000,000 and redeem all or a
portion of those Shares within two years after purchase, a CDSC of 1.00% will be
imposed at the time of redemption. The terms contained in the section of the
Fund's Prospectus entitled "How to Redeem Fund Shares--Contingent Deferred Sales
Charge--Class B Shares" (other than the amount of the CDSC and its time periods)
are applicable to the Class A Shares subject to a CDSC. Letter of Intent and
Right of Accumulation apply to such purchases of Class A Shares.
Full-time employees of NASD member firms and full-time employees of other
financial institutions which have entered into an agreement with Premier
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,
....................... 20 .......................
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or for their spouses or minor children, at NAV, provided that they have
furnished Premier 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 NAV. In
addition, Class A Shares are offered at NAV to full-time or part-time employees
or directors of the Manager or any of its affiliates or subsidiaries, 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 will be offered at NAV without a sales load to employees
participating in certain eligible benefit plans. Class A Shares may be purchased
at NAV through certain broker-dealers and other financial institutions which
have entered into an agreement with Premier, 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. Holders of accounts with Class A Shares of the Fund
as of December 19, 1994, may also purchase additional Class A Shares of the Fund
in the same account at NAV.
The dealer reallowance may be changed from time to time but will remain the
same for all dealers. Premier, at its expense, may provide additional
promotional incentives to dealers that sell shares of funds advised by the
Manager which are sold with a sales load, such as Class A Shares. In some
instances, those incentives may be offered only to certain dealers who have sold
or may sell significant amounts of shares. Dealers receive a larger percentage
of the sales load from Premier than they receive for selling most other funds.
CLASS R SHARES. The public offering price for Class R Shares is the NAV of
that class.
CLASS B SHARES. The public offering price for Class B Shares is the NAV 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 FUND SHARES--CONTINGENT DEFERRED SALES CHARGE--CLASS B SHARES."
Premier compensates certain Agents for selling Class B Shares at the time of
purchase from Premier's own assets. The proceeds of the CDSC and the
distribution fee, in part, are used to defray these expenses.
CLASS C SHARES. The public offering price for Class C Shares is the NAV of
that class. No initial sales charge is imposed at the time of purchase. A CDSC,
however, is imposed on redemptions of Class C Shares made within the first year
of purchase. See "HOW TO REDEEM FUND SHARES--CONTINGENT DEFERRED SALES
CHARGE--CLASS C SHARES."
RIGHT OF ACCUMULATION--CLASS A SHARES. Reduced sales loads apply to any
purchase of Class A Shares, shares of other funds in The Premier Family of
Funds, shares of certain other funds advised by the Manager which are sold with
a sales load, and shares acquired by a previous exchange of such shares
(hereinafter referred to as "Eligible Funds"), by you and any
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related "purchaser" as defined in the SAI, where the aggregate investment,
including such purchase, is $50,000 or more. If, for example, you previously
purchased and still hold Class A Shares, or shares of any other Eligible Fund or
combination thereof, with an aggregate current market value of $40,000 and
subsequently purchase Class A Shares or shares of 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 purchase you or your
Agent must notify Premier 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.
LETTER OF INTENT--CLASS A SHARES. By signing a Letter of Intent form,
available from Premier, 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.
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WHEN SHARE PRICE IS DETERMINED.
NAV is determined on each day that the New York Stock Exchange ("NYSE") is
open (a "business day"). Investments and requests to exchange or redeem Shares
received by the Fund before the close of business on the NYSE (usually 4 p.m.,
Eastern time) are effective on, and will receive the price determined on that
day (except investments made by electronic funds transfer which are effective
two business days after your call). Investment, exchange or redemption requests
received after the close of the NYSE are effective on, and receive the Share
price determined, on the next business day.
ADDITIONAL INFORMATION ABOUT INVESTMENTS.
Once you have mailed or otherwise transmitted your investment instructions
to the Fund, they may not be modified or canceled. The Fund reserves the right
to reject any application or investment. The Fund reserves the right to make
exceptions to the minimum initial investment and account minimum amount from
time to time.
The minimum initial investment to establish a new account in the Fund is
$1,000, except for Individual Retirement Accounts ("IRAs"), retirement plans,
and Uniform Transfers (Gifts) to Minors Act accounts, for which the minimum
initial investment is $500. The Fund may suspend the offering of Shares of any
class of the Fund and reserves the right to vary initial and subsequent
investment minimums. Subsequent investments to purchase additional Shares in the
Fund must be in an amount of $100 or more.
The Fund intends, upon 60 days' prior notice, to involuntarily redeem Shares
in any account if the total value of the Shares is less than a specified minimum
unless you have established an automatic monthly investment to purchase
additional Shares. The Premier Family of Funds reserves the right to change such
minimum from time to time. Any time the Shares of the Fund held in an account
have a value of less than $1,000 ($500 for Uniform Gifts/Transfers to Minors
Acts accounts), unless the deficiency amount is the result of a decrease in NAV,
a notification may be sent advising you of the need to either make an investment
to bring the value of the Shares held in the account up to $1,000 ($500) or to
establish an automatic monthly investment to purchase additional Shares. If the
investment is not made or the automatic monthly investment is not established
within 60 days from the date of notification, the Shares held in the account
will be redeemed and the proceeds from the redemption will be sent by check to
your address of record.
The automatic redemption of Shares will not apply to IRAs, custodial
accounts under Section 403(b) of the Internal Revenue Code of 1986, as amended
(the "Code") ("403(b) accounts") and other types of tax-deferred retirement plan
accounts.
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HOW TO EXCHANGE YOUR INVESTMENT
FROM ONE FUND TO ANOTHER
You may exchange your Fund Shares for shares of the same class of certain other
funds advised by the Manager and that were previously advised by Mellon Bank. As
noted below, exchanges from any one fund account may be limited in any one
calendar year. In addition, the Shares being exchanged and the shares of the
fund being acquired must have a current value of at least $100 and otherwise
meet the minimum investment requirement of the fund being acquired. Call the
Investor Line for additional information and a prospectus describing other
investment portfolios offered by The Premier Family of Funds.
Shares will be exchanged at the next determined NAV; however, a sales load
may be charged with respect to exchanges of Class A Shares into funds sold with
a sales load. No CDSC will be imposed on Class B or C Shares at the time of an
exchange; however, Class B or C Shares acquired through an exchange will be
subject to the higher CDSC applicable to the exchanged or acquired shares. The
CDSC applicable on redemption of the acquired Class B or C Shares will be
calculated from the date of the initial purchase of the Class B or C Shares
exchanged, as the case may be. If you are exchanging Class A Shares into a fund
that charges a sales load, you may qualify for share prices which do not include
the sales load or which reflect a reduced sales load, if the shares of the fund
from which you are exchanging were: (a) purchased with a sales load, (b)
acquired by a previous exchange from shares purchased with a sales load, or (c)
acquired through reinvestment of dividends or distributions paid with respect to
the foregoing categories of shares. To qualify, at the time of the exchange your
Agent must notify Premier. Any such qualification is subject to confirmation of
your holdings through a check of appropriate records. No fees currently are
charged shareholders directly in connection with exchanges, although the Fund
reserves the right, upon not less than 60 days' written notice, to charge
shareholders a nominal fee in accordance with rules promulgated by the SEC. The
Fund reserves the right to reject any exchange request in whole or in part.
BY TELEPHONE.
You may exchange your Shares by calling 1-800-548-2868 if you have
authorized the Fund to accept telephone instructions.
BY MAIL.
You may direct the Fund to exchange your Shares by writing to The Premier
Family of Funds, P.O. Box 9692, Providence, Rhode Island 02940-9830. The request
should be signed by each person in whose name the Shares are registered. All
signatures should be exactly as the name appears in the registration; for
example, if an owner's name is registered as John Robert Jones, he should sign
that way and not as John R. Jones.
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ADDITIONAL INFORMATION ABOUT EXCHANGES.
(1) In an exchange from one account to another account, the Shares being
sold and the new shares being purchased must have a current value of at
least $100.
(2) Exchanges from any one fund account may be limited in any one calendar
year. The Fund reserves the right to make exceptions to an exchange
limitation from time to time. An exchange limitation will not apply to
the exchange of the shares of any of the funds exchanged pursuant to an
Automatic Withdrawal Program, and to Shares held in 403(b) accounts.
(3) The Shares being acquired must be qualified for sale in your state of
residence.
(4) If the Shares are represented by a negotiable stock certificate, the
certificate must be returned before the exchange can be effected.
(5) Once you have telephoned or mailed your exchange request, it is
irrevocable and may not be modified or canceled.
(6) An exchange is based on the next calculated NAV of each fund after
receipt of your exchange order.
(7) Shares may not be exchanged unless you have furnished the Fund with your
taxpayer identification number, certified as prescribed by the Code and
regulations thereunder. (SEE "TAXES.")
(8) Exchange of Fund Shares is, for federal income tax purposes, a sale of
the Shares on which you may realize a taxable gain or loss.
(9) If the request is made by a corporation, partnership, trust, fiduciary,
agent, estate, guardian, pension plan, profit sharing plan or
unincorporated association, the Fund may require evidence satisfactory
to it of the authority of the individual signing the request.
Shareholders will be given sixty days' notice prior to any material changes
in the exchange privilege.
HOW TO REDEEM FUND SHARES
The Fund will redeem or "buy back" your Shares at any time at their NAV. (BEFORE
REDEEMING, PLEASE READ "ADDITIONAL INFORMATION ABOUT REDEMPTIONS.") Your
redemption proceeds may be delayed if you have owned your Shares less than 10
days. (SEE "REDEMPTION PROCEEDS.")
If an investor fails to specify the class of Shares to be redeemed or if he
or she owns fewer Shares of the class than specified to be redeemed, the
redemption request may be delayed until the Transfer Agent receives further
instructions from the investor or his or her Agent.
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The Fund imposes no charges (other than any applicable CDSC) when Shares are
redeemed directly through Premier. Agents or other institutions may charge their
clients a nominal fee for effecting redemptions of Fund Shares.
CONTINGENT DEFERRED SALES CHARGE--CLASS B SHARES. A CDSC payable to Premier
is imposed on any redemption of Class B Shares which reduces the current NAV 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 NAV of
the Class B Shares redeemed does not exceed (i) the current NAV of Class B
Shares acquired through reinvestment of dividends or capital gain distributions,
plus (ii) increases in the NAV of your Class B Shares above the dollar amount of
all your payments for the purchase of Class B Shares held by you at the time of
redemption.
If the aggregate value of Class B Shares redeemed has declined below their
original cost as a result of the Fund's performance, a CDSC may be applied to
the then-current NAV 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:
<TABLE>
<CAPTION>
CDSC as a
% of Amount
Year Since Invested or
Purchase Payment Redemption
Was Made Proceeds
------------------ ---------------
<S> <C>
First.......................................................... 4.00
Second......................................................... 4.00
Third.......................................................... 3.00
Fourth......................................................... 3.00
Fifth.......................................................... 2.00
Sixth.......................................................... 1.00
</TABLE>
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 NAV of Class B Shares above the total
amount of payments for the purchase of Class B Shares made during the preceding
six
....................... 26 .......................
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years; then of amounts representing the cost of Shares purchased six years prior
to the redemption; and finally, of amounts representing the cost of Shares held
for the longest period of time within the applicable six-year period.
For example, assume an investor purchased 100 Shares at $10 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 his or her investment. Assuming at the time of the
redemption the net asset value had appreciated to $12 per Share, the value of
the investor's Shares would be $1,260 (105 Shares at $12 per Share). The CDSC
would not be applied to the value of the reinvested dividend shares and the
amount which represents appreciation ($260). Therefore, $240 of the $500
redemption proceeds ($500 minus $260) would be charged at a rate of 4% (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
Premier is imposed on any redemption of Class C Shares within one year of the
date of purchase. The basis for calculating the payment of any such CDSC will be
the method used in calculating the CDSC for Class B Shares. SEE "CONTINGENT
DEFERRED SALES CHARGE--CLASS B SHARES" above.
WAIVER OF CDSC. The CDSC applicable to Class B and Class C Shares will 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 certain 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 by such shareholders as the SEC or its staff
may permit. If the Fund's Directors determine to discontinue the waiver of the
CDSC, the disclosure in the Fund's Prospectus 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 at
the time of the purchase of such Shares.
To qualify for a waiver of the CDSC, at the time of redemption an investor
must notify the Transfer Agent or his or her Agent must notify Premier. Any such
qualification is subject to confirmation of the investor's entitlement.
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BY TELEPHONE.
If you have authorized the Fund to accept telephone instructions, you may
redeem your Shares by calling 1-800-548-2868. Once made, your telephone request
may not be modified or canceled. (BEFORE CALLING, READ "ADDITIONAL INFORMATION
ABOUT REDEMPTIONS" AND "WHEN SHARE PRICE IS DETERMINED.")
BY MAIL.
Your written instructions to redeem Shares may be in any one of the
following forms:
- A LETTER TO THE PREMIER FAMILY OF FUNDS.
- AN ASSIGNMENT FORM OR STOCK POWER.
- AN ENDORSEMENT ON THE BACK OF YOUR NEGOTIABLE STOCK CERTIFICATE, IF YOU
HAVE ONE.
Once mailed to The Premier Family of Funds, P.O. Box 9692, Providence, Rhode
Island 02940-9830 the redemption request is irrevocable and may not be modified
or canceled. A letter of instruction should state the number of Shares or the
dollar amount to be redeemed. The letter must include your account number, and,
for redemptions in an amount in excess of $25,000, a signature guarantee of each
owner. The redemption request must be signed by each person in whose name the
Shares are registered; for example, in the case of joint ownership, each owner
must sign. All signatures should be exactly as the name appears in the
registration. If the owner's name appears in the registration as John Robert
Jones, he should sign that way and not as John R. Jones. Signature guarantees
can be obtained from commercial banks, credit unions if authorized by state
laws, savings and loans institutions, trust companies, members of a recognized
stock exchange, or from other eligible guarantors who are members of the
Securities Transfer Agents Medallion Program ("STAMP") or any other industry
recognized program approved by the Securities Transfer Association. (BEFORE
WRITING, SEE "ADDITIONAL INFORMATION ABOUT REDEMPTIONS.")
BY AUTOMATED WITHDRAWAL PROGRAM.
The Fund's Automated Withdrawal Program automatically redeems enough Shares
each month to provide you with a check for an amount which you specify (with a
minimum of $100). To set up an Automated Withdrawal Program, call the Fund at
1-800-548-2868 for instructions. Only shareholders with an account balance of
$10,000 or more may participate in this program. Shares will be redeemed on the
15th day or 30th day of each month or the next business day, and your check will
be mailed the next day. If your monthly checks exceed the dividends, interest
and capital appreciation on your Shares, the payments will deplete your
investment. Amounts paid
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to you by Automated Withdrawals are not a return on your investment. They are
derived from the redemption of Shares in your account, and you must report on
your income tax return any gains or losses that you realize.
You may specify an Automated Withdrawal Program when you make your first
investment. If you would like to establish an Automated Withdrawal Program
thereafter, the request for the Automated Withdrawal Program must be signed by
all owners, with their signatures guaranteed.
When you make your first investment you may request that Automated
Withdrawals be sent to an address other than the address of record. Thereafter,
a request to send Automated Withdrawals to an address other than the address of
record must be signed by all owners, with their signatures guaranteed.
The Fund may terminate the Automated Withdrawal Program at any time, upon
notice to you, and you likewise may terminate it or change the amount of the
Automated Withdrawal Program, by notice to the Fund in writing or by telephone.
Termination or change will become effective within five days following receipt
of your instruction. Your Automated Withdrawal Program plan may begin any time
after you have owned your Shares for 10 days.
REDEMPTION PROCEEDS.
Redemption proceeds may be sent to you:
BY MAIL. If your redemption check is mailed, it is usually mailed by the
second business day after receipt of your redemption request, but not later than
seven days afterwards. When a redemption occurs shortly after a recent purchase,
the Fund may hold the redemption proceeds beyond seven days but only until the
purchase check clears, which may take up to 10 days or more. No dividend is paid
on the redemption proceeds after the redemption and before the check is mailed.
If you anticipate redemptions soon after you purchase your Shares, you are
advised to wire funds to avoid delay.
BY WIRE AND ELECTRONIC FUNDS TRANSFER. You may authorize the Fund to
transmit redemption proceeds by wire or electronic funds transfer. Proceeds from
the redemption of Fund Shares will normally be transmitted on the first business
day, but not later than the seventh day, following the date of redemption. Your
bank usually will receive wired funds the day they are transmitted.
Electronically transferred funds will ordinarily be received within two business
days after transmission. Once the funds are transmitted, the time of receipt and
the availability of the funds are not within the Fund's control. If your bank
account changes, you must send a new "voided" check preprinted with the bank
registration with written instructions signed by all owners (with their
signatures guaranteed), including tax identification number.
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ADDITIONAL INFORMATION ABOUT REDEMPTIONS.
(1) Redemptions specifying a certain date or price cannot be accepted and
will be returned.
(2) If the Shares being redeemed are represented by a negotiable stock
certificate, the certificate must be returned before the redemption can
be effected.
(3) All redemptions are made and the price is determined on the day when all
documentation is received in good order.
(4) If the request to redeem is made by a corporation, partnership, trust,
fiduciary, agent, estate, guardian, pension plan, profit sharing plan,
or unincorporated association, the Fund may require evidence
satisfactory to it of the authority of the individual signing the
request. Please call or write the Fund for further information.
(5) A request to redeem Shares in an IRA or 403(b) account must be
accompanied by an IRS Form W4-P and a reason for withdrawal as specified
by the Internal Revenue Service.
HOW TO USE THE PREMIER FAMILY OF FUNDS
IN A TAX-QUALIFIED RETIREMENT PLAN
The Premier Family of Funds' investment portfolios are available for your
tax-deferred retirement plan. Call 1-800-548-2868 or write The Premier Family of
Funds, P.O. Box 9692, Providence, Rhode Island 02940-9830 and request the
appropriate forms for:
- IRAS.
- 403(B) ACCOUNTS FOR EMPLOYEES OF PUBLIC SCHOOL SYSTEMS AND NON-PROFIT
ORGANIZATIONS.
- PROFIT-SHARING PLANS AND PENSION PLANS FOR CORPORATIONS AND OTHER
EMPLOYERS.
HOW TO TRANSFER AN INVESTMENT TO A PREMIER FAMILY OF FUNDS' RETIREMENT PLAN.
It is easy to transfer your tax-deferred plan to The Premier Family of Funds
from another custodian. Call 1-800-548-2868 or write The Premier Family of
Funds, P.O. Box 9692, Providence, Rhode Island 02940-9830 for a request to
transfer form. If you direct The Premier Family of Funds to transfer funds from
an existing non-retirement Premier Family of Funds account into a retirement
account, the Shares in your non-retirement account will be redeemed. The
redemption proceeds will be invested in your Premier Family of Funds IRA or
other tax-qualified retirement plan. The redemption is a taxable event resulting
in a taxable gain or loss.
....................... 30 .......................
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OTHER INFORMATION
SHARE PRICE
An investment portfolio's NAV refers to the worth of one Share. The NAV for
Class A and Class R Shares of the Fund is computed by adding with respect to
each class of Shares the value of all the class' investments, cash, and other
assets, deducting liabilities and dividing the result by the number of Shares of
that class outstanding. The valuation of assets for determining NAV for the Fund
may be summarized as follows:
The portfolio securities of the Fund, except as otherwise noted, listed or
traded on a stock exchange, are valued at the latest sale price. If no sale is
reported, the mean of the latest bid and asked prices is used. Securities traded
over-the-counter are priced at the mean of the latest bid and asked prices but
will be valued at the last sale price if required by regulations of the SEC.
International securities traded principally over-the-counter and international
securities listed on an exchange are valued on the basis of the last sale price.
When market quotations are not readily available, securities and other assets
are valued at fair value as determined in good faith in accordance with
procedures established by the Board of Directors.
Bonds are valued through valuations obtained from a commercial pricing
service or at the most recent mean of the bid and asked prices provided by
investment dealers in accordance with procedures established by the Board of
Directors.
Pursuant to a determination by The Dreyfus/Laurel Funds, Inc.'s Board of
Directors that such value represents fair value, the debt securities with
maturities of 60 days or less held by the Fund are valued at amortized cost.
When a security is valued at amortized cost, it is valued at its cost when
purchased, and thereafter by assuming a constant amortization to maturity of any
discount or premium, regardless of the impact of fluctuating interest rates on
the market value of the instrument.
The NAV of many of The Premier Family of Funds' investment portfolios is
published in leading newspapers daily. The NAV of the Fund may also be obtained
by calling The Premier Family of Funds.
PERFORMANCE ADVERTISING
From time to time, the Fund may advertise the yield and total return on a class
of Shares. TOTAL RETURN AND YIELD FIGURES ARE BASED ON HISTORICAL EARNINGS AND
ARE NOT INTENDED TO INDICATE FUTURE PERFORMANCE. The "total return" of a class
of Shares of the Fund may be calculated on an average annual total return basis
or a cumulative total return basis. Average annual total return refers to the
average annual compounded rates of return on a class of Shares over one-, five-,
....................... 31 .......................
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and ten-year periods or the life of the Fund (as stated in the advertisement)
that would equate an initial amount invested at the beginning of a stated period
to the ending redeemable value of the investment, assuming the reinvestment of
all dividends and capital gains distributions. Cumulative total return reflects
the total percentage change in the value of the investment over the measuring
period, again assuming the reinvestment of all dividends and capital gains
distributions.
The Fund's "yield" is calculated by dividing a class of Shares' annualized
net investment income per Share during a recent 30-day (or one month) period by
the maximum public offering price per class of such Share on the last day of
that period. Since yields fluctuate, yield data cannot necessarily be used to
compare an investment in a class of Shares with bank deposits, savings accounts,
and similar investment alternatives which often provide an agreed-upon or
guaranteed fixed yield for a stated period of time.
Total return and yield quotations will be computed separately for each class
of the Fund's Shares. Because of the difference in the fees and expenses borne
by Class R and Class A Shares of the Fund, the return and yield on Class R
Shares will generally be higher than the return and yield on Class A Shares. Any
fees charged by a Bank or Agent directly to its customers' account in connection
with investments in the Fund will not be included in calculations of total
return or yield. The Fund's annual report contains additional performance
information and is available upon request without charge from Premier or your
Bank or Agent.
The Fund may compare the performance of its Class R and Class A Shares with
various industry standards of performance including Lipper Analytical Services,
Inc. ratings, Standard & Poor's 500 Composite Stock Price Index, Russell 2500
Stock Index, CDA Technologies indexes, indexes created by Lehman Brothers, the
Consumer Price Index, and the Dow Jones Industrial Average. Performance rankings
as reported in CHANGING TIMES, BUSINESS WEEK, INSTITUTIONAL INVESTOR, THE WALL
STREET JOURNAL, MUTUAL FUND FORECASTER, NO LOAD INVESTOR, MONEY MAGAZINE,
MORNINGSTAR MUTUAL FUND VALUES, U.S. NEWS AND WORLD REPORT, FORBES, FORTUNE,
BARRON'S and similar publications may also be used in comparing the Fund's
performance. Furthermore, the Fund may quote its Class R and Class A Shares'
total returns and yields in advertisements or in shareholder reports. The Fund
may also advertise non-standardized performance information, such as total
return for periods other than those required to be shown or cumulative
performance data. The Fund may advertise a quotation of yield or other similar
quotation demonstrating the income earned or distributions made by the Fund.
....................... 32 .......................
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DISTRIBUTIONS
The Fund declares and pays dividends (on the first business day of the following
month) four times yearly, at the beginning of May, August, November and in
mid-December, from its net investment income, if any, and distributes net
realized gains, if any, on an annual basis. The Board of Directors may elect not
to distribute capital gains in whole or in part to take advantage of capital
loss carryovers.
Unless you choose to receive dividend and/or capital gain distributions in
cash, your distributions will be automatically reinvested in additional Shares
of the Fund at the NAV. You may change the method of receiving distributions at
any time by writing to the Fund. Checks which are sent to shareholders who have
requested distributions to be paid in cash and which are subsequently returned
by the United States Postal Service as not deliverable or which remain uncashed
for six months or more will be reinvested in additional Fund Shares in the
shareholder's account at the then current NAV. Subsequent Fund distributions
will be automatically reinvested in additional Fund Shares in the shareholder's
account.
Distributions paid by the Fund with respect to one class of Shares may be
greater or less per Share than those paid with respect to another class of
Shares due to the different expenses of the different classes.
Shares purchased on a day on which the Fund calculates its NAV will not
begin to accrue dividends until the following day. Redemption orders effected on
any particular day will receive all dividends declared through the day of
redemption.
You may elect to have distributions on Shares held in an IRA and 403(b)
account paid in cash only if you are at least 59 1/2 years old or are
permanently and totally disabled. Distribution checks normally are mailed within
seven days after the record date.
Any dividend and/or capital gain distribution paid by the Fund will reduce
each Share's NAV by the amount of the distribution. Shareholders are subject to
taxes with respect to any such distribution. At any given time, the value of the
Fund's Shares includes the undistributed net gains, if any, realized by the Fund
on the sale of portfolio securities, and undistributed dividends and interest
received, less the Fund's expenses. Because such gains and income are included
in the value of your Shares, when they are distributed the value of your Shares
is reduced by the amount of the distribution. Accordingly, if your distribution
is reinvested in additional Shares, the distribution has no effect on the value
of your investment; while you own more Shares, the value of each Share has been
reduced by the amount of the distribution. Likewise, if you take your
distribution in cash, the value of your Shares immediately after the
distribution plus the cash received is equal to the value of the Shares
immediately before the distribution. For example, if you own a Fund Share that
immediately before a distribution has a value of $10, including $2 in
undistributed dividends and capital gains realized by the Fund during the year,
and if the $2 is
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distributed, the value of the Share will decline to $8. If the $2 is reinvested
at $8 per Share, you will receive .250 Shares, so that, after the distribution,
you will have 1.250 Shares at $8 per Share, or $10, the same as before.
TAXES
The Fund intends to qualify for treatment as a regulated investment company
under the Code so that it will be relieved of Federal income tax on that part of
its investment company taxable income (consisting generally of taxable net
investment income, net short-term capital gain) and net capital gain (the excess
of net long-term capital gain over net short-term capital loss) that is
distributed to its shareholders.
Dividends from the Fund's investment company taxable income are taxable to
you as ordinary income, to the extent of the Fund's earnings and profits.
Distributions by the Fund of net capital gain, when designated as such, are
taxable to you as long-term capital gains, regardless of the length of time you
have owned your Shares.
All or a portion of the dividends paid by the Fund may be eligible for the
dividends-received deduction allowed to corporations. The eligible portion may
not exceed the aggregate dividends received by the Fund from U.S. corporations.
However, dividends received by a corporate shareholder and deducted by it
pursuant to the dividends-received deduction are subject indirectly to the
alternative minimum tax.
Dividends and other distributions are taxable to you regardless of whether
they are received in cash or reinvested in additional Fund Shares, even if the
value of your Shares is below your cost. If you purchase Shares shortly before a
taxable distribution, you must pay income taxes on the distribution, even though
the value of your investment (plus cash received, if any) remains the same. In
addition, the Share price at the time you purchase Shares may include unrealized
gains in the securities held in the Fund. If these portfolio securities are
subsequently sold and the gains are realized, they will, to the extent not
offset by capital losses, be paid to you as a capital gain distribution and will
be taxable to you.
Dividends paid by the Fund to qualified retirement plans ordinarily will not
be subject to taxation until the proceeds are distributed from the retirement
plans. The Fund will not report to the IRS dividends paid to such plans.
Generally, distributions from qualified retirement plans, except those
representing returns of non-deductible contributions thereto, will be taxable as
ordinary income and, if made prior to the time the participant reaches age
59 1/2, generally will be subject to an additional tax equal to 10% of the
taxable portion of the distribution. If the distribution from such a retirement
plan (other than certain governmental or church plans) for any taxable year
following the year in which the participant reaches age 70 1/2 is less than the
....................... 34 .......................
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<PAGE>
P R O S P E C T U S
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- - - --------------------------------------------------------------------------------
"minimum required distribution" for that taxable year, an excise tax equal to
50% of the deficiency may be imposed by the IRS. The administrator, trustee or
custodian of such a retirement plan will be responsible for reporting such
distributions from such plans to the IRS. Moreover, certain contributions to a
qualified retirement plan in excess of the amounts permitted by law may be
subject to an excise tax.
In January of each year, the Fund will send you a Form 1099-DIV notifying
you of the status for Federal income tax purposes of your distributions for the
preceding year.
You must furnish the Fund with your taxpayer identification number ("TIN")
and state whether you are subject to withholding for prior under-reporting,
certified under penalties of perjury as prescribed by the Code and the
regulations thereunder. Unless previously furnished, investments received
without such a certification will be returned. The Fund is required to withhold
a portion of all dividends, capital gain distributions and redemption proceeds
payable to any individuals and certain other non-corporate shareholders who do
not provide the Fund with a correct TIN; withholding from dividends and capital
gain distributions also is required for such shareholders who otherwise are
subject to backup withholding.
The Fund will be subject to a 4% nondeductible excise tax to the extent it
fails to distribute by the end of any calendar year substantially all of its
taxable ordinary income for that year and capital gain net income for the
one-year period ending on October 31 of that year, plus certain other amounts.
The Fund expects to make such distributions as are necessary to avoid the
imposition of this tax.
The foregoing is only a summary of some of the important tax considerations
generally affecting the Fund and its shareholders; see the SAI for a further
discussion. There may be other federal, state or local tax considerations
applicable to a particular investor. You therefore are urged to consult your own
tax adviser.
OTHER SERVICES
At least twice a year you will receive the financial statements of the Fund with
a summary of its investments and performance. The Fund will send you a
confirmation statement after every transaction (except with regard to the
reinvestment of dividends and other distributions) that affects your Fund
account. In addition, an account statement will be mailed to you quarterly or
monthly depending on the Fund's reporting schedule. You may also request a
statement of your account activity at any time. Carefully review such
confirmation statements and account statements and notify the Fund immediately
if there is an error. From time to time, to reduce expenses, only one copy of
the Fund's shareholder reports (such as the Fund's annual report) may be mailed
to your household. Please call the Fund if you need additional copies.
....................... 35 .......................
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No later than January 31 of each year, the Premier Family of Funds will send
you the following reports, which you may use in completing your Federal income
tax return:
Form 1099-DIV Reports taxable distributions (and returns of capital, if any)
during the preceding year.
Form 1099-B Reports proceeds paid on redemptions during the preceding year.
Form 1099-R Reports distributions from IRAs and 403(b) accounts during the
preceding year.
At such time as prescribed by law, the Fund will send you a Form 5498, which
reports contributions to your IRA for the previous calendar year. In addition,
the Fund may send you other relevant tax-related forms.
FURTHER INFORMATION ABOUT THE FUND
THE DREYFUS/LAUREL FUNDS, INC.
The Laurel Funds, Inc. was incorporated in Maryland on August 6, 1987 and
changed its name to The Dreyfus/Laurel Funds, Inc. on October 17, 1994. The
Dreyfus/Laurel Funds, Inc. is registered with the SEC under the 1940 Act as a
diversified, open-end management investment company. The Dreyfus/Laurel Funds,
Inc. has an authorized capitalization of 25 billion Shares of $0.001 par value
stock with equal voting rights. The Articles of Incorporation permit the
Directors to create an unlimited number of investment portfolios (each a
"fund"). The Directors of The Dreyfus/Laurel Funds, Inc. have authorized Shares
of the Fund to be issued in four classes-- Class A, Class R, Class B and Class
C.
Each Share (regardless of class) has one vote. All shares of a fund (and
classes thereof) vote together as a single class, except as to any matter for
which a separate vote of any fund or class is required by the 1940 Act, and
except as to any matter which affects the interests of one or more particular
funds or classes, in which case only the shareholders of the affected fund or
classes are entitled to vote, each as a separate class. At your written request,
the Fund will issue negotiable stock certificates.
At January 31, 1995, Mellon Bank Corporation, the Manager's parent, owned of
record through its direct and indirect subsidiaries more than 25% of The
Dreyfus/Laurel Funds, Inc.'s outstanding voting shares, and is deemed, under the
1940 Act, to be a controlling shareholder.
MANAGEMENT.
THE BOARD OF DIRECTORS. The business affairs of The Dreyfus/Laurel Funds,
Inc. are managed under the direction of its Directors. The SAI contains the
names and general background information concerning the Directors and officers
of The Dreyfus/Laurel Funds, Inc.
....................... 36 .......................
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<PAGE>
P R O S P E C T U S
------------------------------------------------------------
- - - --------------------------------------------------------------------------------
INVESTMENT MANAGER. The Manager is located at 200 Park Avenue, New York, New
York 10166. As of January 31, 1995, the Manager managed or administered
approximately $70 billion in assets for more than 1.9 million investor accounts
nationwide. The Manager is a wholly-owned subsidiary of Mellon Bank N.A. (One
Mellon Bank Center, Pittsburgh, Pennsylvania 15258), the Fund's prior investment
manager. Pursuant to an Investment Management Agreement, transferred from Mellon
Bank to the Manager effective as of October 17, 1994, the Manager provides, or
arranges for one or more third parties to provide, investment advisory,
administrative, custody, fund accounting and transfer agency services to the
Fund. As investment manager, the Manager manages the Fund by making investment
decisions based on the Fund's investment objective, policies and restrictions,
and is paid a fee.
Under the Investment Management Agreement, the Fund pays a fee computed
daily, and paid monthly, at the annual rate of 1.25% of the Fund's average daily
net assets less certain expenses described below. The Manager pays all of the
expenses of the Fund except brokerage fees, taxes, interest, fees and expenses
of the non-interested Directors (including counsel fees) and extraordinary
expenses. Although the Manager does not pay for the fees and expenses of the
non-interested Directors (including counsel fees), the Manager is contractually
required to reduce its investment management fee in an amount equal to the
Fund's allocable share of such expenses. In order to compensate the Manager for
paying virtually all of the Fund's expenses, the Fund's investment management
fee is higher than the investment advisory fees paid by most investment
companies. Most, if not all, such companies also pay for additional
non-investment advisory expenses that are not paid by such companies' investment
adviser. From time to time, the Manager may waive (either voluntarily or
pursuant to applicable state limitations) additional investment management fees
payable by the Fund. For the period from September 2, 1994 (commencement of
operations) through the fiscal year ended October 31, 1994, the Fund paid Mellon
Bank or the Manager 1.25% (annualized) of its average daily net assets in
investment management fees, less fees and expenses of the non-interested
Directors (including counsel fees).
For the fiscal year ended October 31, 1994, total operating expenses
(excluding Rule 12b-1 fees) of the Fund were 1.25% (annualized) of the average
daily net assets of each class for both Class A and Class R.
The Manager is authorized to allocate purchase and sale orders for portfolio
securities to certain financial institutions, including, in the case of agency
transactions, financial institutions which are affiliated with the Manager or
which have sold Shares of the Fund, if the Manager believes that the quality of
the transaction and the commission are comparable to what they would be with
other qualified brokerage firms. From time to time, to the extent consistent
with its investment objective, policies and restrictions, the Fund may invest in
securities of companies with which Mellon Bank has a lending relationship.
....................... 37 .......................
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Mellon Bank is a subsidiary of Mellon Bank Corporation. At December 31,
1994, Mellon Bank Corporation was the 24th largest bank holding company in the
United States in terms of total assets. Through its bank subsidiaries, it
operates 631 domestic retail banking locations including 432 branch offices.
Mellon Bank Corporation has 25 domestic representative offices. There are
international branches in Grand Cayman, British West Indies, and London,
England, and two international representative offices in Tokyo, Japan, and Hong
Kong. Mellon Bank has a banking subsidiary, Mellon Bank Canada, in Toronto.
Mellon Bank is a registered municipal securities dealer.
The Glass-Steagall Act of 1933 prohibits a national bank from engaging in
the business of issuing, underwriting, selling or distributing certain
securities. The activities of Mellon Bank and the Manager may raise issues under
these provisions. However, Mellon Bank has been advised by its counsel that
these activities are consistent with these statutory and regulatory obligations.
For more information on the Glass-Steagall Act of 1933, see "FEDERAL LAW
AFFECTING MELLON BANK" in the SAI.
The Fund's portfolio manager is James Wadsworth. Mr. Wadsworth is Vice
President and Director of Investment Research for Laurel Capital Advisers and
Vice President and Director of Investment Research for Mellon Bank. Mr.
Wadsworth is a portfolio manager at the Manager and has been employed by the
Manager since October 17, 1994. Mr. Wadsworth has been employed by Mellon Bank
since 1977.
OTHER SERVICE PROVIDERS.
Under a Custody and Fund Accounting Agreement, Mellon Bank acts as custodian
and fund accountant, maintaining possession of the Fund's investment securities
and providing certain accounting and related services.
The Shareholder Services Group, Inc., a subsidiary of First Data
Corporation, serves as transfer agent ("Transfer Agent") for the Fund's Shares.
The Transfer Agent is located at One American Express Plaza, Providence, Rhode
Island 02903.
Shares of the Fund are sold on a continuous basis by Premier, as the Fund's
sponsor and distributor. Premier is a registered broker-dealer with principal
offices at One Exchange Place, Boston, Massachusetts 02109. The Fund has entered
into a distribution agreement with Premier which provides that Premier has the
exclusive right to distribute Shares of the Fund. Premier may pay service and/or
distribution fees to Agents that assist customers in purchasing and servicing of
Shares of the Funds. (SEE "DISTRIBUTION PLANS (CLASS A PLAN AND CLASS B AND C
PLANS).")
DISTRIBUTION PLANS (CLASS A PLAN AND CLASS B AND C PLANS).
Class A Shares are subject to a Distribution Plan adopted pursuant to Rule
12b-1 under the 1940 Act ("Rule 12b-1"). Class B and C Shares are subject to a
Distribution Plan and a
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<PAGE>
P R O S P E C T U S
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- - - --------------------------------------------------------------------------------
Service Plan, each adopted pursuant to Rule 12b-1. Potential investors should
read this Prospectus in light of the terms governing Agreements with their
Agents. An Agent entitled to receive compensation for selling and servicing the
Fund's Shares may receive different compensation with respect to one class of
Shares over another.
DISTRIBUTION PLAN--CLASS A. The holders of the Class A Shares of the Fund
bear some of the cost of selling those Shares under the Distribution Plan (the
"Plan"). The Plan allows the Fund to spend annually up to 0.25% of its average
daily net assets attributable to Class A Shares to compensate Dreyfus Service
Corporation, an affiliate of the Manager, for shareholder servicing activities
and Premier for shareholder servicing activities and for activities or expenses
primarily intended to result in the sale of Class A Shares of the Fund. The Plan
allows Premier to make payments from the Rule 12b-1 fees it collects from the
Fund to compensate Agents that have entered into Agreements with Premier. Under
the Agreements, the Agents are obligated to provide distribution related
services with regard to the Fund and/or shareholder services to the Agent's
clients that own Class A Shares of the Fund.
The Fund and Premier may suspend or reduce payments under the Plan at any
time, and payments are subject to the continuation of the Fund's Plan and the
Agreements described above. From time to time, the Agents, Premier and the Fund
may agree to voluntarily reduce the maximum fees payable under the Plan. See the
SAI for more details on the Plan.
DISTRIBUTION AND SERVICE PLANS--CLASS B AND C. Under a Distribution Plan
adopted pursuant to Rule 12b-1, the Fund pays Premier for distributing the
Fund's Class B and C Shares, at an aggregate annual rate of .75 or 1% of the
value of the average daily net assets of Class B and C. Under a Service Plan
adopted pursuant to Rule 12b-1, the Fund pays Dreyfus Service Corporation or
Premier for the provision of certain services to the holders of Class B and C
Shares a fee at the annual rate of .25 of 1% of the value of the average daily
net assets of Class B and C. 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 providing
services related to the maintainance of such shareholder accounts. With regard
to such services; each Agent is required to disclose to its clients any
compensation payable to it by the Fund and any other compensation payable by its
clients in connection with the investment of their assets in Class B and C
Shares. Premier may pay one or more Agents in respect of distribution and other
services for these classes of Shares. Premier determines the amounts, if any, to
be paid to Agents under the Distribution and Service Plans and the basis on
which such payments are made. The fees payable under the Distribution Plans are
payable without regard to actual expenses incurred.
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FOR MORE INFORMATION
FUND INFORMATION AND PROSPECTUSES
Call 1-800-548-2868
Please read the prospectus before you invest or send money.
TO INVEST, REDEEM AND EXCHANGE
Call 1-800-548-2868 (for overseas, call collect (401) 455-3476)
9:00 a.m. to 5:00 p.m., Eastern time
Monday through Friday
Or Write: The Premier Family of Funds
P.O. Box 9692
Providence, Rhode Island 02940-9830
YIELD AND SHARE PRICE INFORMATION
1-800-548-2868
24 hours a day, 7 days a week
The Premier Family of Funds
One Exchange Place
Boston, Massachusetts 02109
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<PAGE>
SCS2395
PROSPECTUS
Premier Limited Term Income Fund
Class A and Class R Shares
March 1, 1995
PREMIER LIMITED TERM INCOME FUND seeks to obtain as high a level of cur-
rent income as is consistent with safety of principal and maintenance of
liquidity by investing in fixed-income obligations with average maturities
not in excess of ten years.
THIS PROSPECTUS describes the Premier Limited Term Income Fund (the
"Fund"), a separate portfolio of The Dreyfus/Laurel Funds, Inc. (formerly
The Laurel Funds, Inc.), an open-end, diversified management investment
company that is part of The Premier Family of Funds. This Prospectus de-
scribes two classes of shares--Class A Shares and Class R Shares (collec-
tively, the "Shares")--of the Fund.
This Prospectus sets forth concisely the information about the Fund that a
prospective purchaser should consider before investing. Investors should
read this Prospectus and retain it for future reference. The Fund offers
you four methods of purchasing Fund Shares, but only Class A and Class R
Shares are offered by this Prospectus. See "Alternative Purchase Methods."
Additional information about the Fund is contained in a Statement of Addi-
tional Information (the "SAI"), which has been filed with the Securities
and Exchange Commission (the "SEC") and is available upon request without
charge by calling or writing to The Premier Family of Funds. The SAI bears
the same date as the Prospectus and is incorporated by reference in its
entirety into this Prospectus.
In addition to the Fund, The Premier Family of Funds also offers other
funds that provide investment opportunities for you in the equity and
fixed income markets. For more information about these additional invest-
ment opportunities, call 1-800-548-2868.
The Premier Family of Funds
P.O. Box 9692
Providence, Rhode Island 02940-9830
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DE-
POSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
AGENCY. ALL MUTUAL FUND SHARES INVOLVE CERTAIN RISKS, INCLUDING THE POSSI-
BLE LOSS OF PRINCIPAL.
THE FEES TO WHICH THE FUND IS SUBJECT ARE SUMMARIZED IN THE "EXPENSE SUM-
MARY" SECTION OF THE FUND'S PROSPECTUS. THE FUND PAYS MELLON BANK, N.A.
("MELLON BANK") OR ITS AFFILIATES TO BE ITS INVESTMENT MANAGER. MELLON
BANK OR AN AFFILIATE MAY BE PAID FOR PERFORMING OTHER SERVICES FOR THE
FUND, SUCH AS CUSTODIAN, TRANSFER AGENT OR FUND ACCOUNTANT SERVICES. THE
FUND IS DISTRIBUTED BY PREMIER MUTUAL FUND SERVICES, INC.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SE-
CURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
Expense Summary 5
Financial Highlights 7
Alternative Purchase Methods 10
Investment Objective and Policies 12
Other Investment Policies and Risk Factors 13
HOW TO DO BUSINESS WITH US
Special Shareholder Services 20
Investor Line 20
How to Buy Fund Shares 20
By Mail 21
By Telephone 21
By Wire 21
By Automatic Monthly Investments 22
By Direct Deposit 22
By In-Kind Purchases 22
Offering Price 23
When Share Price is Determined 25
Additional Information About Investments 25
How to Exchange Your Investment From One Fund to Another 26
By Telephone 27
By Mail 27
Additional Information About Exchanges 27
How to Redeem Fund Shares 28
By Telephone 30
By Mail 30
By Automated Withdrawal Program 31
Redemption Proceeds 31
Additional Information About Redemptions 32
How To Use The Premier Family of Funds in a Tax-Qualified
Retirement Plan 32
How to Transfer an Investment to a Premier Family of Funds'
Retirement Plan 32
OTHER INFORMATION
Share Price 33
Performance Advertising 33
Distributions 34
Taxes 36
Other Services 37
Further Information About The Fund 38
The Dreyfus/Laurel Funds, Inc. 38
Management 38
Distribution Plans (Class A Plan and Class B and C Plans) 40
</TABLE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REP-
RESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE FUND'S SAI INCOR-
PORATED HEREIN BY REFERENCE, IN CONNECTION WITH THE OFFERING MADE BY THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND OR THE DISTRIBU-
TOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE FUND OR BY THE
DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT BE LAWFULLY
MADE.
EXPENSE SUMMARY
<TABLE>
<CAPTION>
Class A Class B Class C Class R
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) 3.00% none none none
Maximum Deferred Sales Charge Imposed on
Redemptions (as a percentage of the amount
subject to charge) none 3.00% 0.75% none
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average daily net assets)
Management Fee 0.60% 0.60% 0.60% 0.60%
12b-1 Fee* 0.25% 0.75% 0.75% none
Other Expenses** 0.00% 0.00% 0.00% 0.00%
Total Fund Operating Expenses 0.85% 1.35% 1.35% 0.60%
EXAMPLES
You would pay the following expenses 1 year $ 38 $ 44/14+ $ 21/14+ $ 6
on a $1,000 investment, assuming (1) a 3 years $ 56 $ 63/43+ $ 43 $19
5% annual return and (2) except where 5 years $ 76 $ 84/74+ $ 74 $33
noted, redemption at the end of each 10 years $132 $136 $162 $75
time period:
<FN>
* See "Distribution Plans (Class A Plan and Class B and C Plans)" for a
description of the Fund's Distribution Plans for Class A, B and C
Shares.
** Does not include fees and expenses of the non-interested Directors (in-
cluding counsel). The investment manager is contractually required to
reduce its Management Fee in an amount equal to the Fund's allocable
portion of such fees and expenses, which are estimated to be 0.02% of
the Fund's net assets. See "Further Information About the Fund--
Management."
+ Assuming no redemption of Shares.
</TABLE>
THE INFORMATION CONTAINED IN THE TABLE SHOULD NOT BE CONSIDERED A REPRE-
SENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS
THAN THOSE SHOWN.
The purpose of the foregoing table is to assist you in understanding the
various costs and expenses that investors will bear, directly or indi-
rectly, the payment of which will reduce investors' return on an annual
basis. Long-term investors in Class A, B or C Shares could pay more in
12b-1 fees than the economic equivalent of paying the maximum front-end
sales charges applicable to mutual funds sold by members of the National
Association of Securities Dealers, Inc. ("NASD"). The information in the
foregoing table does not reflect any fee waivers or expense reimbursement
arrangements that may be in effect. Certain Agents (as defined herein) may
charge their clients direct fees for effecting transactions in Fund
shares; such fees are not reflected in the foregoing table. See "Further
Information About the Fund--Management," "How to Buy Fund Shares" and
"Distribution Plans (Class A Plan and Class B and C Plans)."
The Fund understands that banks, brokers, dealers or other financial in-
stitutions (including Mellon Bank and its affiliates) (collectively
"Agents") may charge fees to their clients who are owners of the Fund's
Class A, B or C Shares for various services provided in connection with a
client's account. These fees would be in addition to any amounts received
by an Agent under its Selling Agreement ("Agreement") with Premier Mutual
Fund Services, Inc. ("Premier"). The Agreement requires each Agent to dis-
close to its clients any compensation payable to such Agent by Premier and
any other compensation payable by the client for various services provided
in connection with its account.
FINANCIAL HIGHLIGHTS
The tables below are based upon a single Class A Share or Class R Share
outstanding throughout each fiscal year or period and should be read in
conjunction with the financial statements and related notes that appear in
the Fund's Annual Report dated October 31, 1994 which is incorporated by
reference in the SAI. The financial statements included in the Fund's An-
nual Report for the year ended October 31, 1994 have been audited by KPMG
Peat Marwick LLP, independent accountants, whose report appears in the
Fund's Annual Report. Further information about the Fund's performance is
contained in the Fund's Annual Report, which may be obtained without
charge.
PREMIER LIMITED TERM INCOME FUND
FOR A CLASS A SHARE OUTSTANDING THROUGHOUT THE PERIOD.
<TABLE>
<CAPTION>
Period
Ended
10/31/94*#
<S> <C> <C>
Net asset value, beginning of period $ 10.49
Income from investment operations:
Net investment income 0.28
Net realized and unrealized loss on investments (0.27)
Total from investment operations 0.01
Less distributions:
Distributions from net investment income (0.28)
Total distributions (0.28)
Net asset value, end of period $ 10.22
Total return+ (0.11)%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 932
Ratio of operating expenses to average net assets 0.83%**
Ratio of net investment income to average net assets 4.47%**
Portfolio turnover rate 117%
<FN>
* The Fund commenced selling Investor Shares on April 7, 1994. Effective
as of October 17, 1994, the Fund's Investor Shares were redesignated
Class A Shares.
** Annualized.
+ Total Return represents aggregate total returns for the period indi-
cated.
# Prior to October 17, 1994, Mellon Bank, N.A. served as the Fund's in-
vestment manager. Effective October 17, 1994, The Dreyfus Corporation
serves as the Fund's investment manager.
</TABLE>
PREMIER LIMITED TERM INCOME FUND
FOR A CLASS R SHARE OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.
<TABLE>
<CAPTION>
Years Ended
Period
Ended
10/31/94* 10/31/93 10/31/92 10/31/91*
<S> <C> <C> <C> <C>
Net asset value, beginning of year $ 11.07 $ 10.71 $ 10.41 $10.00
Income from investment operations:
Net investment income 0.49# 0.51 0.62 0.19
Net realized and unrealized gain/(loss)
on investments (0.75) 0.46 0.30 0.36
Total from investment operations (0.26) 0.97 0.92 0.55
Less distributions:
Distributions from net investment income (0.53) (0.52) (0.62) (0.14)
Distributions from net realized gain (0.06) (0.09) (0.00) --
Total distributions (0.59) (0.61) (0.62) (0.14)
Net asset value, end of year $ 10.22 $ 11.07 $ 10.71 $10.41
Total return++ (2.46)% 9.33% 9.11% 5.49%
Ratios to average net assets/
supplemental data:
Net assets, end of year (in 000's) $82,406 $59,534 $20,619 $9,608
Ratio of expenses to average net assets+++ 0.60%+ 0.60% 0.51% 0.02%**
Ratio of net investment income to average
net assets 4.70% 4.81% 5.91% 7.16%**
Portfolio turnover rate 117% 112% 67% 23%
<FN>
* The Fund commenced operations on July 11, 1991. The Fund commenced
selling Investor Shares on April 7, 1994. Those shares outstanding
prior to April 7, 1994 were designated Trust Shares. Effective as of
October 17, 1994, the Fund's Trust Shares were redesignated Class R
Shares.
** Annualized.
+ Annualized expense ratio before reimbursement of expenses by the in-
vestment adviser was 0.60% for the year ended October 31, 1994.
++ Total return represents aggregate total return for the periods indi-
cated.
+++ For the year ended October 31, 1992 and the period ended October 31,
1991, the investment adviser waived all or a portion of its advisory
fee amounting to $0.0064 and $0.0107 per share, respectively. For the
years ended October 31, 1993 and 1992 and the period ended October 31,
1991, the investment adviser reimbursed expenses of the Fund amounting
to $.0509, $.1147, and $.0732 per share, respectively.
# Net investment income before reimbursement of expenses by the invest-
ment adviser was $0.49 for the year ended October 31, 1994.
</TABLE>
Additional classes of Shares--designated Class B and Class C--have been
added to the previously existing Class A (formerly Investor Class) and
Class R (formerly Trust Class) Shares of the Fund. Class A and Class R
Shares are offered by this Prospectus. Class B and Class C Shares are of-
fered through a servicing network associated with The Dreyfus Corporation
(the "Manager") pursuant to a separate Prospectus. Class A and Class R
Shares are also offered through that network pursuant to a separate Pro-
spectus. For more information call 1-800-645-6561. Please read that Pro-
spectus carefully. Exchange and shareholder services vary depending upon
the network through which you purchase Fund Shares. See "How to Buy Fund
Shares."
PREMIER LIMITED TERM INCOME FUND
ALTERNATIVE PURCHASE METHODS
The Fund offers you four methods of purchasing Fund Shares, but only Class
A and Class R Shares are offered by this Prospectus. You may choose the
class of Shares for which you are eligible that best suits your needs,
given the amount of your purchase, the length of time you expect to hold
your Shares and any other relevant circumstances. Each Fund Share repre-
sents an identical pro rata interest in the Fund's investment portfolio.
Class A Shares are sold at net asset value per share ("NAV") plus a maxi-
mum initial sales charge of 3.00% of the public offering price imposed at
the time of purchase. The initial sales charge may be reduced or waived
for certain purchases. See "How to Buy Fund Shares--Class A Shares." These
Shares are subject to an annual 12b-1 fee at the rate of 0.25 of 1% of the
value of the average daily net assets of Class A. See "Distribution Plan--
Class A."
Class A Shares (and Class B and Class C Shares described below) are prima-
rily sold to retail investors by Agents that have entered into Selling
Agreements with Premier, except that full-time or part- time employees or
directors of the Manager or any of its affiliates or subsidiaries, 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 Premier. Subsequent purchases may be sent
directly to the Transfer Agent or your Agent.
Class R Shares generally may not be purchased directly by individuals, al-
though eligible institutions may purchase Class R Shares for accounts
maintained by individuals. Class R Shares are sold at NAV primarily to
bank trust departments and other financial service providers (including
Mellon Bank and its affiliates) acting on behalf of customers having a
qualified trust or investment account or relationship at such institution.
Holders of Class R Shares of the Fund who have held their Shares since
April 4, 1994, may continue to purchase Class R Shares of that Fund,
whether or not they would otherwise be eligible to do so. Class R Shares
may be purchased for a retirement plan only by a custodian, trustee, in-
vestment manager or other entity authorized to act on behalf of such Plan.
Institutions effecting transactions in Class R Shares for the accounts of
their clients may charge their clients direct fees in connection with such
transactions.
In addition to the classes of Shares offered by this Prospectus, the Fund
offers two other classes of Shares designated Class B and Class C avail-
able, together with the Shares offered by this Prospectus, through a ser-
vicing network associated with the Manager. For more information and a
Prospectus relating to shares offered through that network, call 1-800-
645-6561. Please read that Prospectus carefully. Exchange and shareholder
services vary depending upon the network through which you purchase Fund
Shares.
Class B Shares are sold at NAV with no initial sales charge at the time of
purchase; as a result, the entire purchase price is immediately invested
in the Fund. Class B Shares are subject to a maximum 3% Contingent De-
ferred Sales Charge ("CDSC"), which is assessed only if you redeem Class B
Shares within five years of purchase. See "How to Buy Fund Shares--Class B
Shares" and "How to Redeem Fund Shares--Contingent Deferred Sales Charge--
Class B Shares." These Shares also are subject to an annual distribution
fee at the rate of 0.50 of 1% of the value of the average daily net assets
of Class B. In addition, Class B Shares are subject to an annual service
fee at the rate of 0.25 of 1% of the value of the average daily net assets
of Class B. See "Distribution Plans--Class B and C." The distribution fee
paid by Class B will cause such class to have a higher expense ratio and
to pay lower dividends than Class A. Approximately six years after the
date of purchase, Class B Shares automatically will convert to Class A
Shares based on the relative NAVs for Shares of each such class, and will
no longer be subject to the distribution fee. (Such conversion is subject
to suspension by the Fund's Board of Directors if adverse tax consequences
might result.) Class B Shares that have been acquired through the rein-
vestment of dividends and distributions will be converted on a pro rata
basis together with other Class B Shares, in the proportion that a share-
holder's Class B Shares converting to Class A Shares bears to the total
Class B Shares not acquired through the reinvestment of dividends and dis-
tributions.
Class C Shares are subject to a 0.75% CDSC, which is assessed only if a
shareholder redeems Class C Shares within one year of purchase. See "How
to Redeem Fund Shares--Class C Shares." These Shares also are subject to
an annual distribution fee at the rate of 0.50 of 1% of the value of the
average daily net assets of Class C. Class C Shares are also subject to an
annual service fee at the rate of 0.25% of 1% of the value of the average
daily net assets of Class C. See "Distribution and Service Plans--Class B
and C." The distribution fee paid by Class C will cause such class to have
a higher expense ratio and to pay lower dividends than Class A.
The decision as to which class of Shares is more beneficial to an investor
depends on the amount and the intended length of his or her investment. An
investor should consider whether, during the anticipated life of his or
her investment in the Fund, the accumulated distribution fee and CDSC, if
any, on Class B or Class C Shares would be less than the initial sales
charge on Class A Shares purchased at the same time, and to what extent,
if any, such differential would be offset by the return of Class A Shares.
Additionally, investors qualifying for reduced initial sales charges who
expect to maintain their investment for an extended period of time might
consider purchasing Class A Shares because the accumulated continuing dis-
tribution fees on Class B or Class C Shares may exceed the initial sales
charge on Class A Shares during the life of the investment. Finally, an
investor should consider the effect of the CDSC period and any conversion
rights of the classes in the context of his or her investment time frame.
For example, while Class C Shares have a shorter CDSC period than Class B
Shares, Class C Shares do not have a conversion feature and, therefore,
are subject to an ongoing distribution fee. Thus, Class B Shares may be
more attractive than Class C Shares to investors with longer term invest-
ment outlooks. Generally, Class A Shares may be more appropriate for in-
vestors who invest $1,000,000 or more in Fund Shares, but will not be ap-
propriate for investors who invest less than $100,000 in Fund Shares.
INVESTMENT OBJECTIVE AND POLICIES
The Fund seeks to obtain as high a level of current income as is consis-
tent with safety of principal and maintenance of liquidity by investing in
fixed-income obligations with average maturities not in excess of ten
years. There can be no assurance that the Fund will meet its stated in-
vestment objective. See "OTHER INVESTMENT POLICIES AND RISK FACTORS" on
page 13 for a detailed description of risks and other Fund investment pol-
icies. See "OTHER INVESTMENT POLICIES AND RISK FACTORS--Limiting Invest-
ment Risks" for a discussion of the Fund's investment limitations.
Investment selections will be based on fundamental economic, market and
other factors leading to valuation by sector, maturity, quality and such
other criteria as are appropriate to meet the stated objectives. Under
normal circumstances at least 65% of the Fund's total assets will be in-
vested in fixed- income obligations of domestic and foreign issuers. The
Fund will invest in investment grade bonds rated at least Baa by Moody's
Investors Service, Inc. ("Moody's") or BBB by Standard and Poor's Ratings
Group ("Standard & Poor's") rating services, or, if unrated, of comparable
quality as determined by the Manager. The Fund's dollar-weighted average
maturity will not be in excess of ten years.
Securities rated BBB by Standard & Poor's or Baa by Moody's are considered
by those rating agencies to be "investment grade" securities, although
Moody's considers securities rated Baa to have some speculative character-
istics. Further, while bonds rated BBB by Standard & Poor's exhibit ade-
quate protection parameters, adverse economic conditions or changing cir-
cumstances are more likely to lead to a weakened capacity to pay interest
and principal for debt in this category than debt in higher rated catego-
ries.
The Fund will not invest in securities rated less than Baa by Moody's or
BBB by Standard & Poor's, or in unrated securities determined to be of a
lesser credit quality than those designations. The Fund will dispose in a
prudent and orderly fashion of bonds whose ratings drop below these mini-
mum ratings.
The Fund may invest in obligations of foreign issuers which are U.S.
dollar-denominated. Investments in foreign obligations may be affected by
governmental action in the country of domicile. In addition, evidences of
ownership of Fund securities may be held outside of the U.S. and the Fund
may be subject to the risks associated with the holding of such property
overseas. Examples of governmental actions would be the imposition of cur-
rency controls, interest limitations, seizure of assets, or the declara-
tion of a moratorium on payment of principal or interest. (See "OTHER IN-
VESTMENT POLICIES AND RISK FACTORS.")
Other instruments in which the Fund will invest include (1) U.S. Treasury
bills, notes and bonds; (2) other obligations issued or guaranteed as to
interest and principal by the U.S. Government, its agencies or instrumen-
talities; (3) mortgage-related securities backed by U.S. Government agen-
cies or instrumentalities; (4) instruments of U.S. and foreign banks, in-
cluding certificates of deposit, banker's acceptances and time deposits,
and may include Eurodollar Certificates of Deposit ("ECDs"), Yankee Cer-
tificates of Deposit ("Yankee CDs") and Eurodollar Time Deposits ("ETDs");
(5) commercial paper of U.S. and foreign companies; (6) floating rate se-
curities; (7) variable amount master de- mand notes; (8) repurchase agree-
ments; (9) when-issued transactions; (10) Eurodollar bonds and notes; and
(11) American Depository Receipts ("ADRs"). (See "OTHER INVESTMENT POLI-
CIES AND RISK FACTORS.")
The Fund may utilize reverse repurchase agreements. It may also enter into
futures contracts and related options for hedging purposes, but does not
intend to do so during the coming year. (See "OTHER INVESTMENT POLICIES
AND RISK FACTORS.")
OTHER INVESTMENT POLICIES AND RISK FACTORS
AMERICAN DEPOSITORY RECEIPTS. The Fund may invest in U.S. dollar-
denominated ADRs. ADRs typically are issued by an American bank or trust
company and evidence ownership of underlying securities issued by foreign
companies. ADRs are traded in the United States on national securities ex-
changes or in the over-the-counter market. (See "Foreign Securities.")
BORROWING. The Fund is authorized, within specified limits, to borrow
money for temporary administrative purposes and to pledge its assets in
connection with such borrowings.
COMMERCIAL PAPER. The Fund may invest in commercial paper. These instru-
ments are short- term obligations issued by banks and corporations that
have maturities ranging from 2 to 270 days. Each instrument may be backed
only by the credit of the issuer or may be backed by some form of credit
enhancement, typically in the form of a guarantee by a commercial bank.
Commercial paper backed by guarantees of foreign banks may involve addi-
tional risk due to the difficulty of obtaining and enforcing judgments
against such banks and the generally less restrictive regulations to which
such banks are subject. The Fund will only invest in commercial paper of
U.S. and foreign companies rated A-1 at the time of purchase by Standard &
Poor's, Prime-1 by Moody's, F-1 by Fitch Investors Service, Inc., Duff 1
by Duff & Phelps, Inc. or A1 by IBCA, Inc.
ECDS, ETDS AND YANKEE CDS. The Fund may invest in ECDs, ETDs and Yankee
CDs. ECDs are U.S. dollar-denominated certificates of deposit issued by
foreign branches of domestic banks. ETDs are U.S. dollar-denominated time
deposits in a foreign branch of a U.S. bank or a foreign bank. Yankee CDs
are certificates of deposit issued by a U.S. branch of a foreign bank de-
nominated in U.S. dollars and held in the United States. ECDs, ETDs and
Yankee CDs are subject to somewhat different risks than are the obliga-
tions of domestic banks. (See "Foreign Securities.")
EURODOLLAR BONDS AND NOTES. The Fund may invest in Eurodollar bonds and
notes. Eurodollar bonds and notes are obligations which pay principal and
interest in U.S. dollars held in banks outside the United States, prima-
rily in Europe. Investments in Eurodollar bonds and notes involve risks
that differ from investments in securities of domestic issuers. (See "For-
eign Securities.")
FIXED-INCOME SECURITIES. The Fund may invest in fixed-income securities
to achieve its investment objective. In periods of declining interest
rates, the Fund's yield (its income from portfolio investments over a
stated period of time) may tend to be higher than prevailing market rates,
and in periods of rising interest rates, the yield of the Fund may tend to
be lower. Also when interest rates are falling, the inflow of net new
money to the Fund from the continuous sales of its shares will likely be
invested in portfolio instruments producing lower yield than the balance
of the Fund's portfolio, thereby reducing the yield of the Fund. In peri-
ods of rising interest rates, the opposite can be true. The NAV of the
Fund investing in fixed-income securities also may change as general lev-
els of interest rates fluctuate. When interest rates increase, the value
of a portfolio of fixed-income securities can be expected to decline. Con-
versely, when interest rates decline, the value of a portfolio of fixed-
income securities can be expected to increase.
FLOATING RATE SECURITIES. The Fund may invest in floating rate securi-
ties. A floating rate security provides for the automatic adjustment of
its interest whenever a specified interest rate changes. Interest rates on
these securities are ordinarily tied to, and are a percentage of, a widely
recognized interest rate, such as the yield on 90-day U.S. Treasury bills
or the prime rate of a specified bank. These rates may change as often as
twice daily. Generally, changes in interest rates will have a smaller ef-
fect on the market value of floating rate securities than on the market
value of comparable fixed-income obligations. Thus, investing in variable
and floating rate securities generally allows less opportunity for capital
appreciation and depreciation than investing in comparable fixed-income
securities.
FOREIGN SECURITIES. The Fund may purchase securities of foreign issuers
and may invest in obligations of foreign branches of domestic banks and
domestic branches of foreign banks. Investment in foreign securities pre-
sents certain risks, including those resulting from fluctuations in cur-
rency exchange rates, revaluation of currencies, future political and eco-
nomic developments and the possible imposition of currency exchange block-
ages or other foreign governmental laws or restrictions, reduced
availability of public information concerning issuers, and the fact that
foreign issuers are not generally subject to uniform accounting, auditing
and financial reporting standards or to other regulatory practices and re-
quirements comparable to those applicable to domestic issuers. Moreover,
securities of many foreign issuers may be less liquid and their prices
more volatile than those of comparable domestic issuers. In addition, with
respect to certain foreign countries, there is the possibility of expro-
priation, confiscatory taxation and limitations on the use or removal of
funds or other assets of the Fund, including withholding of dividends.
Foreign securities may be subject to foreign government taxes that would
reduce the yield on such securities.
FUTURES, OPTIONS AND OTHER DERIVATIVE INSTRUMENTS. The Fund may attempt
to reduce the overall level of investment risk of particular securities
and attempt to protect the Fund against adverse market movements by in-
vesting in futures, options and other derivative instruments. These in-
clude the purchase and writing of options on securities (including index
options) and options on foreign curren- cies and investing in futures con-
tracts for the purchase or sale of instruments based on financial indices,
including interest rate indices or indices of U.S. or foreign governments,
equity or fixed income securities ("futures contracts"), options on fu-
tures contracts, forward contracts and swaps and swap-related products
such as equity swap contracts, interest rate swaps, currency swaps, caps,
collars and floors.
The use of futures, options, forward contracts and swaps exposes the Fund
to additional investment risks and transaction costs. If the Manager in-
correctly analyzes market conditions or does not employ the appropriate
strategy with respect to these instruments, the Fund could be left in a
less favorable position. Additional risks inherent in the use of futures,
options, forward contracts and swaps include: imperfect correlation be-
tween the price of futures, options and forward contracts and movements in
the prices of the securities or currencies being hedged; the possible ab-
sence of a liquid secondary market for any particular instrument at any
time; and the possible need to defer closing out certain hedged positions
to avoid adverse tax consequences. The Fund may not purchase put and call
options which are traded on a national stock exchange in an amount exceed-
ing 5% of its net assets. Further information on the use of futures, op-
tions and other derivative instruments, and the associated risks is con-
tained in the SAI.
GNMA CERTIFICATES. The Fund may invest in Government National Mortgage
Association ("GNMA") Certificates ("GNMA Certificates"). GNMA Certificates
are mortgage-backed securities representing part ownership of a pool of
mortgage loans. These loans are made by mortgage bankers, commercial
banks, savings and loan associations, and other lenders and are either in-
sured by the Federal Housing Administration or guaranteed by the Veterans
Administration. A "pool" or group of such mortgages is assembled and,
after being approved by GNMA, is offered to investors through securities
dealers. Once approved by GNMA, the timely payment of interest and princi-
pal on each mortgage is guaranteed by the full faith and credit of the
U.S. Government. Although the mortgage loans in a pool underlying a GNMA
Certificate will have maturities of up to 30 years, the average life of a
GNMA Certificate will be substantially less because the mortgages will be
subject to normal principal amortization and also may be prepaid prior to
maturity. Prepayment rates vary widely and may be affected by changes in
mortgage interest rates. In periods of falling interest rates, the rate of
prepayment on higher interest mortgage rates tends to increase, thereby
shortening the actual average life of the GNMA Certificate. Conversely,
when interest rates are rising, the rate of prepayment tends to decrease,
thereby lengthening the average life of the GNMA Certificates. Reinvest-
ment of prepayments may occur at higher or lower rates than the original
yield on the Certificates. Due to the prepayment feature and the need to
reinvest prepayments of principal at current rates, GNMA Certificates with
underlying mortgages bearing higher interest rates can be less effective
than typical non-callable bonds of similar maturities at locking in yields
during periods of declining interest rates, although they may have compa-
rable risks of decline in value during periods of rising interest rates.
ILLIQUID SECURITIES. The Fund will not knowingly invest more than 15% of
the value of its net assets in illiquid securities, including time depos-
its and repurchase agreements having maturities longer than seven days.
Securities that have readily available market quotations are not deemed
illiquid for purposes of this limitation (irrespective of any legal or
contractual restrictions on resale.) The Fund may invest in commercial ob-
ligations issued in reliance on the so-called "private placement" exemp-
tion from registration afforded by Section 4(2) of the Securities Act of
1933, as amended ("Section 4(2) paper"). The Fund may also purchase secu-
rities that are not registered under the Securities Act of 1933, as
amended, but which can be sold to qualified institutional buyers in accor-
dance with Rule 144A under that Act ("Rule 144A securities"). Liquidity
determinations with respect to Section 4(2) paper and Rule 144A Securities
will be made by the Board of Directors as required. The Board will con-
sider availability of reliable price information and other relevant infor-
mation in making such determinations. Section 4(2) paper is restricted as
to disposition under the federal securities laws, and generally is sold to
institutional investors such as the Fund that agree that they are purchas-
ing the paper for investment and not with a view to public distribution.
Any resale by the purchaser must be in an exempt transaction. Section 4(2)
paper normally is resold to other institutional investors like the Fund
through or with the assistance of the issuer or investment dealers who
make a market in the Section 4(2) paper, thus providing liquidity. Rule
144A securities generally must be sold to other qualified institutional
buyers. If a particular investment in Section 4(2) paper or Rule 144A se-
curities is not determined to be liquid, that investment will be included
within the percentage limitation on investment in illiquid securities. The
ability to sell Rule 144A securities to qualified institutional buyers is
a recent development and it is not possible to predict how this market
will mature. Investing in Rule 144A securities could have the effect of
increasing the level of fund illiquidity to the extent that qualified in-
stitutional buyers become, for a time, uninterested in purchasing these
securities.
MORTGAGE PASS-THROUGH CERTIFICATES. The Fund may invest in mortgage pass-
through certificates. Mortgage pass-through certificates are issued by
governmental, government-related and private organizations and are backed
by pools of mortgage loans. These mortgage loans are made by lenders such
as savings and loan associations, mortgage bankers, commercial banks and
others to residential home buyers throughout the United States. The secu-
rities are "pass-through" securities because they provide investors with
monthly payments of principal and interest which in effect are a "pass-
through" of the monthly payments made by the individual borrowers on the
underlying mortgage loans. The principal governmental issuer of such secu-
rities is the GNMA, which is a wholly-owned U.S. Government corporation
within the Department of Housing and Urban Development. Government related
issuers include the Federal Home Loan Mortgage Corporation ("FHLMC"), and
the Federal National Mortgage Association ("FNMA"), both government-
sponsored corporations owned entirely by private stockholders. Commercial
banks, savings and loan institutions, private mortgage insurance compa-
nies, mortgage bankers and other secondary market issuers also create
pass-through pools of conventional residential mortgage loans. Such issu-
ers may be the originators of the underlying mortgage loans as well as the
guarantors of the mortgage-related securities. The market value of
mortgage-related securities depends on, among other things, the level of
interest rates, the certificates' coupon rates and the payment history of
underlying mortgage loans. For further information, see the SAI.
OTHER INVESTMENT COMPANIES. The Fund may invest in securities issued by
other investment companies to the extent that such investments are consis-
tent with the Fund's investment objective and policies and permissible
under the Investment Company Act of 1940, as amended (the "1940 Act"). As
a shareholder of another investment company, the Fund would bear, along
with other shareholders, its pro rata portion of the other investment com-
pany's expenses, including advisory fees. These expenses would be in addi-
tion to the advisory and other expenses that the Fund bears directly in
connection with its own operations.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements. A
repurchase agreement involves the purchase of a security by the Fund and a
simultaneous agreement (generally with a bank or broker-dealer) to repur-
chase that security from the Fund at a specified price and date or upon
demand. This technique offers a method of earning income on idle cash. A
risk associated with repurchase agreements is the failure of the seller to
repurchase the securities as agreed, which may cause the Fund to suffer a
loss if the market value of such securities declines before they can be
liquidated on the open market. Repurchase agreements with a duration of
more than seven days are considered illiquid securities and are subject to
the limit stated above.
REVERSE REPURCHASE AGREEMENTS. The Fund may enter into reverse repurchase
agreements to meet redemption requests where the liquidation of fund secu-
rities is deemed by the Manager to be disadvantageous. Under a reverse re-
purchase agreement, the Fund: (i) transfers possession of fund securities
to a bank or broker-dealer in return for cash in an amount equal to a per-
centage of the securities' market value; and (ii) agrees to repurchase the
securities at a future date by repaying the cash with interest. Cash or
liquid high-grade debt securities held by the Fund equal in value to the
repurchase price including any accrued interest will be maintained in a
segregated account while a reverse repurchase agreement is in effect.
SECURITIES LENDING. To increase return on fund securities, the Fund may
lend its portfolio securities to broker-dealers and other institutional
investors pursuant to agreements requiring that the loans be continuously
secured by collateral equal at all times in value to at least the market
value of the securities loaned. There may be risks of delay in receiving
additional collateral or in recovering the securities loaned or even a
loss of rights to the collateral should the borrower of the securities
fail financially. However, loans are made only to borrowers deemed by the
Manager to be of good standing and when, in its judgment, the income to be
earned from the loan justifies the attendant risks.
U.S. GOVERNMENT SECURITIES. The Fund may invest in obligations issued or
guaranteed as to both principal and interest by the U.S. Government or
backed by the full faith and credit of the United States. In addition to
direct obligations of the U.S. Treasury, these include securities issued
or guaranteed by the Federal Housing Administration, Farmers Home Adminis-
tration, Export-Import Bank of the United States, Small Business Adminis-
tration, Government National Mortgage Association, General Services Admin-
istration and Maritime Administration. Investments may also be made in
U.S. Government obligations that do not carry the full faith and credit
guarantee, such as those issued by the Federal National Mortgage Associa-
tion, the Federal Home Loan Mortgage Corporation, or other instrumentali-
ties.
VARIABLE AMOUNT MASTER DEMAND NOTES. The Fund may invest in variable
amount master demand notes. Variable amount master demand notes are unse-
cured obligations that are redeemable upon demand and are typically un-
rated. These instruments are issued pursuant to written agreements between
their issuers and holders. The agreements permit the holders to increase
(subject to an agreed maximum) and the holders and issuers to decrease the
principal amount of the notes, and specify that the rate of interest pay-
able on the principal fluctuates according to an agreed-upon formula. If
an issuer of a variable amount master demand note were to default on its
payment obligation, the Fund might be unable to dispose of the note be-
cause of the absence of a secondary market and might, for this or other
reasons, suffer a loss to the extent of the default. The Fund will only
invest in variable amount master demand notes issued by entities that the
Manager considers creditworthy.
WHEN-ISSUED SECURITIES AND DELAYED DELIVERY TRANSACTIONS. To secure ad-
vantageous prices or yields, the Fund may purchase U.S. Government Securi-
ties on a when-issued basis or may purchase or sell securities for delayed
delivery. In such transactions, delivery of the securities occurs beyond
the normal settlement periods, but no payment or delivery is made by the
Fund prior to the actual delivery or payment by the other party to the
transaction. The purchase of securities on a when-issued or delayed deliv-
ery basis involves the risk that, as a result of an increase in yields
available in the market place, the value of the securities purchased will
decline prior to the settlement date. The sale of securities for delayed
delivery involves the risk that the prices available in the market on the
delivery date may be greater than those obtained in the sale transactions.
The Fund will establish a segregated account consisting of cash, U.S. Gov-
ernment Securities or other high-grade debt obligations in an amount equal
to the amounts of its when-issued and delayed delivery commitments.
MASTER/FEEDER OPTION. The Dreyfus/Laurel Funds, Inc. may in the future
seek to achieve the Fund's investment objective by investing all of the
Fund's assets in another investment company having the same investment ob-
jective and substantially the same investment policies and restrictions as
those applicable to the Fund. Shareholders of the Fund will be given at
least 30 days' prior notice of any such investment. Such investment would
be made only if the Directors determine it to be in the best interest of
the Fund and its shareholders. In making that determination, the Directors
will consider, among other things, the benefits to shareholders and/or the
opportunity to reduce costs and achieve operational efficiencies. Although
the Fund believes that the Directors will not approve an arrangement that
is likely to result in higher costs, no assurance is given that costs will
be materially reduced if this option is implemented.
PORTFOLIO TURNOVER. While securities are purchased by the Fund on the
basis of potential for high current income and not for short-term trading
profits, the Fund's turnover rate may exceed 100%. A portfolio turnover
rate of 100% would occur, for example, if all the securities held by the
Fund were replaced once in a period of one year. A higher rate of portfo-
lio turnover involves correspondingly greater brokerage commissions and
other expenses which must be borne directly by the Fund and, thus, indi-
rectly by its shareholders. In addition, a high rate of portfolio turnover
may result in the realization of larger amounts of short-term capital
gains which, when distributed to the Fund's shareholders, are taxable to
them as ordinary income. (See "Distributions" and "Taxes.") Nevertheless,
security transactions for the Fund will be based only upon investment con-
siderations and will not be limited by any other considerations when the
Manager deems it appropriate to make changes in the Fund's assets.
LIMITING INVESTMENT RISKS. The Fund is subject to a number of investment
limitations. Certain limitations are matters of fundamental policy and may
not be changed without the affirmative vote of the holders of a majority
of the Fund's outstanding Shares. The SAI describes all of the Fund's fun-
damental and non-fundamental restrictions.
The investment objective, policies, restrictions, practices and procedures
of the Fund, unless otherwise specified, may be changed without share-
holder approval. If the Fund's investment objective, policies, restric-
tions, practices or procedures change, shareholders should consider
whether the Fund remains an appropriate investment in light of their then
current position and needs.
In order to permit the sale of the Fund's Shares in certain states, the
Fund may make commitments more restrictive than the investment policies
and restrictions described in this Prospectus and the SAI. Should the Fund
determine that any such commitment is no longer in the best interests of
the Fund, it may consider terminating sales of its Shares in the states
involved.
HOW TO DO BUSINESS WITH US
SPECIAL SHAREHOLDER SERVICES
You may establish one or more special services designed to provide an easy
way to do business with the Fund. By electing these services on your ap-
plication or by completing the appropriate forms, you may authorize:
* Investment by phone.
* Automatic monthly investments.
* Exchanges or redemptions by phone.
By electing the service which enables you to exchange and redeem by phone,
you agree to indemnify the Fund, its transfer agent and its investment
manager from any loss, claim or expense you may incur as a result of their
acting on such instruction. The Fund will employ reasonable procedures to
confirm that instructions communicated by telephone are genuine. These in-
clude personal identification procedures, recording of telephone conversa-
tions and providing written confirmation of each transaction. A failure on
the part of the Fund to employ such procedures may subject it to liability
for any loss due to unauthorized or fraudulent instructions.
INVESTOR LINE
You may reach The Premier Family of Funds by calling our Investor Line at
1-800-548-2868. If you call on a rotary phone during normal business hours
(9 a.m. to 5 p.m., Eastern time), you will reach a Premier Family of Funds
operator. If you call on a Touch-Tone phone, you will receive instructions
on how to: (1) request a current prospectus or information booklets about
The Premier Family of Funds' investment portfolios and services, (2) lis-
ten to NAVs, yields and total return figures, and (3) talk with a customer
service representative during normal business hours. For more information
about direct access using a Touch-Tone phone, please contact The Premier
Family of Funds.
HOW TO BUY FUND SHARES
Premier serves as the Fund's distributor. Premier is a wholly-owned sub-
sidiary of Institutional Administration Services, Inc., a provider of mu-
tual fund administration services, the parent company of which is Boston
Institutional Group, Inc. Premier also serves as the Fund's sub-
administrator and, pursuant to a Sub-Administration Agreement, provides
various administrative and corporate secretarial services to the Fund.
Premier has established various procedures for purchasing Class R and
Class A Shares of the Fund. Class R Shares are sold primarily to bank
trust departments and other financial service providers (including Mellon
Bank and its affiliates) ("Banks") acting on behalf of customers having a
qualified trust or investment account or relationship at such institution,
or to customers who have received and hold shares of the Fund distributed
to them by virtue of such an account or relationship. Class A Shares are
primarily sold to retail investors by banks, securities brokers or dealers
and other financial institutions (including Mellon Bank and its affili-
ates) ("Agents") that have entered into Selling Agreement with Premier ex-
cept that full-time or part-time employees or directors of the Manager or
any of its affiliates or subsidiaries, 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
Premier. Once an investor has established an account, additional purchases
may, in certain cases, be made directly through the Fund's transfer agent.
If Shares of the Fund are held in an account at a Bank or with an Agent,
such Bank or Agent may require you to place all Fund purchase, exchange
and redemption orders through them. All Banks and Agents have agreed to
transmit your transaction requests to the Fund's transfer agent or to Pre-
mier. You may diversify your investments by choosing a combination of in-
vestment portfolios offered by The Premier Family of Funds.
You may invest in the following ways:
BY MAIL.
Send your application and check or money order to The Premier Family of
Funds, P.O. Box 9692, Providence, Rhode Island 02940-9830. Checks must be
payable in U.S. dollars and drawn on U.S. banks. When making subsequent
investments, enclose your check with the return remittance portion of the
confirmation of your previous investment. If the remittance portion is not
available, indicate on your check or a separate piece of paper your name,
address, the Fund and class of Shares of the Fund that you are buying and
the account number. Orders to purchase Shares are effective on the day the
Fund receives your check or money order. (See "When Share Price is Deter-
mined.")
BY TELEPHONE.
Once your account is open, you may make investments by telephone by call-
ing 1-800-548-2868 if you have elected the service authorizing the Fund to
draw on your bank account by check when you call with instructions. In-
vestments made by phone in any one account must be in an amount of at
least $100 and are effective two days after your call. (See "When Share
Price is Determined.")
BY WIRE.
You may make your initial or subsequent investments in the Fund by wiring
funds. To do so:
(1) Instruct your bank to wire funds to MELLON BANK (ABA routing number
0430-0026-1.)
(2) Be sure to specify on the wire:
(A) The Premier Funds.
(B) The Fund name and the class of Shares of the Fund you are buying and
account number (if you have one).
(C) Your name.
(D) Your city and state.
In order for a wire purchase to be effective on the same day it is re-
ceived both the trading instructions and the wire must be received before
4 p.m., Eastern time. (See "When Share Price is Determined.")
BY AUTOMATIC MONTHLY INVESTMENTS.
Once your account is open, you may make investments automatically by
electing the Automatic Investment Program, the service authorizing the
Fund to draw on your bank account regularly by paper or electronic draft.
Such investments must be in amounts of not less than $100 in any one ac-
count. You should inquire at your bank whether it will honor a preautho-
rized paper or electronic draft. Contact the Fund if your bank requires
additional documentation. Call 1-800-548-2868 or write The Premier Family
of Funds at One Exchange Place, Boston, Massachusetts 02109 for more in-
formation about the Automatic Investment Program.
BY DIRECT DEPOSIT.
If your employer offers Direct Deposit, you may arrange to automatically
purchase Shares of the Fund (minimum $100) each pay period. Direct Deposit
investing may also be available to persons receiving regular payments from
other sources (including government pension or social security payments).
Note that it may not be appropriate to Direct Deposit your entire paycheck
into the Fund because it has a fluctuating NAV. Call 1-800-548-2868 or
write The Premier Family of Funds at One Exchange Place, Boston, Massachu-
setts 02109 for more information or a Direct Deposit authorization form.
BY IN-KIND PURCHASES.
If the following conditions are satisfied, the Fund may at its discretion,
permit you to purchase Shares through an "in-kind" exchange of securities
you hold. Any securities exchanged must meet the investment objective,
policies and limitations of the Fund, must have a readily ascertainable
market value, must be liquid and must not be subject to restrictions on
resale. The market value of any securities exchanged, plus any cash, must
be at least equal to $25,000. Shares purchased in exchange for securities
generally cannot be redeemed for fifteen days following the exchange in
order to allow time for the transfer to settle.
The basis of the exchange will depend upon the relative NAV of the Shares
purchased and securities exchanged. Securities accepted by the Fund will
be valued in the same manner as the Fund values its assets. Any interest
earned on the securities following their delivery to the Fund and prior to
the exchange will be considered in valuing the securities. All interest,
dividends, subscription or other rights attached to the securities become
the property of the Fund, along with the securities. Call 1-800- 548-2868
or write The Premier Family of Funds at One Exchange Place, Boston, Massa-
chusetts 02109 for more information about "in-kind" purchases.
OFFERING PRICE.
CLASS A SHARES. The public offering price of Class A shares is the NAV of
that class plus a sales load as shown below:
<TABLE>
<CAPTION>
Total Sales Load
Dealers'
As a % of As a % of Net Reallowance
Offering Price Asset Value as a % of
Amount of Transaction Per Share Per Share Offering Price
<S> <C> <C> <C>
Less than $100,000 3.00 3.10 2.75
$100,000 to less than $250,000 2.75 2.80 2.50
$250,000 to less than $500,000 2.25 2.30 2.00
$500,000 to less than $1,000,000 2.00 2.00 1.75
</TABLE>
There is no initial sales charge on purchases of $1,000,000 or more of
Class A Shares. However, if you purchase Class A Shares without an initial
sales charge as part of an investment of at least $1,000,000 and redeem
all or a portion of those Shares within two years after purchase, a CDSC
of 1.00% will be imposed at the time of redemption. The terms contained in
the section of the Fund's Prospectus entitled "How to Redeem Fund Shares--
Contingent Deferred Sales Charge--Class B Shares" (other than the amount
of the CDSC and its time periods) are applicable to the Class A Shares
subject to a CDSC. Letter of Intent and Right of Accumulation apply to
such purchases of Class A Shares.
Full-time employees of NASD member firms and full-time employees of other
financial institutions which have entered into an agreement with Premier
pertaining to the sale of Fund Shares (or which otherwise have a brokerage
related or clearing arrangement with an NASD member firm or financial in-
stitution 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 NAV, provided
that they have furnished Premier 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 NAV. In addition, Class A Shares are offered
at NAV to full-time or part-time employees or directors of the Manager or
any of its affiliates of subsidiaries, 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 will be offered at NAV without a sales load to employees
participating in certain eligible benefit plans. Class A Shares may be
purchased at NAV through certain broker-dealers and other financial insti-
tutions that have entered into an agreement with Premier, which includes a
requirement that such Shares be sold for the benefit of clients partici-
pating in a "wrap account" or a similar program under which such clients
pay a fee to such broker-dealer or other financial institution. Holders of
accounts with Class A Shares of the Fund as of December 19, 1994, may also
purchase additional Class A Shares of the Fund in the same account at NAV.
The dealer reallowance may be changed from time to time but will remain
the same for all dealers. Premier, at its expense, may provide additional
promotional incentives to dealers that sell shares of funds advised by the
Manager which are sold with a sales load, such as Class A Shares. In some
instances, those incentives may be offered only to certain dealers who
have sold or may sell significant amounts of shares. Dealers receive a
larger percentage of the sales load from Premier than they receive for
selling most other funds.
CLASS R SHARES. The public offering price for Class R Shares is the NAV
of that class.
CLASS B SHARES. The public offering price for Class B Shares is the NAV
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 Fund Shares--Contingent Deferred Sales
Charge--Class B Shares." Premier compensates certain Agents for selling
Class B Shares at the time of purchase from Premier's own assets. The pro-
ceeds of the CDSC and the distribution fee, in part, are used to defray
these expenses.
CLASS C SHARES. The public offering price for Class C Shares is the NAV
of that class. No initial sales charge is imposed at the time of purchase.
A CDSC, however, is imposed on redemptions of Class C Shares made within
the first year of purchase. See "How to Redeem Fund Shares--Contingent De-
ferred Sales Charge--Class C Shares."
RIGHT OF ACCUMULATION--CLASS A SHARES. Reduced sales loads apply to any
purchase of Class A Shares, shares of other funds in The Premier Family of
Funds, shares of certain other funds advised by the Manager which are sold
with a sales load, and shares acquired by a previous exchange of such
shares (hereinafter referred to as "Eligible Funds"), by you and any re-
lated "purchaser" as defined in the SAI, where the aggregate investment,
including such purchase, is $100,000 or more. If, for example, you previ-
ously purchased and still hold Class A Shares, or shares of any other Eli-
gible Fund or combination thereof, with an aggregate current market value
of $80,000 and subsequently purchase Class A Shares or shares of an Eligi-
ble Fund having a current value of $40,000, the sales load applicable to
the subsequent purchase would be reduced to 2.75% 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 purchase you or your
Agent must notify Premier 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.
LETTER OF INTENT--CLASS A SHARES. By signing a Letter of Intent form,
available from Premier, you become eligible for the reduced sales load ap-
plicable 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 re-
leased 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 spec-
ified, 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 in-
tention to do so under a Letter of Intent.
WHEN SHARE PRICE IS DETERMINED.
NAV is determined at the close of the New York Stock Exchange ("NYSE") on
each day that the NYSE is open (a "business day"). Investments and re-
quests to exchange or redeem Shares received by the Fund before the close
of business on the NYSE (usually 4 p.m., Eastern time) are effective on,
and will receive the share price determined on, that day (except invest-
ments made by electronic funds transfer which are effective two business
days after your call). Investment, exchange and redemption requests re-
ceived after the close of the NYSE are effective on, and receive the Share
price determined, on the next business day.
ADDITIONAL INFORMATION ABOUT INVESTMENTS.
Once you have mailed or otherwise transmitted your investment instructions
to the Fund, it may not be modified or canceled. The Fund reserves the
right to reject any application or investment. The Fund reserves the right
to make exceptions to the minimum initial investment and account minimum
amount from time to time.
The minimum initial investment to establish a new account in the Fund is
$1,000, except for Individual Retirement Accounts ("IRAs"), retirement
plans, and Uniform Transfers (Gifts) to Minors Act accounts, for which the
minimum initial investment is $500. The Fund may suspend the offering of
Shares of any class of the Fund and reserves the right to vary initial and
subsequent investment minimums. Subsequent investments to purchase addi-
tional Shares in the Fund must be in an amount of $100 or more.
The Fund intends, upon 60 days' prior notice, to involuntarily redeem
Shares in any account if the total value of the Shares is less than a
specified minimum unless you have established an automatic monthly invest-
ment to purchase additional Shares. The Fund reserves the right to change
such minimum from time to time. Any time the Shares of the Fund held in an
account have a value of less than $1,000 ($500 for Uniform Gifts/Transfers
to Minors Acts accounts), unless the deficiency amount is the result of a
decrease in the NAV, a notification may be sent advising you of the need
either to make an investment to bring the value of the Shares held in the
account up to $1,000 ($500) or to establish an automatic monthly invest-
ment to purchase additional Shares. If the investment is not made or the
automatic monthly investment is not established within 60 days from the
date of notification, the Shares held in the account will be redeemed and
the proceeds from the redemption will be sent by check to your address of
record.
The automatic redemption of Shares will not apply to IRAs, custodial ac-
counts under Section 403(b) of the Internal Revenue Code of 1986, as
amended (the "Code") ("403(b) accounts") and other types of tax-deferred
retirement plan accounts.
HOW TO EXCHANGE YOUR INVESTMENT
FROM ONE FUND TO ANOTHER
You may exchange your Fund Shares for shares of the same class of certain
other funds advised by the Manager and that were previously advised by
Mellon Bank. As noted below, exchanges from any one fund account may be
limited in any one calendar year. In addition, the Shares being exchanged
and the shares of the fund being acquired must have a current value of at
least $100 and otherwise meet the minimum investment requirement of the
fund being acquired. Call the Investor Line for additional information and
a prospectus describing other investment portfolios offered by The Premier
Family of Funds.
Shares will be exchanged at the next determined NAV; however, a sales load
may be charged with respect to exchanges of Class A Shares into funds sold
with a sales load. No CDSC will be imposed on Class B or C Shares at the
time of an exchange; however, Class B or C Shares acquired through an ex-
change will be subject to the higher CDSC applicable to the exchanged or
acquired shares. The CDSC applicable on redemption of the acquired Class B
or C Shares will be calculated from the date of the initial purchase of
the Class B or C Shares exchanged, as the case may be. If you are exchang-
ing Class A Shares into a fund that charges a sales load, you may qualify
for share prices which do not include the sales load or which reflect a
reduced sales load, if the shares of the fund from which you are exchang-
ing were: (a) purchased with a sales load, (b) acquired by a previous ex-
change from shares purchased with a sales load, or (c) acquired through
reinvestment of dividends or distributions paid with respect to the fore-
going categories of shares. To qualify, at the time of the exchange your
Agent must notify Premier. Any such qualification is subject to confirma-
tion of your holdings through a check of appropriate records. No fees cur-
rently are charged shareholders directly in connection with exchanges, al-
though the Fund reserves the right, upon not less than 60 days' written
notice, to charge shareholders a nominal fee in accordance with rules pro-
mulgated by the SEC. The Fund reserves the right to reject any exchange
request in whole or in part.
BY TELEPHONE.
You may exchange your Shares by calling 1-800-548-2868 if you have autho-
rized the Fund to accept telephone instructions.
BY MAIL.
You may direct the Fund to exchange your Shares by writing to The Premier
Family of Funds, P.O. Box 9692, Providence, Rhode Island 02940-9830. The
request should be signed by each person in whose name the Shares are reg-
istered. All signatures should be exactly as the name appears in the reg-
istration. For example, if an owner's name is registered as John Robert
Jones, he should sign that way and not as John R. Jones.
ADDITIONAL INFORMATION ABOUT EXCHANGES.
(1) In an exchange from one account to another account, the Shares being
sold and the new shares being purchased must have a current value of
at least $100.
(2) Exchanges from any one fund account may be limited in any one calendar
year. The Fund reserves the right to make exceptions to an exchange
limitation from time to time. An exchange limitation will not apply to
the exchange of Shares of any of the funds exchanged pursuant to an
Automatic Withdrawal Program, and to shares held in 403(b) accounts.
(3) The Shares being acquired must be qualified for sale in your state of
residence.
(4) If the Shares are represented by a negotiable stock certificate, the
certificate must be returned before the exchange can be effected.
(5) Once you have telephoned or mailed your exchange request, it is irre-
vocable and may not be modified or canceled.
(6) An exchange is based on the next calculated NAV of each fund after re-
ceipt of your exchange order.
(7) Shares may not be exchanged unless you have furnished the Fund with
your tax identification number, certified as prescribed by the Code.
(See "Taxes.")
(8) Exchange of Fund Shares is, for Federal income tax purposes, a sale of
the Shares, on which you may realize a taxable gain or loss.
(9) If the request is made by a corporation, partnership, trust, fidu-
ciary, agent, estate, guardian, pension plan, profit sharing plan or
unincorporated association, the Fund may require evidence satisfactory
to it of the authority of the individual signing the request.
Shareholders will be given sixty days' notice prior to any material
changes in the exchange privilege.
HOW TO REDEEM FUND SHARES
The Fund will redeem or "buy back" your Shares at any time at their NAV.
(Before redeeming, please read "Additional Information About Redemp-
tions.") Your redemption proceeds may be delayed if you have owned your
Shares less than 10 days. (See "Redemption Proceeds.")
If an investor fails to specify the class of Shares to be redeemed or if
he or she owns fewer Shares of the class than specified to be redeemed,
the redemption request may be delayed until the Transfer Agent receives
further instructions from the investor or his or her Agent.
The Fund imposes no charges (other than any applicable CDSC) when Shares
are redeemed directly through Premier. Agents or other institutions may
charge their clients a nominal fee for effecting redemptions of Fund
Shares.
CONTINGENT DEFERRED SALES CHARGE--CLASS B SHARES. A CDSC payable to Pre-
mier is imposed on any redemption of Class B Shares which reduces the cur-
rent NAV of your Class B Shares to an amount which is lower than the dol-
lar 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 NAV of the Class B Shares redeemed does not exceed (i)
the current NAV of Class B Shares acquired through reinvestment of divi-
dends or capital gain distributions, plus (ii) increases in the NAV of
your Class B Shares above the dollar amount of all your payments for the
purchase of Class B Shares held by you at the time of redemption.
If the aggregate value of Class B Shares redeemed has declined below their
original cost as a result of the Fund's performance, a CDSC may be applied
to the then-current NAV 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 pur-
chase 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:
<TABLE>
<CAPTION>
CDSC as a
% of Amount
Year Since Invested or
Purchase Payment Redemption
Was Made Proceeds
<S> <C> <C>
First 3.00
Second 3.00
Third 2.00
Fourth 2.00
Fifth 1.00
Sixth 0.00
</TABLE>
In determining whether a CDSC is applicable to a redemption, the calcula-
tion 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 distribu-
tions; then of amounts representing the increase in NAV of Class B Shares
above the total amount of payments for the purchase of Class B Shares made
during the preceding five years; then of amounts representing the cost of
Shares purchased five years prior to the redemption; and finally, of
amounts representing the cost of Shares held for the longest period of
time within the applicable five-year period.
For example, assume an investor purchased 100 Shares at $10 a 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 his or her investment. As-
suming at the time of the redemption the NAV 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 rein-
vested 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 3% (the applicable rate in the second year
after purchase) for a total CDSC of $7.20.
CONTINGENT DEFERRED SALES CHARGE--CLASS C SHARES. A CDSC of 0.75% payable
to Premier is imposed on any redemption of Class C Shares within one year
of the date of purchase. The basis for calculating the payment of any such
CDSC will be the method used in calculating the CDSC for Class B Shares.
See "Contingent Deferred Sales Charge--Class B Shares" above.
WAIVER OF CDSC. The CDSC applicable to Class B and Class C Shares will 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 certain eligi-
ble benefit plans, (c) redemptions as a result of a combination of any in-
vestment company with the Fund by merger, acquisition of assets or other-
wise, (d) a distribution following retirement under a tax-deferred retire-
ment 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) re-
demptions by such shareholders as the SEC or its staff may permit. If the
Fund's Directors determine to discontinue the waiver of the CDSC, the dis-
closure in the Fund's Prospectus 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
at the time of the purchase of such Shares.
To qualify for a waiver of the CDSC, at the time of redemption an investor
must notify the Transfer Agent or his or her Agent must notify Premier.
Any such qualification is subject to confirmation of the investor's enti-
tlement.
BY TELEPHONE.
If you have authorized the Fund to accept telephone instructions, you may
redeem your Shares by calling 1-800-548-2868. Once made, your telephone
request may not be modified or canceled. (Before calling, read "Additional
Information About Redemptions" and "When Share Price is Determined.")
BY MAIL.
Your written instructions to redeem Shares may be in any one of the fol-
lowing forms:
* A letter to The Premier Family of Funds.
* An assignment form or stock power.
* An endorsement on the back of your negotiable stock certificate, if you
have one.
Once mailed to The Premier Family of Funds at P.O. Box 9692, Providence,
Rhode Island
02940-9830, the redemption request is irrevocable and may not be modified
or canceled. A letter of instruction should state the number of Shares or
the dollar amount to be redeemed. The letter must include your account
number, and, for redemptions in an amount in excess of $25,000, a signa-
ture guarantee of each owner. The redemption request must be signed by
each person in whose name the Shares are registered. For example, in the
case of joint ownership, each owner must sign. All signatures should be
exactly as the name appears in the registration. If the owner's name ap-
pears in the registration as John Robert Jones, he should sign that way
and not as John R. Jones. Signature guarantees can be obtained from com-
mercial banks, credit unions if authorized by state laws, savings and
loans institutions, trust companies, members of a recognized stock ex-
change, or from other eligible guarantors who are members of the Securi-
ties Transfer Agents Medallion Program ("STAMP") or any other industry
recognized program approved by the Securities Transfer Association. (Be-
fore writing, see "Additional Information About Redemptions.")
BY AUTOMATED WITHDRAWAL PROGRAM.
The Fund's Automated Withdrawal Program automatically redeems enough
Shares each month to provide you with a check for an amount which you
specify (with a minimum of $100). To set up an Automated Withdrawal Pro-
gram, call the Fund at 1-800-548-2868 for instructions. Only shareholders
with an account balance of $10,000 or more may participate in this pro-
gram. Shares will be redeemed on the 15th day or 30th day of each month or
the next business day, and your check will be mailed the next day. If your
monthly checks exceed the dividends, interest and capital appreciation on
your Shares, the payments will deplete your investment. Amounts paid to
you by Automated Withdrawals are not a return on your investment. They are
derived from the redemption of Shares in your account, and you must report
on your income tax return any gains or losses that you realize.
You may specify an Automated Withdrawal Program when you make your first
investment. If you would like to establish an Automated Withdrawal Program
thereafter, the request for the Automated Withdrawal Program must be
signed by all owners, with their signatures guaranteed.
When you make your first investment you may request that Automated With-
drawals be sent to an address other than the address of record. Thereaf-
ter, a request to send Automated Withdrawals to an address other than the
address of record must be signed by all owners, with their signatures
guaranteed.
The Fund may terminate the Automated Withdrawal Program at any time, upon
notice to you, and you likewise may terminate it or change the amount of
the Automated Withdrawal Program, by notice to the Fund in writing or by
telephone. Termination or change will become effective within five days
following receipt of your instructions. Your Automated Withdrawal Program
plan may begin any time after you have owned your Shares for 10 days.
REDEMPTION PROCEEDS.
Redemption proceeds may be sent to you:
BY MAIL. If your redemption check is mailed, it is usually mailed by the
second business day after receipt of your redemption request, but not
later than seven days afterwards. When a redemption occurs shortly after a
recent purchase, the Fund may hold the redemption proceeds beyond seven
days but only until the purchase check clears, which may take up to 10
days or more. No dividend is paid on the redemption proceeds after the re-
demption and before the check is mailed. If you anticipate redemptions
soon after you purchase your Shares, you are advised to wire funds to
avoid delay.
BY WIRE AND ELECTRONIC FUNDS TRANSFER. You may authorize the Fund to
transmit redemption proceeds by wire or electronic funds transfer. Pro-
ceeds from the redemption of Fund Shares will normally be transmitted on
the first business day, but not later than the seventh day, following the
date of redemption. Your bank usually will receive wired funds the day
they are transmitted. Electronically transferred funds will ordinarily be
received within two business days after transmission. Once the funds are
transmitted, the time of receipt and the availability of the funds are not
within the Fund's control. If your bank account changes, you must send a
new "voided" check preprinted with the bank registration with written in-
structions signed by all owners (with their signatures guaranteed), in-
cluding tax identification number.
ADDITIONAL INFORMATION ABOUT REDEMPTIONS.
(1) Redemptions specifying a certain date or price cannot be accepted and
will be returned.
(2) If the Shares being redeemed are represented by a negotiable stock
certificate, the certificate must be returned before the redemption
can be effected.
(3) All redemptions are made and the price is determined on the day when
all documentation is received in good order.
(4) If the request to redeem is made by a corporation, partnership, trust,
fiduciary, agent, estate, guardian, pension plan, profit sharing plan,
or unincorporated association, the Fund may require evidence satisfac-
tory to it of the authority of the individual signing the request.
Please call or write the Fund for further information.
(5) A request to redeem Shares in an IRA or 403(b) account must be accom-
panied by an IRS Form W4-P and a reason for withdrawal as specified by
the Internal Revenue Service.
HOW TO USE THE PREMIER FAMILY OF FUNDS
IN A TAX-QUALIFIED RETIREMENT PLAN
The Premier Family of Funds' investment portfolios are available for your
tax-deferred retirement plan. Call 1-800-548-2868 or write The Premier
Family of Funds at P.O. Box 9692, Providence, Rhode Island 02940-9830 and
request the appropriate forms for:
* IRAs.
* 403(b) accounts for employees of public school systems and non-profit
organizations.
* Profit-sharing plans and pension plans for corporations and other em-
ployers.
HOW TO TRANSFER AN INVESTMENT TO A PREMIER FAMILY OF FUNDS'
RETIREMENT PLAN.
It is easy to transfer your tax-deferred plan to The Premier Family of
Funds from another custodian. Call 1-800-548-2868 or write The Premier
Family of Funds at P.O. Box 9692, Providence, Rhode Island 02940-9830 for
a request to transfer form. If you direct The Premier Family of Funds to
transfer funds from an existing non-retirement Premier Family of Funds ac-
count into a retirement account, the Shares in your non-retirement account
will be redeemed. The redemption proceeds will be invested in your Premier
Family of Funds IRA or other tax-qualified retirement plan. The redemption
is a taxable event resulting in a taxable gain or loss.
OTHER INFORMATION
SHARE PRICE
An investment portfolio's NAV refers to the worth of one Share. The NAV
for Class A and Class R Shares of the Fund is computed by adding with re-
spect to each class of Shares the value of all the class' investments,
cash, and other assets, deducting liabilities and dividing the result by
the number of Shares of that class outstanding. The valuation of assets
for determining NAV for the Fund may be summarized as follows:
The portfolio securities of the Fund, except as otherwise noted, listed or
traded on a stock exchange, are valued at the latest sale price. If no
sale is reported, the mean of the latest bid and asked prices is used. Se-
curities traded over-the-counter are priced at the mean of the latest bid
and asked prices but will be valued at the last sale price if required by
regulations of the SEC. When market quotations are not readily available,
securities and other assets are valued at fair value as determined in good
faith in accordance with procedures established by the Board of Directors.
Bonds are valued through valuations obtained from a commercial pricing
service or at the most recent mean of the bid and asked prices provided by
investment dealers in accordance with procedures established by the Board
of Directors.
Pursuant to a determination by The Dreyfus/Laurel Fund Inc.'s Board of Di-
rectors that such value represents fair value, the debt securities with
maturities of 60 days or less held by the Fund are valued at amortized
cost. When a security is valued at amortized cost, it is valued at its
cost when purchased, and thereafter by assuming a constant amortization to
maturity of any discount or premium, regardless of the impact of fluctuat-
ing interest rates on the market value of the instrument.
The NAV of many of The Premier Family of Funds' investment portfolios is
published in leading newspapers daily. The NAV of the Fund may also be ob-
tained by calling The Premier Family of Funds.
PERFORMANCE ADVERTISING
From time to time, the Fund may advertise the yield and total return on a
class of Shares. Total return and yield figures are based on historical
earnings and are not intended to indicate future performance. The "total
return" of a class of Shares of the Fund may be calculated on an average
annual total return basis or a cumulative total return basis. Average an-
nual total return refers to the average annual compounded rates of return
on a class of Shares over one-, five-, and ten-year periods or the life of
the Fund (as stated in the advertisement) that would equate an initial
amount invested at the beginning of a stated period to the ending redeem-
able value of the investment, assuming the reinvestment of all dividends
and capital gains distributions. Cumulative total return reflects the
total percentage change in the value of the investment over the measuring
period, again assuming the reinvestment of all dividends and capital gains
distributions.
The Fund's "yield" is calculated by dividing a class of Shares' annualized
net investment income per Share during a recent 30-day (or one month) pe-
riod by the maximum public offering price per class of such Share on the
last day of that period. Since yields fluctuate, yield data cannot neces-
sarily be used to compare an investment in a class of Shares with bank de-
posits, savings accounts, and similar investment alternatives which often
provide an agreed-upon or guaranteed fixed yield for a stated period of
time.
Total return and yield quotations will be computed separately for each
class of the Fund's Shares. Because of the difference in the fees and ex-
penses borne by Class R and Class A Shares of the Fund, the return and
yield on Class R Shares will generally be higher than the return and yield
on Class A Shares. Any fees charged by a Bank or Agent directly to its
customers' account in connection with investments in the Fund will not be
included in calculations of total return or yield. The Fund's annual re-
port contains additional performance information and is available upon re-
quest without charge from Premier or your Bank or Agent.
The Fund may compare the performance of its Class A and Class R Shares
with various industry standards of performance including Lipper Analytical
Services, Inc. ratings, CDA Technologies indexes, indexes created by Leh-
man Brothers, the Consumer Price Index, and the Dow Jones Industrial Aver-
age. Performance rankings as reported in Changing Times, Business Week,
Institutional Investor, The Wall Street Journal, IBC/Donoghue's Money Fund
Report, Mutual Fund Forecaster, No Load Investor, Money Magazine, Morning-
star Mutual Fund Values, U.S. News and World Report, Forbes, Fortune, Bar-
ron's and similar publications may also be used in comparing the Fund's
performance. Furthermore, the Fund may quote its Class A and Class R
Shares' total returns and yields in advertisements or in shareholder re-
ports. The Fund may also advertise non-standardized performance informa-
tion, such as total return for periods other than those required to be
shown or cumulative performance data. The Fund may advertise a quotation
of yield or other similar quotation demonstrating the income earned or
distributions made by the Fund.
DISTRIBUTIONS
The Fund declares daily and pays monthly (on the first business day of the
following month) dividends from its net investment income, if any, and
distributes net realized gains, if any, on an annual basis. The Board of
Directors may elect not to distribute capital gains in whole or in part to
take advantage of capital loss carryovers.
Unless you choose to receive dividend and/or capital gain distributions in
cash, your distributions will be automatically reinvested in additional
Shares of the Fund at the NAV. You may change the method of receiving dis-
tributions at any time by writing to the Fund. Checks which are sent to
shareholders who have requested distributions to be paid in cash and which
are subsequently returned by the United States Postal Service as not de-
liverable or which remain uncashed for six months or more will be rein-
vested in additional Fund Shares in the shareholder's account at the then
current NAV. Subsequent Fund distributions will be automatically rein-
vested in additional Fund Shares in the shareholder's account.
Distributions paid by the Fund with respect to one class of Shares may be
greater or less per Share than those paid with respect to another class of
Shares due to the different expenses of the different classes.
Shares purchased on a day on which the Fund calculates its NAV will begin
to accrue dividends on that day, and redemption orders effected on any
particular day will receive dividends declared only through the business
day prior to the day of redemption.
You may elect to have distributions on Shares held in IRAs and 403(b) ac-
counts paid in cash only if you are at least 59 1/2 years old or are per-
manently and totally disabled. Distribution checks normally are mailed
within seven days after the record date.
Any dividend and/or capital gain distribution paid by the Fund will reduce
each Share's NAV by the amount of the distribution. Shareholders are sub-
ject to taxes with respect to any such distribution. At any given time the
value of the Fund's Shares includes the undistributed net gains, if any,
realized by the Fund on the sale of portfolio securities, and undistrib-
uted dividends and interest received, less the Fund's expenses. Because
such gains and income are included in the value of your Shares, when they
are distributed the value of your Shares is reduced by the amount of the
distribution. Accordingly, if your distribution is reinvested in addi-
tional Shares, the distribution has no effect on the value of your invest-
ment; while you own more Shares, the value of each Share has been reduced
by the amount of the distribution. Likewise, if you take your distribution
in cash, the value of your Shares immediately after the distribution plus
the cash received is equal to the value of the Shares immediately before
the distribution. For example, if you own a Fund Share that immediately
before a distribution has a value of $10, including $2 in undistributed
dividends and capital gains realized by the Fund during the year, and if
the $2 is distributed, the value of the Share will decline to $8. If the
$2 is reinvested at $8 per Share, you will receive .250 Shares, so that,
after the distribution, you will have 1.250 Shares at $8 per Share, or
$10, the same as before.
TAXES
The Fund intends to continue to qualify for treatment as a regulated in-
vestment company under the Code so that it will be relieved of federal in-
come tax on that part of its investment company taxable income (consisting
generally of taxable net investment income and net short-term capital
gain) and net capital gain (the excess of net long-term capital gain over
net short-term capital loss) that is distributed to its shareholders.
Dividends from the Fund's investment company taxable income are taxable to
you as ordinary income, to the extent of the Fund's earnings and profits.
Distributions by the Fund of net capital gain, when designated as such,
are taxable to you as long-term capital gains, regardless of the length of
time you have owned your Shares.
Dividends and other distributions are taxable to you regardless of whether
they are received in cash or reinvested in additional Fund Shares, even if
the value of your Shares is below your cost. If you purchase Shares
shortly before a taxable distribution you must pay income taxes on the
distribution, even though the value of your investment (plus cash re-
ceived, if any) remains the same. In addition, the Share price at the time
you purchase Shares may include unrealized gains in the securities held in
the Fund. If these portfolio securities are subsequently sold and the
gains are realized, they will, to the extent not offset by capital losses,
be paid to you as a capital gain distribution and will be taxable to you.
In January of each year, the Fund will send you a Form 1099-DIV notifying
you of the status for federal income tax purposes of your distributions
for the preceding year.
Dividends paid by the Fund to qualified retirement plans ordinarily will
not be subject to taxation until the proceeds are distributed from the re-
tirement plans. The Fund will not report to the IRS dividends paid to such
plans. Generally, distributions from qualified retirement plans, except
those representing returns of non-deductible contributions thereto, will
be taxable as ordinary income and, if made prior to the time the partici-
pant reaches age 59 1/2 , generally will be subject to an additional tax
equal to 10% of the taxable portion of the distribution. If the distribu-
tion from such a retirement plan (other than certain governmental or
church plans) for any taxable year following the year in which the partic-
ipant reaches age 70 1/2 is less than the "minimum required distribution"
for that taxable year, an excise tax equal to 50% of the deficiency may be
imposed by the IRS. The administrator, trustee or custodian of such a re-
tirement plan will be responsible for reporting such distributions from
such plans to the IRS. Moreover, certain contributions to a qualified re-
tirement plan in excess of the amounts permitted by law may be subject to
an excise tax.
You must furnish the Fund with your taxpayer identification number ("TIN")
and state whether you are subject to withholding for prior under-
reporting, certified under penalties of perjury as prescribed by the Code
and the regulations thereunder. Unless previously furnished, investments
received without such a certification will be returned. The Fund is re-
quired to withhold a portion of all dividends, capital gain distributions
and redemption proceeds payable to any individuals and certain other non-
corporate shareholders who do not provide the Fund with a correct TIN;
withholding from dividends and capital gain distributions also is required
for such shareholders who otherwise are subject to backup withholding.
The Fund will be subject to a 4% nondeductible excise tax to the extent it
fails to distribute by the end of any calendar year substantially all of
its taxable ordinary income for that year and capital gain net income for
the one-year period ending on October 31 of that year, plus certain other
amounts. The Fund expects to make such distributions as are necessary to
avoid the imposition of this tax.
The foregoing is only a summary of some of the important tax consider-
ations generally affecting the Fund and its shareholders. See the SAI for
a further discussion. There may be other federal, state or local tax con-
siderations applicable to a particular investor. You therefore are urged
to consult your own tax adviser.
OTHER SERVICES
At least twice a year you will receive the financial statements of the
Fund with a summary of its investments and performance. The Fund will send
you a confirmation statement after every transaction (except with regard
to the reinvestment of dividends and other distributions) that affects
your Fund account. In addition, an account statement will be mailed to you
quarterly or monthly depending on the Fund's reporting schedule. You may
also request a statement of your account activity at any time. Carefully
review such confirmation statements and account statements and notify the
Fund immediately if there is an error. From time to time, to reduce ex-
penses, only one copy of the Fund's shareholder reports (such as the
Fund's annual report) may be mailed to your household. Please call the
Fund if you need additional copies.
No later than January 31 of each year, the Fund will send you the follow-
ing reports, which you may use in completing your federal income tax re-
turn:
Form 1099-DIV Reports taxable distributions (and returns of capital, if
any) during the preceding year.
Form 1099-B Reports proceeds paid on redemptions during the preceding
year.
Form 1099-R Reports distributions from IRAs and 403(b) accounts during
the preceding year.
At such time as prescribed by law, the Fund will send you a Form 5498,
which reports contributions to your IRA for the previous calendar year. In
addition, the Fund may send you other relevant tax-related forms.
FURTHER INFORMATION ABOUT THE FUND
THE DREYFUS/LAUREL FUNDS, INC.
The Laurel Funds, Inc. was incorporated in Maryland on August 6, 1987 and
changed its name to The Dreyfus/Laurel Funds, Inc. on October 17, 1994.
The Dreyfus/Laurel Funds, Inc. is registered with the SEC under the 1940
Act as a diversified, open-end management investment company. The Dreyfu-
s/Laurel Funds, Inc. has an authorized capitalization of 25 billion Shares
of $0.001 par value stock with equal voting rights. The Articles of Incor-
poration permit the Directors to create an unlimited number of investment
portfolios (each a "fund"). The Directors of the Dreyfus/Laurel Funds,
Inc. have authorized Shares of the Fund to be issued in four classes--
Class A, Class R, Class B and Class C.
Each Share (regardless of class) has one vote. All Shares of a fund (and
classes thereof) vote together as a single class, except as to any matter
for which a separate vote of any fund or class is required by the 1940
Act, and except as to any matter which affects the interests of one or
more particular funds or classes, in which case only the shareholders of
the affected fund or class are entitled to vote, each as a separate class.
At your written request, the Fund will issue negotiable stock certifi-
cates.
At January 31, 1995, Mellon Bank Corporation, the investment manager's
parent, owned of record through its direct and indirect subsidiaries more
than 25% of The Dreyfus/Laurel Funds, Inc.'s outstanding voting shares,
and is deemed, under the 1940 Act, to be a controlling shareholder.
MANAGEMENT.
THE BOARD OF DIRECTORS. The business affairs of The Dreyfus/Laurel Funds,
Inc. are managed under the direction of its Directors. The SAI contains
the names and general background information concerning the Directors and
officers of The Dreyfus/Laurel Funds, Inc.
INVESTMENT MANAGER. The Manager is located at 200 Park Avenue, New York,
New York 10166. As of January 31, 1995, the Manager managed or adminis-
tered approximately $70 billion in assets for more than 1.9 million inves-
tor accounts nationwide. The Manager is a wholly-owned subsidiary of Mel-
lon Bank, N.A. (One Mellon Bank Center, Pittsburgh, Pennsylvania 15258),
the Fund's prior investment manager. Pursuant to an Investment Management
Agreement, transferred from Mellon Bank to the Manager effective as of Oc-
tober 17, 1994, the Manager provides, or arranges for one or more third
parties to provide, investment advisory, administrative, custody, fund ac-
counting and transfer agency services to the Fund. As investment manager,
the Manager manages the Fund by making investment decisions based on the
Fund's investment objectives, policies and restrictions, and is paid a
fee.
Under the Investment Management Agreement, the Fund pays a fee computed
daily, and paid monthly, at the annual rate of .60% of the Fund's average
daily net assets less certain expenses described below. The Manager pays
all of the expenses of the Fund except brokerage fees, taxes, interest,
fees and expenses of the non-interested Directors (including counsel fees)
and extraordinary expenses. Although the Manager does not pay for the fees
and expenses of the non-interested Directors (including counsel fees), the
Manager is contractually required to reduce its investment management fee
in an amount equal to the Fund's allocable share of such expenses. In
order to compensate the Manager for paying virtually all of the Fund's ex-
penses, the Fund's investment management fee is higher than the investment
advisory fees paid by most investment companies. Most, if not all, such
companies also pay for additional non-investment advisory expenses that
are not paid by such companies' investment advisers. From time to time,
the Manager may waive (either voluntarily or pursuant to applicable state
limitations) additional investment management fees payable by the Fund.
For the period from November 30, 1993 (commencement of operations) to
April 3, 1994, the Fund paid its investment adviser, Mellon Bank, 0.28%
(annualized) of its average daily net assets in investment advisory fees
(net of expenses reimbursed), under the Fund's previous investment advi-
sory contract (such contract covered only the provision of investment ad-
visory and certain specified administrative services). For the period from
April 4, 1994 through the fiscal year ended October 31, 1994, the Fund
paid Mellon Bank or the Manager 0.30% (annualized) of its average daily
net assets in investment management fees, less fees and expenses of the
non-interested Directors (including counsel fees).
For the fiscal year ended October 31, 1994, total operating expenses (ex-
cluding Rule 12b-1 fees) (net of expenses reimbursed) of the Fund were
0.60% (annualized) of the average daily net assets of each class for both
Class A and Class R. Without the reimbursement, operating expenses would
have been higher.
The Manager is authorized to allocate purchase and sale orders for portfo-
lio securities to certain financial institutions, including, in the case
of agency transactions, financial institutions which are affiliated with
the Manager or which have sold Shares of the Fund, if the Manager believes
that the quality of the transaction and the commission are comparable to
what they would be with other qualified brokerage firms. From time to
time, to the extent consistent with its investment objective, policies and
restrictions, the Fund may invest in securities of companies with which
Mellon Bank has a lending relationship.
Mellon Bank is a subsidiary of Mellon Bank Corporation. At June 30, 1994,
Mellon Bank Corporation was the 24th largest bank holding company in the
United States in terms of total assets. Through its bank subsidiaries, it
operates 631 domestic retail banking locations including 432 branch of-
fices. Mellon Bank Corporation has 25 domestic representative offices.
There are international branches in Grand Cayman, British West Indies,
London, England, and two international representative offices in Tokyo,
Japan and Hong Kong and a banking subsidiary, Mellon Bank Canada, in Tor-
onto. Mellon Bank is a registered municipal securities dealer.
The Glass-Steagall Act of 1933 prohibits a national bank from engaging in
the business of issuing, underwriting, selling or distributing certain se-
curities. The activities of Mellon Bank and the Manager may raise issues
under these provisions. However, Mellon Bank has been advised by its coun-
sel that these activities are consistent with these statutory and regula-
tory obligations. For more information on the Glass-Steagall Act of 1933,
see "Federal Law Affecting Mellon Bank" in the SAI.
The Fund's portfolio manager is Laurie Carroll. Ms. Carroll is a Senior
Vice President and portfolio manager at Mellon Bank. Ms. Carroll is a
portfolio manager at the Manager and has been employed by the Manager
since October 17, 1994. Ms. Carroll has been employed by Mellon Bank since
1986.
OTHER SERVICE PROVIDERS. Under a Custody and Fund Accounting Agreement,
Mellon Bank acts as custodian and fund accountant, maintaining possession
of the Fund's investment securities and providing certain accounting and
related services.
The Shareholder Services Group, Inc., a subsidiary of First Data Corpora-
tion, serves as transfer agent ("Transfer Agent") for the Fund's Shares.
The Transfer Agent is located at One American Express Plaza, Providence,
Rhode Island 02903.
Shares of the Fund are sold on a continuous basis by Premier, as the
Fund's sponsor and distributor. Premier is a registered broker-dealer with
principal offices at One Exchange Place, Boston, Massachusetts 02109. The
Fund has entered into a distribution agreement with Premier which provides
that Premier has the exclusive right to distribute Shares of the Fund.
Premier may pay service and/or distribution fees to Agents that assist
customers in purchasing and servicing of Shares of the Fund. (See "Distri-
bution Plans (Class A Plan and Class B and C Plans)."
DISTRIBUTION PLANS (CLASS A PLAN AND CLASS B AND C PLANS).
Class A Shares are subject to a Distribution Plan adopted pursuant to Rule
12b-1 under the 1940 Act ("Rule 12b-1"). Class B and C Shares are subject
to a Distribution Plan and a Service Plan, each adopted pursuant to Rule
12b-1. Potential investors should read this Prospectus in light of the
terms governing Agreements with their Agents. An Agent entitled to receive
compensation for selling and servicing the Fund's Shares may receive dif-
ferent compensation with respect to one class of Shares over another.
DISTRIBUTION PLAN--CLASS A. The holders of the Class A Shares of the Fund
bear some of the cost of selling those Shares under the Distribution Plan
(the "Plan"). The Plan allows the Fund to spend annually up to 0.25% of
its average daily net assets attributable to Class A Shares to compensate
Dreyfus Service Corporation, an affiliate of the Manager, for shareholder
servicing activities and Premier for shareholder servicing activities and
for activities or expenses primarily intended to result in the sale of
Class A Shares of the Fund. The Plan allows Premier to make payments from
the Rule 12b-1 fees it collects from the Fund to compensate Agents that
have entered into Selling Agreements ("Agreements") with Premier. Under
the Agreements, the Agents are obligated to provide distribution related
services with regard to the Fund and/or shareholder services to the
Agent's clients that own Class A Shares of the Fund.
The Fund and Premier may suspend or reduce payments under the Plan at any
time, and payments are subject to the continuation of the Fund's Plan and
the Agreements described above. From time to time, the Agents, Premier and
the Fund may agree to voluntarily reduce the maximum fees payable under
the Plan. See the SAI for more details on the Plan.
DISTRIBUTION AND SERVICE PLANS--CLASS B AND C. Under a Distribution Plan
adopted pursuant to Rule 12b-1, the Fund pays Premier for distributing the
Fund's Class B and C Shares, at an aggregate annual rate of .50 of 1% of
the value of the average daily net assets of Class B and C. Under a Ser-
vice Plan adopted pursuant to Rule 12b-1, the Fund pays Dreyfus Service
Corporation or Premier for the provision of certain services to the hold-
ers of Class B and C Shares a fee at the annual rate of .25 of 1% of the
value of the average daily net assets of Class B and C. The services pro-
vided may include personal services relating to shareholder accounts, such
as answering shareholder inquiries regarding the Fund and providing re-
ports and other information, and providing services related to the mainte-
nance of such shareholder accounts. With regard to such services, each
Agent is required to disclose to its clients any compensation payable to
it by the Fund and any other compensation payable by its clients in con-
nection with the investment of their assets in Class B and C Shares. Pre-
mier may pay one or more Agents in respect of distribution and other ser-
vices for these classes of Shares. Premier determines the amounts, if any,
to be paid to Agents under the Distribution and Service Plans and the
basis on which such payments are made. The fees payable under the Distri-
bution and Service Plans are payable without regard to actual expenses in-
curred.
FOR MORE INFORMATION
FUND INFORMATION AND PROSPECTUSES
Call 1-800-548-2868
Please read the prospectus before you invest or send money
TO INVEST, REDEEM AND EXCHANGE
Call 1-800-548-2868 (for overseas, call collect (401) 455-3476)
9:00 a.m. to 5:00 p.m., Eastern time
Monday through Friday
Or Write: The Premier Family of Funds
P.O. Box 9692
Providence, Rhode Island 02940-9830
YIELD AND SHARE PRICE INFORMATION
1-800-548-2868
24 hours a day, 7 days a week
The Premier Family of Funds
One Exchange Place
Boston, Massachusetts 02109
DREYFUS DISCIPLINED STOCK FUND
INVESTOR AND CLASS R SHARES
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
March 1, 1995
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus of
the Dreyfus Disciplined Stock Fund (formerly the Laurel Stock Fund) (the
"Fund"), dated March 1, 1995, as it may be revised from time to time. The
Fund is a separate portfolio of The Dreyfus/Laurel Funds, Inc., an open-end,
diversified management investment company (the "Company"), known as a mutual
fund. 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 the
following numbers:
Call Toll Free 1-800-645-6561
In New York City -- Call 1-718-895-1206
On Long Island -- Call 794-5452
The Dreyfus Corporation ("Dreyfus") serves as the Fund's investment
manager.
Premier Mutual Fund Services, Inc. (the "Distributor") is the
distributor of the Fund's shares.
TABLE OF CONTENTS
Page
Investment Objective and Management Policies. . . . . . . . B-2
Management of the Fund. . . . . . . . . . . . . . . . . . . B-8
Management Arrangements . . . . . . . . . . . . . . . . . . B-13
Purchase of Fund Shares . . . . . . . . . . . . . . . . . . B-14
Distribution Plan . . . . . . . . . . . . . . . . . . . . . B-15
Redemption of Fund Shares . . . . . . . . . . . . . . . . . B-16
Shareholder Services. . . . . . . . . . . . . . . . . . . . B-17
Determination of Net Asset Value. . . . . . . . . . . . . . B-20
Dividends, Other Distributions and Taxes. . . . . . . . . . B-21
Portfolio Transactions. . . . . . . . . . . . . . . . . . . B-25
Performance Information . . . . . . . . . . . . . . . . . . B-26
Information About the Fund. . . . . . . . . . . . . . . . . B-28
Custodian, Transfer and Dividend Disbursing
Agent, Counsel and Independent Auditors . . . . . . . . . B-28
Financial Statements. . . . . . . . . . . . . . . . . . . . B-29
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Description of the
Fund."
Portfolio Securities
Government Obligations. The Fund may invest in a variety of U.S.
Treasury obligations, which differ only in their interest rates, maturities
and times of issuance: (a) U.S. Treasury bills have a maturity of one year
or less, (b) U.S. Treasury notes have maturities of one to ten years, and
(c) U.S. Treasury bonds generally have maturities of greater than ten years.
In addition to U.S. Treasury obligations, the Fund may invest in
obligations issued or guaranteed by U.S. Government agencies and
instrumentalities which are supported by any of the following: (a) the full
faith and credit of the U.S. Treasury (such as Government National Mortgage
Association ("GNMA") participation certificates), (b) the right of the
issuer to borrow an amount limited to a specific line of credit from the
U.S. Treasury, (c) discretionary authority of the U.S. Government agency or
instrumentality, or (d) the credit of the instrumentality. (Examples of
agencies and instrumentalities are: Federal Land Banks, Federal Housing
Administration, Farmers Home Administration, Export-Import Bank of the
United States, Central Bank for Cooperatives, Federal Intermediate Credit
Banks, Federal Home Loan Banks, General Services Administration, Maritime
Administration, Tennessee Valley Authority, District of Columbia Armory
Board, Inter-American Development Bank, Asian-American Development Bank,
Student Loan Marketing Association, International Bank for Reconstruction
and Development and Federal National Mortgage Association ("FNMA")). No
assurance can be given that the U.S. Government will provide financial
support to such U.S. Government agencies or instrumentalities described in
(b), (c) and (d) in the future, other than as set forth above, since it is
not obligated to do so by law.
Repurchase Agreements. The Fund may enter into repurchase agreements
with U.S. Government securities dealers recognized by the Federal Reserve
Board, with member banks of the Federal Reserve System, or with such other
brokers or dealers that meet the credit guidelines of the Board of
Directors. In a repurchase agreement, the Fund buys a security from a seller
that has agreed to repurchase the same security at a mutually agreed upon
date and price. The Fund's resale price will be in excess of the purchase
price, reflecting an agreed upon interest rate. This interest rate is
effective for the period of time the Fund is invested in the agreement and
is not related to the coupon rate on the underlying security. Repurchase
agreements may also be viewed as a fully collateralized loan of money by the
Fund to the seller. The period of these repurchase agreements will usually
be short, from overnight to one week, and at no time will the Fund invest in
repurchase agreements for more than one year. The Fund will always receive
as collateral securities whose market value including accrued interest is,
and during the entire term of the agreement remains, at least equal to 100%
of the dollar amount invested by the Fund in each agreement, and the Fund
will make payment for such securities only upon physical delivery or upon
evidence of book entry transfer to the account of the Custodian. If the
seller defaults, the Fund might incur a loss if the value of the collateral
securing the repurchase agreement declines and might incur disposition costs
in connection with liquidating the collateral. In addition, if bankruptcy
proceedings are commenced with respect to the seller of a security which is
the subject of a repurchase agreement, realization upon the collateral by
the Fund may be delayed or limited. The Fund seeks to minimize the risk of
loss through repurchase agreements by analyzing the creditworthiness of the
obligors under repurchase agreements, in accordance with the credit
guidelines of the Company's Board of Directors.
Reverse Repurchase Agreements. The Fund may enter into reverse
repurchase agreements to meet redemption requests where the liquidation of
portfolio securities is deemed by the Fund to be inconvenient or
disadvantageous. A reverse repurchase agreement is a transaction whereby the
Fund transfers possession of a portfolio security to a bank or broker-dealer
in return for a percentage of the portfolio security's market value. The
Fund retains record ownership of the security involved including the right
to receive interest and principal payments. At an agreed upon future date,
the Fund repurchases the security by paying an agreed upon purchase price
plus interest. Cash or liquid high-grade debt obligations of the Fund equal
in value to the repurchase price including any accrued interest will be
maintained in a segregated account while a reverse repurchase agreement is
in effect.
Mortgage Pass-Through Certificates. Mortgage pass-through certificates
are issued by governmental, government-related and private organizations and
are backed by pools of mortgage loans. These mortgage loans are made by
lenders such as savings and loan institutions, mortgage bankers, commercial
banks and others to residential home buyers throughout the United States.
The securities are "pass-through" securities because they provide investors
with monthly payments of principal and interest which in effect are a "pass-
through" of the monthly payments made by the individual borrowers on the
underlying mortgages, net of any fees paid to the issuer or guarantor of the
pass-through certificates. The principal governmental issuer of such
securities is GNMA, which is a wholly owned U.S. Government corporation
within the Department of Housing and Urban Development. Government-related
issuers include the Federal Home Loan Mortgage Corporation ("FHLMC") and the
FNMA, both government sponsored corporations owned entirely by private
stockholders. Commercial banks, savings and loan institutions, private
mortgage insurance companies, mortgage bankers and other secondary market
issuers also create pass-through pools of conventional residential mortgage
loans. Such issuers may be the originators of the underlying mortgage loans
as well as the guarantors of the mortgage-related securities.
(1) GNMA Mortgage Pass-Through Certificates ("Ginnie Maes"). Ginnie
Maes represent an undivided interest in a pool of mortgages that are insured
by the Federal Housing Administration or the Farmers Home Administration or
guaranteed by the Veterans Administration. Ginnie Maes entitle the holder
to receive all payments (including prepayments) of principal and interest
owed by the individual mortgagors, net of fees paid to GNMA and to the
issuer which assembles the mortgage pool and passes through the monthly
mortgage payments to the certificate holders (typically, a mortgage banking
firm), regardless of whether the individual mortgagor actually makes the
payment. Because payments are made to certificate holders regardless of
whether payments are actually received on the underlying mortgages, Ginnie
Maes are of the "modified pass-through" mortgage certificate type. The GNMA
is authorized to guarantee the timely payment of principal and interest on
the Ginnie Maes as securities backed by an eligible pool of mortgages. The
GNMA guarantee is backed by the full faith and credit of the United States,
and the GNMA has unlimited authority to borrow funds from the U.S. Treasury
to make payments under the guarantee. The market for Ginnie Maes is highly
liquid because of the size of the market and the active participation in the
secondary market of securities dealers and a variety of investors.
(2) FHLMC Mortgage Participation Certificates ("Freddie Macs").
Freddie Macs represent interests in groups of specified first lien
residential conventional mortgages underwritten and owned by the FHLMC.
Freddie Macs entitle the holder to timely payment of interest, which is
guaranteed by the FHLMC. The FHLMC guarantees either ultimate collection or
timely payment of all principal payments on the underlying mortgage loans.
In cases where the FHLMC has not guarantee timely payment of principal, the
FHLMC may remit the amount due on account of its guarantee of ultimate
payment of principal at any time after default on an underlying mortgage,
but in no event later than one year after it becomes payable. Freddie Macs
are not guaranteed by the United States or by any of the Federal Home Loan
Banks and do not constitute a debt or obligation of the United States or of
any Federal Home Loan Bank. The secondary market for Freddie Macs is highly
liquid because of the size of the market and the active participation in the
secondary market of the FHLMC, securities dealers and a variety of
investors.
(3) FNMA Guaranteed Mortgage Pass-Through Certificates ("Fannie
Maes"). Fannie Maes represent an undivided interest in a pool of
conventional mortgage loans secured by first mortgages or deeds of trust, on
one family, or two to four family, residential properties. The FNMA is
obliged to distribute scheduled monthly installments of principal and
interest on the mortgages in the pool, whether or not received, plus full
principal of any foreclosed or otherwise liquidated mortgages. The
obligation of the FNMA under its guaranty is solely the obligation of FNMA
and is not backed by, nor entitled to, the full faith and credit of the
United States.
The market value of mortgage-related securities depends on, among other
things, the level of interest rates, the certificates' coupon rates and the
payment history of the mortgagors of the underlying mortgages.
When-Issued Securities. New issues of U.S. Treasury and Government
securities are often offered on a when-issued basis. This means that
delivery and payment for the securities normally will take place
approximately 7 to 15 days after the date the buyer commits to purchase
them. The payment obligation and the interest rate that will be received on
securities purchased on a when-issued basis are each fixed at the time the
buyer enters into the commitment. The Fund will make commitments to purchase
such securities only with the intention of actually acquiring the
securities, but the Fund may sell these securities or dispose of the
commitment before the settlement date if it is deemed advisable as a matter
of investment strategy. Cash or marketable high-grade debt securities equal
to the amount of the above commitments will be segregated on the Fund's
records. For the purpose of determining the adequacy of these securities the
segregated securities will be valued at market. If the market value of such
securities declines, additional cash or securities will be segregated on the
Fund's records on a daily basis so that the market value of the account will
equal the amount of such commitments by the Fund.
Securities purchased on a when-issued basis and the securities held by
the Fund are subject to changes in market value based upon the public's
perception of changes in the level of interest rates. Generally, the value
of such securities will fluctuate inversely to changes in interest rates --
i.e., they will appreciate in value when interest rates decline and decrease
in value when interest rates rise. Therefore, if in order to achieve higher
interest income the Fund remains substantially fully invested at the same
time that it has purchased securities on a "when-issued" basis, there will
be a greater possibility of fluctuation in the Fund's net asset value.
When payment for when-issued securities is due, the Fund will meet its
obligations from then-available cash flow, the sale of segregated
securities, the sale of other securities, and/or although it would not
normally expect to do so, from the sale of the when-issued securities
themselves (which may have a market value greater or less than the Fund's
payment obligation). The sale of securities to meet such obligations carries
with it a greater potential for the realization of capital gains, which are
subject to federal income taxes.
Commercial Paper. The Fund may invest in commercial paper issued in
reliance on the so-called "private placement" exemption from registration
afforded by Section 4(2) of the Securities Act of 1933 ("Section 4(2)
paper"). Section 4(2) paper is restricted as to disposition under the
federal securities laws and generally is sold to investors who agree that
they are purchasing the paper for an investment and not with a view to
public distribution. Any resale by the purchaser must be pursuant to
registration or exemption therefrom. Section 4(2) paper is normally resold
to other investors through or with the assistance of the issuer or
investment dealers who make a market in Section 4(2) paper, thus providing
liquidity. Pursuant to guidelines established by the Company's Board of
Directors, Dreyfus may determine that Section 4(2) paper is liquid for the
purposes of complying with the Fund's investment restriction relating to
investments in illiquid securities.
Management Policies
The Fund engages, in the following practices in furtherance of its
investment objective.
Loans of Fund Securities. The Fund has authority to lend its portfolio
securities provided (1) the loan is secured continuously by collateral
consisting of U.S. Government securities or cash or cash equivalents
adjusted daily to make a market value at least equal to the current market
value of these securities loaned; (2) the Fund may at any time call the loan
and regain the securities loaned; (3) the Fund will receive any interest or
dividends paid on the loaned securities; and (4) the aggregate market value
of securities loaned will not at any time exceed one-third of the total
assets of the Fund. In addition, it is anticipated that the Fund may share
with the borrower some of the income received on the collateral for the loan
or that it will be paid a premium for the loan. In determining whether to
lend securities, the Fund considers all relevant factors and circumstances
including the creditworthiness of the borrower.
Investment Restrictions
The following limitations have been adopted by the Fund. The Fund may
not change any of these fundamental investment limitations without the
consent of: (a) 67% or more of the shares present at a meeting of
shareholders duly called if the holders of more than 50% of the outstanding
shares of the Fund are present or represented by proxy; or (b) more than 50%
of the outstanding shares of the Fund, whichever is less. The Fund may not:
1. Purchase any securities which would cause more than 25% of the value of
the Fund's total assets at the time of such purchase to be invested in
the securities of one or more issuers conducting their principal
activities in the same industry. (For purposes of this limitation, U.S.
Government securities, and state or municipal governments and their
political subdivisions are not considered members of any industry. ln
addition, this limitation does not apply to investments in domestic
banks, including U.S. branches of foreign banks and foreign branches of
U.S. banks).
2. Borrow money or issue senior securities as defined in the 1940 Act
except that (a) the Fund may borrow money in an amount not exceeding
one-third of the Fund's total assets at the time of such borrowings,
and (b) the Fund may issue multiple classes of shares.
3. Purchase with respect to 75% of the Fund's total assets securities of
any one issuer (other than securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities) if, as a result, (a)
more than 5% of the Fund's total assets would be invested in the
securities of that issuer, or (b) the Fund would hold more than 10% of
the outstanding voting securities of that issuer.
4. Make loans or lend securities, if as a result thereof more than
one-third of the Fund's total assets would be subject to all such
loans. For purposes of this limitation debt instruments and repurchase
agreements shall not be treated as loans.
5. Purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the Fund
from investing in securities or other instruments backed by real
estate, including mortgage loans, or securities of companies that
engage in real estate business or invest or deal in real estate or
interests therein).
6. Underwrite securities issued by any other person, except to the extent
that the purchase of securities and later disposition of such
securities in accordance with the Fund's investment program may be
deemed an underwriting.
The Fund may, notwithstanding any other fundamental investment policy or
limitation, invest all of its investable assets in securities of a single
open-end management investment company with substantially the same
investment objectives, policies and limitations as the Fund.
The Fund has adopted the following additional non-fundamental
restrictions. These non-fundamental restrictions may be changed without
shareholder approval, in compliance with applicable law and regulatory
policy.
1. The Fund shall not sell securities short, unless it owns or has the
right to obtain securities equivalent in kind and amount to the
securities sold short, and provided that transactions in futures
contracts are not deemed to constitute selling short.
2. The Fund shall not purchase securities on margin, except that the Fund
may obtain such short-term credits as are necessary for the clearance
of transactions and provided that margin payments in connection with
futures contracts and options on futures contracts shall not constitute
purchasing securities on margin.
3. The Fund shall not purchase oil, gas or mineral leases.
4. The Fund will not purchase or retain the securities of any issuer if
the officers or Directors of the Fund, its advisers, or managers,
owning beneficially more than one half of one percent of the securities
of such issuer, together own beneficially more than 5% of such
securities.
5. The Fund will not purchase securities of issuers (other than securities
issued or guaranteed by domestic or foreign governments or political
subdivisions thereof), including their predecessors, that have been in
operation for less than three years, if by reason thereof, the value of
the Fund's investment in securities would exceed 5% of the Fund's total
assets. For purposes of this limitation, sponsors, general partners,
guarantors and originators of underlying assets may be treated as the
issuer of a security.
6. The Fund will invest no more than 15% of the value of its net assets in
illiquid securities, including repurchase agreements with remaining
maturities in excess of seven days, time deposits with maturities in
excess of seven days and other securities which are not readily
marketable. For purposes of this limitation, illiquid securities shall
not include Section 4(2) paper and securities which may be resold under
Rule 144A under the Securities Act of 1933, provided that the Board of
Directors, or its delegate, determines that such securities are liquid
based upon the trading markets for the specific security.
7. The Fund may not invest in securities of other investment companies,
except as they may be acquired as part of a merger, consolidation or
acquisition of assets and except to the extent otherwise permitted by
the 1940 Act.
8. The Fund shall not purchase any security while borrowings representing
more than 5% of the Fund's total assets are outstanding.
9. The Fund will not purchase warrants if at the time of such purchase:
(a) more than 5% of the value of the Fund's assets would be invested in
warrants, or (b) more than 2% of the value of the Fund's assets would
be invested in warrants that are not listed on the New York or American
Stock Exchange (for purposes of this limitation, warrants acquired by
the Fund in units or attached to securities will be deemed to have no
value).
10. The Fund will not purchase puts, calls, straddles, spreads and any
combination thereof if by reason thereof the value of its aggregate
investment in such classes of securities would exceed 5% of its total
assets except that this limitation shall not apply to standby
commitments.
As an operating policy, the Fund will not invest more than 25% of the value
of its total assets, at the time of such purchase in domestic banks,
including U.S. branches of foreign banks and foreign branches of U.S. banks.
The Company's Board of Directors may change this policy without shareholder
approval. Notice will be given to shareholders if this policy is changed by
the Board of Directors.
MANAGEMENT OF THE FUND
CONTROLLING SHAREHOLDER
Mellon Bank Corporation, a Pennsylvania corporation registered as a
bank holding company under the Bank Holding Company Act of 1956, as amended,
owned of record, through its direct and indirect subsidiaries, more than 25%
of the issued and outstanding voting shares of the Company, as of January
31, 1995, and is, as a consequence, deemed to be a controlling shareholder
of the Company as that term is defined under the 1940 Act. The address of
Mellon Bank Corporation is: Mellon Bank Corporation, Mutual Funds
Department, 3 Mellon Bank Center, Pittsburgh, PA 15259.
PRINCIPAL SHAREHOLDERS
The following shareholder(s) owned 5% or more of the outstanding voting
shares of the Fund at January 31, 1995: InvestNet Corporation, Two Mellon
Bank Center, Pittsburgh, PA 15259, 15% record; InvestNet Corporation, Two
Mellon Bank Center, Pittsburgh, PA 15259, 67% record; Mac & Co. 171-027,
Mellon Bank, N.A., as Nominee for Trust Custodian, P.O. Box 320, Pittsburgh,
PA 15230-0320, 9% record.
FEDERAL LAW AFFECTING MELLON BANK
The Glass-Steagall Act of 1933 prohibits national banks from engaging
in the business of underwriting, selling or distributing securities and
prohibits a member bank of the Federal Reserve System from having certain
affiliations with an entity engaged principally in that business. The
activities of Mellon Bank, N.A. ("Mellon Bank") in informing its customers
of, and performing, investment and redemption services in connection with
the Fund, and in providing services to the Fund as custodian and fund
accountant, as well as Dreyfus' investment advisory activities, may raise
issues under these provisions. Mellon Bank has been advised by counsel that
the activities contemplated under these arrangements are consistent with its
statutory and regulatory obligations.
Changes in either federal or state statutes and regulations relating to
the permissible activities of banks and their subsidiaries or affiliates, as
well as further judicial or administrative decisions or interpretations of
such future statutes and regulations, could prevent Mellon Bank or Dreyfus
from continuing to perform all or a part of the above services for its
customers and/or the Fund. If Mellon Bank or Dreyfus were prohibited from
serving the Fund in any of its present capacities, the Board of Directors
would seek an alternative provider(s) of such services.
DIRECTORS AND OFFICERS
The Company has a Board composed of thirteen Directors which supervises
the Company's investment activities and reviews contractual arrangements
with companies that provide the Funds with services. The following lists
the Directors and officers and their positions with the Company and their
present and principal occupations during the past five years. Each Director
who is an "interested person" of the Company (as defined in the Investment
Company Act of 1940, as amended (the "Act")) is indicated by an asterisk.
Each of the Directors also serves as a Trustee of The Dreyfus/Laurel Funds
Trust, The Dreyfus/Laurel Investment Series and The Dreyfus/Laurel Tax-Free
Municipal Funds (collectively "The Dreyfus/Laurel Funds").
o + RUTH MARIE ADAMS. Director of the Company; Professor of English and
Vice President Emeritus, Dartmouth College; Senator, United Chapters of
Phi Beta Kappa; Trustee, Woods Hole Oceanographic Institution. Age: 79
years old. Address: 1026 Kendal Lyme Road, Hanover, New Hampshire
03755.
o + FRANCIS P. BRENNAN. Chairman of the Board of Directors and Assistant
Treasurer of the Company; Director and Chairman, Massachusetts Business
Development Corp.; Director, Boston Mutual Insurance Company; Director
and Vice Chairman of the Board, Home Owners Federal Savings and Loan
(prior to May 1990). Age: 76 years old. Address: Massachusetts
Business Development Corp., One Liberty Square, Boston, Massachusetts
02109.
o * JOSEPH S. DiMARTINO. Director of the Company since February 1995.
Since January 1995, Mr. DiMartino has served as Chairman of the Board
for various funds in the Dreyfus Family of Funds. For more than five
years prior thereto, he was President, a director and, until August
1994, Chief Operating Officer of Dreyfus and Executive Vice President
and a director of Dreyfus Service Corporation, a wholly-owned
subsidiary of the Manager and, until August 1994, the Fund's
distributor. Mr. DiMartino is a director and former Treasurer of the
Muscular Dystrophy Association; a trustee of Bucknell University; and a
director of the Noel Group, Inc. He is 51 years old and his address is
200 Park Avenue, New York, New York 10166.
o + JAMES M. FITZGIBBONS. Director of the Company; President and Director,
Amoskeag Company; Chairman, Howes Leather Company, Inc.; Director,
Fiduciary Trust Company; Chairman, CEO and Director, Fieldcrest-Cannon
Inc.; Director, Lumber Mutual Insurance Company; Director, Barrett
Resources, Inc. Age: 59 years old. Address: 40 Norfolk Road,
Brookline, Massachusetts 02167.
o * J. TOMLINSON FORT. Director of the Company; Partner, Reed, Smith, Shaw
& McClay (law firm). Age: 65 years old. Address: 204 Woodcock Drive,
Pittsburgh, Pennsylvania 15215.
o + ARTHUR L. GOESCHEL. Director of the Company; Director, Chairman of the
Board and Director, Rexene Corporation; Director, Calgon Carbon
Corporation; Director, National Picture Frame Corporation; Chairman of
the Board and Director, Tetra Corporation 1991-1993; Director, Medalist
Corporation 1992-1993. Age: 71 years old. Address: Way Hallow Road
and Woodland Road, Sewickley, Pennsylvania 15143.
o + KENNETH A. HIMMEL. Director of the Company; Former Director, The Boston
Company, Inc. and Boston Safe Deposit and Trust Company; President and
Chief Executive Officer, Himmel & Co., Inc.; Vice Chairman, Sutton
Place Gourmet, Inc. and Florida Hospitality Group; Managing Partner,
Himmel/MKDG, Franklin Federal Partners, Reston Town Center Associates
and Grill 23 & Bar. Age: 47 years old. Address: Himmel and Company,
Inc., 101 Federal Street, 22nd Floor, Boston, Massachusetts 02110.
o + ARCH S. JEFFERY. Director of the Company; Financial Consultant. Age:
76 years old. Address: 1817 Foxcroft Lane, Allison Park, Pennsylvania
15101.
o + STEPHEN J. LOCKWOOD. Director of the Company; President and CEO, LDG
Management Company Inc.; CEO, LDG Reinsurance Underwriters, SRRF
Management Inc. and Medical Reinsurance Underwriters Inc. Age: 46
years old. Address: 401 Edgewater Place, Wakefield, Massachusetts
01880.
o + ROBERT D. MCBRIDE. Director of the Company; Director, Chairman and CEO,
McLouth Steel; Director, Salem Corporation. Director, SMS/Concast,
Inc. (1983-1991). Age: 66 years old. Address: 15 Waverly Lane,
Grosse Pointe Farms, Michigan 48236.
o + JOHN L. PROPST. Director of the Company; Of Counsel, Reed, Smith, Shaw
& McClay (law firm). Age: 79 years old. Address: 5521 Dunmoyle
Street, Pittsburgh, Pennsylvania 15217.
o + JOHN J. SCIULLO. Director of the Company; Dean Emeritus and Professor
of Law, Duquesne University Law School; Director, Urban Redevelopment
Authority of Pittsburgh. Age: 62 years old. Address: 321 Gross
Street, Pittsburgh, Pennsylvania 15224.
o + ROSLYN M. WATSON. Director of the Company; Principal, Watson Ventures,
Inc., prior to February, 1993; Real Estate Development Project Manager
and Vice President, The Gunwyn Company. Age: 44 years old. Address:
25 Braddock Park, Boston, Massachusetts 02116-5816.
# MARIE E. CONNOLLY. President and Treasurer of the Company, The
Dreyfus/Laurel Investment Series, The Dreyfus/Laurel Funds Trust and
The Dreyfus/Laurel Tax-Free Municipal Funds (since September 1994);
Vice President of the Company (March 1994 to September 1994);
President, Funds Distributor, Inc. (since 1992); Treasurer, Funds
Distributor, Inc. (July 1993 to April 1994); COO, Funds Distributor,
Inc. (since April 1994); Director, Funds Distributor, Inc. (since July
1992); President, COO and Director, Premier Mutual Fund Services, Inc.
(since April 1994); Senior Vice President and Director of Financial
Administration, The Boston Company Advisors, Inc. (December 1988 to May
1993). Address: One Exchange Place, Boston, Massachusetts 02109.
# FREDERICK C. DEY. Vice President of the Company, The Dreyfus/Laurel
Investment Series, The Dreyfus/Laurel Funds Trust and The
Dreyfus/Laurel Tax-Free Municipal Funds (since September 1994); Senior
Vice President, Premier Mutual Fund Services, Inc. (since August 1994);
Vice President, Funds Distributor, Inc. (since August 1994);
Fundraising Manager, Swim Across America (October 1993 to August 1994);
General Manager, Spring Industries (August 1988 to October 1993).
Address: Premier Mutual Fund Services, Inc., 200 Park Avenue New York,
New York 10166.
# ERIC B. FISCHMAN. Vice President of the Company, The Dreyfus/Laurel
Investment Series, The Dreyfus/Laurel Funds Trust and The
Dreyfus/Laurel Tax-Free Municipal Funds (since September 1994); Vice
President and Associate General Counsel, Premier Mutual Fund Services,
Inc. (Since August 1994); Vice President and Associate General Counsel,
Funds Distributor, Inc. (since August 1994); Staff Attorney, Federal
Reserve Board (September 1992 to June 1994); Summer Associate, Venture
Economics (May 1991 to September 1991); Summer Associate, Suffolk
County District Attorney (June 1990 to August 1990). Address: Premier
Mutual Fund Services, Inc., 200 Park Avenue, New York, New York 10166.
LESLIE M. GAYNOR. Assistant Treasurer of the Company, The Dreyfus/Laurel
Investment Series, The Dreyfus/Laurel Funds Trust and The
Dreyfus/Laurel Tax-Free Municipal Funds (since October 1994); Assistant
Treasurer/Manager of Treasury Services, Funds Distributor, Inc. (since
July 1994); Vice President, The Boston Company, Inc. (1989 to July
1994). Address: One Exchange Place, Boston, Massachusetts 02109.
RICHARD W. HEALEY. Vice President of the Company, The Dreyfus/Laurel
Investment Series, The Dreyfus/Laurel Tax-Free Municipal Funds Trust
and The Dreyfus/Laurel Funds Trust (since March 1994); Senior Vice
President, Funds Distributor, Inc. (since March 1993); Vice President,
The Boston Company Inc., (March 1993 to May 1993); Vice President of
Marketing, Calvert Group (1989 to March 1993). Address: One Exchange
Place, Boston, Massachusetts 02109.
# JOHN E. PELLETIER. Vice President and Secretary of the Company; The
Dreyfus/Laurel Investment Series, The Dreyfus/Laurel Funds Trust and
The Dreyfus/Laurel Tax-Free Municipal Funds (since September 1994);
Senior Vice President, General Counsel and Secretary, Funds
Distributor, Inc. (since April 1994); Senior Vice President, General
Counsel and Secretary, Premier Mutual Fund Services, Inc. (since August
1994); Counsel, The Boston Company Advisors, Inc. (February 1992 to
March 1994); Associate, Ropes & Gray (August 1990 to February 1992);
Associate, Sidley & Austin (June 1989 to August 1990). Address: One
Exchange Place, Boston, Massachusetts 02109.
___________________________________________________
* "Interested person" of the Company, as defined in the 1940 Act.
o Member of the Audit Committee.
+ Member of the Nominating Committee.
# Officer also serves as an officer for other investment companies
advised by Dreyfus.
The officers and Directors of the Company as a group owned beneficially
less than 1% of the Fund's total shares outstanding as of January 31, 1995.
No officer or employee of Premier (or of any parent, subsidiary or
affiliate thereof) receives any compensation from the Company for serving as
an officer or Director of the Company. In addition, no officer or employee
of Dreyfus (or of any parent or subsidiary thereof) serves as an officer or
Director of the Company. The Dreyfus/Laurel Funds pay each Director/Trustee
who is not an officer or employee of Premier (or of any parent, subsidiary
or of its affiliate, thereof) or of Dreyfus, $27,000 per annum (and an
additional $75,000 for the Chairman of the Board of Directors/Trustees of
the Dreyfus/Laurel Funds), $1,000 for each Dreyfus/Laurel Funds meeting
attended and $750 for each Dreyfus/Laurel Funds Audit Committee meeting
attended, and reimburses each Director/Trustee for travel and out-of-pocket
expenses. For the fiscal year ended October 31, 1994 the fees for meetings
and expenses totaled $29,319.
For the fiscal year ended October 31, 1994, the aggregate amount of
fees and expenses received by each Director from the Company and all other
Funds in The Dreyfus/Laurel Family of Funds for which such person is a Board
member were as follows:
<TABLE>
Total
Pension of Compensation
Retirement From the
Benefits Estimated Company
Aggregate Accrued as Annual and Fund
Compensation Part of Benefits Complex Paid
From the the Company's Upon to Board
Name of Board Member Company # Expenses Retirement Member
- - - ------------------- ------------ ------------- ---------- ------------
<S> <C> <C> <C> <C>
Ruth Marie Adams $19,685 None None $ 37,500
Francis P. Brennan* 52,809 None None 112,500
Joseph S. DiMartino** N/A N/A N/A N/A
James M. Fitzgibbons 17,685 None None 31,750
J. Tomlinson Fort 7,500 None None 7,500
Arthur L. Goeschel 26,185 None None 32,500
Kenneth A. Himmel 18,685 None None 35,750
Arch S. Jeffrey 27,185 None None 33,500
Steven J. Lockwood 18,685 None None 35,750
Robert D. McBride 27,185 None None 33,500
John L. Propst 27,185 None None 33,500
John J. Sciullo 27,185 None None 33,500
Roslyn M. Watson 19,685 None None 36,750
# Amount does not include reimbursed expenses for attending Board meetings,
which amounted to $10,876 for the Company.
* Compensation of Francis Brennan includes $75,000 paid by The
Dreyfus/Laurel Fund Family to be Chairman of the Board.
** Joseph S. DiMartino was not a director of the Company as of October 31,
1994.
</TABLE>
MANAGEMENT ARRANGEMENTS
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Management of the Fund."
Management Agreement. Dreyfus serves as the investment manager for the
Fund pursuant to an Investment Management Agreement with the Company dated
April 4, 1994 ("Management Agreement"), transferred to Dreyfus as of October
17, 1994. Pursuant to the Management Agreement, Dreyfus provides, or
arranges for one or more third parties to provide, investment advisory,
administrative, custody, fund accounting and transfer agency services to the
Fund. As Manager, Dreyfus manages the Fund by making investment decisions
based on the Fund's investment objectives, policies and restrictions. The
Management Agreement is subject to review and approval at least annually by
the Board of Directors.
The Management Agreement will continue from year to year provided that
a majority of the Directors who are not interested persons of the Company
and either a majority of all Directors or a majority of the shareholders of
the Fund approve its continuance. The Company may terminate the Management
Agreement, without prior notice to Dreyfus, upon the vote of a majority of
the Board of Directors or upon the vote of a majority of the Fund's
outstanding voting securities. Dreyfus may terminate the Management
Agreement upon sixty (60) days' written notice to the Company. The
Management Agreement will terminate immediately and automatically upon its
assignment.
The following persons are officers and/or directors of Dreyfus: Howard
Stein, Chairman of the Board and Chief Executive Officer; W. Keith Smith,
Vice Chairman of the Board; Robert E. Riley, President, Chief Operating
Officer and a director; Lawrence S. Kash, Vice Chairman--Distribution and
director; Philip L. Toia, Vice Chairman--Operations and Administration; Paul
H. Snyder, Vice President and Chief Financial Officer; Daniel C. Maclean,
Vice President and General Counsel; Barbara E. Casey, Vice President--
Retirement Services; Henry D. Gottmann, Vice President--Retail; Elie M.
Genadry, Vice President--Wholesale; Mark N. Jacobs, Vice President--Fund
Legal and Compliance; Jeffrey N. Nachman, Vice President-Mutual Fund
Accounting; Diane M. Coffey, Vice-President--Corporate Communications;
Katherine C. Wickham, Vice President--Human Resources; Maurice Bendrihem,
Controller; and Mandell L. Berman, Frank V. Cahouet, Alvin E. Friedman,
Lawrence M. Greene, Julian M. Smerling and David B. Truman, Directors.
For the last three fiscal years, the Fund has had the following
expenses:
For the Fiscal Years Ended October 31,
--------------------------------------
1994 1993 1992
---- ---- ----
Management fees (gross of waiver) $1,892,422 $574,496 $332,843
Expense Reimbursement from $ 131,810 $244,604 $234,231
investment manager
Management fees waived -- -- --
PURCHASE OF FUND SHARES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "How to Buy Fund Shares."
The Distributor. The Distributor serves as the Fund's distributor
pursuant to an agreement which is renewable annually. The Distributor also
acts as distributor for the other funds in the Dreyfus Family of Funds and
for certain other investment companies.
Dreyfus TeleTransfer Privilege--Investor Shares. Dreyfus TeleTransfer
purchase orders may be made between the hours of 8:00 a.m. and 4:00 p.m.,
New York time, on any business day that The Shareholder Services Group,
Inc., the Fund's transfer and dividend disbursing agent (the "Transfer
Agent"), and the New York Stock Exchange ("NYSE") are open. Such purchases
will be credited to the shareholder's Fund account on the next bank business
day. To qualify to use the Dreyfus TeleTransfer Privilege, the initial
payment for purchase of shares must be drawn on, and redemption proceeds
paid to, the same bank and account as are designated on the Account
Application or Shareholder Services Form on file. If the proceeds of a
particular redemption are to be wired to an account at any other bank, the
request must be in writing and signature-guaranteed. See "Redemption of
Fund Shares-- Dreyfus TeleTransfer Privilege--Investor Shares."
Reopening an Account. An investor may reopen an account with a minimum
investment of $100 without filing a new Account Application during the
calendar year the account is closed or during the following calendar year,
provided the information on the old Account Application is still applicable.
DISTRIBUTION PLAN
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Distribution Plan."
Investor shares are subject to fees for distribution and shareholder
services.
Distribution Plan--Investor Shares. The Securities and Exchange
Commission ("SEC") has adopted Rule 12b-1 under the 1940 Act ("Rule")
regulating the circumstances under which investment companies such as the
Company may, directly or indirectly, bear the expenses of distributing their
shares. The Rule defines distribution expenses to include expenditures for
"any activity which is primarily intended to result in the sale of fund
shares." The Rule, among other things, provides that an investment company
may bear such expenses only pursuant to a plan adopted in accordance with
the Rule. With respect to the Investor shares of the Fund, the Company has
adopted a Distribution Plan ("Plan"), and may enter into Selling Agreements
with Service Agents pursuant to its Plan.
Under the Plan, the Fund may spend annually up to 0.25% of its average
daily net assets attributable to Investor shares for costs and expenses
incurred in connection with the distribution of, and shareholder servicing
with respect to, the Fund's Investor shares.
The Plan provides that a report of the amounts expended under the Plan,
and the purposes for which such expenditures were incurred, must be made to
the Company's Directors for their review at least quarterly. In addition,
the Plan provides that it may not be amended to increase materially the
costs which the Fund may bear for distribution pursuant to the Plan without
approval of the Fund's shareholders, and that other material amendments of
the Plan must be approved by the vote of a majority of the Directors and of
the Directors who are not "interested persons" of the Company or Dreyfus (as
defined in the 1940 Act) and who do not have any direct or indirect
financial interest in the operation of the Plan, cast in person at a meeting
called for the purpose of considering such amendments. The Plan is subject
to annual approval by the entire Board of Directors and by the Directors who
are neither interested persons nor have any direct or indirect financial
interest in the operation of the Plan, by vote cast in person at a meeting
called for the purpose of voting on the Plan. The Plan is terminable, as to
the Fund's Investor shares, at any time by vote of a majority of the
Directors who are not interested persons and have no direct or indirect
financial interest in the operation of the Plan or by vote of the holders of
a majority of the outstanding Investor shares of the Fund.
For the period from April 6, 1994 (inception date of Investor shares)
to October 31, 1994, the Fund paid the Distributor $10,732 pursuant to the
Plan.
Frank Russell Investment Management Company acted as the Fund's
Administrator until September 23, 1994 and was paid $23,661, $18,910 and
$13,054, respectively, in Administrator's fees by the Fund, for the years
ended October 31, 1994, 1993 and 1992.
REDEMPTION OF FUND SHARES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "How to Redeem Fund
Shares."
Wire Redemption Privilege. By using this Privilege, the investor
authorizes the Transfer Agent to act on wire or telephone redemption
instructions from any person representing himself or herself to be the
investor, or a representative of the investor's Agent, and reasonably
believed by the Transfer Agent to be genuine. Ordinarily, the Fund will
initiate payment for shares redeemed pursuant to this Privilege on the next
business day after receipt if the Transfer Agent receives the redemption
request in proper form. Redemption proceeds will be transferred by Federal
Reserve wire only to the commercial bank account specified by the investor
on the Account Application or Shareholder Services Form. Redemption
proceeds, if wired, must be in the amount of $1,000 or more and will be
wired to the investor's account at the bank of record designated in the
investor's file at the Transfer Agent, if the investor's bank is a member of
the Federal Reserve System, or to a correspondent bank if the investor's
bank is not a member. Fees ordinarily are imposed by such bank and usually
are borne by the investor. Immediate notification by the correspondent bank
to the investor's bank is necessary to avoid a delay in crediting the funds
to the investor's bank account.
Investors with access to telegraphic equipment may wire redemption
requests to the Transfer Agent by employing the following transmittal code
which may be used for domestic or overseas transmissions:
Transfer Agent's
Transmittal Code Answer Back Sign
---------------- --------------------
144295 144295 TSSG PREP
Stock 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 NYSE Medallion
Signature Program, the Securities Transfer Agents Medallion Program
("STAMP") and the Stock Exchanges Medallion Program. Guarantees must be
signed by an authorized signatory of the guarantor and "Signature-
Guaranteed" must appear with the signature. The Transfer Agent may request
additional documentation from corporations, executors, administrators,
trustees or guardians, and may accept other suitable verification
arrangements from foreign investors, such as consular verification. For
more information with respect to signature-guarantees, please call one of
the telephone numbers listed on the cover.
Dreyfus TeleTransfer Privilege--Investor Shares. Investors should be
aware that if they have selected the Dreyfus TeleTransfer Privilege, any
request for a wire redemption will be effected as a Dreyfus TeleTransfer
transaction through the ACH system unless more prompt transmittal
specifically is requested. Redemption proceeds will be on deposit in the
investor's account at an ACH member bank ordinarily two business days after
receipt of the redemption request. See "Purchase of Fund Shares-- Dreyfus
TeleTransfer Privilege--Investor Shares."
Redemption Commitment. The Fund has committed itself to pay in cash
all redemption requests by any shareholder of record of the Fund, 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 SEC. In the case of
requests for redemption in excess of such amount, the Board of Directors
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 this event, the securities would be valued in the same
manner as the Fund's portfolio is valued. If the recipient sold such
securities, brokerage charges would be incurred.
Suspension of Redemptions. The right of redemption may be suspended or
the date of payment postponed (a) during any period when the NYSE 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 SEC 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 SEC by order may permit to protect the
Fund's shareholders.
SHAREHOLDER SERVICES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Shareholder Services."
Fund Exchanges. Shares of any Class of the Fund may be exchanged for
shares of the respective Class of certain other funds advised or
administered by Dreyfus. 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. Exchanges for shares of funds that are offered without a sales
load will be made without a sales load.
B. Shares of funds purchased without a sales load may be exchanged
for shares of other funds sold with a sales load, and the
applicable sales load will be deducted.
C. Shares of funds purchased with a sales load may be exchanged
without a sales load for shares of other funds sold without a
sales load.
D. Shares of funds purchased with a sales load, shares of funds
acquired by a previous exchange from shares purchased with a sales
load and additional shares acquired through reinvestment of
dividends or other distributions of any such funds (collectively
referred to herein as "Purchased Shares") may be exchanged for
shares of other funds sold with a sales load (referred to herein
as "Offered Shares"), provided that, if the sales load applicable
to the Offered Shares exceeds the maximum sales load that could
have been imposed in connection with the Purchased Shares (at the
time the Purchased Shares were acquired), without giving effect to
any reduced loads, the difference will be deducted.
E. Shares of funds subject to a contingent deferred sales charge
("CDSC") that are exchanged for shares of another fund will be
subject to the higher applicable CDSC of the two funds, and for
purposes of calculating CDSC rates and conversion periods, if any,
will be deemed to have been held since the date the shares being
exchanged were initially purchased.
To accomplish an exchange under item D above, shareholders must notify
the Transfer Agent of their prior ownership of fund shares and their account
number.
Exchanges of Class R shares held by a Retirement Plan may be made only
between the investor's Retirement Plan account in one fund and such
investor's Retirement Plan account in another fund.
To establish a personal retirement plan by exchange, shares of the fund
being exchanged must have a value of at least the minimum initial investment
required for the fund into which the exchange is being made. For Dreyfus-
sponsored Keogh Plans, IRAs and SEP-IRAs with only one participant, the
minimum initial investment is $750. To exchange shares held in Corporate
Plans, 403(b)(7) Plans and IRAs set up under a Simplified Employee Pension
Plan ("SEP-IRAs") with more than one participant, the minimum initial
investment is $100 if the plan has at least $2,500 invested among the funds
in the Dreyfus Family of Funds. To exchange shares held in a personal
retirement plan account, the shares exchanged must have a current value of
at least $100.
Dreyfus Auto-Exchange Privilege. The Dreyfus Auto-Exchange Privilege
permits an investor to purchase, in exchange for shares of the Fund, shares
of the same Class of another fund in the Dreyfus Family of Funds. This
Privilege is available only for existing accounts. With respect to Class R
shares held by a Retirement Plan, exchanges may be made only between the
investor's Retirement Plan account in one fund and such investor's
Retirement Plan account in another fund. Shares will be exchanged on the
basis of relative net asset value as described above under "Fund Exchanges."
Enrollment in or modification or cancellation of this Privilege is effective
three business days following notification by the investor. An investor
will be notified if the investor's account falls below the amount designated
to be exchanged under this Privilege. In this case, an investor's account
will fall to zero unless additional investments are made in excess of the
designated amount prior to the next 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.
Fund exchanges and Dreyfus Auto-Exchange Privilege are available to
shareholders resident in any state in which shares of the fund being
acquired may legally be sold. Shares may be exchanged only between accounts
having identical names and other identifying designations.
Shareholder Services Forms and prospectuses of the other funds may be
obtained from the Distributor. The Fund reserves the right to reject any
exchange request in whole or in part. The Fund exchange service or Dreyfus
Auto-Exchange Privilege may be modified or terminated at any time upon
notice to shareholders.
Automatic Withdrawal. The Automatic Withdrawal Plan permits an
investor with a $5,000 minimum account to request withdrawal of a specified
dollar amount (minimum of $50) on either a monthly or quarterly basis.
Withdrawal payments are the proceeds from sales of Fund shares, not the
yield on the shares. If withdrawal payments exceed reinvested dividends and
distributions, the investor's shares will be reduced and eventually may be
depleted. An Automatic Withdrawal Plan may be established by completing the
appropriate application available from the Distributor. There is a service
charge of $.50 for each withdrawal check. Automatic Withdrawal may be
terminated at any time by the investor, the Fund or the Transfer Agent.
Shares for which certificates have been issued may not be redeemed through
the Automatic Withdrawal Plan.
Dreyfus Dividend Sweep. Dreyfus Dividend Sweep allows investors to
invest on the payment date their dividends or dividends and capital gain
distributions, if any, from the Fund in shares of the same Class of certain
other funds in the Dreyfus Family of Funds of which the investor is 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 by a fund may be invested without
imposition of a sales load in shares of other funds that are
offered without a sales load.
B. Dividends and distributions paid by a fund which does not charge a
sales load may be invested in shares of other funds sold with a
sales load, and the applicable sales load will be deducted.
C. Dividends and distributions paid by a fund which charges a sales
load may be invested in shares of other funds sold with a sales
load (referred to herein as "Offered Shares"), provided that, if
the sales load applicable to the Offered Shares exceeds the
maximum sales load charged by the fund from which dividends or
distributions are being swept, without giving effect to any
reduced loads, the difference will be deducted.
D. Dividends and distributions paid by a fund may be invested in
shares of other funds that impose a contingent deferred sales
charge ("CDSC") and the applicable CDSC, if any, will be imposed
upon redemption of such shares.
Corporate Pension/Profit-Sharing and Retirement Plans. The 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 SEP-IRAs and IRA "Rollover Accounts,"
and 403(b)(7) Plans. Plan support services also are available.
Investors who wish to purchase Fund shares in conjunction with a Keogh
Plan, a 403(b)(7) Plan or an IRA, including an SEP-IRA, may request from the
Distributor forms for adoption of such plans.
The entity acting as custodian for Keogh Plans, 403(b)(7) Plans or IRAs
may charge a fee, payment of which could require the liquidation of shares.
All fees charged are described in the appropriate form.
Shares may be purchased in connection with these plans only by direct
remittance to the entity acting as custodian. Purchases for these plans may
not be made in advance of receipt of funds.
The minimum initial investment for corporate plans, Salary Reduction
Plans, 403(b)(7) Plans and SEP-IRAs with more than one participant, is
$2,500 with no minimum on subsequent purchases. The minimum initial
investment for Dreyfus-sponsored Keogh Plans, IRAs, SEP-IRAs and 403(b)(7)
Plans with only one participant, is normally $750, with no minimum on
subsequent purchases. Individuals who open an IRA may also open a non-
working spousal IRA with a minimum investment of $250.
The investor should read the Prototype Retirement Plan and the
appropriate form of Custodial Agreement for further details on eligibility,
service fees and tax implications, and should consult a tax adviser.
DETERMINATION OF NET ASSET VALUE
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "How to Buy Fund Shares."
Restricted securities, as well as securities or other assets for which
market quotations are not readily available, or are not valued by a pricing
service approved by the Board of Directors, are valued at fair value as
determined in good faith by the Board of Directors. The Board of Directors
will review the method of valuation on a current basis. In making their
good faith valuation of restricted securities, the Directors generally will
take the following factors into consideration: restricted securities which
are securities of the same class of securities for which a public market
exists usually will be valued at market value less the same percentage
discount at which purchased. This discount will be revised periodically by
the Board of Directors if the Directors believe that it no longer reflects
the value of the restricted securities. Restricted securities not of the
same class as securities for which a public market exists usually will be
valued initially at cost. Any subsequent adjustment from cost will be based
upon considerations deemed relevant by the Board of Directors.
New York Stock Exchange Closings. The holidays (as observed) on which
the NYSE is closed currently are: New Year's Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and
Christmas.
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Dividends, Other
Distributions and Taxes."
The term "regulated investment company" does not imply the supervision
of management or investment practices or policies by any government agency.
To qualify as a regulated investment company ("RIC"), the Fund (1) must
distribute to its shareholders each year at least 90% of its investment
company taxable income (generally consisting of net investment income, net
short-term capital gains and net gains from certain foreign currency
transactions), (2) must derive at least 90% of its annual gross income from
specified sources ("Income Requirement"), (3) must derive less than 30% of
its annual gross income from gain on the sale or disposition of any of the
following that are held for less than three months -- (i) securities,
(ii) non-foreign-currency options and futures and (iii) foreign currencies
(or foreign currency options, futures and forward contracts) that are not
directly related to the Fund's principal business of investing in securities
(or options and futures with respect thereto) ("Short-Short Limitation") --
and (4) must meet certain asset diversification and other requirements.
Accordingly, the Fund may be restricted in the selling of securities held
for less than three months.
Any dividend or other distribution paid shortly after an investor's
purchase may have the effect of reducing the net asset value of the shares
below the cost of his investment. Such a dividend or other distribution
would be a return on investment in an economic sense, although taxable as
stated in the Fund's Prospectus. In addition, the Code provides that if a
shareholder holds shares of the Fund for six months or less and has received
a capital gain distribution with respect to those shares, any loss incurred
on the sale of those shares will be treated as a long-term capital loss to
the extent of the capital gain distribution received.
Dividends and other distributions declared by the Fund in October,
November or December of any year and payable to shareholders of record on a
date in that month any of those months are deemed to have been paid by the
Fund and received by the shareholders on December 31 of that year if the
distributions are paid by the Fund during the following January.
Accordingly, those distributions will be taxed to shareholders for the year
in which that December 31 falls.
A portion of the dividends paid by the Fund, whether received in cash
or reinvested in additional Fund shares, may be eligible for the dividends-
received deduction allowed to corporations. The eligible portion may not
exceed the aggregate dividends received by the Fund from U.S. corporations.
However, dividends received by a corporate shareholder and deducted by it
pursuant to the dividends-received deduction are subject indirectly to the
alternative minimum tax.
Dividends and interest received by the Fund may be subject to income,
withholding or other taxes imposed by foreign countries and U.S. possessions
that would reduce the yield on its securities. Tax conventions between cer-
tain countries and the United States may reduce or eliminate these foreign
taxes, however, and many foreign countries do not impose taxes on capital
gains in respect of investments by foreign investors.
Income from foreign currencies (except certain gains therefrom that may
be excluded by future regulations), and income from transactions in options,
futures and forward contracts derived by the Fund with respect to its
business of investing in securities or foreign currencies, will qualify as
permissible income under the Income Requirement. However, income from the
disposition of options and futures contracts (other than those on foreign
currencies) will be subject to the Short-Short Limitation if they are held
for less than three months. Income from the disposition of foreign
currencies, and options, futures and forward contracts thereon, that are not
directly related to the Fund's principal business of investing in securities
(or options and futures with respect to securities) also will be subject to
the Short-Short Limitation if they are held for less than three months.
If the Fund satisfies certain requirements, any increase in value of a
position that is part of a "designated hedge" will be offset by any decrease
in value (whether realized or not) of the offsetting hedging position during
the period of the hedge for purposes of determining whether the Fund
satisfies the Short-Short Limitation. Thus, only the net gain (if any) from
the designated hedge will be included in gross income for purposes of that
limitation. The Fund will consider whether it should seek to qualify for
this treatment for its hedging transactions. To the extent the Fund does
not so qualify, it may be forced to defer the closing out of certain
options, futures and forward contracts beyond the time when it otherwise
would be advantageous to do so, in order for the Fund to qualify as a RIC.
Ordinarily, gains and losses realized from portfolio transactions will
be treated as capital gain and loss. However, a portion of the gain or loss
from the disposition of foreign currencies and non-U.S. dollar denominated
securities (including debt instruments, certain financial forward, futures
and option contracts and certain preferred stock) may be treated as ordinary
income or loss under Section 988 of the Code. In addition, all or a portion
of any gain realized from the sale or other disposition of certain market
discount bonds will be treated as ordinary income. Moreover, all or a
portion of the gain realized from engaging in "conversion transactions" may
be treated as ordinary income under Section 1258. "Conversion transactions"
are defined to include certain forward, futures, option and straddle
transactions, transactions marketed or sold to produce capital gains, or
transactions described in Treasury regulations to be issued in the future.
Under Section 1256 of the Code, any gain or loss realized by the Fund
from certain futures and forward contracts and options transactions will be
treated as 60% long-term capital gain or loss and 40% short-term capital
gain or loss. Gain or loss will arise upon exercise or lapse of such
contracts and options as well as from closing transactions. In addition,
any such contracts or options remaining unexercised at the end of the Fund's
taxable year will be treated as sold for their then fair market value (a
process known as "marking to market"), resulting in additional gain or loss
to the Fund characterized in the manner described above.
Offsetting positions held by the Fund involving certain contracts or
options may constitute "straddles." "Straddles" are defined to include
"offsetting positions" in actively traded personal property. The tax
treatment of "straddles" is governed by Sections 1092 and 1258 of the Code,
which, in certain circumstances, override or modify Sections 1256 and 988.
As such, all or a portion of any short-term or long-term capital gain from
certain "straddle" transactions may be recharacterized to ordinary income.
If the Fund were treated as entering into "straddles" by reason of its
engaging in certain forward contracts or options transactions, such
"straddles" would be characterized as "mixed straddles" if the forward
contracts or options transactions comprising a part of such "straddles" were
governed by Section 1256. The Fund may make one or more elections with
respect to "mixed straddles." Depending on which election is made, if any,
the results to the Fund may differ. If no election is made, then to the
extent the "straddle" and conversion transactions rules apply to positions
established by the Fund, losses realized by the Fund will be deferred to the
extent of unrealized gain in the offsetting position. Moreover, as a result
of the "straddle" rules, short-term capital loss on "straddle" positions may
be recharacterized as long-term capital loss, and long-term capital gains
may be treated as short-term capital gains or ordinary income.
Investment by the Fund in securities issued or acquired at a discount
(for example, zero coupon securities) or providing for deferred interest or
for payment of interest in the form of additional obligations (for example,
"pay-in-kind" or "PIK" securities) could, under special tax rules, affect
the amount, timing and character of distributions to shareholders by causing
the Fund to recognize income prior to the receipt of cash payments. For
example, the Fund could be required to take into gross income annually a
portion of the discount (or deemed discount) at which the securities were
issued and to distribute such income in order to maintain its qualification
for treatment as a RIC. In such case, the Fund may have to dispose of
securities it might otherwise have continued to hold in order to generate
cash to satisfy these distribution requirements.
If the Fund invests in an entity that is classified as a "passive
foreign investment company" ("PFIC") for federal income tax purposes, the
operation of certain provisions of the Code applying to PFICs could result
in the imposition of certain federal income taxes on the Fund. In addition,
gain realized from the sale or other disposition of PFIC securities may be
treated as ordinary income under Section 1291 of the Code.
State and Local Taxes. Depending upon the extent of the Fund's
activities in states and localities in which its offices are maintained, in
which its agents or independent contractors are located, or in which it is
otherwise deemed to be conducting business, the Fund may be subject to the
tax laws of such states or localities. Shareholders are advised to consult
their tax advisers concerning the application of state and local taxes.
Foreign Shareholders - U.S. Federal Income Taxation. U.S. federal
income taxation of a shareholder who, as to the United States, is a
non-resident alien individual, a foreign trust or estate, a foreign
corporation or a foreign partnership (a "foreign shareholder"), depends on
whether the income from the Fund is "effectively connected" with a U.S.
trade or business carried on by the shareholder, as discussed generally
below. Special U.S. federal income tax rules that differ from those
described below may apply to certain foreign persons who invest in the Fund.
For example, the tax consequences to a foreign shareholder entitled to claim
the benefits of an applicable tax treaty may be different from those
described below. Foreign shareholders are advised to consult their own tax
advisers with respect to the particular tax consequences to them of an
investment in the Fund.
Foreign Shareholders - Income Not Effectively Connected. If the income
from the Fund is not effectively connected with a U.S. trade or business
carried on by the foreign shareholder, distributions of investment company
taxable income generally will be subject to a U.S. federal withholding tax
of 30% (or lower treaty rate) on the gross amount of the distribution.
Foreign shareholders also may be subject to U.S. federal withholding tax on
income resulting from any election by the Fund to treat foreign taxes paid
by it as paid by its shareholders (see discussion above), but foreign
shareholders will not be able to claim a credit or deduction for the foreign
taxes treated as having been paid by them.
Capital gains realized by foreign shareholders on the sale of Fund
shares and distributions to them of net capital gain, as well as amounts
retained by the Fund that are designated as undistributed capital gains,
generally will not be subject to U.S. federal income tax unless the foreign
shareholder is a non-resident alien individual and is physically present in
the United States for more than 182 days during the taxable year. However,
this rule only applies in exceptional cases, because any individual present
in the United States for more than 182 days during the taxable year
generally is treated as a resident for U.S. federal income tax purposes on
his worldwide income at the graduated rates applicable to U.S. citizens,
rather than the 30% U.S. federal withholding tax rate. In the case of
certain foreign shareholders, the Fund may be required to withhold U.S.
Federal income tax at a rate of 31% of capital gain distributions and of the
gross proceeds from a redemption of Fund shares unless the shareholder
furnishes the Fund with a certificate regarding the shareholder's foreign
status.
Foreign Shareholders - Effectively Connected Income. If income from the
Fund is effectively connected with a U.S. trade or business carried on by a
foreign shareholder, then all distributions to that shareholder and any
gains realized by that shareholder on the disposition of the Fund shares
will be subject to U.S. federal income tax at the graduated rates applicable
to U.S. citizens and domestic corporations, as the case may be. Foreign
shareholders also may be subject to the branch profits tax.
Foreign Shareholders - Estate Tax. Foreign individuals generally are
subject to U.S. federal estate tax on their U.S. situs property, such as
shares of the Fund, that they own at the time of their death. Certain
credits against that tax and relief under applicable tax treaties may be
available.
Pennsylvania Personal Property Tax Exemption. The Company has obtained
a Certificate of Authority to do business as a foreign corporation in
Pennsylvania. In the opinion of counsel, shares of The Company are exempt
from Pennsylvania personal property taxes.
PORTFOLIO TRANSACTIONS
All portfolio transactions of the Fund are placed on behalf of the Fund
by Dreyfus. Debt securities purchased and sold by the Fund are generally
traded on a net basis (i.e., without commission) through dealers acting for
their own account and not as brokers, or otherwise involve transactions
directly with the issuer of the instrument. This means that a dealer (the
securities firm or bank dealing with the Fund) makes a market for securities
by offering to buy at one price and sell at a slightly higher price. The
difference between the prices is known as a spread. Other portfolio
transactions may be executed through brokers acting as agent. The Fund will
pay a spread or commissions in connection with such transactions. Dreyfus
uses its best efforts to obtain execution of portfolio transactions at
prices which are advantageous to the Fund and at spreads and commission
rates, if any, which are reasonable in relation to the benefits received.
Dreyfus also places transactions for other accounts that it provides with
investment advice.
Brokers and dealers involved in the execution of portfolio transactions
on behalf of the Fund are selected on the basis of their professional
capability and the value and quality of their services. In selecting brokers
or dealers, Dreyfus will consider various relevant factors, including, but
not limited to, the size and type of the transaction; the nature and
character of the markets for the security to be purchased or sold; the
execution efficiency, settlement capability, and financial condition of the
broker-dealer; the broker-dealer's execution services rendered on a
continuing basis; and the reasonableness of any spreads (or commissions, if
any). Any spread, commission, fee or other remuneration paid to an
affiliated broker-dealer is paid pursuant to the Company's procedures
adopted in accordance with Rule 17e-1 of the 1940 Act.
Brokers or dealers may be selected who provide brokerage and/or
research services to the Fund and/or other accounts over which Dreyfus or
its affiliates exercise investment discretion. Such services may include
advice concerning the value of securities; the advisability of investing in,
purchasing or selling securities; the availability of securities or the
purchasers or sellers of securities; furnishing analyses and reports
concerning issuers, industries, securities, economic factors and trends,
portfolio strategy and performance of accounts; and effecting securities
transactions and performing functions incidental thereto (such as clearance
and settlement).
The receipt of research services from broker-dealers may be useful to
Dreyfus in rendering investment management services to the Fund and/or its
other clients; and, conversely, such information provided by brokers or
dealers who have executed transaction orders on behalf of other clients of
Dreyfus may be useful to these organizations in carrying out their
obligations to the Fund. The receipt of such research services does not
reduce these organizations' normal independent research activities; however,
it enables these organizations to avoid the additional expenses which might
otherwise be incurred if these organizations were to attempt to develop
comparable information through their own staffs.
The Company's Board of Directors periodically review Dreyfus'
performance of its responsibilities in connection with the placement of
portfolio transactions on behalf of the Fund and review the prices paid by
the Fund over representative periods of time to determine if they are
reasonable in relation to the benefits to the Fund.
Although Dreyfus manages other accounts in addition to the Fund,
investment decisions for the Fund are made independently from decisions made
for these other accounts. It sometimes happens that the same security is
held by more than one of the accounts managed by Dreyfus. Simultaneous
transactions may occur when several accounts are managed by the same
investment manager, particularly when the same investment instrument is
suitable for the investment objective of more than one account.
When more than one account is simultaneously engaged in the purchase or
sale of the same investment instrument, the prices and amounts are allocated
in accordance with a formula considered by Dreyfus to be equitable to each
account. In some cases this system could have a detrimental effect on the
price or volume of the investment instrument as far as the Fund is
concerned. In other cases, however, the ability of the Fund to participate
in volume transactions will produce better executions for the Fund. While
the Directors will continue to review simultaneous transactions, it is their
present opinion that the desirability of retaining Dreyfus as investment
manager to the Fund outweighs any disadvantages that may be said to exist
from exposure to simultaneous transactions.
The brokerage commissions paid by the Fund for fiscal years ended
October 31, 1994, 1993 and 1992 were $620,361, $141,241 and $90,162,
respectively. The principal reason for the increase in the Fund's brokerage
commissions for the three years was an increase in assets.
Portfolio Turnover. The portfolio turnover rate for the Fund is
calculated by dividing the lesser of the Fund's annual sales or purchases of
portfolio securities (exclusive of purchases and sales of securities whose
maturities at the time of acquisition were one year or less) by the monthly
average value of securities in the Fund during the year. The portfolio
turnover rates for the last two years for the Fund were:
Fiscal Year Ended October 31,
1994 1993
---- ----
106% 64%
PERFORMANCE INFORMATION
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Performance
Information."
Average annual total return is calculated by determining the ending
redeemable value of an investment purchased with a hypothetical $1,000
payment made at the beginning of the period (assuming the reinvestment of
dividends and other 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.
Total return is calculated by subtracting the amount of the Fund's net
asset value per share at the beginning of a stated period from the net asset
value per share at the end of the period (after giving effect to the
reinvestment of dividends and other distributions during the period), and
dividing the result by the net asset value per share at the beginning of the
period.
Aggregate annual total return (expressed as a percentage) for Investor
shares of the Fund for the periods noted were:
Aggregate Total Return for the
-------------------------------
Periods Ended October 31, 1994
Fund: 1 Year 5 Years 10 Years Inception
- - - ---- ---- ---- ---- ----
Stock Fund -- -- -- 4.62%
(4/6/94)
Inception date appears in parentheses following the aggregate total return
since inception.
Average annual total return (expressed as a percentage) for Class R
shares of the Fund for the periods noted were:
Average Annual Total Return for the
-----------------------------------
Periods Ended October 31, 1994
Fund: 1 Year 5 Years 10 Years Inception
- - - ---- ---- ---- ---- ----
Stock Fund 2.82% 11.75% -- 14.04%
(12/31/87)
Inception date appears in parentheses following the annual total return
since inception.
Performance information for the Fund may be compared, in reports and
promotional literature, to indexes including, but not limited to: (i) the
Morgan Stanley European Index; (ii) the Standard & Poor's 500 Composite
Stock Price Index, the Dow Jones Industrial Average, or other appropriate
unmanaged domestic or foreign indices of performance of various types of
investments so that investors may compare the Fund's results with those of
indices widely regarded by investors as representative of the securities
markets in general; (iii) other groups of mutual funds tracked by Lipper
Analytical Services, Inc., a widely used independent research firm which
ranks mutual funds by overall performance, investment objectives and assets,
or tracked by other services, companies, publications, or persons who rank
mutual funds on overall performance or other criteria; (iv) the Consumer
Price Index (a measure of inflation) to assess the real rate of return from
an investment in the Fund; and (v) products managed by a universe of money
managers with similar country allocation and performance objectives.
Unmanaged indices may assume the reinvestment of dividends but generally do
not reflect deductions or administrative and management costs and expenses.
From time to time, advertising materials for the Fund may refer to, or
include commentary by, the Fund's primary portfolio manager, Bert Mullins,
relating to his investment strategy, the asset growth of the Fund, current
or past business, political, economic or financial conditions and other
matters of general interest to investors. From time to time, advertising
materials for the Fund may refer to the Fund's quantitative disciplined
approach to stock market investing and the number of stocks analyzed by the
Manager.
INFORMATION ABOUT THE FUND
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "General Information."
Each Fund share has one vote and, when issued and paid for in
accordance with the terms of the offering, is fully paid and non-assessable.
Fund shares have no preemptive or subscription rights and are freely
transferable.
Each Fund will send annual and semi-annual financial statements to all
its shareholders.
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT, COUNSEL
AND INDEPENDENT AUDITORS
Mellon Bank, One Mellon Bank Center, Pittsburgh, PA 15258, is the
Fund's custodian and fund accountant. The Shareholder Services Group, Inc.,
a subsidiary of First Data Corporation, P.O. Box 9692, Providence, Rhode
Island 09240-9830, is the Fund's transfer and dividend disbursing agent.
The Shareholder Services Group, Inc. and Mellon Bank, as custodian, have no
part in determining the investment policies of the Fund or which securities
are to be purchased or sold by the Fund. Prior to the effectiveness of the
Investment Management Agreement for its services as custodian and fund
accountant, Mellon Bank was paid an annual fee of $30,000 per portfolio,
and, for all portfolios, an annual administrative account maintenance fee of
$10,000, an annual on-line fee of $3,600, an asset-based fee of .02% of the
first $500 million of the Company's net assets and .01% of net assets over
$500 million, plus a specified transaction fee for each transaction. For
its services as transfer and dividend disbursing agent, Mellon Bank was paid
an annual fee of $13.00 per shareholder account, with a minimum monthly fee
of $3,000 per portfolio. Mellon Bank was reimbursed for certain out-of-
pocket expenses including wire fees, and postage, stationery and telephone
expenses.
Kirkpatrick & Lockhart, 1800 M Street, N.W., South Lobby - 9th Floor,
Washington, D.C. 20036, has passed upon the legality of the shares offered
by the Prospectus and this Statement of Additional Information.
KPMG Peat Marwick LLP was appointed by the Directors to serve as the
Fund's independent auditors for the year ending October 31, 1995, providing
audit services including (1) examination of the annual financial statements,
(2) assistance, review and consultation in connection with the SEC and (3)
review of the annual federal income tax return and the Pennsylvania excise
tax return filed on behalf of the Fund.
FINANCIAL STATEMENTS
The financial statements for the fiscal year ended October 31, 1994,
including notes to the financial statements and supplementary information
and the Report of Independent Auditors, are included in the Annual Report to
shareholders. A copy of the Annual Report accompanies this Statement of
Additional Information. The financial statements for the Annual Report are
incorporated herein by reference.
STATEMENT OF ADDITIONAL INFORMATION
March 1, 1995
THE DREYFUS/LAUREL FUNDS, INC.
200 Park Avenue
New York, NY 10166
For information call 1-800-548-2868
The Funds listed below are portfolios of The Dreyfus/Laurel Funds, Inc.
(formerly The Laurel Funds, Inc.) ("Dreyfus/Laurel"), an open-end,
diversified management investment company that offers shares of common stock
of these Funds. Shares of the Funds are offered without sales commissions.
Dreyfus Disciplined Stock Fund (formerly the Laurel Stock Fund) ("Stock
Fund")
Dreyfus S&P 500 Stock Index Fund (formerly the Laurel S&P 500 Stock
Index Fund) ("S&P 500 Fund")
Dreyfus Disciplined Midcap Stock Fund (formerly the Laurel Midcap Stock
Fund) ("Midcap Fund")
Dreyfus Bond Market Index Fund (formerly the Laurel Bond Market Index
Fund) ("Bond Market Fund")
Dreyfus European Fund (formerly the Laurel European Fund) ("European
Fund")
Dreyfus Equity Income Fund (formerly the Laurel Equity Income Fund)
("Equity Income Fund")
This Statement of Additional Information is not a prospectus and should
be read only in conjunction with each Fund's current Prospectus, dated March
1, 1995. A copy of each Prospectus is available from Premier Mutual Fund
Services, Inc. ("Premier"), One Exchange Place, Boston, MA 02109.
TABLE OF CONTENTS
GENERAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . 3
INVESTMENT INFORMATION AND RISK FACTORS. . . . . . . . . . . . . 3
INVESTMENT LIMITATIONS . . . . . . . . . . . . . . . . . . . . . 11
CONTROLLING SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . 14
PRINCIPAL SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . 14
DIRECTORS AND OFFICERS . . . . . . . . . . . . . . . . . . . . . 15
INVESTMENT MANAGEMENT AND OTHER SERVICES . . . . . . . . . . . . 20
FEDERAL LAW AFFECTING MELLON BANK. . . . . . . . . . . . . . . . 25
PORTFOLIO TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . 26
NET ASSET VALUE. . . . . . . . . . . . . . . . . . . . . . . . . 29
PERFORMANCE CALCULATIONS . . . . . . . . . . . . . . . . . . . . 30
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES . . . . . . . . . . . . 33
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . 38
OTHER INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . 38
APPENDIX . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
GENERAL INFORMATION
Dreyfus/Laurel's name was changed from The Laurel Funds, Inc. to The
Dreyfus/Laurel Funds, Inc. effective October 17, 1994. The names of the
Funds also were changed as follows effective October 17, 1994: Laurel Stock
Fund to Dreyfus Disciplined Stock Fund; Laurel Midcap Stock Fund to Dreyfus
Disciplined Midcap Stock Fund; Laurel S&P 500 Stock Index Fund to Dreyfus
S&P 500 Stock Index Fund; Laurel Equity Income Fund to Dreyfus Equity Income
Fund; Laurel European Fund to Dreyfus European Fund; and Laurel Bond Market
Index Fund to Dreyfus Bond Market Index Fund.
European Fund. The European Fund is the successor, through an
acquisition of assets and assumption of liabilities, to the Capstone
European Fund ("Capstone European") of the Capstone International Series
Trust, a Massachusetts business trust organized on May 9, 1986. The
transfer of assets and liabilities of Capstone European to the European Fund
occurred on November 1, 1993. In exchange for the asset transfer, Capstone
European received shares of the European Fund which Capstone European
distributed to its shareholders. Each Capstone European shareholder
received a number of European Fund shares equal to the number of such
shareholder's shares in Capstone European on the date of the exchange. The
Capstone European shares were canceled and Capstone European ceased
operations. The European Fund Prospectus and this Statement of Additional
Information include performance and other information with respect to
Capstone European.
INVESTMENT INFORMATION AND RISK FACTORS
Floating Rate Securities (Bond Market Fund). A floating rate security
is one whose terms provide for the automatic adjustment of interest rates
whenever a specified interest rate changes. The interest on floating rate
securities is ordinarily tied to and is a percentage of the prime rate of a
specified bank or some similar objective standard such as the 90-day U.S.
Treasury bill rate and may change daily. Generally, changes in interest
rates on floating rate securities will reduce changes in the security's
market value from the original purchase price resulting in the potential for
capital appreciation or capital depreciation being less than for fixed
income obligations with a fixed interest rate.
ECDs, ETDs and Yankee CDs (Midcap and Bond Market Funds). These Funds
may purchase Eurodollar certificates of deposit ("ECDs"), which are U.S.
dollar denominated certificates of deposit issued by foreign branches of
domestic banks, Eurodollar time deposits ("ETDs"), which are U.S. dollar
denominated deposits in a foreign branch of a domestic bank or a foreign
bank, and Yankee-Dollar certificates of deposit ("Yankee CDs") which are
certificates of deposit issued by a domestic branch of a foreign bank
denominated in U.S. dollars and held in the United States. ECDs, ETDs, and
Yankee CDs are subject to somewhat different risks than domestic obligations
of domestic banks. These risks are discussed in the Prospectus.
Government Obligations (All Funds). Each Fund may invest in a variety
of U.S. Treasury obligations, which differ only in their interest rates,
maturities and times of issuance: (a) U.S. Treasury bills have a maturity of
one year or less, (b) U.S. Treasury notes have maturities of one to ten
years, and (c) U.S. Treasury bonds generally have maturities of greater than
ten years.
In addition to U.S. Treasury obligations, the Stock, S&P 500, Midcap,
Bond Market, European, and Equity Income Funds may invest in obligations
issued or guaranteed by U.S. Government agencies and instrumentalities which
are supported by any of the following: (a) the full faith and credit of the
U.S. Treasury (such as Government National Mortgage Association ("GNMA")
participation certificates), (b) the right of the issuer to borrow an amount
limited to a specific line of credit from the U.S. Treasury, (c)
discretionary authority of the U.S. Government agency or instrumentality, or
(d) the credit of the instrumentality. (Examples of agencies and
instrumentalities are: Federal Land Banks, Federal Housing Administration,
Farmers Home Administration, Export-Import Bank of the United States,
Central Bank for Cooperatives, Federal Intermediate Credit Banks, Federal
Home Loan Banks, General Services Administration, Maritime Administration,
Tennessee Valley Authority, District of Columbia Armory Board, Inter-
American Development Bank, Asian-American Development Bank, Student Loan
Marketing Association, International Bank of Reconstruction and Development
and Federal National Mortgage Association ("FNMA")). No assurance can be
given that the U.S. Government will provide financial support to such U.S.
Government agencies or instrumentalities described in (b), (c) and (d) in
the future, other than set forth above, since it is not obligated to do so
by law.
Mortgage Pass-Through Certificates (Stock Fund). Mortgage pass-through
certificates are issued by governmental, government-related and private
organizations which are backed by pools of mortgage loans. These mortgage
loans are made by lenders such as savings and loan institutions, mortgage
bankers, commercial banks and others to residential home buyer throughout
the United States. The securities are "pass-through" securities because
they provide investors with monthly payments of principal and interest which
in effect are a "pass-through" of the monthly payments made by the
individual borrowers on the underlying mortgages, net of any fees paid to
the issuer or guarantor of the pass-through certificates. The principal
government issuer of such securities is the GNMA, which is a wholly-owned
U.S. Government corporation within the Department of Housing and Urban
Development. Government-related issuers include the Federal Home Loan
Mortgage Corporation ("FHLMC") and the FNMA, both government sponsored
corporations owned entirely by private stockholders. Commercial banks,
savings and loan institutions, private mortgage insurance companies,
mortgage bankers and other second market issuers also create pass-through
pools of conventional residential mortgage loans. Such issuers may be the
originators of the underlying mortgage loans as well as the guarantors of
the mortgage-related securities.
(1) GNMA Mortgage Pass-Through Certificates ("Ginnie Maes"). Ginnie
Maes represent an undivided interest in a pool of mortgages that are insured
by the Federal Housing Administration or the Farmers Home Administration or
guaranteed by the Veterans Administration. Ginnie Maes entitle the holder
to receive all payments (including prepayment of principal and interest owed
by the individual mortgagors, net of fees paid to GNMA and the issuer which
assembles the mortgage pool and passes through the monthly mortgage payments
to the certificate holders (typically, a mortgage banking firm), regardless
of whether the individual mortgagor actually makes the payment. Because
payments are made to certificate holders regardless of whether payments are
actually received on the underlying mortgages, Ginnie Maes are of the
"modified pass-through" mortgage certificate type. GNMA is authorized to
guarantee the timely payment of principal and interest on the Ginnie Maes as
securities backed by an eligible pool of mortgages. GNMA is guaranteed to
be backed by the full faith and credit of the United States, and GNMA has
unlimited authority to borrow funds from the U.S. Treasury to make payments
under the guarantee. The market for Ginnie Maes is highly liquid because of
the size of the market and the active participation in the secondary market
of securities dealers and a variety of investors.
(2) FHLMC Mortgage Participation Certificates ("Freddie Macs").
Freddie Macs represent interests in groups of specified first lien
residential conventional mortgages underwritten and owned by the FHLMC.
Freddie Macs entitle the holder to timely payment of interest, which is
guaranteed by the FHLMC. The FHLMC guarantees either ultimate collection or
timely payment of all principal payments on the underlying mortgage loans.
In cases where the FHLMC has not guaranteed timely payment of principal, the
FHLMC may remit the amount due on account of its guarantee of ultimate
payment of principal at any time after default on an underlying mortgage,
but in no event later than one year after it becomes payable. Freddie Macs
are not guaranteed by the United States or by any of the Federal Home Loan
Banks and do not constitute a debt or obligation of the United States or of
any Federal Home Loan Bank. The secondary market for Freddie Macs is highly
liquid because of the size of the market and the active participation in the
secondary market of the FHLMC, securities dealers and a variety of
investors.
(3) FNMA Guaranteed Mortgage Pass-Through Certificates ("Fannie Maes").
Fannie Maes represent an undivided interest in a pool of conventional
mortgage loans secured by first mortgages or deeds of trust, on one family,
or two to four family, residential properties. The FNMA is obligated to
distribute scheduled monthly installments of principal and interest on the
mortgages in the pool, whether or not received, plus full principal of any
foreclosed or otherwise liquidated mortgages. The obligation of the FNMA
under its guaranty is solely the obligation of the FNMA and is not backed
by, nor entitled to, the full faith and credit of the United States.
The market value of mortgage-related securities depends on, among other
things, the level of interest rates, the certificates' coupon rates and the
payment history of the mortgagors of the underlying mortgages.
Repurchase Agreements (All Funds). The Funds may enter into repurchase
agreements with U.S. Government securities dealers recognized by the Federal
Reserve Board, with member banks of the Federal Reserve System, or with such
other brokers or dealers that meet the credit guidelines of the Board of
Directors. In a repurchase agreement, the Fund buys a security from a
seller that has agreed to repurchase the same security at a mutually agreed
upon date and price. A Fund's resale price will be in excess of the
purchase price, reflecting an agreed upon interest rate. This interest rate
is effective for the period of time the Fund is invested in the agreement
and is not related to the coupon rate of the underlying security.
Repurchase agreements may also be viewed as a fully collateralized loan of
money by the Fund to the seller. The period of these repurchase agreements
will usually be short, from overnight to one week, and at no time will a
Fund invest in repurchase agreements for more than one year. A Fund will
always receive as collateral securities whose market value including accrued
interest is, and during the entire term of the agreement remains, at least
equal to 100% of the dollar amount invested by the Fund in each agreement,
and the Fund will make payment for such securities only upon physical
delivery or upon evidence of book entry transfer to the account of the
Custodian. If the seller defaults, the Fund might incur a loss if the value
of the collateral securing the repurchase agreement declines and might incur
disposition costs in connection with liquidating the collateral. In
addition, if bankruptcy proceedings are commenced with respect to the seller
of a security which is the subject of a repurchase agreement, realization
upon the collateral by the Fund may be delayed or limited. The Manager
seeks to minimize the risk of loss through repurchase agreements by
analyzing the creditworthiness of the obligors under repurchase agreements,
in accordance with the credit guidelines of the Board of Directors. With
respect to the European Fund only, no more than 5% of the Funds' net assets
will be invested in repurchase agreements at any one time.
Reverse Repurchase Agreements (Stock, S&P 500, Bond Market Index,
Midcap and Equity Income Funds). A Fund may enter into reverse repurchase
agreements to meet redemption requests where the liquidation of portfolio
securities is deemed by the Manager to be inconvenient or disadvantageous.
A reverse repurchase agreement is a transaction whereby a Fund transfers
possession of a portfolio security to a bank or broker-dealer in return for
a percentage of the portfolio security's market value. The Fund retains
record ownership of the security involved including the right to receive
interest and principal payments. At an agreed upon future date, the Fund
repurchases the security by paying an agreed upon purchase price plus
interest. Cash or liquid high-grade debt obligations of the Fund equal in
value to the repurchase price including any accrued interest will be
maintained in a segregated account while a reverse repurchase agreement is
in effect.
When-Issued Securities (All Funds). New issues of U.S. Treasury and
Government securities are often offered on a when-issued basis. This means
that delivery and payment for the securities normally will take place
approximately 7 to 15 days after the date the buyer commits to purchase
them. The payment obligation and the interest rate that will be received on
securities purchased on a when-issued basis are each fixed at the time the
buyer enters into the commitment. Each Fund will make commitments to
purchase such securities only with the intention of actually acquiring the
securities, but the Fund may sell these securities or dispose of the
commitment before the settlement date if it is deemed advisable as matter of
investment strategy. Cash or marketable high grade debt securities equal to
the amount of the above commitments will be segregated on each Fund's
records. For the purpose of determining the adequacy of these securities
the segregated securities will be valued at market. If the market value of
such securities declines, additional cash or securities will be segregated
on the Fund's records on a daily basis so that the market value of the
account will equal the amount of such commitments by the Fund.
Securities purchased on a when-issued basis and the securities held by
each Fund are subject to changes in market value based upon the public's
perception of changes in the level interest rates. Generally, the value of
such securities will fluctuate inversely to changes in interest rates --
i.e., they will appreciate in value when interest rates decline and decrease
in value when interest rates rise. Therefore, if in order to achieve higher
interest income each Fund remains substantially fully invested at the same
time that it has purchased securities on a "when issued" basis, there will
be a greater possibility of fluctuation in the Fund's net asset value.
When payment for when-issued securities is due, each Fund will meet its
obligation from then-available cash flow, the sale of segregated securities,
the sale of other securities, or, although it would not normally expect to
do so, from the sale of the when-issued securities themselves (which may
have a market value greater or less than the Fund's payment obligation).
The sale of securities to meet such obligations carries with it a greater
potential for the realization of capital gains, which are subject to federal
income taxes.
Loans of Fund Securities (All Funds). Each Fund has authority to lend
its portfolio securities provided (1) the loan is secured continuously by
collateral consisting of U.S Government securities or cash or cash
equivalents adjusted daily to make a market value at least equal to the
current market value of these securities loaned; (2) the Fund may at any
time call the loan and regain the securities loaned; (3) the Fund will
receive any interest or dividends paid on the loaned securities; and (4) the
aggregate market value of securities loaned will not at any time exceed one-
third of the total assets of the Fund. In addition, it is anticipated that
a Fund may share with the borrower some of the income received on the
collateral for the loan or that it will be paid a premium for the loan. In
determining whether to lend securities, the Manager (and in the case of the
European Fund, the sub-adviser) considers all relevant factors and
circumstance including the creditworthiness of the borrower.
Futures Contracts and Options (All Funds, except the Stock Fund). For
the purpose of creating market exposure for uncommitted cash balances,
reducing transaction costs associated with rebalancing a Fund, facilitating
trading or seeking higher investment returns when a futures contract is
priced more attractively than the underlying security or index, each of the
above-referenced Funds may enter into futures contracts, options, and
options on futures contracts with respect to securities in which the Funds
may invest and indices comprised of such securities.
Futures contracts provide for the future sale by one party and purchase
by another party of a specified amount of a specific security or securities
index at a specified future time and at a specified price. Where the
underlying security is an index, no physical transfer of securities takes
place; rather, upon expiration of the contract, the parties settle by
exchanging cash in an amount equal to the difference between the contract
price and the closing value of the index at expiration, net of variation
margin previously paid. Futures contracts that are standardized as to
maturity date and underlying interest are traded on national futures
exchanges.
Futures traders are required to make a good faith margin deposit in
cash or government securities with a broker or custodian to initiate and
maintain open positions in futures contracts. A margin deposit is intended
to assure completion of the contract (delivery or acceptance of the
underlying security) if it is not terminated prior to the specified delivery
date. Minimal initial margin requirements are established by the futures
exchange and may be changed. Brokers may establish deposit requirements
which are higher than the exchange minimums.
After a futures contract position is opened, the value of the contract
is marked to market daily. If the futures contract price changes to the
extent that the margin on deposit does not satisfy margin requirements,
payment of additional "variation" margin will be required. Conversely,
change in the contract value may reduce the required margin, resulting in a
repayment of excess margin to the contract holder. Variation margin
payments are made to and from the futures broker for as long as the contract
remains open. Each Fund expects to earn interest income on its margin
deposits.
Options are of two basic types, either call or put options, and may
relate to a single security, a securities index or a futures contract. A
call option on a security permits the holder of the option to purchase the
underlying security at a specified price ("strike price") at any time during
the term of the option. Thus, in exchange for the premium paid to the
writer, the purchaser obtains the right to profit from any appreciation in
the value of the underlying security above the strike price. A put option
permits the holder to sell the underlying security to the writer at the
strike price at any time during the term of the contract. Thus, in exchange
for the premium paid to the writer, the purchaser is relieved of the risk of
a decline in the value of the underlying security below the strike price.
An option on a securities index gives the holder the right to receive cash
from the writer in an amount equal to the difference between the strike
price of the option and the value of the underlying index multiplied by a
factor established by the exchange upon which the option is traded. An
option on a futures contract gives the holder, in return for the premium
paid to the writer, the right to assume a position in the underlying futures
contract at a specified price at any time during the term of the option.
Although futures and options contracts by their terms call for actual
delivery or acceptance of the underlying securities, in most cases the
contracts are closed out before the settlement date without the making or
taking of delivery. Closing out an open futures position is done by taking
an opposite position ("buying" a contract which has previously been "sold,"
or "selling" a contract previously purchased) in an identical contract to
terminate the position. An option purchased may be closed out by selling
the option. An option written is closed out by purchasing an option
identical to that written. Brokerage commissions are incurred when future
and options contracts are bought and sold.
Restrictions on the Use of Futures Contracts and Options (All Funds,
except the Stock Fund). Each Fund will not enter into futures contracts to
the extent that its outstanding obligations under these contracts would
exceed 25% of the Fund's total assets. To the extent that a Fund enters
into futures contracts and options on futures positions that are not for
bona fide hedging purposes (as defined by the Commodity Futures Trading
Commission), the aggregate initial margin and premiums on these positions
(excluding the amount by which options are "in-the-money") may not exceed 5%
of the Fund's net assets.
Transactions using options and futures contracts (other than options
that the Fund has purchased) expose the Fund to an obligation to another
party. A Fund will not enter into any such transactions unless it owns
either (1) an offsetting ("covered") position in securities or other options
or futures contracts or (2) cash, receivables and short-term debt securities
with a value sufficient at all times to cover its potential obligations not
covered as provided in (1) above. Each Fund will comply with SEC guidelines
regarding cover for these instruments and, if the guidelines so require, set
aside cash, U.S. Government securities or other liquid, high-grade debt
securities in a segregated account with its custodian in the prescribed
amount.
All options purchased or written by a Fund must be listed on a national
securities or futures exchange or traded in the over-the-counter ("OTC")
market. A Fund will not purchase or write OTC options if, as a result of
such transaction, the sum of (i) the market value of outstanding OTC options
purchased by the Fund, (ii) the market value of the underlying securities
covered by outstanding OTC call options written by the Fund, and (iii) the
market value of other assets of the Fund that are illiquid or are not
otherwise readily marketable, would exceed 15% of the net assets of the
Fund, taken at market value. However, if an OTC option is sold by a Fund to
a primary U.S. Government securities dealer recognized by the Federal
Reserve Bank of New York and the Fund has the unconditional contractual
right to repurchase such OTC option from the dealer at a predetermined
price, then the Fund will treat as illiquid such amount of the underlying
securities as is equal to the repurchase price less the amount by which the
option is "in-the-money" (the difference between current market value of the
underlying security and the option's strike price). The repurchase price
with primary dealers is typically a formula price which is generally based
on a multiple of the premium received for the option plus the amount by
which the option is "in-the-money."
Each Fund may write only covered options. A call option is covered if
the Fund owns the underlying security or a call option on the same security
with a lower strike price. A put option is covered if the Fund segregates
cash and/or short-term debt securities in an amount necessary to pay the
strike price of the option or purchases a put option on the same underlying
security with a higher strike price.
Each Fund will not purchase puts, calls, straddles, spreads or any
combination thereof, if as a result of such purchase the value of the Fund's
aggregate investment in such securities would exceed 5% of the Fund's total
assets.
Risk Factors in Futures and Options Transactions (All Funds, except the
Stock Fund). There can be no assurance that a liquid secondary market will
exist for any particular futures or option contract at any specific time.
Thus, it may not be possible to close a futures or option position. In the
event of adverse price movements, each Fund would continue to be required to
make daily cash payments to maintain its required margin with respect to
open futures or written options positions. In such a situation, if the Fund
has insufficient cash, it may have to sell portfolio securities to meet
daily margin requirements at a time when it may be disadvantageous to do so.
In addition, a Fund may be required to make or take delivery of the
securities underlying futures contracts that it holds and options contracts
that it has written.
Each Fund will seek to minimize the risk that it will be unable to
close out a futures contract by entering into only those futures contracts
that are listed on a national futures exchange and for which there appears
to be a liquid secondary market. Likewise, each Fund will enter into only
those option contracts that are listed on a national securities exchange or
traded in the OTC market for which there appears to be a liquid secondary
market.
The risk of loss in trading futures contracts in some strategies can be
substantial, due both to the low margin deposits required, and the extremely
high degree of leverage involved in futures pricing. As a result, a
relatively small price movement in a futures contract may result in
immediate and substantial loss (as well as gain) to the investor. For
example, if at the time of purchase, 10% of the value of the futures
contract is deposited as margin, a subsequent 10% decrease in the value of
the futures contract would result in a total loss of margin deposit, before
any deduction for the transaction costs, if the account were then closed
out. A 15% decrease would result in a loss equal to 150% if the original
margin deposit for the contract were closed out. Thus, a purchase or sale
of a futures contract may result in losses in excess of the amount invested
in the contract. Options transactions are subject to similar risks.
However, because each Fund will not engage in futures or options
transactions for speculative purposes, the Manager believes that a Fund's
risk of loss is less than the risk of loss associated with speculative
transactions. Moreover, in the foregoing example, the Fund would presumably
have sustained comparable losses if, instead of the futures contract, it had
invested in the underlying security and sold it after the decline.
Utilization of futures contracts and options transactions by each Fund
does involve the risk of imperfect or no correlation where the securities
underlying futures and options contracts are different from the portfolio
securities being hedged. It is also possible that a Fund could both lose
money on futures and options contracts and also experience a decline in
value of its portfolio securities. There is also the risk of loss by a Fund
of margin deposits in the event of bankruptcy of a broker with whom the Fund
has an open position in a futures contract or option thereon.
Most futures exchanges limit the amount of fluctuation permitted in
futures contract prices during a single trading day. The daily limit
establishes the maximum amount that the price of a futures contract may vary
either up or down from the previous day's settlement price at the end of a
trading session. Once the daily limit has been reached in a particular type
of contract, no trade may be made on that day at a price beyond that limit.
The daily limit governs only price movement during a particular trading day
and therefore does not limit potential losses, because the limit may prevent
the liquidation of unfavorable positions. Futures contract prices have
occasionally moved to the daily limit for several consecutive trading days
with little or no trading thereby preventing prompt liquidation of future
positions and subjecting some futures traders to substantial losses.
Futures and options contracts involve special tax considerations. See
"Dividends, Other Distributions and Taxes" for further information.
Commercial Paper (All Funds). The Funds may invest in commercial paper
issued in reliance on the so called "private placement" exemption from
registration afforded by Section 4(2) of the Securities Act of 1933
("Section 4(2) paper"). Section 4(2) paper is restricted as to disposition
under the federal securities laws and generally is sold to investors who
agree that they are purchasing the paper for an investment and not with a
view to public distribution. Any resale by the purchaser must be in an
exempt transaction. Section 4(2) paper is normally resold to other
investors through or with the assistance of the issuer or investment dealers
who make a market in Section 4(2) paper, thus providing liquidity. Pursuant
to guidelines established by Dreyfus/Laurel's Board of Directors, the
Manager, (or in the case of the European Fund, the sub-adviser) may
determine that Section 4(2) paper is liquid for the purposes of complying
with the Funds' investment restriction relating to investments in illiquid
securities.
INVESTMENT LIMITATIONS
The following limitations have been adopted by each Fund. A Fund may
not change any of these fundamental investment limitations without the
consent of: (a) 67% or more of the shares present at a meeting of
shareholders duly called if the holders of more than 50% of the outstanding
shares of a Fund are present or represented by proxy; or (b) more than 50%
of the outstanding shares of a Fund, whichever is less. Each Fund may not:
1. Purchase any securities that would cause more than 25% of the value of
a Fund's total assets at the time of such purchase to be invested in
the securities of one or more issuers conducting their principal
activities in the same industry. (For purposes of this limitation,
U.S. Government securities, and state or municipal governments and
their political subdivisions are not considered members of any
industry. In addition, this limitation does not apply to investments
in domestic banks, including U.S. branches of foreign banks and foreign
branches of U.S. banks).
2. Borrow money or issue senior securities as defined in the 1940 Act
except that (a) a Fund may borrow money in an amount not exceeding one
third of the Fund's total assets at the time of such borrowings, and
(b) a Fund may issue multiple classes of shares. The purchase or sale
of futures contracts and related options shall not be considered to
involve the borrowing of money or issuance of senior securities.
3. Purchase with respect to 75% of a Fund's total assets securities of any
one issuer (other than securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities) if, as a result, (a)
more than 5% of a Fund's total assets would be invested in the
securities of that issuer, or (b) a Fund would hold more than 10% of
the outstanding voting securities of that issuer.
4. Make loans or lend securities, if as a result thereof more than one
third of the Fund's total assets would be subject to all such loans.
For purposes of this limitation debt instruments and repurchase
agreements shall not be treated as loans.
5. Purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent a Fund
from investing in securities or other instruments backed by real
estate, including mortgage loans, or securities of companies that
engage in real estate business or invest or deal in real estate or
interests therein).
6. Underwrite securities issued by any other person, except to the extent
that the purchase of securities and later disposition of such
securities in accordance with the Fund's investment program may be
deemed an underwriting.
7. Purchase or sell commodities except that each Fund may enter into
futures contracts and related options, forward currency contracts and
other similar instruments.
Each Fund may:
Notwithstanding any other fundamental investment policy or limitation,
invest all of its investable assets in securities of a single open-end
management investment company with substantially the same investment
objectives, policies and limitations as the Fund.
The Funds above have adopted the following additional non-fundamental
restrictions. These non-fundamental restrictions may be changed without
shareholder approval, in compliance with applicable law and regulatory
policy.
1. No Fund shall sell securities short, unless it owns or has the right to
obtain securities equivalent in kind and amount to the securities sold
short, and provided that transactions in futures contracts are not
deemed to constitute selling short.
2. No Fund shall purchase securities on margin, except that a Fund may
obtain such short-term credits as are necessary for the clearance of
transactions, and provided that margin payments in connection with
futures contracts and options on futures contracts shall not constitute
purchasing securities on margin.
3. No Fund shall purchase oil, gas or mineral leases.
4. Each Fund will not purchase or retain the securities of any issuer if
the officers or Directors of the Fund, its advisers, or managers,
owning beneficially more than one half of one percent of the securities
of such issuer, together own beneficially more than five percent of
such securities.
5. No Fund will purchase securities of issuers (other than securities
issued or guaranteed by domestic or foreign governments or political
subdivisions thereof), including their predecessors, that have been in
operation for less than three years, if by reason thereof, the value of
such Fund's investment in securities would exceed 5% of such Fund's
total assets. For purposes of this limitation, sponsors, general
partners, guarantors and originators of underlying assets may be
treated as the issuer of a security.
6. None of the Stock, S&P 500, Midcap, Bond Market, European and Equity
Income Funds will invest more than 15% of the value of its net assets
in illiquid securities, including repurchase agreements with remaining
maturities in excess of seven days, time deposits with maturities in
excess of seven days and other securities which are not readily
marketable. For purposes of this limitation illiquid securities shall
not include Section 4(2) paper and securities which may be resold under
Rule 144A under the Securities Act of 1933, provided that the Board of
Directors, or its delegate, determines that such securities are liquid
based upon trading markets for the specific security.
7. No Fund may invest in securities of other investment companies, except
as they may acquired as part of a merger, consolidation or acquisition
of assets and except to the extent otherwise permitted by the 1940
Act.
8. No Fund shall purchase any security while borrowings representing more
than 5% of the Fund's total assets are outstanding.
9. No Fund will purchase warrants if at the time of such purchase: (a)
more than 5% of value of such Fund's assets would be invested in
warrants, or (b) more than 2% of the value of the Fund's assets would
be invested in warrants that are not listed on the New York Stock
Exchange ("NYSE") or American Stock Exchange (for purposes of this
limitation, warrants acquired by a Fund in units or attached to
securities will be deemed to have no value).
10. No Fund will purchase puts, calls, straddles, spreads and any
combination thereof if by reason thereof the value of its aggregate
investment in such classes of securities would exceed 5% of its total
assets except that: (a) this limitation shall not apply to standby
commitments, and (b) this limitation shall not apply to a Fund's
transactions in future contracts and related options.
11. The European Fund will not invest more than 25% of the market value of
the Fund's total assets in securities issued or guaranteed by a single
Western European government or its agencies and instrumentalities.
As an operating policy, a Fund will not invest more than 25% of the value of
the Fund's total assets, at the time of such purchase, in domestic banks,
including U.S. branches of foreign banks and foreign branches of U.S. banks.
The Board of Directors may change this operating policy without shareholder
approval. Notice will be given to shareholders if this policy is changed by
the Board of Directors.
CONTROLLING SHAREHOLDERS
The Dreyfus/Laurel Funds, Inc.
Mellon Bank Corporation, a Pennsylvania corporation registered as a
bank holding company under the Bank Holding Company Act of 1956, as amended,
owned of record, through its direct and indirect subsidiaries, more than 25%
of the issued and outstanding voting shares of Dreyfus/Laurel as of January
31, 1995, and is, as a consequence, deemed to be a controlling shareholder
of Dreyfus/Laurel as that term is defined under the 1940 Act. The address
of Mellon Bank Corporation is: Mellon Bank Corporation, Mutual Funds
Department, 2 Mellon Bank Center, Pittsburgh, PA 15259.
PRINCIPAL SHAREHOLDERS
The following shareholder(s) owned 5% or more of the outstanding voting
shares of the Funds at January 31, 1995:
STOCK FUND: InvestNet Corporation, Two Mellon Bank Center, Pittsburgh, PA
15259, 15% record; InvestNet Corporation, Two Mellon Bank Center,
Pittsburgh, PA, 67% record; Mac & Co., 171-027, Mellon Bank, N.A. as Nominee
for Trust Custodian, P.O. Box 320, Pittsburgh, PA 15230-0320, 9% record.
S&P 500 FUND: Mac & Co. 862-823, Mellon Bank, N.A., as Nominee for Trust
Custodian, P.O. Box 320, Pittsburgh, PA 15230-0320, 29% record; Mac & Co.,
194-803, Mellon Bank, N.A., as Nominee for Trust Custodian, P.O. Box 320,
Pittsburgh, PA 15230-0320, 29% record; Mac & Co. 853-922, Mellon Bank, N.A.,
as Nominee for Trust Custodian, P.O. Box 320, Pittsburgh, PA 15230-0320, 19%
record; Mac & Co., 178-827, Mellon Bank, N.A. as Nominee for Trust
Custodian, P.O. Box 320, Pittsburgh, PA 15230-0320, 10% record.
MIDCAP FUND: Mac & Co. 171-028, Mellon Bank, N.A., as Nominee for Trust
Custodian, P.O. Box 320, Pittsburgh, PA 15230, 73% record.
BOND MARKET FUND: Mac & Co. 178-832, Mellon Bank, N.A., as Nominee for
Trust Custodian, P.O. Box 320, Pittsburgh, PA 15230, 34% record; Mac & Co.
057-090, Mellon Bank, N.A., as Nominee for Trust Custodian, P.O. Box 320,
Pittsburgh, PA 15230, 11% record; Mac & Co. 833-6BP, Mellon Bank, N.A., as
Nominee for Trust Custodian, P.O. Box 320, Pittsburgh, PA, 8% record; Mac &
Co. 180-192, Mellon Bank, N.A., as Nominee for Trust Custodian, P.O. Box
320, Pittsburgh, PA 15230, 5% record; Mac & Co. 821-6BN, Mellon Bank, N.A.,
as Nominee for Trust Custodian, P.O. Box 320, Pittsburgh, PA 15230, 5%
record; Mac & Co. 820-1BR, Mellon Bank, N.A., as Nominee for Trust
Custodian, P.O. Box 320, Pittsburgh, PA 15230, 5% record.
EUROPEAN FUND: Mutanie, 9 Rue Huy manns, 75006 Paris, France, 20% record;
Elysees Ercins, c/o CCFSAM Back Office, 37 Avenue Pierre 1 er de Serbie,
75008 Paris, France, 14% record; Selection Mondiale, c/o CCFSAM Back Office,
37 Avenue Pierre 1 er de Serbie, 75008 Paris, France, 14% record; Selection
Europe - SICAV, c/o CCFSAM Back Office, 37 Avenue Pierre 1 er de Serbie,
75008 Paris, France, 10% record; Azur Gestion Fund, c/o CCFSAM Back Office,
3 Avenue Pierre 1 er de Serbie, 75008 Paris, France, 6% record; Rhou-Alpes
Investment Fund, c/o CCFSAM Back Office, 37 Pierre 1 er de Serbie, 75008
Paris, France record; Investment Corporation, 2 Mellon Bank Center,
Pittsburgh, PA 15259, 18% record.
EQUITY INCOME FUND: Mac & Co. 080-056, Mellon Bank, N.A., as Nominee for
Trust Custodian, P.O. Box 320, Pittsburgh, PA 15230, 98% record.
DIRECTORS AND OFFICERS
Dreyfus/Laurel has a Board composed of thirteen Directors which
supervises Dreyfus/Laurel's investment activities and reviews contractual
arrangements with companies that provide the Funds with services. The
following lists the Directors and officers and their positions with
Dreyfus/Laurel and their present and principal occupations during the past
five years. Each Director who is an "interested person" of Dreyfus/Laurel
(as defined in the Investment Company Act of 1940, as amended (the "Act"))
is indicated by an asterisk. Each of the Directors also serves as a Trustee
of The Dreyfus/Laurel Funds Trust, The Dreyfus/Laurel Investment Series and
The Dreyfus/Laurel Tax-Free Municipal Funds (collectively "The
Dreyfus/Laurel Funds").
o +RUTH MARIE ADAMS. Director of Dreyfus/Laurel; Professor of English and
Vice President Emeritus, Dartmouth College; Senator, United Chapters of
Phi Beta Kappa; Trustee, Woods Hole Oceanographic Institution. Age:
79 years old. Address: 1026 Kendal Lyme Road, Hanover, New Hampshire
03755.
o +FRANCIS P. BRENNAN. Chairman of the Board of Directors and Assistant
Treasurer of Dreyfus/Laurel; Director and Chairman, Massachusetts
Business Development Corp.; Director, Boston Mutual Insurance Company;
Director and Vice Chairman of the Board, Home Owners Federal Savings
and Loan (prior to May 1990). Age: 76 years old. Address:
Massachusetts Business Development Corp., One Liberty Square, Boston,
Massachusetts 02109.
o *JOSEPH S. DiMARTINO. Director of Dreyfus/Laurel since February 1995.
Since January 1995, Mr. DiMartino has served as Chairman of the Board
for various funds in the Dreyfus Family of Funds. For more than five
years prior thereto, he was President, a director and, until August
1994, Chief Operating Officer of the Manager and Executive Vice
President and a director of Dreyfus Service Corporation, a wholly-owned
subsidiary of the Manager and, until August 1994, the Fund's
distributor. From August 1994 to December 31, 1994, he was a director
of Mellon Bank Corporation. Mr. DiMartino is a director and former
Treasurer of the Muscular Dystrophy Association; a trustee of Bucknell
University; and a director of the Noel Group, Inc. Mr. DiMartino is
also a Board member of 58 other funds in the Dreyfus Family of Funds.
He is 51 years old and his address is 200 Park Avenue, New York, New
York 10166.
o +JAMES M. FITZGIBBONS. Director of Dreyfus/Laurel; President and
Director, Amoskeag Company; Chairman, Howes Leather Company, Inc.;
Director, Fiduciary Trust Company; Chairman, CEO and Director,
Fieldcrest-Cannon Inc.; Director, Lumber Mutual Insurance Company;
Director, Barrett Resources, Inc. Age: 59 years old. Address: 40
Norfolk Road, Brookline, Massachusetts 02167.
o *J. TOMLINSON FORT. Director of Dreyfus/Laurel; Partner, Reed, Smith,
Shaw & McClay (law firm). Age: 65 years old. Address: 204 Woodcock
Drive, Pittsburgh, Pennsylvania 15215.
o +ARTHUR L. GOESCHEL. Director of Dreyfus/Laurel; Director, Chairman of
the Board and Director, Rexene Corporation; Director, Calgon Carbon
Corporation; Director, National Picture Frame Corporation; Chairman of
the Board and Director, Tetra Corporation 1991-1993; Director, Medalist
Corporation 1992-1993; From 1988-1989 Director, Rexene Corporation.
Age: 71 years old. Address: Way Hallow Road and Woodland Road,
Sewickley, Pennsylvania 15143.
o +KENNETH A. HIMMEL. Director of Dreyfus/Laurel; Former Director, The
Boston Company, Inc. and Boston Safe Deposit and Trust Company;
President and Chief Executive Officer, Himmel & Co., Inc.; Vice
Chairman, Sutton Place Gourmet, Inc. and Florida Hospitality Group;
Managing Partner, Himmel/MKDG, Franklin Federal Partners, Reston Town
Center Associates and Grill 23 & Bar. Age: 47 years old. Address:
Himmel and Company, Inc., 101 Federal Street, 22nd Floor, Boston,
Massachusetts 02110.
o +ARCH S. JEFFERY. Director of Dreyfus/Laurel; Financial Consultant. Age:
76 years old. Address: 1817 Foxcroft Lane, Allison Park,
Pennsylvania 15101.
o +STEPHEN J. LOCKWOOD. Director of Dreyfus/Laurel; President and CEO, LDG
Management Company Inc.; CEO, LDG Reinsurance Underwriters, SRRF
Management Inc. and Medical Reinsurance Underwriters Inc. Age: 46
years old. Address: 401 Edgewater Place, Wakefield, Massachusetts
01880.
o +ROBERT D. MCBRIDE. Director of Dreyfus/Laurel; Director, Chairman and
CEO, McLouth Steel; Director, Salem Corporation. Director,
SMS/Concast, Inc. (1983-1991). Age: 66 years old. Address: 15
Waverly Lane, Grosse Pointe Farms, Michigan 48236.
o +JOHN L. PROPST. Director of Dreyfus/Laurel; Of Counsel, Reed, Smith,
Shaw & McClay (law firm). Age: 79 years old. Address: 5521 Dunmoyle
Street, Pittsburgh, Pennsylvania 15217.
o +JOHN J. SCIULLO. Director of Dreyfus/Laurel; Dean Emeritus and Professor
of Law, Duquesne University Law School; Director, Urban Redevelopment
Authority of Pittsburgh. Age: 62 years old. Address: 321 Gross
Street, Pittsburgh, Pennsylvania 15224
o +ROSLYN M. WATSON. Director of Dreyfus/Laurel; Principal, Watson
Ventures, Inc., prior to February, 1993; Real Estate Development
Project Manager and Vice President, The Gunwyn Company. Age: 44 years
old. Address: 25 Braddock Park, Boston, Massachusetts 02116-5816.
#MARIE E. CONNOLLY. President and Treasurer of Dreyfus/Laurel, The
Dreyfus/Laurel Investment Series, The Dreyfus/Laurel Funds Trust and
The Dreyfus/Laurel Tax-Free Municipal Funds (since September 1994);
Vice President of Dreyfus/Laurel, Inc. (March 1994 to September 1994);
President, Funds Distributor, Inc. (since 1992); Treasurer, Funds
Distributor, Inc. (July 1993 to April 1994); COO, Funds Distributor,
Inc. (since April 1994); Director, Funds Distributor, Inc. (since July
1992); President, COO and Director, Premier Mutual Fund Services, Inc.
(since April 1994); Senior Vice President and Director of Financial
Administration, The Boston Company Advisors, Inc. (December 1988 to May
1993). Address: One Exchange Place, Boston, Massachusetts 02109.
#FREDERICK C. DEY. Vice President of Dreyfus/Laurel, The Dreyfus/Laurel
Investment Series, The Dreyfus/Laurel Funds Trust and The
Dreyfus/Laurel Tax-Free Municipal Funds (since September 1994); Senior
Vice President, Premier Mutual Fund Services, Inc. (since August 1994);
Vice President, Funds Distributor, Inc. (since August 1994);
Fundraising Manager, Swim Across America (October 1993 to August 1994);
General Manager, Spring Industries (August 1988 to October 1993).
Address: Premier Mutual Fund Services, Inc., 200 Park Avenue New York,
New York 10166.
#ERIC B. FISCHMAN. Vice President of Dreyfus/Laurel, The Dreyfus/Laurel
Investment Series, The Dreyfus/Laurel Funds Trust and The
Dreyfus/Laurel Tax-Free Municipal Funds (since September 1994); Vice
President and Associate General Counsel, Premier Mutual Fund Services,
Inc. (Since August 1994); Vice President and Associate General Counsel,
Funds Distributor, Inc. (since August 1994); Staff Attorney, Federal
Reserve Board (September 1992 to June 1994); Summer Associate, Venture
Economics (May 1991 to September 1991); Summer Associate, Suffolk
County District Attorney (June 1990 to August 1990). Address: Premier
Mutual Fund Services, Inc., 200 Park Avenue, New York, New York 10166.
LESLIE M. GAYNOR. Assistant Treasurer of Dreyfus/Laurel, The Dreyfus/Laurel
Investment Series, The Dreyfus/Laurel Funds Trust and The
Dreyfus/Laurel Tax-Free Municipal Funds (since October 1994); Assistant
Treasurer/Manager of Treasury Services, Funds Distributor, Inc. (since
July 1994); Vice President, The Boston Company, Inc. (1989 to July
1994). Address: One Exchange Place, Boston, Massachusetts 02109.
RICHARD W. HEALEY. Vice President of Dreyfus/Laurel, The Dreyfus/Laurel
Investment Series, The Dreyfus/Laurel Tax-Free Municipal Funds and The
Dreyfus/Laurel Funds Trust (since March 1994); Senior Vice President,
Funds Distributor, Inc. (since March 1993); Vice President, The Boston
Company Inc., (March 1993 to May 1993); Vice President of Marketing,
Calvert Group (1989 to March 1993); Fidelity Investments (prior to
1989). Address: One Exchange Place, Boston, Massachusetts 02109.
#JOHN E. PELLETIER. Vice President and Secretary of Dreyfus/Laurel, The
Dreyfus/Laurel Investment Series, The Dreyfus/Laurel Funds Trust and
The Dreyfus/Laurel Tax-Free Municipal Funds (since September 1994);
Senior Vice President, General Counsel and Secretary, Funds
Distributor, Inc. (since April 1994); Senior Vice President, General
Counsel and Secretary, Premier Mutual Fund Services, Inc. (since August
1994); Counsel, The Boston Company Advisors, Inc. (February 1992 to
March 1994); Associate, Ropes & Gray (August 1990 to February 1992);
Associate, Sidley & Austin (June 1989 to August 1990). Address: One
Exchange Place, Boston, Massachusetts 02109.
___________________________
* "Interested person" of Dreyfus/Laurel, as defined in the 1940 Act.
o Member of the Audit Committee.
+ Member of the Nominating Committee.
# Officer also serves as an officer for other investment companies
advised by The Dreyfus Corporation.
The officers and Directors of Dreyfus/Laurel as a group owned
beneficially less than 1% of the total shares of each Fund outstanding as of
January 31, 1995.
No officer or employee of Premier (or of any parent, subsidiary or
affiliate thereof) receives any compensation from Dreyfus/Laurel for serving
as an officer or Director of Dreyfus/Laurel. In addition, no officer or
employee of The Dreyfus (or of any parent or subsidiary thereof) serves as
an officer or Director of Dreyfus/Laurel. The Dreyfus/Laurel Funds pay each
Director/Trustee who is not an officer or employee of (Premier or of any
parent, subsidiary or affiliate thereof) or of Dreyfus, $27,000 per annum
(and an additional $75,000 for the Chairman of the Board of
Directors/Trustees of the Dreyfus/Laurel Funds), $1,000 for each
Dreyfus/Laurel Fund meeting attended, and $750 for each Dreyfus/Laurel Fund
Audit Committee meeting attended, and reimburses each Director/Trustee for
travel and out-of-pocket expenses. For the fiscal year ended October 31,
1994 the fees for meetings and expenses totaled $57,967.
For the fiscal year ended October 31, 1994, the aggregate amount of
fees and expenses received by each Director from the Company and all other
Funds in The Dreyfus/Laurel Family of Funds for which such person is a Board
member were as follows:
<TABLE>
<CAPTION>
Total
Pension of Compensation
Retirement From the
Benefits Estimated Company
Aggregate Accrued as Annual and Fund
Compensation Part of Benefits Complex Paid
From the the Company's Upon to Board
Name of Board Member Company # Expenses Retirement Member
<S> <C> <C> <C> <C>
Ruth Marie Adams $19,685 None None $ 37,500
Francis P. Brennan* 52,809 None None 112,500
Joseph S. DiMartino** N/A N/A N/A N/A
James M. Fitzgibbons 17,685 None None 31,750
J. Tomlinson Fort 7,500 None None 7,500
Arthur L. Goeschel 26,185 None None 32,500
Kenneth A. Himmel 18,685 None None 35,750
Arch S. Jeffrey 27,185 None None 33,500
Steven J. Lockwood 18,685 None None 35,750
Robert D. McBride 27,185 None None 33,500
John L. Propst 27,185 None None 33,500
John J. Sciullo 27,185 None None 33,500
Roslyn M. Watson 19,685 None None 36,750
</TABLE>
# Amount does not include reimbursed expenses for attending Board meetings,
which amounted to $10,876 for the Company.
* Compensation of Francis Brennan includes $75,000 paid by The
Dreyfus/Laurel Fund Family to be Chairman of the Board.
** Joseph S. DiMartino was not a director of the Company as of October 31,
1994.
INVESTMENT MANAGEMENT AND OTHER SERVICES
Advisory Services. The Dreyfus Corporation ("Dreyfus") serves as the
investment manager (the "Manager") for the Funds pursuant to an Investment
Management Agreement with Dreyfus/Laurel dated April 4, 1994 ("Management
Agreement"), transferred from Mellon Bank, N.A. (One Mellon Bank Center,
Pittsburgh, PA 15258) ("Mellon Bank"), to Dreyfus effective October 17,
1994. Dreyfus is a wholly-owned subsidiary of Mellon Bank. Pursuant to the
Management Agreement, Dreyfus provides, or arranges for one or more third
parties to provide investment advisory, administrative, custody, fund
accounting and transfer agency services to each Fund. As Manager, Dreyfus
manages each Fund by making investment decisions based on the Fund's
investment objective, policies and restrictions. For these services, each
Fund pays a fee to Dreyfus at the rates stated in the Prospectus.
With respect to the European Fund, S.A.M. Finance, S.A. ("CCF SAM") 115
Avenue des Champs-Elysees, Paris, France 75008, serves as an investment sub-
adviser pursuant to a Sub-Advisory Agreement among Dreyfus/Laurel, CCF SAM
and Mellon Bank dated August 31, 1993 ("European Sub-Advisory Agreement"),
transferred to Dreyfus effective as of October 17, 1994, (the "Sub-Advisory
Agreement"). CCF SAM is a wholly-owned subsidiary of Credit Commercial de
France ("CCF"), a French bank. Under the Management and Sub-Advisory
Agreements, CCF SAM directs the investments of substantially all of the
European Fund's assets in accordance with its investment objective, policies
and limitations. The Manager has overall responsibility for general
management of the European Fund, and for compliance with applicable law and
the European Fund's investment objective, policies and limitations. The
Manager also directs investments of all assets not assigned to CCF SAM. For
these services, the European Fund pays a fee to the Manager, and the manager
pays a portion thereof to CCF SAM, at the rates stated in the Prospectus.
The Management and Sub-Advisory Agreements will continue from year to
year provided that a majority of the Directors who are not interested
persons of the Funds or the Manager and either a majority of all Directors
or a majority of the shareholders of each Fund approve the continuance.
Dreyfus/Laurel may terminate the Agreements, without prior notice to the
Manager or CCF SAM, upon the vote of a majority of the Board of Directors or
upon the vote of a majority of the outstanding voting securities of each
Fund. The Manager may terminate the Management Agreement upon 60 days'
written notice to Dreyfus/Laurel; the Manager or CCF SAM may terminate the
Sub-Advisory Agreement upon 60 days' notice to the other parties. The
Management Agreement and the Sub-Advisory Agreement each will terminate
immediately and automatically upon its assignment.
CCF International Finance Corp. ("CCIF"), a wholly owned subsidiary of
CCF, was the adviser to Capstone European and received an investment
advisory fee equal to an annual rate of .65% of Capstone European's average
net assets. CCIF agreed to waive a portion of its fees, thereby reducing
the amount payable to CCIF to an annual rate of .50% of Capstone European's
average net assets.
Except as noted below, each of the Funds did not pay a management fee.
For the last three fiscal years, each Fund had the following expenses:
<TABLE>
<CAPTION>
For the Fiscal Years Ended October 31,
1994 1993 1992
<S> <C> <C> <C>
Equity Income Fund (1)
Advisory fees (gross of waiver) $7,144 -- --
Expense reimbursement from Adviser -- -- --
Advisory fees waived -- -- --
Midcap Fund (2)
Advisory fees (gross of waiver) 170,453 -- --
Expense reimbursement from Adviser 61,475 -- --
Advisory Fees waived -- -- --
Stock Fund
Advisory fees (gross of waiver) 1,892,422 $574,496 $332,843
Expense reimbursement from Adviser 131,810 244,604 234,231
Advisory Fees waived -- -- --
Bond Market Fund (3)
Advisory fees (gross of waiver) 19,521 -- --
Expense reimbursement from Adviser 57,622 -- --
Advisory Fees waived -- -- --
S&P 500 Fund
Advisory fees (gross of waiver) 371,508 5,476 (4) --
Expense reimbursement from Adviser 52,201 30,614 (4) --
Advisory Fees waived -- -- (4) --
European Fund
Advisory fees (gross of waiver) 147,137 77,215 (5) 71,546
(5)
Expense reimbursement from Adviser 28,625 -- --
Advisory Fees waived -- 17,819 --
</TABLE>
(1) Equity Income Fund commenced operations on September 2, 1994.
(2) Midcap Fund commenced operations on November 12, 1993.
(3) Bond Market Index Fund commenced operations on November 30, 1993.
(4) For the period September 30, 1993 (commencement of operations) to
October 31, 1993.
(5) Advisory fee paid by Capstone European to CCIF.
Distribution Plan--Investor Shares. The Securities and Exchange
Commission ("SEC") has adopted Rule 12b-l under the 1940 Act ("Rule")
regulating the circumstances under which investment companies such as
Dreyfus/Laurel may, directly or indirectly, bear the expenses of
distributing their shares. The Rule defines distribution expenses to
include expenditures for "any activity which is primarily intended to result
in the sale of fund shares." The Rule, among other things, provides that an
investment company may bear such expenses only pursuant to a plan adopted in
accordance with the Rule. With respect to the Investor Class shares of the
Funds, Dreyfus/Laurel has adopted a Distribution Plan ("Plan"), and may
enter into Selling Agreements with Service Agents pursuant to the Plan.
Under the Plan, each Fund may spend annually up to 0.25% of its average
daily net assets attributable to Investor shares for costs and expenses
incurred in connection with the distribution of, and shareholder servicing
with respect to, the Fund's Investor shares.
The Plan provides that a report of the amounts expended under the Plan,
and the purposes for which such expenditures were incurred, must be made to
Dreyfus/Laurel's Directors for their review at least quarterly. In
addition, the Plan provides that it may not be amended to increase
materially the costs which a Fund may bear for distribution pursuant to the
Plan without approval of a Fund's shareholders, and that other material
amendments of the Plan must be approved by the vote of a majority of the
Directors and of the Directors who are not "interested persons" of the Funds
or the Manager (as defined in the 1940 Act) and who do not have any direct
or indirect financial interest in the operation the Plan, cast in person at
a meeting called for the purpose of considering such amendments. The Plan
is subject to annual approval by the entire Board of Directors and by the
Directors who are neither interested persons nor have any direct or indirect
financial interest in the operation of the Plan, by vote cast in person at a
meeting called for the purpose of voting on the Plan. The Plan is
terminable, as to a Fund's Investor class of shares, at any time by vote of
a majority of the Directors who are not interested persons and have no
direct or indirect financial interest in the operation of the Plan or by
vote of the holders of a majority of the outstanding shares of such class of
the Fund.
The Distributor; Sub-Administrator. Premier Mutual Fund Services,
Inc., One Exchange Place, Boston, Massachusetts 02109 ("Premier"), a wholly-
owned subsidiary of Institutional Administration Services, Inc., serves as
the Fund's distributor pursuant to an agreement which is renewable annually.
Premier also acts as distributor for other funds in the Dreyfus Family of
Funds and for certain other investment companies. Premier also serves as
Sub-Administrator ("Sub-Administrator") to the Funds pursuant to a Sub-
Administration Agreement effective October, 17, 1994.
With respect to European Fund, until October 31, 1993, Capstone Asset
Management Company served as Capstone European's administrator and received
a fee, computed daily and payable monthly, at an annual rate of .35% of the
Capstone European's average net assets. Capstone Asset Management Company
had agreed, at least through February 1, 1995, to limit its fees to a .25%
annual rate. For the fiscal years ended October 31, 1993, and 1992,
Capstone Asset Management Company received $65,577 and $91,093,
respectively, in administration fees from Capstone European.
Prior to September 23, 1994, Frank Russell Investment Management
Company acted as the Fund's Administrator and was paid the following amounts
in Administrator's fees by the Funds:
<TABLE>
<CAPTION>
For year Ended October 31
Fund 1994 1993 1992
<S> <C> <C> <C>
Stock Fund $23,661 $18,910 $13,054
S&P 500 Fund 10,838 551 N/A
MidCap Fund 1,819 N/A N/A
Bond Market Fund 876 N/A N/A
European Fund 1,270 N/A N/A
Equity Income Fund N/A N/A N/A
</TABLE>
Suspension of Redemptions. The right of redemption may be suspended or
the date of payment postponed (a) during any period when the NYSE 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 SEC 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 SEC by order may permit to protect the
Fund's shareholders.
Redemption Commitment. Each Fund has committed itself to pay in cash
all redemption requests by any shareholder of record of the Fund, limited in
amount during any 90-day period to the lesser of $250,000 or 1% of the value
of a particular Fund's net assets at the beginning of such period. Such
commitment is irrevocable without the prior approval of the SEC. In the
case of requests for redemption in excess of such amount, the Board of
Directors 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 Funds to the detriment of the
existing shareholders. In this event, the securities would be valued in the
same manner as the Funds' portfolio are valued. If the recipient sold such
securities, brokerage charges would be incurred.
Custodian and Fund Accountant (European Fund). Boston Safe Deposit &
Trust Company, One Boston Place, Boston, Massachusetts 02109 ("Boston Safe")
serves as custodian and fund accountant for the European Fund pursuant to a
Custodian Agreement and Fund Accountant Agreement with Dreyfus/Laurel, dated
November 1, 1993. Prior to effectiveness of the Management Agreement, for
its services as custodian to the European Fund, Boston Safe was paid an
annual fee of $20,000, a per security holding charge of $5.00 per month, a
monthly global safekeeping charge based on asset level and country invested
in, and an additional charge of $20.00 for each third party transaction.
For its services as fund accountant, Boston Safe was paid an annual fee of
$20,000 and an annual asset-based fee of .12% of the first $10 million of
the European Fund's average daily net assets, .10% on the next $10 million
of average daily net assets and .08% on average daily net assets over $20
million. In addition, Boston Safe is reimbursed for out-of-pocket expenses
that include wire fees, telephone expenses, postage fee and courier
services.
CCF served as the custodian for the CCF Capstone European with respect
to all securities owned by Capstone European and cash from the sale of its
securities. The cash from the purchase and sale of Capstone European shares
was held by National Westminister Bank, NJ. CCF charged Capstone European
$26,826 in 1990 for custodial services.
Custodian, Fund Accountant (All Funds, except the European Fund).
Mellon Bank serves as custodian and fund accountant with respect to each
Fund except the European Fund. Mellon Bank provides portfolio and
shareholder recordkeeping required for regulatory and financial reporting
purposes. Mellon Bank, as Custodian and Fund Accountant, has no part in
determining the investment policies of the Fund or which securities are to
be purchased or sold by the Fund.
Prior to the effectiveness of the Management Agreement, for its
services as custodian and fund accountant, Mellon Bank was paid an annual
fee of $30,000 per portfolio and, for all portfolios, an annual
administrative account maintenance fee of $ 10,000, an annual on-line fee of
$3,600, an asset-based fee of .02% of the first $500 million of
Dreyfus/Laurel's net assets and .01% of net assets over $500 million, plus a
specified transaction fee for each transaction.
Transfer and Dividend Disbursing Agent (All Funds). The Shareholder
Services Group, Inc. ("TSSG"), a subsidiary of First Data Corporation, is
the Fund's transfer and dividend disbursing agent. TSSG has no part in
determining the investment policies of the Fund or which securities are to
be purchased or sold by the Fund.
FEDERAL LAW AFFECTING MELLON BANK
The Glass-Steagall Act of 1933 prohibits national banks from engaging
in the business of underwriting, selling or distributing securities and
prohibits a member bank of the Federal Reserve System from having certain
affiliations with an entity engaged principally in the business. The
activities of Mellon Bank in informing its customers of, and performing,
investment and redemption services in connection with a Fund, and in
providing services to a Fund as custodian and fund accountant, as well as
Dreyfus' investment advisory activities, may raise issues under these
provisions. Mellon Bank has been advised by counsel that these activities
are consistent with Mellon Bank's statutory and regulatory obligations.
Changes in either federal or state statutes and regulations relating to
the permissible activities of banks and their subsidiaries or affiliates, as
well as further judicial or administrative decisions or interpretations of
such future statutes and regulations could prevent Mellon Bank or Dreyfus
from continuing to perform all or a part of the above services for its
customers and/or a Fund. If Mellon Bank or Dreyfus were prohibited from
serving a Fund in any of its present capacities, the Directors would seek an
alternative provider(s) of such services.
PORTFOLIO TRANSACTIONS
All portfolio transactions of each Fund are placed on behalf of a Fund
by the Manager or in the case of European Fund, CCF SAM. Debt securities
purchased and sold by a Fund are generally traded on a net basis (i.e.,
without commission) through dealers acting for their own account and not as
brokers, or otherwise involve transactions directly with the issuer of the
instrument. This means that a dealer (the securities firm or bank dealing
with a Fund) makes a market for securities by offering to buy at one price
and sell at a slightly higher price. The difference between the prices is
known as a spread. Other portfolio transactions may be executed through
brokers acting as agent. A Fund will pay a spread or commissions in
connection with such transactions. The Manager, or in the case of European
Fund CCF SAM, uses its best efforts to obtain execution of portfolio
transactions at prices which are advantageous to a Fund and at spreads and
commission rates, if any, which are reasonable in relation to the benefits
received. The Manager, or in the case of European Fund CCF SAM, also places
transactions for other accounts that it provides with investment advice.
Brokers and dealers involved in the execution of portfolio transactions
on behalf of Fund are selected on the basis of their professional capability
and the value and quality of their services. In selecting brokers or
dealers, the Manager, or in the case of European Fund CCF SAM, will consider
various relevant factors, including, but not limited to, the size and type
of the transaction; the nature and character of the markets for the security
to be purchased or sold; the execution efficiency, settlement capability,
and financial condition of the broker-dealer; the broker-dealer's execution
services rendered on a continuing basis; and the reasonableness of any
spreads (or commissions, if any). Any spread, commission, fee or other
remuneration paid to an affiliated broker-dealer is paid pursuant to
Dreyfus/Laurel's procedures adopted in accordance with Rule 17e-1 of the
1940 Act.
Brokers or dealers may be selected who provide brokerage and/or
research services to a Fund and/or other accounts over which the Manager, or
in the case of European Fund CCF SAM, or its affiliates exercise investment
discretion. Such services may include advice concerning the value of
securities; the advisability of investing in, purchasing or selling
securities; the availability of securities or the purchasers or sellers of
securities; furnishing analyses and reports concerning issuers, industries,
securities, economic factors and trends, portfolio strategy and performance
of accounts; and effecting securities transactions and performing functions
incidental thereto (such as clearance and settlement).
The receipt of research services from broker-dealers may be useful to
the Manager, or in the case of European Fund CCF SAM, in rendering
investment management services to a Fund and/or its other clients; and,
conversely, such information provided by brokers or dealers who have
executed transaction orders on behalf of other clients of the Manager, or in
the case of European Fund CCF SAM, may be useful to these organizations in
carrying out their obligations to a Fund. The receipt of such research
services does not reduce these organizations' normal independent research
activities; however, it enables these organizations to avoid the additional
expenses which might otherwise be incurred if these organizations were to
attempt to develop comparable information through their own staffs.
The Directors periodically review the Manager's and CCF SAM's
performance of responsibilities in connection with the placement of
portfolio transactions on behalf of a Fund and review the prices paid by the
Funds over representative periods of time to determine if they are
reasonable in relation to the benefits to the Funds.
Although the Manager and CCF SAM manage other accounts in addition to
the Funds, investment decisions for each Fund are made independently from
decisions made for these other accounts. It sometimes happens that the same
security is held by more than one of the accounts managed by the Manager, or
in the case of European Fund CCF SAM. Simultaneous transactions may occur
when several accounts are managed by the same investment adviser,
particularly when the same investment instrument is suitable for the
investment objective of more than one account.
When more than one account is simultaneously engaged in the purchase or
sale of the same investment instrument, the prices and amounts are allocated
in accordance with a formula considered by the Manager, or in the case of
European Fund CCF SAM, to be equitable to each account. In some cases this
system could have a detrimental effect on the price or volume of the
investment instrument as far as a particular Fund is concerned. In other
cases, however, the ability of the Fund to participate in volume
transactions will produce better executions for the Fund. While the
Directors will continue to review simultaneous transactions, it is their
present opinion that the desirability of retaining the Manager, or in the
case of European Fund CCF SAM, as investment advisers to the Funds outweighs
any disadvantages that may be said to exist from exposure to simultaneous
transactions.
Except as noted below, none of the Funds pay a stated brokerage
commission.
The brokerage commissions paid by the Stock Fund for fiscal years ended
October 31, 1994, 1993 and 1992 were $620,361, $141,241 and $90,162,
respectively. The principal reason for the increase in the Stock Fund's
brokerage commissions for the three years was an increase in assets.
For the period September 30, 1993 (commencement of operations) to
October 31, 1993 and for the fiscal year ended 1994, S&P 500 Fund paid
brokerage commissions amounting to $1,194 and $29,595, respectively.
Brokerage commissions paid by the European Fund on portfolio
transactions during the fiscal year ended October 31, 1994 totaled $21,305,
which represented 0.20% of European Fund's assets. Brokerage commissions
paid by Capstone European on portfolio transactions during the fiscal year
ended October 31, 1993 totaled $65,168 which represented 0.62% of Capstone
European's assets. Of that total, payments were made to the following
affiliates of CCIF, Capstone European's previous adviser. CCF SAM and CCIF
are both wholly-owned subsidiaries of CCF.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
% of Total % of Total
Brokerage Transactions Involving
Broker Payments Commissions Payment of Commission
CCF Frankfurt $12,606 19.34% 14.95%
CCF Geneva 3,918 6.01 6.31
Elysees Bourse 10,040 15.41 14.68
</TABLE>
Brokerage commissions paid by Capstone European on portfolio
transactions during the fiscal year ended October 31, 1992, totaled $31,228,
which represented 0.17% of Capstone European's assets. Of that total,
payments were made to the following affiliates of CCIF:
<TABLE>
<CAPTION>
% of Total % of Total
Brokerage Transactions Involving
Broker Payments Commissions Payment of Commission
<S> <C> <C> <C>
CCF Geneva $4,825 15.45% 15.20%
CCF Frankfurt 4,690 15.02 15.46
Elysees Bourse 3,849 12.32 13.36
CCF Milan 2,067 6.62 5.66
</TABLE>
The percentage of Capstone European's aggregate dollar amount of
transactions involving the payment of commissions effected through
affiliates for the fiscal years ended October 31, 1993 and 1992 was 35.9%
and 49.4%, respectively. During the fiscal years ended October 31, 1993,
1992 and 1991 Capstone European also executed trades in the amount of
$107,436 and $50,708, respectively, in which a "mark-up" (the dealers
profit) was included in the price of the securities, which trades are
excluded when calculating average commission rates.
Portfolio Turnover. The portfolio turnover rate for each Fund is
calculated by dividing the lesser of a Fund's annual sales or purchases of
portfolio securities (exclusive of purchases and sales of securities whose
maturities at the time of acquisition were one year or less) by the monthly
average value of securities in the Fund during the year.
The portfolio turnover rates for the last three years for each Fund
were:
<TABLE>
<CAPTION>
Fiscal Year Ended October 31,
1994 1993 1992
<S> <C> <C> <C>
Stock Fund 106% 64% 84%
Equity Income 5 -- --
S&P 500 Fund (1) 13 22 --
European Fund 46 -- --
Bond Market Fund 188 12 7
Midcap Fund 83 -- --
</TABLE>
(1) For the period September 30, 1993 (commencement of operations) to
October 31, 1993. Turnover calculation does not include in-kind purchases
of $22,472,314.
NET ASSET VALUE
The Fund's net asset value per share is calculated on each business
day. A business day is any day on which the NYSE is open for business. The
Fund determines net asset value as of the close of business of the regular
session of NYSE (currently 4:00 p.m. Eastern time). The holidays (as
observed) on which the NYSE is closed currently are: New Years Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas.
All Funds. Equity securities listed or traded on a stock exchange, are
valued at the latest sale price. If no sale is reported, the mean of the
latest bid and asked prices is used. Securities traded over-the-counter are
priced at the mean of the latest bid and asked prices but will be valued at
the last sale price if required by regulations of the SEC. When market
quotations are not readily available, securities and other assets are valued
at fair value as determined in good faith in accordance with procedures
established by the Board of Directors.
Bonds are valued through valuations obtained from a commercial pricing
service or the most recent mean of the bid and asked prices provided by
investment dealers in accordance with procedures established by the Board of
Directors. Pursuant to a determination by Dreyfus/Laurel's Board of
Directors that such value represents fair value, debt securities with
maturities of 60 days or less are valued at amortized cost.
For purposes of determining a Fund's net asset value, all assets and
liabilities initially expressed in foreign currency values will be converted
into U.S. dollar values at the mean between the bid and offered quotations
of such currencies against U.S. dollars as last quoted by any recognized
dealer. If an event were to occur after the value of a portfolio instrument
was so established but before the net asset value per share is determined
which is likely to materially change the net asset value, then the portfolio
instrument would be valued using fair value considerations established by
Dreyfus/Laurel's Board of Directors.
Securities for which market quotations are not readily available are
valued at fair value as determined in good faith and pursuant to procedures
approved by Dreyfus/Laurel's Board of Directors. Because of the need to
obtain prices as of the close of trading on the exchanges on which portfolio
securities are most frequently traded, the calculation of net asset value
may not take place contemporaneously with the determination of the prices of
the majority of a Fund's portfolio securities.
European Fund. Equity securities which are traded on a Western
European securities exchange are valued at the last sale price on that
exchange or, if there is no recent last sale price available, at the last
current bid quotation. An equity security which is listed or traded on more
than one exchange is valued at the quotation on the exchange determined to
be the primary market for such security by CCF SAM. All other equity
securities not so traded are valued at the last sale price prior to the time
of valuation.
PERFORMANCE CALCULATIONS
All Funds. Each Fund computes average annual total return by using a
standardized method required by the SEC. Average annual total return is
computed by finding the average annual compounded rates of return on
hypothetical initial investment of $1,000 over the periods that would equate
the initial amount invested to the ending redeemable value, according to the
following formula:
n
P(1+T) = ERV
Where: P = $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a $1,000 payment made at the
beginning of the 1, 5 or 10 year periods at the end of the
year or period
The calculation assumes (1) the deduction of the maximum sales load
(and any other charges deducted, if any, from payment) and all recurring
fees that are charged to all shareholder accounts, and (2) the reinvestment
of all dividends and other distributions by the Fund at the price stated in
the Prospectus on the reinvestment dates during the period.
Aggregate total return (expressed as a percentage) for Investor Shares
of each Fund for the periods noted were:
Aggregate Total Return for the
Periods Ended October 31, 1994
Fund: 1 Year 5 Years 10 Years Inception
4.62%
Stock Fund -- -- -- (4/6/94)
7.86%
S&P 500 Fund -- -- -- (4/18/94)
0.91%
Equity Income Fund -- -- -- (9/14/94)
6.11%
European Fund -- -- -- (4/14/94)
(0.46%)
Bond Index Fund -- -- -- (4/28/94)
(2.06%)
Midcap Fund -- -- -- (4/6/94)
Inception dates appear in parentheses following the aggregate total return
since inception.
Average annual total return (expressed as a percentage) for Class R
shares of each Fund for the periods noted were:
Annual Total Return for the
Periods Ended October 31, 1994
Fund: 1 Year 5 Years 10 Years Inception
Stock Fund 2.82% 11.75% -- 14.04%
(12/31/87)
S&P 500 Fund 3.50% -- -- 5.42%
(9/30/93)
Equity Income Fund -- -- -- (0.50%)
(9/02/94)
European Fund 5.97% 9.14% -- 5.09%
(1/5/87)
Bond Index Fund -- -- -- (3.68%)
(11/30/93)
Midcap Fund -- -- -- (1.77%)
(11/12/93)
Inception dates appear in parentheses following the annual total return
since inception.
Certain Funds may also advertise yield from time to time. Yields are
computed by using standardized methods of calculation required by the SEC.
Yields are calculated by dividing the net investment income per share earn
during a 30-day (or one month) period by the maximum offering price per
share on the last day of the period, according to the following formula:
YIELD = 2[ca-b/cd)6 -1]
Where: a = dividends and interest earned during the period;
b = expenses accrued for the period (net of reimbursements);
c = average daily number of shares outstanding during the
period that were entitled to receive dividends; and
d = the maximum offering price per share
on the last day of the period.
The 30-day yield for each Fund quoting yield for the period ended
October 31, 1994:
Bond Market Fund (Class R) 6.99%
(Investor Shares) 6.72%
Performance information for the Funds may be compared, in reports and
promotional literature, to indexes including, but not limited to: (i) the
Morgan Stanley European Index; (ii) the Standard & Poor's 500 Composite
Stock Price Index, the Dow Jones Industrial Average, or other appropriate
unmanaged domestic or foreign indices of performance of various types of
investments so that investors may compare the Fund's results with those of
indices widely regarded by investors as representative of the securities
markets in general; (iii) other groups of mutual funds tracked by Lipper
Analytical Services, a widely used independent research firm which ranks
mutual funds by overall performance, investment objectives and assets, or
tracked by other services, companies, publications, or persons who rank
mutual funds on overall performance or other criteria; (iv) the Consumer
Price Index (a measure of inflation) to assess the real rate of return from
an investment in the Fund; and (v) products managed by a universe of money
managers with similar country allocation and performance objectives.
Unmanaged indices may assume the reinvestment of dividends but generally do
not reflect deductions or administrative and management costs and expenses.
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
The term "regulated investment company" does not imply the supervision of
management or investment practices or policies by a government agency.
Federal Tax--General. To qualify for treatment as a regulated
investment company ("RIC") under the Internal Revenue Code of 1986, as
amended, ("Code") each Fund -- each of which is treated as a separate
corporation for federal tax purposes-- must distribute to shareholders for
each taxable year at least 90% of its investment company taxable income
(generally consisting of taxable net investment income, net short-term
capital gain and, in the case of European Fund, net gains from certain
foreign currency transactions) and must meet several additional
requirements. For each Fund these requirements include the following: (1)
the Fund must derive at least 90% of its gross income each taxable year from
dividends, interest, payments with respect to securities loans and gains
from the sale or other disposition of securities or foreign currencies or
other income (including gains from options, futures, or forward contracts)
derived with respect to its business of investing in securities or other
currencies ("Income Requirement"); (2) the Fund must derive less than 30% of
its gross income each taxable year from the sale or other disposition of
securities held for less than three months - options, futures, or forward
contracts (other than those on foreign currencies), or foreign currencies
(or options, futures or forward contacts thereon) that are not directly
related to the Fund's principal business of investing in securities (or
options and futures with respect thereto) ("Short-Short Limitation"); (3) at
the close of each quarter of the Fund's taxable year, at least 50% of the
value of its total assets must be represented by cash and cash items, U.S.
government securities, securities of other RICs and other securities, with
those other securities limited, in respect of any one issuer, to an amount
that does not exceed 5% of the value of the Fund's total assets and that
does not represent more than 10% of the issuer's outstanding voting
securities; and (4) at the close of each quarter of the Fund's taxable year,
not more than 25% of the value its total assets may be invested in
securities (other than U.S. government securities or securities of other
RICs) of any one issuer.
Dividends and other distributions declared by a Fund in October,
November or December of any year and payable to shareholders of record on a
date in any of those months are deemed to have been paid by the Fund and
received by the shareholders on December 31 of the year if the distributions
are paid by the Fund during the following January. Accordingly, those
distributions will be taxed to shareholders for the year in which that
December 31 falls.
If Fund shares are sold at a loss after being held six months or less
the loss will be treated as a long-term, instead of short-term, capital loss
to the extent of capital gain distributions on those shares. Investors also
should be aware that if shares are purchased shortly before the record date
for any distribution, the shareholder will pay full price for the shares and
receive some portion of the price back as a taxable dividend or capital gain
distribution.
If a Fund retains net capital gain (the excess of net long-term capital
gains over net short-term capital loss) for reinvestment, although it has no
plans to do so, the Fund may elect to treat such amounts as having been
distributed to its shareholders. As a result, the Fund's shareholders would
be subject to tax on the undistributed net capital gain, would be able to
claim their proportionate share of the federal income tax paid by the Fund
on that gain as a credit against their own federal income tax liabilities,
and would be entitled to an increase in their basis for their Fund shares.
Hedging Transactions. Certain Funds may employ hedging strategies, such
as writing (selling) and purchasing options and futures contracts and
entering into forward contracts. The use of these strategies involves
complex rules that will determine for income tax purposes the character and
timing of recognition of the gains and losses a Fund realizes in connection
therewith. Income from foreign currencies (except certain gains therefrom
may be excluded by future regulations) and income from transactions in
options, futures and forward contracts derived by a Fund with respect to its
business of investing in securities or foreign currencies will qualify as
permissible income under the Income Requirement. However, income from
disposition of options and futures contracts, other than those on foreign
currencies, will be subject to the Short-Short Limitation if they are held
for less than three months. Income from the disposition of foreign
currencies, and options, futures and forward contracts thereon, that are not
directly related to a Fund's principal business of investing in securities
(or options and futures with respect thereto) also will be subject to the
Short-Short Limitation if they are held for less than three months.
If a Fund satisfies certain requirements, any increase in value of a
position that is part of a "designated hedge" will be offset by any decrease
in value (whether realized or not) of an offsetting hedging position during
the period of the hedge for purposes of determining whether the Fund
satisfies the Short-Short Limitation. Thus, only the net gain (if any) from
the designated hedge will be included in gross income for purposes of that
limitation. Each Fund will consider, when it engages in hedging strategies,
whether it should seek to qualify for this treatment. To the extent a Fund
does not qualify therefor, it may be forced to defer the closing out of
certain options, futures and forward contracts beyond the time when it
otherwise would be advantageous to do so, in order for the Fund to continue
to qualify as a RIC.
Certain futures contracts in which some Funds may invest are "section
1256 contracts." Section 1256 contracts held by a Fund at the end of each
taxable year are "marked-to-market" (that is, treated as sold for their fair
market value) for federal income tax purposes, with the result that
unrealized gains or losses are treated as though they were realized. Sixty
percent of any net gain or loss recognized on these deemed sales, and 60% of
any net realized gain or loss from any actual sales of section 1256
contracts, are treated as long-term capital gain or loss, and the balance is
treated as short-term capital gain or loss. These contracts also may be
marked-to-market for purposes of the 4% excise tax described in the
Prospectuses ("Excise Tax") and for other purposes.
Certain futures contracts entered into by a Fund may result in
"straddles" for federal income tax purposes. The straddle rules may affect
the character of gains (or losses) realized by a Fund on straddle positions.
In addition, losses realized by a Fund on straddle positions may be deferred
under the straddle rules. If a Fund makes certain elections, the amount,
character and timing of the recognition of gains and losses from the
affected straddle positions will determined under rules that vary according
to the elections made.
Passive Foreign Investment Companies (European Fund). The Fund may
invest in the stock of foreign corporations that are classified as "passive
foreign investment companies" ("PFICs"). In general, a foreign corporation
is classified as a PFIC if at least one-half of its assets constitute
investment-type assets or 75% or more of its gross income is passive income.
An "excess distribution" received with respect to a PFIC's stock and gain
from the disposition of such stock will be treated as having been realized
ratably over the entire period during which the Fund held the PFIC stock.
The Fund itself will be subject to tax on the portion, if any, of the excess
distribution and gain that is allocated to the portion of that holding
period in prior taxable years (and an interest factor will be added to the
tax, as if the tax had actually been payable in those prior taxable years),
even if the Fund distributes the corresponding income to shareholders. All
excess distributions and such gains are taxable as ordinary income.
The Fund may elect alternative tax treatment with respect to any PFIC
stock holds. Under the election, the Fund generally would be required to
include in their gross income each year their share of the PFIC earnings and
capital gains of a PFIC for the year regardless of whether any distributions
are received from the PFIC, and the special rules in the preceding paragraph
would not apply; the amount so included in the Fund's income would have to
be distributed to the Fund's shareholders to satisfy the Distribution
Requirement and to avoid imposition of the Excise Tax. In most instances it
will be very difficult, if not impossible, to make this election because of
certain requirements thereof.
Three bills passed by Congress in 1991 and 1992 and vetoed by Former
President Bush, would have substantially modified the taxation of
shareholders of foreign corporations, including eliminating the provisions
described above dealing with PFICs and replacing them (and other provisions)
with a regulatory scheme involving entities called "passive foreign
corporations." The "Tax Simplification Bill of 1993," approved November
1993 by the House Ways and Means Committee, contains the same modifications.
It is unclear at this time whether, and in what form, the proposed
modifications may be enacted into law.
Pursuant to proposed regulations, open-end RICs, such as the Fund,
would be entitled to elect to "mark-to-market" their stock in certain PFICs.
"Marking-to-Market," in this context, means recognizing as gain for each
taxable year the excess, as of the end of that year, of the fair market
value of the PFIC's stock over the adjusted basis in that stock (including
mark-to-market gain for each prior year for which an election was in
effect).
Foreign Currency Gains and Losses (European Fund). Gains and losses
attributable to fluctuations in foreign currency exchange rates that occur
between the time the Fund accrues dividends, interest or other receivables,
or expenses or other liabilities, denominated in a foreign currency and the
time the Fund actually collects the receivables or pays the liabilities
generally are treated as ordinary income or ordinary loss. Similarly, on
the disposition of a debt security denominated in a foreign currency, or of
an option or forward contract on a foreign currency, gains or losses
attributable to fluctuations in the value of foreign currency between the
date of acquisition of the security, option, or contract and the date of
disposition also are treated as ordinary gains or losses. These gains or
losses, may increase or decrease the amount of the Fund's investment company
taxable income to be distributed to its shareholders.
State and Local Taxes. Depending upon a Fund's activities in states and
localities in which its offices are maintained, in which its agents or
independent contractors are located, or in which it is otherwise deemed to
be conducting business, the Fund may be subject to the tax laws of such
states or localities. Shareholders are advised to consult their tax
advisers concerning the application of state and local taxes.
Foreign Taxes (European Fund). Dividends and interest received by the
Fund may be subject to income, withholding or other taxes imposed by foreign
countries and U.S. possessions that would reduce the yield on its
securities. Tax conventions between certain countries and the United States
may reduce or eliminate these foreign taxes, however, and many foreign
countries do not impose taxes on capital gains in respect of investment by
foreign investors. If more than 50% of the value of the Fund's total assets
at the close of taxable year consists of securities of foreign corporations,
it will be eligible to, and may, file an election with the Internal Revenue
Service that will enable its shareholders, in effect, to receive the benefit
of the foreign tax credit with respect to any foreign or U.S. possessions'
income taxes paid by it. Pursuant to the election, the Fund would treat
those taxes as dividends paid to shareholders and each shareholder would be
required to (1) include in gross income, and treat as paid by him or her,
his or her proportionate share of those taxes, (2) treat his or her share of
those taxes and of any dividend paid by the Fund that represents income from
foreign or U.S. possession sources as his or her own income from those
sources and (3) either deduct the taxes deemed paid by him or her in
computing his or her taxable income or, alternatively, use the foregoing
information in calculating the foreign tax credit against his or her federal
income tax. No deduction for foreign taxes may be claimed by a shareholder
who does not itemize deductions. Generally, a credit for foreign taxes may
not exceed the shareholder's federal income tax attributable to his total
foreign source taxable income. The European Fund will report to its
shareholders shortly after each taxable year their respective shares of the
income from sources within, and taxes paid to, foreign countries and U.S.
possessions if it makes this election.
Foreign Shareholders - U.S. Federal Income Taxation. U.S. federal
income taxation of a shareholder who, as to the United States, is a non-
resident alien individual, a foreign trust or estate, a foreign corporation
or a foreign partnership (a "foreign shareholder"), depends on whether the
income from a Fund is "effectively connected" with a U.S. trade or business
carried on by the shareholder, as discussed generally below. Special U.S.
federal income tax rules that differ from those described below may apply to
certain foreign persons who invest in a Fund. For example, the tax
consequences to a foreign shareholder entitled to claim the benefits of a
applicable tax treaty may be different from those described below. Foreign
shareholders are advised to consult their own tax advisers with respect to
the particular tax consequences to them of an investment in a Fund.
Foreign Shareholders - Income Not Effectively Connected. If the income
from a Fund is not effectively connected with a U.S. trade or business
carried on by the foreign shareholder, distributions of investment company
taxable income generally will be subject to U.S. federal withholding tax of
30% (or lower treaty rate) on the gross amount of the distribution. Foreign
shareholders also may be subject to U.S. federal withholding tax on income
resulting from any election by a Fund to treat foreign taxes paid by it as
paid by shareholders (see discussion above), but foreign shareholders will
not be able to claim a credit or deduction for the foreign taxes treated as
having been paid by them.
Capital gains realized by foreign shareholders on the sale of Fund
shares and distributions to them of net capital gain, as well as amounts
retained by the Fund that are designated as undistributed capital gains,
generally will not be subject to U.S. federal income tax unless the foreign
shareholder is a non-resident alien individual and is physically present in
the United States for more than 182 days during the taxable year. However,
this rule only applies in exceptional cases, because any individual present
in the United States for more than 182 days during the taxable year
generally is treated as a resident for U.S. federal income tax purposes on
his worldwide income at the graduated rates applicable to U.S. citizens,
rather than the 30% U.S. federal withholding tax rate. In the case of
certain foreign shareholders, a Fund may be required to withhold U.S.
Federal income tax at a rate of 31% of capital gain distributions and of the
gross proceeds from a redemption of Fund shares unless the shareholder
furnishes the Fund with a certificate regarding the shareholder's foreign
status.
Foreign Shareholders - Effectively Connected Income. If income from a
Fund is effectively connected with a U.S. trade or business carried on by a
foreign shareholder, then distributions to that shareholder and any gains
realized by that shareholder on the disposition the Fund shares will be
subject to U.S. federal income tax at the graduated rates applicable to U.S.
citizens and domestic corporations, as the case may be. Foreign
shareholders also may be subject to the branch profits tax.
Foreign Shareholders - Estate Tax. Foreign individuals generally are
subject to U.S. federal estate tax on their U.S. situs property, such as
shares of a Fund, that they own at the time of their death. Certain credits
against that tax and relief under applicable tax treaties may be available.
Pennsylvania Personal Property Tax Exemption. Dreyfus/Laurel has
obtained a Certificate of Authority to do business as a foreign corporation
in Pennsylvania. In the opinion of counsel, shares of Dreyfus/Laurel are
exempt from Pennsylvania personal property taxes.
FINANCIAL STATEMENTS
The financial statements for the fiscal year ended October 31, 1994,
including notes to the financial statements and supplementary information
and the Report of Independent Auditors, are included in the Annual Report to
shareholders. A copy of the Annual Report accompanies this Statement of
Additional Information. The financial statements from the Annual Report
are incorporated herein by reference.
OTHER INFORMATION
Auditor. KPMG Peat Marwick LLP was appointed by the Directors to serve
as each Fund's independent auditors for the year ending October 31, 1995,
providing audit services including (1) examination of the annual financial
statements, (2) assistance, review and consultation in connection with the
SEC and (3) review of the annual federal income tax return and the
Pennsylvania excise tax return filed on behalf of Dreyfus/Laurel. Tait,
Weller & Baker served as independent auditors to the Capstone European Fund,
predecessor to the Dreyfus European Fund, for the fiscal year ended October
31, 1993 (and prior).
Legal Counsel. Kirkpatrick & Lockhart, 1800 M Street, N.W., South Lobby
- - - - 9th Floor, Washington, D.C. 20036, has passed upon the legality of the
shares offered by the Prospectuses and this Statement of Additional
Information.
APPENDIX
DESCRIPTION OF SECURITIES RATINGS
Municipal and Debt Instruments Rating
Moody's Investors Service, Inc. (Moody's):
AAA -- Bonds which are rated AAA are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred
to as "gilt-edge." Interest payments are protected by a large or
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.
AA -- Bonds which are rated AA are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in AAA Securities or
fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long-term risks appear somewhat
larger than in AAA securities.
A -- Bonds rated A possess many favorable investment attributes and are
considered "upper medium grade obligations."
Those Bonds in the AA and A group which Moody's believes possess the
strongest investment attributes are designated by the symbols AA 1 and A 1.
Standard & Poor's Ratings Group ("S&P"):
AAA -- This is the highest rating assigned by S&P to a debt obligation
and indicates an extremely strong capacity to pay principal and interest.
AA -- Bonds rated AA also qualify as high-quality debt obligations.
Capacity to pay principal and interest is very strong, and in the majority
of instances they differ from AAA issues only in small degree.
A -- Bonds rated A have a strong capacity to pay principal and
interest, although they are somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions.
Plus (+) or Minus (-): The AA rating may be modified by the addition of
a plus or minus sign to show relative standing within the AA rating
category.
Commercial Paper Ratings
Moody's:
Commercial paper rated Prime by Moody's is based upon its evaluation of
many factors including: (1) management of the issuer; (2) the issuer's
industry or industries and the speculative-type risks which may be inherent
in certain areas; (3) the issuer's products in relation to competition and
customer acceptance; (4) liquidity; (5) amount and quality of long-term
debt; (6) trend of earnings over a period of ten years; (7) financial
strength of a parent company and the relationships which exist with the
issue; and (8) recognition by the management of obligations which may be
present or may arise as a result of public interest questions and
preparations to meet such obligations. Relative differences in these
factors determine whether the issuer's commercial paper is rated Prime-1,
Prime-2, or Prime-3.
Prime-1 indicates a superior capacity for repayment of short-term
promissory obligations. Prime-1 repayment capacity will normally be
evidenced by the following characteristics: (1) leading market positions in
well established industries; (2) high rates of return on funds employed; (3)
conservative capitalization structures with moderate reliance on debt and
ample asset protection; (4) broad margins in earnings coverage of fixed
financial charges and high internal cash generation; and (5) well
established access to a range of financial markets and assured sources of
alternative liquidity.
Prime-2 indicates a strong capacity for repayment of short-term
promissory obligations. This will normally be evidenced by many of the
characteristics cited above but to a lesser degree. Earnings trends and
coverage ratios, while sound, will be more subject to variation.
Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternative liquidity is maintained.
S&P
Commercial paper rated by S&P has the following characteristics:
liquidity ratios adequate to meet cash requirements. Long-term senior debt
is rated A or better. The issuer has access to at least two additional
channels of borrowing. Basic earnings and cash flow have an upward trend
with allowance made for unusual circumstances. Typically, the issuer's
industry is well established and the issuer has a strong position within the
industry. The reliability and quality of management are unquestioned.
Relative strength or weakness of the above factors determine whether the
issuer's commercial paper is rated A-1, A-2, or A-3.
A-1 -- This designation indicates that the degree of safety regarding
timely payment is either overwhelming or very strong. Those issues
determined to possess overwhelming safety characteristics are denoted with a
plus (+) sign designation.
A-2 -- Capacity for timely payment on issues with this designation is
strong. However, the relative degree of safety is not as high as for issues
designated A-1.
Fitch Investors Service, Inc. ("Fitch"):
Commercial paper rated by Fitch reflects Fitch's current appraisal of
the degree of assurance of timely payment of such debt. An appraisal
results in the rating of an issuer's paper as F-1, F-2, F-3, or F-4.
F-1 -- This designation indicates that the commercial paper is regarded
as having the strongest degree of assurance for timely payment.
F-2 -- Commercial paper issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than those issues
rated F- 1.
Duff and Phelps. Inc.:
Duff & Phelps' short-term ratings are consistent with the rating
criteria utilized by money market participants. The ratings apply to all
obligations with maturities of under one year including commercial paper,
the uninsured portion of certificates of deposit, unsecured bank loans,
master notes, bankers acceptances, irrevocable letters of credit, and
current maturities of long-term debt. Asset-backed commercial paper is also
rated according to this scale.
Emphasis is placed on liquidity which is defined as not only cash from
operations, but also access to alternative sources of funds including trade
credit, bank lines, and the capital markets. An important consideration is
the level of an obligor's reliance on short-term funds on an ongoing basis.
The distinguishing feature of Duff & Phelps' short-term ratings is the
refinement of the traditional '1' category. The majority of short-term
debt issuers carry the highest rating, yet quality differences exist within
that tier. As a consequence, Duff & Phelps has incorporated gradations of
'l+' (one plus) and '1-' (one minus) to assist investors in recognizing
those differences.
Duff l+ -- Highest certainty of timely payment. Short-term liquidity,
including internal operating factors and/or access to alternative sources of
funds, is outstanding, and safety is just below risk-free U.S. Treasury
short-term obligations.
Duff 1 -- Very high certainty of timely payment. Liquidity factors are
excellent and supported by good fundamental protection factors. Risk factors
are minor.
Duff 1 -- High certainty of timely payment. Liquidity factors are
strong and supported by good fundamental protection factors. Risk factors
are very small.
Good Grade
Duff 2 -- Good certainty of timely payment. Liquidity factors and
company fundamental are sound. Although ongoing funding needs may enlarge
total financing requirements, access capital markets is good. Risk factors
are small.
Satisfactory Grade
Duff 3 -- Satisfactory liquidity and other protection factors qualify
issue as to investment grade. Risk factors are larger and subject to more
variation. Nevertheless, timely payment expected.
Non-Investment Grade
Duff 4 -- Speculative investment characteristics. Liquidity is not
sufficient to ensure against disruption in debt service. Operating factors
and market access may be subject to a high degree of variation.
Default
Duff 5 -- Issuer failed to meet scheduled principal and/or interest
payments.
IBCA, Inc.:
In addition to conducting a careful review of an institution's reports
and publish figures, IBCA's analysts regularly visit the companies for
discussions with senior management. These meetings are fundamental to the
preparation of individual reports and ratings. To keep abreast of any
changes that may affect assessments, analysts maintain contact throughout
the year with the management of the companies they cover.
IBCA's analysts speak the languages of the countries they cover, which
is essential to maximize the value of their meetings with management and to
properly analyze a company written materials. They also have a thorough
knowledge of the laws and accounting practices that govern the operations
and reporting of companies within the various countries.
Often, in order to ensure a full understanding of their position,
companies entrust IBCA with confidential data. While these data cannot be
disclosed in reports, they are taken into account when assigning IBCA's
ratings. Before dispatch to subscribers, a draft of the report submitted to
each company to permit correction of any factual errors and to enable
clarification of issues raised.
IBCA's Rating Committees meet at regular intervals to review all
ratings and to ensure that individual ratings are assigned consistently for
institutions in all the countries covered. Following the Committee
meetings, ratings are issued directly to subscribers. At the same time the
company is informed of the ratings as a matter of courtesy, but not for
discussion.
Al+ -- Obligations supported by the highest capacity for timely
repayment.
Al -- Obligations supported by a very strong capacity for timely
repayment.
A2 -- Obligations supported by a strong capacity for timely repayment,
although such capacity may be susceptible to adverse changes in business,
economic or financial conditions.
B1 -- Obligations supported by an adequate capacity for timely
repayment. Such capacity is more susceptible to adverse changes in business,
economic, or financial conditions than for obligations in higher categories.
B2 -- Obligations for which the capacity for timely repayment is
susceptible to adverse changes in business, economic or financial
conditions.
C1 -- Obligations for which there is an inadequate capacity to ensure
timely repayment.
D1 -- Obligations which have a high risk of default or which are
currently in default.
DREYFUS DISCIPLINED MIDCAP STOCK FUND
INVESTOR AND CLASS R SHARES
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
March 1, 1995
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus of
the Dreyfus Disciplined Midcap Stock Fund (formerly the Laurel Midcap Stock
Fund) (the "Fund"), dated March 1, 1995, as it may be revised from time to
time. The Fund is a separate portfolio of The Dreyfus/Laurel Funds, Inc.
(formerly The Laurel Funds, Inc.), an open-end, diversified management
investment company (the "Company"), known as a mutual fund. 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 the following numbers:
Call Toll Free 1-800-645-6561
In New York City -- Call 1-718-895-1206
On Long Island -- Call 794-5452
The Dreyfus Corporation ("Dreyfus") serves as the Fund's investment
manager.
Premier Mutual Fund Services, Inc. (the "Distributor") is the
distributor of the Fund's shares.
TABLE OF CONTENTS
Page
Investment Objective and Management Policies. . . . . . B-2
Management of the Fund. . . . . . . . . . . . . . . . . B-10
Management Arrangements . . . . . . . . . . . . . . . . B-15
Purchase of Fund Shares . . . . . . . . . . . . . . . . B-16
Distribution Plan . . . . . . . . . . . . . . . . . . . B-17
Redemption of Fund Shares . . . . . . . . . . . . . . . B-18
Shareholder Services. . . . . . . . . . . . . . . . . . B-19
Determination of Net Asset Value. . . . . . . . . . . . B-22
Dividends, Other Distributions and Taxes. . . . . . . . B-23
Portfolio Transactions. . . . . . . . . . . . . . . . . B-27
Performance Information . . . . . . . . . . . . . . . . B-29
Information About the Fund. . . . . . . . . . . . . . . B-30
Custodian, Transfer and Dividend Disbursing
Agent, Counsel and Independent Auditors . . . . . . . B-30
Financial Statements. . . . . . . . . . . . . . . . . . B-31
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Description of the
Fund."
Portfolio Securities
Government Obligations. The Fund may invest in a variety of U.S.
Treasury obligations, which differ only in their interest rates, maturities
and times of issuance: (a) U.S. Treasury bills have a maturity of one year
or less, (b) U.S. Treasury notes have maturities of one to ten years, and
(c) U.S. Treasury bonds generally have maturities of greater than ten years.
In addition to U.S. Treasury obligations, the Fund may invest in
obligations issued or guaranteed by U.S. Government agencies and
instrumentalities which are supported by any of the following: (a) the full
faith and credit of the U.S. Treasury (such as Government National Mortgage
Association ("GNMA") participation certificates), (b) the right of the
issuer to borrow an amount limited to a specific line of credit from the
U.S. Treasury, (c) discretionary authority of the U.S. Government agency or
instrumentality, or (d) the credit of the instrumentality. (Examples of
agencies and instrumentalities are: Federal Land Banks, Federal Housing
Administration, Farmers Home Administration, Export-Import Bank of the
United States, Central Bank for Cooperatives, Federal Intermediate Credit
Banks, Federal Home Loan Banks, General Services Administration, Maritime
Administration, Tennessee Valley Authority, District of Columbia Armory
Board, Inter-American Development Bank, Asian-American Development Bank,
Student Loan Marketing Association, International Bank for Reconstruction
and Development and Federal National Mortgage Association ("FNMA")). No
assurance can be given that the U.S. Government will provide financial
support to such U.S. Government agencies or instrumentalities described in
(b), (c) and (d) in the future, other than as set forth above, since it is
not obligated to do so by law.
Repurchase Agreements. The Fund may enter into repurchase agreements
with U.S. Government securities dealers recognized by the Federal Reserve
Board, with member banks of the Federal Reserve System, or with such other
brokers or dealers that meet the credit guidelines of the Board of
Directors. In a repurchase agreement, the Fund buys a security from a seller
that has agreed to repurchase the same security at a mutually agreed upon
date and price. The Fund's resale price will be in excess of the purchase
price, reflecting an agreed upon interest rate. This interest rate is
effective for the period of time the Fund is invested in the agreement and
is not related to the coupon rate on the underlying security. Repurchase
agreements may also be viewed as a fully collateralized loan of money by the
Fund to the seller. The period of these repurchase agreements will usually
be short, from overnight to one week, and at no time will the Fund invest in
repurchase agreements for more than one year. The Fund will always receive
as collateral securities whose market value including accrued interest is,
and during the entire term of the agreement remains, at least equal to 100%
of the dollar amount invested by the Fund in each agreement, and the Fund
will make payment for such securities only upon physical delivery or upon
evidence of book entry transfer to the account of the Custodian. If the
seller defaults, the Fund might incur a loss if the value of the collateral
securing the repurchase agreement declines and might incur disposition costs
in connection with liquidating the collateral. In addition, if bankruptcy
proceedings are commenced with respect to the seller of a security which is
the subject of a repurchase agreement, realization upon the collateral by
the Fund may be delayed or limited. The Fund seeks to minimize the risk of
loss through repurchase agreements by analyzing the creditworthiness of the
obligors under repurchase agreements, in accordance with the credit
guidelines of the Company's Board of Directors.
Reverse Repurchase Agreements. The Fund may enter into reverse
repurchase agreements to meet redemption requests where the liquidation of
portfolio securities is deemed by the Fund to be inconvenient or
disadvantageous. A reverse repurchase agreement is a transaction whereby the
Fund transfers possession of a portfolio security to a bank or broker-dealer
in return for a percentage of the portfolio security's market value. The
Fund retains record ownership of the security involved including the right
to receive interest and principal payments. At an agreed upon future date,
the Fund repurchases the security by paying an agreed upon purchase price
plus interest. Cash or liquid high-grade debt obligations of the Fund equal
in value to the repurchase price including any accrued interest will be
maintained in a segregated account while a reverse repurchase agreement is
in effect.
When-Issued Securities. New issues of U.S. Treasury and Government
securities are often offered on a when-issued basis. This means that
delivery and payment for the securities normally will take place
approximately 7 to 15 days after the date the buyer commits to purchase
them. The payment obligation and the interest rate that will be received on
securities purchased on a when-issued basis are each fixed at the time the
buyer enters into the commitment. The Fund will make commitments to purchase
such securities only with the intention of actually acquiring the
securities, but the Fund may sell these securities or dispose of the
commitment before the settlement date if it is deemed advisable as a matter
of investment strategy. Cash or marketable high-grade debt securities equal
to the amount of the above commitments will be segregated on the Fund's
records. For the purpose of determining the adequacy of these securities the
segregated securities will be valued at market. If the market value of such
securities declines, additional cash or securities will be segregated on the
Fund's records on a daily basis so that the market value of the account will
equal the amount of such commitments by the Fund.
Securities purchased on a when-issued basis and the securities held by
the Fund are subject to changes in market value based upon the public's
perception of changes in the level of interest rates. Generally, the value
of such securities will fluctuate inversely to changes in interest rates --
i.e., they will appreciate in value when interest rates decline and decrease
in value when interest rates rise. Therefore, if in order to achieve higher
interest income the Fund remains substantially fully invested at the same
time that it has purchased securities on a "when-issued" basis, there will
be a greater possibility of fluctuation in the Fund's net asset value.
When payment for when-issued securities is due, the Fund will meet its
obligations from then-available cash flow, the sale of segregated
securities, the sale of other securities and/or, although it would not
normally expect to do so, from the sale of the when-issued securities
themselves (which may have a market value greater or less than the Fund's
payment obligation). The sale of securities to meet such obligations carries
with it a greater potential for the realization of capital gains, which are
subject to federal income taxes.
Commercial Paper. The Fund may invest in commercial paper issued in
reliance on the so-called "private placement" exemption from registration
afforded by Section 4(2) of the Securities Act of 1933 ("Section 4(2)
paper"). Section 4(2) paper is restricted as to disposition under the
federal securities laws and generally is sold to investors who agree that
they are purchasing the paper for an investment and not with a view to
public distribution. Any resale by the purchaser must be in an exempt
transaction. Section 4(2) paper is normally resold to other investors
through or with the assistance of the issuer or investment dealers who make
a market in Section 4(2) paper, thus providing liquidity. Pursuant to
guidelines established by the Company's Board of Directors, Dreyfus may
determine that Section 4(2) paper is liquid for the purposes of complying
with the Fund's investment restriction relating to investments in illiquid
securities.
Management Policies
The Fund engages, in the following practices in furtherance of its
investment objective.
Loans of Fund Securities. The Fund has authority to lend its portfolio
securities provided (1) the loan is secured continuously by collateral
consisting of U.S. Government securities or cash or cash equivalents
adjusted daily to make a market value at least equal to the current market
value of these securities loaned; (2) the Fund may at any time call the loan
and regain the securities loaned; (3) the Fund will receive any interest or
dividends paid on the loaned securities; and (4) the aggregate market value
of securities loaned will not at any time exceed one-third of the total
assets of the Fund. In addition, it is anticipated that the Fund may share
with the borrower some of the income received on the collateral for the loan
or that it will be paid a premium for the loan. In determining whether to
lend securities, the Fund considers all relevant factors and circumstances
including the creditworthiness of the borrower.
ECDs, ETDs and Yankee CDs. The Fund may purchase Eurodollar
certificates of deposit ("ECDs"), which are U.S. dollar-denominated
certificates of deposit issued by foreign branches of domestic banks,
Eurodollar time deposits ("ETDs"), which are U.S. dollar-denominated
deposits in a foreign branch of a domestic bank or a foreign bank, and
Yankee-Dollar certificates of deposit ("Yankee CDs") which are certificates
of deposit issued by a domestic branch of a foreign bank denominated in U.S.
dollars and held in the United States. ECDs, ETDs, and Yankee CDs are
subject to somewhat different risks than domestic obligations of domestic
banks. These risks are discussed in the Prospectus.
Futures Contracts and Options. For the purpose of creating market
exposure for uncommitted cash balances, reducing transaction costs
associated with rebalancing the Fund, facilitating trading or seeking higher
investment returns when a futures contract is priced more attractively than
the underlying security or the index of the Fund, the Fund may enter into
futures contracts, options, and options on futures contracts with respect to
securities in which the Fund may invest and indices comprised of such
securities.
Futures contracts provide for the future sale by one party and purchase
by another party of a specified amount of a specific security or securities
index at a specified future time and at a specified price. Where the
underlying security is an index, no physical transfer of securities takes
place; rather, upon expiration of the contract, the parties settle by
exchanging cash in an amount equal to the difference between the contract
price and the closing value of the index at expiration, net of variation
margin previously paid. Futures contracts that are standardized as to
maturity date and underlying interest are traded on national futures
exchanges.
Futures traders are required to make a good faith margin deposit in
cash or government securities with a broker or custodian to initiate and
maintain open positions in futures contracts. A margin deposit is intended
to assure completion of the contract (delivery or acceptance of the
underlying security) if it is not terminated prior to the specified delivery
date. Minimal initial margin requirements are established by the futures
exchange and may be changed. Brokers may establish deposit requirements
which are higher than the exchange minimums.
After a futures contract position is opened, the value of the contract
is marked to market daily. If the futures contract price changes to the
extent that the margin on deposit does not satisfy margin requirements,
payment of additional "variation" margin will be required. Conversely,
change in the contract value may reduce the required margin, resulting in a
repayment of excess margin to the contract holder. Variation margin payments
are made to and from the futures broker for as long as the contract remains
open. The Fund expects to earn interest income on its margin deposits.
Options are of two basic types, either call or put options, and may
relate to a single security or a securities index or a futures contract. A
call option on a security permits the holder of the option to purchase the
underlying security at a specified price ("strike price") at any time during
the term of the option. Thus, in exchange for the premium paid to the
writer, the purchaser obtains the right to profit from any appreciation in
the value of the underlying security above the strike price. A put option
permits the holder to sell the underlying security to the writer at the
strike price at any time during the term of the contract. Thus, in exchange
for the premium paid to the writer, the purchaser is relieved of the risk of
a decline in the value of the underlying security below the strike price. An
option on a securities index gives the holder the right to receive cash from
the writer in an amount equal to the difference between the strike price of
the option and the value of the underlying index multiplied by a factor
established by the exchange upon which the option is traded. An option on a
futures contract gives the holder, in return for the premium paid to the
writer, the right to assume a position in the underlying futures contract at
a specified price at any time during the term of the option.
Although futures and options contracts by their terms call for actual
delivery or acceptance of the underlying securities, in most cases the
contracts are closed out before the settlement date without the making or
taking of delivery. Closing out an open futures position is done by taking
an opposite position ("buying" a contract which has previously been "sold,"
or "selling" a contract previously purchased) in an identical contract to
terminate the position. An option purchased may be closed out by selling the
option. An option written is closed out by purchasing an option identical to
that written. Brokerage commissions are incurred when futures and options
contracts are bought and sold.
Restrictions on the Use of Futures Contracts and Options. The Fund
will not enter into futures contracts to the extent that its outstanding
obligations under these contracts would exceed 25% of the Fund's total
assets. To the extent that the Fund enters into futures contracts and
options on futures positions that are not for bona fide hedging purposes (as
defined by the Commodity Futures Trading Commission), the aggregate initial
margin and premiums on these positions (excluding the amount by which
options are "in-the-money") may not exceed 5% of the Fund's net assets.
Transactions using options and futures contracts (other than options
that the Fund has purchased) expose the Fund to an obligation to another
party. The Fund will not enter into any such transactions unless it owns
either (1) an offsetting ("covered") position in securities or other options
or futures contracts or (2) cash, receivables and short-term debt securities
with a value sufficient at all times to cover its potential obligations not
covered as provided in (1) above. The Fund will comply with SEC guidelines
regarding cover for these instruments and, if the guidelines so require, set
aside cash, U.S. Government securities or other liquid, high-grade debt
securities in a segregated account with its custodian in the prescribed
amount.
All options purchased or written by the Fund must be listed on a
national securities or futures exchange or traded in the over-the-counter
("OTC") market. The Fund will not purchase or write OTC options if, as a
result of such transaction, the sum of (i) the market value of outstanding
OTC options purchased by the Fund, (ii) the market value of the underlying
securities covered by outstanding OTC call options written by the Fund, and
(iii) the market value of all other assets of the Fund that are illiquid or
are not otherwise readily marketable, would exceed 15% of the net assets of
the Fund, taken at market value. However, if an OTC option is sold by the
Fund to a primary U.S. Government securities dealer recognized by the
Federal Reserve Bank of New York and the Fund has the unconditional
contractual right to repurchase such OTC option from the dealer at a
predetermined price, then the Fund will treat as illiquid such amount of the
underlying securities as is equal to the repurchase price less the amount by
which the option is "in-the-money" (the difference between current market
value of the underlying security and the option's strike price). The
repurchase price with primary dealers is typically a formula price which is
generally based on a multiple of the premium received for the option plus
the amount by which the option is "in-the-money."
The Fund may write only covered options. A call option is covered if
the Fund owns the underlying security or a call option on the same security
with a lower strike price. A put option is covered if the Fund segregates
cash and/or short-term debt securities in an amount necessary to pay the
strike price of the option or purchases a put option on the same underlying
security with a higher strike price.
The Fund will not purchase puts, calls, straddles, spreads or any
combination thereof, if as a result of such purchase the value of the Fund's
aggregate investment in such securities would exceed 5% of the Fund's total
assets.
Risk Factors in Futures and Options Transactions. There can be no
assurance that a liquid secondary market will exist for any particular
futures or option contract at any specific time. Thus, it may not be
possible to close a futures or option position. In the event of adverse
price movements, the Fund would continue to be required to make daily cash
payments to maintain its required margin with respect to open futures or
written options positions. In such a situation, if the Fund has insufficient
cash, it may have to sell portfolio securities to meet daily margin
requirements at a time when it may be disadvantageous to do so. In addition,
the Fund may be required to make or take delivery of the securities
underlying futures contracts that it holds and options contracts that it has
written.
The Fund will seek to minimize the risk that it will be unable to close
out a futures contract by entering into only those futures contracts that
are listed on national futures exchanges and for which there appears to be a
liquid secondary market. Likewise, the Fund will enter into only those
option contracts that are listed on a national securities exchange or traded
in the OTC market for which there appears to be a liquid secondary market.
The risk of loss in trading futures contracts in some strategies can be
substantial, due both to the low margin deposits required, and the extremely
high degree of leverage involved in futures pricing. As a result, a
relatively small price movement in a futures contract may result in
immediate and substantial loss (as well as gain) to the investor. For
example, if at the time of purchase, 10% of the value of the futures
contract is deposited as margin, a subsequent 10% decrease in the value of
the futures contract would result in a total loss of margin deposit, before
any deduction for the transaction costs, if the account were then closed
out. A 15% decrease would result in a loss equal to 150% if the original
margin deposit for the contract were closed out. Thus, a purchase or sale of
a futures contract may result in losses in excess of the amount invested in
the contract. Options transactions are subject to similar risks. However,
because the Fund will not engage in futures or options transactions for
speculative purposes, Dreyfus believes that the Fund's risk of loss is less
than the risk of loss associated with speculative transactions. Moreover, in
the foregoing example, the Fund would presumably have sustained comparable
losses if, instead of the futures contract, it had invested in the
underlying security and sold it after the decline.
Utilization of futures contracts and options transactions by the Fund
does involve the risk of imperfect or no correlation where the securities
underlying futures and options contracts are different from the portfolio
securities being hedged. It is also possible that the Fund could both lose
money on futures and options contracts and also experience a decline in
value of its portfolio securities. There is also the risk of loss by the
Fund of margin deposits in the event of bankruptcy of a broker with whom the
Fund has an open position in a futures contract or option thereon.
Most futures exchanges limit the amount of fluctuation permitted in
futures contract prices during a single trading day. The daily limit
establishes the maximum amount that the price of a futures contract may vary
either up or down from the previous day's settlement price at the end of a
trading session. Once the daily limit has been reached in a particular type
of contract, no trades may be made on that day at a price beyond that limit.
The daily limit governs only price movement during a particular trading day
and therefore does not limit potential losses, because the limit may prevent
the liquidation of unfavorable positions. Futures contract prices have
occasionally moved to the daily limit for several consecutive trading days
with little or no trading, thereby preventing prompt liquidation of future
positions and subjecting some futures traders to substantial losses.
Futures and options contracts involve special tax considerations. See
"Dividends, Other Distributions and Taxes" for further information.
Investment Restrictions
The following limitations have been adopted by the Fund. The Fund may
not change any of these fundamental investment limitations without the
consent of: (a) 67% or more of the shares present at a meeting of
shareholders duly called if the holders of more than 50% of the outstanding
shares of the Fund are present or represented by proxy; or (b) more than 50%
of the outstanding shares of the Fund, whichever is less. The Fund may not:
1. Purchase any securities which would cause more than 25% of the value of
the Fund's total assets at the time of such purchase to be invested in
the securities of one or more issuers conducting their principal
activities in the same industry. (For purposes of this limitation, U.S.
Government securities, and state or municipal governments and their
political subdivisions are not considered members of any industry. ln
addition, this limitation does not apply to investments in domestic
banks, including U.S. branches of foreign banks and foreign branches of
U.S. banks).
2. Borrow money or issue senior securities as defined in the 1940 Act
except that (a) the Fund may borrow money in an amount not exceeding
one-third of the Fund's total assets at the time of such borrowings,
and (b) the Fund may issue multiple classes of shares. The purchase or
sale of futures contracts and related options shall not be considered
to involve the borrowing of money or issuance of senior securities.
3. Purchase with respect to 75% of the Fund's total assets securities of
any one issuer (other than securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities) if, as a result, (a)
more than 5% of the Fund's total assets would be invested in the
securities of that issuer, or (b) the Fund would hold more than 10% of
the outstanding voting securities of that issuer.
4. Make loans or lend securities, if as a result thereof more than
one-third of the Fund's total assets would be subject to all such
loans. For purposes of this limitation debt instruments and repurchase
agreements shall not be treated as loans.
5. Purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the Fund
from investing in securities or other instruments backed by real
estate, including mortgage loans, or securities of companies that
engage in real estate business or invest or deal in real estate or
interests therein).
6. Underwrite securities issued by any other person, except to the extent
that the purchase of securities and later disposition of such
securities in accordance with the Fund's investment program may be
deemed an underwriting.
7. Purchase or sell commodities except that the Fund may enter into
futures contracts and related options, forward currency contracts and
other similar instruments.
The Fund may, notwithstanding any other fundamental investment policy or
limitation, invest all of its investable assets in securities of a single
open-end management investment company with substantially the same
investment objectives, policies and limitations as the Fund.
The Fund has adopted the following additional non-fundamental
restrictions. These non-fundamental restrictions may be changed without
shareholder approval, in compliance with applicable law and regulatory
policy.
1. The Fund shall not sell securities short, unless it owns or has the
right to obtain securities equivalent in kind and amount to the
securities sold short, and provided that transactions in futures
contracts are not deemed to constitute selling short.
2. The Fund shall not purchase securities on margin, except that the Fund
may obtain such short-term credits as are necessary for the clearance
of transactions, and provided that margin payments in connection with
futures contracts and options on futures contracts shall not constitute
purchasing securities on margin.
3. The Fund shall not purchase oil, gas or mineral leases.
4. The Fund will not purchase or retain the securities of any issuer if
the officers or Directors of the Fund, its advisers, or managers,
owning beneficially more than one half of one percent of the securities
of such issuer, together own beneficially more than 5% of such
securities.
5. The Fund will not purchase securities of issuers (other than securities
issued or guaranteed by domestic or foreign governments or political
subdivisions thereof), including their predecessors, that have been in
operation for less than three years, if by reason thereof, the value of
the Fund's investment in securities would exceed 5% of the Fund's total
assets. For purposes of this limitation, sponsors, general partners,
guarantors and originators of underlying assets may be treated as the
issuer of a security.
6. The Fund will invest no more than 15% of the value of its net assets in
illiquid securities, including repurchase agreements with remaining
maturities in excess of seven days, time deposits with maturities in
excess of seven days and other securities which are not readily
marketable. For purposes of this limitation, illiquid securities shall
not include Section 4(2) paper and securities which may be resold under
Rule 144A under the Securities Act of 1933, provided that the Board of
Directors, or its delegate, determines that such securities are liquid
based upon the trading markets for the specific security.
7. The Fund may not invest in securities of other investment companies,
except as they may be acquired as part of a merger, consolidation or
acquisition of assets and except to the extent otherwise permitted by
the 1940 Act.
8. The Fund shall not purchase any security while borrowings representing
more than 5% of the Fund's total assets are outstanding.
9. The Fund will not purchase warrants if at the time of such purchase:
(a) more than 5% of the value of the Fund's assets would be invested in
warrants, or (b) more than 2% of the value of the Fund's assets would
be invested in warrants that are not listed on the New York or American
Stock Exchange (for purposes of this limitation, warrants acquired by
the Fund in units or attached to securities will be deemed to have no
value).
10. The Fund will not purchase puts, calls, straddles, spreads and any
combination thereof if by reason thereof the value of its aggregate
investment in such classes of securities would exceed 5% of its total
assets except that: (a) this limitation shall not apply to standby
commitments, and (b) this limitation shall not apply to the Fund's
transactions in futures contracts and related options.
As an operating policy, the Fund will not invest more than 25% of the value
of its total assets, at the time of such purchase in domestic banks,
including U.S. branches of foreign banks and foreign branches of U.S. banks.
The Company's Board of Directors may change this policy without shareholder
approval. Notice will be given to shareholders if this policy is changed by
the Board.
MANAGEMENT OF THE FUND
CONTROLLING SHAREHOLDER
Mellon Bank Corporation, a Pennsylvania corporation registered as a
bank holding company under the Bank Holding Company Act of 1956, as amended,
owned of record, through its direct and indirect subsidiaries, more than 25%
of the issued and outstanding voting shares of the Company, as of January
31, 1995, and is, as a consequence, deemed to be a controlling shareholder
of the Company as that term is defined under the 1940 Act. The address of
Mellon Bank Corporation is: Mellon Bank Corporation, Mutual Fund Department,
3 Mellon Bank Center, Pittsburgh, PA 15259.
PRINCIPAL SHAREHOLDERS
The following shareholder(s) owned 5% or more of the outstanding voting
shares of the Funds at January 31, 1995: Mac & Co. 171-028, Mellon Bank,
N.A., as Nominee for Trust Custodian, P.O. Box 320, Pittsburgh, PA 15230,
73% record.
FEDERAL LAW AFFECTING MELLON BANK
The Glass-Steagall Act of 1933 prohibits national banks from engaging
in the business of underwriting, selling or distributing securities and
prohibits a member bank of the Federal Reserve System from having certain
affiliations with an entity engaged principally in that business. The
activities of Mellon Bank, N.A. ("Mellon Bank") in informing its customers
of, and performing, investment and redemption services in connection with
the Fund, and in providing services to the Fund as custodian and fund
accountant, as well as Dreyfus' investment advisory activities, may raise
issues under these provisions. Mellon Bank has been advised by counsel that
the activities contemplated under these arrangements are consistent with its
statutory and regulatory obligations.
Changes in either federal or state statutes and regulations relating to
the permissible activities of banks and their subsidiaries or affiliates, as
well as further judicial or administrative decisions or interpretations of
such future statutes and regulations, could prevent Mellon Bank or Dreyfus
from continuing to perform all or a part of the above services for its
customers and/or the Fund. If Mellon Bank or Dreyfus were prohibited from
serving the Fund in any of its present capacities, the Board of Directors
would seek an alternative provider(s) of such services.
DIRECTORS AND OFFICERS
The Company has a Board composed of thirteen Directors which supervises
the Company's investment activities and reviews contractual arrangements
with companies that provide the Fund with services. The following lists the
Directors and officers and their positions with the Company and their
present and principal occupations during the past five years. Each Director
who is an "interested person" of the Company (as defined in the Investment
Company Act of 1940, as amended (the "Act")) is indicated by an asterisk.
Each of the Directors also serves as a Trustee of The Dreyfus/Laurel Funds
Trust, The Dreyfus/Laurel Investment Series and The Dreyfus/Laurel Tax-Free
Municipal Funds (collectively "The Dreyfus/Laurel Funds").
o + RUTH MARIE ADAMS. Director of the Company; Professor of English and
Vice President Emeritus, Dartmouth College; Senator, United Chapters of
Phi Beta Kappa; Trustee, Woods Hole Oceanographic Institution. Age: 79
years old. Address: 1026 Kendal Lyme Road, Hanover, New
Hampshire 03755.
o + FRANCIS P. BRENNAN. Chairman of the Board of Directors and Assistant
Treasurer of the Company; Director and Chairman, Massachusetts Business
Development Corp.; Director, Boston Mutual Insurance Company; Director
and Vice Chairman of the Board, Home Owners Federal Savings and Loan
(prior to May 1990). Age: 76 years old. Address: Massachusetts
Business Development Corp., One Liberty Square, Boston, Massachusetts
02109.
o * JOSEPH S. DiMARTINO. Director of the Company since February 1995.
Since January 1995, Mr. DiMartino has served as Chairman of the Board
for various funds in the Dreyfus Family of Funds. For more than five
years prior thereto, he was President, a director and, until August
1994, Chief Operating Officer of the Manager and Executive Vice
President and a director of Dreyfus Service Corporation, a wholly-owned
subsidiary of the Manager and, until August 1994, the Fund's
distributor. Mr. DiMartino is a director and former Treasurer of
the Muscular Dystrophy Association; a trustee of Bucknell University;
and a director of the Noel Group, Inc. He is 51 years old and his
address is 200 Park Avenue, New York, New York 10166.
o + JAMES M. FITZGIBBONS. Director of the Company; President and Director,
Amoskeag Company; Chairman, Howes Leather Company, Inc.; Director,
Fiduciary Trust Company; Chairman, CEO and Director, Fieldcrest-Cannon
Inc.; Director, Lumber Mutual Insurance Company; Director, Barrett
Resources, Inc. Age: 59 years old. Address: 40 Norfolk Road,
Brookline, Massachusetts 02167.
o * J. TOMLINSON FORT. Director of the Company; Partner, Reed, Smith, Shaw
& McClay (law firm). Age: 65 years old. Address: 204 Woodcock
Drive, Pittsburgh, Pennsylvania 15215.
o + ARTHUR L. GOESCHEL. Director of the Company; Director, Chairman of the
Board and Director, Rexene Corporation; Director, Calgon Carbon
Corporation; Director, National Picture Frame Corporation; Chairman of
the Board and Director, Tetra Corporation 1991-1993; Director, Medalist
Corporation 1992-1993. Age: 71 years old. Address: Way Hallow Road
and Woodland Road, Sewickley, Pennsylvania 15143.
o + KENNETH A. HIMMEL. Director of the Company; Former Director, The Boston
Company, Inc. and Boston Safe Deposit and Trust Company; President and
Chief Executive Officer, Himmel & Co., Inc.; Vice Chairman, Sutton
Place Gourmet, Inc. and Florida Hospitality Group; Managing Partner,
Himmel/MKDG, Franklin Federal Partners, Reston Town Center Associates
and Grill 23 & Bar. Age: 47 years old. Address: Himmel and Company,
Inc., 101 Federal Street, 22nd Floor, Boston, Massachusetts 02110.
o + ARCH S. JEFFERY. Director of the Company; Financial Consultant. Age:
76 years old. Address: 1817 Foxcroft Lane, Allison Park, Pennsylvania
15101.
o + STEPHEN J. LOCKWOOD. Director of the Company; President and CEO, LDG
Management Company Inc.; CEO, LDG Reinsurance Underwriters, SRRF
Management Inc. and Medical Reinsurance Underwriters Inc. Age: 46 years
old. Address: 401 Edgewater Place, Wakefield, Massachusetts 01880.
o + ROBERT D. MCBRIDE. Director of the Company; Director, Chairman and CEO,
McLouth Steel; Director, Salem Corporation. Director, SMS/Concast,
Inc. (1983-1991). Age: 66 years old. Address: 15 Waverly Lane,
Grosse Pointe Farms, Michigan 48236.
o + JOHN L. PROPST. Director of the Company; Of Counsel, Reed, Smith, Shaw
& McClay (law firm). Age: 79 years old. Address: 5521 Dunmoyle
Street, Pittsburgh, Pennsylvania 15217.
o + JOHN J. SCIULLO. Director of the Company; Dean Emeritus and Professor
of Law, Duquesne University Law School; Director, Urban Redevelopment
Authority of Pittsburgh. Age: 62 years old. Address: 321 Gross
Street, Pittsburgh, Pennsylvania 15224
o + ROSLYN M. WATSON. Director of the Company; Principal, Watson Ventures,
Inc., prior to February, 1993; Real Estate Development Project Manager
and Vice President, The Gunwyn Company. Age: 44 years old. Address:
25 Braddock Park, Boston, Massachusetts 02116-5816.
# MARIE E. CONNOLLY. President and Treasurer of the Company, The
Dreyfus/Laurel Investment Series, The Dreyfus/Laurel Funds Trust and
The Dreyfus/Laurel Tax-Free Municipal Funds (since September 1994);
Vice President of The Dreyfus/Laurel Funds, Inc. (March 1994 to
September 1994); President, Funds Distributor, Inc. (since 1992);
Treasurer, Funds Distributor, Inc. (July 1993 to April 1994); COO,
Funds Distributor, Inc. (since April 1994); Director, Funds
Distributor, Inc. (since July 1992); President, COO and Director,
Premier Mutual Fund Services, Inc. (since April 1994); Senior Vice
President and Director of Financial Administration, The Boston Company
Advisors, Inc. (December 1988 to May 1993). Address: One Exchange
Place, Boston, Massachusetts 02109.
# FREDERICK C. DEY. Vice President of the Company, The Dreyfus/Laurel
Investment Series, The Dreyfus/Laurel Funds Trust and The
Dreyfus/Laurel Tax-Free Municipal Funds (since September 1994); Senior
Vice President, Premier Mutual Fund Services, Inc. (since August 1994);
Vice President, Funds Distributor, Inc. (since August 1994);
Fundraising Manager, Swim Across America (October 1993 to August 1994);
General Manager, Spring Industries (August 1988 to October 1993).
Address: Premier Mutual Fund Services, Inc., 200 Park Avenue New York,
New York 10166.
# ERIC B. FISCHMAN. Vice President of the Company, The Dreyfus/Laurel
Investment Series, The Dreyfus/Laurel Funds Trust and The
Dreyfus/Laurel Tax-Free Municipal Funds (since September 1994); Vice
President and Associate General Counsel, Premier Mutual Fund Services,
Inc. (Since August 1994); Vice President and Associate General Counsel,
Funds Distributor, Inc. (since August 1994); Staff Attorney, Federal
Reserve Board (September 1992 to June 1994); Summer Associate, Venture
Economics (May 1991 to September 1991); Summer Associate, Suffolk
County District Attorney (June 1990 to August 1990). Address: Premier
Mutual Fund Services, Inc., 200 Park Avenue, New York, New York 10166.
LESLIE M. GAYNOR. Assistant Treasurer of the Company, The Dreyfus/Laurel
Investment Series, The Dreyfus/Laurel Funds Trust and The
Dreyfus/Laurel Tax-Free Municipal Funds (since October 1994); Assistant
Treasurer/Manager of Treasury Services, Funds Distributor, Inc. (since
July 1994); Vice President, The Boston Company, Inc. (1989 to July
1994). Address: One Exchange Place, Boston, Massachusetts 02109.
RICHARD W. HEALEY. Vice President of the Company, The Dreyfus/Laurel
Investment Series, The Dreyfus/Laurel Tax-Free Municipal Funds Trust
and The Dreyfus/Laurel Funds Trust (since March 1994); Senior Vice
President, Funds Distributor, Inc. (since March 1993); Vice President,
The Boston Company Inc., (March 1993 to May 1993); Vice President of
Marketing, Calvert Group (1989 to March 1993). Address: One Exchange
Place, Boston, Massachusetts 02109.
# JOHN E. PELLETIER. Vice President and Secretary of the Company; The
Dreyfus/Laurel Investment Series, The Dreyfus/Laurel Funds Trust and
The Dreyfus/Laurel Tax-Free Municipal Funds (since September 1994);
Senior Vice President, General Counsel and Secretary, Funds
Distributor, Inc. (since April 1994); Senior Vice President, General
Counsel and Secretary, Premier Mutual Fund Services, Inc. (since August
1994); Counsel, The Boston Company Advisors, Inc. (February 1992 to
March 1994); Associate, Ropes & Gray (August 1990 to February 1992);
Associate, Sidley & Austin (June 1989 to August 1990). Address: One
Exchange Place, Boston, Massachusetts 02109.
___________________________________________________
* "Interested person" of the Company, as defined in the 1940 Act.
o Member of the Audit Committee.
+ Member of the Nominating Committee.
# Officer also serves as an officer for other investment companies
advised by Dreyfus.
The officers and Directors of Dreyfus/Laurel as a group owned
beneficially less than 1% of the Fund's total shares outstanding as of
January 31, 1995.
No officer or employee of Premier (or of any parent, subsidiary or
affiliate thereof) receives any compensation from Dreyfus/Laurel for serving
as an officer or Director of Dreyfus/Laurel. In addition, no officer or
employee of Dreyfus (or of any parent or subsidiary thereof) serves as an
officer or Director of the Company. The Dreyfus/Laurel Funds pay each
Director/Trustee who is not an officer or employee of Premier (or of any
parent, subsidiary of any of its affiliates thereof) or of Dreyfus, $27,000
per annum (and an additional $75,000 for the Chairman of the Board of
Directors/Trustees of the Dreyfus/Laurel Funds), $1,000 for each
Dreyfus/Laurel Funds meeting attended and $750 for each Dreyfus/Laurel Funds
Family Audit Committee meeting attended and reimburses each Director/Trustee
for travel and out-of-pocket expenses. For the fiscal year ended October
31, 1994 the fees for meetings and expenses totaled $4,665.
For the fiscal year ended October 31, 1994, the aggregate amount of
fees and expenses received by each Director from the Company and all other
Funds in The Dreyfus/Laurel Family of Funds for which such person is a Board
member were as follows:
<TABLE>
Total
Pension of Compensation
Retirement From the
Benefits Estimated Company
Aggregate Accrued as Annual and Fund
Compensation Part of Benefits Complex Paid
From the the Company's Upon to Board
Name of Board Member Company # Expenses Retirement Member
- - - ------------------- ------------ ------------ ---------- -------------
<S> <C> <C> <C> <C>
Ruth Marie Adams $19,685 None None $ 37,500
Francis P. Brennan* 52,809 None None 112,500
Joseph S. DiMartino** N/A N/A N/A N/A
James M. Fitzgibbons 17,685 None None 31,750
J. Tomlinson Fort 7,500 None None 7,500
Arthur L. Goeschel 26,185 None None 32,500
Kenneth A. Himmel 18,685 None None 35,750
Arch S. Jeffrey 27,185 None None 33,500
Steven J. Lockwood 18,685 None None 35,750
Robert D. McBride 27,185 None None 33,500
John L. Propst 27,185 None None 33,500
John J. Sciullo 27,185 None None 33,500
Roslyn M. Watson 19,685 None None 36,750
# Amount does not include reimbursed expenses for attending Board meetings,
which amounted to $10,876 for the Company.
* Compensation of Francis Brennan includes $75,000 paid by The
Dreyfus/Laurel Fund Family to be Chairman of the Board.
** Joseph S. DiMartino was not a director of the Company as of October 31,
1994.
</TABLE>
MANAGEMENT ARRANGEMENTS
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Management of the Fund."
Management Agreement. Dreyfus serves as the investment manager for the
Fund pursuant to an Investment Management Agreement with the Company dated
April 4, 1994 ("Management Agreement"), transferred to Dreyfus as of October
17, 1994. Pursuant to the Management Agreement, Dreyfus provides, or
arranges for one or more third parties to provide, investment advisory,
administrative, custody, fund accounting and transfer agency services to the
Fund. As investment manager, Dreyfus manages the Fund by making investment
decisions based on the Fund's investment objectives, policies and
restrictions. The Management Agreement is subject to review and approval at
least annually by the Board of Directors.
The Management Agreement will continue from year to year provided that
a majority of the Directors who are not interested persons of the Company
and either a majority of all Directors or a majority of the shareholders of
the Fund approve its continuance. The Company may terminate the Agreement,
without prior notice to Dreyfus, upon the vote of a majority of the Board of
Directors or upon the vote of a majority of the Fund's outstanding voting
securities. Dreyfus may terminate the Management Agreement upon sixty (60)
days' written notice to Dreyfus/Laurel. The Management Agreement will
terminate immediately and automatically upon its assignment.
The following persons are officers and/or directors of Dreyfus: Howard
Stein, Chairman of the Board and Chief Executive Officer: W. Keith Smith,
Vice Chairman of the Board; Robert E. Riley, President, Chief Operating
Officer and a director; Lawrence S. Kash, Vice Chairman--Distribution and
director; Philip L. Toia, Vice Chairman--Operations and Administration; Paul
H. Snyder, Vice President and Chief Financial Officer; Daniel C. Maclean,
Vice President and General Counsel; Barbara E. Casey, Vice President--
Retirement Services; Henry D. Gottmann, Vice President--Retail; Elie M.
Genadry, Vice President--Wholesale; Mark N. Jacobs, Vice President--Fund
Legal and Compliance; Jeffrey N. Nachman, Vice President-Mutual Fund
Accounting; Diane M. Coffey, Vice-President--Corporate Communications;
Katherine C. Wickham, Vice President--Human Resources; Maurice Bendrihem,
Controller; and Mandell L. Berman, Frank V. Cahouet, Alvin E. Friedman,
Lawrence M. Greene, Julian M. Smerling and David B. Truman, Directors.
For the period from November 12, 1993 (commenced of operations) through
October 31, 1994, the Fund had the following expenses:
For the Fiscal Year Ended October 31,
1994
Management fees (gross ----
of waiver) $170,453
Expense Reimbursement from
investment manager $ 61,475
Management fees waived --
PURCHASE OF FUND SHARES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "How to Buy Fund Shares."
The Distributor. The Distributor serves as the Fund's distributor
pursuant to an agreement which is renewable annually. The Distributor also
acts as distributor for the other funds in the Dreyfus Family of Funds and
for certain other investment companies.
Dreyfus TeleTransfer Privilege--Investor Shares. Dreyfus TeleTransfer
purchase orders may be made between the hours of 8:00 a.m. and 4:00 p.m.,
New York time, on any business day that The Shareholder Services Group,
Inc., the Fund's transfer and dividend disbursing agent (the "Transfer
Agent"), and the New York Stock Exchange ("NYSE") are open. Such purchases
will be credited to the shareholder's Fund account on the next bank business
day. To qualify to use the Dreyfus TeleTransfer Privilege, the initial
payment for purchase of shares must be drawn on, and redemption proceeds
paid to, the same bank and account as are designated on the Account
Application or Shareholder Services Form on file. If the proceeds of a
particular redemption are to be wired to an account at any other bank, the
request must be in writing and signature-guaranteed. See "Redemption of
Fund Shares--Dreyfus TeleTransfer Privilege--Investor Shares."
Reopening an Account. An investor may reopen an account with a minimum
investment of $100 without filing a new Account Application during the
calendar year the account is closed or during the following calendar year,
provided the information on the old Account Application is still applicable.
DISTRIBUTION PLAN
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Distribution Plan."
Investor shares are subject to fees for distribution and shareholder
services.
Distribution Plan--Investor Shares. The Securities and Exchange
Commission ("SEC") has adopted Rule 12b-1 under the 1940 Act ("Rule")
regulating the circumstances under which investment companies such as the
Company may, directly or indirectly, bear the expenses of distributing their
shares. The Rule defines distribution expenses to include expenditures for
"any activity which is primarily intended to result in the sale of fund
shares." The Rule, among other things, provides that an investment company
may bear such expenses only pursuant to a plan adopted in accordance with
the Rule. With respect to the Investor shares of the Fund, the Company has
adopted a Distribution Plan ("Plan"), and may enter into Selling Agreements
with Service Agents pursuant to its Plan.
Under the Plan, the Fund may spend annually up to 0.25% of its average
daily net assets attributable to Investor shares for costs and expenses
incurred in connection with the distribution of, and shareholder servicing
with respect to, the Fund's Investor shares.
The Plan provides that a report of the amounts expended under the Plan,
and the purposes for which such expenditures were incurred, must be made to
the Company's Directors for their review at least quarterly. In addition,
the Plan provides that it may not be amended to increase materially the
costs which the Fund may bear for distribution pursuant to the Plan without
approval of the Fund's shareholders, and that other material amendments of
the Plan must be approved by the vote of a majority of the Directors and of
the Directors who are not "interested persons" of the Company (as defined in
the 1940 Act) and who do not have any direct or indirect financial interest
in the operation of the Plan, cast in person at a meeting called for the
purpose of considering such amendments. The Plan is subject to annual
approval by the entire Board of Directors and by the Directors who are
neither interested persons nor have any direct or indirect financial
interest in the operation of the Plan, by vote cast in person at a meeting
called for the purpose of voting on the Plan. The Plan is terminable, as to
the Fund's Investor shares, at any time by vote of a majority of the
Directors who are not interested persons and have no direct or indirect
financial interest in the operation of the Plan or by vote of the holders of
a majority of the outstanding shares of such class of the Fund.
For the period from April 6, 1994 (inception date of Investor shares)
to October 31, 1994, the Fund paid the Distributor $49 pursuant to the Plan.
Prior to September 23, 1994, Frank Russell Investment Management
Company acted as Administrator to the Fund and was paid $1,819 in fees by
the Fund for the fiscal year ended October 31, 1994.
REDEMPTION OF FUND SHARES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "How to Redeem Fund
Shares."
Wire Redemption Privilege. By using this Privilege, the investor
authorizes the Transfer Agent to act on wire or telephone redemption
instructions from any person representing himself or herself to be the
investor, or a representative of the investor's Service Agent, and
reasonably believed by the Transfer Agent to be genuine. Ordinarily, the
Fund will initiate payment for shares redeemed pursuant to this Privilege on
the next business day after receipt if the Transfer Agent receives the
redemption request in proper form. Redemption proceeds will be transferred
by Federal Reserve wire only to the commercial bank account specified by the
investor on the Account Application or Shareholder Services Form.
Redemption proceeds, if wired, must be in the amount of $1,000 or more and
will be wired to the investor's account at the bank of record designated in
the investor's file at the Transfer Agent, if the investor's bank is a
member of the Federal Reserve System, or to a correspondent bank if the
investor's bank is not a member. Fees ordinarily are imposed by such bank
and usually are borne by the investor. Immediate notification by the
correspondent bank to the investor's bank is necessary to avoid a delay in
crediting the funds to the investor's bank account.
Investors with access to telegraphic equipment may wire redemption
requests to the Transfer Agent by employing the following transmittal code
which may be used for domestic or overseas transmissions:
Transfer Agent's
Transmittal Code Answer Back Sign
---------------- ----------------
144295 144295 TSSG PREP
Investors who do not have direct access to telegraphic equipment may
have the wire transmitted by contacting a TRT Cables operator at 1-800-654-
7171, toll free. Investors should advise the operator that the above
transmittal code must be used and should also inform the operator of the
Transfer Agent's answer back sign.
To change the commercial bank or account designated to receive
redemption proceeds, a written request must be sent to the Transfer Agent.
This request must be signed by each shareholder, with each signature
guaranteed as a described below under "Stock Certificates; Signatures."
Stock 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 NYSE Medallion
Signature Program, the Securities Transfer Agents Medallion Program
("STAMP") and the Stock Exchanges Medallion Program. Guarantees must be
signed by an authorized signatory of the guarantor and "Signature-
Guaranteed" must appear with the signature. The Transfer Agent may request
additional documentation from corporations, executors, administrators,
trustees or guardians, and may accept other suitable verification
arrangements from foreign investors, such as consular verification. For
more information with respect to signature-guarantees, please call one of
the telephone numbers listed on the cover.
Dreyfus TeleTransfer Privilege--Investor Shares. Investors should be
aware that if they have selected the Dreyfus TeleTransfer Privilege, any
request for a wire redemption will be effected as a Dreyfus TeleTransfer
transaction through the ACH system unless more prompt transmittal
specifically is requested. Redemption proceeds will be on deposit in the
investor's account at an ACH member bank ordinarily two business days after
receipt of the redemption request. See "Purchase of Fund Shares--Dreyfus
TeleTransfer Privilege--Investor Shares."
Redemption Commitment. The Fund has committed itself to pay in cash
all redemption requests by any shareholder of record of the Fund, 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 SEC. In the case of
requests for redemption in excess of such amount, the Board of Directors
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 this event, the securities would be valued in the same
manner as the Fund's portfolio is valued. If the recipient sold such
securities, brokerage charges would be incurred.
Suspension of Redemptions. The right of redemption may be suspended or
the date of payment postponed (a) during any period when the NYSE 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 SEC 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 SEC by order may permit to protect the
Fund's shareholders.
SHAREHOLDER SERVICES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Shareholder Services."
Fund Exchanges. Shares of any Class of the Fund may be exchanged for
shares of the respective Class of certain other funds advised or
administered by Dreyfus. 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. Exchanges for shares of funds that are offered without a sales
load will be made without a sales load.
B. Shares of funds purchased without a sales load may be exchanged
for shares of other funds sold with a sales load, and the
applicable sales load will be deducted.
C. Shares of funds purchased with a sales load may be exchanged
without a sales load for shares of other funds sold without a
sales load.
D. Shares of funds purchased with a sales load, shares of funds
acquired by a previous exchange from shares purchased with a sales
load and additional shares acquired through reinvestment of
dividends or other distributions of any such funds (collectively
referred to herein as "Purchased Shares") may be exchanged for
shares of other funds sold with a sales load (referred to herein
as "Offered Shares"), provided that, if the sales load applicable
to the Offered Shares exceeds the maximum sales load that could
have been imposed in connection with the Purchased Shares (at the
time the Purchased Shares were acquired), without giving effect to
any reduced loads, the difference will be deducted.
E. Shares of funds subject to contingent deferred sales charge
("CDSC") that are exchanged for shares of another fund will be
subject to the higher applicable CDSC of the two funds, and for
purposes of calculating CDSC rates and conversion periods, if any,
will be deemed to have been held since the date the shares being
exchanged were initially purchased.
To accomplish an exchange under item D above, shareholders must notify
the Transfer Agent of their prior ownership of fund shares and their account
number.
Exchanges of Class R shares held by a Retirement Plan may be made only
between the investor's Retirement Plan account in one fund and such
investor's Retirement Plan account in another fund.
To establish a personal retirement plan by exchange, shares of the fund
being exchanged must have a value of at least the minimum initial investment
required for the fund into which the exchange is being made. For Dreyfus-
sponsored Keogh Plans, IRAs and SEP-IRAs with only one participant, the
minimum initial investment is $750. To exchange shares held in Corporate
Plans, 403(b)(7) Plans and IRAs set up under a Simplified Employee Pension
Plan ("SEP-IRAs") with more than one participant, the minimum initial
investment is $100 if the plan has at least $2,500 invested among the funds
in the Dreyfus Family of Funds. To exchange shares held in a personal
retirement plan account, the shares exchanged must have a current value of
at least $100.
Dreyfus Auto-Exchange Privilege. The Dreyfus Auto-Exchange Privilege
permits an investor to purchase, in exchange for shares of the Fund, shares
of the same Class of another fund in the Dreyfus Family of Funds. This
Privilege is available only for existing accounts. With respect to Class R
shares held by a Retirement Plan, exchanges may be made only between the
investor's Retirement Plan account in one fund and such investor's
Retirement Plan account in another fund. Shares will be exchanged on the
basis of relative net asset value as described above under "Fund Exchanges."
Enrollment in or modification or cancellation of this Privilege is effective
three business days following notification by the investor. An investor
will be notified if the investor's account falls below the amount designated
to be exchanged under this Privilege. In this case, an investor's account
will fall to zero unless additional investments are made in excess of the
designated amount prior to the next 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.
Fund exchanges and Dreyfus Auto-Exchange Privilege are available to
shareholders resident in any state in which shares of the fund being
acquired may legally be sold. Shares may be exchanged only between accounts
having identical names and other identifying designations.
Shareholder Services Forms and prospectuses of the other funds may be
obtained from the Distributor. The Fund reserves the right to reject any
exchange request in whole or in part. The Fund exchange service or Dreyfus
Auto-Exchange Privilege may be modified or terminated at any time upon
notice to shareholders.
Automatic Withdrawal. The Automatic Withdrawal Plan permits an
investor with a $5,000 minimum account to request withdrawal of a specified
dollar amount (minimum of $50) on either a monthly or quarterly basis.
Withdrawal payments are the proceeds from sales of Fund shares, not the
yield on the shares. If withdrawal payments exceed reinvested dividends and
distributions, the investor's shares will be reduced and eventually may be
depleted. An Automatic Withdrawal Plan may be established by completing the
appropriate application available from the Distributor. There is a service
charge of $.50 for each withdrawal check. Automatic Withdrawal may be
terminated at any time by the investor, the Fund or the Transfer Agent.
Shares for which certificates have been issued may not be redeemed through
the Automatic Withdrawal Plan.
Dreyfus Dividend Sweep. Dreyfus Dividend Sweep allows investors to
invest on the payment date their dividends or dividends and capital gain
distributions, if any, from the Fund in shares of the same Class of certain
other funds in the Dreyfus Family of Funds of which the investor is 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 by a fund may be invested without
imposition of a sales load in shares of other funds that are
offered without a sales load.
B. Dividends and distributions paid by a fund which does not charge a
sales load may be invested in shares of other funds sold with a
sales load, and the applicable sales load will be deducted.
C. Dividends and distributions paid by a fund which charges a sales
load may be invested in shares of other funds sold with a sales
load (referred to herein as "Offered Shares"), provided that, if
the sales load applicable to the Offered Shares exceeds the
maximum sales load charged by the fund from which dividends or
distributions are being swept, without giving effect to any
reduced loads, the difference will be deducted.
D. Dividends and distributions paid by a fund may be invested in
shares of other funds that impose a contingent deferred sales
charge ("CDSC") and the applicable CDSC, if any, will be imposed
upon redemption of such shares.
Corporate Pension/Profit-Sharing and Retirement Plans. The 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 SEP-IRAs and IRA "Rollover Accounts,"
and 403(b)(7) Plans. Plan support services also are available.
Investors who wish to purchase Fund shares in conjunction with a Keogh
Plan, a 403(b)(7) Plan or an IRA, including an SEP-IRA, may request from the
Distributor forms for adoption of such plans.
The entity acting as custodian for Keogh Plans, 403(b)(7) Plans or IRAs
may charge a fee, payment of which could require the liquidation of shares.
All fees charged are described in the appropriate form.
Shares may be purchased in connection with these plans only by direct
remittance to the entity acting as custodian. Purchases for these plans may
not be made in advance of receipt of funds.
The minimum initial investment for corporate plans, Salary Reduction
Plans, 403(b)(7) Plans and SEP-IRAs with more than one participant, is
$2,500 with no minimum on subsequent purchases. The minimum initial
investment for Dreyfus-sponsored Keogh Plans, IRAs, SEP-IRAs and 403(b)(7)
Plans with only one participant, is normally $750, with no minimum on
subsequent purchases. Individuals who open an IRA may also open a non-
working spousal IRA with a minimum investment of $250.
The investor should read the Prototype Retirement Plan and the
appropriate form of Custodial Agreement for further details on eligibility,
service fees and tax implications, and should consult a tax adviser.
DETERMINATION OF NET ASSET VALUE
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "How to Buy Fund Shares."
Restricted securities, as well as securities or other assets for which
market quotations are not readily available, or are not valued by a pricing
service approved by the Board of Directors, are valued at fair value as
determined in good faith by the Board of Directors. The Board of Directors
will review the method of valuation on a current basis. In making their
good faith valuation of restricted securities, the Directors generally will
take the following factors into consideration: restricted securities which
are securities of the same class of securities for which a public market
exists usually will be valued at market value less the same percentage
discount at which purchased. This discount will be revised periodically by
the Board of Directors if the Directors believe that it no longer reflects
the value of the restricted securities. Restricted securities not of the
same class as securities for which a public market exists usually will be
valued initially at cost. Any subsequent adjustment from cost will be based
upon considerations deemed relevant by the Board of Directors.
New York Stock Exchange Closings. The holidays (as observed) on which
the NYSE is closed currently are: New Year's Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and
Christmas.
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Dividends, Other
Distributions and Taxes."
The term "regulated investment company" does not imply the supervision
of management or investment practices or policies by any government agency.
To qualify as a regulated investment company ("RIC"), the Fund (1) must
distribute to its shareholders each year at least 90% of its investment
company taxable income (generally consisting of net investment income, net
short-term capital gains and net gains from certain foreign currency
transactions), (2) must derive at least 90% of its annual gross income from
specified sources ("Income Requirement"), (3) must derive less than 30% of
its annual gross income from gain on the sale or disposition of any of the
following that are held for less than three months -- (i) securities,
(ii) non-foreign-currency options and futures and (iii) foreign currencies
(or foreign currency options, futures and forward contracts) that are not
directly related to the Fund's principal business of investing in securities
(or options and futures with respect thereto) ("Short-Short Limitation") --
and (4) must meet certain asset diversification and other requirements.
Accordingly, the Fund may be restricted in the selling of securities held
for less than three months.
Any dividend or other distribution paid shortly after an investor's
purchase may have the effect of reducing the net asset value of the shares
below the cost of his investment. Such a dividend or other distribution
would be a return on investment in an economic sense, although taxable as
stated in the Fund's Prospectus. In addition, the Code provides that if a
shareholder holds shares of the Fund for six months or less and has received
a capital gain distribution with respect to those shares, any loss incurred
on the sale of those shares will be treated as a long-term capital loss to
the extent of the capital gain distribution received.
Dividends and other distributions declared by the Fund in October,
November or December of any year and payable to shareholders of record on a
date in that month any of those months are deemed to have been paid by the
Fund and received by the shareholders on December 31 of that year if the
distributions are paid by the Fund during the following January.
Accordingly, those distributions will be taxed to shareholders for the year
in which that December 31 falls.
A portion of the dividends paid by the Fund, whether received in cash
or reinvested in additional Fund shares, may be eligible for the dividends-
received deduction allowed to corporations. The eligible portion may not
exceed the aggregate dividends received by the Fund from U.S. corporations.
However, dividends received by a corporate shareholder and deducted by it
pursuant to the dividends-received deduction are subject indirectly to the
alternative minimum tax.
Dividends and interest received by the Fund may be subject to income,
withholding or other taxes imposed by foreign countries and U.S. possessions
that would reduce the yield on its securities. Tax conventions between cer-
tain countries and the United States may reduce or eliminate these foreign
taxes, however, and many foreign countries do not impose taxes on capital
gains in respect of investments by foreign investors.
Income from foreign currencies (except certain gains therefrom that may
be excluded by future regulations), and income from transactions in options,
futures and forward contracts derived by the Fund with respect to its
business of investing in securities or foreign currencies, will qualify as
permissible income under the Income Requirement. However, income from the
disposition of options and futures contracts (other than those on foreign
currencies) will be subject to the Short-Short Limitation if they are held
for less than three months. Income from the disposition of foreign
currencies, and options, futures and forward contracts thereon, that are not
directly related to the Fund's principal business of investing in securities
(or options and futures with respect to securities) also will be subject to
the Short-Short Limitation if they are held for less than three months.
If the Fund satisfies certain requirements, any increase in value of a
position that is part of a "designated hedge" will be offset by any decrease
in value (whether realized or not) of the offsetting hedging position during
the period of the hedge for purposes of determining whether the Fund
satisfies the Short-Short Limitation. Thus, only the net gain (if any) from
the designated hedge will be included in gross income for purposes of that
limitation. The Fund will consider whether it should seek to qualify for
this treatment for its hedging transactions. To the extent the Fund does
not so qualify, it may be forced to defer the closing out of certain
options, futures and forward contracts beyond the time when it otherwise
would be advantageous to do so, in order for the Fund to qualify as a RIC.
Ordinarily, gains and losses realized from portfolio transactions will
be treated as capital gain and loss. However, a portion of the gain or loss
from the disposition of foreign currencies and non-U.S. dollar denominated
securities (including debt instruments, certain financial forward, futures
and option contracts and certain preferred stock) may be treated as ordinary
income or loss under Section 988 of the Code. In addition, all or a portion
of any gain realized from the sale or other disposition of certain market
discount bonds will be treated as ordinary income. Moreover, all or a
portion of the gain realized from engaging in "conversion transactions" may
be treated as ordinary income under Section 1258. "Conversion transactions"
are defined to include certain forward, futures, option and straddle
transactions, transactions marketed or sold to produce capital gains, or
transactions described in Treasury regulations to be issued in the future.
Under Section 1256 of the Code, any gain or loss realized by the Fund
from certain futures and forward contracts and options transactions will be
treated as 60% long-term capital gain or loss and 40% short-term capital
gain or loss. Gain or loss will arise upon exercise or lapse of such
contracts and options as well as from closing transactions. In addition,
any such contracts or options remaining unexercised at the end of the Fund's
taxable year will be treated as sold for their then fair market value (a
process known as "marking to market"), resulting in additional gain or loss
to the Fund characterized in the manner described above.
Offsetting positions held by the Fund involving certain contracts or
options may constitute "straddles." "Straddles" are defined to include
"offsetting positions" in actively traded personal property. The tax
treatment of "straddles" is governed by Sections 1092 and 1258 of the Code,
which, in certain circumstances, override or modify Sections 1256 and 988.
As such, all or a portion of any short-term or long-term capital gain from
certain "straddle" transactions may be recharacterized to ordinary income.
If the Fund were treated as entering into "straddles" by reason of its
engaging in certain forward contracts or options transactions, such
"straddles" would be characterized as "mixed straddles" if the forward
contracts or options transactions comprising a part of such "straddles" were
governed by Section 1256. The Fund may make one or more elections with
respect to "mixed straddles." Depending on which election is made, if any,
the results to the Fund may differ. If no election is made, then to the
extent the "straddle" and conversion transactions rules apply to positions
established by the Fund, losses realized by the Fund will be deferred to the
extent of unrealized gain in the offsetting position. Moreover, as a result
of the "straddle" rules, short-term capital loss on "straddle" positions may
be recharacterized as long-term capital loss, and long-term capital gains
may be treated as short-term capital gains or ordinary income.
Investment by the Fund in securities issued or acquired at a discount
(for example, zero coupon securities) or providing for deferred interest or
for payment of interest in the form of additional obligations (for example,
"pay-in-kind" or "PIK" securities) could, under special tax rules, affect
the amount, timing and character of distributions to shareholders by causing
the Fund to recognize income prior to the receipt of cash payments. For
example, the Fund could be required to take into gross income annually a
portion of the discount (or deemed discount) at which the securities were
issued and to distribute such income in order to maintain its qualification
for treatment as a RIC. In such case, the Fund may have to dispose of
securities it might otherwise have continued to hold in order to generate
cash to satisfy these distribution requirements.
If the Fund invests in an entity that is classified as a "passive
foreign investment company" ("PFIC") for federal income tax purposes, the
operation of certain provisions of the Code applying to PFICs could result
in the imposition of certain federal income taxes on the Fund. In addition,
gain realized from the sale or other disposition of PFIC securities may be
treated as ordinary income under Section 1291 of the Code.
State and Local Taxes. Depending upon the extent of the Fund's
activities in states and localities in which its offices are maintained, in
which its agents or independent contractors are located, or in which it is
otherwise deemed to be conducting business, the Fund may be subject to the
tax laws of such states or localities. Shareholders are advised to consult
their tax advisers concerning the application of state and local taxes.
Foreign Shareholders - U.S. Federal Income Taxation. U.S. federal
income taxation of a shareholder who, as to the United States, is a
non-resident alien individual, a foreign trust or estate, a foreign
corporation or a foreign partnership (a "foreign shareholder"), depends on
whether the income from the Fund is "effectively connected" with a U.S.
trade or business carried on by the shareholder, as discussed generally
below. Special U.S. federal income tax rules that differ from those
described below may apply to certain foreign persons who invest in the Fund.
For example, the tax consequences to a foreign shareholder entitled to claim
the benefits of an applicable tax treaty may be different from those
described below. Foreign shareholders are advised to consult their own tax
advisers with respect to the particular tax consequences to them of an
investment in the Fund.
Foreign Shareholders - Income Not Effectively Connected. If the income
from the Fund is not effectively connected with a U.S. trade or business
carried on by the foreign shareholder, distributions of investment company
taxable income generally will be subject to a U.S. federal withholding tax
of 30% (or lower treaty rate) on the gross amount of the distribution.
Foreign shareholders also may be subject to U.S. federal withholding tax on
income resulting from any election by the Fund to treat foreign taxes paid
by it as paid by its shareholders (see discussion above), but foreign
shareholders will not be able to claim a credit or deduction for the foreign
taxes treated as having been paid by them.
Capital gains realized by foreign shareholders on the sale of Fund
shares and distributions to them of net capital gain, as well as amounts
retained by the Fund that are designated as undistributed capital gains,
generally will not be subject to U.S. federal income tax unless the foreign
shareholder is a non-resident alien individual and is physically present in
the United States for more than 182 days during the taxable year. However,
this rule only applies in exceptional cases, because any individual present
in the United States for more than 182 days during the taxable year
generally is treated as a resident for U.S. federal income tax purposes on
his worldwide income at the graduated rates applicable to U.S. citizens,
rather than the 30% U.S. federal withholding tax rate. In the case of
certain foreign shareholders, the Fund may be required to withhold U.S.
Federal income tax at a rate of 31% of capital gain distributions and of the
gross proceeds from a redemption of Fund shares unless the shareholder
furnishes the Fund with a certificate regarding the shareholder's foreign
status.
Foreign Shareholders - Effectively Connected Income. If income from the
Fund is effectively connected with a U.S. trade or business carried on by a
foreign shareholder, then all distributions to that shareholder and any
gains realized by that shareholder on the disposition of the Fund shares
will be subject to U.S. federal income tax at the graduated rates applicable
to U.S. citizens and domestic corporations, as the case may be. Foreign
shareholders also may be subject to the branch profits tax.
Foreign Shareholders - Estate Tax. Foreign individuals generally are
subject to U.S. federal estate tax on their U.S. situs property, such as
shares of the Fund, that they own at the time of their death. Certain
credits against that tax and relief under applicable tax treaties may be
available.
Pennsylvania Personal Property Tax Exemption. The Company has obtained
a Certificate of Authority to do business as a foreign corporation in
Pennsylvania. In the opinion of counsel, shares of The Company are exempt
from Pennsylvania personal property taxes.
PORTFOLIO TRANSACTIONS
All portfolio transactions of the Fund are placed on behalf of the Fund
by Dreyfus. Debt securities purchased and sold by the Fund are generally
traded on a net basis (i.e., without commission) through dealers acting for
their own account and not as brokers, or otherwise involve transactions
directly with the issuer of the instrument. This means that a dealer (the
securities firm or bank dealing with the Fund) makes a market for securities
by offering to buy at one price and sell at a slightly higher price. The
difference between the prices is known as a spread. Other portfolio
transactions may be executed through brokers acting as agent. The Fund will
pay a spread or commissions in connection with such transactions. Dreyfus
uses its best efforts to obtain execution of portfolio transactions at
prices which are advantageous to the Fund and at spreads and commission
rates, if any, which are reasonable in relation to the benefits received.
Dreyfus also places transactions for other accounts that it provides with
investment advice.
Brokers and dealers involved in the execution of portfolio transactions
on behalf of the Fund are selected on the basis of their professional
capability and the value and quality of their services. In selecting brokers
or dealers, Dreyfus will consider various relevant factors, including, but
not limited to, the size and type of the transaction; the nature and
character of the markets for the security to be purchased or sold; the
execution efficiency, settlement capability, and financial condition of the
broker-dealer; the broker-dealer's execution services rendered on a
continuing basis; and the reasonableness of any spreads (or commissions, if
any). Any spread, commission, fee or other remuneration paid to an
affiliated broker-dealer is paid pursuant to the Company's procedures
adopted in accordance with Rule 17e-1 of the 1940 Act.
Brokers or dealers may be selected who provide brokerage and/or
research services to the Fund and/or other accounts over which Dreyfus or
its affiliates exercise investment discretion. Such services may include
advice concerning the value of securities; the advisability of investing in,
purchasing or selling securities; the availability of securities or the
purchasers or sellers of securities; furnishing analyses and reports
concerning issuers, industries, securities, economic factors and trends,
portfolio strategy and performance of accounts; and effecting securities
transactions and performing functions incidental thereto (such as clearance
and settlement).
The receipt of research services from broker-dealers may be useful to
Dreyfus in rendering investment management services to the Fund and/or its
other clients; and, conversely, such information provided by brokers or
dealers who have executed transaction orders on behalf of other clients of
Dreyfus may be useful to these organizations in carrying out their
obligations to the Fund. The receipt of such research services does not
reduce these organizations' normal independent research activities; however,
it enables these organizations to avoid the additional expenses which might
otherwise be incurred if these organizations were to attempt to develop
comparable information through their own staffs.
The Company's Board of Directors periodically review Dreyfus'
performance of its responsibilities in connection with the placement of
portfolio transactions on behalf of the Fund and review the prices paid by
the Fund over representative periods of time to determine if they are
reasonable in relation to the benefits to the Fund.
Although Dreyfus manages other accounts in addition to the Fund,
investment decisions for the Fund are made independently from decisions made
for these other accounts. It sometimes happens that the same security is
held by more than one of the accounts managed by Dreyfus. Simultaneous
transactions may occur when several accounts are managed by the same
investment manager, particularly when the same investment instrument is
suitable for the investment objective of more than one account.
When more than one account is simultaneously engaged in the purchase or
sale of the same investment instrument, the prices and amounts are allocated
in accordance with a formula considered by Dreyfus to be equitable to each
account. In some cases this system could have a detrimental effect on the
price or volume of the investment instrument as far as the Fund is
concerned. In other cases, however, the ability of the Fund to participate
in volume transactions will produce better executions for the Fund. While
the Directors will continue to review simultaneous transactions, it is their
present opinion that the desirability of retaining the Dreyfus as investment
manager to the Fund outweighs any disadvantages that may be said to exist
from exposure to simultaneous transactions.
The Fund did not commence operations until November 12, 1993.
Portfolio Turnover. The portfolio turnover rate for the Fund is
calculated by dividing the lesser of the Fund's annual sales or purchases of
portfolio securities (exclusive of purchases and sales of securities whose
maturities at the time of acquisition were one year or less) by the monthly
average value of securities in the Fund during the year. The Portfolio
turnover rate for the period since inception of the Fund was:
November 12, 1993 to October 31, 1994
83%
PERFORMANCE INFORMATION
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Performance
Information."
Average annual total return is calculated by determining the ending
redeemable value of an investment purchased with a hypothetical $1,000
payment made at the beginning of the period (assuming the reinvestment of
dividends and other 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.
Total return is calculated by subtracting the amount of the Fund's net
asset value per share at the beginning of a stated period from the net asset
value per share at the end of the period (after giving effect to the
reinvestment of dividends and other distributions during the period), and
dividing the result by the net asset value per share at the beginning of the
period.
Aggregate annual total return (expressed as a percentage) for Investor
shares of the Fund for the periods noted were:
Aggregate Total Return for the
Periods Ended October 31, 1994
Fund: 1 Year 5 Years 10 Years Inception
- - - ---- ---- ---- ---- ----
Midcap Fund -- -- -- (2.06%)
(4/6/94)
Inception date appears in parentheses following the aggregate total return
since inception.
Aggregate total return (expressed as a percentage) for Class R shares
of the Fund for the periods noted were:
Aggregate Total Return for the
Periods Ended October 31, 1994
Fund: 1 Year 5 Years 10 Years Inception
- - - ---- ---- ---- ---- ----
Midcap Fund -- -- -- (1.77%)
(11/12/93)
Inception date appears in parentheses following the aggregate total return
since inception.
Performance information for the Fund may be compared, in reports and
promotional literature, to indexes including, but not limited to: (i) the
Morgan Stanley European Index; (ii) the Standard & Poor's 500 Composite
Stock Price Index, the Dow Jones Industrial Average, or other appropriate
unmanaged domestic or foreign indices of performance of various types of
investments so that investors may compare the Fund's results with those of
indices widely regarded by investors as representative of the securities
markets in general; (iii) other groups of mutual funds tracked by Lipper
Analytical Services, a widely used independent research firm which ranks
mutual funds by overall performance, investment objectives and assets, or
tracked by other services, companies, publications, or persons who rank
mutual funds on overall performance or other criteria; (iv) the Consumer
Price Index (a measure of inflation) to assess the real rate of return from
an investment in the Fund; and (v) products managed by a universe of money
managers with similar country allocation and performance objectives.
Unmanaged indices may assume the reinvestment of dividends but generally do
not reflect deductions or administrative and management costs and expenses.
INFORMATION ABOUT THE FUND
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "General Information."
Each Fund share has one vote and, when issued and paid for in
accordance with the terms of the offering, is fully paid and non-assessable.
Fund shares have no preemptive or subscription rights and are freely
transferable.
The Fund will send annual and semi-annual financial statements to all
its shareholders.
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT, COUNSEL
AND INDEPENDENT AUDITORS
Mellon Bank, One Mellon Bank Center, Pittsburgh, PA 15258, is the
Fund's custodian. The Shareholder Services Group, Inc., a subsidiary of
First Data Corporation, P.O. Box 9671, Providence, Rhode Island 02940-9671,
is the Fund's transfer and dividend disbursing agent. The Shareholder
Services Group, Inc. and Mellon Bank as custodian, have no part in
determining the investment policies of the Fund or which securities are to
be purchased or sold by the Fund.
Kirkpatrick & Lockhart, 1800 M Street, N.W., South Lobby - 9th Floor,
Washington, D.C. 20036, has passed upon the legality of the shares offered
by the Prospectus and this Statement of Additional Information.
KPMG Peat Marwick LLP was appointed by the Directors to serve as the
Fund's independent auditors for the year ending October 31, 1995, providing
audit services including (1) examination of the annual financial statements,
(2) assistance, review and consultation in connection with the SEC and (3)
review of the annual federal income tax return and the Pennsylvania excise
tax return filed on behalf of the Fund.
FINANCIAL STATEMENTS
The financial statements for the period ended October 31, 1994,
including notes to the financial statements and supplementary information
are included in the Annual Report to shareholders. A copy of the Annual
Report accompanies this Statement of Additional Information. The financial
statements for the Annual Report are incorporated herein by reference.
__________________________________________________________________________
DREYFUS S&P 500 STOCK INDEX FUND
INVESTOR SHARES AND CLASS R SHARES
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
March 1, 1995
__________________________________________________________________________
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus
of the Dreyfus S&P 500 Stock Index Fund (formerly the Laurel S&P 500 Stock
Index Fund) (the "Fund"), dated March 1, 1995, as it may be revised from
time to time. The Fund is a separate portfolio of The Dreyfus/Laurel
Funds, Inc. (formerly, The Laurel Funds, Inc.), an open-end, diversified
management investment company (the "Company"), known as a mutual fund. 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 the
following numbers:
Call Toll Free 1-800-645-6561
In New York City -- Call 1-718-895-1206
On Long Island -- Call 794-5452
The Dreyfus Corporation ("Dreyfus") serves as the Fund's investment
manager.
Premier Mutual Fund Services, Inc. (the "Distributor") is the
distributor of the Fund's shares.
TABLE OF CONTENTS
Page
Investment Objective and Management Policies . . . . . . . . . . . . B-2
Management of the Fund . . . . . . . . . . . . . . . . . . . . . . . B-10
Management Arrangements. . . . . . . . . . . . . . . . . . . . . . . B-15
Purchase of Fund Shares. . . . . . . . . . . . . . . . . . . . . . . B-16
Distribution Plan . . . . . . . . . . . . . . . . . . . . . . . . . B-17
Redemption of Fund Shares. . . . . . . . . . . . . . . . . . . . . . B-18
Shareholder Services . . . . . . . . . . . . . . . . . . . . . . . . B-20
Determination of Net Asset Value . . . . . . . . . . . . . . . . . . B-23
Dividends, Other Distributions and Taxes . . . . . . . . . . . . . . B-23
Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . . . B-27
Performance Information. . . . . . . . . . . . . . . . . . . . . . . B-29
Information About the Fund . . . . . . . . . . . . . . . . . . . . . B-30
Custodian, Transfer and Dividend Disbursing
Agent, Counsel and Independent Auditors. . . . . . . . . . . . . . B-30
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . B-31
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled
"Description of the Fund."
Portfolio Securities
Government Obligations. The Fund may invest in a variety of U.S.
Treasury obligations, which differ only in their interest rates,
maturities and times of issuance: (a) U.S. Treasury bills have a maturity
of one year or less, (b) U.S. Treasury notes have maturities of one to ten
years, and (c) U.S. Treasury bonds generally have maturities of greater
than ten years.
In addition to U.S. Treasury obligations, the Fund may invest in
obligations issued or guaranteed by U.S. Government agencies and
instrumentalities which are supported by any of the following: (a) the
full faith and credit of the U.S. Treasury (such as Government National
Mortgage Association ("GNMA") participation certificates), (b) the right
of the issuer to borrow an amount limited to a specific line of credit
from the U.S. Treasury, (c) discretionary authority of the U.S. Government
agency or instrumentality, or (d) the credit of the instrumentality.
(Examples of agencies and instrumentalities are: Federal Land Banks,
Federal Housing Administration, Farmers Home Administration, Export-Import
Bank of the United States, Central Bank for Cooperatives, Federal
Intermediate Credit Banks, Federal Home Loan Banks, General Services
Administration, Maritime Administration, Tennessee Valley Authority,
District of Columbia Armory Board, Inter-American Development Bank, Asian-
American Development Bank, Student Loan Marketing Association,
International Bank for Reconstruction and Development and Federal National
Mortgage Association ("FNMA")). No assurance can be given that the U.S.
Government will provide financial support to such U.S. Government agencies
or instrumentalities described in (b), (c) and (d) in the future, other
than as set forth above, since it is not obligated to do so by law.
Repurchase Agreements. The Fund may enter into repurchase agreements
with U.S. Government securities dealers recognized by the Federal Reserve
Board, with member banks of the Federal Reserve System, or with such other
brokers or dealers that meet the credit guidelines of the Board of
Directors. In a repurchase agreement, the Fund buys a security from a
seller that has agreed to repurchase the same security at a mutually
agreed upon date and price. The Fund's resale price will be in excess of
the purchase price, reflecting an agreed upon interest rate. This interest
rate is effective for the period of time the Fund is invested in the
agreement and is not related to the coupon rate on the underlying
security. Repurchase agreements may also be viewed as a fully
collateralized loan of money by the Fund to the seller. The period of
these repurchase agreements will usually be short, from overnight to one
week, and at no time will the Fund invest in repurchase agreements for
more than one year. The Fund will always receive as collateral securities
whose market value including accrued interest is, and during the entire
term of the agreement remains, at least equal to 100% of the dollar amount
invested by the Fund in each agreement, and the Fund will make payment for
such securities only upon physical delivery or upon evidence of book entry
transfer to the account of the Custodian. If the seller defaults, the Fund
might incur a loss if the value of the collateral securing the repurchase
agreement declines and might incur disposition costs in connection with
liquidating the collateral. In addition, if bankruptcy proceedings are
commenced with respect to the seller of a security which is the subject of
a repurchase agreement, realization upon the collateral by the Fund may be
delayed or limited. The Fund seeks to minimize the risk of loss through
repurchase agreements by analyzing the creditworthiness of the obligors
under repurchase agreements, in accordance with the credit guidelines of
the Company's Board of Directors.
Reverse Repurchase Agreements. The Fund may enter into reverse
repurchase agreements to meet redemption requests where the liquidation of
portfolio securities is deemed by the Fund to be inconvenient or
disadvantageous. A reverse repurchase agreement is a transaction whereby
the Fund transfers possession of a portfolio security to a bank or
broker-dealer in return for a percentage of the portfolio security's
market value. The Fund retains record ownership of the security involved
including the right to receive interest and principal payments. At an
agreed upon future date, the Fund repurchases the security by paying an
agreed upon purchase price plus interest. Cash or liquid high-grade debt
obligations of the Fund equal in value to the repurchase price including
any accrued interest will be maintained in a segregated account while a
reverse repurchase agreement is in effect.
When-Issued Securities. New issues of U.S. Treasury and Government
securities are often offered on a when-issued basis. This means that
delivery and payment for the securities normally will take place
approximately 7 to 15 days after the date the buyer commits to purchase
them. The payment obligation and the interest rate that will be received
on securities purchased on a when-issued basis are each fixed at the time
the buyer enters into the commitment. The Fund will make commitments to
purchase such securities only with the intention of actually acquiring the
securities, but the Fund may sell these securities or dispose of the
commitment before the settlement date if it is deemed advisable as a
matter of investment strategy. Cash or marketable high-grade debt
securities equal to the amount of the above commitments will be segregated
on the Fund's records. For the purpose of determining the adequacy of
these securities the segregated securities will be valued at market. If
the market value of such securities declines, additional cash or
securities will be segregated on the Fund's records on a daily basis so
that the market value of the account will equal the amount of such
commitments by the Fund.
Securities purchased on a when-issued basis and the securities held
by the Fund are subject to changes in market value based upon the public's
perception of changes in the level of interest rates. Generally, the value
of such securities will fluctuate inversely to changes in interest rates
- - - -- i.e., they will appreciate in value when interest rates decline and
decrease in value when interest rates rise. Therefore, if in order to
achieve higher interest income the Fund remains substantially fully
invested at the same time that it has purchased securities on a "when-
issued" basis, there will be a greater possibility of fluctuation in the
Fund's net asset value.
When payment for when-issued securities is due, the Fund will meet
its obligations from then-available cash flow, the sale of segregated
securities, the sale of other securities and/or, although it would not
normally expect to do so, from the sale of the when-issued securities
themselves (which may have a market value greater or less than the Fund's
payment obligation). The sale of securities to meet such obligations
carries with it a greater potential for the realization of capital gains,
which are subject to federal income taxes.
Commercial Paper. The Fund may invest in commercial paper issued in
reliance on the so-called "private placement" exemption from registration
afforded by Section 4(2) of the Securities Act of 1933 ("Section 4(2)
paper"). Section 4(2) paper is restricted as to disposition under the
federal securities laws and generally is sold to investors who agree that
they are purchasing the paper for an investment and not with a view to
public distribution. Any resale by the purchaser must be pursuant to
registration or exemption therefrom. Section 4(2) paper is normally resold
to other investors through or with the assistance of the issuer or
investment dealers who make a market in Section 4(2) paper, thus providing
liquidity. Pursuant to guidelines established by the Company's Board of
Directors, Dreyfus may determine that Section 4(2) paper is liquid for the
purposes of complying with the Fund's investment restriction relating to
investments in illiquid securities.
Management Policies
The Fund engages, except as noted, in the following practices in
furtherance of its investment objective.
Loans of Fund Securities. The Fund has authority to lend its
portfolio securities provided (1) the loan is secured continuously by
collateral consisting of U.S. Government securities or cash or cash
equivalents adjusted daily to make a market value at least equal to the
current market value of these securities loaned; (2) the Fund may at any
time call the loan and regain the securities loaned; (3) the Fund will
receive any interest or dividends paid on the loaned securities; and (4)
the aggregate market value of securities loaned will not at any time
exceed one-third of the total assets of the Fund. In addition, it is
anticipated that the Fund may share with the borrower some of the income
received on the collateral for the loan or that it will be paid a premium
for the loan. In determining whether to lend securities, the Fund
considers all relevant factors and circumstances including the
creditworthiness of the borrower.
Futures Contracts and Options. For the purpose of creating market
exposure for uncommitted cash balances, reducing transaction costs
associated with rebalancing the Fund, facilitating trading or seeking
higher investment returns when a futures contract is priced more
attractively than the underlying security or the index of the Fund, the
Fund may enter into futures contracts, options, and options on futures
contracts with respect to securities in which the Fund may invest and
indices comprised of such securities.
Futures contracts provide for the future sale by one party and
purchase by another party of a specified amount of a specific security or
securities index at a specified future time and at a specified price.
Where the underlying security is an index, no physical transfer of
securities takes place; rather, upon expiration of the contract, the
parties settle by exchanging cash in an amount equal to the difference
between the contract price and the closing value of the index at
expiration, net of variation margin previously paid. Futures contracts
that are standardized as to maturity date and underlying interest are
traded on national futures exchanges.
Futures traders are required to make a good faith margin deposit in
cash or government securities with a broker or custodian to initiate and
maintain open positions in futures contracts. A margin deposit is intended
to assure completion of the contract (delivery or acceptance of the
underlying security) if it is not terminated prior to the specified
delivery date. Minimal initial margin requirements are established by the
futures exchange and may be changed. Brokers may establish deposit
requirements which are higher than the exchange minimums.
After a futures contract position is opened, the value of the
contract is marked to market daily. If the futures contract price changes
to the extent that the margin on deposit does not satisfy margin
requirements, payment of additional "variation" margin will be required.
Conversely, change in the contract value may reduce the required margin,
resulting in a repayment of excess margin to the contract holder.
Variation margin payments are made to and from the futures broker for as
long as the contract remains open. The Fund expects to earn interest
income on its margin deposits.
Options are of two basic types, either call or put options, and may
relate to a single security or a securities index or a futures contract. A
call option on a security permits the holder of the option to purchase the
underlying security at a specified price ("strike price") at any time
during the term of the option. Thus, in exchange for the premium paid to
the writer, the purchaser obtains the right to profit from any
appreciation in the value of the underlying security above the strike
price. A put option permits the holder to sell the underlying security to
the writer at the strike price at any time during the term of the
contract. Thus, in exchange for the premium paid to the writer, the
purchaser is relieved of the risk of a decline in the value of the
underlying security below the strike price. An option on a securities
index gives the holder the right to receive cash from the writer in an
amount equal to the difference between the strike price of the option and
the value of the underlying index multiplied by a factor established by
the exchange upon which the option is traded. An option on a futures
contract gives the holder, in return for the premium paid to the writer,
the right to assume a position in the underlying futures contract at a
specified price at any time during the term of the option.
Although futures and options contracts by their terms call for actual
delivery or acceptance of the underlying securities, in most cases the
contracts are closed out before the settlement date without the making or
taking of delivery. Closing out an open futures position is done by taking
an opposite position ("buying" a contract which has previously been
"sold," or "selling" a contract previously purchased) in an identical
contract to terminate the position. An option purchased may be closed out
by selling the option. An option written is closed out by purchasing an
option identical to that written. Brokerage commissions are incurred when
futures and options contracts are bought and sold.
Restrictions on the Use of Futures Contracts and Options. The Fund
will not enter into futures contracts to the extent that its outstanding
obligations under these contracts would exceed 25% of the Fund's total
assets. To the extent that the Fund enters into futures contracts and
options on futures positions that are not for bona fide hedging purposes
(as defined by the Commodity Futures Trading Commission), the aggregate
initial margin and premiums on these positions (excluding the amount by
which options are "in-the-money") may not exceed 5% of the Fund's net
assets.
Transactions using options and futures contracts (other than options
that the Fund has purchased) expose the Fund to an obligation to another
party. The Fund will not enter into any such transactions unless it owns
either (1) an offsetting ("covered") position in securities or other
options or futures contracts or (2) cash, receivables and short-term debt
securities with a value sufficient at all times to cover its potential
obligations not covered as provided in (1) above. The Fund will comply
with SEC guidelines regarding cover for these instruments and, if the
guidelines so require, set aside cash, U.S. Government securities or other
liquid, high-grade debt securities in a segregated account with its
custodian in the prescribed amount.
All options purchased or written by the Fund must be listed on a
national securities or futures exchange or traded in the over-the-counter
("OTC") market. The Fund will not purchase or write OTC options if, as a
result of such transaction, the sum of (i) the market value of outstanding
OTC options purchased by the Fund, (ii) the market value of the underlying
securities covered by outstanding OTC call options written by the Fund,
and (iii) the market value of all other assets of the Fund that are
illiquid or are not otherwise readily marketable, would exceed 15% of the
net assets of the Fund, taken at market value. However, if an OTC option
is sold by the Fund to a primary U.S. Government securities dealer
recognized by the Federal Reserve Bank of New York and the Fund has the
unconditional contractual right to repurchase such OTC option from the
dealer at a predetermined price, then the Fund will treat as illiquid such
amount of the underlying securities as is equal to the repurchase price
less the amount by which the option is "in-the-money" (the difference
between current market value of the underlying security and the option's
strike price). The repurchase price with primary dealers is typically a
formula price which is generally based on a multiple of the premium
received for the option plus the amount by which the option is
"in-the-money."
The Fund may write only covered options. A call option is covered if
the Fund owns the underlying security or a call option on the same
security with a lower strike price. A put option is covered if the Fund
segregates cash and/or short-term debt securities in an amount necessary
to pay the strike price of the option or purchases a put option on the
same underlying security with a higher strike price.
The Fund will not purchase puts, calls, straddles, spreads or any
combination thereof, if as a result of such purchase the value of the
Fund's aggregate investment in such securities would exceed 5% of the
Fund's total assets.
Risk Factors in Futures and Options Transactions. There can be no
assurance that a liquid secondary market will exist for any particular
futures or option contract at any specific time. Thus, it may not be
possible to close a futures or option position. In the event of adverse
price movements, the Fund would continue to be required to make daily cash
payments to maintain its required margin with respect to open futures or
written options positions. In such a situation, if the Fund has
insufficient cash, it may have to sell portfolio securities to meet daily
margin requirements at a time when it may be disadvantageous to do so. In
addition, the Fund may be required to make or take delivery of the
securities underlying futures contracts that it holds and options
contracts that it has written.
The Fund will seek to minimize the risk that it will be unable to
close out a futures contract by entering into only those futures contracts
that are listed on national futures exchanges and for which there appears
to be a liquid secondary market. Likewise, the Fund will enter into only
those option contracts that are listed on a national securities exchange
or traded in the OTC market for which there appears to be a liquid
secondary market.
The risk of loss in trading futures contracts in some strategies can
be substantial, due both to the low margin deposits required, and the
extremely high degree of leverage involved in futures pricing. As a
result, a relatively small price movement in a futures contract may result
in immediate and substantial loss (as well as gain) to the investor. For
example, if at the time of purchase, 10% of the value of the futures
contract is deposited as margin, a subsequent 10% decrease in the value of
the futures contract would result in a total loss of margin deposit,
before any deduction for the transaction costs, if the account were then
closed out. A 15% decrease would result in a loss equal to 150% if the
original margin deposit for the contract were closed out. Thus, a purchase
or sale of a futures contract may result in losses in excess of the amount
invested in the contract. Options transactions are subject to similar
risks. However, because the Fund will not engage in futures or options
transactions for speculative purposes, Dreyfus believes that the Fund's
risk of loss is less than the risk of loss associated with speculative
transactions. Moreover, in the foregoing example, the Fund would
presumably have sustained comparable losses if, instead of the futures
contract, it had invested in the underlying security and sold it after the
decline.
Utilization of futures contracts and options transactions by the Fund
does involve the risk of imperfect or no correlation where the securities
underlying futures and options contracts are different from the portfolio
securities being hedged. It is also possible that the Fund could both lose
money on futures and options contracts and also experience a decline in
value of its portfolio securities. There is also the risk of loss by the
Fund of margin deposits in the event of bankruptcy of a broker with whom
the Fund has an open position in a futures contract or option thereon.
Most futures exchanges limit the amount of fluctuation permitted in
futures contract prices during a single trading day. The daily limit
establishes the maximum amount that the price of a futures contract may
vary either up or down from the previous day's settlement price at the end
of a trading session. Once the daily limit has been reached in a
particular type of contract, no trades may be made on that day at a price
beyond that limit. The daily limit governs only price movement during a
particular trading day and therefore does not limit potential losses,
because the limit may prevent the liquidation of unfavorable positions.
Futures contract prices have occasionally moved to the daily limit for
several consecutive trading days with little or no trading, thereby
preventing prompt liquidation of future positions and subjecting some
futures traders to substantial losses.
Futures and options contracts involve special tax considerations. See
"Dividends, Other Distributions and Taxes" for further information.
Investment Restrictions
The following limitations have been adopted by the Fund. The Fund may
not change any of these fundamental investment limitations without the
consent of: (a) 67% or more of the shares present at a meeting of
shareholders duly called if the holders of more than 50% of the
outstanding shares of the Fund are present or represented by proxy; or (b)
more than 50% of the outstanding shares of the Fund, whichever is less.
The Fund may not:
1. Purchase any securities which would cause more than 25% of the value
of the Fund's total assets at the time of such purchase to be
invested in the securities of one or more issuers conducting their
principal activities in the same industry. (For purposes of this
limitation, U.S. Government securities, and state or municipal
governments and their political subdivisions are not considered
members of any industry. ln addition, this limitation does not apply
to investments in domestic banks, including U.S. branches of foreign
banks and foreign branches of U.S. banks).
2. Borrow money or issue senior securities as defined in the 1940 Act
except that (a) the Fund may borrow money in an amount not exceeding
one-third of the Fund's total assets at the time of such borrowings,
and (b) the Fund may issue multiple classes of shares. The purchase
or sale of futures contracts and related options shall not be
considered to involve the borrowing of money or issuance of senior
securities.
3. Purchase with respect to 75% of the Fund's total assets securities of
any one issuer (other than securities issued or guaranteed by the
U.S. Government, its agencies or instrumentalities) if, as a result,
(a) more than 5% of the Fund's total assets would be invested in the
securities of that issuer, or (b) the Fund would hold more than 10%
of the outstanding voting securities of that issuer.
4. Make loans or lend securities, if as a result thereof more than
one-third of the Fund's total assets would be subject to all such
loans. For purposes of this limitation debt instruments and
repurchase agreements shall not be treated as loans.
5. Purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the
Fund from investing in securities or other instruments backed by real
estate, including mortgage loans, or securities of companies that
engage in real estate business or invest or deal in real estate or
interests therein).
6. Underwrite securities issued by any other person, except to the
extent that the purchase of securities and later disposition of such
securities in accordance with the Fund's investment program may be
deemed an underwriting.
7. Purchase or sell commodities except that the Fund may enter into
futures contracts and related options, forward currency contracts and
other similar instruments.
The Fund may, notwithstanding any other fundamental investment policy or
limitation, invest all of its investable assets in securities of a single
open-end management investment company with substantially the same
investment objectives, policies and limitations as the Fund.
The Fund has adopted the following additional non-fundamental
restrictions. These non-fundamental restrictions may be changed without
shareholder approval, in compliance with applicable law and regulatory
policy.
1. The Fund shall not sell securities short, unless it owns or has the
right to obtain securities equivalent in kind and amount to the
securities sold short, and provided that transactions in futures
contracts are not deemed to constitute selling short.
2. The Fund shall not purchase securities on margin, except that the
Fund may obtain such short-term credits as are necessary for the
clearance of transactions, and provided that margin payments in
connection with futures contracts and options on futures contracts
shall not constitute purchasing securities on margin.
3. The Fund shall not purchase oil, gas or mineral leases.
4. The Fund will not purchase or retain the securities of any issuer if
the officers or Directors of the Fund, its advisers, or managers,
owning beneficially more than one half of one percent of the
securities of such issuer, together own beneficially more than 5% of
such securities.
5. The Fund will not purchase securities of issuers (other than
securities issued or guaranteed by domestic or foreign governments or
political subdivisions thereof), including their predecessors, that
have been in operation for less than three years, if by reason
thereof, the value of the Fund's investment in securities would
exceed 5% of the Fund's total assets. For purposes of this
limitation, sponsors, general partners, guarantors and originators of
underlying assets may be treated as the issuer of a security.
6. The Fund will invest no more than 15% of the value of its net assets
in illiquid securities, including repurchase agreements with
remaining maturities in excess of seven days, time deposits with
maturities in excess of seven days and other securities which are not
readily marketable. For purposes of this limitation, illiquid
securities shall not include Section 4(2) paper and securities which
may be resold under Rule 144A under the Securities Act of 1933,
provided that the Board of Directors, or its delegate, determines
that such securities are liquid based upon the trading markets for
the specific security.
7. The Fund may not invest in securities of other investment companies,
except as they may be acquired as part of a merger, consolidation or
acquisition of assets and except to the extent otherwise permitted by
the 1940 Act.
8. The Fund shall not purchase any security while borrowings
representing more than 5% of the Fund's total assets are outstanding.
9. The Fund will not purchase warrants if at the time of such purchase:
(a) more than 5% of the value of the Fund's assets would be invested
in warrants, or (b) more than 2% of the value of the Fund's assets
would be invested in warrants that are not listed on the New York or
American Stock Exchange (for purposes of this limitation, warrants
acquired by the Fund in units or attached to securities will be
deemed to have no value).
10. The Fund will not purchase puts, calls, straddles, spreads and any
combination thereof if by reason thereof the value of its aggregate
investment in such classes of securities would exceed 5% of its total
assets except that: (a) this limitation shall not apply to standby
commitments, and (b) this limitation shall not apply to the Fund's
transactions in futures contracts and related options.
As an operating policy, the Fund will not invest more than 25% of the
value of its total assets, at the time of such purchase in domestic banks,
including U.S. branches of foreign banks and foreign branches of U.S.
banks. The Company's Board of Directors may change this policy without
shareholder approval. Notice will be given to shareholders if this policy
is changed by the Board.
MANAGEMENT OF THE FUND
CONTROLLING SHAREHOLDER
Mellon Bank Corporation, a Pennsylvania corporation registered as a
bank holding company under the Bank Holding Company Act of 1956, as
amended, owned of record, through its direct and indirect subsidiaries,
more than 25% of the issued and outstanding voting shares of the Company,
as of January 31, 1995, and is, as a consequence, deemed to be a
controlling shareholder of the Company as that term is defined under the
1940 Act. The address of Mellon Bank Corporation is: Mellon Bank
Corporation, Mutual Fund Department, 3 Mellon Bank Center, Pittsburgh, PA
15259.
PRINCIPAL SHAREHOLDERS
The following shareholder(s) owned 5% or more of the outstanding
voting shares of the Fund at January 31, 1995: Mac & Co. 862-823, Mellon
Bank, N.A., as Nominee for Trust Custodian, P.O. Box 320, Pittsburgh, PA
15230-0320, 29% record; Mac & Co. 194-803, Mellon Bank, N.A., as Nominee for
Trust Custodian, P.O. Box 320, Pittsburgh, PA 15230-0320, 29% record; Mac & Co.
853-922 Mellon Bank, N.A., as Nominee for Trust Custodian, P.O. Box 320
Pittsburgh, PA 15230-0320, 19% record; Mac & Co. 178-827, Mellon Bank, N.A. as
Nominee for Trust Custodian, P.O. Box 320, Pittsburgh, PA 15230-0320, 10%
record.
FEDERAL LAW AFFECTING MELLON BANK
The Glass-Steagall Act of 1933 prohibits national banks from engaging
in the business of underwriting, selling or distributing securities and
prohibits a member bank of the Federal Reserve System from having certain
affiliations with an entity engaged principally in that business. The
activities of Mellon Bank, N.A. ("Mellon Bank") in informing its customers
of, and performing, investment and redemption services in connection with
the Fund, and in providing services to the Fund as custodian and fund
accountant, as well as Dreyfus' investment advisory activities, may raise
issues under these provisions. Mellon Bank has been advised by counsel
that the activities contemplated under these arrangements are consistent
with its statutory and regulatory obligations.
Changes in either federal or state statutes and regulations relating
to the permissible activities of banks and their subsidiaries or
affiliates, as well as further judicial or administrative decisions or
interpretations of such future statutes and regulations, could prevent
Mellon Bank or Dreyfus from continuing to perform all or a part of the
above services for its customers and/or the Fund. If Mellon Bank or
Dreyfus were prohibited from serving the Fund in any of its present
capacities, the Board of Directors would seek an alternative provider(s)
of such services.
DIRECTORS AND OFFICERS
The Company has a Board composed of thirteen Directors which
supervises the Company's investment activities and reviews contractual
arrangements with companies that provide the Funds with services. The
following lists the Directors and officers and their positions with the
Company and their present and principal occupations during the past five
years. Each Director who is an "interested person" of the Company (as
defined in the Investment Company Act of 1940, as amended (the "Act")) is
indicated by an asterisk (*). Each of the Directors also serves as a
Trustee of The Dreyfus/Laurel Funds Trust, The Dreyfus/Laurel Investment
Series and The Dreyfus/Laurel Tax-Free Municipal Funds (collectively "The
Dreyfus/Laurel Funds").
o + RUTH MARIE ADAMS. Director of the Company; Professor of English and
Vice President Emeritus, Dartmouth College; Senator, United Chapters
of Phi Beta Kappa; Trustee, Woods Hole Oceanographic Institution.
Age: 79 years old. Address: 1026 Kendal Lyme Road, Hanover, New
Hampshire 03755.
o + FRANCIS P. BRENNAN. Chairman of the Board of Directors and Assistant
Treasurer of the Company; Director and Chairman, Massachusetts
Business Development Corp.; Director, Boston Mutual Insurance
Company; Director and Vice Chairman of the Board, Home Owners Federal
Savings and Loan (prior to May 1990). Age: 76 years old. Address:
Massachusetts Business Development Corp., One Liberty Square, Boston,
Massachusetts 02109.
o * JOSEPH S. DiMARTINO. Director of the Company since February 1995.
Since January 1995, Mr. DiMartino has served as Chairman of the Board
for various funds in the Dreyfus Family of Funds. For more than five
years prior thereto, he was President, a director and, until August
1994, Chief Operating Officer of the Manager and Executive Vice
President and a director of Dreyfus Service Corporation, a wholly-
owned subsidiary of the Manager and, until August 1994, the Fund's
distributor. Mr. DiMartino is a director and former Treasurer of the
Muscular Dystrophy Association; a trustee of Bucknell University; and
a director of the Noel Group, Inc. He is 51 years old and his
address is 200 Park Avenue, New York, New York 10166.
o + JAMES M. FITZGIBBONS. Director of the Company; President and
Director, Amoskeag Company; Chairman, Howes Leather Company, Inc.;
Director, Fiduciary Trust Company; Chairman, CEO and Director,
Fieldcrest-Cannon Inc.; Director, Lumber Mutual Insurance Company;
Director, Barrett Resources, Inc. Age: 59 years old. Address: 40
Norfolk Road, Brookline, Massachusetts 02167.
o * J. TOMLINSON FORT. Director of the Company; Partner, Reed, Smith,
Shaw & McClay (law firm). Age: 65 years old. Address: 204 Woodcock
Drive, Pittsburgh, Pennsylvania 15215.
o + ARTHUR L. GOESCHEL. Director of the Company; Director, Chairman of
the Board and Director, Rexene Corporation; Director, Calgon Carbon
Corporation; Director, National Picture Frame Corporation; Chairman
of the Board and Director, Tetra Corporation 1991-1993; Director,
Medalist Corporation 1992-1993. Age: 71 years old. Address: Way
Hallow Road and Woodland Road, Sewickley, Pennsylvania 15143.
o + KENNETH A. HIMMEL. Director of the Company; Former Director, The
Boston Company, Inc. and Boston Safe Deposit and Trust Company;
President and Chief Executive Officer, Himmel & Co., Inc.; Vice
Chairman, Sutton Place Gourmet, Inc. and Florida Hospitality Group;
Managing Partner, Himmel/MKDG, Franklin Federal Partners, Reston Town
Center Associates and Grill 23 & Bar. Age: 47 years old. Address:
Himmel and Company, Inc., 101 Federal Street, 22nd Floor, Boston,
Massachusetts 02110.
o + ARCH S. JEFFERY. Director of the Company; Financial Consultant. Age:
76 years old. Address: 1817 Foxcroft Lane, Allison Park,
Pennsylvania 15101.
o + STEPHEN J. LOCKWOOD. Director of the Company; President and CEO, LDG
Management Company Inc.; CEO, LDG Reinsurance Underwriters, SRRF
Management Inc. and Medical Reinsurance Underwriters Inc. Age: 46
years old. Address: 401 Edgewater Place, Wakefield, Massachusetts
01880.
o + ROBERT D. MCBRIDE. Director of the Company; Director, Chairman and
CEO, McLouth Steel; Director, Salem Corporation. Director,
SMS/Concast, Inc. (1983-1991). Age: 66 years old. Address: 15
Waverly Lane, Grosse Pointe Farms, Michigan 48236.
o + JOHN L. PROPST. Director of the Company; Of Counsel, Reed, Smith,
Shaw & McClay (law firm). Age: 79 years old. Address: 5521
Dunmoyle Street, Pittsburgh, Pennsylvania 15217.
o + JOHN J. SCIULLO. Director of the Company; Dean Emeritus and Professor
of Law, Duquesne University Law School; Director, Urban Redevelopment
Authority of Pittsburgh. Age: 62 years old. Address: 321 Gross
Street, Pittsburgh, Pennsylvania 15224
o + ROSLYN M. WATSON. Director of the Company; Principal, Watson
Ventures, Inc., prior to February, 1993; Real Estate Development
Project Manager and Vice President, The Gunwyn Company. Age: 44
years old. Address: 25 Braddock Park, Boston, Massachusetts 02116-
-5816.
# MARIE E. CONNOLLY. President and Treasurer of the Company, The
Dreyfus/Laurel Investment Series, The Dreyfus/Laurel Funds Trust and
The Dreyfus/Laurel Tax-Free Municipal Funds (since September 1994);
Vice President of The Dreyfus/Laurel Funds, Inc. (March 1994 to
September 1994); President, Funds Distributor, Inc. (since 1992);
Treasurer, Funds Distributor, Inc. (July 1993 to April 1994); COO,
Funds Distributor, Inc. (since April 1994); Director, Funds
Distributor, Inc. (since July 1992); President, COO and Director,
Premier Mutual Fund Services, Inc. (since April 1994); Senior Vice
President and Director of Financial Administration, The Boston
Company Advisors, Inc. (December 1988 to May 1993). Address: One
Exchange Place, Boston, Massachusetts 02109.
# FREDERICK C. DEY. Vice President of the Company, The Dreyfus/Laurel
Investment Series, The Dreyfus/Laurel Funds Trust and The
Dreyfus/Laurel Tax-Free Municipal Funds (since September 1994);
Senior Vice President, Premier Mutual Fund Services, Inc. (since
August 1994); Vice President, Funds Distributor, Inc. (since August
1994); Fundraising Manager, Swim Across America (October 1993 to
August 1994); General Manager, Spring Industries (August 1988 to
October 1993). Address: Premier Mutual Fund Services, Inc., 200 Park
Avenue New York, New York 10166.
# ERIC B. FISCHMAN. Vice President of the Company, The Dreyfus/Laurel
Investment Series, The Dreyfus/Laurel Funds Trust and The
Dreyfus/Laurel Tax-Free Municipal Funds (since September 1994); Vice
President and Associate General Counsel, Premier Mutual Fund
Services, Inc. (Since August 1994); Vice President and Associate
General Counsel, Funds Distributor, Inc. (since August 1994); Staff
Attorney, Federal Reserve Board (September 1992 to June 1994); Summer
Associate, Venture Economics (May 1991 to September 1991); Summer
Associate, Suffolk County District Attorney (June 1990 to August
1990). Address: Premier Mutual Fund Services, Inc., 200 Park Avenue,
New York, New York 10166.
LESLIE M. GAYNOR. Assistant Treasurer of the Company, The Dreyfus/Laurel
Investment Series, The Dreyfus/Laurel Funds Trust and The
Dreyfus/Laurel Tax-Free Municipal Funds (since October 1994);
Assistant Treasurer/Manager of Treasury Services, Funds Distributor,
Inc. (since July 1994); Vice President, The Boston Company, Inc.
(1989 to July 1994). Address: One Exchange Place, Boston,
Massachusetts 02109.
RICHARD W. HEALEY. Vice President of the Company, The Dreyfus/Laurel
Investment Series, The Dreyfus/Laurel Tax-Free Municipal Funds Trust
and The Dreyfus/Laurel Funds Trust (since March 1994); Senior Vice
President, Funds Distributor, Inc. (since March 1993); Vice
President, The Boston Company Inc., (March 1993 to May 1993); Vice
President of Marketing, Calvert Group (1989 to March 1993). Address:
One Exchange Place, Boston, Massachusetts 02109.
# JOHN E. PELLETIER. Vice President and Secretary of the Company; The
Dreyfus/Laurel Investment Series, The Dreyfus/Laurel Funds Trust and
The Dreyfus/Laurel Tax-Free Municipal Funds (since September 1994);
Senior Vice President, General Counsel and Secretary, Funds
Distributor, Inc. (since April 1994); Senior Vice President, General
Counsel and Secretary, Premier Mutual Fund Services, Inc. (since
August 1994); Counsel, The Boston Company Advisors, Inc. (February
1992 to March 1994); Associate, Ropes & Gray (August 1990 to February
1992); Associate, Sidley & Austin (June 1989 to August 1990).
Address: One Exchange Place, Boston, Massachusetts 02109.
___________________________________________________
* "Interested person" of the Company, as defined in the 1940 Act.
o Member of the Audit Committee.
+ Member of the Nominating Committee.
# Officer also serves as an officer for other investment companies
advised by Dreyfus.
The officers and Directors of the Company as a group owned
beneficially less than 1% of the Fund's total shares outstanding as of
January 31, 1995.
No officer or employee of Premier (or of any parent, subsidiary or
affiliate thereof) receives any compensation from the Company for serving
as an officer or Director of the Company. In addition, no officer or
employee of Dreyfus (or of any parent or subsidiary thereof) serves as an
officer or Director of the Company. The Dreyfus/Laurel Funds pay each
Director/Trustee who is not an officer or employee of (Premier or of any
parent, subsidiary or of its affiliate thereof) or of Dreyfus, $27,000 per
annum (and an additional $75,000 for the Chairman of the Board of
Directors/Trustees of the Dreyfus/Laurel Funds), $1,000 for each
Dreyfus/Laurel Funds meeting attended and $750 for each Dreyfus/Laurel
Funds Audit Committee meeting attended, and reimburses each
Director/Trustee for travel and out-of-pocket expenses. For the fiscal
year ended October 31, 1994 the fees for meetings and expenses totaled
$16,832.
For the fiscal year ended October 31, 1994, the aggregate amount of
fees and expenses received by each Director from the Company and all other
Funds in The Dreyfus/Laurel Family of Funds for which such person is a
Board member were as follows:
<TABLE>
<CAPTION>
Total
Pension of Compensation
Retirement From the
Benefits Estimated Company
Aggregate Accrued as Annual and Fund
Compensation Part of Benefits Complex Paid
From the the Company's Upon to Board
Name of Board Member Company # Expenses Retirement Member
____________________ ____________ _____________ __________ ____________
<S> <C> <C> <C> <C>
Ruth Marie Adams $19,685 None None $ 37,500
Francis P. Brennan* 52,809 None None 112,500
Joseph S. DiMartino** N/A N/A N/A N/A
James M. Fitzgibbons 17,685 None None 31,750
J. Tomlinson Fort 7,500 None None 7,500
Arthur L. Goeschel 26,185 None None 32,500
Kenneth A. Himmel 18,685 None None 35,750
Arch S. Jeffrey 27,185 None None 33,500
Steven J. Lockwood 18,685 None None 35,750
Robert D. McBride 27,185 None None 33,500
John L. Propst 27,185 None None 33,500
John J. Sciullo 27,185 None None 33,500
Roslyn M. Watson 19,685 None None 36,750
</TABLE>
# Amount does not include reimbursed expenses for attending Board
meetings, which amounted to $10,876 for the Company.
* Compensation of Francis Brennan includes $75,000 paid by The
Dreyfus/Laurel Fund Family to be Chairman of the Board.
** Joseph S. DiMartino was not a director of the Company as of October
31, 1994.
MANAGEMENT ARRANGEMENTS
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "Management
of the Fund."
Management Agreement. Dreyfus serves as the investment manager for
the Fund pursuant to an Investment Management Agreement with the Company
dated April 4, 1994 ("Management Agreement"), transferred to Dreyfus as of
October 17, 1994. Pursuant to the Management Agreement, Dreyfus provides,
or arranges for one or more third parties to provide, investment advisory,
administrative, custody, fund accounting and transfer agency services to
the Fund. As investment manager, Dreyfus manages the Fund by making
investment decisions based on the Fund's investment objective, policies
and restrictions. The Management Agreement is subject to review and
approval at least annually by the Board of Directors.
The Fund is not managed according to traditional methods of "active"
investment management, which involve the buying and selling of securities
based upon economic, financial and market analysis and investment
judgment. Instead, the Fund utilizes a "passive" investment approach,
attempting to duplicate the investment performance of the S&P 500
Composite Stock Price Index through statistical procedures.
The Management Agreement will continue from year to year provided
that a majority of the Directors who are not interested persons of the
Company and either a majority of all Directors or a majority of the
shareholders of the Fund approve its continuance. The Company may
terminate the Management Agreement, without prior notice to Dreyfus, upon
the vote of a majority of the Board of Directors or upon the vote of a
majority of the Fund's outstanding voting securities. Dreyfus may
terminate the Management Agreement upon sixty (60) days' written notice to
the Company. The Management Agreement will terminate immediately and
automatically upon its assignment.
The following persons are officers and/or directors of Dreyfus:
Howard Stein, Chairman of the Board and Chief Executive Officer; W. Keith
Smith, Vice Chairman of the Board; Robert E. Riley, President, Chief
Operating Officer and a director; Lawrence S. Kash, Vice Chairman--
Distribution and a director; Philip L. Toia, Vice Chairman--Operations and
Administration; Paul H. Snyder, Vice President and Chief Financial
Officer; Daniel C. Maclean, Vice President and General Counsel; Barbara E.
Casey, Vice President--Retirement Services; Henry D. Gottmann, Vice
President--Retail; Elie M. Genadry, Vice President--Wholesale; Mark N.
Jacobs, Vice President--Fund Legal and Compliance; Jeffrey N. Nachman,
Vice President-Mutual Fund Accounting; Diane M. Coffey, Vice-President--
Corporate Communications; Katherine C. Wickham, Vice President--Human
Resources; Maurice Bendrihem, Controller; and Mandell L. Berman, Frank V.
Cahouet, Alvin E. Friedman, Lawrence M. Greene, Julian M. Smerling and
David B. Truman, Directors.
For the last three fiscal years, the Fund has had the following
expenses:
For the Fiscal Year Ended October 31,
1994 1993 1992
Management fees (gross
of waiver) $371,508 $ 5,476 --
Expense Reimbursement from $ 52,201 $30,614 --
investment manager
Management fees waived -- -- --
PURCHASE OF FUND SHARES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "How to Buy
Fund Shares."
The Distributor. The Distributor serves as the Fund's distributor
pursuant to an agreement which is renewable annually. The Distributor
also acts as distributor for the other funds in the Dreyfus Family of
Funds and for certain other investment companies.
Dreyfus TeleTransfer Privilege--Investor Shares. Dreyfus
TeleTransfer purchase orders may be made between the hours of 8:00 a.m.
and 4:00 p.m., New York time, on any business day that The Shareholder
Services Group, Inc., the Fund's transfer and dividend disbursing agent
(the "Transfer Agent"), and the New York Stock Exchange ("NYSE") are open.
Such purchases will be credited to the shareholder's Fund account on the
next bank business day. To qualify to use the Dreyfus TeleTransfer
Privilege, the initial payment for purchase of shares must be drawn on,
and redemption proceeds paid to, the same bank and account as are
designated on the Account Application or Shareholder Services Form on
file. If the proceeds of a particular redemption are to be wired to an
account at any other bank, the request must be in writing and signature-
guaranteed. See "Redemption of Fund Shares--Dreyfus TeleTransfer
Privilege--Investor Shares."
Reopening an Account. An investor may reopen an account with a
minimum investment of $100 without filing a new Account Application during
the calendar year in which the account is closed or during the following
calendar year, provided the information on the old Account Application is
still applicable.
DISTRIBUTION PLAN
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled
"Distribution Plan."
Investor shares are subject to fees for distribution and shareholder
services.
Distribution Plan--Investor Shares. The Securities and Exchange
Commission ("SEC") has adopted Rule 12b-1 under the 1940 Act ("Rule")
regulating the circumstances under which investment companies such as the
Company may, directly or indirectly, bear the expenses of distributing
their shares. The Rule defines distribution expenses to include
expenditures for "any activity which is primarily intended to result in
the sale of fund shares." The Rule, among other things, provides that an
investment company may bear such expenses only pursuant to a plan adopted
in accordance with the Rule. With respect to the Investor shares of the
Fund, the Company has adopted a Distribution Plan ("Plan"), and may enter
into Selling Agreements with Service Agents pursuant to its Plan.
Under the Plan, the Fund may spend annually up to 0.25% of its
average daily net assets attributable to Investor shares for costs and
expenses incurred in connection with the distribution of, and shareholder
servicing with respect to, the Fund's Investor shares.
The Plan provides that a report of the amounts expended under the
Plan, and the purposes for which such expenditures were incurred, must be
made to the Company's Directors for their review at least quarterly. In
addition, the Plan provides that it may not be amended to increase
materially the costs which the Fund may bear for distribution pursuant to
the Plan without approval of the Fund's shareholders, and that other
material amendments of the Plan must be approved by the vote of a majority
of the Directors and of the Directors who are not "interested persons" of
the Company (as defined in the 1940 Act) and who do not have any direct or
indirect financial interest in the operation of the Plan, cast in person
at a meeting called for the purpose of considering such amendments. The
Plan is subject to annual approval by the entire Board of Directors and by
the Directors who are neither interested persons nor have any direct or
indirect financial interest in the operation of the Plan, by vote cast in
person at a meeting called for the purpose of voting on the Plan. The
Plan is terminable, as to the Fund's Investor shares, at any time by vote
of a majority of the Directors who are not interested persons and have no
direct or indirect financial interest in the operation of the Plan or by
vote of the holders of a majority of the outstanding Investor shares of
the Fund.
For the period from April 18, 1994 (inception date of Investor
shares) to October 31, 1994, the Fund paid the Distributor $308 pursuant
to the Plan.
Frank Russell Investment Management Company served as the Fund's
Administrator prior to September 31, 1994 and was paid $10,838 and $551,
respectively, in fees by the Fund for the fiscal years ended October 31,
1994 and 1993.
REDEMPTION OF FUND SHARES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "How to
Redeem Fund Shares."
Wire Redemption Privilege. By using this Privilege, the investor
authorizes the Transfer Agent to act on wire or telephone redemption
instructions from any person representing himself or herself to be the
investor, or a representative of the investor's Service Agent, and
reasonably believed by the Transfer Agent to be genuine. Ordinarily, the
Fund will initiate payment for shares redeemed pursuant to this Privilege
on the next business day after receipt if the Transfer Agent receives the
redemption request in proper form. Redemption proceeds will be
transferred by Federal Reserve wire only to the commercial bank account
specified by the investor on the Account Application or Shareholder
Services Form. Redemption proceeds, if wired, must be in the amount of
$1,000 or more and will be wired to the investor's account at the bank of
record designated in the investor's file at the Transfer Agent, if the
investor's bank is a member of the Federal Reserve System, or to a
correspondent bank if the investor's bank is not a member. Fees
ordinarily are imposed by such bank and usually are borne by the investor.
Immediate notification by the correspondent bank to the investor's bank is
necessary to avoid a delay in crediting the funds to the investor's bank
account.
Investors with access to telegraphic equipment may wire redemption
requests to the Transfer Agent by employing the following transmittal code
which may be used for domestic or overseas transmissions:
Transfer Agent's
Transmittal Code Answer Back Sign
________________ ________________
144295 144295 TSSG PREP
Investors who do not have direct access to telegraphic equipment may
have the wire transmitted by contacting a TRT Cables operator at 1-800-
654-7171, toll free. Investors should advise the operator that the above
transmittal code must be used and should also inform the operator of the
Transfer Agent's answer back sign.
To change the commercial bank or account designated to receive
redemption proceeds, a written request must be sent to the Transfer Agent.
This request must be signed by each shareholder, with each signature
guaranteed as a described below under "Stock Certificates; Signatures."
Stock 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 NYSE
Medallion Signature Program, the Securities Transfer Agents Medallion
Program ("STAMP") and the Stock Exchanges Medallion Program. Guarantees
must be signed by an authorized signatory of the guarantor and "Signature-
Guaranteed" must appear with the signature. The Transfer Agent may
request additional documentation from corporations, executors,
administrators, trustees or guardians, and may accept other suitable
verification arrangements from foreign investors, such as consular
verification. For more information with respect to signature-guarantees,
please call one of the telephone numbers listed on the cover.
Dreyfus TeleTransfer Privilege--Investor Shares. Investors should be
aware that if they have selected the Dreyfus TeleTransfer Privilege, any
request for a wire redemption will be effected as a Dreyfus TeleTransfer
transaction through the ACH system unless more prompt transmittal
specifically is requested. Redemption proceeds will be on deposit in the
investor's account at an ACH member bank ordinarily two business days
after receipt of the redemption request. See "Purchase of Fund
Shares--Dreyfus TeleTransfer Privilege--Investor Shares."
Redemption Commitment. The Fund has committed itself to pay in cash
all redemption requests by any shareholder of record of the Fund, 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 SEC. In the
case of requests for redemption in excess of such amount, the Board of
Directors 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 this event, the securities would be valued
in the same manner as the Fund's portfolio is valued. If the recipient
sold such securities, brokerage charges would be incurred.
Suspension of Redemptions. The right of redemption may be suspended
or the date of payment postponed (a) during any period when the NYSE 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 SEC 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 SEC by order
may permit to protect the Fund's shareholders.
SHAREHOLDER SERVICES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled
"Shareholder Services."
Fund Exchanges. Shares of any Class of the Fund may be exchanged for
shares of the respective Class of certain other funds advised or
administered by Dreyfus. 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. Exchanges for shares of funds that are offered without a sales
load will be made without a sales load.
B. Shares of funds purchased without a sales load may be exchanged
for shares of other funds sold with a sales load, and the
applicable sales load will be deducted.
C. Shares of funds purchased with a sales load may be exchanged
without a sales load for shares of other funds sold without a
sales load.
D. Shares of funds purchased with a sales load, shares of funds
acquired by a previous exchange from shares purchased with a
sales load and additional shares acquired through reinvestment
of dividends or other distributions of any such funds
(collectively referred to herein as "Purchased Shares") may be
exchanged for shares of other funds sold with a sales load
(referred to herein as "Offered Shares"), provided that, if the
sales load applicable to the Offered Shares exceeds the maximum
sales load that could have been imposed in connection with the
Purchased Shares (at the time the Purchased Shares were
acquired), without giving effect to any reduced loads, the
difference will be deducted.
E. Shares of funds subject to a contingent deferred sales charge
("CDSC") that are exchanged for shares of another fund will be
subject to the higher applicable CDSC of the two funds, and for
purposes of calculating CDSC rates and conversion periods, if
any, will be deemed to have been held since the date the shares
being exchanged were initially purchased.
To accomplish an exchange under item D above, shareholders must
notify the Transfer Agent of their prior ownership of fund shares and
their account number.
Exchanges of Class R shares held by a Retirement Plan may be made
only between the investor's Retirement Plan account in one fund and such
investor's Retirement Plan account in another fund.
To establish a personal retirement plan by exchange, shares of the
fund being exchanged must have a value of at least the minimum initial
investment required for the fund into which the exchange is being made.
For Dreyfus-sponsored Keogh Plans, IRAs and SEP-IRAs with only one
participant, the minimum initial investment is $750. To exchange shares
held in Corporate Plans, 403(b)(7) Plans and IRAs set up under a
Simplified Employee Pension Plan ("SEP-IRAs") with more than one
participant, the minimum initial investment is $100 if the plan has at
least $2,500 invested among the funds in the Dreyfus Family of Funds. To
exchange shares held in a personal retirement plan account, the shares
exchanged must have a current value of at least $100.
Dreyfus Auto-Exchange Privilege. The Dreyfus Auto-Exchange Privilege
permits an investor to purchase, in exchange for shares of the Fund,
shares of the same Class of another fund in the Dreyfus Family of Funds.
This Privilege is available only for existing accounts. With respect to
Class R shares held by a Retirement Plan, exchanges may be made only
between the investor's Retirement Plan account in one fund and such
investor's Retirement Plan account in another fund. Shares will be
exchanged on the basis of relative net asset value as described above
under "Fund Exchanges." Enrollment in or modification or cancellation of
this Privilege is effective three business days following notification by
the investor. An investor will be notified if the investor's account
falls below the amount designated to be exchanged under this Privilege.
In this case, an investor's account will fall to zero unless additional
investments are made in excess of the designated amount prior to the next
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.
Fund exchanges and Dreyfus Auto-Exchange Privilege are available to
shareholders resident in any state in which shares of the fund being
acquired may legally be sold. Shares may be exchanged only between
accounts having identical names and other identifying designations.
Shareholder Services Forms and prospectuses of the other funds may be
obtained from the Distributor. The Fund reserves the right to reject any
exchange request in whole or in part. The Fund exchange service or
Dreyfus Auto-Exchange Privilege may be modified or terminated at any time
upon notice to shareholders.
Automatic Withdrawal. The Automatic Withdrawal Plan permits an
investor with a $5,000 minimum account to request withdrawal of a
specified dollar amount (minimum of $50) on either a monthly or quarterly
basis. Withdrawal payments are the proceeds from sales of Fund shares,
not the yield on the shares. If withdrawal payments exceed reinvested
dividends and distributions, the investor's shares will be reduced and
eventually may be depleted. An Automatic Withdrawal Plan may be
established by completing the appropriate application available from the
Distributor. There is a service charge of $.50 for each withdrawal check.
Automatic Withdrawal may be terminated at any time by the investor, the
Fund or the Transfer Agent. Shares for which certificates have been
issued may not be redeemed through the Automatic Withdrawal Plan.
Dreyfus Dividend Sweep. Dreyfus Dividend Sweep allows investors to
invest on the payment date their dividends or dividends and capital gain
distributions, if any, from the Fund in shares of the same Class of
certain other funds in the Dreyfus Family of Funds of which the investor
is 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 by a fund may be invested
without imposition of a sales load in shares of other funds that
are offered without a sales load.
B. Dividends and distributions paid by a fund which does not charge
a sales load may be invested in shares of other funds sold with
a sales load, and the applicable sales load will be deducted.
C. Dividends and distributions paid by a fund which charges a sales
load may be invested in shares of other funds sold with a sales
load (referred to herein as "Offered Shares"), provided that, if
the sales load applicable to the Offered Shares exceeds the
maximum sales load charged by the fund from which dividends or
distributions are being swept, without giving effect to any
reduced loads, the difference will be deducted.
D. Dividends and distributions paid by a fund may be invested in
shares of other funds that impose a contingent deferred sales
charge ("CDSC") and the applicable CDSC, if any, will be imposed
upon redemption of such shares.
Corporate Pension/Profit-Sharing and Retirement Plans. The 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 SEP-IRAs and IRA
"Rollover Accounts," and 403(b)(7) Plans. Plan support services also are
available.
Investors who wish to purchase Fund shares in conjunction with a
Keogh Plan, a 403(b)(7) Plan or an IRA, including an SEP-IRA, may request
from the Distributor forms for adoption of such plans.
The entity acting as custodian for Keogh Plans, 403(b)(7) Plans or
IRAs may charge a fee, payment of which could require the liquidation of
shares. All fees charged are described in the appropriate form.
Shares may be purchased in connection with these plans only by direct
remittance to the entity acting as custodian. Purchases for these plans
may not be made in advance of receipt of funds.
The minimum initial investment for corporate plans, Salary Reduction
Plans, 403(b)(7) Plans and SEP-IRAs with more than one participant, is
$2,500 with no minimum on subsequent purchases. The minimum initial
investment for Dreyfus-sponsored Keogh Plans, IRAs, SEP-IRAs and 403(b)(7)
Plans with only one participant, is normally $750, with no minimum on
subsequent purchases. Individuals who open an IRA may also open a non-
working spousal IRA with a minimum investment of $250.
The investor should read the Prototype Retirement Plan and the
appropriate form of Custodial Agreement for further details on
eligibility, service fees and tax implications, and should consult a tax
adviser.
DETERMINATION OF NET ASSET VALUE
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "How to Buy
Fund Shares."
Restricted securities, as well as securities or other assets for
which market quotations are not readily available, or are not valued by a
pricing service approved by the Board of Directors, are valued at fair
value as determined in good faith by the Board of Directors. The Board of
Directors will review the method of valuation on a current basis. In
making their good faith valuation of restricted securities, the Directors
generally will take the following factors into consideration: restricted
securities which are securities of the same class of securities for which
a public market exists usually will be valued at market value less the
same percentage discount at which purchased. This discount will be
revised periodically by the Board of Directors if the Directors believe
that it no longer reflects the value of the restricted securities.
Restricted securities not of the same class as securities for which a
public market exists usually will be valued initially at cost. Any
subsequent adjustment from cost will be based upon considerations deemed
relevant by the Board of Directors.
New York Stock Exchange Closings. The holidays (as observed) on
which the NYSE is closed currently are: New Year's Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and
Christmas.
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "Dividends,
Other Distributions and Taxes."
The term "regulated investment company" does not imply the
supervision of management or investment practices or policies by any
government agency.
To qualify as a regulated investment company ("RIC"), the Fund
(1) must distribute to its shareholders each year at least 90% of its
investment company taxable income (generally consisting of net investment
income, net short-term capital gains and net gains from certain foreign
currency transactions), (2) must derive at least 90% of its annual gross
income from specified sources ("Income Requirement"), (3) must derive less
than 30% of its annual gross income from gain on the sale or disposition
of any of the following that are held for less than three months --
(i) securities, (ii) non-foreign-currency options and futures and
(iii) foreign currencies (or foreign currency options, futures and forward
contracts) that are not directly related to the Fund's principal business
of investing in securities (or options and futures with respect thereto)
("Short-Short Limitation") -- and (4) must meet certain asset
diversification and other requirements. Accordingly, the Fund may be
restricted in the selling of securities held for less than three months.
Any dividend or other distribution paid shortly after an investor's
purchase may have the effect of reducing the net asset value of the shares
below the cost of his investment. Such a dividend or other distribution
would be a return on investment in an economic sense, although taxable as
stated in the Fund's Prospectus. In addition, the Code provides that if a
shareholder holds shares of the Fund for six months or less and has
received a capital gain distribution with respect to those shares, any
loss incurred on the sale of those shares will be treated as a long-term
capital loss to the extent of the capital gain distribution received.
Dividends and other distributions declared by the Fund in October,
November or December of any year and payable to shareholders of record on
a date in that month any of those months are deemed to have been paid by
the Fund and received by the shareholders on December 31 of that year if
the distributions are paid by the Fund during the following January.
Accordingly, those distributions will be taxed to shareholders for the
year in which that December 31 falls.
A portion of the dividends paid by the Fund, whether received in cash
or reinvested in additional Fund shares, may be eligible for the
dividends-received deduction allowed to corporations. The eligible
portion may not exceed the aggregate dividends received by the Fund from
U.S. corporations. However, dividends received by a corporate shareholder
and deducted by it pursuant to the dividends-received deduction are
subject indirectly to the alternative minimum tax.
Dividends and interest received by the Fund may be subject to income,
withholding or other taxes imposed by foreign countries and U.S.
possessions that would reduce the yield on its securities. Tax
conventions between certain countries and the United States may reduce or
eliminate these foreign taxes, however, and many foreign countries do not
impose taxes on capital gains in respect of investments by foreign invest-
ors.
Income from foreign currencies (except certain gains therefrom that
may be excluded by future regulations), and income from transactions in
options, futures and forward contracts derived by the Fund with respect to
its business of investing in securities or foreign currencies, will
qualify as permissible income under the Income Requirement. However,
income from the disposition of options and futures contracts (other than
those on foreign currencies) will be subject to the Short-Short Limitation
if they are held for less than three months. Income from the disposition
of foreign currencies, and options, futures and forward contracts thereon,
that are not directly related to the Fund's principal business of
investing in securities (or options and futures with respect to
securities) also will be subject to the Short-Short Limitation if they are
held for less than three months.
If the Fund satisfies certain requirements, any increase in value of
a position that is part of a "designated hedge" will be offset by any
decrease in value (whether realized or not) of the offsetting hedging
position during the period of the hedge for purposes of determining
whether the Fund satisfies the Short-Short Limitation. Thus, only the net
gain (if any) from the designated hedge will be included in gross income
for purposes of that limitation. The Fund will consider whether it should
seek to qualify for this treatment for its hedging transactions. To the
extent the Fund does not so qualify, it may be forced to defer the closing
out of certain options, futures and forward contracts beyond the time when
it otherwise would be advantageous to do so, in order for the Fund to
qualify as a RIC.
Ordinarily, gains and losses realized from portfolio transactions
will be treated as capital gain and loss. However, a portion of the gain
or loss from the disposition of foreign currencies and non-U.S. dollar
denominated securities (including debt instruments, certain financial
forward, futures and option contracts and certain preferred stock) may be
treated as ordinary income or loss under Section 988 of the Code. In
addition, all or a portion of any gain realized from the sale or other
disposition of certain market discount bonds will be treated as ordinary
income. Moreover, all or a portion of the gain realized from engaging in
"conversion transactions" may be treated as ordinary income under Section
1258. "Conversion transactions" are defined to include certain forward,
futures, option and straddle transactions, transactions marketed or sold
to produce capital gains, or transactions described in Treasury
regulations to be issued in the future.
Under Section 1256 of the Code, any gain or loss realized by the Fund
from certain futures and forward contracts and options transactions will
be treated as 60% long-term capital gain or loss and 40% short-term
capital gain or loss. Gain or loss will arise upon exercise or lapse of
such contracts and options as well as from closing transactions. In
addition, any such contracts or options remaining unexercised at the end
of the Fund's taxable year will be treated as sold for their then fair
market value (a process known as "marking to market"), resulting in
additional gain or loss to the Fund characterized in the manner described
above.
Offsetting positions held by the Fund involving certain contracts or
options may constitute "straddles." "Straddles" are defined to include
"offsetting positions" in actively traded personal property. The tax
treatment of "straddles" is governed by Sections 1092 and 1258 of the
Code, which, in certain circumstances, override or modify Sections 1256
and 988. As such, all or a portion of any short-term or long-term capital
gain from certain "straddle" transactions may be recharacterized to
ordinary income. If the Fund were treated as entering into "straddles" by
reason of its engaging in certain forward contracts or options
transactions, such "straddles" would be characterized as "mixed straddles"
if the forward contracts or options transactions comprising a part of such
"straddles" were governed by Section 1256. The Fund may make one or more
elections with respect to "mixed straddles." Depending on which election
is made, if any, the results to the Fund may differ. If no election is
made, then to the extent the "straddle" and conversion transactions rules
apply to positions established by the Fund, losses realized by the Fund
will be deferred to the extent of unrealized gain in the offsetting
position. Moreover, as a result of the "straddle" rules, short-term
capital loss on "straddle" positions may be recharacterized as long-term
capital loss, and long-term capital gains may be treated as short-term
capital gains or ordinary income.
Investment by the Fund in securities issued or acquired at a discount
(for example, zero coupon securities) or providing for deferred interest
or for payment of interest in the form of additional obligations (for
example, "pay-in-kind" or "PIK" securities) could, under special tax
rules, affect the amount, timing and character of distributions to
shareholders by causing the Fund to recognize income prior to the receipt
of cash payments. For example, the Fund could be required to take into
gross income annually a portion of the discount (or deemed discount) at
which the securities were issued and to distribute such income in order to
maintain its qualification for treatment as a RIC. In such case, the Fund
may have to dispose of securities it might otherwise have continued to
hold in order to generate cash to satisfy these distribution requirements.
If the Fund invests in an entity that is classified as a "passive
foreign investment company" ("PFIC") for federal income tax purposes, the
operation of certain provisions of the Code applying to PFICs could result
in the imposition of certain federal income taxes on the Fund. In
addition, gain realized from the sale or other disposition of PFIC
securities may be treated as ordinary income under Section 1291 of the
Code.
State and Local Taxes. Depending upon the extent of the Fund's
activities in states and localities in which its offices are maintained,
in which its agents or independent contractors are located, or in which it
is otherwise deemed to be conducting business, the Fund may be subject to
the tax laws of such states or localities. Shareholders are advised to
consult their tax advisers concerning the application of state and local
taxes.
Foreign Shareholders - U.S. Federal Income Taxation. U.S. federal
income taxation of a shareholder who, as to the United States, is a
non-resident alien individual, a foreign trust or estate, a foreign
corporation or a foreign partnership (a "foreign shareholder"), depends on
whether the income from the Fund is "effectively connected" with a U.S.
trade or business carried on by the shareholder, as discussed generally
below. Special U.S. federal income tax rules that differ from those
described below may apply to certain foreign persons who invest in the
Fund. For example, the tax consequences to a foreign shareholder entitled
to claim the benefits of an applicable tax treaty may be different from
those described below. Foreign shareholders are advised to consult their
own tax advisers with respect to the particular tax consequences to them
of an investment in the Fund.
Foreign Shareholders - Income Not Effectively Connected. If the
income from the Fund is not effectively connected with a U.S. trade or
business carried on by the foreign shareholder, distributions of
investment company taxable income generally will be subject to a U.S.
federal withholding tax of 30% (or lower treaty rate) on the gross amount
of the distribution. Foreign shareholders also may be subject to U.S.
federal withholding tax on income resulting from any election by the Fund
to treat foreign taxes paid by it as paid by its shareholders (see
discussion above), but foreign shareholders will not be able to claim a
credit or deduction for the foreign taxes treated as having been paid by
them.
Capital gains realized by foreign shareholders on the sale of Fund
shares and distributions to them of net capital gain, as well as amounts
retained by the Fund that are designated as undistributed capital gains,
generally will not be subject to U.S. federal income tax unless the
foreign shareholder is a non-resident alien individual and is physically
present in the United States for more than 182 days during the taxable
year. However, this rule only applies in exceptional cases, because any
individual present in the United States for more than 182 days during the
taxable year generally is treated as a resident for U.S. federal income
tax purposes on his worldwide income at the graduated rates applicable to
U.S. citizens, rather than the 30% U.S. federal withholding tax rate. In
the case of certain foreign shareholders, the Fund may be required to
withhold U.S. Federal income tax at a rate of 31% of capital gain
distributions and of the gross proceeds from a redemption of Fund shares
unless the shareholder furnishes the Fund with a certificate regarding the
shareholder's foreign status.
Foreign Shareholders - Effectively Connected Income. If income from
the Fund is effectively connected with a U.S. trade or business carried on
by a foreign shareholder, then all distributions to that shareholder and
any gains realized by that shareholder on the disposition of the Fund
shares will be subject to U.S. federal income tax at the graduated rates
applicable to U.S. citizens and domestic corporations, as the case may be.
Foreign shareholders also may be subject to the branch profits tax.
Foreign Shareholders - Estate Tax. Foreign individuals generally are
subject to U.S. federal estate tax on their U.S. situs property, such as
shares of the Fund, that they own at the time of their death. Certain
credits against that tax and relief under applicable tax treaties may be
available.
Pennsylvania Personal Property Tax Exemption. The Company has
obtained a Certificate of Authority to do business as a foreign
corporation in Pennsylvania. In the opinion of counsel, shares of The
Company are exempt from Pennsylvania personal property taxes.
PORTFOLIO TRANSACTIONS
All portfolio transactions of the Fund are placed on behalf of the
Fund by Dreyfus. Debt securities purchased and sold by the Fund are
generally traded on a net basis (i.e., without commission) through dealers
acting for their own account and not as brokers, or otherwise involve
transactions directly with the issuer of the instrument. This means that
a dealer (the securities firm or bank dealing with the Fund) makes a
market for securities by offering to buy at one price and sell at a
slightly higher price. The difference between the prices is known as a
spread. Other portfolio transactions may be executed through brokers
acting as agent. The Fund will pay a spread or commissions in connection
with such transactions. Dreyfus uses its best efforts to obtain execution
of portfolio transactions at prices which are advantageous to the Fund and
at spreads and commission rates, if any, which are reasonable in relation
to the benefits received. Dreyfus also places transactions for other
accounts that it provides with investment advice.
Brokers and dealers involved in the execution of portfolio
transactions on behalf of the Fund are selected on the basis of their
professional capability and the value and quality of their services. In
selecting brokers or dealers, Dreyfus will consider various relevant
factors, including, but not limited to, the size and type of the
transaction; the nature and character of the markets for the security to
be purchased or sold; the execution efficiency, settlement capability, and
financial condition of the broker-dealer; the broker-dealer's execution
services rendered on a continuing basis; and the reasonableness of any
spreads (or commissions, if any). Any spread, commission, fee or other
remuneration paid to an affiliated broker-dealer is paid pursuant to the
Company's procedures adopted in accordance with Rule 17e-1 of the 1940
Act.
Brokers or dealers may be selected who provide brokerage and/or
research services to the Fund and/or other accounts over which Dreyfus or
its affiliates exercise investment discretion. Such services may include
advice concerning the value of securities; the advisability of investing
in, purchasing or selling securities; the availability of securities or
the purchasers or sellers of securities; furnishing analyses and reports
concerning issuers, industries, securities, economic factors and trends,
portfolio strategy and performance of accounts; and effecting securities
transactions and performing functions incidental thereto (such as
clearance and settlement).
The receipt of research services from broker-dealers may be useful to
Dreyfus in rendering investment management services to the Fund and/or its
other clients; and, conversely, such information provided by brokers or
dealers who have executed transaction orders on behalf of other clients of
Dreyfus may be useful to these organizations in carrying out their
obligations to the Fund. The receipt of such research services does not
reduce these organizations' normal independent research activities;
however, it enables these organizations to avoid the additional expenses
which might otherwise be incurred if these organizations were to attempt
to develop comparable information through their own staffs.
The Company's Board of Directors periodically review Dreyfus'
performance of its responsibilities in connection with the placement of
portfolio transactions on behalf of the Fund and review the prices paid by
the Fund over representative periods of time to determine if they are
reasonable in relation to the benefits to the Fund.
Although Dreyfus manages other accounts in addition to the Fund,
investment decisions for the Fund are made independently from decisions
made for these other accounts. It sometimes happens that the same security
is held by more than one of the accounts managed by Dreyfus. Simultaneous
transactions may occur when several accounts are managed by the same
investment manager, particularly when the same investment instrument is
suitable for the investment objective of more than one account.
When more than one account is simultaneously engaged in the purchase
or sale of the same investment instrument, the prices and amounts are
allocated in accordance with a formula considered by Dreyfus to be
equitable to each account. In some cases this system could have a
detrimental effect on the price or volume of the investment instrument as
far as the Fund is concerned. In other cases, however, the ability of the
Fund to participate in volume transactions will produce better executions
for the Fund. While the Directors will continue to review simultaneous
transactions, it is their present opinion that the desirability of
retaining Dreyfus as investment manager to the Fund outweighs any
disadvantages that may be said to exist from exposure to simultaneous
transactions.
For the period September 30, 1993 (commencement of operations) to
October 31, 1993 and for the fiscal year ended October 31, 1994, the Fund
paid brokerage commissions amounting to $1,194 and $29,595, respectively.
Portfolio Turnover. The portfolio turnover rate for the Fund is
calculated by dividing the lesser of the Fund's annual sales or purchases
of portfolio securities (exclusive of purchases and sales of securities
whose maturities at the time of acquisition were one year or less) by the
monthly average value of securities in the Fund during the year. The
portfolio turnover rates for the last two years for the Fund were:
Fiscal Year Ended October 31,
1994 1993
13% 22%(1)
_________________________
(1) For the period September 30, 1993 (commencement of operations) to
October 31, 1993. Turnover calculation does not include in-kind
purchases of $22,472,314.
PERFORMANCE INFORMATION
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled
"Performance Information."
Average annual total return is calculated by determining the ending
redeemable value of an investment purchased with a hypothetical $1,000
payment made at the beginning of the period (assuming the reinvestment of
dividends and other 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.
Total return is calculated by subtracting the amount of the Fund's
net asset value per share at the beginning of a stated period from the net
asset value per share at the end of the period (after giving effect to the
reinvestment of dividends and other distributions during the period), and
dividing the result by the net asset value per share at the beginning of
the period.
Aggregate total return (expressed as a percentage) for Investor
shares of the Fund for the periods noted were:
Aggregate Total Return for the
Periods Ended October 31, 1994
Fund: 1 Year 5 Years 10 Years Inception
S&P 500 Fund -- -- -- 7.86%
(4/18/94)
Inception date appears in parentheses following the aggregate total return
since inception.
Average annual total return (expressed as a percentage) for Class R
shares of the Fund for the periods noted were:
Annualized Total Return for the
Periods Ended October 31, 1994
Fund: 1 Year 5 Years 10 Years Inception
S&P 500 Fund 3.50% -- -- 5.42%
(9/30/93)
Inception date appears in parentheses following the annual total return
since inception.
Performance information for the Fund may be compared, in reports and
promotional literature, to indexes including, but not limited to: (i) the
Morgan Stanley European Index; (ii) the Standard & Poor's 500 Composite
Stock Price Index, the Dow Jones Industrial Average, or other appropriate
unmanaged domestic or foreign indices of performance of various types of
investments so that investors may compare the Fund's results with those of
indices widely regarded by investors as representative of the securities
markets in general; (iii) other groups of mutual funds tracked by Lipper
Analytical Services, a widely used independent research firm which ranks
mutual funds by overall performance, investment objectives and assets, or
tracked by other services, companies, publications, or persons who rank
mutual funds on overall performance or other criteria; (iv) the Consumer
Price Index (a measure of inflation) to assess the real rate of return
from an investment in the Fund; and (v) products managed by a universe of
money managers with similar country allocation and performance objectives.
Unmanaged indices may assume the reinvestment of dividends but generally
do not reflect deductions or administrative and management costs and
expenses.
INFORMATION ABOUT THE FUND
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "General
Information."
Each Fund share has one vote and, when issued and paid for in
accordance with the terms of the offering, is fully paid and non-
assessable. Fund shares have no preemptive or subscription rights and are
freely transferable.
The Fund will send annual and semi-annual financial statements to all
its shareholders.
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT, COUNSEL
AND INDEPENDENT AUDITORS
Mellon Bank, One Mellon Bank Center, Pittsburgh, PA 15258, is the
Fund's custodian. The Shareholder Services Group, Inc., a subsidiary of
First Data Corporation, P.O. Box 9671, Providence, Rhode Island 02940-
9671, is the Fund's transfer and dividend disbursing agent. The
Shareholder Services Group, Inc. and Mellon Bank, as custodian, have no
part in determining the investment policies of the Fund or which
securities are to be purchased or sold by the Fund.
Kirkpatrick & Lockhart, 1800 M Street, N.W., South Lobby - 9th Floor,
Washington, D.C. 20036, has passed upon the legality of the shares offered
by the Prospectus and this Statement of Additional Information.
KPMG Peat Marwick LLP was appointed by the Directors to serve as the
Fund's independent auditors for the year ending October 31, 1995,
providing audit services including (1) examination of the annual financial
statements, (2) assistance, review and consultation in connection with the
SEC and (3) review of the annual federal income tax return and the
Pennsylvania excise tax return filed on behalf of the Fund.
FINANCIAL STATEMENTS
The financial statements for the fiscal year ended October 31, 1994,
including notes to the financial statements and supplementary information
and the Report of Independent Auditors, are included in the Annual Report
to shareholders. A copy of the Annual Report accompanies this Statement
of Additional Information. The financial statements for the Annual Report
are incorporated herein by reference.
DREYFUS EQUITY INCOME FUND
INVESTOR AND CLASS R SHARES
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
March 1, 1995
This Statement of Additional Information, which is not a
prospectus, supplements and should be read in conjunction with
the current Prospectus of the Dreyfus Equity Income Fund
(formerly the Laurel Equity Income Fund) (the "Fund"), dated
March 1, 1995, as it may be revised from time to time. The Fund
is a separate portfolio of The Dreyfus/Laurel Funds, Inc., an
open-end, diversified management investment company (the
"Company"), known as a mutual fund. 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 the following
numbers:
Call Toll Free 1-800-645-6561
In New York City -- Call 1-718-895-1206
On Long Island -- Call 794-5452
The Dreyfus Corporation ("Dreyfus") serves as the Fund's
investment manager.
Premier Mutual Fund Services, Inc. (the "Distributor") is
the distributor of the Fund's shares.
TABLE OF CONTENTS
Page
Investment Objective and Management Policies . . . . . . . . B-2
Management of the Fund . . . . . . . . . . . . . . . . . . . B-11
Management Arrangements. . . . . . . . . . . . . . . . . . . B-16
Purchase of Fund Shares. . . . . . . . . . . . . . . . . . . B-18
Distribution Plan. . . . . . . . . . . . . . . . . . . . . . B-18
Redemption of Fund Shares. . . . . . . . . . . . . . . . . . B-19
Shareholder Services . . . . . . . . . . . . . . . . . . . . B-21
Determination of Net Asset Value . . . . . . . . . . . . . . B-25
Dividends, Other Distributions and Taxes . . . . . . . . . . B-25
Portfolio Transactions . . . . . . . . . . . . . . . . . . . B-29
Performance Information. . . . . . . . . . . . . . . . . . . B-31
Information About the Fund . . . . . . . . . . . . . . . . . B-33
Custodian, Transfer and Dividend Disbursing Agent, Counsel
and Independent Auditors . . . . . . . . . . . . . . . . . B-33
Financial Statements . . . . . . . . . . . . . . . . . . . . B-34
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled
"Description of the Fund."
Portfolio Securities
Government Obligations. The Fund may invest in a variety of
U.S. Treasury obligations, which differ only in their interest
rates, maturities and times of issuance: (a) U.S. Treasury bills
have a maturity of one year or less, (b) U.S. Treasury notes have
maturities of one to ten years, and (c) U.S. Treasury bonds
generally have maturities of greater than ten years.
In addition to U.S. Treasury obligations, the Fund may
invest in obligations issued or guaranteed by U.S. Government
agencies and instrumentalities which are supported by any of the
following: (a) the full faith and credit of the U.S. Treasury
(such as Government National Mortgage Association ("GNMA")
participation certificates), (b) the right of the issuer to
borrow an amount limited to a specific line of credit from the
U.S. Treasury, (c) discretionary authority of the U.S. Government
agency or instrumentality, or (d) the credit of the
instrumentality. (Examples of agencies and instrumentalities are:
Federal Land Banks, Federal Housing Administration, Farmers Home
Administration, Export-Import Bank of the United States, Central
Bank for Cooperatives, Federal Intermediate Credit Banks, Federal
Home Loan Banks, General Services Administration, Maritime
Administration, Tennessee Valley Authority, District of Columbia
Armory Board, Inter-American Development Bank, Asian-American
Development Bank, Student Loan Marketing Association,
International Bank for Reconstruction and Development and Federal
National Mortgage Association ("FNMA")). No assurance can be
given that the U.S. Government will provide financial support to
such U.S. Government agencies or instrumentalities described in
(b), (c) and (d) in the future, other than as set forth above,
since it is not obligated to do so by law.
Repurchase Agreements. The Fund may enter into repurchase
agreements with U.S. Government securities dealers recognized by
the Federal Reserve Board, with member banks of the Federal
Reserve System, or with such other brokers or dealers that meet
the credit guidelines of the Board of Directors. In a repurchase
agreement, the Fund buys a security from a seller that has agreed
to repurchase the same security at a mutually agreed upon date
and price. The Fund's resale price will be in excess of the
purchase price, reflecting an agreed upon interest rate. This
interest rate is effective for the period of time the Fund is
invested in the agreement and is not related to the coupon rate
on the underlying security. Repurchase agreements may also be
viewed as a fully collateralized loan of money by the Fund to the
seller. The period of these repurchase agreements will usually be
short, from overnight to one week, and at no time will the Fund
invest in repurchase agreements for more than one year. The Fund
will always receive as collateral securities whose market value
including accrued interest is, and during the entire term of the
agreement remains, at least equal to 100% of the dollar amount
invested by the Fund in each agreement, and the Fund will make
payment for such securities only upon physical delivery or upon
evidence of book entry transfer to the account of the Custodian.
If the seller defaults, the Fund might incur a loss if the value
of the collateral securing the repurchase agreement declines and
might incur disposition costs in connection with liquidating the
collateral. In addition, if bankruptcy proceedings are commenced
with respect to the seller of a security which is the subject of
a repurchase agreement, realization upon the collateral by the
Fund may be delayed or limited. The Fund seeks to minimize the
risk of loss through repurchase agreements by analyzing the
creditworthiness of the obligors under repurchase agreements, in
accordance with the credit guidelines of the Company's Board of
Directors.
Reverse Repurchase Agreements. The Fund may enter into
reverse repurchase agreements to meet redemption requests where
the liquidation of portfolio securities is deemed by the Fund to
be inconvenient or disadvantageous. A reverse repurchase
agreement is a transaction whereby the Fund transfers possession
of a portfolio security to a bank or broker-dealer in return for
a percentage of the portfolio security's market value. The Fund
retains record ownership of the security involved including the
right to receive interest and principal payments. At an agreed
upon future date, the Fund repurchases the security by paying an
agreed upon purchase price plus interest. Cash or liquid
high-grade debt obligations of the Fund equal in value to the
repurchase price including any accrued interest will be
maintained in a segregated account while a reverse repurchase
agreement is in effect.
When-Issued Securities. New issues of U.S. Treasury and
Government securities are often offered on a when-issued basis.
This means that delivery and payment for the securities normally
will take place approximately 7 to 15 days after the date the
buyer commits to purchase them. The payment obligation and the
interest rate that will be received on securities purchased on a
when-issued basis are each fixed at the time the buyer enters
into the commitment. The Fund will make commitments to purchase
such securities only with the intention of actually acquiring the
securities, but the Fund may sell these securities or dispose of
the commitment before the settlement date if it is deemed
advisable as a matter of investment strategy. Cash or marketable
high-grade debt securities equal to the amount of the above
commitments will be segregated on the Fund's records. For the
purpose of determining the adequacy of these securities the
segregated securities will be valued at market. If the market
value of such securities declines, additional cash or securities
will be segregated on the Fund's records on a daily basis so that
the market value of the account will equal the amount of such
commitments by the Fund.
Securities purchased on a when-issued basis and the
securities held by the Fund are subject to changes in market
value based upon the public's perception of changes in the level
of interest rates. Generally, the value of such securities will
fluctuate inversely to changes in interest rates -- i.e., they
will appreciate in value when interest rates decline and decrease
in value when interest rates rise. Therefore, if in order to
achieve higher interest income the Fund remains substantially
fully invested at the same time that it has purchased securities
on a "when-issued" basis, there will be a greater possibility of
fluctuation in the Fund's net asset value.
When payment for when-issued securities is due, the Fund
will meet its obligations from then-available cash flow, the sale
of segregated securities, the sale of other securities and/or,
although it would not normally expect to do so, from the sale of
the when-issued securities themselves (which may have a market
value greater or less than the Fund's payment obligation). The
sale of securities to meet such obligations carries with it a
greater potential for the realization of capital gains, which are
subject to federal income taxes.
Commercial Paper. The Fund may invest in commercial paper
issued in reliance on the so-called "private placement" exemption
from registration afforded by Section 4(2) of the Securities Act
of 1933 ("Section 4(2) paper"). Section 4(2) paper is restricted
as to disposition under the federal securities laws and generally
is sold to investors who agree that they are purchasing the paper
for an investment and not with a view to public distribution. Any
resale by the purchaser must be in an exempt transaction. Section
4(2) paper is normally resold to other investors through or with
the assistance of the issuer or investment dealers who make a
market in Section 4(2) paper, thus providing liquidity. Pursuant
to guidelines established by the Company's Board of Directors,
Dreyfus may determine that Section 4(2) paper is liquid for the
purposes of complying with the Fund's investment restriction
relating to investments in illiquid securities.
Management Policies
The Fund engages, except as noted, in the following
practices in furtherance of its investment objective.
Loans of Fund Securities. The Fund has authority to lend
its portfolio securities provided (1) the loan is secured
continuously by collateral consisting of U.S. Government
securities or cash or cash equivalents adjusted daily to make a
market value at least equal to the current market value of these
securities loaned; (2) the Fund may at any time call the loan and
regain the securities loaned; (3) the Fund will receive any
interest or dividends paid on the loaned securities; and (4) the
aggregate market value of securities loaned will not at any time
exceed one-third of the total assets of the Fund. In addition, it
is anticipated that the Fund may share with the borrower some of
the income received on the collateral for the loan or that it
will be paid a premium for the loan. In determining whether to
lend securities, the Fund considers all relevant factors and
circumstances including the creditworthiness of the borrower.
Futures Contracts and Options. For the purpose of creating
market exposure for uncommitted cash balances, reducing
transaction costs associated with rebalancing the Fund,
facilitating trading or seeking higher investment returns when a
futures contract is priced more attractively than the underlying
security or the index of the Fund, the Fund may enter into
futures contracts, options, and options on futures contracts with
respect to securities in which the Fund may invest and indices
comprised of such securities.
Futures contracts provide for the future sale by one party
and purchase by another party of a specified amount of a specific
security or securities index at a specified future time and at a
specified price. Where the underlying security is an index, no
physical transfer of securities takes place; rather, upon
expiration of the contract, the parties settle by exchanging cash
in an amount equal to the difference between the contract price
and the closing value of the index at expiration, net of
variation margin previously paid. Futures contracts that are
standardized as to maturity date and underlying interest are
traded on national futures exchanges.
Futures traders are required to make a good faith margin
deposit in cash or government securities with a broker or
custodian to initiate and maintain open positions in futures
contracts. A margin deposit is intended to assure completion of
the contract (delivery or acceptance of the underlying security)
if it is not terminated prior to the specified delivery date.
Minimal initial margin requirements are established by the
futures exchange and may be changed. Brokers may establish
deposit requirements which are higher than the exchange minimums.
After a futures contract position is opened, the value of
the contract is marked to market daily. If the futures contract
price changes to the extent that the margin on deposit does not
satisfy margin requirements, payment of additional "variation"
margin will be required. Conversely, change in the contract value
may reduce the required margin, resulting in a repayment of
excess margin to the contract holder. Variation margin payments
are made to and from the futures broker for as long as the
contract remains open. The Fund expects to earn interest income
on its margin deposits.
Options are of two basic types, either call or put options,
and may relate to a single security or a securities index or a
futures contract. A call option on a security permits the holder
of the option to purchase the underlying security at a specified
price ("strike price") at any time during the term of the option.
Thus, in exchange for the premium paid to the writer, the
purchaser obtains the right to profit from any appreciation in
the value of the underlying security above the strike price. A
put option permits the holder to sell the underlying security to
the writer at the strike price at any time during the term of the
contract. Thus, in exchange for the premium paid to the writer,
the purchaser is relieved of the risk of a decline in the value
of the underlying security below the strike price. An option on a
securities index gives the holder the right to receive cash from
the writer in an amount equal to the difference between the
strike price of the option and the value of the underlying index
multiplied by a factor established by the exchange upon which the
option is traded. An option on a futures contract gives the
holder, in return for the premium paid to the writer, the right
to assume a position in the underlying futures contract at a
specified price at any time during the term of the option.
Although futures and options contracts by their terms call
for actual delivery or acceptance of the underlying securities,
in most cases the contracts are closed out before the settlement
date without the making or taking of delivery. Closing out an
open futures position is done by taking an opposite position
("buying" a contract which has previously been "sold," or
"selling" a contract previously purchased) in an identical
contract to terminate the position. An option purchased may be
closed out by selling the option. An option written is closed out
by purchasing an option identical to that written. Brokerage
commissions are incurred when futures and options contracts are
bought and sold.
Restrictions on the Use of Futures Contracts and Options.
The Fund will not enter into futures contracts to the extent that
its outstanding obligations under these contracts would exceed
25% of the Fund's total assets. To the extent that the Fund
enters into futures contracts and options on futures positions
that are not for bona fide hedging purposes (as defined by the
Commodity Futures Trading Commission), the aggregate initial
margin and premiums on these positions (excluding the amount by
which options are "in-the-money") may not exceed 5% of the Fund's
net assets.
Transactions using options and futures contracts (other than
options that the Fund has purchased) expose the Fund to an
obligation to another party. The Fund will not enter into any
such transactions unless it owns either (1) an offsetting
("covered") position in securities or other options or futures
contracts or (2) cash, receivables and short-term debt securities
with a value sufficient at all times to cover its potential
obligations not covered as provided in (1) above. The Fund will
comply with SEC guidelines regarding cover for these instruments
and, if the guidelines so require, set aside cash, U.S.
Government securities or other liquid, high-grade debt securities
in a segregated account with its custodian in the prescribed
amount.
All options purchased or written by the Fund must be listed
on a national securities or futures exchange or traded in the
over-the-counter ("OTC") market. The Fund will not purchase or
write OTC options if, as a result of such transaction, the sum of
(i) the market value of outstanding OTC options purchased by the
Fund, (ii) the market value of the underlying securities covered
by outstanding OTC call options written by the Fund, and (iii)
the market value of all other assets of the Fund that are
illiquid or are not otherwise readily marketable, would exceed
15% of the net assets of the Fund, taken at market value.
However, if an OTC option is sold by the Fund to a primary U.S.
Government securities dealer recognized by the Federal Reserve
Bank of New York and the Fund has the unconditional contractual
right to repurchase such OTC option from the dealer at a
predetermined price, then the Fund will treat as illiquid such
amount of the underlying securities as is equal to the repurchase
price less the amount by which the option is "in-the-money" (the
difference between current market value of the underlying
security and the option's strike price). The repurchase price
with primary dealers is typically a formula price which is
generally based on a multiple of the premium received for the
option plus the amount by which the option is "in-the-money."
The Fund may write only covered options. A call option is
covered if the Fund owns the underlying security or a call option
on the same security with a lower strike price. A put option is
covered if the Fund segregates cash and/or short-term debt
securities in an amount necessary to pay the strike price of the
option or purchases a put option on the same underlying security
with a higher strike price.
The Fund will not purchase puts, calls, straddles, spreads
or any combination thereof, if as a result of such purchase the
value of the Fund's aggregate investment in such securities would
exceed 5% of the Fund's total assets.
Risk Factors in Futures and Options Transactions. There can
be no assurance that a liquid secondary market will exist for any
particular futures or option contract at any specific time. Thus,
it may not be possible to close a futures or option position. In
the event of adverse price movements, the Fund would continue to
be required to make daily cash payments to maintain its required
margin with respect to open futures or written options positions.
In such a situation, if the Fund has insufficient cash, it may
have to sell portfolio securities to meet daily margin
requirements at a time when it may be disadvantageous to do so.
In addition, the Fund may be required to make or take delivery of
the securities underlying futures contracts that it holds and
options contracts that it has written.
The Fund will seek to minimize the risk that it will be
unable to close out a futures contract by entering into only
those futures contracts that are listed on national futures
exchanges and for which there appears to be a liquid secondary
market. Likewise, the Fund will enter into only those option
contracts that are listed on a national securities exchange or
traded in the OTC market for which there appears to be a liquid
secondary market.
The risk of loss in trading futures contracts in some
strategies can be substantial, due both to the low margin
deposits required, and the extremely high degree of leverage
involved in futures pricing. As a result, a relatively small
price movement in a futures contract may result in immediate and
substantial loss (as well as gain) to the investor. For example,
if at the time of purchase, 10% of the value of the futures
contract is deposited as margin, a subsequent 10% decrease in the
value of the futures contract would result in a total loss of
margin deposit, before any deduction for the transaction costs,
if the account were then closed out. A 15% decrease would result
in a loss equal to 150% if the original margin deposit for the
contract were closed out. Thus, a purchase or sale of a futures
contract may result in losses in excess of the amount invested in
the contract. Options transactions are subject to similar risks.
However, because the Fund will not engage in futures or options
transactions for speculative purposes, Dreyfus believes that the
Fund's risk of loss is less than the risk of loss associated with
speculative transactions. Moreover, in the foregoing example, the
Fund would presumably have sustained comparable losses if,
instead of the futures contract, it had invested in the
underlying security and sold it after the decline.
Utilization of futures contracts and options transactions by
the Fund does involve the risk of imperfect or no correlation
where the securities underlying futures and options contracts are
different from the portfolio securities being hedged. It is also
possible that the Fund could both lose money on futures and
options contracts and also experience a decline in value of its
portfolio securities. There is also the risk of loss by the Fund
of margin deposits in the event of bankruptcy of a broker with
whom the Fund has an open position in a futures contract or
option thereon.
Most futures exchanges limit the amount of fluctuation
permitted in futures contract prices during a single trading day.
The daily limit establishes the maximum amount that the price of
a futures contract may vary either up or down from the previous
day's settlement price at the end of a trading session. Once the
daily limit has been reached in a particular type of contract, no
trades may be made on that day at a price beyond that limit. The
daily limit governs only price movement during a particular
trading day and therefore does not limit potential losses,
because the limit may prevent the liquidation of unfavorable
positions. Futures contract prices have occasionally moved to the
daily limit for several consecutive trading days with little or
no trading, thereby preventing prompt liquidation of future
positions and subjecting some futures traders to substantial
losses.
Futures and options contracts involve special tax
considerations. See "Dividends, Other Distributions and Taxes"
for further information.
Investment Restrictions
The following limitations have been adopted by the Fund. The
Fund may not change any of these fundamental investment
limitations without the consent of: (a) 67% or more of the shares
present at a meeting of shareholders duly called if the holders
of more than 50% of the outstanding shares of the Fund are
present or represented by proxy; or (b) more than 50% of the
outstanding shares of the Fund, whichever is less. The Fund may
not:
1. Purchase any securities which would cause more than 25% of
the value of the Fund's total assets at the time of such
purchase to be invested in the securities of one or more
issuers conducting their principal activities in the same
industry. (For purposes of this limitation, U.S. Government
securities, and state or municipal governments and their
political subdivisions are not considered members of any
industry. ln addition, this limitation does not apply to
investments in domestic banks, including U.S. branches of
foreign banks and foreign branches of U.S. banks).
2. Borrow money or issue senior securities as defined in the
1940 Act except that (a) the Fund may borrow money in an
amount not exceeding one-third of the Fund's total assets at
the time of such borrowings, and (b) the Fund may issue
multiple classes of shares. The purchase or sale of futures
contracts and related options shall not be considered to
involve the borrowing of money or issuance of senior
securities.
3. Purchase with respect to 75% of the Fund's total assets
securities of any one issuer (other than securities issued
or guaranteed by the U.S. Government, its agencies or
instrumentalities) if, as a result, (a) more than 5% of the
Fund's total assets would be invested in the securities of
that issuer, or (b) the Fund would hold more than 10% of the
outstanding voting securities of that issuer.
4. Make loans or lend securities, if as a result thereof more
than one-third of the Fund's total assets would be subject
to all such loans. For purposes of this limitation debt
instruments and repurchase agreements shall not be treated
as loans.
5. Purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (but this shall
not prevent the Fund from investing in securities or other
instruments backed by real estate, including mortgage loans,
or securities of companies that engage in real estate
business or invest or deal in real estate or interests
therein).
6. Underwrite securities issued by any other person, except to
the extent that the purchase of securities and later
disposition of such securities in accordance with the Fund's
investment program may be deemed an underwriting.
7. Purchase or sell commodities except that the Fund may enter
into futures contracts and related options, forward currency
contracts and other similar instruments.
The Fund may, notwithstanding any other fundamental investment
policy or limitation, invest all of its investable assets in
securities of a single open-end management investment company
with substantially the same investment objectives, policies and
limitations as the Fund.
The Fund has adopted the following additional
non-fundamental restrictions. These non-fundamental restrictions
may be changed without shareholder approval, in compliance with
applicable law and regulatory policy.
1. The Fund shall not sell securities short, unless it owns or
has the right to obtain securities equivalent in kind and
amount to the securities sold short, and provided that
transactions in futures contracts are not deemed to
constitute selling short.
2. The Fund shall not purchase securities on margin, except
that the Fund may obtain such short-term credits as are
necessary for the clearance of transactions, and provided
that margin payments in connection with futures contracts
and options on futures contracts shall not constitute
purchasing securities on margin.
3. The Fund shall not purchase oil, gas or mineral leases.
4. The Fund will not purchase or retain the securities of any
issuer if the officers or Directors of the Fund, its
advisers, or managers, owning beneficially more than one
half of one percent of the securities of such issuer,
together own beneficially more than 5% of such securities.
5. The Fund will not purchase securities of issuers (other than
securities issued or guaranteed by domestic or foreign
governments or political subdivisions thereof), including
their predecessors, that have been in operation for less
than three years, if by reason thereof, the value of the
Fund's investment in securities would exceed 5% of the
Fund's total assets. For purposes of this limitation,
sponsors, general partners, guarantors and originators of
underlying assets may be treated as the issuer of a
security.
6. The Fund will invest no more than 15% of the value of its
net assets in illiquid securities, including repurchase
agreements with remaining maturities in excess of seven
days, time deposits with maturities in excess of seven days
and other securities which are not readily marketable. For
purposes of this limitation, illiquid securities shall not
include Section 4(2) paper and securities which may be
resold under Rule 144A under the Securities Act of 1933,
provided that the Board of Directors, or its delegate,
determines that such securities are liquid based upon the
trading markets for the specific security.
7. The Fund may not invest in securities of other investment
companies, except as they may be acquired as part of a
merger, consolidation or acquisition of assets and except to
the extent otherwise permitted by the 1940 Act.
8. The Fund shall not purchase any security while borrowings
representing more than 5% of the Fund's total assets are
outstanding.
9. The Fund will not purchase warrants if at the time of such
purchase: (a) more than 5% of the value of the Fund's assets
would be invested in warrants, or (b) more than 2% of the
value of the Fund's assets would be invested in warrants
that are not listed on the New York or American Stock
Exchange (for purposes of this limitation, warrants acquired
by the Fund in units or attached to securities will be
deemed to have no value).
10. The Fund will not purchase puts, calls, straddles, spreads
and any combination thereof if by reason thereof the value
of its aggregate investment in such classes of securities
would exceed 5% of its total assets except that: (a) this
limitation shall not apply to standby commitments, and (b)
this limitation shall not apply to the Fund's transactions
in futures contracts and related options.
As an operating policy, the Fund will not invest more than 25% of
the value of its total assets, at the time of such purchase in
domestic banks, including U.S. branches of foreign banks and
foreign branches of U.S. banks. The Company's Board of Directors
may change this policy without shareholder approval. Notice will
be given to shareholders if this policy is changed by the Board.
MANAGEMENT OF THE FUND
CONTROLLING SHAREHOLDER
Mellon Bank Corporation, a Pennsylvania corporation
registered as a bank holding company under the Bank Holding
Company Act of 1956, as amended, owned of record, through its
direct and indirect subsidiaries, more than 25% of the issued and
outstanding voting shares of the Company, as of January 31, 1995,
and is, as a consequence, deemed to be a controlling shareholder
of the Company as that term is defined under the 1940 Act. The
address of Mellon Bank Corporation is: Mellon Bank Corporation,
Mutual Fund Department, 3 Mellon Bank Center, Pittsburgh, PA
15259.
PRINCIPAL SHAREHOLDERS
The following shareholder owned 5% or more of the
outstanding voting shares of the Fund at January 31, 1995: Mac &
Co. 080-056, Mellon Bank, N.A., as Nominee for Trust Custodian,
P.O. Box 320, Pittsburgh, PA 15230, 98% record.
FEDERAL LAW AFFECTING MELLON BANK
The Glass-Steagall Act of 1933 prohibits national banks from
engaging in the business of underwriting, selling or distributing
securities and prohibits a member bank of the Federal Reserve
System from having certain affiliations with an entity engaged
principally in that business. The activities of Mellon Bank,
N.A. ("Mellon Bank") in informing its customers of, and
performing, investment and redemption services in connection with
the Fund, and in providing services to the Fund as custodian and
fund accountant, as well as Dreyfus' investment advisory
activities, may raise issues under these provisions. Mellon Bank
has been advised by counsel that the activities contemplated
under these arrangements are consistent with its statutory and
regulatory obligations.
Changes in either federal or state statutes and regulations
relating to the permissible activities of banks and their
subsidiaries or affiliates, as well as further judicial or
administrative decisions or interpretations of such future
statutes and regulations, could prevent Mellon Bank or Dreyfus
from continuing to perform all or a part of the above services
for its customers and/or the Fund. If Mellon Bank or Dreyfus were
prohibited from serving the Fund in any of its present
capacities, the Board of Directors would seek an alternative
provider(s) of such services.
DIRECTORS AND OFFICERS
The Company has a Board composed of thirteen Directors which
supervises the Company's investment activities and reviews
contractual arrangements with companies that provide the Funds
with services. The following lists the Directors and officers
and their positions with the Company and their present and
principal occupations during the past five years. Each Director
who is an "interested person" of the Company (as defined in the
Investment Company Act of 1940, as amended (the "Act")) is
indicated by an asterisk. Each of the Directors also serves as a
Trustee of The Dreyfus/Laurel Funds Trust, The Dreyfus/Laurel
Investment Series and The Dreyfus/Laurel Tax-Free Municipal Funds
(collectively "The Dreyfus/Laurel Funds").
o + RUTH MARIE ADAMS. Director of the Company; Professor of
English and Vice President Emeritus, Dartmouth College;
Senator, United Chapters of Phi Beta Kappa; Trustee, Woods
Hole Oceanographic Institution. Age: 79 years old.
Address: 1026 Kendal Lyme Road, Hanover, New Hampshire
03755.
o + FRANCIS P. BRENNAN. Chairman of the Board of Directors and
Assistant Treasurer of the Company; Director and Chairman,
Massachusetts Business Development Corp.; Director, Boston
Mutual Insurance Company; Director and Vice Chairman of the
Board, Home Owners Federal Savings and Loan (prior to May
1990). Age: 76 years old. Address: Massachusetts Business
Development Corp., One Liberty Square, Boston, Massachusetts
02109.
o * JOSEPH S. DiMARTINO. Director of the Company since February
1995. Since January 1995, Mr. DiMartino has served as
Chairman of the Board for various funds in the Dreyfus
Family of Funds. For more than five years prior thereto, he
was President, a director and, until August 1994, Chief
Operating Officer of the Manager and Executive Vice
President and a director of Dreyfus Service Corporation, a
wholly-owned subsidiary of the Manager and, until August
1994, the Fund's distributor. From August 1994 to December
31, 1994, he was a director of Mellon Bank Corporation. Mr.
DiMartino is a director and former Treasurer of the Muscular
Dystrophy Association; a trustee of Bucknell University; and
a director of the Noel Group, Inc. Mr. DiMartino is also a
Board member of 58 other funds in the Dreyfus Family of
Funds. He is 51 years old and his address is 200 Park
Avenue, New York, New York 10166.
o + JAMES M. FITZGIBBONS. Director of the Company; President and
Director, Amoskeag Company; Chairman, Howes Leather Company,
Inc.; Director, Fiduciary Trust Company; Chairman, CEO and
Director, Fieldcrest-Cannon Inc.; Director, Lumber Mutual
Insurance Company; Director, Barrett Resources, Inc. Age: 59
years old. Address: 40 Norfolk Road, Brookline,
Massachusetts 02167.
o * J. TOMLINSON FORT. Director of the Company; Partner, Reed,
Smith, Shaw & McClay (law firm). Age: 65 years old.
Address: 204 Woodcock Drive, Pittsburgh, Pennsylvania
15215.
o + ARTHUR L. GOESCHEL. Director of the Company; Director,
Chairman of the Board and Director, Rexene Corporation;
Director, Calgon Carbon Corporation; Director, National
Picture Frame Corporation; Chairman of the Board and
Director, Tetra Corporation 1991-1993; Director, Medalist
Corporation 1992-1993. Age: 71 years old. Address: Way
Hallow Road and Woodland Road, Sewickley, Pennsylvania
15143.
o + KENNETH A. HIMMEL. Director of the Company; Former Director,
The Boston Company, Inc. and Boston Safe Deposit and Trust
Company; President and Chief Executive Officer, Himmel &
Co., Inc.; Vice Chairman, Sutton Place Gourmet, Inc. and
Florida Hospitality Group; Managing Partner, Himmel/MKDG,
Franklin Federal Partners, Reston Town Center Associates and
Grill 23 & Bar. Age: 47 years old. Address: Himmel and
Company, Inc., 101 Federal Street, 22nd Floor, Boston,
Massachusetts 02110.
o + ARCH S. JEFFERY. Director of the Company; Financial
Consultant. Age: 76 years old. Address: 1817 Foxcroft
Lane, Allison Park, Pennsylvania 15101.
o + STEPHEN J. LOCKWOOD. Director of the Company; President and
CEO, LDG Management Company Inc.; CEO, LDG Reinsurance
Underwriters, SRRF Management Inc. and Medical Reinsurance
Underwriters Inc. Age: 46 years old. Address: 401
Edgewater Place, Wakefield, Massachusetts 01880.
o + ROBERT D. MCBRIDE. Director of the Company; Director,
Chairman and CEO, McLouth Steel; Director, Salem
Corporation. Director, SMS/Concast, Inc. (1983-1991). Age:
66 years old. Address: 15 Waverly Lane, Grosse Pointe
Farms, Michigan 48236.
o + JOHN L. PROPST. Director of the Company; Of Counsel, Reed,
Smith, Shaw & McClay (law firm). Age: 79 years old.
Address: 5521 Dunmoyle Street, Pittsburgh, Pennsylvania
15217.
o + JOHN J. SCIULLO. Director of the Company; Dean Emeritus and
Professor of Law, Duquesne University Law School; Director,
Urban Redevelopment Authority of Pittsburgh. Age: 62 years
old. Address: 321 Gross Street, Pittsburgh, Pennsylvania
15224
o + ROSLYN M. WATSON. Director of the Company; Principal, Watson
Ventures, Inc., prior to February, 1993; Real Estate
Development Project Manager and Vice President, The Gunwyn
Company. Age: 44 years old. Address: 25 Braddock Park,
Boston, Massachusetts 02116-5816.
# MARIE E. CONNOLLY. President and Treasurer of the Company; The
Dreyfus/Laurel Investment Series, The Dreyfus/Laurel Funds
Trust and The Dreyfus/Laurel Tax-Free Municipal Funds (since
September 1994); Vice President of The Dreyfus/Laurel Funds,
Inc. (March 1994 to September 1994); President, Funds
Distributor, Inc. (since 1992); Treasurer, Funds
Distributor, Inc. (July 1993 to April 1994); COO, Funds
Distributor, Inc. (since April 1994); Director, Funds
Distributor, Inc. (since July 1992); President, COO and
Director, Premier Mutual Fund Services, Inc. (since April
1994); Senior Vice President and Director of Financial
Administration, The Boston Company Advisors, Inc. (December
1988 to May 1993). Address: One Exchange Place, Boston,
Massachusetts 02109.
# FREDERICK C. DEY. Vice President of the Company, The
Dreyfus/Laurel Investment Series, The Dreyfus/Laurel Funds
Trust and The Dreyfus/Laurel Tax-Free Municipal Funds (since
September 1994); Senior Vice President, Premier Mutual Fund
Services, Inc. (since August 1994); Vice President, Funds
Distributor, Inc. (since August 1994); Fundraising Manager,
Swim Across America (October 1993 to August 1994); General
Manager, Spring Industries (August 1988 to October 1993).
Address: Premier Mutual Fund Services, Inc., 200 Park Avenue
New York, New York 10166.
# ERIC B. FISCHMAN. Vice President of the Company, The
Dreyfus/Laurel Investment Series, The Dreyfus/Laurel Funds
Trust and The Dreyfus/Laurel Tax-Free Municipal Funds (since
September 1994); Vice President and Associate General
Counsel, Premier Mutual Fund Services, Inc. (Since August
1994); Vice President and Associate General Counsel, Funds
Distributor, Inc. (since August 1994); Staff Attorney,
Federal Reserve Board (September 1992 to June 1994); Summer
Associate, Venture Economics (May 1991 to September 1991);
Summer Associate, Suffolk County District Attorney (June
1990 to August 1990). Address: Premier Mutual Fund
Services, Inc., 200 Park Avenue, New York, New York 10166.
LESLIE M. GAYNOR. Assistant Treasurer of the Company, The
Dreyfus/Laurel Investment Series, The Dreyfus/Laurel Funds
Trust and The Dreyfus/Laurel Tax-Free Municipal Funds (since
October 1994); Assistant Treasurer/Manager of Treasury
Services, Funds Distributor, Inc. (since July 1994); Vice
President, The Boston Company, Inc. (1989 to July 1994).
Address: One Exchange Place, Boston, Massachusetts 02109.
RICHARD W. HEALEY. Vice President of the Company, The
Dreyfus/Laurel Investment Series, The Dreyfus/Laurel Tax
Free Municipal Funds Trust and The Dreyfus/Laurel Funds
Trust (since March 1994); Senior Vice President, Funds
Distributor, Inc. (since March 1993); Vice President, The
Boston Company Inc., (March 1993 to May 1993); Vice
President of Marketing, Calvert Group (1989 to March 1993).
Address: One Exchange Place, Boston, Massachusetts 02109.
# JOHN E. PELLETIER. Vice President and Secretary of the
Company; The Dreyfus/Laurel Investment Series, The
Dreyfus/Laurel Funds Trust and The Dreyfus/Laurel Tax-Free
Municipal Funds (since September 1994); Senior Vice
President, General Counsel and Secretary, Funds Distributor,
Inc. (since April 1994); Senior Vice President, General
Counsel and Secretary, Premier Mutual Fund Services, Inc.
(since August 1994); Counsel, The Boston Company Advisors,
Inc. (February 1992 to March 1994); Associate, Ropes & Gray
(August 1990 to February 1992); Associate, Sidley & Austin
(June 1989 to August 1990). Address: One Exchange Place,
Boston, Massachusetts 02109.
___________________________________________________
* "Interested person" of the Company, as defined in the 1940
Act.
o Member of the Audit Committee.
+ Member of the Nominating Committee.
# Officer also serves as an officer for other investment
companies advised by Dreyfus.
The officers and Directors of the Company as a group owned
beneficially less than 1% of the Fund's total shares outstanding
as of January 31, 1995.
No officer or employee of Premier (or of any parent,
subsidiary or affiliate thereof) receives any compensation from
the Company for serving as an officer or Director of the Company.
In addition, no officer or employee of Dreyfus (or of any parent
or subsidiary thereof) serves as an officer or Director of the
Company. The Dreyfus/Laurel Funds pay each Director/Trustee who
is not an officer or employee of Premier (or parent, subsidiary
or any thereof) or of Dreyfus, $27,000 per annum (and an
additional $75,000 for the Chairman of the Board of
Directors/Trustees of the Dreyfus/Laurel Funds), $1,000 for each
Dreyfus/Laurel Funds meeting attended and $750 per joint
Dreyfus/Laurel Funds Audit Committee meeting attended, and
reimburses each Director/Trustee for travel and out-of-pocket
expenses. For the fiscal year ended October 31, 1994 the fees
for meeting and expenses totaled $162.00.
For the fiscal year ended October 31, 1994, the aggregate
amount of fees and expenses received by each Director from the
Company and all other Funds in The Dreyfus/Laurel Family of Funds
for which such person is a Board member were as follows:
<TABLE>
Total
Pension of Compensation
Retirement From the
Benefits Estimated Company
Aggregate Accrued as Annual and Fund
Compensation Part of Benefits Complex Paid
From the the Company's Upon to Board
Name of Board Member Company # Expenses Retirement Member
- - - ------------------- ----------- ------------- ---------- -------------
<S> <C> <C> <C> <C>
Ruth Marie Adams $19,685 None None $ 37,500
Francis P. Brennan* 52,809 None None 112,500
Joseph S. DiMartino** N/A N/A N/A N/A
James M. Fitzgibbons 17,685 None None 31,750
J. Tomlinson Fort 7,500 None None 7,500
Arthur L. Goeschel 26,185 None None 32,500
Kenneth A. Himmel 18,685 None None 35,750
Arch S. Jeffrey 27,185 None None 33,500
Steven J. Lockwood 18,685 None None 35,750
Robert D. McBride 27,185 None None 33,500
John L. Propst 27,185 None None 33,500
John J. Sciullo 27,185 None None 33,500
Roslyn M. Watson 19,685 None None 36,750
</TABLE>
# Amount does not include reimbursed expenses for attending
Board meetings, which amounted to $10,876 for the Company.
* Compensation of Francis Brennan includes $75,000 paid by The
Dreyfus/Laurel Fund Family to be Chairman of the Board.
** Joseph S. DiMartino was not a director of the Company as of
October 31, 1994.
MANAGEMENT ARRANGEMENTS
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled
"Management of the Fund."
Management Agreement. Dreyfus serves as the investment
manager for the Fund pursuant to an Investment Management
Agreement with the Company dated April 4, 1994 ("Management
Agreement"), transferred to Dreyfus as of October 17, 1994.
Pursuant to the Management Agreement, Dreyfus provides, or
arranges for one or more third parties to provide, investment
advisory, administrative, custody, fund accounting and transfer
agency services to the Fund. As investment manager, Dreyfus
manages the Fund by making investment decisions based on the
Fund's investment objectives, policies and restrictions. The
Management Agreement is subject to review and approval at least
annually by the Board of Directors.
The Management Agreement will continue from year to year
provided that a majority of the Directors who are not interested
persons of the Company and either a majority of all Directors or
a majority of the shareholders of the Fund approve its
continuance. The Company may terminate the Management Agreement,
without prior notice to Dreyfus, upon the vote of a majority of
the Board of Directors or upon the vote of a majority of the
Fund's outstanding voting securities. Dreyfus may terminate the
Management Agreement upon sixty (60) days' written notice to the
Company. The Management Agreement will terminate immediately and
automatically upon its assignment.
The following persons are officers and/or directors of
Dreyfus: Howard Stein, Chairman of the Board and Chief Executive
Officer; W. Keith Smith, Vice Chairman of the Board; Robert E.
Riley, President, Chief Operating Officer and a director;
Lawrence S. Kash, Vice Chairman--Distribution and director;
Philip L. Toia, Vice Chairman--Operations and Administration;
Paul H. Snyder, Vice President and Chief Financial Officer;
Daniel C. Maclean, Vice President and General Counsel; Barbara E.
Casey, Vice President--Retirement Services; Henry D. Gottmann,
Vice President--Retail; Elie M. Genadry, Vice President--
Wholesale; Mark N. Jacobs, Vice President--Fund Legal and
Compliance; Jeffrey N. Nachman, Vice President-Mutual Fund
Accounting; Diane M. Coffey, Vice-President--Corporate
Communications; Katherine C. Wickham, Vice President--Human
Resources; Maurice Bendrihem, Controller; and Mandell L. Berman,
Frank V. Cahouet, Alvin E. Friedman, Lawrence M. Greene, Julian
M. Smerling and David B. Truman, Directors.
For the period from September 2, 1994 (commencement of
operations) through October 31, 1994, the Fund had the following
expenses:
For the Fiscal Year Ended October 31,
1994
----
Management fees (gross of waiver) $7,144
Expense Reimbursement from
investment manager --
Management fees waived --
PURCHASE OF FUND SHARES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled
"How to Buy Fund Shares."
The Distributor. The Distributor serves as the Fund's
distributor pursuant to an agreement which is renewable annually.
The Distributor also acts as distributor for the other funds in
the Dreyfus Family of Funds and for certain other investment
companies.
Dreyfus TeleTransfer Privilege--Investor Shares. Dreyfus
TeleTransfer purchase orders may be made between the hours of
8:00 a.m. and 4:00 p.m., New York time, on any business day that
The Shareholder Services Group, Inc., the Fund's transfer and
dividend disbursing agent (the "Transfer Agent"), and the New
York Stock Exchange ("NYSE") are open. Such purchases will be
credited to the shareholder's Fund account on the next bank
business day. To qualify to use the Dreyfus TeleTransfer
Privilege, the initial payment for purchase of shares must be
drawn on, and redemption proceeds paid to, the same bank and
account as are designated on the Account Application or
Shareholder Services Form on file. If the proceeds of a
particular redemption are to be wired to an account at any other
bank, the request must be in writing and signature-guaranteed.
See "Redemption of Fund Shares--Dreyfus TeleTransfer Privilege--
Investor Shares."
Reopening an Account. An investor may reopen an account
with a minimum investment of $100 without filing a new Account
Application during the calendar year the account is closed or
during the following calendar year, provided the information on
the old Account Application is still applicable.
DISTRIBUTION PLAN
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled
"Distribution Plan."
Investor shares are subject to fees for distribution and
shareholder services.
Distribution Plan--Investor Shares. The Securities and
Exchange Commission ("SEC") has adopted Rule 12b-1 under the 1940
Act ("Rule") regulating the circumstances under which investment
companies such as the Company may, directly or indirectly, bear
the expenses of distributing their shares. The Rule defines
distribution expenses to include expenditures for "any activity
which is primarily intended to result in the sale of fund
shares." The Rule, among other things, provides that an
investment company may bear such expenses only pursuant to a plan
adopted in accordance with the Rule. With respect to the
Investor shares of the Fund, the Company has adopted a
Distribution Plan ("Plan"), and may enter into Selling Agreements
with Service Agents pursuant to its Plan.
Under the Plan, the Fund may spend annually up to 0.25% of
its average daily net assets attributable to Investor shares for
costs and expenses incurred in connection with the distribution
of, and shareholder servicing with respect to, the Fund's
Investor shares.
The Plan provides that a report of the amounts expended
under the Plan, and the purposes for which such expenditures were
incurred, must be made to the Company's Directors for their
review at least quarterly. In addition, the Plan provides that
it may not be amended to increase materially the costs which the
Fund may bear for distribution pursuant to the Plan without
approval of the Fund's shareholders, and that other material
amendments of the Plan must be approved by the vote of a majority
of the Directors and of the Directors who are not "interested
persons" of the Company (as defined in the 1940 Act) and who do
not have any direct or indirect financial interest in the
operation of the Plan, cast in person at a meeting called for the
purpose of considering such amendments. The Plan is subject to
annual approval by the entire Board of Directors and by the
Directors who are neither interested persons nor have any direct
or indirect financial interest in the operation of the Plan, by
vote cast in person at a meeting called for the purpose of voting
on the Plan. The Plan is terminable, as to the Fund's Investor
shares, at any time by vote of a majority of the Directors who
are not interested persons and have no direct or indirect
financial interest in the operation of the Plan or by vote of the
holders of a majority of the outstanding shares of such class of
the Fund.
For the period from September 2, 1994 (inception date of
Investor shares) to October 31, 1994, the Fund paid the
Distributor $1 pursuant to the Plan.
REDEMPTION OF FUND SHARES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled
"How to Redeem Fund Shares."
Wire Redemption Privilege. By using this Privilege, the
investor authorizes the Transfer Agent to act on wire or
telephone redemption instructions from any person representing
himself or herself to be the investor, or a representative of the
investor's Service Agent, and reasonably believed by the Transfer
Agent to be genuine. Ordinarily, the Fund will initiate payment
for shares redeemed pursuant to this Privilege on the next
business day after receipt if the Transfer Agent receives the
redemption request in proper form. Redemption proceeds will be
transferred by Federal Reserve wire only to the commercial bank
account specified by the investor on the Account Application or
Shareholder Services Form. Redemption proceeds, if wired, must
be in the amount of $1,000 or more and will be wired to the
investor's account at the bank of record designated in the
investor's file at the Transfer Agent, if the investor's bank is
a member of the Federal Reserve System, or to a correspondent
bank if the investor's bank is not a member. Fees ordinarily are
imposed by such bank and usually are borne by the investor.
Immediate notification by the correspondent bank to the
investor's bank is necessary to avoid a delay in crediting the
funds to the investor's bank account.
Investors with access to telegraphic equipment may wire
redemption requests to the Transfer Agent by employing the
following transmittal code which may be used for domestic or
overseas transmissions:
Transfer Agent's
Transmittal Code Answer Back Sign
- - - ---------------- ----------------
144295 144295 TSSG PREP
Investors who do not have direct access to telegraphic
equipment may have the wire transmitted by contacting a TRT
Cables operator at 1-800-654-7171, toll free. Investors should
advise the operator that the above transmittal code must be used
and should also inform the operator of the Transfer Agent's
answer back sign.
To change the commercial bank or account designated to
receive redemption proceeds, a written request must be sent to
the Transfer Agent. This request must be signed by each
shareholder, with each signature guaranteed as a described below
under "Stock Certificates; Signatures."
Stock 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 NYSE Medallion
Signature Program, the Securities Transfer Agents Medallion
Program ("STAMP") and the Stock Exchanges Medallion Program.
Guarantees must be signed by an authorized signatory of the
guarantor and "Signature-Guaranteed" must appear with the
signature. The Transfer Agent may request additional
documentation from corporations, executors, administrators,
trustees or guardians, and may accept other suitable verification
arrangements from foreign investors, such as consular
verification. For more information with respect to signature-
guarantees, please call one of the telephone numbers listed on
the cover.
Dreyfus TeleTransfer Privilege--Investor Shares. Investors
should be aware that if they have selected the Dreyfus
TeleTransfer Privilege, any request for a wire redemption will be
effected as a Dreyfus TeleTransfer transaction through the ACH
system unless more prompt transmittal specifically is requested.
Redemption proceeds will be on deposit in the investor's account
at an ACH member bank ordinarily two business days after receipt
of the redemption request. See "Purchase of Fund Shares--Dreyfus
TeleTransfer Privilege--Investor Shares."
Redemption Commitment. The Fund has committed itself to pay
in cash all redemption requests by any shareholder of record of
the Fund, 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 SEC. In the case of requests
for redemption in excess of such amount, the Board of Directors
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 this event, the
securities would be valued in the same manner as the Fund's
portfolio is valued. If the recipient sold such securities,
brokerage charges would be incurred.
Suspension of Redemptions. The right of redemption may be
suspended or the date of payment postponed (a) during any period
when the NYSE 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 SEC 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 SEC by order
may permit to protect the Fund's shareholders.
SHAREHOLDER SERVICES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled
"Shareholder Services."
Exchange Privilege. Shares of any Class of the Fund may be
exchanged for shares of the respective Class of certain other
funds advised or administered by Dreyfus. 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. Exchanges for shares of funds that are offered without
a sales load will be made without a sales load.
B. Shares of funds purchased without a sales load may be
exchanged for shares of other funds sold with a sales
load, and the applicable sales load will be deducted.
C. Shares of funds purchased with a sales load may be
exchanged without a sales load for shares of other
funds sold without a sales load.
D. Shares of funds purchased with a sales load, shares of
funds acquired by a previous exchange from shares
purchased with a sales load and additional shares
acquired through reinvestment of dividends or other
distributions of any such funds (collectively referred
to herein as "Purchased Shares") may be exchanged for
shares of other funds sold with a sales load (referred
to herein as "Offered Shares"), provided that, if the
sales load applicable to the Offered Shares exceeds the
maximum sales load that could have been imposed in
connection with the Purchased Shares (at the time the
Purchased Shares were acquired), without giving effect
to any reduced loads, the difference will be deducted.
E. Shares of funds subject to a contingent deferred sales
charge ("CDSC") that are exchanged for shares of
another fund will be subject to the higher applicable
CDSC of the two funds, and for purposes of calculating
CDSC rates and conversion periods, if any, will be
deemed to have been held since the date the shares
being exchanged were initially purchased.
To accomplish an exchange under item D above, shareholders
must notify the Transfer Agent of their prior ownership of fund
shares and their account number.
Exchanges of Class R shares held by a Retirement Plan may be
made only between the investor's Retirement Plan account in one
fund and such investor's Retirement Plan account in another fund.
To establish a personal retirement plan by exchange, shares
of the fund being exchanged must have a value of at least the
minimum initial investment required for the fund into which the
exchange is being made. For Dreyfus-sponsored Keogh Plans, IRAs
and SEP-IRAs with only one participant, the minimum initial
investment is $750. To exchange shares held in Corporate Plans,
403(b)(7) Plans and IRAs set up under a Simplified Employee
Pension Plan ("SEP-IRAs") with more than one participant, the
minimum initial investment is $100 if the plan has at least
$2,500 invested among the funds in the Dreyfus Family of Funds.
To exchange shares held in a personal retirement plan account,
the shares exchanged must have a current value of at least $100.
Dreyfus Auto-Exchange Privilege. The Dreyfus Auto-Exchange
Privilege permits an investor to purchase, in exchange for shares
of the Fund, shares of the same Class of another fund in the
Dreyfus Family of Funds. This Privilege is available only for
existing accounts. With respect to Class R shares held by a
Retirement Plan, exchanges may be made only between the
investor's Retirement Plan account in one fund and such
investor's Retirement Plan account in another fund. Shares will
be exchanged on the basis of relative net asset value as
described above under "Fund Exchanges." Enrollment in or
modification or cancellation of this Privilege is effective three
business days following notification by the investor. An
investor will be notified if the investor's account falls below
the amount designated to be exchanged under this Privilege. In
this case, an investor's account will fall to zero unless
additional investments are made in excess of the designated
amount prior to the next 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.
Fund exchanges and Dreyfus Auto-Exchange Privilege are
available to shareholders resident in any state in which shares
of the fund being acquired may legally be sold. Shares may be
exchanged only between accounts having identical names and other
identifying designations.
Shareholder Services Forms and prospectuses of the other
funds may be obtained from the Distributor. The Fund reserves
the right to reject any exchange request in whole or in part.
The Fund exchange service or Dreyfus Auto-Exchange Privilege may
be modified or terminated at any time upon notice to
shareholders.
Automatic Withdrawal. The Automatic Withdrawal Plan permits
an investor with a $5,000 minimum account to request withdrawal
of a specified dollar amount (minimum of $50) on either a monthly
or quarterly basis. Withdrawal payments are the proceeds from
sales of Fund shares, not the yield on the shares. If withdrawal
payments exceed reinvested dividends and distributions, the
investor's shares will be reduced and eventually may be depleted.
An Automatic Withdrawal Plan may be established by completing the
appropriate application available from the Distributor. There is
a service charge of $.50 for each withdrawal check. Automatic
Withdrawal may be terminated at any time by the investor, the
Fund or the Transfer Agent. Shares for which certificates have
been issued may not be redeemed through the Automatic Withdrawal
Plan.
Dreyfus Dividend Sweep. Dreyfus Dividend Sweep allows
investors to invest on the payment date their dividends or
dividends and capital gain distributions, if any, from the Fund
in shares of the same Class of certain other funds in the Dreyfus
Family of Funds of which the investor is 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 by a fund may be
invested without imposition of a sales load in shares
of other funds that are offered without a sales load.
B. Dividends and distributions paid by a fund which does
not charge a sales load may be invested in shares of
other funds sold with a sales load, and the applicable
sales load will be deducted.
C. Dividends and distributions paid by a fund which
charges a sales load may be invested in shares of other
funds sold with a sales load (referred to herein as
"Offered Shares"), provided that, if the sales load
applicable to the Offered Shares exceeds the maximum
sales load charged by the fund from which dividends or
distributions are being swept, without giving effect to
any reduced loads, the difference will be deducted.
D. Dividends and distributions paid by a fund may be
invested in shares of other funds that impose a
contingent deferred sales charge ("CDSC") and the
applicable CDSC, if any, will be imposed upon
redemption of such shares.
Corporate Pension/Profit-Sharing and Retirement Plans. The
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 SEP-IRAs and IRA "Rollover Accounts," and
403(b)(7) Plans. Plan support services also are available.
Investors who wish to purchase Fund shares in conjunction
with a Keogh Plan, a 403(b)(7) Plan or an IRA, including an SEP-
IRA, may request from the Distributor forms for adoption of such
plans.
The entity acting as custodian for Keogh Plans, 403(b)(7)
Plans or IRAs may charge a fee, payment of which could require
the liquidation of shares. All fees charged are described in the
appropriate form.
Shares may be purchased in connection with these plans only
by direct remittance to the entity acting as custodian.
Purchases for these plans may not be made in advance of receipt
of funds.
The minimum initial investment for corporate plans, Salary
Reduction Plans, 403(b)(7) Plans and SEP-IRAs with more than one
participant, is $2,500 with no minimum on subsequent purchases.
The minimum initial investment for Dreyfus-sponsored Keogh Plans,
IRAs, SEP-IRAs and 403(b)(7) Plans with only one participant, is
normally $750, with no minimum on subsequent purchases.
Individuals who open an IRA may also open a non-working spousal
IRA with a minimum investment of $250.
The investor should read the Prototype Retirement Plan and
the appropriate form of Custodial Agreement for further details
on eligibility, service fees and tax implications, and should
consult a tax adviser.
DETERMINATION OF NET ASSET VALUE
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled
"How to Buy Fund Shares."
Restricted securities, as well as securities or other assets
for which market quotations are not readily available, or are not
valued by a pricing service approved by the Board of Directors,
are valued at fair value as determined in good faith by the Board
of Directors. The Board of Directors will review the method of
valuation on a current basis. In making their good faith
valuation of restricted securities, the Directors generally will
take the following factors into consideration: restricted
securities which are securities of the same class of securities
for which a public market exists usually will be valued at market
value less the same percentage discount at which purchased. This
discount will be revised periodically by the Board of Directors
if the Directors believe that it no longer reflects the value of
the restricted securities. Restricted securities not of the same
class as securities for which a public market exists usually will
be valued initially at cost. Any subsequent adjustment from cost
will be based upon considerations deemed relevant by the Board of
Directors.
New York Stock Exchange Closings. The holidays (as
observed) on which the NYSE is closed currently are: New Year's
Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving and Christmas.
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled
"Dividends, Other Distributions and Taxes."
The term "regulated investment company" does not imply the
supervision of management or investment practices or policies by
any government agency.
To qualify as a regulated investment company ("RIC"), the
Fund (1) must distribute to its shareholders each year at least
90% of its investment company taxable income (generally
consisting of net investment income, net short-term capital gains
and net gains from certain foreign currency transactions), (2)
must derive at least 90% of its annual gross income from
specified sources ("Income Requirement"), (3) must derive less
than 30% of its annual gross income from gain on the sale or
disposition of any of the following that are held for less than
three months -- (i) securities, (ii) non-foreign-currency options
and futures and (iii) foreign currencies (or foreign currency
options, futures and forward contracts) that are not directly
related to the Fund's principal business of investing in
securities (or options and futures with respect thereto) ("Short-
Short Limitation") -- and (4) must meet certain asset
diversification and other requirements. Accordingly, the Fund
may be restricted in the selling of securities held for less than
three months.
Any dividend or other distribution paid shortly after an
investor's purchase may have the effect of reducing the net asset
value of the shares below the cost of his investment. Such a
dividend or other distribution would be a return on investment in
an economic sense, although taxable as stated in the Fund's
Prospectus. In addition, the Code provides that if a shareholder
holds shares of the Fund for six months or less and has received
a capital gain distribution with respect to those shares, any
loss incurred on the sale of those shares will be treated as a
long-term capital loss to the extent of the capital gain
distribution received.
Dividends and other distributions declared by the Fund in
October, November or December of any year and payable to share-
holders of record on a date in that month any of those months are
deemed to have been paid by the Fund and received by the share-
holders on December 31 of that year if the distributions are paid
by the Fund during the following January. Accordingly, those
distributions will be taxed to shareholders for the year in which
that December 31 falls.
A portion of the dividends paid by the Fund, whether
received in cash or reinvested in additional Fund shares, may be
eligible for the dividends-received deduction allowed to
corporations. The eligible portion may not exceed the aggregate
dividends received by the Fund from U.S. corporations. However,
dividends received by a corporate shareholder and deducted by it
pursuant to the dividends-received deduction are subject
indirectly to the alternative minimum tax.
Dividends and interest received by the Fund may be subject
to income, withholding or other taxes imposed by foreign coun-
tries and U.S. possessions that would reduce the yield on its
securities. Tax conventions between certain countries and the
United States may reduce or eliminate these foreign taxes, how-
ever, and many foreign countries do not impose taxes on capital
gains in respect of investments by foreign investors.
Income from foreign currencies (except certain gains
therefrom that may be excluded by future regulations), and income
from transactions in options, futures and forward contracts
derived by the Fund with respect to its business of investing in
securities or foreign currencies, will qualify as permissible
income under the Income Requirement. However, income from the
disposition of options and futures contracts (other than those on
foreign currencies) will be subject to the Short-Short Limitation
if they are held for less than three months. Income from the
disposition of foreign currencies, and options, futures and
forward contracts thereon, that are not directly related to the
Fund's principal business of investing in securities (or options
and futures with respect to securities) also will be subject to
the Short-Short Limitation if they are held for less than three
months.
If the Fund satisfies certain requirements, any increase in
value of a position that is part of a "designated hedge" will be
offset by any decrease in value (whether realized or not) of the
offsetting hedging position during the period of the hedge for
purposes of determining whether the Fund satisfies the Short-
Short Limitation. Thus, only the net gain (if any) from the
designated hedge will be included in gross income for purposes of
that limitation. The Fund will consider whether it should seek
to qualify for this treatment for its hedging transactions. To
the extent the Fund does not so qualify, it may be forced to
defer the closing out of certain options, futures and forward
contracts beyond the time when it otherwise would be advantageous
to do so, in order for the Fund to qualify as a RIC.
Ordinarily, gains and losses realized from portfolio
transactions will be treated as capital gain and loss. However,
a portion of the gain or loss from the disposition of foreign
currencies and non-U.S. dollar denominated securities (including
debt instruments, certain financial forward, futures and option
contracts and certain preferred stock) may be treated as ordinary
income or loss under Section 988 of the Code. In addition, all
or a portion of any gain realized from the sale or other
disposition of certain market discount bonds will be treated as
ordinary income. Moreover, all or a portion of the gain realized
from engaging in "conversion transactions" may be treated as
ordinary income under Section 1258. "Conversion transactions"
are defined to include certain forward, futures, option and
straddle transactions, transactions marketed or sold to produce
capital gains, or transactions described in Treasury regulations
to be issued in the future.
Under Section 1256 of the Code, any gain or loss realized by
the Fund from certain futures and forward contracts and options
transactions will be treated as 60% long-term capital gain or
loss and 40% short-term capital gain or loss. Gain or loss will
arise upon exercise or lapse of such contracts and options as
well as from closing transactions. In addition, any such
contracts or options remaining unexercised at the end of the
Fund's taxable year will be treated as sold for their then fair
market value (a process known as "marking to market"), resulting
in additional gain or loss to the Fund characterized in the
manner described above.
Offsetting positions held by the Fund involving certain
contracts or options may constitute "straddles." "Straddles" are
defined to include "offsetting positions" in actively traded
personal property. The tax treatment of "straddles" is governed
by Sections 1092 and 1258 of the Code, which, in certain
circumstances, override or modify Sections 1256 and 988. As
such, all or a portion of any short-term or long-term capital
gain from certain "straddle" transactions may be recharacterized
to ordinary income. If the Fund were treated as entering into
"straddles" by reason of its engaging in certain forward
contracts or options transactions, such "straddles" would be
characterized as "mixed straddles" if the forward contracts or
options transactions comprising a part of such "straddles" were
governed by Section 1256. The Fund may make one or more
elections with respect to "mixed straddles." Depending on which
election is made, if any, the results to the Fund may differ. If
no election is made, then to the extent the "straddle" and
conversion transactions rules apply to positions established by
the Fund, losses realized by the Fund will be deferred to the
extent of unrealized gain in the offsetting position. Moreover,
as a result of the "straddle" rules, short-term capital loss on
"straddle" positions may be recharacterized as long-term capital
loss, and long-term capital gains may be treated as short-term
capital gains or ordinary income.
Investment by the Fund in securities issued or acquired at a
discount (for example, zero coupon securities) or providing for
deferred interest or for payment of interest in the form of
additional obligations (for example, "pay-in-kind" or "PIK"
securities) could, under special tax rules, affect the amount,
timing and character of distributions to shareholders by causing
the Fund to recognize income prior to the receipt of cash
payments. For example, the Fund could be required to take into
gross income annually a portion of the discount (or deemed
discount) at which the securities were issued and to distribute
such income in order to maintain its qualification for treatment
as a RIC. In such case, the Fund may have to dispose of
securities it might otherwise have continued to hold in order to
generate cash to satisfy these distribution requirements.
If the Fund invests in an entity that is classified as a
"passive foreign investment company" ("PFIC") for federal income
tax purposes, the operation of certain provisions of the Code
applying to PFICs could result in the imposition of certain
federal income taxes on the Fund. In addition, gain realized
from the sale or other disposition of PFIC securities may be
treated as ordinary income under Section 1291 of the Code.
State and Local Taxes. Depending upon the extent of the
Fund's activities in states and localities in which its offices
are maintained, in which its agents or independent contractors
are located, or in which it is otherwise deemed to be conducting
business, the Fund may be subject to the tax laws of such states
or localities. Shareholders are advised to consult their tax
advisers concerning the application of state and local taxes.
Foreign Shareholders - U.S. Federal Income Taxation. U.S.
federal income taxation of a shareholder who, as to the United
States, is a non-resident alien individual, a foreign trust or
estate, a foreign corporation or a foreign partnership (a
"foreign shareholder"), depends on whether the income from the
Fund is "effectively connected" with a U.S. trade or business
carried on by the shareholder, as discussed generally below.
Special U.S. federal income tax rules that differ from those
described below may apply to certain foreign persons who invest
in the Fund. For example, the tax consequences to a foreign
shareholder entitled to claim the benefits of an applicable tax
treaty may be different from those described below. Foreign
shareholders are advised to consult their own tax advisers with
respect to the particular tax consequences to them of an
investment in the Fund.
Foreign Shareholders - Income Not Effectively Connected. If
the income from the Fund is not effectively connected with a U.S.
trade or business carried on by the foreign shareholder,
distributions of investment company taxable income generally will
be subject to a U.S. federal withholding tax of 30% (or lower
treaty rate) on the gross amount of the distribution. Foreign
shareholders also may be subject to U.S. federal withholding tax
on income resulting from any election by the Fund to treat
foreign taxes paid by it as paid by its shareholders (see
discussion above), but foreign shareholders will not be able to
claim a credit or deduction for the foreign taxes treated as
having been paid by them.
Capital gains realized by foreign shareholders on the sale
of Fund shares and distributions to them of net capital gain, as
well as amounts retained by the Fund that are designated as
undistributed capital gains, generally will not be subject to
U.S. federal income tax unless the foreign shareholder is a
non-resident alien individual and is physically present in the
United States for more than 182 days during the taxable year.
However, this rule only applies in exceptional cases, because any
individual present in the United States for more than 182 days
during the taxable year generally is treated as a resident for
U.S. federal income tax purposes on his worldwide income at the
graduated rates applicable to U.S. citizens, rather than the 30%
U.S. federal withholding tax rate. In the case of certain foreign
shareholders, the Fund may be required to withhold U.S. Federal
income tax at a rate of 31% of capital gain distributions and of
the gross proceeds from a redemption of Fund shares unless the
shareholder furnishes the Fund with a certificate regarding the
shareholder's foreign status.
Foreign Shareholders - Effectively Connected Income. If
income from the Fund is effectively connected with a U.S. trade
or business carried on by a foreign shareholder, then all
distributions to that shareholder and any gains realized by that
shareholder on the disposition of the Fund shares will be subject
to U.S. federal income tax at the graduated rates applicable to
U.S. citizens and domestic corporations, as the case may be.
Foreign shareholders also may be subject to the branch profits
tax.
Foreign Shareholders - Estate Tax. Foreign individuals
generally are subject to U.S. federal estate tax on their U.S.
situs property, such as shares of the Fund, that they own at the
time of their death. Certain credits against that tax and relief
under applicable tax treaties may be available.
Pennsylvania Personal Property Tax Exemption. The Company
has obtained a Certificate of Authority to do business as a
foreign corporation in Pennsylvania. In the opinion of counsel,
shares of The Company are exempt from Pennsylvania personal
property taxes.
PORTFOLIO TRANSACTIONS
All portfolio transactions of the Fund are placed on behalf
of the Fund by Dreyfus. Debt securities purchased and sold by
the Fund are generally traded on a net basis (i.e., without
commission) through dealers acting for their own account and not
as brokers, or otherwise involve transactions directly with the
issuer of the instrument. This means that a dealer (the
securities firm or bank dealing with the Fund) makes a market for
securities by offering to buy at one price and sell at a slightly
higher price. The difference between the prices is known as a
spread. Other portfolio transactions may be executed through
brokers acting as agent. The Fund will pay a spread or
commissions in connection with such transactions. Dreyfus uses
its best efforts to obtain execution of portfolio transactions at
prices which are advantageous to the Fund and at spreads and
commission rates, if any, which are reasonable in relation to the
benefits received. Dreyfus also places transactions for other
accounts that it provides with investment advice.
Brokers and dealers involved in the execution of portfolio
transactions on behalf of the Fund are selected on the basis of
their professional capability and the value and quality of their
services. In selecting brokers or dealers, Dreyfus will consider
various relevant factors, including, but not limited to, the size
and type of the transaction; the nature and character of the
markets for the security to be purchased or sold; the execution
efficiency, settlement capability, and financial condition of the
broker-dealer; the broker-dealer's execution services rendered on
a continuing basis; and the reasonableness of any spreads (or
commissions, if any). Any spread, commission, fee or other
remuneration paid to an affiliated broker-dealer is paid pursuant
to the Company's procedures adopted in accordance with Rule 17e-1
of the 1940 Act.
Brokers or dealers may be selected who provide brokerage
and/or research services to the Fund and/or other accounts over
which Dreyfus or its affiliates exercise investment discretion.
Such services may include advice concerning the value of
securities; the advisability of investing in, purchasing or
selling securities; the availability of securities or the
purchasers or sellers of securities; furnishing analyses and
reports concerning issuers, industries, securities, economic
factors and trends, portfolio strategy and performance of
accounts; and effecting securities transactions and performing
functions incidental thereto (such as clearance and settlement).
The receipt of research services from broker-dealers may be
useful to Dreyfus in rendering investment management services to
the Fund and/or its other clients; and, conversely, such
information provided by brokers or dealers who have executed
transaction orders on behalf of other clients of Dreyfus may be
useful to these organizations in carrying out their obligations
to the Fund. The receipt of such research services does not
reduce these organizations' normal independent research
activities; however, it enables these organizations to avoid the
additional expenses which might otherwise be incurred if these
organizations were to attempt to develop comparable information
through their own staffs.
The Company's Board of Directors periodically review
Dreyfus' performance of its responsibilities in connection with
the placement of portfolio transactions on behalf of the Fund and
review the prices paid by the Fund over representative periods of
time to determine if they are reasonable in relation to the
benefits to the Fund.
Although Dreyfus manages other accounts in addition to the
Fund, investment decisions for the Fund are made independently
from decisions made for these other accounts. It sometimes
happens that the same security is held by more than one of the
accounts managed by Dreyfus. Simultaneous transactions may occur
when several accounts are managed by the same investment manager,
particularly when the same investment instrument is suitable for
the investment objective of more than one account.
When more than one account is simultaneously engaged in the
purchase or sale of the same investment instrument, the prices
and amounts are allocated in accordance with a formula considered
by Dreyfus to be equitable to each account. In some cases this
system could have a detrimental effect on the price or volume of
the investment instrument as far as the Fund is concerned. In
other cases, however, the ability of the Fund to participate in
volume transactions will produce better executions for the Fund.
While the Directors will continue to review simultaneous
transactions, it is their present opinion that the desirability
of retaining Dreyfus as investment manager to the Fund outweighs
any disadvantages that may be said to exist from exposure to
simultaneous transactions.
The Fund did not commence operations until September 2,
1994.
Portfolio Turnover. The portfolio turnover rate for the Fund
is calculated by dividing the lesser of the Fund's annual sales
or purchases of portfolio securities (exclusive of purchases and
sales of securities whose maturities at the time of acquisition
were one year or less) by the monthly average value of securities
in the Fund during the year. The portfolio turnover rate for the
period since inception of the Fund was:
September 2, 1994 to October 31, 1994
-------------------------------------
5%
PERFORMANCE INFORMATION
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled
"Performance Information."
Average annual total return is calculated by determining the
ending redeemable value of an investment purchased with a
hypothetical $1,000 payment made at the beginning of the period
(assuming the reinvestment of dividends and other 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.
Total return is calculated by subtracting the amount of the
Fund's net asset value per share at the beginning of a stated
period from the net asset value per share at the end of the
period (after giving effect to the reinvestment of dividends and
other distributions during the period), and dividing the result
by the net asset value (maximum offering price in the case of
Investor shares) per share at the beginning of the period.
Aggregate annual total return (expressed as a percentage)
for Investor shares of the Fund for the periods noted were:
Aggregate Total Return for the
------------------------------
Periods Ended October 31, 1994
Fund: 1 Year 5 Years 10 Years Inception
- - - ---- ---- ---- ---- ----
Equity Income Fund -- -- -- 0.91%
(9/14/94)
Inception date appears in parentheses following the aggregate
total return since inception.
Aggregate total return (expressed as a percentage) for Class
R shares of the Fund for the periods noted were:
Aggregate Total Return for the
------------------------------
Periods Ended October 31, 1994
Fund: 1 Year 5 Years 10 Years Inception
- - - ---- ---- ---- ---- ----
Equity Income Fund -- -- -- (0.50%)
(9/02/94)
Inception date appears in parentheses following the aggregate
total return since inception.
Performance information for the Fund may be compared, in
reports and promotional literature, to indexes including, but not
limited to: (i) the Morgan Stanley European Index; (ii) the
Standard & Poor's 500 Composite Stock Price Index, the Dow Jones
Industrial Average, or other appropriate unmanaged domestic or
foreign indices of performance of various types of investments so
that investors may compare the Fund's results with those of
indices widely regarded by investors as representative of the
securities markets in general; (iii) other groups of mutual funds
tracked by Lipper Analytical Services, a widely used independent
research firm which ranks mutual funds by overall performance,
investment objectives and assets, or tracked by other services,
companies, publications, or persons who rank mutual funds on
overall performance or other criteria; (iv) the Consumer Price
Index (a measure of inflation) to assess the real rate of return
from an investment in the Fund; and (v) products managed by a
universe of money managers with similar country allocation and
performance objectives. Unmanaged indices may assume the
reinvestment of dividends but generally do not reflect deductions
or administrative and management costs and expenses.
INFORMATION ABOUT THE FUND
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled
"General Information."
The 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.
The Fund will send annual and semi-annual financial
statements to all its shareholders.
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT, COUNSEL
AND INDEPENDENT AUDITORS
Mellon Bank, One Mellon Bank Center, Pittsburgh, PA 15258,
is the Fund's custodian and fund accountant. The Shareholders
Services Group, Inc., a subsidiary of First Data Corporation,
P.O. Box 9692, Providence, Rhode Island 02940-9830, is the Fund's
transfer and dividend disbursing agent. The Shareholder Service
Group, Inc. and Mellon Bank, as custodian, have no part in
determining the investment policies of the Fund or which
securities are to be purchased or sold by the Fund. Prior to
the effectiveness of the Investment Management Agreement for its
services as custodian and fund accountant, Mellon Bank was paid
an annual fee of $30,000 per portfolio, and, for all portfolios,
an annual administrative account maintenance fee of $10,000, an
annual on-line fee of $3,600, an asset-based fee of .02% of the
first $500 million of the Company's net assets and .01% of net
assets over $500 million, plus a specified transaction fee for
each transaction. For its services as transfer and dividend
disbursing agent, Mellon Bank was paid an annual fee of $13.00
per shareholder account, with a minimum monthly fee of $3,000 per
portfolio. Mellon Bank was reimbursed for certain out-of-pocket
expenses including wire-fees and postage, stationery and
telephone expenses.
Kirkpatrick & Lockhart, 1800 M Street, N.W., South Lobby -
9th Floor, Washington, D.C. 20036, has passed upon the legality
of the shares offered by the Prospectus and this Statement of
Additional Information.
KPMG Peat Marwick LLP was appointed by the Directors to
serve as the Fund's independent auditors for the year ending
October 31, 1995, providing audit services including (1)
examination of the annual financial statements (2) assistance,
review and consultation in connection with the SEC and (3) review
of the annual federal income tax return and the Pennsylvania
excise tax return filed on behalf of the Fund.
FINANCIAL STATEMENTS
The financial statements for the fiscal year ended October
31, 1994, including notes to the financial statements and
supplementary information and the Report of Independent Auditors,
are included in the Annual Report to shareholders. A copy of the
Annual Report accompanies this Statement of Additional
Information. The financial statements for the Annual Report are
incorporated herein by reference.
DREYFUS EUROPEAN FUND
INVESTOR SHARES AND CLASS R SHARES
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
March 1, 1995
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus of
the Dreyfus European Fund (formerly the Laurel European Fund) (the "Fund"),
dated March 1, 1995, as it may be revised from time to time. The Fund is a
separate portfolio of The Dreyfus/Laurel Funds, Inc. (formerly The Laurel
Funds, Inc.), an open-end, diversified management investment company (the
"Company"), known as a mutual fund. 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 the following numbers:
Call Toll Free 1-800-645-6561
In New York City -- Call 1-718-895-1206
On Long Island -- Call 794-5452
The Dreyfus Corporation ("Dreyfus") serves as the Fund's investment
manager.
Premier Mutual Fund Services, Inc. (the "Distributor") is the
distributor of the Fund's shares.
TABLE OF CONTENTS
Page
Investment Objective and Management Policies. . . . . . . . . B-2
Management of the Fund. . . . . . . . . . . . . . . . . . . . B-10
Management Arrangements . . . . . . . . . . . . . . . . . . . B-16
Purchase of Fund Shares . . . . . . . . . . . . . . . . . . . B-18
Distribution Plan . . . . . . . . . . . . . . . . . . . . . . B-18
Redemption of Fund Shares . . . . . . . . . . . . . . . . . . B-19
Shareholder Services. . . . . . . . . . . . . . . . . . . . . B-21
Determination of Net Asset Value. . . . . . . . . . . . . . . B-24
Dividends, Other Distributions and Taxes. . . . . . . . . . . B-24
Portfolio Transactions. . . . . . . . . . . . . . . . . . . . B-29
Performance Information . . . . . . . . . . . . . . . . . . . B-32
Information About the Fund. . . . . . . . . . . . . . . . . . B-33
Custodian, Transfer and Dividend Disbursing
Agent, Counsel and Independent Auditors . . . . . . . . . . B-33
Financial Statements. . . . . . . . . . . . . . . . . . . . . B-34
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The following information supplements and should be read in conjunction with
the section in the Fund's Prospectus entitled "Description of the Fund."
The Fund is the successor, through an acquisition of assets and
assumption of liabilities, to the Capstone European Fund ("Capstone
European") of the Capstone International Series Trust, a Massachusetts
business trust organized on May 9, 1986. The transfer of assets and
liabilities of Capstone European to the Fund occurred on November 1, 1993.
In exchange for the asset transfer, Capstone European received shares of the
Fund which Capstone European distributed to its shareholders. Each Capstone
European shareholder received a number of Fund shares equal to the number of
such shareholder's shares in Capstone European on the date of the exchange.
The Capstone European shares were canceled and Capstone European ceased
operations. The Prospectus and this SAI include performance and other
information with respect to Capstone European.
Portfolio Securities
Government Obligations. The Fund may invest in a variety of U.S.
Treasury obligations, which differ only in their interest rates, maturities
and times of issuance: (a) U.S. Treasury bills have a maturity of one year
or less, (b) U.S. Treasury notes have maturities of one to ten years, and
(c) U.S. Treasury bonds generally have maturities of greater than ten years.
In addition to U.S. Treasury obligations, the Fund may invest in
obligations issued or guaranteed by U.S. Government agencies and
instrumentalities which are supported by any of the following: (a) the full
faith and credit of the U.S. Treasury (such as Government National Mortgage
Association ("GNMA") participation certificates), (b) the right of the
issuer to borrow an amount limited to a specific line of credit from the
U.S. Treasury, (c) discretionary authority of the U.S. Government agency or
instrumentality, or (d) the credit of the instrumentality. (Examples of
agencies and instrumentalities are: Federal Land Banks, Federal Housing
Administration, Farmers Home Administration, Export-Import Bank of the
United States, Central Bank for Cooperatives, Federal Intermediate Credit
Banks, Federal Home Loan Banks, General Services Administration, Maritime
Administration, Tennessee Valley Authority, District of Columbia Armory
Board, Inter-American Development Bank, Asian-American Development Bank,
Student Loan Marketing Association, International Bank for Reconstruction
and Development and Federal National Mortgage Association ("FNMA")). No
assurance can be given that the U.S. Government will provide financial
support to such U.S. Government agencies or instrumentalities described in
(b), (c) and (d) in the future, other than as set forth above, since it is
not obligated to do so by law.
Commercial Paper. The Fund may invest in commercial paper issued in
reliance on the so-called "private placement" exemption from registration
afforded by Section 4(2) of the Securities Act of 1933 ("Section 4(2)
paper"). Section 4(2) paper is restricted as to disposition under the
federal securities laws and generally is sold to investors who agree that
they are purchasing the paper for an investment and not with a view to
public distribution. Any resale by the purchaser must be in an exempt
transaction. Section 4(2) paper is normally resold to other investors
through or with the assistance of the issuer or investment dealers who make
a market in Section 4(2) paper, thus providing liquidity. Pursuant to
guidelines established by the Company's Board of Directors, Dreyfus or the
Fund's sub-adviser, S.A.M. Finance, S.A. ("CCF S.A.M."), may determine that
Section 4(2) paper is liquid for the purposes of complying with the Fund's
investment restriction relating to investments in illiquid securities.
Repurchase Agreements. The Fund may enter into repurchase agreements
with U.S. Government securities dealers recognized by the Federal Reserve
Board, with member banks of the Federal Reserve System, or with such other
brokers or dealers that meet the credit guidelines of the Board of
Directors. In a repurchase agreement, the Fund buys a security from a seller
that has agreed to repurchase the same security at a mutually agreed upon
date and price. The Fund's resale price will be in excess of the purchase
price, reflecting an agreed upon interest rate. This interest rate is
effective for the period of time the Fund is invested in the agreement and
is not related to the coupon rate of the underlying security. Repurchase
agreements may also be viewed as a fully collateralized loan of money by the
Fund to the seller. The period of these repurchase agreements will usually
be short, from overnight to one week, and at no time will the Fund invest in
repurchase agreements for more than one year. The Fund will always receive
as collateral securities whose market value including accrued interest is,
and during the entire term of the agreement remains, at least equal to 100%
of the dollar amount invested by the Fund in each agreement, and the Fund
will make payment for such securities only upon physical delivery or upon
evidence of book entry transfer to the account of the Custodian. If the
seller defaults, the Fund might incur a loss if the value of the collateral
securing the repurchase agreement declines and might incur disposition costs
in connection with liquidating the collateral. In addition, if bankruptcy
proceedings are commenced with respect to the seller of a security which is
the subject of a repurchase agreement, realization upon the collateral by
the Fund may be delayed or limited. The Fund seeks to minimize the risk of
loss through repurchase agreements by analyzing the creditworthiness of the
obligors under repurchase agreements, in accordance with the credit
guidelines of the Company's Board of Directors. No more than 5% of the
Fund's net assets will be invested in repurchase agreements at any one time.
When-Issued Securities. New issues of U.S. Treasury and Government
securities are often offered on a when-issued basis. This means that
delivery and payment for the securities normally will take place
approximately 7 to 15 days after the date the buyer commits to purchase
them. The payment obligation and the interest rate that will be received on
securities purchased on a when-issued basis are each fixed at the time the
buyer enters into the commitment. The Fund will make commitments to purchase
such securities only with the intention of actually acquiring the
securities, but the Fund may sell these securities or dispose of the
commitment before the settlement date if it is deemed advisable as a matter
of investment strategy. Cash or marketable high-grade debt securities equal
to the amount of the above commitments will be segregated on the Fund's
records. For the purpose of determining the adequacy of these securities the
segregated securities will be valued at market. If the market value of such
securities declines, additional cash or securities will be segregated on the
Fund's records on a daily basis so that the market value of the account will
equal the amount of such commitments by the Fund.
Securities purchased on a when-issued basis and the securities held by
the Fund are subject to changes in market value based upon the public's
perception of changes in the level of interest rates. Generally, the value
of such securities will fluctuate inversely to changes in interest rates --
i.e., they will appreciate in value when interest rates decline and decrease
in value when interest rates rise. Therefore, if in order to achieve higher
interest income the Fund remains substantially fully invested at the same
time that it has purchased securities on a "when-issued" basis, there will
be a greater possibility of fluctuation in the Fund's net asset value.
When payment for when-issued securities is due, the Fund will meet its
obligations from then-available cash flow, the sale of segregated
securities, the sale of other securities and/or, although it would not
normally expect to do so, from the sale of the when-issued securities
themselves (which may have a market value greater or less than the Fund's
payment obligation). The sale of securities to meet such obligations carries
with it a greater potential for the realization of capital gains, which are
subject to federal income taxes.
Management Policies
The Fund engages, except as noted, in the following practices in
furtherance of its investment objective.
Loans of Fund Securities. The Fund has authority to lend its portfolio
securities provided (1) the loan is secured continuously by collateral
consisting of U.S. Government securities or cash or cash equivalents
adjusted daily to make a market value at least equal to the current market
value of these securities loaned; (2) the Fund may at any time call the loan
and regain the securities loaned; (3) the Fund will receive any interest or
dividends paid on the loaned securities; and (4) the aggregate market value
of securities loaned will not at any time exceed one-third of the total
assets of the Fund. In addition, it is anticipated that the Fund may share
with the borrower some of the income received on the collateral for the loan
or that it will be paid a premium for the loan. In determining whether to
lend securities, Dreyfus or CCF S.A.M. considers all relevant factors and
circumstances including the creditworthiness of the borrower.
Futures Contracts and Options. For the purpose of creating market
exposure for uncommitted cash balances, reducing transaction costs
associated with rebalancing the Fund, facilitating trading or seeking higher
investment returns when a futures contract is priced more attractively than
the underlying security or the index of the Fund, the Fund may enter into
futures contracts, options, and options on futures contracts with respect to
securities in which the Fund may invest and indices comprised of such
securities.
Futures contracts provide for the future sale by one party and purchase
by another party of a specified amount of a specific security or securities
index at a specified future time and at a specified price. Where the
underlying security is an index, no physical transfer of securities takes
place; rather, upon expiration of the contract, the parties settle by
exchanging cash in an amount equal to the difference between the contract
price and the closing value of the index at expiration, net of variation
margin previously paid. Futures contracts that are standardized as to
maturity date and underlying interest are traded on national futures
exchanges.
Futures traders are required to make a good faith margin deposit in
cash or government securities with a broker or custodian to initiate and
maintain open positions in futures contracts. A margin deposit is intended
to assure completion of the contract (delivery or acceptance of the
underlying security) if it is not terminated prior to the specified delivery
date. Minimal initial margin requirements are established by the futures
exchange and may be changed. Brokers may establish deposit requirements
which are higher than the exchange minimums.
After a futures contract position is opened, the value of the contract
is marked to market daily. If the futures contract price changes to the
extent that the margin on deposit does not satisfy margin requirements,
payment of additional "variation" margin will be required. Conversely,
change in the contract value may reduce the required margin, resulting in a
repayment of excess margin to the contract holder. Variation margin payments
are made to and from the futures broker for as long as the contract remains
open. The Fund expects to earn interest income on its margin deposits.
Options are of two basic types, either call or put options, and may
relate to a single security or a securities index or a futures contract. A
call option on a security permits the holder of the option to purchase the
underlying security at a specified price ("strike price") at any time during
the term of the option. Thus, in exchange for the premium paid to the
writer, the purchaser obtains the right to profit from any appreciation in
the value of the underlying security above the strike price. A put option
permits the holder to sell the underlying security to the writer at the
strike price at any time during the term of the contract. Thus, in exchange
for the premium paid to the writer, the purchaser is relieved of the risk of
a decline in the value of the underlying security below the strike price. An
option on a securities index gives the holder the right to receive cash from
the writer in an amount equal to the difference between the strike price of
the option and the value of the underlying index multiplied by a factor
established by the exchange upon which the option is traded. An option on a
futures contract gives the holder, in return for the premium paid to the
writer, the right to assume a position in the underlying futures contract at
a specified price at any time during the term of the option.
Although futures and options contracts by their terms call for actual
delivery or acceptance of the underlying securities, in most cases the
contracts are closed out before the settlement date without the making or
taking of delivery. Closing out an open futures position is done by taking
an opposite position ("buying" a contract which has previously been "sold,"
or "selling" a contract previously purchased) in an identical contract to
terminate the position. An option purchased may be closed out by selling the
option. An option written is closed out by purchasing an option identical to
that written. Brokerage commissions are incurred when futures and options
contracts are bought and sold.
Restrictions on the Use of Futures Contracts and Options. The Fund will
not enter into futures contracts to the extent that its outstanding
obligations under these contracts would exceed 25% of the Fund's total
assets. To the extent that the Fund enters into futures contracts and
options on futures positions that are not for bona fide hedging purposes (as
defined by the Commodity Futures Trading Commission), the aggregate initial
margin and premiums on these positions (excluding the amount by which
options are "in-the-money") may not exceed 5% of the Fund's net assets.
Transactions using options and futures contracts (other than options
that the Fund has purchased) expose the Fund to an obligation to another
party. The Fund will not enter into any such transactions unless it owns
either (1) an offsetting ("covered") position in securities or other options
or futures contracts or (2) cash, receivables and short-term debt securities
with a value sufficient at all times to cover its potential obligations not
covered as provided in (1) above. The Fund will comply with SEC guidelines
regarding cover for these instruments and, if the guidelines so require, set
aside cash, U.S. Government securities or other liquid, high-grade debt
securities in a segregated account with its custodian in the prescribed
amount.
All options purchased or written by the Fund must be listed on a
national securities or futures exchange or traded in the over-the-counter
("OTC") market. The Fund will not purchase or write OTC options if, as a
result of such transaction, the sum of (i) the market value of outstanding
OTC options purchased by the Fund, (ii) the market value of the underlying
securities covered by outstanding OTC call options written by the Fund, and
(iii) the market value of all other assets of the Fund that are illiquid or
are not otherwise readily marketable, would exceed 15% of the net assets of
the Fund, taken at market value. However, if an OTC option is sold by the
Fund to a primary U.S. Government securities dealer recognized by the
Federal Reserve Bank of New York and the Fund has the unconditional
contractual right to repurchase such OTC option from the dealer at a
predetermined price, then the Fund will treat as illiquid such amount of the
underlying securities as is equal to the repurchase price less the amount by
which the option is "in-the-money" (the difference between current market
value of the underlying security and the option's strike price). The
repurchase price with primary dealers is typically a formula price which is
generally based on a multiple of the premium received for the option plus
the amount by which the option is "in-the-money."
The Fund may write only covered options. A call option is covered if
the Fund owns the underlying security or a call option on the same security
with a lower strike price. A put option is covered if the Fund segregates
cash and/or short-term debt securities in an amount necessary to pay the
strike price of the option or purchases a put option on the same underlying
security with a higher strike price.
The Fund will not purchase puts, calls, straddles, spreads or any
combination thereof, if as a result of such purchase the value of the Fund's
aggregate investment in such securities would exceed 5% of the Fund's total
assets.
Risk Factors in Futures and Options Transactions. There can be no
assurance that a liquid secondary market will exist for any particular
futures or option contract at any specific time. Thus, it may not be
possible to close a futures or option position. In the event of adverse
price movements, the Fund would continue to be required to make daily cash
payments to maintain its required margin with respect to open futures or
written options positions. In such a situation, if the Fund has insufficient
cash, it may have to sell portfolio securities to meet daily margin
requirements at a time when it may be disadvantageous to do so. In addition,
the Fund may be required to make or take delivery of the securities
underlying futures contracts that it holds and options contracts that it has
written.
The Fund will seek to minimize the risk that it will be unable to close
out a futures contract by entering into only those futures contracts that
are listed on national futures exchanges and for which there appears to be a
liquid secondary market. Likewise, the Fund will enter into only those
option contracts that are listed on a national securities exchange or traded
in the OTC market for which there appears to be a liquid secondary market.
The risk of loss in trading futures contracts in some strategies can be
substantial, due both to the low margin deposits required, and the extremely
high degree of leverage involved in futures pricing. As a result, a
relatively small price movement in a futures contract may result in
immediate and substantial loss (as well as gain) to the investor. For
example, if at the time of purchase, 10% of the value of the futures
contract is deposited as margin, a subsequent 10% decrease in the value of
the futures contract would result in a total loss of margin deposit, before
any deduction for the transaction costs, if the account were then closed
out. A 15% decrease would result in a loss equal to 150% if the original
margin deposit for the contract were closed out. Thus, a purchase or sale of
a futures contract may result in losses in excess of the amount invested in
the contract. Options transactions are subject to similar risks. However,
because the Fund will not engage in futures or options transactions for
speculative purposes, Dreyfus and CCF S.A.M. believe that the Fund's risk of
loss is less than the risk of loss associated with speculative transactions.
Moreover, in the foregoing example, the Fund would presumably have sustained
comparable losses if, instead of the futures contract, it had invested in
the underlying security and sold it after the decline.
Utilization of futures contracts and options transactions by the Fund
does involve the risk of imperfect or no correlation where the securities
underlying futures and options contracts are different from the portfolio
securities being hedged. It is also possible that the Fund could both lose
money on futures and options contracts and also experience a decline in
value of its portfolio securities. There is also the risk of loss by the
Fund of margin deposits in the event of bankruptcy of a broker with whom the
Fund has an open position in a futures contract or option thereon.
Most futures exchanges limit the amount of fluctuation permitted in
futures contract prices during a single trading day. The daily limit
establishes the maximum amount that the price of a futures contract may vary
either up or down from the previous day's settlement price at the end of a
trading session. Once the daily limit has been reached in a particular type
of contract, no trades may be made on that day at a price beyond that limit.
The daily limit governs only price movement during a particular trading day
and therefore does not limit potential losses, because the limit may prevent
the liquidation of unfavorable positions. Futures contract prices have
occasionally moved to the daily limit for several consecutive trading days
with little or no trading, thereby preventing prompt liquidation of future
positions and subjecting some futures traders to substantial losses.
Futures and options contracts involve special tax considerations. See
"Dividends, Other Distributions and Taxes" for further information.
Investment Restrictions
The following limitations have been adopted by the Fund. The Fund may
not change any of these fundamental investment limitations without the
consent of: (a) 67% or more of the shares present at a meeting of
shareholders duly called if the holders of more than 50% of the outstanding
shares of the Fund are present or represented by proxy; or (b) more than 50%
of the outstanding shares of the Fund, whichever is less. The Fund may not:
1. Purchase any securities which would cause more than 25% of the value of
the Fund's total assets at the time of such purchase to be invested in
the securities of one or more issuers conducting their principal
activities in the same industry. (For purposes of this limitation, U.S.
Government securities, and state or municipal governments and their
political subdivisions are not considered members of any industry. ln
addition, this limitation does not apply to investments in domestic
banks, including U.S. branches of foreign banks and foreign branches of
U.S. banks).
2. Borrow money or issue senior securities as defined in the 1940 Act
except that (a) the Fund may borrow money in an amount not exceeding
one-third of the Fund's total assets at the time of such borrowings,
and (b) the Fund may issue multiple classes of shares. The purchase or
sale of futures contracts and related options shall not be considered
to involve the borrowing of money or issuance of senior securities.
3. Purchase with respect to 75% of the Fund's total assets securities of
any one issuer (other than securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities) if, as a result, (a)
more than 5% of the Fund's total assets would be invested in the
securities of that issuer, or (b) the Fund would hold more than 10% of
the outstanding voting securities of that issuer.
4. Make loans or lend securities, if as a result thereof more than
one-third of the Fund's total assets would be subject to all such
loans. For purposes of this limitation debt instruments and repurchase
agreements shall not be treated as loans.
5. Purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the Fund
from investing in securities or other instruments backed by real
estate, including mortgage loans, or securities of companies that
engage in real estate business or invest or deal in real estate or
interests therein).
6. Underwrite securities issued by any other person, except to the extent
that the purchase of securities and later disposition of such
securities in accordance with the Fund's investment program may be
deemed an underwriting.
7. Purchase or sell commodities except that the Fund may enter into
futures contracts and related options, forward currency contracts and
other similar instruments.
The Fund may, notwithstanding any other fundamental investment policy or
limitation, invest all of its investable assets in securities of a single
open-end management investment company with substantially the same
investment objectives, policies and limitations as the Fund.
The Fund has adopted the following additional non-fundamental
restrictions. These non-fundamental restrictions may be changed without
shareholder approval, in compliance with applicable law and regulatory
policy.
1. The Fund shall not sell securities short, unless it owns or has the
right to obtain securities equivalent in kind and amount to the
securities sold short, and provided that transactions in futures
contracts are not deemed to constitute selling short.
2. The Fund shall not purchase securities on margin, except that the Fund
may obtain such short-term credits as are necessary for the clearance
of transactions, and provided that margin payments in connection with
futures contracts and options on futures contracts shall not constitute
purchasing securities on margin.
3. The Fund shall not purchase oil, gas or mineral leases.
4. The Fund will not purchase or retain the securities of any issuer if
the officers or Directors of the Fund, its advisers, or managers,
owning beneficially more than one half of one percent of the securities
of such issuer, together own beneficially more than 5% of such
securities.
5. The Fund will not purchase securities of issuers (other than securities
issued or guaranteed by domestic or foreign governments or political
subdivisions thereof), including their predecessors, that have been in
operation for less than three years, if by reason thereof, the value of
the Fund's investment in securities would exceed 5% of the Fund's total
assets. For purposes of this limitation, sponsors, general partners,
guarantors and originators of underlying assets may be treated as the
issuer of a security.
6. The Fund will invest no more than 15% of the value of its net assets in
illiquid securities, including repurchase agreements with remaining
maturities in excess of seven days, time deposits with maturities in
excess of seven days and other securities which are not readily
marketable. For purposes of this limitation, illiquid securities shall
not include Section 4(2) paper and securities which may be resold under
Rule 144A under the Securities Act of 1933, provided that the Board of
Directors, or its delegate, determines that such securities are liquid
based upon the trading markets for the specific security.
7. The Fund may not invest in securities of other investment companies,
except as they may be acquired as part of a merger, consolidation or
acquisition of assets and except to the extent otherwise permitted by
the 1940 Act.
8. The Fund shall not purchase any security while borrowings representing
more than 5% of the Fund's total assets are outstanding.
9. The Fund will not purchase warrants if at the time of such purchase:
(a) more than 5% of the value of the Fund's assets would be invested in
warrants, or (b) more than 2% of the value of the Fund's assets would
be invested in warrants that are not listed on the New York or American
Stock Exchange (for purposes of this limitation, warrants acquired by
the Fund in units or attached to securities will be deemed to have no
value).
10. The Fund will not purchase puts, calls, straddles, spreads and any
combination thereof if by reason thereof the value of its aggregate
investment in such classes of securities would exceed 5% of its total
assets except that: (a) this limitation shall not apply to standby
commitments, and (b) this limitation shall not apply to the Fund's
transactions in futures contracts and related options.
11. The Fund will not invest more than 25% of the market value of its total
assets in securities issued or guaranteed by a single Western European
government or its agencies or instrumentalities.
As an operating policy, the Fund will not invest more than 25% of the value
of its total assets, at the time of such purchase in domestic banks,
including U.S. branches of foreign banks and foreign branches of U.S. banks.
The Company's Board of Directors may change this policy without shareholder
approval. Notice will be given to shareholders if this policy is changed by
the Board.
MANAGEMENT OF THE FUND
CONTROLLING SHAREHOLDER
Mellon Bank Corporation, a Pennsylvania corporation registered as a
bank holding company under the Bank Holding Company Act of 1956, as amended,
owned of record, through its direct and indirect subsidiaries, more than 25%
of the issued and outstanding voting shares of the Company, as of January
31, 1995, and is, as a consequence, deemed to be a controlling shareholder
of the Company as that term is defined under the 1940 Act. The address of
Mellon Bank Corporation is: Mellon Bank Corporation, Mutual Fund Department,
3 Mellon Bank Center, Pittsburgh, PA 15259.
PRINCIPAL SHAREHOLDERS
The following shareholder(s) owned 5% or more of the outstanding voting
shares of the Fund at January 31, 1995: Mutavie, 9 Rue Huymanns, 75006
Paris, France, 20% record; Elysees Ecrins, c/o CCF SAM Back Office, 37
Avenue Pierre 1er de Serbie, 75008 Paris, France, 14% record; Selection
Mondiale, c/o CCF SAM Back Office, 37 Avenue Pierre 1er de Serbie, 75008
Paris, France, 14% record; Selection Europe-SICAV, c/o CCF SAM Back Office,
37 Avenue Pierre 1er de Serbie, 75008 Paris, France, 10% record; Azur
Gestion Fund, c/o CCF SAM Back Office, 3 Avenue Pierre 1er de Serbie, 75008
Paris, France, 6% record; Rhone-Alpes Investment Fund, c/o CCF SAM Back
Office, 37 Pierre 1er de Serbie, 75008 Paris, France, 5% record; InvestNet
Corporation, 2 Mellon Bank Center, Pittsburgh, PA 15259, 18% record.
FEDERAL LAW AFFECTING MELLON BANK
The Glass-Steagall Act of 1933 prohibits national banks from engaging
in the business of underwriting, selling or distributing securities and
prohibits a member bank of the Federal Reserve System from having certain
affiliations with an entity engaged principally in that business. The
activities of Mellon Bank, N.A. ("Mellon Bank") in informing its customers
of, and performing, investment and redemption services in connection with
the Fund, and in providing services to the Fund as custodian and fund
accountant, as well as Dreyfus' investment advisory activities, may raise
issues under these provisions. Mellon Bank has been advised by counsel that
these activities are consistent with its statutory and regulatory
obligations.
Changes in either federal or state statutes and regulations relating to
the permissible activities of banks and their subsidiaries or affiliates, as
well as further judicial or administrative decisions or interpretations of
such future statutes and regulations, could prevent Mellon Bank or Dreyfus
from continuing to perform all or a part of the above services for its
customers and/or the Fund. If Mellon Bank or Dreyfus were prohibited from
serving the Fund in any of its present capacities, the Board of Directors
would seek an alternative provider(s) of such services.
DIRECTORS AND OFFICERS
The Company has a Board composed of thirteen Directors which supervises
the Company's investment activities and reviews contractual arrangements
with companies that provide the Fund with services. The following lists the
Directors and officers and their positions with the Company and their
present and principal occupations during the past five years. Each Director
who is an "interested person" of the Company (as defined in the Investment
Company Act of 1940, as amended (the "Act")) is indicated by an asterisk.
Each of the Directors also serves as a Trustee of The Dreyfus/Laurel Funds
Trust, The Dreyfus/Laurel Investment Series and The Dreyfus/Laurel Tax-Free
Municipal Funds (collectively "The Dreyfus/Laurel Funds").
o + RUTH MARIE ADAMS. Director of the Company; Professor of English and
Vice President Emeritus, Dartmouth College; Senator, United Chapters of
Phi Beta Kappa; Trustee, Woods Hole Oceanographic Institution. Age: 79
years old. Address: 1026 Kendal Lyme Road, Hanover, New Hampshire
03755.
o + FRANCIS P. BRENNAN. Chairman of the Board of Directors and Assistant
Treasurer of the Company; Director and Chairman, Massachusetts Business
Development Corp.; Director, Boston Mutual Insurance Company; Director
and Vice Chairman of the Board, Home Owners Federal Savings and Loan
(prior to May 1990). Age: 76 years old. Address: Massachusetts
Business Development Corp., One Liberty Square, Boston, Massachusetts
02109.
o * JOSEPH S. DiMARTINO. Director of the Company since February 1995.
Since January 1995, Mr. DiMartino has served as Chairman of the Board
for various funds in the Dreyfus Family of Funds. For more than five
years prior thereto, he was President, a director and, until August
1994, Chief Operating Officer of the Manager and Executive Vice
President and a director of Dreyfus Service Corporation, a wholly-owned
subsidiary of the Manager and, until August 1994, the Fund's
distributor. From August 1994 to December 31, 1994, he was a director
of Mellon Bank Corporation. Mr. DiMartino is a director and former
Treasurer of the Muscular Dystrophy Association; a trustee of Bucknell
University; and a director of the Noel Group, Inc. Mr. DiMartino is
also a Board member of 58 other funds in the Dreyfus Family of Funds.
He is 51 years old and his address is 200 Park Avenue, New York, New
York 10166.
o + JAMES M. FITZGIBBONS. Director of the Company; President and Director,
Amoskeag Company; Chairman, Howes Leather Company, Inc.; Director,
Fiduciary Trust Company; Chairman, CEO and Director, Fieldcrest-Cannon
Inc.; Director, Lumber Mutual Insurance Company; Director, Barrett
Resources, Inc. Age: 59 years old. Address: 40 Norfolk Road,
Brookline, Massachusetts 02167.
o * J. TOMLINSON FORT. Director of the Company; Partner, Reed, Smith, Shaw
& McClay (law firm). Age: 65 years old. Address: 204 Woodcock Drive,
Pittsburgh, Pennsylvania 15215.
o + ARTHUR L. GOESCHEL. Director of the Company; Director, Chairman of the
Board and Director, Rexene Corporation; Director, Calgon Carbon
Corporation; Director, National Picture Frame Corporation; Chairman of
the Board and Director, Tetra Corporation 1991-1993; Director, Medalist
Corporation 1992-1993. Age: 71 years old. Address: Way Hallow Road
and Woodland Road, Sewickley, Pennsylvania 15143.
o + KENNETH A. HIMMEL. Director of the Company; Former Director, The Boston
Company, Inc. and Boston Safe Deposit and Trust Company; President and
Chief Executive Officer, Himmel & Co., Inc.; Vice Chairman, Sutton
Place Gourmet, Inc. and Florida Hospitality Group; Managing Partner,
Himmel/MKDG, Franklin Federal Partners, Reston Town Center Associates
and Grill 23 & Bar. Age: 47 years old. Address: Himmel and Company,
Inc., 101 Federal Street, 22nd Floor, Boston, Massachusetts 02110.
o + ARCH S. JEFFERY. Director of the Company; Financial Consultant. Age:
76 years old. Address: 1817 Foxcroft Lane, Allison Park, Pennsylvania
15101.
o + STEPHEN J. LOCKWOOD. Director of Company; President and CEO, LDG
Management Company Inc.; CEO, LDG Reinsurance Underwriters, SRRF
Management Inc. and Medical Reinsurance Underwriters Inc. Age: 46 years
old. Address: 401 Edgewater Place, Wakefield, Massachusetts 01880.
o + ROBERT D. MCBRIDE. Director of Company; Director, Chairman and CEO,
McLouth Steel; Director, Salem Corporation. Director, SMS/Concast,
Inc. (1983-1991). Age: 66 years old. Address: 15 Waverly Lane,
Grosse Pointe Farms, Michigan 48236.
o + JOHN L. PROPST. Director of Company; Of Counsel, Reed, Smith, Shaw &
McClay (law firm). Age: 79 years old. Address: 5521 Dunmoyle Street,
Pittsburgh, Pennsylvania 15217.
o + JOHN J. SCIULLO. Director of the Company; Dean Emeritus and Professor
of Law, Duquesne University Law School; Director, Urban Redevelopment
Authority of Pittsburgh. Age: 62 years old. Address: 321 Gross
Street, Pittsburgh, Pennsylvania 15224
o + ROSLYN M. WATSON. Director of the Company; Principal, Watson Ventures,
Inc., prior to February, 1993; Real Estate Development Project Manager
and Vice President, The Gunwyn Company. Age: 44 years old. Address:
25 Braddock Park, Boston, Massachusetts 02116-5816.
# MARIE E. CONNOLLY. President and Treasurer of the Company, The
Dreyfus/Laurel Investment Series, The Dreyfus/Laurel Funds Trust and
The Dreyfus/Laurel Tax-Free Municipal Funds (since September 1994);
Vice President of the Company (March 1994 to September 1994);
President, Funds Distributor, Inc. (since 1992); Treasurer, Funds
Distributor, Inc. (July 1993 to April 1994); COO, Funds Distributor,
Inc. (since April 1994); Director, Funds Distributor, Inc. (since July
1992); President, COO and Director, Premier Mutual Fund Services, Inc.
(since April 1994); Senior Vice President and Director of Financial
Administration, The Boston Company Advisors, Inc. (December 1988 to May
1993). Address: One Exchange Place, Boston, Massachusetts 02109.
# FREDERICK C. DEY. Vice President of the Company, The Dreyfus/Laurel
Investment Series, The Dreyfus/Laurel Funds Trust and The
Dreyfus/Laurel Tax-Free Municipal Funds (since September 1994); Senior
Vice President, Premier Mutual Fund Services, Inc. (since August 1994);
Vice President, Funds Distributor, Inc. (since August 1994);
Fundraising Manager, Swim Across America (October 1993 to August 1994);
General Manager, Spring Industries (August 1988 to October 1993).
Address: Premier Mutual Fund Services, Inc., 200 Park Avenue New York,
New York 10166.
# ERIC B. FISCHMAN. Vice President of the Company, The Dreyfus/Laurel
Investment Series, The Dreyfus/Laurel Funds Trust and The
Dreyfus/Laurel Tax-Free Municipal Funds (since September 1994); Vice
President and Associate General Counsel, Premier Mutual Fund Services,
Inc. (Since August 1994); Vice President and Associate General Counsel,
Funds Distributor, Inc. (since August 1994); Staff Attorney, Federal
Reserve Board (September 1992 to June 1994); Summer Associate, Venture
Economics (May 1991 to September 1991); Summer Associate, Suffolk
County District Attorney (June 1990 to August 1990). Address: Premier
Mutual Fund Services, Inc., 200 Park Avenue, New York, New York 10166.
LESLIE M. GAYNOR. Assistant Treasurer of the Company, The Dreyfus/Laurel
Investment Series, The Dreyfus/Laurel Funds Trust and The
Dreyfus/Laurel Tax-Free Municipal Funds (since October 1994); Assistant
Treasurer/Manager of Treasury Services, Funds Distributor, Inc. (since
July 1994); Vice President, The Boston Company, Inc. (1989 to July
1994). Address: One Exchange Place, Boston, Massachusetts 02109.
RICHARD W. HEALEY. Vice President of the Company, The Dreyfus/Laurel
Investment Series, The Dreyfus/Laurel Tax-Free Municipal Funds Trust
and The Dreyfus/Laurel Funds Trust (since March 1994); Senior Vice
President, Funds Distributor, Inc. (since March 1993); Vice President,
The Boston Company Inc., (March 1993 to May 1993); Vice President of
Marketing, Calvert Group (1989 to March 1993). Address: One Exchange
Place, Boston, Massachusetts 02109.
# JOHN E. PELLETIER. Vice President and Secretary of the Company; The
Dreyfus/Laurel Investment Series, The Dreyfus/Laurel Funds Trust and
The Dreyfus/Laurel Tax-Free Municipal Funds (since September 1994);
Senior Vice President, General Counsel and Secretary, Funds
Distributor, Inc. (since April 1994); Senior Vice President, General
Counsel and Secretary, Premier Mutual Fund Services, Inc. (since August
1994); Counsel, The Boston Company Advisors, Inc. (February 1992 to
March 1994); Associate, Ropes & Gray (August 1990 to February 1992);
Associate, Sidley & Austin (June 1989 to August 1990). Address: One
Exchange Place, Boston, Massachusetts 02109.
___________________________________________________
* "Interested person" of the Company as defined in the 1940 Act.
o Member of the Audit Committee.
+ Member of the Nominating Committee.
# Officer also serves as an officer for other investment companies
advised by Dreyfus.
The officers and Directors of the Company as a group owned beneficially
less than 1% of the total shares of the Fund outstanding as of January 31,
1995.
No officer or employee of Premier (or of any parent, subsidiary or
affiliate thereof) receives any compensation from Dreyfus/Laurel for serving
as an officer or Director of Dreyfus/Laurel. In addition, no officer or
employee of The Dreyfus (or of any parent or subsidiary thereof) serves as
an officer or Director of Dreyfus/Laurel. The Dreyfus/Laurel Funds pay each
Director/Trustee who is not an officer or employee of (Premier or of any
parent, subsidiary or affiliate thereof) or of Dreyfus, $27,000 per annum
(and an additional $75,000 for the Chairman of the Board of
Directors/Trustees of the Dreyfus/Laurel Funds), $1,000 for each
Dreyfus/Laurel Fund meeting attended, and $750 for each Dreyfus/Laurel Fund
Audit Committee meeting attended, and reimburses each Director/Trustee for
travel and out-of-pocket expenses. For the fiscal year ended October 31,
1994 the fees for meetings and expenses totaled $4,325.
For the fiscal year ended October 31, 1994, the aggregate amount of
fees and expenses received by each Director from the Company and all other
Funds in The Dreyfus/Laurel Family of Funds for which such person is a Board
member were as follows:
<TABLE>
Pension of Compensation
Retirement From the
Benefits Estimated Company
Aggregate Accrued as Annual and Fund
Compensation Part of Benefits Complex Paid
From the the Company's Upon to Board
Name of Board Member Company # Expenses Retirement Member
- - - -------------------- ------------- ------------- ---------- --------------
<S> <C> <C> <C> <C>
Ruth Marie Adams $19,685 None None $ 37,500
Francis P. Brennan* 52,809 None None 112,500
Joseph S. DiMartino** N/A N/A N/A N/A
James M. Fitzgibbons 17,685 None None 31,750
J. Tomlinson Fort 7,500 None None 7,500
Arthur L. Goeschel 26,185 None None 32,500
Kenneth A. Himmel 18,685 None None 35,750
Arch S. Jeffrey 27,185 None None 33,500
Steven J. Lockwood 18,685 None None 35,750
Robert D. McBride 27,185 None None 33,500
John L. Propst 27,185 None None 33,500
John J. Sciullo 27,185 None None 33,500
Roslyn M. Watson 19,685 None None 36,750
# Amount does not include reimbursed expenses for attending Board meetings,
which amounted to $10,876 for the Company.
* Compensation of Francis Brennan includes $75,000 paid by The
Dreyfus/Laurel Fund Family to be Chairman of the Board.
** Joseph S. DiMartino was not a director of the Company as of October 31,
1994.
</TABLE>
MANAGEMENT ARRANGEMENTS
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Management of the Fund."
Management Agreement. Dreyfus serves as the investment manager for the
Fund pursuant to an Investment Management Agreement with the Company dated
April 4, 1994 ("Management Agreement"), transferred to Dreyfus as of October
17, 1994. Pursuant to the Management Agreement, Dreyfus provides, or
arranges for one or more third parties to provide, investment advisory,
administrative, and transfer agency services to the Fund. As investment
manager, Dreyfus manages the Fund by making investment decisions based on
the Fund's investment objectives, policies and restrictions. The Management
Agreement is subject to review and approval at least annually by the Board
of Directors.
The Management Agreement will continue from year to year provided that
a majority of the Directors who are not interested persons of the Company
and either a majority of all Directors or a majority of the shareholders of
the Fund approve its continuance. The Company may terminate the Agreement,
without prior notice to Dreyfus, upon the vote of a majority of the Board of
Directors or upon the vote of a majority of the Fund's outstanding voting
securities. Dreyfus may terminate the Management Agreement upon sixty (60)
days' written notice to the Company. The Management Agreement will
terminate immediately and automatically upon its assignment.
The following persons are officers and/or directors of Dreyfus: Howard
Stein, Chairman of the Board and Chief Executive Officer; W. Keith Smith,
Vice Chairman of the Board; Robert E. Riley, President, Chief Operating
Officer and a director; Lawrence S. Kash, Vice Chairman--Distribution and
director; Philip L. Toia, Vice Chairman--Operations and Administration; Paul
H. Snyder, Vice President and Chief Financial Officer; Daniel C. Maclean,
Vice President and General Counsel; Barbara E. Casey, Vice President--
Retirement Services; Henry D. Gottmann, Vice President--Retail; Elie M.
Genadry, Vice President--Wholesale; Mark N. Jacobs, Vice President--Fund
Legal and Compliance; Jeffrey N. Nachman, Vice President-Mutual Fund
Accounting; Diane M. Coffey, Vice-President--Corporate Communications;
Katherine C. Wickham, Vice President--Human Resources; Maurice Bendrihem,
Controller; and Mandell L. Berman, Frank V. Cahouet, Alvin E. Friedman,
Lawrence M. Greene, Julian M. Smerling and David B. Truman, Directors.
CCF S.A.M., 115 Avenue des Champs-Elysees, Paris, France 75008, serves
as investment sub-adviser for the Fund pursuant to a Sub-Advisory Agreement
among the Company, CCF S.A.M. and Mellon Bank dated August 31, 1993 ("Sub-
Advisory Agreement"). CCF S.A.M. is a wholly-owned subsidiary of Credit
Commercial de France ("CCF"), a French bank. Mellon Bank transferred its
interest in the Sub-Advisory Agreement to Dreyfus on October 17, 1994.
Under the Management and Sub-Advisory Agreements, CCF S.A.M. directs the
investments of substantially all of the Fund's assets in accordance with the
Fund's investment objective, policies and limitations. Dreyfus has overall
responsibility for general management of the Fund, and for compliance with
applicable law and the Fund's investment objective, policies and
limitations. Dreyfus also directs investments of all assets not assigned to
CCF S.A.M. For these services, the Fund pays a fee to Dreyfus, and Dreyfus
pays a portion thereof to CCF S.A.M., at the rates stated in the Prospectus.
The Sub-Advisory Agreement will continue from year to year provided
that a majority of the Directors who are not interested persons of the Fund
or Dreyfus and either a majority of all Directors or a majority of the
shareholders of each Fund approve their continuance. The Company may
terminate the Agreement, without prior notice to Dreyfus or CCF S.A.M., upon
the vote of a majority of the Directors who are not interested persons of
the Fund, or upon the vote of a majority of the Board of Directors who are
not interested persons of the Fund, or upon the vote of a majority of the
outstanding voting securities of the Fund on 60 days written notice to
Dreyfus or CCF S.A.M. Dreyfus or CCF S.A.M. may terminate the Sub-Advisory
Agreement upon 60 days notice to the other parties.
CCF International Finance Corp. ("CCIF"), a wholly-owned subsidiary of
CCF was the adviser to Capstone European prior to November 1, 1993, and
received an investment advisory fee equal to an annual rate of .65% of
Capstone European's average annual net assets. CCIF agreed to waive a
portion of its fees, thereby reducing the amount payable to CCIF to an
annual rate of .50% of Capstone European's average net assets.
For the last three fiscal years, the Fund has had the following
expenses:
For the Fiscal Year Ended October 31,
1994 1993 1992
Management fee (gross of waiver) $147,137 $77,215 $71,546
Expense Reimbursement from $ 28,625 -- --
investment manager
Management fees waived -- $17,819 --
For the fiscal year ended October 31, 1994, management fees in the
amount of $118,512 were paid by the Fund to Dreyfus and/or Mellon. For the
fiscal years ended October 31, 1993 and 1992, the management fee, except for
a portion of the management fee in the amount of $17,819 for the year ending
October 31, 1993, which was waived, was paid by Capstone European to CCF
International Finance Corp. ("CCIF").
Boston Safe Deposit & Trust Company, One Boston Place, Boston, MA 02109
("Boston Safe") serves as custodian and fund accountant for the Fund
pursuant to a Custodian Agreement and Fund Accountant Agreement with the
Fund, dated November 1, 1993. Prior to effectiveness of the Investment
Management Agreement for its services as custodian to the Fund, Boston Safe
was paid an annual fee of $20,000, a per security holding charge of $5.00
per month, a monthly global safekeeping charge based on asset level and
country invested in, and an additional charge of $20.00 for each third party
transaction. For its services as fund accountant, Boston Safe was paid an
annual fee of $20,000 and an annual asset-based fee of .12% of the first $10
million of the Fund's average daily net assets, .10% on the next $10 million
of average daily net assets and .08% on average daily net assets over $20
million. In addition, Boston Safe is reimbursed for out-of-pocket expenses
that include wire fees, telephone expenses, postage fees and courier
services.
PURCHASE OF FUND SHARES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "How to Buy Fund Shares."
The Distributor. The Distributor serves as the Fund's distributor
pursuant to an agreement which is renewable annually. The Distributor also
acts as distributor for the other funds in the Dreyfus Family of Funds and
for certain other investment companies.
Dreyfus TeleTransfer Privilege--Investor Shares. Dreyfus TeleTransfer
purchase orders may be made between the hours of 8:00 a.m. and 4:00 p.m.,
New York time, on any business day that The Shareholder Services Group,
Inc., the Fund's transfer and dividend disbursing agent (the "Transfer
Agent"), and the New York Stock Exchange ("NYSE") are open. Such purchases
will be credited to the shareholder's Fund account on the next bank business
day. To qualify to use the Dreyfus TeleTransfer Privilege, the initial
payment for purchase of shares must be drawn on, and redemption proceeds
paid to, the same bank and account as are designated on the Account
Application or Shareholder Services Form on file. If the proceeds of a
particular redemption are to be wired to an account at any other bank, the
request must be in writing and signature-guaranteed. See "Redemption of
Fund Shares--Dreyfus TeleTransfer Privilege--Investor Shares."
Reopening an Account. An investor may reopen an account with a minimum
investment of $100 without filing a new Account Application during the
calendar year the account is closed or during the following calendar year,
provided the information on the old Account Application is still applicable.
DISTRIBUTION PLAN
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Distribution Plan."
Investor shares are subject to fees for distribution and shareholder
services.
Distribution Plan--Investor Shares. The Securities and Exchange
Commission ("SEC") has adopted Rule 12b-1 under the 1940 Act ("Rule")
regulating the circumstances under which investment companies such as the
Company may, directly or indirectly, bear the expenses of distributing their
shares. The Rule defines distribution expenses to include expenditures for
"any activity which is primarily intended to result in the sale of fund
shares." The Rule, among other things, provides that an investment company
may bear such expenses only pursuant to a plan adopted in accordance with
the Rule. With respect to the Investor shares of the Fund, the Company has
adopted a Distribution Plan ("Plan"), and may enter into Selling Agreements
with Service Agents pursuant to its Plan.
Under the Plan, the Fund may spend annually up to 0.25% of its average
daily net assets attributable to Investor shares for costs and expenses
incurred in connection with the distribution of, and shareholder services
with respect to, the Fund's Investor shares.
The Plan provides that a report of the amounts expended under the Plan,
and the purposes for which such expenditures were incurred, must be made to
the Company's Directors for their review at least quarterly. In addition,
the Plan provides that it may not be amended to increase materially the
costs which the Fund may bear for distribution pursuant to the Plan without
approval of the Fund's shareholders, and that other material amendments of
the Plan must be approved by the vote of a majority of the Directors and of
the Directors who are not "interested persons" of the Company (as defined in
the 1940 Act) and who do not have any direct or indirect financial interest
in the operation of the Plan, cast in person at a meeting called for the
purpose of considering such amendments. The Plan is subject to annual
approval by the entire Board of Directors and by the Directors who are
neither interested persons nor have any direct or indirect financial
interest in the operation of the Plan, by vote cast in person at a meeting
called for the purpose of voting on the Plan. The Plan is terminable, as to
the Fund's Investor shares, at any time by vote of a majority of the
Directors who are not interested persons and have no direct or indirect
financial interest in the operation of the Plan or by vote of the holders of
a majority of the outstanding shares of such class of the Fund.
For the period from April 14, 1994 (inception date of Investor shares)
to October 31, 1994, the Fund paid the Distributor $47 pursuant to the Plan.
Until October 31, 1993 Capstone Asset Management Company served as
Capstone European's administrator and received a fee, computed daily and
payable monthly, at an annual rate of .35% of the Capstone European's
average net assets. Capstone Asset Management Company had agreed, to limit
its fees to a .25% annual rate. For the fiscal years ended October 31,
1993, and 1992, Capstone Asset Management Company received $65,577 and
$91,093, respectively, in administration fees from Capstone European.
From November 1, 1993 through September 23, 1994, Frank Russell
Investment Management Company acted as the Fund's Administrator and, prior
to April 4, 1994, was paid $1,270 by the Fund in Administrator's fees.
REDEMPTION OF FUND SHARES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "How to Redeem Fund
Shares."
Wire Redemption Privilege. By using this Privilege, the investor
authorizes the Transfer Agent to act on wire or telephone redemption
instructions from any person representing himself or herself to be the
investor, or a representative of the investor's Service Agent, and
reasonably believed by the Transfer Agent to be genuine. Ordinarily, the
Fund will initiate payment for shares redeemed pursuant to this Privilege on
the next business day after receipt if the Transfer Agent receives the
redemption request in proper form. Redemption proceeds will be transferred
by Federal Reserve wire only to the commercial bank account specified by the
investor on the Account Application or Shareholder Services Form.
Redemption proceeds, if wired, must be in the amount of $1,000 or more and
will be wired to the investor's account at the bank of record designated in
the investor's file at the Transfer Agent, if the investor's bank is a
member of the Federal Reserve System, or to a correspondent bank if the
investor's bank is not a member. Fees ordinarily are imposed by such bank
and usually are borne by the investor. Immediate notification by the
correspondent bank to the investor's bank is necessary to avoid a delay in
crediting the funds to the investor's bank account.
Investors with access to telegraphic equipment may wire redemption
requests to the Transfer Agent by employing the following transmittal code
which may be used for domestic or overseas transmissions:
Transfer Agent's
Transmittal Code Answer Back Sign
---------------- ----------------
144295 144295 TSSG PREP
Investors who do not have direct access to telegraphic equipment may
have the wire transmitted by contacting a TRT Cables operator at 1-800-654-
7171, toll free. Investors should advise the operator that the above
transmittal code must be used and should also inform the operator of the
Transfer Agent's answer back sign.
To change the commercial bank or account designated to receive
redemption proceeds, a written request must be sent to the Transfer Agent.
This request must be signed by each shareholder, with each signature
guaranteed as a described below under "Stock Certificates; Signatures."
Stock 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 NYSE Medallion
Signature Program, the Securities Transfer Agents Medallion Program
("STAMP") and the Stock Exchanges Medallion Program. Guarantees must be
signed by an authorized signatory of the guarantor and "Signature-
Guaranteed" must appear with the signature. The Transfer Agent may request
additional documentation from corporations, executors, administrators,
trustees or guardians, and may accept other suitable verification
arrangements from foreign investors, such as consular verification. For
more information with respect to signature-guarantees, please call one of
the telephone numbers listed on the cover.
Dreyfus TeleTransfer Privilege--Investor Shares. Investors should be
aware that if they have selected the Dreyfus TeleTransfer Privilege, any
request for a wire redemption will be effected as a Dreyfus TeleTransfer
transaction through the ACH system unless more prompt transmittal
specifically is requested. Redemption proceeds will be on deposit in the
investor's account at an ACH member bank ordinarily two business days after
receipt of the redemption request. See "Purchase of Fund Shares--Dreyfus
TeleTransfer Privilege--Investor Shares."
Redemption Commitment. The Fund has committed itself to pay in cash
all redemption requests by any shareholder of record of the Fund, 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 SEC. In the case of
requests for redemption in excess of such amount, the Board of Directors
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 this event, the securities would be valued in the same
manner as the Fund's portfolio is valued. If the recipient sold such
securities, brokerage charges would be incurred.
Suspension of Redemptions. The right of redemption may be suspended or
the date of payment postponed (a) during any period when the NYSE 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 SEC 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 SEC by order may permit to protect the
Fund's shareholders.
SHAREHOLDER SERVICES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Shareholder Services."
Fund Exchanges. Shares of any Class of the Fund may be exchanged for
shares of the respective Class of certain other funds advised or
administered by Dreyfus. 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. Exchanges for shares of funds that are offered without a sales
load will be made without a sales load.
B. Shares of funds purchased without a sales load may be exchanged
for shares of other funds sold with a sales load, and the
applicable sales load will be deducted.
C. Shares of funds purchased with a sales load may be exchanged
without a sales load for shares of other funds sold without a
sales load.
D. Shares of funds purchased with a sales load, shares of funds
acquired by a previous exchange from shares purchased with a sales
load and additional shares acquired through reinvestment of
dividends or other distributions of any such funds (collectively
referred to herein as "Purchased Shares") may be exchanged for
shares of other funds sold with a sales load (referred to herein
as "Offered Shares"), provided that, if the sales load applicable
to the Offered Shares exceeds the maximum sales load that could
have been imposed in connection with the Purchased Shares (at the
time the Purchased Shares were acquired), without giving effect to
any reduced loads, the difference will be deducted.
E. Shares of funds subject to a contingent deferred sales charge
("CDSC") that are exchanged for shares of another fund will be
subject to the higher applicable CDSC of the two funds, and for
purposes of calculating CDSC rates and conversion periods, if any,
will be deemed to have been held since the date the shares being
exchanged were initially purchased.
To accomplish an exchange under item D above, shareholders must notify
the Transfer Agent of their prior ownership of fund shares and their account
number.
Exchanges of Class R shares held by a Retirement Plan may be made only
between the investor's Retirement Plan account in one fund and such
investor's Retirement Plan account in another fund.
To establish a personal retirement plan by exchange, shares of the fund
being exchanged must have a value of at least the minimum initial investment
required for the fund into which the exchange is being made. For Dreyfus-
sponsored Keogh Plans, IRAs and SEP-IRAs with only one participant, the
minimum initial investment is $750. To exchange shares held in Corporate
Plans, 403(b)(7) Plans and IRAs set up under a Simplified Employee Pension
Plan ("SEP-IRAs") with more than one participant, the minimum initial
investment is $100 if the plan has at least $2,500 invested among the funds
in the Dreyfus Family of Funds. To exchange shares held in a personal
retirement plan account, the shares exchanged must have a current value of
at least $100.
Dreyfus Auto-Exchange Privilege. The Dreyfus Auto-Exchange Privilege
permits an investor to purchase, in exchange for shares of the Fund, shares
of the same Class of another fund in the Dreyfus Family of Funds. This
Privilege is available only for existing accounts. With respect to Class R
shares held by a Retirement Plan, exchanges may be made only between the
investor's Retirement Plan account in one fund and such investor's
Retirement Plan account in another fund. Shares will be exchanged on the
basis of relative net asset value as described above under "Fund Exchanges."
Enrollment in or modification or cancellation of this Privilege is effective
three business days following notification by the investor. An investor
will be notified if the investor's account falls below the amount designated
to be exchanged under this Privilege. In this case, an investor's account
will fall to zero unless additional investments are made in excess of the
designated amount prior to the next 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.
Fund exchanges and Dreyfus Auto-Exchange Privilege are available to
shareholders resident in any state in which shares of the fund being
acquired may legally be sold. Shares may be exchanged only between accounts
having identical names and other identifying designations.
Shareholder Services Forms and prospectuses of the other funds may be
obtained from the Distributor. The Fund reserves the right to reject any
exchange request in whole or in part. The Fund exchange service and Dreyfus
Auto-Exchange Privilege may be modified or terminated at any time upon
notice to shareholders.
Automatic Withdrawal. The Automatic Withdrawal Plan permits an
investor with a $5,000 minimum account to request withdrawal of a specified
dollar amount (minimum of $50) on either a monthly or quarterly basis.
Withdrawal payments are the proceeds from sales of Fund shares, not the
yield on the shares. If withdrawal payments exceed reinvested dividends and
distributions, the investor's shares will be reduced and eventually may be
depleted. There is a service charge of $.50 for each withdrawal check.
Automatic Withdrawal may be terminated at any time by the investor, the Fund
or the Transfer Agent. Shares for which certificates have been issued may
not be redeemed through the Automatic Withdrawal Plan.
Dreyfus Dividend Sweep. Dreyfus Dividend Sweep allows investors to
invest on the payment date their dividends or dividends and capital gain
distributions, if any, from the Fund in shares of the same Class of another
fund in the Dreyfus Family of Funds of which the investor is 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 by a fund may be invested without
imposition of a sales load in shares of other funds that are
offered without a sales load.
B. Dividends and distributions paid by a fund which does not charge a
sales load may be invested in shares of other funds sold with a
sales load, and the applicable sales load will be deducted.
C. Dividends and distributions paid by a fund which charges a sales
load may be invested in shares of other funds sold with a sales
load (referred to herein as "Offered Shares"), provided that, if
the sales load applicable to the Offered Shares exceeds the
maximum sales load charged by the fund from which dividends or
distributions are being swept, without giving effect to any
reduced loads, the difference will be deducted.
D. Dividends and distributions paid by a fund may be invested in
shares of other funds that impose a contingent deferred sales
charge ("CDSC") and the applicable CDSC, if any, will be imposed
upon redemption of such shares.
Corporate Pension/Profit-Sharing and Retirement Plans. The 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 SEP-IRAs and IRA "Rollover Accounts,"
and 403(b)(7) Plans. Plan support services also are available.
Investors who wish to purchase Fund shares in conjunction with a Keogh
Plan, a 403(b)(7) Plan or an IRA, including an SEP-IRA, may request from the
Distributor forms for adoption of such plans.
The entity acting as custodian for Keogh Plans, 403(b)(7) Plans or IRAs
may charge a fee, payment of which could require the liquidation of shares.
All fees charged are described in the appropriate form.
Shares may be purchased in connection with these plans only by direct
remittance to the entity acting as custodian. Purchases for these plans may
not be made in advance of receipt of funds.
The minimum initial investment for corporate plans, Salary Reduction
Plans, 403(b)(7) Plans and SEP-IRAs with more than one participant, is
$2,500 with no minimum on subsequent purchases. The minimum initial
investment for Dreyfus-sponsored Keogh Plans, IRAs, SEP-IRAs and 403(b)(7)
Plans with only one participant, is normally $750, with no minimum on
subsequent purchases. Individuals who open an IRA may also open a non-
working spousal IRA with a minimum investment of $250.
The investor should read the Prototype Retirement Plan and the
appropriate form of Custodial Agreement for further details on eligibility,
service fees and tax implications, and should consult a tax adviser.
DETERMINATION OF NET ASSET VALUE
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "How to Buy Fund Shares."
Restricted securities, as well as securities or other assets for which
market quotations are not readily available, or are not valued by a pricing
service approved by the Board of Directors, are valued at fair value as
determined in good faith by the Board of Directors. The Board of Directors
will review the method of valuation on a current basis. In making their
good faith valuation of restricted securities, the Directors generally will
take the following factors into consideration: restricted securities which
are securities of the same class of securities for which a public market
exists usually will be valued at market value less the same percentage
discount at which purchased. This discount will be revised periodically by
the Board of Directors if the Directors believe that it no longer reflects
the value of the restricted securities. Restricted securities not of the
same class as securities for which a public market exists usually will be
valued initially at cost. Any subsequent adjustment from cost will be based
upon considerations deemed relevant by the Board of Directors.
New York Stock Exchange Closings. The holidays (as observed) on which
the NYSE is closed currently are: New Year's Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and
Christmas.
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Dividends, Other
Distributions and Taxes."
The term "regulated investment company" does not imply the supervision
of management or investment practices or policies by any government agency.
To qualify as a regulated investment company ("RIC"), the Fund (1) must
distribute to its shareholders each year at least 90% of its investment
company taxable income (generally consisting of net investment income, net
short-term capital gains and net gains from certain foreign currency
transactions), (2) must derive at least 90% of its annual gross income from
specified sources ("Income Requirement"), (3) must derive less than 30% of
its annual gross income from gain on the sale or disposition of any of the
following that are held for less than three months -- (i) securities,
(ii) non-foreign-currency options and futures and (iii) foreign currencies
(or foreign currency options, futures and forward contracts) that are not
directly related to the Fund's principal business of investing in securities
(or options and futures with respect thereto) ("Short-Short Limitation") --
and (4) must meet certain asset diversification and other requirements.
Accordingly, the Fund may be restricted in the selling of securities held
for less than three months.
Any dividend or other distribution paid shortly after an investor's
purchase may have the effect of reducing the net asset value of the shares
below the cost of his investment. Such a dividend or other distribution
would be a return on investment in an economic sense, although taxable as
stated in the Fund's Prospectus. In addition, the Code provides that if a
shareholder holds shares of the Fund for six months or less and has received
a capital gain distribution with respect to those shares, any loss incurred
on the sale of those shares will be treated as a long-term capital loss to
the extent of the capital gain distribution received.
Dividends and other distributions declared by the Fund in October,
November or December of any year and payable to shareholders of record on a
date in that month any of those months are deemed to have been paid by the
Fund and received by the shareholders on December 31 of that year if the
distributions are paid by the Fund during the following January.
Accordingly, those distributions will be taxed to shareholders for the year
in which that December 31 falls.
A portion of the dividends paid by the Fund, whether received in cash
or reinvested in additional Fund shares, may be eligible for the dividends-
received deduction allowed to corporations. The eligible portion may not
exceed the aggregate dividends received by the Fund from U.S. corporations.
However, dividends received by a corporate shareholder and deducted by it
pursuant to the dividends-received deduction are subject indirectly to the
alternative minimum tax.
Dividends and interest received by the Fund may be subject to income,
withholding or other taxes imposed by foreign countries and U.S. possessions
that would reduce the yield on its securities. Tax conventions between cer-
tain countries and the United States may reduce or eliminate these foreign
taxes, however, and many foreign countries do not impose taxes on capital
gains in respect of investments by foreign investors. If more than 50% of
the value of the Fund's total assets at the close of its taxable year
consist of securities of foreign corporations, it will be eligible to, and
may, file an election with the Internal Revenue Service that will enable its
shareholders, in effect, to receive the benefit
of the foreign tax credit with respect to any foreign or U.S. possessions'
income taxes paid by it. Pursuant to the election, the Fund would treat
those taxes as dividends paid to its shareholders and each shareholder would
be required to (1) include in gross income, as treat as paid by him or her,
his or her proportionate share of those taxes, (2) treat his or her share of
those taxes and of any dividend paid by the Fund that represents income from
foreign or U.S. possession sources as his or her own income from those
sources and (3) either deduct the taxes deemed paid by him or her in
computing his or her taxable income or, alternatively, use the foregoing
information in calculating the foreign tax credit against his or her federal
income tax. No deductions for foreign taxes may be claimed by a shareholder
who does not itemize deductions. Generally, a credit for foreign taxes may
not exceed the shareholder's federal income tax attributable to his total
foreign source taxable income. The Fund will report to its shareholders
shortly after each taxable year their respective shares of the income from
sources within, and paid to, foreign countries and U.S. possessions if it
makes this election.
The Fund may invest in the stock of foreign corporations that are
classified as "passive foreign investment companies" ("PFICs"). In general,
a foreign corporation is classified as a PFIC if at least one-half of its
assets constitute investment-type assets or 75% or more of its gross income
is passive income. An "excess distribution" received with respect to a
PFIC's stock and gain from the disposition of such stock will be treated as
having been realized ratably over the entire period during which the Fund
held the PFIC stock. The Fund itself will be subject to tax on that
portion, if any, of the excess distribution and gain that is allocated to
the portion of that holding period in prior taxable years (and an interest
factor will be added to the tax, as if the tax had actually been payable in
those prior taxable years), even if the Fund distributes the corresponding
income to its shareholders. All excess distributions and such gains are
taxable as ordinary income.
The Fund may elect alternative tax treatment with respect to any PFIC
stock it holds. Under the election, the Fund generally would be required to
include in its gross income each year its share of the PFIC earnings and
capital gains of a PFIC for the year regardless of whether any distributions
are received from the PFIC, and the special rules in the preceding paragraph
would not apply; the amount so included in the Fund's income would have to
be distributed to the Fund's shareholders to satisfy the Distribution
Requirement and to avoid imposition of the Excise Tax. In most instances it
will be very difficult, if not impossible, to make this election because of
certain requirements thereof.
Pursuant to proposed regulations, open-end RICs such as the Fund would
be entitled to elect to "mark to market" their stock in certain PFICs.
"Marking to Market", in this context, means recognizing as gain for each
taxable year the excess, as of the end of that year, of the fair market
value of the PFIC's stock over the adjusted basis in that stock (including
mark-to-market gain for each prior year for which an election was in
effect.)
In addition, gain realized from the sale or other disposition of PFIC
securities may be treated as ordinary income under Section 1291 of the Code.
Income from foreign currencies (except certain gains therefrom that may
be excluded by future regulations), and income from transactions in options,
futures and forward contracts derived by the Fund with respect to its
business of investing in securities or foreign currencies, will qualify as
permissible income under the Income Requirement. However, income from the
disposition of options and futures contracts (other than those on foreign
currencies) will be subject to the Short-Short Limitation if they are held
for less than three months. Income from the disposition of foreign
currencies, and options, futures and forward contracts thereon, that are not
directly related to the Fund's principal business of investing in securities
(or options and futures with respect to securities) also will be subject to
the Short-Short Limitation if they are held for less than three months.
Gains and losses attributable to fluctuations in foreign currency
exchange rates that occur between the time the Fund accrues dividends,
interest or other receivables, or expenses or other liabilities, denominated
in a foreign currency and the time that Fund actually collects the
receivables or pays the liabilities generally are treated as ordinary income
or ordinary loss. Similarly, on the disposition of a debt security
denominated in a foreign currency, or of an option or forward contract on a
foreign currency, gains or losses attributable to fluctuations in the value
of foreign currency between the date of acquisition of the security, option,
or contract and the date of disposition also are treated as ordinary gain or
loss. These gains or losses may increase or decrease the amount of the
Fund's investment company taxable income to be distributed to its
shareholders.
If the Fund satisfies certain requirements, any increase in value of a
position that is part of a "designated hedge" will be offset by any decrease
in value (whether realized or not) of the offsetting hedging position during
the period of the hedge for purposes of determining whether the Fund
satisfies the Short-Short Limitation. Thus, only the net gain (if any) from
the designated hedge will be included in gross income for purposes of that
limitation. The Fund will consider whether it should seek to qualify for
this treatment for its hedging transactions. To the extent the Fund does
not so qualify, it may be forced to defer the closing out of certain
options, futures and forward contracts beyond the time when it otherwise
would be advantageous to do so, in order for the Fund to qualify as a RIC.
Ordinarily, gains and losses realized from portfolio transactions will
be treated as capital gain and loss. However, a portion of the gain or loss
from the disposition of foreign currencies and non-U.S. dollar denominated
securities (including debt instruments, certain financial forward, futures
and option contracts and certain preferred stock) may be treated as ordinary
income or loss under Section 988 of the Code. In addition, all or a portion
of any gain realized from the sale or other disposition of certain market
discount bonds will be treated as ordinary income. Moreover, all or a
portion of the gain realized from engaging in "conversion transactions" may
be treated as ordinary income under Section 1258. "Conversion transactions"
are defined to include certain forward, futures, option and straddle
transactions, transactions marketed or sold to produce capital gains, or
transactions described in Treasury regulations to be issued in the future.
Under Section 1256 of the Code, any gain or loss realized by the Fund
from certain futures and forward contracts and options transactions will be
treated as 60% long-term capital gain or loss and 40% short-term capital
gain or loss. Gain or loss will arise upon exercise or lapse of such
contracts and options as well as from closing transactions. In addition,
any such contracts or options remaining unexercised at the end of the Fund's
taxable year will be treated as sold for their then fair market value (a
process known as "marking to market"), resulting in additional gain or loss
to the Fund characterized in the manner described above.
Offsetting positions held by the Fund involving certain contracts or
options may constitute "straddles." "Straddles" are defined to include
"offsetting positions" in actively traded personal property. The tax
treatment of "straddles" is governed by Sections 1092 and 1258 of the Code,
which, in certain circumstances, override or modify Sections 1256 and 988.
As such, all or a portion of any short-term or long-term capital gain from
certain "straddle" transactions may be recharacterized to ordinary income.
If the Fund were treated as entering into "straddles" by reason of its
engaging in certain forward contracts or options transactions, such
"straddles" would be characterized as "mixed straddles" if the forward
contracts or options transactions comprising a part of such "straddles" were
governed by Section 1256. The Fund may make one or more elections with
respect to "mixed straddles." Depending on which election is made, if any,
the results to the Fund may differ. If no election is made, then to the
extent the "straddle" and conversion transactions rules apply to positions
established by the Fund, losses realized by the Fund will be deferred to the
extent of unrealized gain in the offsetting position. Moreover, as a result
of the "straddle" rules, short-term capital loss on "straddle" positions may
be recharacterized as long-term capital loss, and long-term capital gains
may be treated as short-term capital gains or ordinary income.
Investment by the Fund in securities issued or acquired at a discount
(for example, zero coupon securities) or providing for deferred interest or
for payment of interest in the form of additional obligations (for example,
"pay-in-kind" or "PIK" securities) could, under special tax rules, affect
the amount, timing and character of distributions to shareholders by causing
the Fund to recognize income prior to the receipt of cash payments. For
example, the Fund could be required to take into gross income annually a
portion of the discount (or deemed discount) at which the securities were
issued and to distribute such income in order to maintain its qualification
for treatment as a RIC. In such case, the Fund may have to dispose of
securities it might otherwise have continued to hold in order to generate
cash to satisfy these distribution requirements.
State and Local Taxes. Depending upon the extent of the Fund's
activities in states and localities in which its offices are maintained, in
which its agents or independent contractors are located, or in which it is
otherwise deemed to be conducting business, the Fund may be subject to the
tax laws of such states or localities. Shareholders are advised to consult
their tax advisers concerning the application of state and local taxes.
Foreign Shareholders - U.S. Federal Income Taxation. U.S. federal
income taxation of a shareholder who, as to the United States, is a
non-resident alien individual, a foreign trust or estate, a foreign
corporation or a foreign partnership (a "foreign shareholder"), depends on
whether the income from the Fund is "effectively connected" with a U.S.
trade or business carried on by the shareholder, as discussed generally
below. Special U.S. federal income tax rules that differ from those
described below may apply to certain foreign persons who invest in the Fund.
For example, the tax consequences to a foreign shareholder entitled to claim
the benefits of an applicable tax treaty may be different from those
described below. Foreign shareholders are advised to consult their own tax
advisers with respect to the particular tax consequences to them of an
investment in the Fund.
Foreign Shareholders - Income Not Effectively Connected. If the income
from the Fund is not effectively connected with a U.S. trade or business
carried on by the foreign shareholder, distributions of investment company
taxable income generally will be subject to a U.S. federal withholding tax
of 30% (or lower treaty rate) on the gross amount of the distribution.
Foreign shareholders also may be subject to U.S. federal withholding tax on
income resulting from any election by the Fund to treat foreign taxes paid
by it as paid by its shareholders (see discussion above), but foreign
shareholders will not be able to claim a credit or deduction for the foreign
taxes treated as having been paid by them.
Capital gains realized by foreign shareholders on the sale of Fund
shares and distributions to them of net capital gain, as well as amounts
retained by the Fund that are designated as undistributed capital gains,
generally will not be subject to U.S. federal income tax unless the foreign
shareholder is a non-resident alien individual and is physically present in
the United States for more than 182 days during the taxable year. However,
this rule only applies in exceptional cases, because any individual present
in the United States for more than 182 days during the taxable year
generally is treated as a resident for U.S. federal income tax purposes on
his worldwide income at the graduated rates applicable to U.S. citizens,
rather than the 30% U.S. federal withholding tax rate. In the case of
certain foreign shareholders, the Fund may be required to withhold U.S.
Federal income tax at a rate of 31% of capital gain distributions and of the
gross proceeds from a redemption of Fund shares unless the shareholder
furnishes the Fund with a certificate regarding the shareholder's foreign
status.
Foreign Shareholders - Effectively Connected Income. If income from the
Fund is effectively connected with a U.S. trade or business carried on by a
foreign shareholder, then all distributions to that shareholder and any
gains realized by that shareholder on the disposition of the Fund shares
will be subject to U.S. federal income tax at the graduated rates applicable
to U.S. citizens and domestic corporations, as the case may be. Foreign
shareholders also may be subject to the branch profits tax.
Foreign Shareholders - Estate Tax. Foreign individuals generally are
subject to U.S. federal estate tax on their U.S. situs property, such as
shares of the Fund, that they own at the time of their death. Certain
credits against that tax and relief under applicable tax treaties may be
available.
Pennsylvania Personal Property Tax Exemption. The Company has obtained
a Certificate of Authority to do business as a foreign corporation in
Pennsylvania. In the opinion of counsel, shares of The Company are exempt
from Pennsylvania personal property taxes.
PORTFOLIO TRANSACTIONS
All portfolio transactions of the Fund are placed on behalf of the Fund
by Dreyfus or CCF S.A.M. Debt securities purchased and sold by the Fund are
generally traded on a net basis (i.e., without commission) through dealers
acting for their own account and not as brokers, or otherwise involve
transactions directly with the issuer of the instrument. This means that a
dealer (the securities firm or bank dealing with the Fund) makes a market
for securities by offering to buy at one price and sell at a slightly higher
price. The difference between the prices is known as a spread. Other
portfolio transactions may be executed through brokers acting as agent. The
Fund will pay a spread or commissions in connection with such transactions.
Dreyfus or CCF S.A.M. uses its best efforts to obtain execution of portfolio
transactions at prices which are advantageous to the Fund and at spreads and
commission rates, if any, which are reasonable in relation to the benefits
received. Dreyfus or CCF S.A.M. also places transactions for other accounts
that it provides with investment advice.
Brokers and dealers involved in the execution of portfolio transactions
on behalf of the Fund are selected on the basis of their professional
capability and the value and quality of their services. In selecting brokers
or dealers, Dreyfus or CCF S.A.M. will consider various relevant factors,
including, but not limited to, the size and type of the transaction; the
nature and character of the markets for the security to be purchased or
sold; the execution efficiency, settlement capability, and financial
condition of the broker-dealer; the broker-dealer's execution services
rendered on a continuing basis; and the reasonableness of any spreads (or
commissions, if any). Any spread, commission, fee or other remuneration paid
to an affiliated broker-dealer is paid pursuant to the Company's procedures
adopted in accordance with Rule 17e-1 of the 1940 Act.
Brokers or dealers may be selected who provide brokerage and/or
research services to the Fund and/or other accounts over which Dreyfus or
CCF S.A.M. or their affiliates exercise investment discretion. Such services
may include advice concerning the value of securities; the advisability of
investing in, purchasing or selling securities; the availability of
securities or the purchasers or sellers of securities; furnishing analyses
and reports concerning issuers, industries, securities, economic factors and
trends, portfolio strategy and performance of accounts; and effecting
securities transactions and performing functions incidental thereto (such as
clearance and settlement).
The receipt of research services from broker-dealers may be useful to
Dreyfus or CCF S.A.M. in rendering investment management services to the
Fund and/or its other clients; and, conversely, such information provided by
brokers or dealers who have executed transaction orders on behalf of other
clients of CCF S.A.M. may be useful to these organizations in carrying out
their obligations to the Fund. The receipt of such research services does
not reduce these organizations' normal independent research activities;
however, it enables these organizations to avoid the additional expenses
which might otherwise be incurred if these organizations were to attempt to
develop comparable information through their own staffs.
The Company's Board of Directors periodically reviews Dreyfus' or CCF
S.A.M.'s performance of its responsibilities in connection with the
placement of portfolio transactions on behalf of the Fund and reviews the
prices paid by the Fund over representative periods of time to determine if
they are reasonable in relation to the benefits to the Fund.
Although Dreyfus and CCF S.A.M. manage other accounts in addition to
the Fund, investment decisions for the Fund are made independently from
decisions made for these other accounts. It sometimes happens that the same
security is held by more than one of the accounts managed by Dreyfus and CCF
S.A.M. Simultaneous transactions may occur when several accounts are managed
by the same investment manager, particularly when the same investment
instrument is suitable for the investment objective of more than one
account.
When more than one account is simultaneously engaged in the purchase or
sale of the same investment instrument, the prices and amounts are allocated
in accordance with a formula considered by Dreyfus or CCF S.A.M. to be
equitable to each account. In some cases this system could have a
detrimental effect on the price or volume of the investment instrument as
far as the Fund is concerned. In other cases, however, the ability of the
Fund to participate in volume transactions will produce better executions
for the Fund. While the Directors will continue to review simultaneous
transactions, it is their present opinion that the desirability of retaining
Dreyfus or CCF S.A.M. as investment manager or sub-investment manager to the
Fund outweighs any disadvantages that may be said to exist from exposure to
simultaneous transactions.
Brokerage commissions paid by the Fund on portfolio transactions during
the fiscal year ended October 31, 1994 totaled $21,305, which represented
0.20% of the Fund's total assets. Of that total, payments were made to the
following:
% of Total % of Total
Brokerage Transactions Involving
Broker Payments Commissions Payment of Commission
- - - ------ ------- ----------- ----------------------
CCF $100 0.5% 0.5%
Brokerage commissions paid by Capstone European on portfolio
transactions during the fiscal year ended October 31, 1993 totaled $65,168,
which represented 0.62% of Capstone European's total assets. Of that total,
payments were made to the following affiliates of CCIF:
% of Total % of Total
Brokerage Transactions Involving
Broker Payments Commissions Payment of Commission
- - - ------- -------- ----------- ----------------------
CCF-Frankfurt $12,606 19.34% 14.95%
CCF-Geneva $ 3,918 6.01% 6.31%
Elysees Bourse $10,040 15.41% 14.68%
Brokerage commissions paid by Capstone European on portfolio
transactions during the fiscal year ended October 31, 1992 totaled $31,228,
which represented 0.17% of Capstone European's total assets. Of that total,
payments were made to the following affiliates of CCIF, Capstone European's
previous adviser:
% of Total % of Total
Brokerage Transactions Involving
Broker Payments Commissions Payment of Commission
- - - ------ -------- ----------- ----------------------
CCF-Geneva $4,825 15.45% 15.20%
CCF-Frankfurt $4,690 15.02% 15.46%
Elysees Bourse $3,849 12.32% 13.36%
CCF Milan $2,067 6.62% 5.66%
The percentage of Capstone European's aggregate dollar amount of
transactions involving the payment of commissions effected through
affiliates for the fiscal years ended October 31, 1993 and 1992 was 35.9%
and 49.4%, respectively. During the fiscal years ended October 31, 1993 and
1992, Capstone European also executed trades in the amount of $107,436 and
$50,708, respectively, in which a "mark-up" (the dealers' profit) was
included in the price of the securities, which trades are excluded when
calculating average commission rates.
Portfolio Turnover. The portfolio turnover rate for the Fund is
calculated by dividing the lesser of the Fund's annual sales or purchases of
portfolio securities (exclusive of purchases and sales of securities whose
maturities at the time of acquisition were one year or less) by the monthly
average value of securities in the Fund during the year. The portfolio
turnover rates for the last two years for the Fund were:
Fiscal Year Ended October 31,
1994 1993
---- ----
46% 12%
PERFORMANCE INFORMATION
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Performance
Information."
Average annual total return is calculated by determining the ending
redeemable value of an investment purchased with a hypothetical $1,000
payment made at the beginning of the period (assuming the reinvestment of
dividends and other 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.
Total return is calculated by subtracting the amount of the Fund's net
asset value per share at the beginning of a stated period from the net asset
value per share at the end of the period (after giving effect to the
reinvestment of dividends and other distributions during the period), and
dividing the result by the net asset value per share at the beginning of the
period.
Aggregate total return (expressed as a percentage) for Investor shares
of the Fund for the period from April 14, 1994 (inception date of Investor
shares) to October 31, 1994 was 6.11%.
Average annual total return (expressed as a percentage) for Class R
shares of the Fund for the periods noted were:
Annualized Total Return for the
-------------------------------
Periods Ended October 31, 1994
1 Year 5 Years 10 Years Inception
------ ------- -------- ---------
European Fund 5.97% 9.14% -- 5.09%
(1/5/87)
Inception date appears in parenthesis following the annual total return
since inception.
Performance information for the Fund may be compared, in reports and
promotional literature, to indexes including, but not limited to: (i) the
Morgan Stanley European Index; (ii) the Standard & Poor's 500 Composite
Stock Price Index, the Dow Jones Industrial Average, or other appropriate
unmanaged domestic or foreign indices of performance of various types of
investments so that investors may compare the Fund's results with those of
indices widely regarded by investors as representative of the securities
markets in general; (iii) other groups of mutual funds tracked by Lipper
Analytical Services, a widely used independent research firm which ranks
mutual funds by overall performance, investment objectives and assets, or
tracked by other services, companies, publications, or persons who rank
mutual funds or overall performance or other criteria; (iv) the Consumer
Price Index (a measure of inflation) to assess the real rate of return from
an investment in the Fund; and (v) products managed by a universe of money
managers with similar country allocation and performance objectives.
Unmanaged indices may assume the reinvestment of dividends but generally do
not reflect deductions or administrative and management costs and expenses.
INFORMATION ABOUT THE FUND
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "General Information."
Each Fund share has one vote and, when issued and paid for in
accordance with the terms of the offering, is fully paid and non-assessable.
Fund shares have no preemptive or subscription rights and are freely
transferable.
The Fund will send annual and semi-annual financial statements to all
its shareholders.
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT, COUNSEL
AND INDEPENDENT AUDITORS
Mellon Bank, One Mellon Bank Center, Pittsburgh, PA 15258, is the
Fund's custodian. The Shareholder Services Group, Inc., a subsidiary of
First Data Corporation, P.O. Box 9671, Providence, Rhode Island 02940-9671,
is the Fund's transfer and dividend disbursing agent. The Shareholder
Services Group, Inc. and Mellon Bank as custodian, have no part in
determining the investment policies of the Fund or which securities are to
be purchased or sold by the Fund.
Kirkpatrick & Lockhart, 1800 M Street, N.W., South Lobby - 9th Floor,
Washington, D.C. 20036, has passed upon the legality of the shares offered
by the Prospectus and this Statement of Additional Information.
KPMG Peat Marwick LLP was appointed by the Directors to serve as the
Fund's independent auditors for the year ending October 31, 1995, providing
audit services including (1) examination of the annual financial statements,
(2) assistance, review and consultation in connection with the SEC and (3)
review of the annual federal income tax return and the Pennsylvania excise
tax return filed on behalf of the Fund. Tait, Weller & Baker served as the
Fund's independent auditors for the year ended October 31, 1993.
FINANCIAL STATEMENTS
The financial statements for the fiscal year ended October 31, 1994,
including notes to the financial statements and supplementary information
and the Report of Independent Auditors are included in the Annual Report to
shareholders. A copy of the Annual Report accompanies this Statement of
Additional Information. The financial statements from the Annual Report are
incorporated herein by reference.
STATEMENT OF ADDITIONAL INFORMATION
March 1, 1995
THE DREYFUS/LAUREL FUNDS, INC.
200 Park Avenue
New York, NY 10166
For information call 1-800-548-2868
The Funds listed below are portfolios of The Dreyfus/Laurel Funds,
Inc. ("Dreyfus/Laurel"), an open-end, diversified management investment
company that offers shares of common stock of these Funds. Shares of the
Funds are offered without sales commissions.
Dreyfus/Laurel Prime Money Market Fund ("Prime Fund")
Dreyfus/Laurel U.S. Treasury Money Market Fund ("U.S. Treasury Fund")
Dreyfus/Laurel Tax-Exempt Money Market Fund ("Tax-Exempt Fund")
Dreyfus/Laurel Institutional Prime Money Market Fund ("Institutional
Prime Fund")
Dreyfus/Laurel Institutional Government Money Market Fund
("Institutional Government Fund")
Dreyfus/Laurel Institutional U.S. Treasury Money Market Fund
("Institutional U.S. Treasury Fund")
Dreyfus/Laurel Institutional U.S. Treasury Only Money Market Fund
("Institutional Treasury Only Fund")
Dreyfus/Laurel Institutional Short-Term Bond Fund ("Institutional
Short-Term Bond Fund")
This Statement of Additional Information is not a prospectus and
should be read only in conjunction with each Fund's current prospectus,
dated March 1, 1995. A copy of these Prospectuses are available from
Premier Mutual Fund Services, Inc. ("Premier"), One Exchange Place,
Boston, MA 02109.
TABLE OF CONTENTS
Page
General Information. . . . . . . . . . . . . . . . . . . . . . . . . . . .3
Investment Information and Risk Factors. . . . . . . . . . . . . . . . . .4
Investment Limitations . . . . . . . . . . . . . . . . . . . . . . . . . 14
Controlling Shareholders . . . . . . . . . . . . . . . . . . . . . . . . 17
Principal Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . 17
Directors and Officers . . . . . . . . . . . . . . . . . . . . . . . . . 19
Investment Management and Other Services . . . . . . . . . . . . . . . . 23
Federal Law Affecting Mellon Bank. . . . . . . . . . . . . . . . . . . . 27
Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . . . . . 27
Net Asset Value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Performance Calculations . . . . . . . . . . . . . . . . . . . . . . . . 30
Dividends, Other Distributions and Taxes . . . . . . . . . . . . . . . . 32
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Other Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
GENERAL INFORMATION
Tax-Exempt Fund. The Tax-Exempt Fund may invest more than 25% of its
assets in industrial development bonds, in participation interests therein
issued by banks, and in municipal securities and other obligations issued
or guaranteed by the U.S. Government, its agencies or instrumentalities.
When the assets and revenues of an agency, authority, instrumentality
or other political subdivision are separate from those of the government
creating the issuing entity and a security is backed only by the assets or
revenues of the entity, the entity will be deemed to be the sole issuer of
the security. Similarly, in the case of an industrial development bond
backed only by the assets or revenues of the non-governmental user, the
non-governmental user will be deemed to be the sole issuer of the bond.
The Tax-Exempt Fund will invest in securities, including the
foregoing types of securities, only if the investments are of a type which
would satisfy the requirements of Rule 2a-7 promulgated under the
Investment Company Act of 1940 ("1940 Act") and only to the extent
permitted by the Tax-Exempt Fund's investment limitations. Accordingly,
if the creating agency, authority, instrumentality or other political
subdivision or some other entity, such as an insurance company or other
corporate obligor, guarantees a security purchased by the Tax-Exempt Fund
or a bank issues a letter of credit in support of a security purchased by
the Tax-Exempt Fund, the Fund will not purchase any security which, as to
75% of the value of all securities held by the Fund, would result in the
value of all securities issued or guaranteed by a single guarantor or
issuer of letters of credit exceeding 10% of the total value of the Fund's
assets.
The achievement of the Tax-Exempt Fund's investment objectives is
dependent in part on the continuing ability of the issuers of municipal
securities in which the Fund invests to meet their obligations for the
payment of principal and interest when due. Municipal securities
historically have not been subject to registration with the Securities and
Exchange Commission ("SEC"), although there have been proposals which
would require registration in the future.
Obligations of issuers of municipal securities are subject to the
provisions of bankruptcy, insolvency, and other laws affecting the rights
and remedies of creditors. In addition, the obligations of such issuers
may become subject to laws enacted in the future by Congress or state
legislatures, or referenda extending the time for payment of principal
and/or interest, or imposing other constraints upon enforcement of such
obligations or upon the ability of municipalities to levy taxes. There is
also the possibility that, as a result of litigation or other conditions,
the ability of any issuer to pay, when due, the principal of and interest
on its municipal securities may be materially affected.
INVESTMENT INFORMATION AND RISK FACTORS
Municipal Securities (Tax-Exempt Fund). The municipal securities in
which the Tax-Exempt Fund will invest are limited to those obligations
which at the time of purchase:
1. are backed by the full faith and credit of the United States; or
2. are municipal notes rated MIG-1/VMIG-1 or MIG-2/VMIG-2 by
Moody's Investors Service, Inc. ("Moody's") or SP-1 or SP-2 by
Standard & Poor's Ratings Group ("S&P"), or, if not rated, are
of equivalent investment quality as determined by Dreyfus under
guidelines approved by the Board of Directors or are obligations
of an issuer which has outstanding municipal bonds rated Aa or
higher by Moody's or Aa or higher by S&P; or
3. are municipal bonds rated Aa or higher by Moody's or AA or
higher by S&P or, if not rated, are of equivalent investment
quality as determined by The Dreyfus Corporation ("Dreyfus")
under guidelines approved by the Board of Directors or are
obligations of an issuer which has outstanding municipal notes
rated MIG-1/VMIG-1 or MIG-2/VMIG-2 by Moody's or SP-1 or SP-2 by
S&P; or
4. are other types of municipal securities, provided that such
obligations are rated Prime-2 or higher by Moody's or A-2 or
higher by S&P or determined by Dreyfus to be of comparable
quality pursuant to guidelines approved by the Board of
Directors (see the Appendix for a description of these ratings.)
The municipal securities in which the Tax-Exempt Fund may invest
include municipal notes, short-term municipal bonds and municipal leases.
Municipal notes are generally used to provide for the issuer's short-term
capital needs and generally have maturities of one year or less. Examples
include tax anticipation and revenue anticipation notes which generally
are issued in anticipation of various seasonal revenues, bond anticipation
notes, construction loan notes and tax exempt commercial paper. Short-
term municipal bonds may include "general obligation bonds," which are
secured by the issuer's pledge of its faith, credit and taxing power for
payment of principal and interest, "revenue bonds," which are generally
paid from the revenues of a particular facility or a specific excise or
other source and "industrial revenue bonds," which are issued by or on
behalf of public authorities to provide funding for various privately
operated industrial and commercial facilities. "Municipal leases," which
may take the form of a lease or an installment purchase or conditional
sale contract, are issued by state and local governments and authorities
to acquire a wide variety of equipment and facilities such as fire and
sanitation vehicles, telecommunications equipment and other capital
assets.
Variable Rate Obligations (Tax-Exempt Fund). The interest rates
payable on certain municipal securities, including municipal leases, in
which the Tax-Exempt Fund may invest, called "variable rate" obligations,
are not fixed and may fluctuate based upon changes in market rates. The
interest rate payable on a variable rate municipal security is adjusted
either at predesignated periodic intervals or whenever there is a change
in the market rate to which the security's interest rate is tied. Other
features may include the right whereby the Tax-Exempt Fund may demand
prepayment of the principal amount of the obligation prior to its stated
maturity and the right of the issuer to prepay the principal amount prior
to maturity. The main benefit of variable rate municipal securities is
that the interest rate adjustment minimizes changes in the market value of
the obligation. As a result, the purchase of variable rate municipal
securities enhances the ability of the Tax-Exempt Fund to maintain a
stable net asset value per share and to sell an obligation prior to
maturity at a price approximating the full principal amount of the
obligation. The payment of principal and interest by issuers of certain
municipal securities purchased by the Tax-Exempt Fund may be guaranteed by
letters of credit or other credit facilities offered by banks or other
financial institutions. Such guarantees will be considered in determining
whether a municipal security meets the Tax-Exempt Fund's investment
quality requirements.
Variable rate obligations purchased by the Tax-Exempt Fund may
include participation interests purchased by the Tax-Exempt Fund from
banks, insurance companies or other financial institutions and variable
rate obligations that are backed by irrevocable letters of credit or
guarantees of banks. The Tax-Exempt Fund can exercise the right, on not
more than thirty days' notice, to sell such an instrument back to the bank
from which it purchased the instrument and draw on the letter of credit
for all or any part of the principal amount of the Tax-Exempt Fund's
participation interest in the instrument, plus accrued interest, but will
do so only (i) as required to provide liquidity to the Tax-Exempt Fund,
(ii) to maintain a high quality investment portfolio, or (iii) upon a
default under the terms of the demand instrument. Banks and other
financial institutions retain portions of the interest paid on such
variable rate obligations as their fees for servicing such instruments and
the issuance of related letters of credit, guarantees and repurchase
commitments. With respect to 75% of the Tax-Exempt Fund's net assets, no
single bank will issue its letters of credit with respect to variable rate
obligations or participation interests therein covering more than 10% of
the total assets of the Fund. Dreyfus will monitor the pricing, quality
and liquidity of variable rate demand obligations and participation
interests therein held by the Tax-Exempt Fund on the basis of published
financial information, rating agency reports and other research services
to which the Tax-Exempt Fund may subscribe.
Stand-by Commitments (Tax-Exempt Fund). The Tax-Exempt Fund may
purchase municipal securities together with the right to resell them to
the seller at an agreed-upon price or yield within specified periods prior
to their maturity dates. The right to resell is commonly known as a
"stand-by commitment," and the aggregate price which the Tax-Exempt Fund
pays for securities with a stand-by commitment may be higher than the
price which otherwise would be paid. The primary purpose of this practice
is to permit the Tax-Exempt Fund to be as fully invested as practicable in
municipal securities while preserving the necessary flexibility and
liquidity to meet unanticipated redemptions. In this regard, the Tax-
Exempt Fund acquires stand-by commitments solely to facilitate portfolio
liquidity and does not exercise its rights thereunder for trading
purposes. In connection with stand-by commitments, the Tax-Exempt Fund
will segregate on the Fund's records cash or liquid high-grade debt
obligations of the Fund in an amount at least equal to the commitments.
On delivery dates under the commitments, the Tax-Exempt Fund will meet its
obligations from maturing securities, sales of securities held in a
separate account or other available sources of cash. Since the value of a
stand-by commitment is dependent on the ability of the stand-by commitment
writer to meet its obligation to repurchase, the Tax-Exempt Fund's policy
is to enter into stand-by commitment transactions only with municipal
securities dealers which are determined to present minimal credit risks as
determined by Dreyfus.
The acquisition of a stand-by commitment does not affect the
valuation or maturity of the underlying municipal securities which
continue to be valued in accordance with the amortized cost method.
Stand-by commitments acquired by the Tax-Exempt Fund are valued at zero in
determining net asset value. When the Tax-Exempt Fund pays directly or
indirectly for a stand-by commitment its cost is reflected as unrealized
depreciation for the period during which the commitment is held. Stand-by
commitments do not affect the average weighted maturity of the Fund's
portfolio of securities.
Floating Rate Securities (Prime, Tax-Exempt, and Institutional Short-
Term Bond Funds). A floating rate security is one whose terms provide for
the automatic adjustment of interest rate whenever a specified interest
rate changes. The interest on floating rate securities is ordinarily tied
to and is a percentage of the prime rate of a specified bank or some
similar objective standard such as the 90-day U.S. Treasury bill rate and
may change daily. Generally, changes in interest rates on floating rate
securities will reduce changes in the security's market value from the
original purchase price resulting in the potential for capital
appreciation or capital depreciation being less than for fixed income
obligations with a fixed interest rate.
ECDs, ETDs and Yankee CDs (Prime, Tax-Exempt, Institutional Prime and
Institutional Short-Term Bond Funds). These Funds may purchase Eurodollar
certificates of deposit ("ECDs"), which are U.S. dollar-denominated
certificates of deposit issued by foreign branches of domestic banks,
Eurodollar time deposits ("ETDs"), which are U.S. dollar denominated
deposits in a foreign branch of a domestic bank or a foreign bank, and
Yankee-Dollar certificates of deposit ("Yankee CDs") which are
certificates of deposit issued by a domestic branch of a foreign bank
denominated in U.S. dollars and held in the United States. ECDs, ETDs,
and Yankee CDs are subject to somewhat different risks than domestic
obligations of domestic banks. These risks are discussed in the
Prospectus.
Government Obligations (All Funds). Each Fund may invest in a
variety of U.S. Treasury obligations, which differ only in their interest
rates, maturities and times of issuance: (a) U.S. Treasury bills have a
maturity of one year or less, (b) U.S. Treasury notes have maturities of
one to ten years, and (c) U.S. Treasury bonds generally have maturities of
greater than ten years.
In addition to U.S. Treasury obligations, the Prime, Tax-Exempt,
Institutional Prime, Institutional Government, and Institutional Short-
Term Bond Funds may invest in obligations issued or guaranteed by
U.S. Government agencies and instrumentalities which are supported by any
of the following: (a) the full faith and credit of the U.S. Treasury
(such as Government National Mortgage Association ("GNMA") participation
certificates), (b) the right of the issuer to borrow an amount limited to
a specific line of credit from the U.S. Treasury, (c) discretionary
authority of the U.S. Government agency or instrumentality, or (d) the
credit of the instrumentality. (Examples of agencies and
instrumentalities are: Federal Land Banks, Federal Housing
Administration, Farmers Home Administration, Export-Import Bank of the
United States, Central Bank for Cooperatives, Federal Intermediate Credit
Banks, Federal Home Loan Banks, General Services Administration, Maritime
Administration, Tennessee Valley Authority, District of Columbia Armory
Board, Inter-American Development Bank, Asian-American Development Bank,
Student Loan Marketing Association, International Bank for Reconstruction
and Development and Federal National Mortgage Association ("FNMA")). No
assurance can be given that the U.S. Government will provide financial
support to such U.S. Government agencies or instrumentalities described in
(b), (c) and (d) in the future, other than as set forth above, since it is
not obligated to do so by law.
Mortgage Pass-Through Certificates (Prime, Tax-Exempt, Institutional
Prime, Institutional Government, and Institutional Short-Term Bond Funds).
Mortgage pass-through certificates are issued by governmental, government-
related and private organizations which are backed by pools of mortgage
loans. These mortgage loans are made by lenders such as savings and loan
institutions, mortgage bankers, commercial banks and others to residential
home buyers throughout the United States. The securities are "pass-
through" securities because they provide investors with monthly payments
of principal and interest which in effect are a "pass-through" of the
monthly payments made by the individual borrowers on the underlying
mortgages, net of any fees paid to the issuer or guarantor of the pass-
through certificates. The principal governmental issuer of such
securities is the GNMA, which is a wholly-owned U.S. Government
corporation within the Department of Housing and Urban Development.
Government-related issuers include the Federal Home Loan Mortgage
Corporation ("FHLMC") and the FNMA, both government sponsored corporations
owned entirely by private stockholders. Commercial banks, savings and
loan institutions, private mortgage insurance companies, mortgage bankers
and other secondary market issuers also create pass-through pools of
conventional residential mortgage loans. Such issuers may be the
originators of the underlying mortgage loans as well as the guarantors of
the mortgage-related securities.
(1) GNMA Mortgage Pass-Through Certificates ("Ginnie Maes").
Ginnie Maes represent an undivided interest in a pool of mortgages that are
insured by the Federal Housing Administration or the Farmers Home
Administration or guaranteed by the Veterans Administration. Ginnie Maes
entitle the holder to receive all payments (including prepayments) of
principal and interest owed by the individual mortgagors, net of fees paid
to GNMA and to the issuer which assembles the mortgage pool and passes
through the monthly mortgage payments to the certificate holders
(typically, a mortgage banking firm), regardless of whether the individual
mortgagor actually makes the payment. Because payments are made to
certificate holders regardless of whether payments are actually received
on the underlying mortgages, Ginnie Maes are of the "modified pass-
through" mortgage certificate type. The GNMA is authorized to guarantee
the timely payment of principal and interest on the Ginnie Maes as
securities backed by an eligible pool of mortgages. The GNMA guarantee is
backed by the full faith and credit of the United States, and the GNMA has
unlimited authority to borrow funds from the U.S. Treasury to make
payments under the guarantee. The market for Ginnie Maes is highly liquid
because of the size of the market and the active participation in the
secondary market of securities dealers and a variety of investors.
(2) FHLMC Mortgage Participation Certificates ("Freddie Macs").
Freddie Macs represent interests in groups of specified first lien
residential conventional mortgages underwritten and owned by the FHLMC.
Freddie Macs entitle the holder to timely payment of interest, which is
guaranteed by the FHLMC. The FHLMC guarantees either ultimate collection
or timely payment of all principal payments on the underlying mortgage
loans. In cases where the FHLMC has not guaranteed timely payment of
principal, the FHLMC may remit the amount due on account of its guarantee
of ultimate payment of principal at any time after default on an
underlying mortgage, but in no event later than one year after it becomes
payable. Freddie Macs are not guaranteed by the United States or by any
of the Federal Home Loan Banks and do not constitute a debt or obligation
of the United States or of any Federal Home Loan Bank. The secondary
market for Freddie Macs is highly liquid because of the size of the market
and the active participation in the secondary market of the FHLMC,
securities dealers and a variety of investors.
(3) FNMA Guaranteed Mortgage Pass-Through Certificates ("Fannie
Maes"). Fannie Maes represent an undivided interest in a pool of
conventional mortgage loans secured by first mortgages or deeds of trust,
on one family, or two to four family, residential properties. The FNMA is
obligated to distribute scheduled monthly installments of principal and
interest on the mortgages in the pool, whether or not received, plus full
principal of any foreclosed or otherwise liquidated mortgages. The
obligation of the FNMA under its guaranty is solely the obligation of the
FNMA and is not backed by, nor entitled to, the full faith and credit of
the United States.
The market value of mortgage-related securities depends on, among
other things, the level of interest rates, the certificates' coupon rates
and the payment history of the mortgagors of the mortgages in the
underlying mortgages.
Repurchase Agreements (All Funds except Institutional Treasury Only
Fund). The Funds may enter into repurchase agreements with U.S.
Government securities dealers recognized by the Federal Reserve Board,
with member banks of the Federal Reserve System, or with such other
brokers or dealers that meet the credit guidelines of the Board of
Directors. In a repurchase agreement, the Fund buys a security from a
seller that has agreed to repurchase the same security at a mutually
agreed upon date and price. A Fund's resale price will be in excess of
the purchase price, reflecting an agreed upon interest rate. This
interest rate is effective for the period of time the Fund is invested in
the agreement and is not related to the coupon rate on the underlying
security. Repurchase agreements may also be viewed as a fully
collateralized loan of money by the Fund to the seller. The period of
these repurchase agreements will usually be short, from overnight to one
week, and at no time will a Fund invest in repurchase agreements for more
than one year. A Fund will always receive as collateral securities whose
market value including accrued interest is, and during the entire term of
the agreement remains, at least equal to 100% of the dollar amount
invested by the Fund in each agreement, and the Fund will make payment for
such securities only upon physical delivery or upon evidence of book entry
transfer to the account of the Custodian. If the seller defaults, the
Fund might incur a loss if the value of the collateral securing the
repurchase agreement declines and might incur disposition costs in
connection with liquidating the collateral. In addition, if bankruptcy
proceedings are commenced with respect to the seller of a security which
is the subject of a repurchase agreement, realization upon the collateral
by the Fund may be delayed or limited. Dreyfus seeks to minimize the risk
of loss through repurchase agreements by analyzing the creditworthiness of
the obligors under repurchase agreements, in accordance with the credit
guidelines of Dreyfus/Laurel's Board of Directors.
Reverse Repurchase Agreements (Prime, Tax-Exempt, Institutional
Prime, and Institutional Short-Term Bond Funds). A Fund may enter into
reverse repurchase agreements to meet redemption requests where the
liquidation of portfolio securities is deemed by Dreyfus to be
inconvenient or disadvantageous. A reverse repurchase agreement is a
transaction whereby a Fund transfers possession of a portfolio security to
a bank or broker-dealer in return for a percentage of the portfolio
security's market value. The Fund retains record ownership of the
security involved including the right to receive interest and principal
payments. At an agreed upon future date, the Fund repurchases the
security by paying an agreed upon purchase price plus interest. Cash or
liquid high-grade debt obligations of the Fund equal in value to the
repurchase price including any accrued interest will be maintained in a
segregated account while a reverse repurchase agreement is in effect.
When-Issued Securities (All Funds). New issues of U.S. Treasury and
Government securities are often offered on a when-issued basis. This
means that delivery and payment for the securities normally will take
place approximately 7 to 15 days after the date the buyer commits to
purchase them. The payment obligation and the interest rate that will be
received on securities purchased on a when-issued basis are each fixed at
the time the buyer enters into the commitment. Each Fund will make
commitments to purchase such securities only with the intention of
actually acquiring the securities, but the Fund may sell these securities
or dispose of the commitment before the settlement date if it is deemed
advisable as a matter of investment strategy. Cash or marketable high
grade debt securities equal to the amount of the above commitments will be
segregated on each Fund's records. For the purpose of determining the
adequacy of these securities the segregated securities will be valued at
market. If the market value of such securities declines, additional cash
or securities will be segregated on the Fund's records on a daily basis so
that the market value of the account will equal the amount of such
commitments by the Fund.
Securities purchased on a when-issued basis and the securities held
by each Fund are subject to changes in market value based upon the
public's perception of changes in the level of interest rates. Generally,
the value of such securities will fluctuate inversely to changes in
interest rates -- i.e., they will appreciate in value when interest rates
decline and decrease in value when interest rates rise. Therefore, if in
order to achieve higher interest income each Fund remains substantially
fully invested at the same time that it has purchased securities on a
"when-issued" basis, there will be a greater possibility of fluctuation in
the Fund's net asset value.
When payment for when-issued securities is due, each Fund will meet
its obligations from then-available cash flow, the sale of segregated
securities, the sale of other securities or, and although it would not
normally expect to do so, from the sale of the when-issued securities
themselves (which may have a market value greater or less than the Fund's
payment obligation). The sale of securities to meet such obligations
carries with it a greater potential for the realization of capital gains,
which are subject to federal income taxes.
Loans of Fund Securities (All Funds). Each Fund has authority to
lend its portfolio securities provided (1) the loan is secured
continuously by collateral consisting of U.S. Government securities or
cash or cash equivalents adjusted daily to make a market value at least
equal to the current market value of these securities loaned; (2) the Fund
may at any time call the loan and regain the securities loaned; (3) the
Fund will receive any interest or dividends paid on the loaned securities;
and (4) the aggregate market value of securities loaned will not at any
time exceed one-third of the total assets of the Fund. In addition, it is
anticipated that a Fund may share with the borrower some of the income
received on the collateral for the loan or that it will be paid a premium
for the loan. In determining whether to lend securities, Dreyfus
considers all relevant factors and circumstances including the
creditworthiness of the borrower.
Futures Contracts and Options (Institutional Short-Term Bond Funds).
For the purpose of creating market exposure for uncommitted cash balances,
reducing transaction costs associated with rebalancing a Fund,
facilitating trading or seeking higher investment returns when a futures
contract is priced more attractively than the underlying security or each
index of the above-referenced Funds may enter into futures contracts,
options, and options on futures contracts with respect to securities in
which the Funds may invest and indices comprised of such securities.
Futures contracts provide for the future sale by one party and
purchase by another party of a specified amount of a specific security or
securities index at a specified future time and at a specified price.
Where the underlying security is an index, no physical transfer of
securities takes place; rather, upon expiration of the contract, the
parties settle by exchanging cash in an amount equal to the difference
between the contract price and the closing value of the index at
expiration, net of variation margin previously paid. Futures contracts
that are standardized as to maturity date and underlying interest are
traded on national futures exchanges.
Futures traders are required to make a good faith margin deposit in
cash or government securities with a broker or custodian to initiate and
maintain open positions in futures contracts. A margin deposit is
intended to assure completion of the contract (delivery or acceptance of
the underlying security) if it is not terminated prior to the specified
delivery date. Minimal initial margin requirements are established by the
futures exchange and may be changed. Brokers may establish deposit
requirements which are higher than the exchange minimums.
After a futures contract position is opened, the value of the
contract is marked to market daily. If the futures contract price changes
to the extent that the margin on deposit does not satisfy margin
requirements, payment of additional "variation" margin will be required.
Conversely, change in the contract value may reduce the required margin,
resulting in a repayment of excess margin to the contract holder.
Variation margin payments are made to and from the futures broker for as
long as the contract remains open. The Fund expects to earn interest
income on its margin deposits.
Options are of two basic types, either call or put options, and may
relate to a single security or a securities index or a futures contract.
A call option on a security permits the holder of the option to purchase
the underlying security at a specified price ("strike price") at any time
during the term of the option. Thus, in exchange for the premium paid to
the writer, the purchaser obtains the right to profit from any
appreciation in the value of the underlying security above the strike
price. A put option permits the holder to sell the underlying security to
the writer at the strike price at any time during the term of the
contract. Thus, in exchange for the premium paid to the writer, the
purchaser is relieved of the risk of a decline in the value of the
underlying security below the strike price. An option on a securities
index gives the holder the right to receive cash from the writer in an
amount equal to the difference between the strike price of the option and
the value of the underlying index multiplied by a factor established by
the exchange upon which the option is traded. An option on a futures
contract gives the holder, in return for the premium paid to the writer,
the right to assume a position in the underlying futures contract at a
specified price at any time during the term of the option.
Although futures and options contracts by their terms call for actual
delivery or acceptance of the underlying securities, in most cases the
contracts are closed out before the settlement date without the making or
taking of delivery. Closing out an open futures position is done by
taking an opposite position ("buying" a contract which has previously been
"sold," or "selling" a contract previously purchased) in an identical
contract to terminate the position. An option purchased may be closed out
by selling the option. An option written is closed out by purchasing an
option identical to that written. Brokerage commissions are incurred when
futures and options contracts are bought and sold.
Restrictions on the Use of Futures Contracts and Options. The Fund
will not enter into futures contracts to the extent that its outstanding
obligations under these contracts would exceed 25% of the Fund's total
assets. To the extent that the Fund enters into futures contracts and
options on futures positions that are not for bona fide hedging purposes
(as defined by the Commodity Futures Trading Commission), the aggregate
initial margin and premiums on these positions (excluding the amount by
which options are "in-the-money") may not exceed 5% of the Fund's net
assets.
Transactions using options and futures contracts (other than options
that the Fund has purchased) expose the Fund to an obligation to another
party. The Fund will not enter into any such transactions unless it owns
either (1) an offsetting ("covered") position in securities or other
options or futures contracts or (2) cash, receivables and short-term debt
securities with a value sufficient at all times to cover its potential
obligations not covered as provided in (1) above. The Fund will comply
with SEC guidelines regarding cover for these instruments and, if the
guidelines so require, set aside cash, U.S. Government securities or other
liquid, high-grade debt securities in a segregated account with its
custodian in the prescribed amount.
All options purchased or written by a Fund must be listed on a
national securities or futures exchange or traded in the over-the-counter
("OTC") market. A Fund will not purchase or write OTC options if, as a
result of such transaction, the sum of (i) the market value of outstanding
OTC options purchased by the Fund, (ii) the market value of the underlying
securities covered by outstanding OTC call options written by the Fund,
and (iii) the market value of all other assets of the Fund that are
illiquid or are not otherwise readily marketable, would exceed 15% of the
net assets of the Fund, taken at market value. However, if an OTC option
is sold by a Fund to a primary U.S. Government securities dealer
recognized by the Federal Reserve Bank of New York and the Fund has the
unconditional contractual right to repurchase such OTC option from the
dealer at a predetermined price, then the Fund will treat as illiquid such
amount of the underlying securities as is equal to the repurchase price
less the amount by which the option is "in-the-money" (the difference
between current market value of the underlying security and the option's
strike price). The repurchase price with primary dealers is typically a
formula price which is generally based on a multiple of the premium
received for the option plus the amount by which the option is "in-the-
money."
Each Fund may write only covered options. A call option is covered
if the Fund owns the underlying security or a call option on the same
security with a lower strike price. A put option is covered if the Fund
segregates cash and/or short-term debt securities in an amount necessary
to pay the strike price of the option or purchases a put option on the
same underlying security with a higher strike price.
Each Fund will not purchase puts, calls, straddles, spreads or any
combination thereof, if as a result of such purchase the value of the
Fund's aggregate investment in such securities would exceed 5% of the
Fund's total assets.
Risk Factors in Futures and Options Transactions. There can be no
assurance that a liquid secondary market will exist for any particular
futures or option contract at any specific time. Thus, it may not be
possible to close a futures or option position. In the event of adverse
price movements, each Fund would continue to be required to make daily
cash payments to maintain its required margin with respect to open futures
or written options positions. In such a situation, if the Fund has
insufficient cash, it may have to sell portfolio securities to meet daily
margin requirements at a time when it may be disadvantageous to do so. In
addition, a Fund may be required to make or take delivery of the
securities underlying futures contracts that it holds and options
contracts that it has written.
Each Fund will seek to minimize the risk that it will be unable to
close out a futures contract by entering into only those futures contracts
that are listed on national futures exchanges and for which there appears
to be a liquid secondary market. Likewise, each Fund will enter into only
those option contracts that are listed on a national securities exchange
or traded in the OTC market for which there appears to be a liquid
secondary market.
The risk of loss in trading futures contracts in some strategies can
be substantial, due both to the low margin deposits required, and the
extremely high degree of leverage involved in futures pricing. As a
result, a relatively small price movement in a futures contract may result
in immediate and substantial loss (as well as gain) to the investor. For
example, if at the time of purchase, 10% of the value of the futures
contract is deposited as margin, a subsequent 10% decrease in the value of
the futures contract would result in a total loss of margin deposit,
before any deduction for the transaction costs, if the account were then
closed out. A 15% decrease would result in a loss equal to 150% if the
original margin deposit for the contract were closed out. Thus, a
purchase or sale of a futures contract may result in losses in excess of
the amount invested in the contract. Options transactions are subject to
similar risks. However, because each Fund will not engage in futures or
options transactions for speculative purposes, Dreyfus believes that a
Fund's risk of loss is less than the risk of loss associated with
speculative transactions. Moreover, in the foregoing example, the Fund
would presumably have sustained comparable losses if, instead of the
futures contract, it had invested in the underlying security and sold it
after the decline.
Utilization of futures contracts and options transactions by each
Fund does involve the risk of imperfect or no correlation where the
securities underlying futures and options contracts are different from the
portfolio securities being hedged. It is also possible that a Fund could
lose money on both futures and options contracts and also experience a
decline in value of its portfolio securities. There is also the risk of
loss by a Fund of margin deposits in the event of bankruptcy of a broker
with whom the Fund has an open position in a futures contract or option
thereon.
Most futures exchanges limit the amount of fluctuation permitted in
futures contract prices during a single trading day. The daily limit
establishes the maximum amount that the price of a futures contract may
vary either up or down from the previous day's settlement price at the end
of a trading session. Once the daily limit has been reached in a
particular type of contract, no trades may be made on that day at a price
beyond that limit. The daily limit governs only price movement during a
particular trading day and therefore does not limit potential losses,
because the limit may prevent the liquidation of unfavorable positions.
Futures contract prices have occasionally moved to the daily limit for
several consecutive trading days with little or no trading thereby
preventing prompt liquidation of future positions and subjecting some
futures traders to substantial losses.
Futures and options contracts involve special tax considerations.
See "Dividends, Other Distributions and Taxes" for further information.
Commercial Paper (Prime, Tax-Exempt, Institutional Prime, and
Institutional Short-Term Bond Funds). The Funds may invest in commercial
paper issued in reliance on the so-called "private placement" exemption
from registration afforded by Section 4(2) of the Securities Act of 1933
("Section 4(2) paper"). Section 4(2) paper is restricted as to
disposition under the federal securities laws and generally is sold to
investors who agree that they are purchasing the paper for an investment
and not with a view to public distribution. Any resale by the purchaser
must be in an exempt transaction. Section 4(2) paper is normally resold
to other investors through or with the assistance of the issuer or
investment dealers who make a market in Section 4(2) paper, thus providing
liquidity. Pursuant to guidelines established by Dreyfus/Laurel's Board
of Directors, Dreyfus may determine that Section 4(2) paper is liquid for
the purposes of complying with the Fund's investment restriction relating
to investments in illiquid securities.
INVESTMENT LIMITATIONS
The following limitations have been adopted by each Fund except that
the Institutional Treasury Only Fund has only adopted limitations 2, 4, 5,
6 and 7 noted below. A Fund may not change any of these fundamental
investment limitations or its investment objective without the consent of:
(a) 67% or more of the shares present at a meeting of shareholders duly
called if the holders of more than 50% of the outstanding shares of a Fund
are present or represented by proxy; or (b) more than 50% of the
outstanding shares of a Fund, whichever is less. Each Fund may not:
1. Purchase any securities which would cause more than 25% of the value
of a Fund's total assets at the time of such purchase to be invested
in the securities of one or more issuers conducting their principal
activities in the same industry. (For purposes of this limitation,
U.S. Government securities, and state or municipal governments and
their political subdivisions are not considered members of any
industry. In addition, this limitation does not apply to investments
in domestic banks, including U.S. branches of foreign banks and
foreign branches of U.S. banks).
2. Borrow money or issue senior securities as defined in the 1940 Act
except that (a) a Fund may borrow money in an amount not exceeding
one-third of the Fund's total assets at the time of such borrowings,
and (b) a Fund may issue multiple classes of shares. The purchase or
sale of futures contracts and related options shall not be considered
to involve the borrowing of money or issuance of senior securities.
3. Purchase with respect to 75% of a Fund's total assets securities of
any one issuer (other than securities issued or guaranteed by the
U.S. Government, its agencies or instrumentalities) if, as a result,
(a) more than 5% of a Fund's total assets would be invested in the
securities of that issuer, or (b) a Fund would hold more than 10% of
the outstanding voting securities of that issuer.
4. Make loans or lend securities, if as a result thereof more than one-
third of the Fund's total assets would be subject to all such loans.
For purposes of this limitation debt instruments and repurchase
agreements shall not be treated as loans.
5. Purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent a Fund
from investing in securities or other instruments backed by real
estate, including mortgage loans, or securities of companies that
engage in real estate business or invest or deal in real estate or
interests therein).
6. Underwrite securities issued by any other person, except to the
extent that the purchase of securities and later disposition of such
securities in accordance with the Fund's investment program may be
deemed an underwriting.
7. Purchase or sell commodities except that each Fund may enter into
futures contracts and related options, forward currency contacts and
other similar instruments.
Each Fund may:
Notwithstanding any other fundamental investment policy or
limitation, invest all of its investable assets in securities of a
single open-end management investment company with substantially the
same investment objectives, policies and limitations as the Fund.
The Funds above have adopted the following additional non-fundamental
restrictions, except that the Institutional Treasury Only Fund has only
adopted limitations 1, 2, 4, 8 and 9 noted below. These non-fundamental
restrictions may be changed without shareholder approval, in compliance
with applicable law and regulatory policy.
1. No Fund shall sell securities short, unless it owns or has the right
to obtain securities equivalent in kind and amounts to the securities
sold short, and provided that transactions in futures contracts are
not deemed to constitute selling short.
2. No Fund shall purchase securities on margin, except that a Fund may
obtain such short-term credits as are necessary for the clearance of
transactions, and provided that margin payments in connection with
futures contracts and options on futures contracts shall not
constitute purchasing securities on margin.
3. No Fund shall purchase oil, gas or mineral leases (Funds, other than
the Institutional Short-Term Bond Fund, may not, however purchase and
sell the securities of companies engaged in the exploration,
development, production, refining, transporting, and marketing of
oil, gas or minerals).
4. Each Fund will not purchase or retain the securities of any issuer if
the officers, Directors of the Fund, its advisers, or managers,
owning beneficially more than one half of one percent of the
securities of such issuer, together own beneficially more than five
percent of such securities.
5. No Fund will purchase securities of issuers (other than securities
issued or guaranteed by domestic or foreign governments or political
subdivisions thereof), including their predecessors, that have been
in operation for less than three years, if by reason thereof, the
value of such Fund's investment in securities would exceed 5% of such
Fund's total assets. For purposes of this limitation, sponsors,
general partners, guarantors and originators of underlying assets may
be treated as the issuer of a security.
6. The Institutional Short-Term Bond Fund will not invest more than 15%
of the value of its net assets in illiquid securities, including
repurchase agreements with remaining maturities in excess of seven
days, time deposits with maturities in excess of seven days and other
securities which are not readily marketable. For purposes of this
limitation, illiquid securities shall not include Section 4(2) Paper
and securities which may be resold under Rule 144A under the
Securities Act of 1933, provided that the Board of Directors, or its
delegate, determines that such securities are liquid based upon the
trading markets for the specific security.
7. None of the Prime, U.S. Treasury, Tax-Exempt, Institutional Prime,
Institutional Government and Institutional U.S. Treasury Funds will
invest more than 10% of the value of its net assets in illiquid
securities, including repurchase agreements with remaining maturities
in excess of seven days, time deposits with maturities in excess of
seven days and other securities which are not readily marketable.
For purposes of this limitation, illiquid securities shall not
include Section 4(2) Paper and securities which may be resold under
Rule 144A under the Securities Act of 1933, provided that the Board
of Directors, or its delegate, determines that such securities are
liquid based upon the trading markets for the specific security.
8. No Fund may invest in securities of other investment companies,
except as they may be acquired as part of a merger, consolidation or
acquisition of assets and except to the extent otherwise permitted by
the 1940 Act.
9. No Fund shall purchase any security while borrowings representing
more than 5% of the Fund's total assets are outstanding.
10. No Fund will purchase warrants if at the time of such purchase: (a)
more than 5% of the value of such Fund's assets would be invested in
warrants, or (b) more than 2% of the value of the Fund's assets would
be invested in warrants that are not listed on the New York or
American Stock Exchange (for purposes of this limitation, warrants
acquired by a Fund in units or attached to securities will be deemed
to have no value).
11. No Fund will purchase puts, calls, straddles, spreads and any
combination thereof if by reason thereof the value of its aggregate
investment in such classes of securities will exceed 5% of its total
assets except that: (a) this limitation shall not apply to standby
commitment, and (b) this limitation shall not apply to a Fund's
transactions in futures contracts and related options.
CONTROLLING SHAREHOLDERS
Mellon Bank Corporation, a Pennsylvania corporation registered as a
bank holding company under the Bank Holding Company Act of 1956, as
amended, owned of record, through its direct and indirect subsidiaries,
more than 25% of the issued and outstanding voting shares of
Dreyfus/Laurel as of January 31, 1995, and is, as a consequence, deemed to
be a controlling shareholder of Dreyfus/Laurel as that term is defined
under the 1940 Act. The address of Mellon Bank Corporation is: Mellon
Bank Corporation, Mutual Funds Department, 2 Mellon Bank Center,
Pittsburgh, PA 15259.
PRINCIPAL SHAREHOLDERS
The following shareholder(s) owned 5% or more of the outstanding
voting shares of the Funds at January 31, 1995:
PRIME FUND: InvestNet Corporation, a Mellon Bank Center, Pittsburgh, PA
15259-0001, 40% record; Mac & Company, Mellon Bank, N.A., Trust and
Investment Department, 3 Mellon Bank Center, Pittsburgh, PA 15259-0001,
26% record; Mac & Company, Mellon Bank, N.A., Trust and Investment
Department, 3 Mellon Bank Center, Pittsburgh, PA 15259-0001, 10% record;
Mellon Bank, N.A., #14 as Agent for Capital Markets Customers, One Mellon
Bank Center, Room 151-0440, Pittsburgh, PA 15258-0001, 5% record.
U.S. TREASURY FUND: Mellon Bank, N.A. - Mellon PSFS, P.O. Box 7899, Room
199-5264, Philadelphia, PA 19101-7899, 33% record; Mac & Company, Mellon
Bank, N.A., Trust and Investment Department, 3 Mellon Bank Center,
Pittsburgh, PA 15259-001, 15% record; Mellon Bank, N.A. - Western Region,
P.O. Box 7899, Room 199-5264, Philadephia, PA 19101-7899, 14% record;
InvestNet Corporation, 2 Mellon Bank Center, Pittsburgh, PA 15259-0001,
10% record; Mellon Bank, N.A. - Central Region, P.O. Box 7899, Room 199-
5264, Philadelphia, PA 19101-7899, 8% record; Mellon Bank, DE - National
Association, P.O. Box 7899, Room 199-5264, Philadelphia, PA 19101-7899, 6%
record.
TAX-EXEMPT FUND: Mac & Company, Mellon Bank, N.A., Trust and Investment
Department, 3 Mellon Bank Center, Pittsburgh, PA 15259-0001, 29% record;
Mellon Bank, N.A. #14 as Agent for Capital Markets Customers, One Mellon
Bank Center, Room 151-0440, Pittsburgh, PA 15258-0001, 13% record; Mac &
Company, Mellon Bank, N.A., Trust and Investment Department, 3 Mellon Bank
Center, Pittsburgh, PA 15259-0001, 9% record; InvestNet Corporation, 2
Mellon Bank Center, Pittsburgh, PA 15259-0001, 7% record.
INSTITUTIONAL PRIME FUND: Mellon Bank, N.A., #14 as Agent for Capital
Markets Customers, One Mellon Bank Center, Room 151-0440, Pittsburgh, PA
15258-0001, 100% record.
INSTITUTIONAL GOVERNMENT FUND: Mac & Co., Mellon Bank, N.A., Trust and
Investment Department, 3 Mellon Bank Center, Pittsburgh, PA 15259-0001,
33% record; Mac & Co., One Mellon Bank Center, Room 0525, Pittsburgh, PA
15258-0001, 26% record; Mac & Co., One Mellon Bank Center, Room 0525,
Pittsburgh, PA 15258-0001, 23% record; Mac & Co., Mellon Bank, N.A., Trust
and Investment Department, 3 Mellon Bank Center, Pittsburgh, PA 15259-
0001, 9% record.
INSTITUTIONAL TREASURY FUND: Mac & Co., Mellon Bank, N.A., Trust and
Investment Department, 3 Mellon Bank Center, Pittsburgh, PA 15259-0001,
59% record; Mac & Co., Mellon Bank, N.A., Trust and Investment Department,
3 Mellon Bank Center, Pittsburgh, PA 15259-0001, 16% record; Mellon Bank,
N.A., #14 as Agent for Capital Markets Customers, One Mellon Bank Center,
Room 151-0440, Pittsburgh, PA 15258-0001, 10% record.
INSTITUTIONAL TREASURY ONLY FUND: Mellon Bank, N.A., #14 as Agent for
Capital Markets Customers, One Mellon Bank Center, Room 151-0440,
Pittsburgh, PA 15258-0001, 100% record; Mac & Co., Mellon Bank, N.A.,
Trust and Investment Department, 3 Mellon Bank Center, Pittsburgh, PA
15259-0001, 64% record.
INSTITUTIONAL SHORT-TERM BOND FUND: Mac & Co., 178-801, Mellon Bank,
N.A., Mutual Funds, P.O. Box 320, Pittsburgh, PA 15230, 64% record; Mac &
Co. 860-621, Mellon Bank, N.A., Mutual Funds, P.O. Box 320, Pittsburgh, PA
15230, 31% record.
DIRECTORS AND OFFICERS
Dreyfus/Laurel has a Board composed of thirteen Directors which
supervises Dreyfus/Laurel's investment activities and reviews contractual
arrangements with companies that provide the Funds with services. The
following lists the Directors and officers and their positions with
Dreyfus/Laurel and their present and principal occupations during the past
five years. Each Director who is an "interested person" of Dreyfus/Laurel
(as defined in the Investment Company Act of 1940, as amended (the "Act"))
is indicated by an asterisk. Each of the Directors also serves as a
Trustee of The Dreyfus/Laurel Funds Trust, The Dreyfus/Laurel Investment
Series and The Dreyfus/Laurel Tax-Free Municipal Funds (collectively "The
Dreyfus/Laurel Funds").
o + RUTH MARIE ADAMS. Director of Dreyfus/Laurel; Professor of English
and Vice President Emeritus, Dartmouth College; Senator, United
Chapters of Phi Beta Kappa; Trustee, Woods Hole Oceanographic
Institution. Age: 79 years old. Address: 1026 Kendal Lyme Road,
Hanover, New Hampshire 03755.
o + FRANCIS P. BRENNAN. Chairman of the Board of Directors and Assistant
Treasurer of Dreyfus/Laurel; Director and Chairman, Massachusetts
Business Development Corp.; Director, Boston Mutual Insurance
Company; Director and Vice Chairman of the Board, Home Owners Federal
Savings and Loan (prior to May 1990). Age: 76 years old. Address:
Massachusetts Business Development Corp., One Liberty Square, Boston,
Massachusetts 02109.
o * JOSEPH S. DiMARTINO. Director of Dreyfus/Laurel since February 1995.
Since January 1995, Mr. DiMartino has served as Chairman of the
Board for various funds in the Dreyfus Family of Funds. For more
than five years prior thereto, he was President, a director and,
until August 1994, Chief Operating Officer of the Manager and
Executive Vice President and a director of Dreyfus Service
Corporation, a wholly-owned subsidiary of the Manager and, until
August 1994, the Fund's distributor. Mr. DiMartino is a director and
former Treasurer of the Muscular Dystrophy Association; a trustee of
Bucknell University; and a director of the Noel Group, Inc. He is 51
years old and his address is 200 Park Avenue, New York, New York
10166.
o + JAMES M. FITZGIBBONS. Director of Dreyfus/Laurel; President and
Director, Amoskeag Company; Chairman, Howes Leather Company, Inc.;
Director, Fiduciary Trust Company; Chairman, CEO and Director,
Fieldcrest-Cannon Inc.; Director, Lumber Mutual Insurance Company;
Director, Barrett Resources, Inc. Age: 59 years old. Address: 40
Norfolk Road, Brookline, Massachusetts 02167.
o * J. TOMLINSON FORT. Director of Dreyfus/Laurel; Partner, Reed, Smith,
Shaw & McClay (law firm). Age: 65 years old. Address: 204
Woodcock Drive, Pittsburgh, Pennsylvania 15215.
o + ARTHUR L. GOESCHEL. Director of Dreyfus/Laurel; Director, Chairman
of the Board and Director, Rexene Corporation; Director, Calgon
Carbon Corporation; Director, National Picture Frame Corporation;
Chairman of the Board and Director, Tetra Corporation 1991-1993;
Director, Medalist Corporation 1992-1993; From 1988-1989 Director,
Rexene Corporation. Age: 71 years old. Address: Way Hallow Road
and Woodland Road, Sewickley, Pennsylvania 15143.
o + KENNETH A. HIMMEL. Director of Dreyfus/Laurel; Former Director, The
Boston Company, Inc. and Boston Safe Deposit and Trust Company;
President and Chief Executive Officer, Himmel & Co., Inc.; Vice
Chairman, Sutton Place Gourmet, Inc. and Florida Hospitality Group;
Managing Partner, Himmel/MKDG, Franklin Federal Partners, Reston Town
Center Associates and Grill 23 & Bar. Age: 47 years old. Address:
Himmel and Company, Inc., 101 Federal Street, 22nd Floor, Boston,
Massachusetts 02110.
o + ARCH S. JEFFERY. Director of Dreyfus/Laurel; Financial Consultant.
Age: 76 years old. Address: 1817 Foxcroft Lane, Allison Park,
Pennsylvania 15101.
o + STEPHEN J. LOCKWOOD. Director of Dreyfus/Laurel; President and CEO,
LDG Management Company Inc.; CEO, LDG Reinsurance Underwriters, SRRF
Management Inc. and Medical Reinsurance Underwriters Inc. Age: 46
years old. Address: 401 Edgewater Place, Wakefield, Massachusetts
01880.
o + ROBERT D. MCBRIDE. Director of Dreyfus/Laurel; Director, Chairman
and CEO, McLouth Steel; Director, Salem Corporation. Director,
SMS/Concast, Inc. (1983-1991). Age: 66 years old. Address: 15
Waverly Lane, Grosse Pointe Farms, Michigan 48236.
o + JOHN L. PROPST. Director of Dreyfus/Laurel; Of Counsel, Reed, Smith,
Shaw & McClay (law firm). Age: 79 years old. Address: 5521
Dunmoyle Street, Pittsburgh, Pennsylvania 15217.
o + JOHN J. SCIULLO. Director of Dreyfus/Laurel; Dean Emeritus and
Professor of Law, Duquesne University Law School; Director, Urban
Redevelopment Authority of Pittsburgh. Age: 62 years old.
Address: 321 Gross Street, Pittsburgh, Pennsylvania 15224
o + ROSLYN M. WATSON. Director of Dreyfus/Laurel; Principal, Watson
Ventures, Inc., prior to February, 1993; Real Estate Development
Project Manager and Vice President, The Gunwyn Company. Age: 44
years old. Address: 25 Braddock Park, Boston, Massachusetts 02116-
5816.
# MARIE E. CONNOLLY. President and Treasurer of Dreyfus/Laurel, The
Dreyfus/Laurel Investment Series, The Dreyfus/Laurel Funds Trust and
The Dreyfus/Laurel Tax-Free Municipal Funds (since September 1994);
Vice President of The Dreyfus/Laurel Funds, Inc. (March 1994 to
September 1994); President, Funds Distributor, Inc. (since 1992);
Treasurer, Funds Distributor, Inc. (July 1993 to April 1994); COO,
Funds Distributor, Inc. (since April 1994); Director, Funds
Distributor, Inc. (since July 1992); President, COO and Director,
Premier Mutual Fund Services, Inc. (since April 1994); Senior Vice
President and Director of Financial Administration, The Boston
Company Advisors, Inc. (December 1988 to May 1993). Address: One
Exchange Place, Boston, Massachusetts 02109.
# FREDERICK C. DEY. Vice President of Dreyfus/Laurel, The
Dreyfus/Laurel Investment Series, The Dreyfus/Laurel Funds Trust and
The Dreyfus/Laurel Tax-Free Municipal Funds (since September 1994);
Senior Vice President, Premier Mutual Fund Services, Inc. (since
August 1994); Vice President, Funds Distributor, Inc. (since August
1994); Fundraising Manager, Swim Across America (October 1993 to
August 1994); General Manager, Spring Industries (August 1988 to
October 1993). Address: Premier Mutual Fund Services, Inc., 200 Park
Avenue New York, New York 10166.
# ERIC B. FISCHMAN. Vice President of Dreyfus/Laurel, The
Dreyfus/Laurel Investment Series, The Dreyfus/Laurel Funds Trust and
The Dreyfus/Laurel Tax-Free Municipal Funds (since September 1994);
Vice President and Associate General Counsel, Premier Mutual Fund
Services, Inc. (Since August 1994); Vice President and Associate
General Counsel, Funds Distributor, Inc. (since August 1994); Staff
Attorney, Federal Reserve Board (September 1992 to June 1994); Summer
Associate, Venture Economics (May 1991 to September 1991); Summer
Associate, Suffolk County District Attorney (June 1990 to August
1990). Address: Premier Mutual Fund Services, Inc., 200 Park Avenue,
New York, New York 10166.
LESLIE M. GAYNOR. Assistant Treasurer of Dreyfus/Laurel, The
Dreyfus/Laurel Investent Series, The Dreyfus/Laurel Funds Trust and
The Dreyfus/Laurel Tax-Free Municipal Funds (since October 1994);
Assistant Treasurer/Manager of Treasury Services, Funds Distributor,
Inc. (since July 1994); Vice President, The Boston Company, Inc.
(1989 to July 1994). Address: One Exchange Place, Boston,
Massachusetts 02109.
RICHARD W. HEALEY. Vice President of Dreyfus/Laurel, The
Dreyfus/Laurel Investment Series, The Dreyfus/Laurel Funds Trust and
The Dreyfus/Laurel Tax-Free Municipal Funds (since March 1994);
Senior Vice President, Funds Distributor, Inc. (since March 1993);
Vice President, The Boston Company Inc., (March 1993 to May 1993);
Vice President of Marketing, Calvert Group (1989 to March 1993);
Fidelity Investments (prior to 1989). Address: One Exchange Place,
Boston, Massachusetts 02109.
# JOHN E. PELLETIER. Vice President and Secretary of Dreyfus/Laurel,
The Dreyfus/Laurel Investment Series, The Dreyfus/Laurel Funds Trust
and The Dreyfus/Laurel Tax-Free Municipal Funds (since September
1994); Senior Vice President, General Counsel and Secretary, Funds
Distributor, Inc. (since April 1994); Senior Vice President, General
Counsel and Secretary, Premier Mutual Fund Services, Inc. (since
August 1994); Counsel, The Boston Company Advisors, Inc. (February
1992 to March 1994); Associate, Ropes & Gray (August 1990 to February
1992); Associate, Sidley & Austin (June 1989 to August 1990).
Address: One Exchange Place, Boston, Massachusetts 02109.
_____________________________
* "Interested person" of Dreyfus/Laurel, as defined in the 1940 Act.
o Member of the Audit Committee.
+ Member of the Nominating Committee.
# Officer also serves as an officer for other investment companies
advised by Dreyfus.
The officers and Directors of Dreyfus/Laurel as a group owned
beneficially less than 1% of the total shares of each Fund outstanding as
of January 31, 1995.
No officer or employee of Premier (or of any parent, subsidiary or
affiliate thereof) receives any compensation from Dreyfus/Laurel for
serving as an officer or Director of the Dreyfus/Laurel. In addition, no
officer or employee of The Dreyfus Corporation (or of any parent or
subsidiary thereof) serves as an officer or Director of Dreyfus/Laurel.
The Dreyfus/Laurel Funds pay each Director/Trustee who is not an officer
or employee of Premier or any of its affiliate thereof) or of Dreyfus
$27,000 per annum (and an additional $75,000 for the Chairman of the Board
of Directors/Trustees of the Dreyfus/Laurel Funds), $1,000 for each
Dreyfus/Laurel Funds meeting attended, plus $750 per joint Dreyfus/Laurel
Funds Audit Committee meeting attended, and reimburses each
Director/Trustee for travel and out-of-pocket expenses. For the fiscal
year ended October 31, 1994 the fees for meetings and expenses totaled
$25,897.
For the fiscal year ended October 31, 1994, the aggregate amount of
fees and expenses received by each Director from the Company and all other
Funds in The Dreyfus/Laurel Family of Funds for which such person is a
Board member were as follows:
<TABLE>
<CAPTION>
Total
Pension of Compensation
Retirement From the
Benefits Estimated Company
Aggregate Accrued as Annual and Fund
Compensation Part of Benefits Complex Paid
From the the Company's Upon to Board
Name of Board Member Company # Expenses Retirement Member
___________________ _____________ _____________ __________ _____________
<S> <C> <C> <C> <C>
Ruth Marie Adams $19,685 None None $ 37,500
Francis P. Brennan* 52,809 None None 112,500
Joseph S. DiMartino** N/A N/A N/A N/A
James M. Fitzgibbons 17,685 None None 31,750
J. Tomlinson Fort 7,500 None None 7,500
Arthur L. Goeschel 26,185 None None 32,500
Kenneth A. Himmel 18,685 None None 35,750
Arch S. Jeffrey 27,185 None None 33,500
Steven J. Lockwood 18,685 None None 35,750
Robert D. McBride 27,185 None None 33,500
John L. Propst 27,185 None None 33,500
John J. Sciullo 27,185 None None 33,500
Roslyn M. Watson 19,685 None None 36,750
</TABLE>
# Amount does not include reimbursed expenses for attending Board
meetings, which amounted to $10,876 for the Company.
* Compensation of Francis Brennan includes $75,000 paid by The
Dreyfus/Laurel Fund Family to be Chairman of the Board.
** Joseph S. DiMartino was not a director of the Company as of
October 31, 1994.
INVESTMENT MANAGEMENT AND OTHER SERVICES
Advisory Services. The Dreyfus Corporation ("Dreyfus") (200 Park
Avenue, New York, New York 10166) serves as each Fund's investment
manager. As of January 31, 1995, Dreyfus managed or administered
approximately $70 billion in assets for more than 1.9 million investor
accounts nationwide. Dreyfus is a wholly-owned subsidiary of Mellon Bank,
N.A. (One Mellon Bank Center, Pittsburgh, PA 15258) ("Mellon Bank"), each
Fund's prior investment manager. Pursuant to an Investment Management
Agreement, transferred from Mellon Bank to Dreyfus effective as of October
17, 1994, Dreyfus provides, or arranges for one or more third parties to
provide investment advisory, administrative, custody, fund accounting and
transfer agency services to each Fund. As investment manager, Dreyfus
manages each Fund by making investment decisions based on each Fund's
investment objectives, policies and restrictions, and is paid a fee as
described in the Fund's Prospectus. Each Fund continues to be managed by
the same individual who was the portfolio manager of the Fund prior to the
transfer of the Investment Management Agreement.
The Investment Management Agreement will continue from year to year
provided that a majority of the Directors who are not interested persons
of the Funds or Dreyfus and either a majority of all Directors or a
majority of the shareholders of each Fund approve their continuance.
Dreyfus/Laurel may terminate the Investment Management Agreement, without
prior notice to Dreyfus, upon the vote of a majority of the Board of
Directors or upon the vote of a majority of the outstanding voting
securities of each Fund. Dreyfus may terminate the Investment Management
Agreement upon 60 days' written notice to Dreyfus/Laurel. The Management
Agreement will terminate immediately and automatically upon its
assignment.
For the last three fiscal years, each Fund had the following
expenses:
<TABLE>
<CAPTION>
For the Fiscal Years Ended October 31,
1994 1993 1992
<S> <C> <C> <C>
Prime Fund
Advisory fees (gross of waiver) $241,885 $481,181 $515,936
Expense reimbursement from Adviser 147,972 343,319 281,690
Advisory fees waived -- -- 75,619
U.S. Treasury Fund
Advisory fees (gross of waiver) $152,242 $ 333,417 $ 346,626
Expense reimbursement from Adviser 111,352 267,656 272,313
Advisory fees waived -- -- --
Tax-Exempt Fund
Advisory fees (gross of waiver) $563,317 $1,156,577 $1,089,996
Expense reimbursement from Adviser 206,817 468,941 524,628
Advisory fees waived -- -- --
Institutional Prime Fund
Advisory fees (gross of waiver) $719,248 $2,085,334 $1,854,273
Expense reimbursement from Adviser -- 55,366 115,869
Advisory fees waived -- -- --
Institutional Government Fund
Advisory fees (gross of waiver) $380,929 $ 837,576 $828,072
Expense reimbursement from Adviser -- 53,054 168,501
Advisory fees waived -- -- --
Institutional U.S. Treasury Fund
Advisory fees (gross of waiver) $404,422 $1,252,103 $1,094,290
Expense reimbursement from Adviser 21,564 25,387 165,341
Advisory fees waived -- -- --
Institutional Treasury Only Fund
Advisory fees (gross of waiver) $55,152 $ 117,491 $ 46,9061
Expense reimbursement from Adviser 81,152 183,354 179,59731
Advisory fees waived -- -- --
Institutional Short-Term Bond Fund
Advisory fees (gross of waiver) $11,572 -- --
Expense reimbursement from Adviser 85,177 -- --
Advisory fees waived -- -- --
</TABLE>
Distribution and Shareholder Services Plan. The SEC has adopted Rule
12b-1 under the 1940 Act ("Rule") regulating the circumstances under which
investment companies such as Dreyfus/Laurel may, directly or indirectly,
bear the expenses of distributing their shares. The Rule defines
distribution expenses to include expenditures for "any activity which is
primarily intended to result in the sale of fund shares." The Rule, among
other things, provides that an investment company may bear such expenses
only pursuant to a plan adopted in accordance with the Rule. With respect
to the Investor Class of Prime, U.S. Treasury and Tax-Exempt Funds,
Dreyfus/Laurel has adopted a Distribution Plan ("Plan"), and may enter
into Selling Agreements with Servicing Agents pursuant to its Plan. With
respect to the Class I and Class II Shares of the Institutional Prime,
Institutional Government, Institutional U.S. Treasury, Institutional
Treasury Only and Institutional Short-Term Bond Funds, Dreyfus/Laurel has
adopted a Shareholder Servicing Plan (the "Institutional Plan")
(collectively, the "Plans"), and may enter into Shareholder Servicing and
Sales Support Agreements with Selling and Servicing Agents.
Under the Plan, each of the Prime, U.S. Treasury and Tax-Exempt
Funds, may spend annually up to 0.20% of the average ot its daily net
assets attributable to Investor shares for costs and expenses incurred in
connection with the sale of such shares.
The Institutional Plan permits each Institutional Fund to compensate
certain banks, brokers, dealers or other financial institutions (including
Dreyfus and its affiliates) (collectively "Agents") that have entered into
Shareholder Servicing Agreements ("Agreements") with Dreyfus/Laurel.
Payments under the Institutional Plan are calculated daily and paid
monthly at a rate or rates set from time to time by a Fund, provided that
the annual rate may not exceed: (i) 0.15% of the average daily net asset
value of the Class I Shares, or (ii) 0.05% of the average daily net asset
value of the Class II Shares.
The fees payable under the Institutional Plan are used primarily to
compensate or reimburse Agents for shareholder services provided, and
related expenses incurred by such Agents. The shareholder services
provided by Agents may include: (i) aggregating and processing purchase
and redemption requests for Class I or Class II Shares from their
customers and transmitting net purchase and redemption orders to the
Distributor or Transfer Agent; (ii) providing customers with a service
that invests the assets of their accounts in Class I or Class II Shares
pursuant to specific or pre-authorized instructions; (iii) processing
dividend and distribution payments from a Fund on behalf of customers;
(iv) providing information periodically to customers showing their
positions in Class I or Class II Shares; (v) arranging for bank wires; and
(vi) providing general shareholder liaison services.
The Plans provide that a report of the amounts expended under each
Plan, and the purposes for which such expenditures were incurred, must be
made to the Directors for their review at least quarterly. In addition,
each Plan provides that it may not be amended to increase materially the
costs which a Fund may bear for distribution pursuant to the Plan without
approval of a Fund's shareholders, and that other material amendments of
the Plan must be approved by the vote of a majority of the Directors and
of the Directors who are not interested persons of Dreyfus/Laurel and who
do not have any direct or indirect financial interest in the operation of
the Plan or in the related Shareholder Servicing and Sales Support
Agreements, cast in person at a meeting called for the purpose of
considering such amendments. Both Plans are subject to annual approval by
all of the Directors and by the Directors who are neither interested
persons nor have any direct or indirect financial interest in the
operation of either Plan or in the related Shareholder Servicing and Sales
Support Agreements, by vote cast in person at a meeting called for the
purpose of voting on the Plan. The Plans are terminable, as to a Fund's
class of shares, at any time by vote of a majority of the Directors who
are not interested persons and have no direct or indirect financial
interest in the operation of the Plan or in the related Shareholder
Servicing and Sales Support Agreements or by vote of the holders of a
majority of the outstanding shares of such class of a Fund.
Prior to September 23, 1994, Frank Russell Investment Management
Company acted as the Fund's Administrator and was paid the following
amounts in fees by the Funds:
<TABLE>
<CAPTION>
For Year Ended October 31
Fund 1994 1993 1992
<S> <C> <C> <C>
Prime Fund $ 13,821 $ 28,296 $ 37,888
U.S. Treasury Fund 8,699 19,612 24,699
Tax-Exempt Fund 26,808 56,584 65,898
Institutional Prime Fund 102,687 303,285 339,576
Institutional Government Fund 54,384 122,940 148,258
Institutional U.S. Treasury Fund 57,738 182,602 198,281
Institutional Treasury Only Fund 7,882 17,440 8,109
Institutional Short-Term Bond Fund 1,649 N/A N/A
</TABLE>
The Distributor; Sub-Administrator. Premier, a wholly-owned
subsidiary of Institutional Administration Services, Inc., serves as the
Funds' distributor pursuant to an agreement which is renewable annually.
Premier also acts as distributor for the other funds in the Premier Family
of Funds, for funds in the Dreyfus Family of Funds and for certain other
investment companies. Premier also serves as sub-administrator to the
Funds pursuant to a Sub-Administration Agreement effective October 17,
1994.
Custodian, Fund Accountant (All Funds) and Transfer and Dividend
Disbursing Agent (All Funds). Mellon Bank serves as custodian and fund
accountant with respect to each Fund. Mellon Bank provides portfolio and
shareholder recordkeeping required for regulatory and financial reporting
purposes. Prior to the effectivness of the Investment Management
Agreement for its services as custodian and fund accountant, Mellon Bank
was paid an annual fee of $30,000 per portfolio, and, for all portfolios,
an annual administrative account maintenance fee of $10,000, an annual on-
line fee of $3,600, an asset-based fee of .02% of the first $500 million
of Dreyfus/Laurel's net assets and .01% of net assets over $500 million,
plus a specified transaction fee for each transaction.
The Shareholder Services Group, Inc., a subsidiary of First Data
Corporation, serves as transfer agent ("Transfer Agent") for each Fund's
shares. The Transfer Agent is located at One American Express Plaza,
Providence, Rhode Island 02903.
FEDERAL LAW AFFECTING MELLON BANK
The Glass-Steagall Act of 1933 prohibits national banks from engaging
in the business of underwriting, selling or distributing securities and
prohibits a member bank of the Federal Reserve System from having certain
affiliations with an entity engaged principally in that business. The
activities of Mellon Bank in informing its customers of, and performing,
investment and redemption services in connection with a Fund, and in
providing services to a Fund as custodian, and transfer agent, shareholder
servicing and dividend disbursing agent, as well as Mellon Bank's
investment advisory activities, may raise issues under these provisions.
Mellon Bank has been advised by its counsel that the activities
contemplated under these arrangements are consistent with its statutory
and regulatory obligations.
Changes in either federal or state statutes and regulations relating
to the permissible activities of banks and their subsidiaries or
affiliates, as well as further judicial or administrative decisions or
interpretations of such future statutes and regulations, could prevent
Mellon Bank from continuing to perform all or a part of the above services
for its customers and/or a Fund. If Mellon Bank were prohibited from
serving a Fund in any of its present capacities the Board of Directors
would seek an alternative provider(s) of such services.
PORTFOLIO TRANSACTIONS
All portfolio transactions of each Fund are placed on behalf of a
Fund by Dreyfus. Debt securities purchased and sold by a Fund are
generally traded on a net basis (i.e., without commission) through dealers
acting for their own account and not as brokers, or otherwise involve
transactions directly with the issuer of the instrument. This means that
a dealer (the securities firm or bank dealing with a Fund) makes a market
for securities by offering to buy at one price and sell at a slightly
higher price. The difference between the prices is known as a spread.
Other portfolio transactions may be executed through brokers acting as
agent. A Fund will pay a spread or commissions in connection with such
transactions. Dreyfus uses its best efforts to obtain execution of
portfolio transactions at prices which are advantageous to a Fund and at
spreads and commission rates, if any, which are reasonable in relation to
the benefits received. Dreyfus also places transactions for other
accounts that it provides with investment advice.
Brokers and dealers involved in the execution of portfolio
transactions on behalf of a Fund are selected on the basis of their
professional capability and the value and quality of their services. In
selecting brokers or dealers, Dreyfus will consider various relevant
factors, including, but not limited to, the size and type of the
transaction; the nature and character of the markets for the security to
be purchased or sold; the execution efficiency, settlement capability, and
financial condition of the broker-dealer; the broker-dealer's execution
services rendered on a continuing basis; and the reasonableness of any
spreads (or commissions, if any). Any spread, commission, fee or other
remuneration paid to an affiliated broker-dealer is paid pursuant to
Dreyfus/Laurel's procedures adopted in accordance with Rule 17e-1 of the
1940 Act.
Brokers or dealers may be selected who provide brokerage and/or
research services to a Fund and/or other accounts over which Dreyfus or
its affiliates exercise investment discretion. Such services may include
advice concerning the value of securities; the advisability of investing
in, purchasing or selling securities; the availability of securities or
the purchasers or sellers of securities; furnishing analyses and reports
concerning issuers, industries, securities, economic factors and trends,
portfolio strategy and performance of accounts; and effecting securities
transactions and performing functions incidental thereto (such as
clearance and settlement).
The receipt of research services from broker-dealers may be useful to
Dreyfus, in rendering investment management services to a Fund and/or its
other clients; and, conversely, such information provided by brokers or
dealers who have executed transaction orders on behalf of other clients of
Dreyfus may be useful to these organizations in carrying out their
obligations to a Fund. The receipt of such research services does not
reduce these organizations' normal independent research activities;
however, it enables these organizations to avoid the additional expenses
which might otherwise be incurred if these organizations were to attempt
to develop comparable information through their own staffs.
The Directors periodically review Dreyfus' performance of its
responsibilities in connection with the placement of portfolio
transactions on behalf of a Fund and review the prices paid by the Fund
over representative periods of time to determine if they are reasonable in
relation to the benefits to the Fund.
Although Dreyfus manages other accounts in addition to the Funds,
investment decisions for each Fund are made independently from decisions
made for these other accounts. It sometimes happens that the same
security is held by more than one of the accounts managed by Dreyfus.
Simultaneous transactions may occur when several accounts are managed by
the same investment adviser, particularly when the same investment
instrument is suitable for the investment objective of more than one
account.
When more than one account is simultaneously engaged in the purchase
or sale of the same investment instrument, the prices and amounts are
allocated in accordance with a formula considered by Dreyfus to be
equitable to each account. In some cases this system could have a
detrimental effect on the price or volume of the investment instrument as
far as a Fund is concerned. In other cases, however, the ability of the
Fund to participate in volume transactions will produce better executions
for the Fund. While the Directors will continue to review simultaneous
transactions, it is their present opinion that the desirability of
retaining Dreyfus as investment advisers to the Funds outweighs any
disadvantages that may be said to exist from exposure to simultaneous
transactions.
None of the Funds paid a stated brokerage commission.
NET ASSET VALUE
Each Fund's net asset value per share is calculated on each business
day. A business day is any day on which the New York Stock Exchange is
open for business. Prime, U.S. Treasury and Tax-Exempt Funds determine
net asset value twice daily, as of 12:00 p.m. and 4:00 p.m., Eastern time.
Institutional Prime, Institutional Government, Institutional U.S. Treasury
and Institutional Treasury Only Funds determine net asset value three
times daily, as of 12:00 p.m., 3:00 p.m. and 4:00 p.m., Eastern time.
It is the policy of each Fund to use its best efforts to maintain a
constant price per share of $1.00. There can be no assurance that a $1.00
net asset value per share will be maintained. These Funds' portfolio
instruments are valued based on the amortized cost valuation technique
pursuant to Rule 2a-7 under the 1940 Act. This involves valuing an
instrument at its cost and thereafter assuming a constant amortization to
maturity of any discount or premium, even though the portfolio security
may increase or decrease in market value generally in response to changes
in interest rates. While this method provides certainty in valuation, it
may result in periods during which value, as determined by amortized cost,
is higher or lower than the price the Fund would receive if it sold the
instrument.
The use of amortized cost is permitted by Rule 2a-7 under the 1940
Act. Pursuant to the provisions of Rule 2a-7, the Directors have
established procedures reasonably designed to stabilize each Fund's price
per share, as computed for the purpose of sale and redemption, at $1.00.
These procedures include the determination by the Directors, at such times
as they deem appropriate, of the extent of deviation, if any, of each
Fund's current net asset value, using market values, from $1.00; periodic
review by the Directors of the amount of and the methods used to calculate
the deviation; maintenance of records of the determination; and review of
such deviations. The procedures employed to stabilize each Fund's price
per share require the Directors to promptly consider what action, if any,
should be taken by the Directors if such deviation exceeds 1/2 of one
percent. Such procedures also require the Directors to take appropriate
action to eliminate or reduce, to the extent reasonably practicable,
material dilution or other unfair effects resulting from any deviation.
In addition to such procedures, Rule 2a-7 requires each Fund to purchase
instruments having remaining maturities of 397 days or less, to maintain a
dollar-weighted average portfolio maturity of 90 days or less and to
invest only in securities determined by the Directors to be of high
quality, as defined in Rule 2a-7, with minimal credit risks.
In periods of declining interest rates, the indicated daily yield on
shares of a Fund computed by dividing the annualized daily income on the
Fund by the net asset value computed as above may tend to be higher than a
similar computation made by using a method of valuation based upon market
prices and estimates. In periods of rising interest rates, the indicated
daily yield on shares of a Fund computed the same way may tend to be lower
than a similar computation made by using a method of calculation based
upon market prices and estimates.
PERFORMANCE CALCULATIONS
Each Fund computes its current annualized and compound effective
yields using standardized methods required by the SEC. The annualized
yield for each Fund is computed by (a) determining the net change in the
value of a hypothetical account having a balance of one share at the
beginning of a seven calendar day period; (b) dividing the net change by
the value of the account at the beginning of the period to obtain the base
period return; and (c) annualizing the results (i.e., multiplying the base
period return by 365/7). The net change in the value of the account
reflects the value of additional shares purchased with dividends declared
on both the original share and such additional shares, but does not
include realized gains and losses or unrealized appreciation and
depreciation. Compound effective yields are computed by adding 1 to the
base period return (calculated as described above), raising that sum to a
power equal to 365/7 and subtracting 1.
Yield may fluctuate daily and does not provide a basis for
determining future yields. Because each Fund's yield fluctuates, its
yield cannot be compared with yields on savings accounts or other
investment alternatives that provide an agreed-to or guaranteed fixed
yield for a stated period of time. However, yield information may be
useful to an investor considering temporary investments in money market
instruments. In comparing the yield of one money market fund to another,
consideration should be given to each Fund's investment policies,
including the types of investments made, length of maturities of portfolio
securities, the methods used by each fund to compute the yield (methods
may differ) and whether there are any special account charges which may
reduce effective yield.
The following are the current and effective yields for the Funds for
the seven-day period ended October 31, 1994:
<TABLE>
<CAPTION>
Current Effective
Investor Yield Class R Investor Yield Class R
<S> <C> <C> <C> <C> <C> <C>
Prime Fund 4.30% 4.50% 4.40% 4.61%
U.S. Treasury Fund 4.12% 4.32% 4.20% 4.41%
Tax-Exempt Fund 2.72% 2.92% 2.76% 2.97%
Class I Class II Class I Class II
Class III Class III
Institutional Prime Fund 4.70% - 4.81% -
Institutional Government Fund 4.59% - 4.70% -
Institutional U.S. Treasury Fund 4.51% - 4.61% -
Class II
Institutional Treasury Only Fund 4.50% - 4.60% -
Class I
Class II
Class III Class I Class III
Institutional Short-Term Bond Fund 4.25% 4.55% 4.66%
</TABLE>
The Tax-Exempt Fund may also, from time to time, utilize tax-
equivalent yields. The tax-equivalent yield is calculated by dividing
that portion of the Fund's yield (as calculated above) which is tax-exempt
by one minus a stated tax rate and adding the quotient to that portion of
the Fund's yield, if any (as calculated above) that is not tax-exempt.
The following are the current and effective tax-equivalent yields based on
a tax rate of 39.6% for the Tax-Exempt Fund for the seven day period ended
October 31, 1994:
Investor Class R
Current Tax-Equivalent Yield 4.50 4.83
Effective Tax-Equivalent Yield 4.57 4.92
The Tax-Exempt Fund may from time to time for illustrative purposes
only use tax-equivalency tables which compare tax-exempt yields to their
equivalent taxable yields for relevant federal income tax brackets. The
following is an example of such a table:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Tax Bracket 28% 31% 36% 39.6%
Tax-Exempt Yields Equivalent Taxable Yields
4.5% 6.25% 6.52% 7.03% 7.45%
5.0% 6.94% 7.25% 7.81% 8.28%
5.5% 7.64% 7.97% 8.59% 9.11%
6.0% 8.33% 8.70% 9.38% 9.93%
6.5% 9.03% 9.42% 10.16% 10.76%
</TABLE>
A Fund may from time to time advertise non-standardized performance,
including average annual total return, computed as noted above.
For the fiscal year ending October 31, 1994, the average annual total
return for each Fund was as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Investor Class R Class I Class II Class III
Prime Fund 2.14% 3.52% - - -
U.S. Treasury Fund 1.96% 3.37% - - -
Tax-Exempt Fund 1.23% 2.29% - - -
Institutional Prime Fund - - 3.67% - -
Institutional Government Fund - - 2.63% - -
Institutional U.S. Treasury Fund - - 3.55% - -
Institutional Treasury Only Fund - - - 3.53% 1.97%
Institutional Short Term Bond Fund - - 2.82% - -
</TABLE>
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
Federal Tax--General. In order to qualify for treatment as a
regulated investment company ("RIC") under the Internal Revenue Code of
1986, as amended, ("Code") each Fund -- each of which is treated as a
separate corporation for federal tax purposes-- must distribute to its
shareholders for each taxable year at least 90% of its investment company
taxable income (generally consisting of taxable net investment income and
net short-term capital gain, or, in the case of the Tax-Exempt Fund, at
least 90% of the sum of that income plus its net interest income
excludable from gross income under section 103(a) of the Code -- and must
meet several additional requirements. For each Fund these requirements
include the following: (1) the Fund must derive at least 90% of its gross
income each taxable year from dividends, interest, payments with respect
to securities loans and gains from the sale or other disposition of
securities or foreign currencies or other income (including gains from
options, futures, or forward contracts) derived with respect to its
business of investing in securities or other currencies ("Income
Requirement"); (2) the Fund must derive less than 30% of its gross income
each taxable year from the sale or other disposition of securities held
for less than three months -- options, futures, or forward contracts
(other than those on foreign currencies), or foreign currencies (or
options, futures or forward contacts thereon) that are not directly
related to the Fund's principal business of investing in securities (or
options and futures with respect thereto) ("Short-Short Limitation");
(3) at the close of each quarter of the Fund's taxable year, at least 50%
of the value of its total assets must be represented by cash and cash
items, U.S. government securities, securities of other RICs and other
securities, with those other securities limited, in respect of any one
issuer, to an amount that does not exceed 5% of the value of the Fund's
total assets and that does not represent more than 10% of the issuer's
outstanding voting securities; and (4) at the close of each quarter of the
Fund's taxable year, not more than 25% of the value of its total assets
may be invested in securities (other than U.S. government securities or
the securities of other RICs) of any one issuer.
Dividends and other distributions declared by a Fund in October,
November or December of any year and payable to shareholders of record on
a date in any of those months are deemed to have been paid by the Fund and
received by the shareholders on December 31 of that year if the
distributions are paid by the Fund during the following January.
Accordingly, those distributions will be taxed to shareholders for the
year in which that December 31 falls.
If Fund shares are sold at a loss after being held six months or less
the loss will be treated as a long-term, instead of short-term, capital
loss to the extent of capital gain distributions on those shares.
Investors also should be aware that if shares are purchased shortly before
the record date for any distribution, the shareholder will pay full price
for the shares and receive some portion of the price back as a taxable
dividend or capital gain distribution.
If a Fund retains net capital gain (the excess of net long-term
capital gains over net short-term capital loss) for reinvestment, although
it has no plans to do so, the Fund may elect to treat such amounts as
having been distributed to its shareholders. As a result, the Fund's
shareholders would be subject to tax on the undistributed net capital
gain, would be able to claim their proportionate share of the federal
income tax paid by the Fund on that gain as a credit against their own
federal income tax liabilities, and would be entitled to an increase in
their basis for their Fund shares.
Hedging Transactions. Certain Funds may employ hedging strategies,
such as writing (selling) and purchasing options and futures contracts and
entering into forward contracts. The use of these strategies involves
complex rules that will determine for income tax purposes the character
and timing of recognition of the gains and losses a Fund realizes in
connection therewith. Income from foreign currencies (except certain
gains therefrom may be excluded by future regulations) and income from
transactions in options, futures and forward contracts derived by a Fund
with respect to its business of investing in securities or foreign
currencies, will qualify as permissible income under the Income
Requirement. However, income from the disposition of options and futures
contracts, other than those on foreign currencies, will be subject to the
Short-Short Limitation if they are held for less than three months.
Income from the disposition of foreign currencies, and options, futures
and forward contracts thereon, that are not directly related to a Fund's
principal business of investing in securities (or options and futures with
respect thereto) also will be subject to the Short-Short Limitation if
they are held for less than three months.
If a Fund satisfies certain requirements, any increase in value of a
position that is part of a "designated hedge" will be offset by any
decrease in value (whether realized or not) of the offsetting hedging
position during the period of the hedge for purposes of determining
whether the Fund satisfies the Short-Short Limitation. Thus, only the net
gain (if any) from the designated hedge will be included in gross income
for purposes of that limitation. Each Fund will consider, when it engages
in hedging strategies, whether it should seek to qualify for this
treatment. To the extent a Fund does not qualify therefor, it may be
forced to defer the closing out of certain options, futures and forward
contracts beyond the time when it otherwise would be advantageous to do
so, in order for the Fund to continue to qualify as a RIC.
Certain futures contracts in which some Funds may invest are "section
1256 contracts." Section 1256 contracts held by a Fund at the end of each
taxable year are "marked-to-market" (that is, treated as sold for their
fair market value) for federal income tax purposes, with the result that
unrealized gains or losses are treated as though they were realized.
Sixty percent of any net gain or loss recognized on these deemed sales,
and 60% of any net realized gain or loss from any actual sales of section
1256 contracts, are treated as long-term capital gain or loss, and the
balance is treated as short-term capital gain or loss. These contracts
also may be marked-to-market for purposes of the 4% excise tax described
in the Prospectuses ("Excise Tax") and for other purposes.
Certain futures contracts entered into by a Fund may result in
"straddles" for federal income tax purposes. The straddle rules may
affect the character of gains (or losses) realized by a Fund on straddle
positions. In addition, losses realized by the Fund on straddle positions
may be deferred under the straddle rules. If a Fund makes certain
elections, the amount, character and timing of the recognition of gains
and losses from the affected straddle positions will be determined under
rules that vary according to the elections made.
Tax-Exempt Fund. Dividends paid by the Tax-Exempt Fund will qualify
as "exempt-interest dividends," and thus will be excludable from gross
income by its shareholders, if that Fund satisfies the requirement that,
at the close of each quarter of its taxable year, at least 50% of the
value of its total assets consists of securities the interest on which is
excludable from gross income under section 103(a) of the Code; that Fund
intends to continue to satisfy this requirement. The aggregate dividends
excludable from the shareholders' treatment of dividends from that Fund
under local and state income tax laws may differ from the treatment
thereof under the Code.
If shares of the Tax-Exempt Fund are sold at a loss after being held
for six months or less, the loss will be disallowed to the extent of any
exempt-interest dividends received on those shares.
Tax-exempt interest attributable to certain private activity bonds
("PABs") (including, in the case of a RIC receiving interest on such
bonds, a proportionate part of the exempt-interest dividends paid by that
RIC) is an item of tax preference for purposes of the alternative minimum
tax. Exempt-interest dividends received by a corporate shareholder also
may be indirectly subject to that tax without regard to whether the Tax-
Exempt Fund's tax-exempt interest was attributable to those bonds.
Entities or persons who are "substantial users" (or persons related
to "substantial users") of facilities financed by PABs or industrial
development bonds ("IDBs") should consult their tax advisers before
purchasing shares of the Tax-Exempt Fund because, for users of certain of
these facilities, the interest on those bonds is not exempt from federal
income tax. For these purposes, the term "substantial user" is defined
generally to include a "non-exempt person" who regularly uses in trade or
business a part of a facility financed from the proceeds of PABs or IDBs.
Up to 85% of social security and railroad retirement benefits may be
included in taxable income for recipients whose adjusted gross income
(including income from tax-exempt sources such as the Tax-Exempt Fund)
plus 50% of their benefits exceeds certain base amounts. Exempt-interest
dividends paid by that Fund still are tax-exempt to the extent described
in the Fund's Prospectus; they are only included in the calculation of
whether a recipient's income exceeds the established amounts.
If the Tax-Exempt Fund invests in any instrument that generate
taxable income, under the circumstances described in the Prospectus,
distributions of the interest earned thereon will be taxable to that
Fund's shareholders as ordinary income to the extent of that Fund's
earnings and profits. Moreover, if the Tax-Exempt Fund realizes capital
gain as a result of market transactions, any distribution of that gain
will be taxable to its shareholders. There also may be collateral federal
income tax consequences regarding the receipt of exempt-interest dividends
by shareholders such as S corporations, financial institutions and
property and casualty insurance companies. A shareholder falling into any
such category should consult its tax adviser concerning its investment in
shares of the Tax-Exempt Fund.
State and Local Taxes. Depending upon the extent of a Fund's
activities in states and localities in which its offices are maintained,
in which its agents or independent contractors are located, or in which it
is otherwise deemed to be conducting business, the Fund may be subject to
the tax laws of such states or localities. Shareholders are advised to
consult their tax advisers concerning the application of state and local
taxes.
Foreign Shareholders - U.S. Federal Income Taxation. U.S. federal
income taxation of a shareholder who, as to the United States, is a non-
resident alien individual, a foreign trust or estate, a foreign
corporation or a foreign partnership (a "foreign shareholder"), depends on
whether the income from a Fund is "effectively connected" with a U.S.
trade or business carried on by the shareholder, as discussed generally
below. Special U.S. federal income tax rules that differ from those
described below may apply to certain foreign persons who invest in a Fund.
For example, the tax consequences to a foreign shareholder entitled to
claim the benefits of an applicable tax treaty may be different from those
described below. Foreign shareholders are advised to consult their own
tax advisers with respect to the particular tax consequences to them of an
investment in a Fund.
Foreign Shareholders - Income Not Effectively Connected. If the
income from a Fund is not effectively connected with a U.S. trade or
business carried on by the foreign shareholder, distributions of
investment company taxable income generally will be subject to a U.S.
federal withholding tax of 30% (or lower treaty rate) on the gross amount
of the distribution. Foreign shareholders also may be subject to U.S.
federal withholding tax on income resulting from any election by a Fund to
treat foreign taxes paid by it as paid by its shareholders (see discussion
above), but foreign shareholders will not be able to claim a credit or
deduction for the foreign taxes treated as having been paid by them.
Capital gains realized by foreign shareholders on the sale of Fund
shares and distributions to them of net capital gain, as well as amounts
retained by the Fund that are designated as undistributed capital gains,
generally will not be subject to U.S. federal income tax unless the
foreign shareholder is a non-resident alien individual and is physically
present in the United States for more than 182 days during the taxable
year. However, this rule only applies in exceptional cases, because any
individual present in the United States for more than 182 days during the
taxable year generally is treated as a resident for U.S. federal income
tax purposes on his worldwide income at the graduated rates applicable to
U.S. citizens, rather than the 30% U.S. federal withholding tax rate. In
the case of certain foreign shareholders, a Fund may be required to
withhold U.S. federal income tax at a rate of 31% of capital gain
distributions and of the gross proceeds from a redemption of Fund shares
unless the shareholder furnishes the Fund with a certificate regarding the
shareholder's foreign status.
Foreign Shareholders - Effectively Connected Income. If income from
a Fund is effectively connected with a U.S. trade or business carried on
by a foreign shareholder, then all distributions to that shareholder and
any gains realized by that shareholder on the disposition of the Fund
shares will be subject to U.S. federal income tax at the graduated rates
applicable to U.S. citizens and domestic corporations, as the case may be.
Foreign shareholders also may be subject to the branch profits tax.
Foreign Shareholders - Estate Tax. Foreign individuals generally are
subject to U.S. federal estate tax on their U.S. situs property, such as
shares of a Fund, that they own at the time of their death. Certain
credits against that tax and relief under applicable tax treaties may be
available.
Pennsylvania Personal Property Tax Exemption. Dreyfus/Laurel has
obtained a Certificate of Authority to do business as a foreign
corporation in Pennsylvania. In the opinion of counsel, shares of
Dreyfus/Laurel are exempt from Pennsylvania personal property taxes.
FINANCIAL STATEMENTS
The financial statements for the fiscal year ended October 31, 1994,
including notes to the financial statements and supplementary information
and the Report of Independent Auditors are included in the Annual Report
to shareholders. A copy of the Annual Report accompanies this Statement
of Additional Information. The financial statements from the Annual
Report are incorporated herein by reference.
OTHER INFORMATION
Auditor. KPMG Peat Marwick was appointed by the Directors to serve
as the Funds' independent auditors for the year ending October 31, 1995,
providing audit services including (1) examination of the annual financial
statements, (2) assistance, review and consultation in connection with SEC
(3) review of the annual federal income tax return and the Pennsylvania
excise tax return filed on behalf of Dreyfus/Laurel.
Legal Counsel. Kirkpatrick & Lockhart, 1800 M Street, N.W., South
Lobby - 9th Floor, Washington, D.C. 20036, has passed upon the legality of
the shares offered by the Prospectus and this Statement of Additional
Information.
APPENDIX
DESCRIPTION OF SECURITIES RATINGS
Municipal and Debt Instruments Ratings
Moody's Investors Service, Inc. (Moody's):
Aaa -- Bonds which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk and are
generally referred to as "gilt-edge." Interest payments are protected by
a large or exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position
of such issues.
Aa -- Bonds which are rated Aa are judged to be of high quality by
all standards. Together with the Aaa group they comprise what are
generally known as high grade bonds. They are rated lower than the best
bonds because margins of protection may not be as large as in Aaa
Securities or fluctuation of protective elements may be of greater
amplitude or there may be other elements present which make the long-term
risks appear somewhat larger than in Aaa securities.
A -- Bonds rated A possess many favorable investment attributes and
are considered "upper medium grade obligations."
Those Bonds in the Aa and A group which Moody's believes possess the
strongest investment attributes are designated by the symbols Aa 1 and A
1.
Standard & Poor's Ratings Group ("S&P"):
AAA -- This is the highest rating assigned by S&P to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.
AA -- Bonds rated AA also qualify as high-quality debt obligations.
Capacity to pay principal and interest is very strong, and in the majority
of instances they differ from AAA issues only in small degree.
A -- Bonds rated A have a strong capacity to pay principal and
interest, although they are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions.
Plus (+) or Minus (-): The AA rating may be modified by the addition
of a plus or minus sign to show relative standing within the AA rating
category.
Short Term Municipal Loans
Moody's:
MIG-1/VMIG-1 -- Securities rated MIG-1/VMIG-1 are of the best
quality, enjoying strong protection from established cash flows of funds
for their servicing or from established and broad-based access to the
market for refinancing, or both.
MIG-2/VMIG-2 -- Loans bearing the MIG-2/VMIG-2 designation are of
high quality, with margins of protection ample although not so large as in
the MIG-1/VMIG-1 group.
S&P:
SP-1 -- Short-term municipal securities bearing the SP-1 designation
have very strong or strong capacity to pay principal and interest. Those
issues rated SP-1 which are determined to possess overwhelming safety
characteristics will be given a plus (+) designation.
SP-2 -- Issues rated SP-2 have satisfactory capacity to pay principal
and interest.
Other Municipal Securities and Commercial Paper Ratings
Moody's:
Commercial paper rated Prime by Moody's is based upon its evaluation
of many factors, including: (l) management of the issuer; (2) the
issuer's industry or industries and the speculative-type risks which may
be inherent in certain areas; (3) the issuer's products in relation to
competition and customer acceptance; (4) liquidity; (5) amount and quality
of long-term debt; (6) trend of earnings over a period of ten years; (7)
financial strength of a parent company and the relationships which exist
with the issue; and (8) recognition by the management of obligations which
may be present or may arise as a result of public interest questions and
preparations to meet such obligations. Relative differences in these
factors determine whether the issuer's commercial paper is rated Prime-l,
Prime-2, or Prime-3.
Prime-1 indicates a superior capacity for repayment of short-term
promissory obligations. Prime-1 repayment capacity will normally be
evidenced by the following characteristics: (1) leading market positions
in well established industries; (2) high rates of return on funds
employed; (3) conservative capitalization structures with moderate
reliance on debt and ample asset protection; (4) broad margins in earnings
coverage of fixed financial charges and high internal cash generation; and
(5) well established access to a range of financial markets and assured
sources of alternative liquidity.
Prime-2 indicates a strong capacity for repayment of short-term
promissory obligations. This will normally be evidenced by many of the
characteristics cited above but to a lesser degree. Earnings trends and
coverage ratios, while sound, will be more subject to variation.
Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternative liquidity is
maintained.
S&P:
Commercial paper rated by S&P has the following characteristics:
liquidity ratios are adequate to meet cash requirements. Long-term senior
debt is rated A or better. The issuer has access to at least two
additional channels of borrowing. Basic earnings and cash flow have an
upward trend with allowance made for unusual circumstances. Typically,
the issuer's industry is well established and the issuer has a strong
position within the industry. The reliability and quality of management
are unquestioned. Relative strength or weakness of the above factors
determine whether the issuer's commercial paper is rated A-l, A-2, or A-3.
A-1 -- This designation indicates that the degree of safety regarding
timely payment is either overwhelming or very strong. Those issues
determined to possess overwhelming safety characteristics are denoted with
a plus (+) sign designation.
A-2 -- Capacity for timely payment on issues with this designation is
strong. However, the relative degree of safety is not as high as for
issues designated A-1.
Fitch Investors Service, Inc. ("Fitch"):
Commercial paper rated by Fitch reflects Fitch's current appraisal of
the degree of assurance of timely payment of such debt. An appraisal
results in the rating of an issuer's paper as F-1, F-2, F-3, or F-4.
F-1 -- This designation indicates that the commercial paper is
regarded as having the strongest degree of assurance for timely payment.
F-2 -- Commercial paper issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than those issues
rated F-1.
Duff and Phelps, Inc.:
Duff & Phelps' short-term ratings are consistent with the rating
criteria utilized by money market participants. The ratings apply to all
obligations with maturities of under one year, including commercial paper,
the uninsured portion of certificates of deposit, unsecured bank loans,
master notes, bankers acceptances, irrevocable letters of credit, and
current maturities of long-term debt. Asset-backed commercial paper is
also rated according to this scale.
Emphasis is placed on liquidity which is defined as not only cash
from operations, but also access to alternative sources of funds including
trade credit, bank lines, and the capital markets. An important
consideration is the level of an obligor's reliance on short-term funds on
an ongoing basis.
The distinguishing feature of Duff & Phelps' short-term ratings is
the refinement of the traditional '1' category. The majority of short-
term debt issuers carry the highest rating, yet quality differences exist
within that tier. As a consequence, Duff & Phelps has incorporated
gradations of '1+' (one plus) and '1-' (one minus) to assist investors in
recognizing those differences.
Duff 1+--Highest certainty of timely payment. Short-term liquidity,
including internal operating factors and/or access to alternative sources
of funds, is outstanding, and safety is just below risk-free U.S. Treasury
short-term obligations.
Duff 1--Very high certainty of timely payment. Liquidity factors are
excellent and supported by good fundamental protection factors. Risk
factors are minor.
Duff 1- -- High certainty of timely payment. Liquidity factors are
strong and supported by good fundamental protection factors. Risk factors
are very small.
Good Grade
Duff 2--Good certainty of timely payment. Liquidity factors and
company fundamentals are sound. Although ongoing funding needs may
enlarge total financing requirements, access to capital markets is good.
Risk factors are small.
Satisfactory Grade
Duff 3--Satisfactory liquidity and other protection factors qualify
issue as to investment grade. Risk factors are larger and subject to more
variation. Nevertheless, timely payment is expected.
Non-Investment Grade
Duff 4--Speculative investment characteristics. Liquidity is not
sufficient to ensure against disruption in debt service. Operating
factors and market access may be subject to a high degree of variation.
Default
Duff 5--Issuer failed to meet scheduled principal and/or interest
payments.
IBCA, Inc.:
In addition to conducting a careful review of an institution's
reports and published figures, IBCA's analysts regularly visit the
companies for discussions with senior management. These meetings are
fundamental to the preparation of individual reports and ratings. To keep
abreast of any changes that may affect assessments, analysts maintain
contact throughout the year with the management of the companies they
cover.
IBCA's analysts speak the languages of the countries they cover,
which is essential to maximize the value of their meetings with management
and to properly analyze a company's written materials. They also have a
thorough knowledge of the laws and accounting practices that govern the
operations and reporting of companies within the various countries.
Often, in order to ensure a full understanding of their position,
companies entrust IBCA with confidential data. While these data cannot be
disclosed in reports, they are taken into account when assigning our
ratings. Before dispatch to subscribers, a draft of the report is
submitted to each company to permit correction of any factual errors and
to enable clarification of issues raised.
IBCA's Rating Committees meet at regular intervals to review all
ratings and to ensure that individual ratings are assigned consistently
for institutions in all the countries covered. Following the Committee
meetings, ratings are issued directly to subscribers. At the same time,
the company is informed of the ratings as a matter of courtesy, but not
for discussion.
A1+--Obligations supported by the highest capacity for timely
repayment.
A1--Obligations supported by a very strong capacity for timely
repayment.
A2--Obligations supported by a strong capacity for timely repayment,
although such capacity may be susceptible to adverse changes in business,
economic or financial conditions.
B1--Obligations supported by an adequate capacity for timely
repayment. Such capacity is more susceptible to adverse changes in
business, economic, or financial conditions than for obligations in higher
categories.
B2--Obligations for which the capacity for timely repayment is
susceptible to adverse changes in business, economic or financial
conditions.
C1--Obligations for which there is an inadequate capacity to ensure
timely repayment.
D1--Obligations which have a high risk of default or which are
currently in default.
DESCRIPTION OF MUNICIPAL SECURITIES
Municipal Notes generally are used to provide for short-term capital
needs and usually have maturities of one year or less. They include the
following:
1. Tax Anticipation Notes are issued to finance working capital
needs of municipalities. Generally, they are issued in anticipation of
various seasonal tax revenues, such as income, sales, use and business
taxes, and are payable from these specific future taxes.
2. Revenue Anticipation Notes are issued in expectation of receipt
of other types of revenues, such as Federal revenues available under the
Federal Revenue Sharing Programs.
3. Bond Anticipation Notes are issued to provide interim financing
until long-term financing can be arranged. In most cases, the long-term
bonds then provide the money for the repayment of the Notes.
4. Construction Loan Notes are sold to provide construction
financing. After successful completion and acceptance, many projects
receive permanent financing through the Federal Housing Administration
under the Federal National Mortgage Association ("Fannie Mae") or the
Government National Mortgage Association ("Ginnie Mae").
5. Tax-Exempt Commercial Paper is a short-term obligation with a
stated maturity of 365 days or less. It is issued by agencies of state
and local governments to finance seasonal working capital needs or as
short-term financing in anticipation of longer term financing.
Municipals Bonds, which meet longer term capital needs and generally
have maturities of more than one year when issued, have three principal
classifications:
1. General Obligation Bonds are issued by such entities as states,
counties, cities, towns, and regional districts. The proceeds of these
obligations are used to fund a wide range of public projects, including
construction or improvement of schools, highways and roads, and water and
sewer systems. The basic security behind General Obligation Bonds is the
issuer's pledge of its full faith and credit and taxing power for the
payment of principal and interest. The taxes that can be levied for the
payment of debt service may be limited or unlimited as to the rate or
amount of special assessments.
2. Revenue Bonds generally are secured by the net revenues derived
from a particular facility, group of facilities, or, in some cases, the
proceeds of a special excise or other specific revenue source. Revenue
Bonds are issued to finance a wide variety of capital projects including
electric, gas, water and sewer systems; highways, bridges, and tunnels;
port and airport facilities; colleges and universities; and hospitals.
Many of these Bonds provide additional security in the form of a debt
service reserve fund to be used to make principal and interest payments.
Housing authorities have a wide range of security, including partially or
fully insured mortgages, rent subsidized and/or collateralized mortgages,
and/or the net revenues from housing or other public projects. Some
authorities provide further security in the form of a state's ability
(without obligation) to make up deficiencies in the debt service reserve
fund.
3. Industrial Development Bonds are considered municipal bonds if
the interest paid thereon is exempt from Federal income tax and are issued
by or on behalf of public authorities to raise money to finance various
privately operated facilities for business and manufacturing, housing,
health, sports, and pollution control. These Bonds are also used to
finance public facilities such as airports, mass transit systems, ports,
and parking. The payment of the principal and interest on such Bonds is
dependent solely on the ability of the facility's user to meet its
financial obligations and the pledge, if any, of real and personal
property as security for such payment.
4. Other Municipal Obligations incurred for a variety of financing
purposes, including: Municipal Leases, which may take the form of a lease
or an installment purchase or conditional sale contract, are issued by
state and local governments and authorities to acquire a wide variety of
equipment and facilities such as fire and sanitation vehicles,
telecommunications equipment and other capital assets. Municipal leases
frequently have special risks not normally associated with general
obligation or revenue bonds. Leases and installment purchase or
conditional sale contracts (which normally provide for title to the leased
asset to pass eventually to the government issuer) have evolved as a means
for governmental issuers to acquire property and equipment without meeting
the constitutional and statutory requirements for the issuance of debt.
The debt-issuance limitations of many state constitutions and statutes are
deemed to be inapplicable because of the inclusion in many leases or
contracts of "non-appropriation" clauses that provide that the
governmental issuer has no obligation to make future payments under the
lease or contract unless money is appropriated for such purpose by the
appropriate legislative body on a yearly or other periodic basis. To
reduce this risk, the Tax-Exempt Money Fund will only purchase Municipal
leases subject to a non-appropriation clause when the payment of principal
and accrued interest is backed by an unconditional irrevocable letter of
credit, or guarantee of a bank or other entity acceptable to the Adviser.
PREMIER SMALL COMPANY STOCK FUND
CLASS A, CLASS B, CLASS C AND CLASS R SHARES
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
March 1, 1995
This Statement of Additional Information ("SAI"), which is not a
prospectus, supplements and should be read in conjunction with the current
Prospectus of the Premier Small Company Stock Fund (formerly the Laurel
Smallcap Stock Fund) (the "Fund"), dated March 1, 1995, as it may be revised
from time to time. The Fund is a separate portfolio of The Dreyfus/Laurel
Funds, Inc. (formerly The Laurel Funds, Inc.), an open-end, diversified,
management investment company (the "Company"), known as a mutual fund. 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 the
following numbers:
Call Toll Free 1-800-645-6561
In New York City -- Call 1-718-895-1206
On Long Island -- Call 794-5452
The Dreyfus Corporation ("Dreyfus") serves as the Fund's investment
manager.
Premier Mutual Fund Services, Inc. (the "Distributor") is the
distributor of the Fund's shares.
TABLE OF CONTENTS
Page
Investment Objective and Management Policies. . . . . . . . B-2
Management of the Fund. . . . . . . . . . . . . . . . . . . B-11
Management Arrangements . . . . . . . . . . . . . . . . . . B-17
Purchase of Fund Shares . . . . . . . . . . . . . . . . . . B-18
Distribution and Service Plans. . . . . . . . . . . . . . . B-20
Redemption of Fund Shares . . . . . . . . . . . . . . . . . B-21
Shareholder Services. . . . . . . . . . . . . . . . . . . . B-22
Determination of Net Asset Value. . . . . . . . . . . . . . B-26
Dividends, Other Distributions and Taxes. . . . . . . . . . B-26
Portfolio Transactions. . . . . . . . . . . . . . . . . . . B-30
Performance Information . . . . . . . . . . . . . . . . . . B-32
Information About the Fund. . . . . . . . . . . . . . . . . B-34
Custodian, Transfer and Dividend Disbursing Agent, Counsel
and Independent Auditors. . . . . . . . . . . . . . . . . B-34
Financial Statements. . . . . . . . . . . . . . . . . . . . B-34
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Description of the
Fund."
Portfolio Securities
Government Obligations. The Fund may invest in a variety of U.S.
Treasury obligations, which differ only in their interest rates, maturities
and times of issuance: (a) U.S. Treasury bills have a maturity of one year
or less, (b) U.S. Treasury notes have maturities of one to ten years, and
(c) U.S. Treasury bonds generally have maturities of greater than ten years.
In addition to U.S. Treasury obligations, the Fund may invest in
obligations issued or guaranteed by U.S. Government agencies and
instrumentalities which are supported by any of the following: (a) the full
faith and credit of the U.S. Treasury (such as Government National Mortgage
Association ("GNMA") participation certificates), (b) the right of the
issuer to borrow an amount limited to a specific line of credit from the
U.S. Treasury, (c) discretionary authority of the U.S. Government agency or
instrumentality, or (d) the credit of the instrumentality. (Examples of
agencies and instrumentalities are: Federal Land Banks, Federal Housing
Administration, Farmers Home Administration, Export-Import Bank of the
United States, Central Bank for Cooperatives, Federal Intermediate Credit
Banks, Federal Home Loan Banks, General Services Administration, Maritime
Administration, Tennessee Valley Authority, District of Columbia Armory
Board, Inter-American Development Bank, Asian-American Development Bank,
Student Loan Marketing Association, International Bank for Reconstruction
and Development and Federal National Mortgage Association ("FNMA")). No
assurance can be given that the U.S. Government will provide financial
support to such U.S. Government agencies or instrumentalities described in
(b), (c) and (d) in the future, other than as set forth above, since it is
not obligated to do so by law.
Repurchase Agreements. The Fund may enter into repurchase agreements
with U.S. Government securities dealers recognized by the Federal Reserve
Board, with member banks of the Federal Reserve System, or with such other
brokers or dealers that meet the credit guidelines of the Board of
Directors. In a repurchase agreement, the Fund buys a security from a seller
that has agreed to repurchase the same security at a mutually agreed upon
date and price. The Fund's resale price will be in excess of the purchase
price, reflecting an agreed upon interest rate. This interest rate is
effective for the period of time the Fund is invested in the agreement and
is not related to the coupon rate on the underlying security. Repurchase
agreements may also be viewed as a fully collateralized loan of money by the
Fund to the seller. The period of these repurchase agreements will usually
be short, from overnight to one week, and at no time will the Fund invest in
repurchase agreements for more than one year. The Fund will always receive
as collateral securities whose market value including accrued interest is,
and during the entire term of the agreement remains, at least equal to 100%
of the dollar amount invested by the Fund in each agreement, and the Fund
will make payment for such securities only upon physical delivery or upon
evidence of book entry transfer to the account of the Custodian. If the
seller defaults, the Fund might incur a loss if the value of the collateral
securing the repurchase agreement declines and might incur disposition costs
in connection with liquidating the collateral. In addition, if bankruptcy
proceedings are commenced with respect to the seller of a security which is
the subject of a repurchase agreement, realization upon the collateral by
the Fund may be delayed or limited. The Fund seeks to minimize the risk of
loss through repurchase agreements by analyzing the creditworthiness of the
obligors under repurchase agreements, in accordance with the credit
guidelines of the Company's Board of Directors.
Reverse Repurchase Agreements. The Fund may enter into reverse
repurchase agreements to meet redemption requests where the liquidation of
portfolio securities is deemed by the Fund to be inconvenient or
disadvantageous. A reverse repurchase agreement is a transaction whereby the
Fund transfers possession of a portfolio security to a bank or broker-dealer
in return for a percentage of the portfolio security's market value. The
Fund retains record ownership of the security involved including the right
to receive interest and principal payments. At an agreed upon future date,
the Fund repurchases the security by paying an agreed upon purchase price
plus interest. Cash or liquid high-grade debt obligations of the Fund equal
in value to the repurchase price including any accrued interest will be
maintained in a segregated account while a reverse repurchase agreement is
in effect.
When-Issued Securities. New issues of U.S. Treasury and Government
securities are often offered on a when-issued basis. This means that
delivery and payment for the securities normally will take place
approximately 7 to 15 days after the date the buyer commits to purchase
them. The payment obligation and the interest rate that will be received on
securities purchased on a when-issued basis are each fixed at the time the
buyer enters into the commitment. The Fund will make commitments to purchase
such securities only with the intention of actually acquiring the
securities, but the Fund may sell these securities or dispose of the
commitment before the settlement date if it is deemed advisable as a matter
of investment strategy. Cash or marketable high-grade debt securities equal
to the amount of the above commitments will be segregated on the Fund's
records. For the purpose of determining the adequacy of these securities the
segregated securities will be valued at market. If the market value of such
securities declines, additional cash or securities will be segregated on the
Fund's records on a daily basis so that the market value of the account will
equal the amount of such commitments by the Fund.
Securities purchased on a when-issued basis and the securities held by
the Fund are subject to changes in market value based upon the public's
perception of changes in the level of interest rates. Generally, the value
of such securities will fluctuate inversely to changes in interest rates --
i.e., they will appreciate in value when interest rates decline and decrease
in value when interest rates rise. Therefore, if in order to achieve higher
interest income the Fund remains substantially fully invested at the same
time that it has purchased securities on a "when-issued" basis, there will
be a greater possibility of fluctuation in the Fund's net asset value.
When payment for when-issued securities is due, the Fund will meet its
obligations from then-available cash flow, the sale of segregated
securities, the sale of other securities or, and although it would not
normally expect to do so, from the sale of the when-issued securities
themselves (which may have a market value greater or less than the Fund's
payment obligation). The sale of securities to meet such obligations carries
with it a greater potential for the realization of capital gains, which are
subject to federal income taxes.
Commercial Paper. The Fund may invest in commercial paper issued in
reliance on the so-called "private placement" exemption from registration
afforded by Section 4(2) of the Securities Act of 1933 ("Section 4(2)
paper"). Section 4(2) paper is restricted as to disposition under the
federal securities laws and generally is sold to investors who agree that
they are purchasing the paper for an investment and not with a view to
public distribution. Any resale by the purchaser must be in an exempt
transaction. Section 4(2) paper is normally resold to other investors
through or with the assistance of the issuer or investment dealers who make
a market in Section 4(2) paper, thus providing liquidity. Pursuant to
guidelines established by the Company's Board of Directors, Dreyfus may
determine that Section 4(2) paper is liquid for the purposes of complying
with the Fund's investment restriction relating to investments in illiquid
securities.
Management Policies
The Fund engages, except as noted, in the following practices in
furtherance of its investment objective.
Loans of Fund Securities. The Fund has authority to lend its portfolio
securities provided (1) the loan is secured continuously by collateral
consisting of U.S. Government securities or cash or cash equivalents
adjusted daily to make a market value at least equal to the current market
value of these securities loaned; (2) the Fund may at any time call the loan
and regain the securities loaned; (3) the Fund will receive any interest or
dividends paid on the loaned securities; and (4) the aggregate market value
of securities loaned will not at any time exceed one-third of the total
assets of the Fund. In addition, it is anticipated that the Fund may share
with the borrower some of the income received on the collateral for the loan
or that it will be paid a premium for the loan. In determining whether to
lend securities, the Fund considers all relevant factors and circumstances
including the creditworthiness of the borrower.
Futures Contracts and Options. For the purpose of creating market
exposure for uncommitted cash balances, reducing transaction costs
associated with rebalancing the Fund, facilitating trading or seeking higher
investment returns when a futures contract is priced more attractively than
the underlying security or the index of the Fund, the Fund may enter into
futures contracts, options, and options on futures contracts with respect to
securities in which the Fund may invest and indices comprised of such
securities.
Futures contracts provide for the future sale by one party and purchase
by another party of a specified amount of a specific security or securities
index at a specified future time and at a specified price. Where the
underlying security is an index, no physical transfer of securities takes
place; rather, upon expiration of the contract, the parties settle by
exchanging cash in an amount equal to the difference between the contract
price and the closing value of the index at expiration, net of variation
margin previously paid. Futures contracts that are standardized as to
maturity date and underlying interest are traded on national futures
exchanges.
Futures traders are required to make a good faith margin deposit in
cash or government securities with a broker or custodian to initiate and
maintain open positions in futures contracts. A margin deposit is intended
to assure completion of the contract (delivery or acceptance of the
underlying security) if it is not terminated prior to the specified delivery
date. Minimal initial margin requirements are established by the futures
exchange and may be changed. Brokers may establish deposit requirements
which are higher than the exchange minimums.
After a futures contract position is opened, the value of the contract
is marked to market daily. If the futures contract price changes to the
extent that the margin on deposit does not satisfy margin requirements,
payment of additional "variation" margin will be required. Conversely,
change in the contract value may reduce the required margin, resulting in a
repayment of excess margin to the contract holder. Variation margin payments
are made to and from the futures broker for as long as the contract remains
open. The Fund expects to earn interest income on its margin deposits.
Options are of two basic types, either call or put options, and may
relate to a single security or a securities index or a futures contract. A
call option on a security permits the holder of the option to purchase the
underlying security at a specified price ("strike price") at any time during
the term of the option. Thus, in exchange for the premium paid to the
writer, the purchaser obtains the right to profit from any appreciation in
the value of the underlying security above the strike price. A put option
permits the holder to sell the underlying security to the writer at the
strike price at any time during the term of the contract. Thus, in exchange
for the premium paid to the writer, the purchaser is relieved of the risk of
a decline in the value of the underlying security below the strike price. An
option on a securities index gives the holder the right to receive cash from
the writer in an amount equal to the difference between the strike price of
the option and the value of the underlying index multiplied by a factor
established by the exchange upon which the option is traded. An option on a
futures contract gives the holder, in return for the premium paid to the
writer, the right to assume a position in the underlying futures contract at
a specified price at any time during the term of the option.
Although futures and options contracts by their terms call for actual
delivery or acceptance of the underlying securities, in most cases the
contracts are closed out before the settlement date without the making or
taking of delivery. Closing out an open futures position is done by taking
an opposite position ("buying" a contract which has previously been "sold,"
or "selling" a contract previously purchased) in an identical contract to
terminate the position. An option purchased may be closed out by selling the
option. An option written is closed out by purchasing an option identical to
that written. Brokerage commissions are incurred when futures and options
contracts are bought and sold.
Restrictions on the Use of Futures Contracts and Options. The Fund
will not enter into futures contracts to the extent that its outstanding
obligations under these contracts would exceed 25% of the Fund's total
assets. To the extent that the Fund enters into futures contracts and
options on futures positions that are not for bona fide hedging purposes (as
defined by the Commodity Futures Trading Commission), the aggregate initial
margin and premiums on these positions (excluding the amount by which
options are "in-the-money") may not exceed 5% of the Fund's net assets.
Transactions using options and futures contracts (other than options
that the Fund has purchased) expose the Fund to an obligation to another
party. The Fund will not enter into any such transactions unless it owns
either (1) an offsetting ("covered") position in securities or other options
or futures contracts or (2) cash, receivables and short-term debt securities
with a value sufficient at all times to cover its potential obligations not
covered as provided in (1) above. The Fund will comply with SEC guidelines
regarding cover for these instruments and, if the guidelines so require, set
aside cash, U.S. Government securities or other liquid, high-grade debt
securities in a segregated account with its custodian in the prescribed
amount.
All options purchased or written by the Fund must be listed on a
national securities or futures exchange or traded in the over-the-counter
("OTC") market. The Fund will not purchase or write OTC options if, as a
result of such transaction, the sum of (i) the market value of outstanding
OTC options purchased by the Fund, (ii) the market value of the underlying
securities covered by outstanding OTC call options written by the Fund, and
(iii) the market value of all other assets of the Fund that are illiquid or
are not otherwise readily marketable, would exceed 15% of the net assets of
the Fund, taken at market value. However, if an OTC option is sold by the
Fund to a primary U.S. Government securities dealer recognized by the
Federal Reserve Bank of New York and the Fund has the unconditional
contractual right to repurchase such OTC option from the dealer at a
predetermined price, then the Fund will treat as illiquid such amount of the
underlying securities as is equal to the repurchase price less the amount by
which the option is "in-the-money" (the difference between current market
value of the underlying security and the option's strike price). The
repurchase price with primary dealers is typically a formula price which is
generally based on a multiple of the premium received for the option plus
the amount by which the option is "in-the-money."
The Fund may write only covered options. A call option is covered if
the Fund owns the underlying security or a call option on the same security
with a lower strike price. A put option is covered if the Fund segregates
cash and/or short-term debt securities in an amount necessary to pay the
strike price of the option or purchases a put option on the same underlying
security with a higher strike price.
The Fund will not purchase puts, calls, straddles, spreads or any
combination thereof, if as a result of such purchase the value of the Fund's
aggregate investment in such securities would exceed 5% of the Fund's total
assets.
Risk Factors in Futures and Options Transactions. There can be no
assurance that a liquid secondary market will exist for any particular
futures or option contract at any specific time. Thus, it may not be
possible to close a futures or option position. In the event of adverse
price movements, the Fund would continue to be required to make daily cash
payments to maintain its required margin with respect to open futures or
written options positions. In such a situation, if the Fund has insufficient
cash, it may have to sell portfolio securities to meet daily margin
requirements at a time when it may be disadvantageous to do so. In addition,
the Fund may be required to make or take delivery of the securities
underlying futures contracts that it holds and options contracts that it has
written.
The Fund will seek to minimize the risk that it will be unable to close
out a futures contract by entering into only those futures contracts that
are listed on national futures exchanges and for which there appears to be a
liquid secondary market. Likewise, the Fund will enter into only those
option contracts that are listed on a national securities exchange or traded
in the OTC market for which there appears to be a liquid secondary market.
The risk of loss in trading futures contracts in some strategies can be
substantial, due both to the low margin deposits required, and the extremely
high degree of leverage involved in futures pricing. As a result, a
relatively small price movement in a futures contract may result in
immediate and substantial loss (as well as gain) to the investor. For
example, if at the time of purchase, 10% of the value of the futures
contract is deposited as margin, a subsequent 10% decrease in the value of
the futures contract would result in a total loss of margin deposit, before
any deduction for the transaction costs, if the account were then closed
out. A 15% decrease would result in a loss equal to 150% if the original
margin deposit for the contract were closed out. Thus, a purchase or sale of
a futures contract may result in losses in excess of the amount invested in
the contract. Options transactions are subject to similar risks. However,
because the Fund will not engage in futures or options transactions for
speculative purposes, Dreyfus believes that the Fund's risk of loss is less
than the risk of loss associated with speculative transactions. Moreover, in
the foregoing example, the Fund would presumably have sustained comparable
losses if, instead of the futures contract, it had invested in the
underlying security and sold it after the decline.
Utilization of futures contracts and options transactions by the Fund
does involve the risk of imperfect or no correlation where the securities
underlying futures and options contracts are different from the portfolio
securities being hedged. It is also possible that the Fund could both lose
money on futures and options contracts and also experience a decline in
value of its portfolio securities. There is also the risk of loss by the
Fund of margin deposits in the event of bankruptcy of a broker with whom the
Fund has an open position in a futures contract or option thereon.
Most futures exchanges limit the amount of fluctuation permitted in
futures contract prices during a single trading day. The daily limit
establishes the maximum amount that the price of a futures contract may vary
either up or down from the previous day's settlement price at the end of a
trading session. Once the daily limit has been reached in a particular type
of contract, no trades may be made on that day at a price beyond that limit.
The daily limit governs only price movement during a particular trading day
and therefore does not limit potential losses, because the limit may prevent
the liquidation of unfavorable positions. Futures contract prices have
occasionally moved to the daily limit for several consecutive trading days
with little or no trading, thereby preventing prompt liquidation of future
positions and subjecting some futures traders to substantial losses.
Futures and options contracts involve special tax considerations. See
"Dividends, Other Distributions and Taxes" for further information.
Investment Restrictions
The following limitations have been adopted by the Fund. The Fund may
not change any of these fundamental investment limitations without the
consent of: (a) 67% or more of the shares present at a meeting of
shareholders duly called if the holders of more than 50% of the outstanding
shares of the Fund are present or represented by proxy; or (b) more than 50%
of the outstanding shares of the Fund, whichever is less. The Fund may not:
1. Purchase any securities which would cause more than 25% of the value of
the Fund's total assets at the time of such purchase to be invested in
the securities of one or more issuers conducting their principal
activities in the same industry. (For purposes of this limitation, U.S.
Government securities, and state or municipal governments and their
political subdivisions are not considered members of any industry. In
addition, this limitation does not apply to investments in domestic
banks, including U.S. branches of foreign banks and foreign branches of
U.S. banks).
2. Borrow money or issue senior securities as defined in the 1940 Act
except that (a) the Fund may borrow money in an amount not exceeding
one-third of the Fund's total assets at the time of such borrowings,
and (b) the Fund may issue multiple classes of shares. The purchase or
sale of futures contracts and related options shall not be considered
to involve the borrowing of money or issuance of senior securities.
3. Purchase with respect to 75% of the Fund's total assets securities of
any one issuer (other than securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities) if, as a result, (a)
more than 5% of the Fund's total assets would be invested in the
securities of that issuer, or (b) the Fund would hold more than 10% of
the outstanding voting securities of that issuer.
4. Make loans or lend securities, if as a result thereof more than
one-third of the Fund's total assets would be subject to all such
loans. For purposes of this limitation debt instruments and repurchase
agreements shall not be treated as loans.
5. Purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the Fund
from investing in securities or other instruments backed by real
estate, including mortgage loans, or securities of companies that
engage in real estate business or invest or deal in real estate or
interests therein).
6. Underwrite securities issued by any other person, except to the extent
that the purchase of securities and later disposition of such
securities in accordance with the Fund's investment program may be
deemed an underwriting.
7. Purchase or sell commodities except that the Fund may enter into
futures contracts and related options, forward currency contacts and
other similar instruments.
The Fund may, notwithstanding any other fundamental investment policy
or limitation, invest all of its investable assets in securities of a single
open-end management investment company with substantially the same
investment objectives, policies and limitations as the Fund.
The Fund has adopted the following additional non-fundamental
restrictions. These non-fundamental restrictions may be changed without
shareholder approval, in compliance with applicable law and regulatory
policy.
1. The Fund shall not sell securities short, unless it owns or has the
right to obtain securities equivalent in kind and amounts to the
securities sold short, and provided that transactions in futures
contracts are not deemed to constitute selling short.
2. The Fund shall not purchase securities on margin, except that the Fund
may obtain such short-term credits as are necessary for the clearance
of transactions, and provided that margin payments in connection with
futures contracts and options on futures contracts shall not constitute
purchasing securities on margin.
3. The Fund shall not purchase oil, gas or mineral leases.
4. The Fund will not purchase or retain the securities of any issuer if
the officers or, Directors of the Fund, its advisers, or managers,
owning beneficially more than one half of one percent of the securities
of such issuer, together own beneficially more than 5% of such
securities.
5. The Fund will not purchase securities of issuers (other than securities
issued or guaranteed by domestic or foreign governments or political
subdivisions thereof), including their predecessors, that have been in
operation for less than three years, if by reason thereof, the value of
the Fund's investment in securities would exceed 5% of the Fund's total
assets. For purposes of this limitation, sponsors, general partners,
guarantors and originators of underlying assets may be treated as the
issuer of a security.
6. The Fund will invest no more than 15% of the value of its net assets in
illiquid securities, including repurchase agreements with remaining
maturities in excess of seven days, time deposits with maturities in
excess of seven days and other securities which are not readily
marketable. For purposes of this limitation, illiquid securities shall
not include Section 4(2) Paper and securities which may be resold under
Rule 144A under the Securities Act of 1933, provided that the Board of
Directors, or its delegate, determines that such securities are liquid
based upon the trading markets for the specific security.
7. The Fund may not invest in securities of other investment companies,
except as they may be acquired as part of a merger, consolidation or
acquisition of assets and except to the extent otherwise permitted by
the 1940 Act.
8. The Fund shall not purchase any security while borrowings representing
more than 5% of the Fund's total assets are outstanding.
9. The Fund will not purchase warrants if at the time of such purchase:
(a) more than 5% of the value of the Fund's assets would be invested in
warrants, or (b) more than 2% of the value of the Fund's assets would
be invested in warrants that are not listed on the New York or American
Stock Exchange (for purposes of this limitation, warrants acquired by
the Fund in units or attached to securities will be deemed to have no
value).
10. The Fund will not purchase puts, calls, straddles, spreads and any
combination thereof if by reason thereof the value of its aggregate
investment in such classes of securities will exceed 5% of its total
assets except that: (a) this limitation shall not apply to standby
commitments, and (b) this limitation shall not apply to the Fund's
transactions in futures contracts and related options.
As an operating policy, the Fund will not invest more than 25% of the value
of its total assets, at the time of such purchase in domestic banks,
including U.S. branches of foreign banks and foreign branches of U.S. banks.
The Company's Board of Directors may change this policy without shareholder
approval. Notice will be given to shareholders if this policy is changed by
the Board.
MANAGEMENT OF THE FUND
CONTROLLING SHAREHOLDERS
Mellon Bank Corporation, a Pennsylvania corporation registered as a
bank holding company under the Bank Holding Company Act of 1956, as amended,
owned of record, through its direct and indirect subsidiaries, more than 25%
of the issued and outstanding voting shares of the Company, as of January
31, 1995, and is, as a consequence, deemed to be a controlling shareholder
of the Company as that term is defined under the 1940 Act. The address of
Mellon Bank Corporation is: Mellon Bank Corporation, Mutual Fund Department,
3 Mellon Bank Center, Pittsburgh, PA 15259.
PRINCIPAL SHAREHOLDERS
The following shareholder(s) owned 5% or more of the outstanding voting
shares of the Funds at January 31, 1995: Mac & Co. 080-056, Mellon Bank,
N.A., as Nominee for Trust Custodian, P.O. Box 320, Pittsburgh, PA 15230-
0320, 36% record.
FEDERAL LAW AFFECTING MELLON BANK
The Glass-Steagall Act of 1933 prohibits national banks from engaging
in the business of underwriting, selling or distributing securities and
prohibits a member bank of the Federal Reserve System from having certain
affiliations with an entity engaged principally in that business. The
activities of Mellon Bank, N.A. ("Mellon Bank") in informing its customers
of, and performing, investment and redemption services in connection with
the Fund, and in providing services to the Fund as custodian and fund
accountant, as well as Dreyfus' investment advisory activities, may raise
issues under these provisions. Mellon Bank has been advised by its counsel
that the activities contemplated under these arrangements are consistent
with its statutory and regulatory obligations.
Changes in either federal or state statutes and regulations relating to
the permissible activities of banks and their subsidiaries or affiliates, as
well as further judicial or administrative decisions or interpretations of
such future statutes and regulations, could prevent Mellon Bank from
continuing to perform all or a part of the above services for its customers
and/or the Fund. If Mellon Bank were prohibited from serving the Fund in any
of its present capacities, the Board of Directors would seek an alternative
provider(s) of such services.
DIRECTORS AND OFFICERS
The Company has a Board composed of thirteen Directors which supervises
the Company's investment activities and reviews contractual arrangements
with companies that provide the Fund with services. The following lists the
Directors and officers and their positions with the Company and their
present and principal occupations during the past five years. Each Director
who is an "interested person" of the Company (as defined in the Investment
Company Act of 1940, as amended (the "Act")) is indicated by an asterisk.
Each of the Directors also serves as a Trustee of The Dreyfus/Laurel Funds
Trust, The Dreyfus/Laurel Investment Series and The Dreyfus/Laurel Tax-Free
Municipal Funds (collectively "The Dreyfus/Laurel Funds").
o + RUTH MARIE ADAMS. Director of the Company; Professor of English
and Vice President Emeritus, Dartmouth College; Senator, United
Chapters of Phi Beta Kappa; Trustee, Woods Hole Oceanographic
Institution. Age: 79 years old. Address: 1026 Kendal Lyme Road,
Hanover, New Hampshire 03755.
o + FRANCIS P. BRENNAN. Chairman of the Board of Directors and Assistant
Treasurer of the Company; Director and Chairman, Massachusetts Business
Development Corp.; Director, Boston Mutual Insurance Company; Director
and Vice Chairman of the Board, Home Owners Federal Savings and Loan
(prior to May 1990). Age: 76 years old. Address: Massachusetts
Business Development Corp., One Liberty Square, Boston, Massachusetts
02109.
o * JOSEPH S. DiMARTINO. Director of the Dreyfus/Laural Funds, Inc. since
February 1995. Since January 1995, Mr. DiMartino has served as
Chairman of the Board for various funds in the Dreyfus Family of Funds.
For more than five years prior thereto, he was President, a director
and, until August 1994, Chief Operating Officer of the Manager and
Executive Vice President and a director of Dreyfus Service Corporation,
a wholly-owned subsidiary of the Manager and, until August 1994, the
Fund's distributor. From August 1994 to December 31, 1994, he was a
director of Mellon Bank Corporation. Mr. DiMartino is a director and
former Treasurer of the Muscular Dystrophy Association; a trustee of
Bucknell University; and a director of the Noel Group, Inc. Mr.
DiMartino is also a Board member of 58 other funds in the Dreyfus
Family of Funds. He is 51 years old and his address is 200 Park
Avenue, New York, New York 10166.
o + JAMES M. FITZGIBBONS. Director of the Company; President and Director,
Amoskeag Company; Chairman, Howes Leather Company, Inc.; Director,
Fiduciary Trust Company; Chairman, CEO and Director, Fieldcrest-Cannon
Inc.; Director, Lumber Mutual Insurance Company; Director, Barrett
Resources, Inc. Age: 59 years old. Address: 40 Norfolk Road,
Brookline, Massachusetts 02167.
o * J. TOMLINSON FORT. Director of The Dreyfus/Laurel Funds, Inc.; Partner,
Reed, Smith, Shaw & McClay (law firm). Age: 65 years old. Address:
204 Woodcock Drive, Pittsburgh, Pennsylvania 15215.
o + ARTHUR L. GOESCHEL. Director of the Company; Director, Chairman of the
Board and Director, Rexene Corporation; Director, Calgon Carbon
Corporation; Director, National Picture Frame Corporation; Chairman of
the Board and Director, Tetra Corporation 1991-1993; Director, Medalist
Corporation 1992-1993. Age: 71 years old. Address: Way Hallow Road
and Woodland Road, Sewickley, Pennsylvania 15143.
o + KENNETH A. HIMMEL. Director of the Company; Former Director, The Boston
Company, Inc. and Boston Safe Deposit and Trust Company; President and
Chief Executive Officer, Himmel & Co., Inc.; Vice Chairman, Sutton
Place Gourmet, Inc. and Florida Hospitality Group; Managing Partner,
Himmel/MKDG, Franklin Federal Partners, Reston Town Center Associates
and Grill 23 & Bar. Age: 47 years old. Address: Himmel and Company,
Inc., 101 Federal Street, 22nd Floor, Boston, Massachusetts 02110.
o + ARCH S. JEFFERY. Director of the Company; Financial Consultant. Age:
76 year old. Address: 1817 Foxcroft Lane, Allison Park, Pennsylvania
15101.
o + STEPHEN J. LOCKWOOD. Director of the Company; President and CEO, LDG
Management Company Inc.; CEO, LDG Reinsurance Underwriters, SRRF
Management Inc. and Medical Reinsurance Underwriters Inc. Age: 46
years old. Address: 401 Edgewater Place, Wakefield, Massachusetts
01880.
o + ROBERT D. MCBRIDE. Director of the Company; Director, Chairman and CEO,
McLouth Steel; Director, Salem Corporation. Director, SMS/Concast,
Inc. (1983-1991). Age: 66 years old. Address: 15 Waverly Lane,
Grosse Pointe Farms, Michigan 48236.
o + JOHN L. PROPST. Director of the Company; Of Counsel, Reed, Smith, Shaw
& McClay (law firm). Age: 79 years old. Address: 5521 Dunmoyle
Street, Pittsburgh, Pennsylvania 15217.
o + JOHN J. SCIULLO. Director of the Company; Dean Emeritus and Professor
of Law, Duquesne University Law School; Director, Urban Redevelopment
Authority of Pittsburgh. Age: 62 years old. Address: 321 Gross
Street, Pittsburgh, Pennsylvania 15224
o + ROSLYN M. WATSON. Director of the Company; Principal, Watson Ventures,
Inc., prior to February, 1993; Real Estate Development Project Manager
and Vice President, The Gunwyn Company. Age: 44 years old. Address:
25 Braddock Park, Boston, Massachusetts 02116-5816.
# MARIE E. CONNOLLY. President and Treasurer of the Company, The
Dreyfus/Laurel Investment Series, The Dreyfus/Laurel Funds Trust and
The Dreyfus/Laurel Tax-Free Municipal Funds (since September 1994);
Vice President of The Dreyfus/Laurel Funds, Inc. (March 1994 to
September 1994); President, Funds Distributor, Inc. (since 1992);
Treasurer, Funds Distributor, Inc. (July 1993 to April 1994); COO,
Funds Distributor, Inc. (since April 1994); Director, Funds
Distributor, Inc. (since July 1992); President, COO and Director,
Premier Mutual Fund Services, Inc. (since April 1994); Senior Vice
President and Director of Financial Administration, The Boston Company
Advisors, Inc. (December 1988 to May 1993). Address: One Exchange
Place, Boston, Massachusetts 02109.
# FREDERICK C. DEY. Vice President of the Company, The Dreyfus/Laurel
Investment Series, The Dreyfus/Laurel Funds Trust and The
Dreyfus/Laurel Tax-Free Municipal Funds (since September 1994); Senior
Vice President, Premier Mutual Fund Services, Inc. (since August 1994);
Vice President, Funds Distributor, Inc. (since August 1994);
Fundraising Manager, Swim Across America (October 1993 to August 1994);
General Manager, Spring Industries (August 1988 to October 1993).
Address: Premier Mutual Fund Services, Inc., 200 Park Avenue New York,
New York 10166.
# ERIC B. FISCHMAN. Vice President of the Company, The Dreyfus/Laurel
Investment Series, The Dreyfus/Laurel Funds Trust and The
Dreyfus/Laurel Tax-Free Municipal Funds (since September 1994); Vice
President and Associate General Counsel, Premier Mutual Fund Services,
Inc. (Since August 1994); Vice President and Associate General Counsel,
Funds Distributor, Inc. (since August 1994); Staff Attorney, Federal
Reserve Board (September 1992 to June 1994); Summer Associate, Venture
Economics (May 1991 to September 1991); Summer Associate, Suffolk
County District Attorney (June 1990 to August 1990). Address: Premier
Mutual Fund Services, Inc., 200 Park Avenue, New York, New York 10166.
LESLIE M. GAYNOR. Assistant Treasurer of the Company, The Dreyfus/Laurel
Investment Series, The Dreyfus/Laurel Tax-Free Municipal Funds Trust
and The Dreyfus/Laurel Funds Trust (since March 1994); Senior Vice
President, Funds Distributor, Inc. (Since March 1993); Vice President,
The Boston Company, Inc. (March 1993 to May 1993); Vice President of
Marketing, Calvert Group (1989 to March 1993); Fidelity Investments
(prior to 1989). Address: One Exchange Place, Boston,
Massachusetts 02109.
RICHARD W. HEALEY. Vice President of the Company, The Dreyfus/Laurel
Investment Series, The Dreyfus/Laurel Tax-Free Municipal Funds Trust
and The Dreyfus/Laurel Funds Trust (since March 1994); Senior Vice
President, Funds Distributor, Inc. (since March 1993); Vice President,
The Boston Company Inc., (March 1993 to May 1993); Vice President of
Marketing, Calvert Group (1989 to March 1993). Address: One Exchange
Place, Boston, Massachusetts 02109.
# JOHN E. PELLETIER. Vice President and Secretary of the Company; The
Dreyfus/Laurel Investment Series, The Dreyfus/Laurel Funds Trust and
The Dreyfus/Laurel Tax-Free Municipal Funds (since September 1994);
Senior Vice President, General Counsel and Secretary, Funds
Distributor, Inc. (since April 1994); Senior Vice President, General
Counsel and Secretary, Premier Mutual Fund Services, Inc. (since August
1994); Counsel, The Boston Company Advisors, Inc. (February 1992 to
March 1994); Associate, Ropes & Gray (August 1990 to February 1992);
Associate, Sidley & Austin (June 1989 to August 1990). Address: One
Exchange Place, Boston, Massachusetts 02109.
___________________________________________________
* "Interested person" of the Company, as defined in the 1940 Act.
o Member of the Audit Committee.
+ Member of the Nominating Committee.
# Officer also serves as an officer for other investment companies
advised by Dreyfus.
The officers and Directors of Dreyfus/Laurel as a group owned
beneficially less than 1% of the total shares of each Fund outstanding as of
January 31, 1995.
No officer or employee of Premier (or of any parent, subsidiary or
affiliate thereof) receives any compensation from the Company for serving as
an officer or Director of the Company. In addition, no officer or employee
of Dreyfus (or of any parent or subsidiary thereof) serves as an officer or
Director of the Company. The Dreyfus/Laurel Funds pay each Director/Trustee
who is not an officer or employee of Premier (or of any parent, subsidiary
or of its affiliate thereof) or of Dreyfus, $27,000 per annum (and an
additional $75,000 for the Chairman of the Board of Directors/Trustees of
the Dreyfus/Laurel Funds), $1,000 for each Dreyfus/Laurel Funds meeting
attended and $750 for each Dreyfus/Laurel Funds Audit Committee meeting
attended, and reimburses each for travel and out-of-pocket expenses. For
the fiscal year ended October 31, 1994 the fees for meetings and expenses
totaled $25,346.
For the fiscal year ended October 31, 1994, the aggregate amount of
fees and expenses received by each Director from the Company and all other
Funds in The Dreyfus/Laurel Family of Funds for which such person is a Board
member were as follows:
<TABLE>
Total
Pension of Compensation
Retirement From the
Benefits Estimated Company
Aggregate Accrued as Annual and Fund
Compensation Part of Benefits Complex Paid
From the the Company's Upon to Board
Name of Board Member Company # Expenses Retirement Member
- - - -------------------- ------------ ------------ ---------- ------------
<S> <C> <C> <C> <C>
Ruth Marie Adams $19,685 None None $ 37,500
Francis P. Brennan* 52,809 None None 112,500
Joseph S. DiMartino** N/A N/A N/A N/A
James M. Fitzgibbons 17,685 None None 31,750
J. Tomlinson Fort 7,500 None None 7,500
Arthur L. Goeschel 26,185 None None 32,500
Kenneth A. Himmel 18,685 None None 35,750
Arch S. Jeffrey 27,185 None None 33,500
Steven J. Lockwood 18,685 None None 35,750
Robert D. McBride 27,185 None None 33,500
John L. Propst 27,185 None None 33,500
John J. Sciullo 27,185 None None 33,500
Roslyn M. Watson 19,685 None None 36,750
# Amount does not include reimbursed expenses for attending Board meetings,
which amounted to $10,876 for the Company.
* Compensation of Francis Brennan includes $75,000 paid by The
Dreyfus/Laurel Fund Family to be Chairman of the Board.
** Joseph S. DiMartino was not a director of the Company as of October 31,
1994.
</TABLE>
MANAGEMENT ARRANGEMENTS
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Management of the Fund."
Management Agreement. Dreyfus serves as the investment manager for the
Fund pursuant to an Investment Management Agreement with the Company dated
April 4, 1994 ("Management Agreement"), transferred to Dreyfus as of October
17, 1994. Pursuant to the Management Agreement, Dreyfus provides, or
arranges for one or more third parties to provide, investment advisory,
administrative, custody, fund accounting and transfer agency service to the
Fund. As investment manager, Dreyfus manages the Fund by making investment
decisions based on the Fund's investment objectives, policies and
restrictions. The Management Agreement is subject to review and approval at
least annually by the Board of Directors.
The current Management Agreement with Dreyfus provides for a "unitary
fee." Under the unitary fee structure, Dreyfus pays all expenses of the
Fund except: (i) brokerage commissions, (ii) taxes, interest, fees and
expenses of the non-interested Directors (including counsel expenses), and
extraordinary expenses (which are expected to be minimal), and (iii) the
Rule 12b-1 fees described in this Statement of Additional Information.
Under the unitary fee, Dreyfus provides, or arranges for one or more third
parties to provide, investment advisory, administrative, custody, fund
accounting and transfer agency services to the Fund. For the provision of
such services directly, or through one or more third parties, Dreyfus
receives as full compensation for all services and facilities provided by
it, a fee computed daily and paid monthly at the annual rate set forth in
the Fund's Prospectus, applied to the average daily net assets of the Fund's
investment portfolio, less the accrued fees and expenses (including counsel
fees) of the non-interested Directors of the Company. Previously, the
payments to the investment manager covered merely the provision of
investment advisory services (and payment for sub-advisory services) and
certain specified administrative services. Under this previous arrangement,
the Fund also paid for additional non-investment advisory expenses, such as
custody and transfer agency services, that were not paid by the investment
advisor.
The Fund paid management fees of $21,306 during the period from
September 1, 1994 (commencement of operations) to October 31, 1994.
The Management Agreement will continue from year to year provided that
a majority of the Directors who are not interested persons of the Company
and either a majority of all Directors or a majority of the shareholders of
the Fund approve their continuance. The Company may terminate the
Management Agreement, without prior notice to Dreyfus, upon the vote of a
majority of the Board of Directors or upon the vote of a majority of the
Fund's outstanding voting securities. Dreyfus may terminate the Management
Agreement upon sixty (60) days' written notice to the Company. The
Management Agreement will terminate immediately and automatically upon its
assignment.
The following persons are officers and/or directors of Dreyfus: Howard
Stein, Chairman of the Board and Chief Executive Officer; W. Keith Smith,
Vice Chairman of the Board; Robert E. Riley, President, Chief Operating
Officer and a director; Lawrence S. Kash, Vice Chairman--Distribution and
director; Philip L. Toia, Vice Chairman--Operations and Administration; Paul
H. Snyder, Vice President and Chief Financial Officer; Daniel C. Maclean,
Vice President and General Counsel; Barbara E. Casey. Vice President--
Retirement Services; Henry D. Gottmann, Vice President--Retail; Elie M.
Genadry, Vice President--Wholesale; Mark N. Jacobs, Vice President--Fund
Legal and Compliance; Jeffery N. Nachman, Vice President--Mutual Fund
Accounting; Diane M. Coffey, Vice President--Corporate Communications;
Katherine C. Wickham, Vice President--Human Resources; Maurice Bendrihem,
Controller; and Mandell L. Berman, Frank V. Cahouet, Alvin E. Friedman,
Lawrence M. Greene, Julian M. Smerling and David B. Truman, Directors.
PURCHASE OF FUND SHARES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "How to Buy Fund Shares."
The Distributor. The Distributor serves as the Fund's distributor
pursuant to an agreement which is renewable annually. The Distributor also
acts as distributor for the other funds in the Premier Family of Funds, for
funds in the Dreyfus Family of Funds and for certain other investment
companies.
Sales Loads--Class A. 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 ("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 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 in the Prospectus at a price based upon the net asset
value of the Class A shares at the close of business on October 31, 1994.
Net Asset Value per Share $12.50
Per Share Sales Charge - 4.5%
of offering price (4.7% of
net asset value per share) $ 0.59
Per Share Offering Price to
the Public $13.09
Class B and Class C shares, which are subject to a contingent deferred
sales charge, were not offered as of the fiscal year ended October 31, 1994.
TeleTransfer Privilege--All Classes, except Class R. TeleTransfer
purchase orders may be made between the hours of 8:00 a.m. and 4:00 p.m.,
New York time, on any business day that The Shareholder Services Group,
Inc., the Fund's transfer and dividend disbursing agent (the "Transfer
Agent"), and the New York Stock Exchange ("NYSE") are open. Such purchases
will be credited to the shareholder's Fund account on the next bank business
day. To qualify to use the TeleTransfer Privilege, the initial payment for
purchase of shares must be drawn on, and redemption proceeds paid to, the
same bank and account as are designated on the Account Application or
Shareholder Services Form on file. If the proceeds of a particular
redemption are to be wired to an account at any other bank, the request must
be in writing and signature-guaranteed. See "Redemption of Fund Shares--
TeleTransfer Privilege--All Classes, except Class R."
Reopening an Account. An investor may reopen an account with a minimum
investment of $100 without filing a new Account Application during the
calendar year the account is closed or during the following calendar year,
provided the information on the old Account Application is still applicable.
DISTRIBUTION AND SERVICE PLANS
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Distribution and Service
Plans."
Class A, B and C shares are subject to annual fees for distribution and
shareholder services.
Distribution Plan--Class A Shares. The Securities and Exchange
Commission ("SEC") has adopted Rule 12b-1 under the 1940 Act ("Rule")
regulating the circumstances under which investment companies such as the
Company may, directly or indirectly, bear the expenses of distributing their
shares. The Rule defines distribution expenses to include expenditures for
"any activity which is primarily intended to result in the sale of fund
shares." The Rule, among other things, provides that an investment company
may bear such expenses only pursuant to a plan adopted in accordance with
the Rule. With respect to the Class A shares of the Fund, the Company has
adopted a Distribution Plan ("Class A Plan"), and may enter into Selling
Agreements with Service Agents pursuant to the Class A Plan.
Under the Class A Plan, Class A shares of the Fund may spend annually
up to 0.25% of the average of its daily net assets for costs and expenses
incurred in connection with the distribution of, and shareholder servicing
with respect to, Fund shares.
The Class A Plan provides that a report of the amounts expended under
the Class A Plan, and the purposes for which such expenditures were
incurred, must be made to the Company's Directors for their review at least
quarterly. In addition, the Class A Plan provides that it may not be
amended to increase materially the costs which the Fund may bear for
distribution pursuant to the Class A Plan without approval of a Fund's
shareholders, and that other material amendments of the Class A Plan must be
approved by the vote of a majority of the Directors and of the Directors who
are not "interested persons" of the Company (as defined in the 1940 Act) and
who do not have any direct or indirect financial interest in the operation
of the Class A Plan, cast in person at a meeting called for the purpose of
considering such amendments. The Class A Plan is subject to annual approval
by the entire Board of Directors and by the Directors who are neither
interested persons nor have any direct or indirect financial interest in the
operation of the Class A Plan, by vote cast in person at a meeting called
for the purpose of voting on the Class A Plan. The Class A Plan is
terminable, as to the Fund's Class A shares, at any time by vote of a
majority of the Directors who are not interested persons and have no direct
or indirect financial interest in the operation of the Class A Plan or by
vote of the holders of a majority of the outstanding shares of such class of
the Fund.
For the period from October 17, 1994 (inception date of Class A shares)
to October 31, 1994, the Fund paid the Distributor $12 pursuant to the Class
A Plan.
Distribution and Service Plans -- Class B and C Shares. In addition to
the above described Plan for Class A shares, the Company's Board of
Directors has adopted a Service Plan (the "Service Plan") under the Rule for
Class B and Class C shares, pursuant to which the Fund pays the Distributor
and Dreyfus Service Corporation for the provision of certain services to the
holders of Class B and C shares. The Company's Board of Directors has also
adopted a Distribution Plan pursuant to the Rule with respect to Class B and
C shares (the "Distribution Plan"). The Company's Board of Directors
believes that there is a reasonable likelihood that the Distribution and
Service Plans (the "Plans") will benefit the Fund and the holders of Class B
and C shares.
A quarterly report of the amounts expended under each Plan, and the
purposes for which such expenditures were incurred, must be made to the
Directors for their review. In addition, each Plan provides that it may not
be amended to increase materially the cost which holders of Class B or C
shares may bear pursuant to the Plan without the approval of the holders of
such Classes and that other material amendments of the Plan must be approved
by the Board of Directors and by the Directors who are not interested
persons of the Fund and have no direct or indirect financial interest in the
operation of the Plan or in any agreements entered into in connection with
the Plan, by vote cast in person at a meeting called for the purpose of
considering such amendments. The Plan is subject to annual approval by such
vote of the Directors cast in person at a meeting called for the purpose of
voting on the Plan. Each Plan was so approved by the Directors at a meeting
held on September 23, 1994. Each Plan may be terminated at any time by vote
of a majority of the Directors who are not interested persons and have no
direct or indirect financial interest in the operation of the Plan or in any
agreements entered into in connection with the Plan or by vote of the
holders of a majority of Class B and C shares.
Class B and Class C shares were not offered as of October 31, 1994.
REDEMPTION OF FUND SHARES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "How to Redeem Fund
Shares."
Stock 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 NYSE Medallion
Signature Program, the Securities Transfer Agents Medallion Program
("STAMP") and the Stock Exchanges Medallion Program. Guarantees must be
signed by an authorized signatory of the guarantor and "Signature-
Guaranteed" must appear with the signature. The Transfer Agent may request
additional documentation from corporations, executors, administrators,
trustees or guardians, and may accept other suitable verification
arrangements from foreign investors, such as consular verification. For
more information with respect to signature-guarantees, please call one of
the telephone numbers listed on the cover.
TeleTransfer Privilege--All Classes, except Class R. Investors should
be aware that if they have selected the TeleTransfer Privilege, any request
for a wire redemption will be effected as a TeleTransfer transaction through
the Automated Clearing House system unless more prompt transmittal
specifically is requested. Redemption proceeds will be on deposit in the
investor's account at an ACH member bank ordinarily two business days after
receipt of the redemption request. See "Purchase of Fund
Shares--TeleTransfer Privilege--All Classes, except Class R."
Redemption Commitment. The Fund has committed itself to pay in cash
all redemption requests by any shareholder of record of the Fund, 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 SEC. In the case of
requests for redemption in excess of such amount, the Board of Directors
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 this event, the securities wold be valued in the same
manner as the Fund's portfolio is valued. If the recipient sold such
securities, brokerage charges would be incurred.
Suspension of Redemptions. The right of redemption may be suspended or
the date of payment postponed (a) during any period when the NYSE 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 SEC 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 SEC by order may permit to protect the
Fund's shareholders.
SHAREHOLDER SERVICES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Shareholder Services."
Fund Exchanges. Shares of any Class of the Fund may be exchanged for
shares of the respective Class of certain other funds advised or
administered by Dreyfus. 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. Exchanges for shares of funds that are offered without a sales
load will be made without a sales load.
B. Shares of funds purchased without a sales load may be exchanged
for shares of other funds sold with a sales load, and the
applicable sales load will be deducted.
C. Shares of funds purchased with a sales load may be exchanged
without a sales load for shares of other funds sold without a
sales load.
D. Shares of funds purchased with a sales load, shares of funds
acquired by a previous exchange from shares purchased with a sales
load and additional shares acquired through reinvestment of
dividends or other distributions of any such funds (collectively
referred to herein as "Purchased Shares") may be exchanged for
shares of other funds sold with a sales load (referred to herein
as "Offered Shares"), provided that, if the sales load applicable
to the Offered Shares exceeds the maximum sales load that could
have been imposed in connection with the Purchased Shares (at the
time the Purchased Shares were acquired), without giving effect to
any reduced loads, the difference will be deducted.
E. Shares of funds subject to a contingent deferred sales charge
("CDSC") that are exchanged for shares of another fund will be
subject to the higher applicable CDSC of the two funds, and for
purposes of calculating CDSC rates and conversion periods, if any,
will be deemed to have been held since the date the shares being
exchanged were initially purchased.
To accomplish an exchange under item D above, shareholders must notify
the Transfer Agent of their prior ownership of fund shares and their account
number.
Exchanges of Class R shares held by a Retirement Plan may be made only
between the investor's Retirement Plan account in one fund and such
investor's Retirement Plan account in another fund.
To establish a personal retirement plan by exchange, shares of the fund
being exchanged must have a value of at least the minimum initial investment
required for the fund into which the exchange is being made. For Dreyfus-
sponsored Keogh Plans, IRAs and SEP-IRAs with only one participant, the
minimum initial investment is $750. To exchange shares held in Corporate
Plans, 403(b)(7) Plans and IRAs set up under a Simplified Employee Pension
Plan ("SEP-IRAs") with more than one participant, the minimum initial
investment is $100 if the plan has at least $2,500 invested among the funds
in the Premier Family of Funds or the Dreyfus Family of Funds. To exchange
shares held in a personal retirement plan account, the shares exchanged must
have a current value of at least $100.
Auto-Exchange Privilege. The Auto-Exchange Privilege permits an
investor to purchase, in exchange for shares of the Fund, shares of the same
Class of another fund in the Premier Family of Funds or the Dreyfus Family
of Funds. This privilege is available only for existing accounts. With
respect to Class R shares held by a Retirement Plan, exchanges may be made
only between the investor's Retirement Plan account in one fund and such
investor's Retirement Plan account in another fund. Shares will be
exchanged on the basis of relative net asset value as described above under
"Fund Exchanges." Enrollment in or modification or cancellation of this
privilege is effective three business days following notification by the
investor. An investor will be notified if the investor's account falls
below the amount designated to be exchanged under this privilege. In this
case, an investor's account will fall to zero unless additional investments
are made in excess of the designated amount prior to the next Auto-Exchange
transaction. Shares held under IRA and other retirement plans are eligible
for this privilege. Exchanges of IRA shares may be made between IRA
accounts and from regular accounts to IRA accounts, but not from IRA
accounts to regular accounts. With respect to all other retirement
accounts, exchanges may be made only among those accounts.
Fund exchanges and Auto-Exchange Privilege are available to
shareholders resident in any state in which shares of the fund being
acquired may legally be sold. Shares may be exchanged only between accounts
having identical names and other identifying designations.
Shareholder Services Forms and prospectuses of the other funds may be
obtained from the Distributor. The Fund reserves the right to reject any
exchange request in whole or in part. The Fund exchange service or Auto-
Exchange Privilege may be modified or terminated at any time upon notice to
shareholders.
Automatic Withdrawal. The Automatic Withdrawal Plan permits an
investor with a $5,000 minimum account to request withdrawal of a specified
dollar amount (minimum of $50) on either a monthly or quarterly basis.
Withdrawal payments are the proceeds from sales of Fund shares, not the
yield on the shares. If withdrawal payments exceed reinvested dividends and
distributions, the investor's shares will be reduced and eventually may be
depleted. An Automatic Withdrawal Plan may be established by completing the
appropriate application available from the Distributor. There is a service
charge of $.50 for each withdrawal check. Automatic Withdrawal may be
terminated at any time by the investor, the Fund or the Transfer Agent.
Shares for which certificates have been issued may not be redeemed through
the Automatic Withdrawal Plan.
Dividend Sweep. Dividend Sweep allows investors to invest on the
payment date their dividends or dividends and capital gain distributions, if
any, from the Fund in shares of the same Class of another fund in the
Premier Family of Funds or the Dreyfus Family of Funds of which the investor
is 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 by a fund may be invested without
imposition of a sales load in shares of other funds that are
offered without a sales load.
B. Dividends and distributions paid by a fund which does not charge a
sales load may be invested in shares of other funds sold with a
sales load, and the applicable sales load will be deducted.
C. Dividends and distributions paid by a fund which charges a sales
load may be invested in shares of other funds sold with a sales
load (referred to herein as "Offered Shares"), provided that, if
the sales load applicable to the Offered Shares exceeds the
maximum sales load charged by the fund from which dividends or
distributions are being swept, without giving effect to any
reduced loads, the difference will be deducted.
D. Dividends and distributions paid by a fund may be invested in
shares of other funds that impose a CDSC and the applicable CDSC,
if any, will be imposed upon redemption of such shares.
Corporate Pension/Profit-Sharing and Retirement Plans. The 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 SEP-IRAs and IRA "Rollover Accounts,"
and 403(b)(7) Plans. Plan support services also are available.
Investors who wish to purchase Fund shares in conjunction with a Keogh
Plan, a 403(b)(7) Plan or an IRA, including an SEP-IRA, may request from the
Distributor forms for adoption of such plans.
The entity acting as custodian for Keogh Plans, 403(b)(7) Plans or IRAs
may charge a fee, payment of which could require the liquidation of shares.
All fees charged are described in the appropriate form.
Shares may be purchased in connection with these plans only by direct
remittance to the entity acting as custodian. Purchases for these plans may
not be made in advance of receipt of funds.
The minimum initial investment for corporate plans, Salary Reduction
Plans, 403(b)(7) Plans and SEP-IRAs with more than one participant, is
$1,000 with no minimum on subsequent purchases. The minimum initial
investment for Dreyfus-sponsored Keogh Plans, IRAs, SEP-IRAs and 403(b)(7)
Plans with only one participant, is normally $750, with no minimum on
subsequent purchases. Individuals who open an IRA may also open a non-
working spousal IRA with a minimum investment of $250.
The investor should read the Prototype Retirement Plan and the
appropriate form of Custodial Agreement for further details on eligibility,
service fees and tax implications, and should consult a tax adviser.
DETERMINATION OF NET ASSET VALUE
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "How to Buy Fund Shares."
Restricted securities, as well as securities or other assets for which
market quotations are not readily available, or are not valued by a pricing
service approved by the Board of Directors, are valued at fair value as
determined in good faith by the Board of Directors. The Board of Directors
will review the method of valuation on a current basis. In making their
good faith valuation of restricted securities, the Directors generally will
take the following factors into consideration: restricted securities which
are securities of the same class of securities for which a public market
exists usually will be valued at market value less the same percentage
discount at which purchased. This discount will be revised periodically by
the Board of Directors if the Directors believe that it no longer reflects
the value of the restricted securities. Restricted securities not of the
same class as securities for which a public market exists usually will be
valued initially at cost. Any subsequent adjustment from cost will be based
upon considerations deemed relevant by the Board of Directors.
New York Stock Exchange Closings. The holidays (as observed) on which
the NYSE is closed currently are: New Year's Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and
Christmas.
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Dividends, Other
Distributions and Taxes."
The term "regulated investment company" does not imply the supervision
of management or investment practices or policies by any government agency.
To qualify as a regulated investment company ("RIC"), the Fund (1) must
distribute to its shareholders each year at least 90% of its investment
company taxable income (generally consisting of net investment income, net
short-term capital gains and net gains from certain foreign currency
transactions), (2) must derive at least 90% of its annual gross income from
specified sources ("Income Requirement"), (3) must derive less than 30% of
its annual gross income from gain on the sale or disposition of any of the
following that are held for less than three months -- (i) securities,
(ii) non-foreign-currency options and futures and (iii) foreign currencies
(or foreign currency options, futures and forward contracts) that are not
directly related to the Fund's principal business of investing in securities
(or options and futures with respect thereto) ("Short-Short Limitation") --
and (4) must meet certain asset diversification and other requirements.
Accordingly, the Fund may be restricted in the selling of securities held
for less than three months.
Any dividend or other distribution paid shortly after an investor's
purchase may have the effect of reducing the net asset value of the shares
below the cost of his investment. Such a dividend or other distribution
would be a return on investment in an economic sense, although taxable as
stated in the Fund's Prospectus. In addition, the Code provides that if a
shareholder holds shares of the Fund for six months or less and has received
a capital gain distribution with respect to those shares, any loss incurred
on the sale of those shares will be treated as a long-term capital loss to
the extent of the capital gain distribution received.
Dividends and other distributions declared by the Fund in October,
November or December of any year and payable to shareholders of record on a
date in that month any of those months are deemed to have been paid by the
Fund and received by the shareholders on December 31 of that year if the
distributions are paid by the Fund during the following January.
Accordingly, those distributions will be taxed to shareholders for the year
in which that December 31 falls.
A portion of the dividends paid by the Fund, whether received in cash
or reinvested in additional Fund shares, may be eligible for the dividends-
received deduction allowed to corporations. The eligible portion may not
exceed the aggregate dividends received by the Fund from U.S. corporations.
However, dividends received by a corporate shareholder and deducted by it
pursuant to the dividends-received deduction are subject indirectly to the
alternative minimum tax.
Dividends and interest received by the Fund may be subject to income,
withholding or other taxes imposed by foreign countries and U.S. possessions
that would reduce the yield on its securities. Tax conventions between cer-
tain countries and the United States may reduce or eliminate these foreign
taxes, however, and many foreign countries do not impose taxes on capital
gains in respect of investments by foreign investors.
Income from foreign currencies (except certain gains therefrom that may
be excluded by future regulations), and income from transactions in options,
futures and forward contracts derived by the Fund with respect to its
business of investing in securities or foreign currencies, will qualify as
permissible income under the Income Requirement. However, income from the
disposition of options and futures contracts (other than those on foreign
currencies) will be subject to the Short-Short Limitation if they are held
for less than three months. Income from the disposition of foreign
currencies, and options, futures and forward contracts thereon, that are not
directly related to the Fund's principal business of investing in securities
(or options and futures with respect to securities) also will be subject to
the Short-Short Limitation if they are held for less than three months.
If the Fund satisfies certain requirements, any increase in value of a
position that is part of a "designated hedge" will be offset by any decrease
in value (whether realized or not) of the offsetting hedging position during
the period of the hedge for purposes of determining whether the Fund
satisfies the Short-Short Limitation. Thus, only the net gain (if any) from
the designated hedge will be included in gross income for purposes of that
limitation. The Fund will consider whether it should seek to qualify for
this treatment for its hedging transactions. To the extent the Fund does
not so qualify, it may be forced to defer the closing out of certain
options, futures and forward contracts beyond the time when it otherwise
would be advantageous to do so, in order for the Fund to qualify as a RIC.
Ordinarily, gains and losses realized from portfolio transactions will
be treated as capital gain and loss. However, a portion of the gain or loss
from the disposition of foreign currencies and non-U.S. dollar denominated
securities (including debt instruments, certain financial forward, futures
and option contracts and certain preferred stock) may be treated as ordinary
income or loss under Section 988 of the Code. In addition, all or a portion
of any gain realized from the sale or other disposition of certain market
discount bonds will be treated as ordinary income. Moreover, all or a
portion of the gain realized from engaging in "conversion transactions" may
be treated as ordinary income under Section 1258. "Conversion transactions"
are defined to include certain forward, futures, option and straddle
transactions, transactions marketed or sold to produce capital gains, or
transactions described in Treasury regulations to be issued in the future.
Under Section 1256 of the Code, any gain or loss realized by the Fund
from certain futures and forward contracts and options transactions will be
treated as 60% long-term capital gain or loss and 40% short-term capital
gain or loss. Gain or loss will arise upon exercise or lapse of such
contracts and options as well as from closing transactions. In addition,
any such contracts or options remaining unexercised at the end of the Fund's
taxable year will be treated as sold for their then fair market value (a
process known as "marking to market"), resulting in additional gain or loss
to the Fund characterized in the manner described above.
Offsetting positions held by the Fund involving certain contracts or
options may constitute "straddles." "Straddles" are defined to include
"offsetting positions" in actively traded personal property. The tax
treatment of "straddles" is governed by Sections 1092 and 1258 of the Code,
which, in certain circumstances, override or modify Sections 1256 and 988.
As such, all or a portion of any short-term or long-term capital gain from
certain "straddle" transactions may be recharacterized to ordinary income.
If the Fund were treated as entering into "straddles" by reason of its
engaging in certain forward contracts or options transactions, such
"straddles" would be characterized as "mixed straddles" if the forward
contracts or options transactions comprising a part of such "straddles" were
governed by Section 1256. The Fund may make one or more elections with
respect to "mixed straddles." Depending on which election is made, if any,
the results to the Fund may differ. If no election is made, then to the
extent the "straddle" and conversion transactions rules apply to positions
established by the Fund, losses realized by the Fund will be deferred to the
extent of unrealized gain in the offsetting position. Moreover, as a result
of the "straddle" rules, short-term capital loss on "straddle" positions may
be recharacterized as long-term capital loss, and long-term capital gains
may be treated as short-term capital gains or ordinary income.
Investment by the Fund in securities issued or acquired at a discount
(for example, zero coupon securities) or providing for deferred interest or
for payment of interest in the form of additional obligations (for example,
"pay-in-kind" or "PIK" securities) could, under special tax rules, affect
the amount, timing and character of distributions to shareholders by causing
the Fund to recognize income prior to the receipt of cash payments. For
example, the Fund could be required to take into gross income annually a
portion of the discount (or deemed discount) at which the securities were
issued and to distribute such income in order to maintain its qualification
for treatment as a RIC. In such case, the Fund may have to dispose of
securities it might otherwise have continued to hold in order to generate
cash to satisfy these distribution requirements.
If the Fund invests in an entity that is classified as a "passive
foreign investment company" ("PFIC") for federal income tax purposes, the
operation of certain provisions of the Code applying to PFICs could result
in the imposition of certain federal income taxes on the Fund. In addition,
gain realized from the sale or other disposition of PFIC securities may be
treated as ordinary income under Section 1291 of the Code.
State and Local Taxes. Depending upon the extent of the Fund's
activities in states and localities in which its offices are maintained, in
which its agents or independent contractors are located, or in which it is
otherwise deemed to be conducting business, the Fund may be subject to the
tax laws of such states or localities. Shareholders are advised to consult
their tax advisers concerning the application of state and local taxes.
Foreign Shareholders - U.S. Federal Income Taxation. U.S. federal
income taxation of a shareholder who, as to the United States, is a
non-resident alien individual, a foreign trust or estate, a foreign
corporation or a foreign partnership (a "foreign shareholder"), depends on
whether the income from the Fund is "effectively connected" with a U.S.
trade or business carried on by the shareholder, as discussed generally
below. Special U.S. federal income tax rules that differ from those
described below may apply to certain foreign persons who invest in the Fund.
For example, the tax consequences to a foreign shareholder entitled to claim
the benefits of an applicable tax treaty may be different from those
described below. Foreign shareholders are advised to consult their own tax
advisers with respect to the particular tax consequences to them of an
investment in the Fund.
Foreign Shareholders - Income Not Effectively Connected. If the income
from the Fund is not effectively connected with a U.S. trade or business
carried on by the foreign shareholder, distributions of investment company
taxable income generally will be subject to a U.S. federal withholding tax
of 30% (or lower treaty rate) on the gross amount of the distribution.
Foreign shareholders also may be subject to U.S. federal withholding tax on
income resulting from any election by the Fund to treat foreign taxes paid
by it as paid by its shareholders (see discussion above), but foreign
shareholders will not be able to claim a credit or deduction for the foreign
taxes treated as having been paid by them.
Capital gains realized by foreign shareholders on the sale of Fund
shares and distributions to them of net capital gain, as well as amounts
retained by the Fund that are designated as undistributed capital gains,
generally will not be subject to U.S. federal income tax unless the foreign
shareholder is a non-resident alien individual and is physically present in
the United States for more than 182 days during the taxable year. However,
this rule only applies in exceptional cases, because any individual present
in the United States for more than 182 days during the taxable year
generally is treated as a resident for U.S. federal income tax purposes on
his worldwide income at the graduated rates applicable to U.S. citizens,
rather than the 30% U.S. federal withholding tax rate. In the case of
certain foreign shareholders, the Fund may be required to withhold U.S.
Federal income tax at a rate of 31% of capital gain distributions and of the
gross proceeds from a redemption of Fund shares unless the shareholder
furnishes the Fund with a certificate regarding the shareholder's foreign
status.
Foreign Shareholders - Effectively Connected Income. If income from the
Fund is effectively connected with a U.S. trade or business carried on by a
foreign shareholder, then all distributions to that shareholder and any
gains realized by that shareholder on the disposition of the Fund shares
will be subject to U.S. federal income tax at the graduated rates applicable
to U.S. citizens and domestic corporations, as the case may be. Foreign
shareholders also may be subject to the branch profits tax.
Foreign Shareholders - Estate Tax. Foreign individuals generally are
subject to U.S. federal estate tax on their U.S. situs property, such as
shares of the Fund, that they own at the time of their death. Certain
credits against that tax and relief under applicable tax treaties may be
available.
Pennsylvania Personal Property Tax Exemption. The Company has obtained
a Certificate of Authority to do business as a foreign corporation in
Pennsylvania. In the opinion of counsel, shares of The Company are exempt
from Pennsylvania personal property taxes.
PORTFOLIO TRANSACTIONS
All portfolio transactions of the Fund are placed on behalf of the Fund
by Dreyfus. Debt securities purchased and sold by the Fund are generally
traded on a net basis (i.e., without commission) through dealers acting for
their own account and not as brokers, or otherwise involve transactions
directly with the issuer of the instrument. This means that a dealer (the
securities firm or bank dealing with the Fund) makes a market for securities
by offering to buy at one price and sell at a slightly higher price. The
difference between the prices is known as a spread. Other portfolio
transactions may be executed through brokers acting as agent. The Fund will
pay a spread or commissions in connection with such transactions. Dreyfus
uses its best efforts to obtain execution of portfolio transactions at
prices which are advantageous to the Fund and at spreads and commission
rates, if any, which are reasonable in relation to the benefits received.
Dreyfus also places transactions for other accounts that it provides with
investment advice.
Brokers and dealers involved in the execution of portfolio transactions
on behalf of the Fund are selected on the basis of their professional
capability and the value and quality of their services. In selecting brokers
or dealers, Dreyfus will consider various relevant factors, including, but
not limited to, the size and type of the transaction; the nature and
character of the markets for the security to be purchased or sold; the
execution efficiency, settlement capability, and financial condition of the
broker-dealer; the broker-dealer's execution services rendered on a
continuing basis; and the reasonableness of any spreads (or commissions, if
any). Any spread, commission, fee or other remuneration paid to an
affiliated broker-dealer is paid pursuant to the Company's procedures
adopted in accordance with Rule 17e-1 of the 1940 Act.
Brokers or dealers may be selected who provide brokerage and/or
research services to the Fund and/or other accounts over which Dreyfus or
its affiliates exercise investment discretion. Such services may include
advice concerning the value of securities; the advisability of investing in,
purchasing or selling securities; the availability of securities or the
purchasers or sellers of securities; furnishing analyses and reports
concerning issuers, industries, securities, economic factors and trends,
portfolio strategy and performance of accounts; and effecting securities
transactions and performing functions incidental thereto (such as clearance
and settlement).
The receipt of research services from broker-dealers may be useful to
Dreyfus in rendering investment management services to the Fund and/or its
other clients; and, conversely, such information provided by brokers or
dealers who have executed transaction orders on behalf of other clients of
Dreyfus may be useful to these organizations in carrying out their
obligations to the Fund. The receipt of such research services does not
reduce these organizations' normal independent research activities; however,
it enables these organizations to avoid the additional expenses which might
otherwise be incurred if these organizations were to attempt to develop
comparable information through their own staffs.
The Company's Board of Directors periodically reviews Dreyfus'
performance of its responsibilities in connection with the placement of
portfolio transactions on behalf of the Fund and reviews the prices paid by
the Fund over representative periods of time to determine if they are
reasonable in relation to the benefits to the Fund.
Although Dreyfus manages other accounts in addition to the Fund,
investment decisions for the Fund are made independently from decisions made
for these other accounts. It sometimes happens that the same security is
held by more than one of the accounts managed by Dreyfus. Simultaneous
transactions may occur when several accounts are managed by the same
investment manager, particularly when the same investment instrument is
suitable for the investment objective of more than one account.
When more than one account is simultaneously engaged in the purchase or
sale of the same investment instrument, the prices and amounts are allocated
in accordance with a formula considered by Dreyfus to be equitable to each
account. In some cases this system could have a detrimental effect on the
price or volume of the investment instrument as far as the Fund is
concerned. In other cases, however, the ability of the Fund to participate
in volume transactions will produce better executions for the Fund. While
the Directors will continue to review simultaneous transactions, it is their
present opinion that the desirability of retaining the Dreyfus as investment
manager to the Fund outweighs any disadvantages that may be said to exist
from exposure to simultaneous transactions.
The Fund paid $13,899 in brokerage commissions during the period from
September 1, 1994 (commencement of operations) to October 31, 1994.
Portfolio Turnover. The portfolio turnover rate for the Fund is
calculated by dividing the lesser of the Fund's annual sales or purchases of
portfolio securities (exclusive of purchases and sales of securities whose
maturities at the time of acquisition were one year or less) by the monthly
average value of securities in the Fund during the year.
The portfolio turnover rate for the period from September 1, 1994
(commencement of operations) to October 31, 1994 was 8%.
PERFORMANCE INFORMATION
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Performance
Information."
Class B and Class C shares had not been offered as of the date of the
financials accordingly, no performance data are available for Class B or
Class C shares.
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 other distributions), dividing by the amount of the initial
investment, taking the "n"th root of the quotient (where "n" is the number
of years in the period) and subtracting 1 from the result. A Class's
average annual total return figures calculated in accordance with such
formula assume that in the case of Class A 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 C the maximum applicable CDSC has been paid upon
redemption at the end of the period.
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 (maximum offering
price in the case of Class A) per share at the end of the period (after
giving effect to the reinvestment of dividends and other distributions
during the period and any applicable CDSC), and dividing the result by the
net asset value (maximum offering price in the case of Class A) 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 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 C shares, which, if reflected
would reduce the performance quoted.
Aggregate total return (expressed as a percentage) for Class A shares
and Class R shares of the Fund for the periods from September 2, 1994
(commencement of operations) to October 31, 1994 was 0.70% and 0.70%,
respectively.
Performance information for the Fund may be compared, in reports and
promotional literature, to indexes including, but not limited to: (i) the
Morgan Stanley European Index; (ii) the Standard & Poor's 500 Composite
Stock Price Index ("S&P 500"), the Dow Jones Industrial Average ("DJIA"), or
other appropriate unmanaged domestic or foreign indices of performance of
various types of investments so that investors may compare the Fund's
results with those of indices widely regarded by investors as representative
of the securities markets in general; (iii) other groups of mutual funds
tracked by Lipper Analytical Services, a widely used independent research
firm which ranks mutual funds by overall performance, investment objectives
and assets, or tracked by other services, companies, publications, or
persons who rank mutual funds on overall performance or other criteria; (iv)
the Consumer Price Index (a measure of inflation) to assess the real rate of
return from an investment in the Fund; and (v) products managed by a
universe of money managers with similar country allocation and performance
objectives. Unmanaged indices may assume the reinvestment of dividends but
generally do not reflect deductions or administrative and management costs
and expenses.
INFORMATION ABOUT THE FUND
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "General Information."
Each Fund share has one vote and, when issued and paid for in
accordance with the terms of the offering, is fully paid and non-assessable.
Fund shares have no preemptive or subscription rights and are freely
transferable.
The Fund will send annual and semi-annual financial statements to all
its shareholders.
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT, COUNSEL
AND INDEPENDENT AUDITORS
Mellon Bank, One Mellon Bank Center, Pittsburgh, PA 15258, is the
Fund's custodian and fund accountant. The Shareholder Services Group, Inc.,
a subsidiary of First Data Corporation, P.O. Box 9692, Providence, Rhode
Island 09240-9830, is the Fund's transfer and dividend disbursing agent.
The Shareholder Services Group, Inc. and Mellon Bank, as custodian, have no
part in determining the investment policies of the Fund or which securities
are to be purchased or sold by the Fund. Prior to the effectiveness of the
Investment Management Agreement for its services as custodian and fund
accountant, Mellon Bank was paid an annual fee of $30,000 per portfolio,
and, for all portfolios, an annual administrative account maintenance fee of
$10,000, an annual on-line fee of $3,600, an asset-based fee of .02% of the
first $500 million of the Company's net assets and .01% of net assets over
$500 million, plus a specified transaction fee for each transaction. For
its services as transfer and dividend disbursing agent, Mellon Bank was paid
an annual fee of $13.00 per shareholder account, with a minimum monthly fee
of $3,000 per portfolio. Mellon Bank was reimbursed for certain out-of-
pocket expenses including wire fees, and postage, stationery and telephone
expenses.
Kirkpatrick & Lockhart, 1800 M Street, N.W., South Lobby - 9th Floor,
Washington, D.C. 20036, has passed upon the legality of the shares offered
by the Prospectus and this Statement of Additional Information.
KPMG Peat Marwick LLP was appointed by the Directors to serve as the
Fund's independent auditors for the year ending October 31, 1995, providing
audit services including (1) examination of the annual financial statements
(2) assistance, review and consultation in connection with the SEC and (3)
review of the annual federal income tax return and the Pennsylvania excise
tax return filed on behalf of the Fund.
FINANCIAL STATEMENTS
The financial statements for the fiscal year ended October 31, 1994,
including notes to the financial statements and supplementary information
and the Report of Independent Auditors are included in the Annual Report to
Shareholders. A copy of the Annual Report accompanies this Statement of
Additional Information and is incorporated herein by reference.
STATEMENT OF ADDITIONAL INFORMATION
March 1, 1995
THE DREYFUS/LAUREL FUNDS, INC.
200 Park Avenue
New York, NY 10166
For information call 1-800-548-2868
The Funds listed below are portfolios of The Dreyfus/Laurel Funds,
Inc. (formerly The Laurel Funds, Inc.) ("Dreyfus/Laurel"), an open-end,
diversified management investment company that offers shares of common
stock of these Funds.
Premier Small Company Stock Fund (formerly the Laurel Smallcap Stock
Fund) ("Small Company")
Premier Balanced Fund (formerly the Laurel Balanced Fund)
("Balanced")
Premier Limited Term Income Fund (formerly the Laurel Intermediate
Income Fund) ("Limited Term Income")
This Statement of Additional Information is not a prospectus and
should be read only in conjunction with each Fund's current prospectus,
dated March 1, 1995. A copy of the Prospectus is available from Premier
Mutual Fund Services, Inc. ("Premier"), One Exchange Place, Boston,
Massachusetts 02109.
TABLE OF CONTENTS
General Information. . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Investment Information and Risk Factors. . . . . . . . . . . . . . . . . 3
Investment Limitations . . . . . . . . . . . . . . . . . . . . . . . . . 11
Controlling Shareholders . . . . . . . . . . . . . . . . . . . . . . . . 14
Principal Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . 14
Directors and Officers . . . . . . . . . . . . . . . . . . . . . . . . . 14
Investment Management and Other Services . . . . . . . . . . . . . . . . 19
Distribution and Service Plans . . . . . . . . . . . . . . . . . . . . . 20
Additional Purchase and Redemption Information . . . . . . . . . . . . . 22
Federal Law Affecting Mellon Bank. . . . . . . . . . . . . . . . . . . . 24
Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . . . . . 24
Net Asset Value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Performance Calculations . . . . . . . . . . . . . . . . . . . . . . . . 27
Dividends, Other Distributions and Taxes . . . . . . . . . . . . . . . . 29
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Other Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
GENERAL INFORMATION
Dreyfus/Laurel's name was changed from The Laurel Funds, Inc. to
The Dreyfus/Laurel Funds, Inc. effective October 17, 1994. The names of
the Funds were also changed as follows effective October 17, 1994: Laurel
Smallcap Stock Fund to Premier Small Company Stock Fund; Laurel Balanced
Fund to Premier Balanced Fund; and Laurel Intermediate Income Fund to
Premier Limited Term Income Fund.
INVESTMENT INFORMATION AND RISK FACTORS
Floating Rate Securities (Limited Term Income Fund). A floating
rate security is one whose terms provide for the automatic adjustment of
interest rates whenever a specified interest rate changes. The interest
on floating rate securities is ordinarily tied to and is a percentage of
the prime rate of a specified bank or some similar objective standard such
as the 90-day U.S. Treasury bill rate and may change daily. Generally,
changes in interest rates on floating rate securities will reduce changes
in the security's market value from the original purchase price resulting
in the potential for capital appreciation or capital depreciation being
less than for fixed income obligations with a fixed interest rate.
ECDs, ETDs and Yankee CDs (Limited Term Income and Balanced Funds).
These Funds may purchase Eurodollar certificates of deposit ("ECDs"),
which are U.S. dollar denominated certificates of deposit issued by
foreign branches of domestic banks, Eurodollar time deposits ("ETDs"),
which are U.S. dollar denominated deposits in a foreign branch of a
domestic bank or a foreign bank, and Yankee-Dollar certificates of deposit
("Yankee CDs") which are certificates of deposit issued by a domestic
branch of a foreign bank denominated in U.S. dollars and held in the
United States. ECDs, ETDs, and Yankee CDs are subject to somewhat
different risks than domestic obligations of domestic banks. These risks
are discussed in the Prospectus.
Government Obligations (All Funds). Each Fund may invest in a
variety of U.S. Treasury obligations, which differ only in their interest
rates, maturities and times of issuance: (a) U.S. Treasury bills have a
maturity of one year or less, (b) U.S. Treasury notes have maturities of
one to ten years, and (c) U.S. Treasury bonds generally have maturities of
greater than ten years.
In addition to U.S. Treasury obligations, the Funds may invest in
obligations issued or guaranteed by U.S. Government agencies and
instrumentalities which are supported by any of the following: (a) the
full faith and credit of the U.S. Treasury (such as Government National
Mortgage Association ("GNMA") participation certificates), (b) the right
of the issuer to borrow an amount limited to a specific line of credit
from the U.S. Treasury, (c) discretionary authority of the U.S. Government
agency or instrumentality, or (d) the credit of the instrumentality.
(Examples of agencies and instrumentalities are: Federal Land Banks,
Federal Housing Administration, Farmers Home Administration, Export-Import
Bank of the United States, Central Bank for Cooperatives, Federal
Intermediate Credit Banks, Federal Home Loan Banks, General Services
Administration, Maritime Administration, Tennessee Valley Authority,
District of Columbia Armory Board, Inter-American Development Bank, Asian-
American Development Bank, Student Loan Marketing Association,
International Bank of Reconstruction and Development and Federal National
Mortgage Association ("FNMA")). No assurance can be given that the U.S.
Government will provide financial support to such U.S. Government agencies
or instrumentalities described in (b), (c) and (d) in the future, other
than set forth above, since it is not obligated to do so by law.
Mortgage Pass-Through Certificates (Limited Term Income and
Balanced Funds). Mortgage pass-through certificates are issued by
governmental, government-related and private organizations which are
backed by pools of mortgage loans. These mortgage loans are made by
lenders such as savings and loan institutions, mortgage bankers,
commercial banks and others to residential home buyer throughout the
United States. The securities are "pass-through" securities because they
provide investors with monthly payments of principal and interest which in
effect are a "pass-through" of the monthly payments made by the individual
borrowers on the underlying mortgages, net of any fees paid to the issuer
or guarantor of the pass-through certificates. The principal government
issuer of such securities is GNMA, which is a wholly-owned U.S. Government
corporation within the Department of Housing and Urban Development.
Government-related issuers include the Federal Home Loan Mortgage
Corporation ("FHLMC") and FNMA, both government sponsored corporations
owned entirely by private stockholders. Commercial banks, savings and
loan institutions, private mortgage insurance companies, mortgage bankers
and other second market issuers also create pass-through pools of
conventional residential mortgage loans. Such issuers may be the
originators of the underlying mortgage loans as well as the guarantors of
the mortgage-related securities.
(1) GNMA Mortgage Pass-Through Certificates ("Ginnie Maes").
Ginnie Maes represent an undivided interest in a pool of mortgages that
are insured by the Federal Housing Administration or the Farmers Home
Administration or guaranteed by the Veterans Administration. Ginnie Maes
entitle the holder to receive all payments (including prepayment of
principal and interest owed by the individual mortgagors, net of fees paid
to GNMA and the issuer which assembles the mortgage pool and passes
through the monthly mortgage payments to the certificate holders
(typically, a mortgage banking firm), regardless of whether the individual
mortgagor actually makes the payment. Because payments are made to
certificate holders regardless of whether payments are actually received
on the underlying mortgages, Ginnie Maes are of the "modified pass-
through" mortgage certificate type. The GNMA is authorized to guarantee
the timely payment of principal and interest on the Ginnie Maes as
securities backed by an eligible pool of mortgages. The GNMA guarantee is
backed by the full faith and credit of the United States, and the GNMA has
unlimited authority to borrow funds from the U.S. Treasury to make
payments under the guarantee. The market for Ginnie Maes is highly liquid
because of the size of the market and the active participation in the
secondary market of securities dealers and a variety of investors.
(2) FHLMC Mortgage Participation Certificates ("Freddie Macs").
Freddie Macs represent interests in groups of specified first lien
residential conventional mortgages underwritten and owned by the FHLMC.
Freddie Macs entitle the holder to timely payment of interest, which is
guaranteed by the FHLMC. The FHLMC guarantees either ultimate collection
or timely payment of all principal payments on the underlying mortgage
loans. In cases where the FHLMC has not guaranteed timely payment of
principal, the FHLMC may remit the amount due on account of its guarantee
of ultimate payment of principal at any time after default on an
underlying mortgage, but in no event later than one year after it becomes
payable. Freddie Macs are not guaranteed by the United States or by any
of the Federal Home Loan Banks and do not constitute a debt or obligation
of the United States or of any Federal Home Loan Bank. The secondary
market for Freddie Macs is highly liquid because of the size of the market
and the active participation in the secondary market of the FHLMC,
securities dealers and a variety of investors.
(3) FNMA Guaranteed Mortgage Pass-Through Certificates ("Fannie
Maes"). Fannie Maes represent an undivided interest in a pool of
conventional mortgage loans secured by first mortgages or deeds of trust,
on one family, or two to four family, residential properties. The FNMA is
obligated to distribute scheduled monthly installments of principal and
interest on the mortgages in the pool, whether or not received, plus full
principal of any foreclosed or otherwise liquidated mortgages. The
obligation of the FNMA under its guaranty is solely the obligation of the
FNMA and is not backed by, nor entitled to, the full faith and credit of
the United States.
The market value of mortgage-related securities depends on, among
other things, the level of interest rates, the certificates' coupon rates
and the payment history of the mortgagors of the underlying mortgages.
Repurchase Agreements (All Funds). The Funds may enter into
repurchase agreements with U.S. Government securities dealers recognized
by the Federal Reserve Board, with member banks of the Federal Reserve
System, or with such other brokers or dealers that meet the credit
guidelines of the Board of Directors. In a repurchase agreement, the Fund
buys a security from a seller that has agreed to repurchase the same
security at a mutually agreed upon date and price. A Fund's resale price
will be in excess of the purchase price, reflecting an agreed upon
interest rate. This interest rate is effective for the period of time the
Fund is invested in the agreement and is not related to the coupon rate of
the underlying security. Repurchase agreements may also be viewed as a
fully collateralized loan of money by the Fund to the seller. The period
of these repurchase agreements will usually be short, from overnight to
one week, and at no time will a Fund invest in repurchase agreements for
more than one year. A Fund will always receive as collateral securities
whose market value including accrued interest is, and during the entire
term of the agreement remains, at least equal to 100% of the dollar amount
invested by the Fund in each agreement, and the Fund will make payment for
such securities only upon physical delivery or upon evidence of book entry
transfer to the account of the Custodian. If the seller defaults, the
Fund might incur a loss if the value of the collateral securing the
repurchase agreement declines and might incur disposition costs in
connection with liquidating the collateral. In addition, if bankruptcy
proceedings are commenced with respect to the seller of a security which
is the subject of a repurchase agreement, realization upon the collateral
by the Fund may be delayed or limited. The Manager seeks to minimize the
risk of loss through repurchase agreements by analyzing the
creditworthiness of the obligors under repurchase agreements, in
accordance with the credit guidelines of the Board of Directors.
Reverse Repurchase Agreements (All Funds). A Fund may enter into
reverse repurchase agreements to meet redemption requests where the
liquidation of portfolio securities is deemed by the Manager to be
inconvenient or disadvantageous. A reverse repurchase agreement is a
transaction whereby a Fund transfers possession of a portfolio security to
a bank or broker-dealer in return for a percentage of the portfolio
security's market value. The Fund retains record ownership of the
security involved including the right to receive interest and principal
payments. At an agreed upon future date, the Fund repurchases the
security by paying an agreed upon purchase price plus interest. Cash or
liquid high-grade debt obligations of the Fund equal in value to the
repurchase price including any accrued interest will be maintained in a
segregated account while a reverse repurchase agreement is in effect.
When-Issued Securities (All Funds). New issues of U.S. Treasury
and Government securities are often offered on a when-issued basis. This
means that delivery and payment for the securities normally will take
place approximately 7 to 15 days after the date the buyer commits to
purchase them. The payment obligation and the interest rate that will be
received on securities purchased on a when-issued basis are each fixed at
the time the buyer enters into the commitment. Each Fund will make
commitments to purchase such securities only with the intention of
actually acquiring the securities, but the Fund may sell these securities
or dispose of the commitment before the settlement date if it is deemed
advisable as a matter of investment strategy. Cash or marketable high
grade debt securities equal to the amount of the above commitments will be
segregated on each Fund's records. For the purpose of determining the
adequacy of these securities the segregated securities will be valued at
market. If the market value of such securities declines, additional cash
or securities will be segregated on the Fund's records on a daily basis so
that the market value of the account will equal the amount of such
commitments by the Fund.
Securities purchased on a when-issued basis and the securities held
by each Fund are subject to changes in market value based upon the
public's perception of changes in the level of interest rates. Generally,
the value of such securities will fluctuate inversely to changes in
interest rates -- i.e., they will appreciate in value when interest rates
decline and decrease in value when interest rates rise. Therefore, if in
order to achieve higher interest income each Fund remains substantially
fully invested at the same time that it has purchased securities on a
"when issued" basis, there will be a greater possibility of fluctuation in
the Fund's net asset value.
When payment for when-issued securities is due, each Fund will meet
its obligation from then-available cash flow, the sale of segregated
securities, the sale of other securities and/or, although it would not
normally expect to do so, from the sale of the when-issued securities
themselves (which may have a market value greater or less than the Fund's
payment obligation). The sale of securities to meet such obligations
carries with it a greater potential for the realization of capital gains,
which are subject to federal income taxes.
Loans of Fund Securities (All Funds). Each Fund has authority to
lend its portfolio securities provided (1) the loan is secured
continuously by collateral consisting of U.S Government securities or cash
or cash equivalents adjusted daily to make a market value at least equal
to the current market value of these securities loaned; (2) the Fund may
at any time call the loan and regain the securities loaned; (3) the Fund
will receive any interest or dividends paid on the loaned securities; and
(4) the aggregate market value of securities loaned will not at any time
exceed one-third of the total assets of the Fund. In addition, it is
anticipated that a Fund may share with the borrower some of the income
received on the collateral for the loan or that it will be paid a premium
for the loan. In determining whether to lend securities, the Manager
considers all relevant factors and circumstance including the
creditworthiness of the borrower.
Futures Contracts and Options (All Funds). For the purpose of
creating market exposure for uncommitted cash balances, reducing
transaction costs associated with rebalancing a Fund, facilitating trading
or seeking higher investment returns when a futures contract is priced
more attractively than the underlying security or index, each of the
above-referenced Funds may enter into futures contracts, options, and
options on futures contracts with respect to securities in which the Funds
may invest and indices comprised of such securities.
Futures contracts provide for the future sale by one party and
purchase by another party of a specified amount of a specific security or
securities index at a specified future time and at a specified price.
Where the underlying security is an index, no physical transfer of
securities takes place; rather, upon expiration of the contract, the
parties settle by exchanging cash in an amount equal to the difference
between the contract price and the closing value of the index at
expiration, net of variation margin previously paid. Futures contracts
that are standardized as to maturity date and underlying interest are
traded on national futures exchanges.
Futures traders are required to make a good faith margin deposit in
cash or government securities with a broker or custodian to initiate and
maintain open positions in futures contracts. A margin deposit is
intended to assure completion of the contract (delivery or acceptance of
the underlying security) if it is not terminated prior to the specified
delivery date. Minimal initial margin requirements are established by the
futures exchange and may be changed. Brokers may establish deposit
requirements which are higher than the exchange minimums.
After a futures contract position is opened, the value of the
contract is marked to market daily. If the futures contract price changes
to the extent that the margin on deposit does not satisfy margin
requirements, payment of additional "variation" margin will be required.
Conversely, change in the contract value may reduce the required margin,
resulting in a repayment of excess margin to the contract holder.
Variation margin payments are made to and from the futures broker for as
long as the contract remains open. Each Fund expects to earn interest
income on its margin deposits.
Options are of two basic types, either call or put options, and may
relate to a single security, a securities index or a futures contract. A
call option on a security permits the holder of the option to purchase the
underlying security at a specified price ("strike price") at any time
during the term of the option. Thus, in exchange for the premium paid to
the writer, the purchaser obtains the right to profit from any
appreciation in the value of the underlying security above the strike
price. A put option permits the holder to sell the underlying security to
the writer at the strike price at any time during the term of the
contract. Thus, in exchange for the premium paid to the writer, the
purchaser is relieved of the risk of a decline in the value of the
underlying security below the strike price. An option on a securities
index gives the holder the right to receive cash from the writer in an
amount equal to the difference between the strike price of the option and
the value of the underlying index multiplied by a factor established by
the exchange upon which the option is traded. An option on a futures
contract gives the holder, in return for the premium paid to the writer,
the right to assume a position in the underlying futures contract at a
specified price at any time during the term of the option.
Although futures and options contracts by their terms call for
actual delivery or acceptance of the underlying securities, in most cases
the contracts are closed out before the settlement date without the making
or taking of delivery. Closing out an open futures position is done by
taking an opposite position ("buying" a contract which has previously been
"sold," or "selling" a contract previously purchased) in an identical
contract to terminate the position. An option purchased may be closed out
by selling the option. An option written is closed out by purchasing an
option identical to that written. Brokerage commissions are incurred when
future and options contracts are bought and sold.
Restrictions on the Use of Futures Contracts and Options (All
Funds). Each Fund will not enter into futures contracts to the extent
that its outstanding obligations under these contracts would exceed 25% of
the Fund's total assets. To the extent that a Fund enters into futures
contracts and options on futures positions that are not for bona fide
hedging purposes (as defined by the Commodity Futures Trading Commission),
the aggregate initial margin and premiums on these positions (excluding
the amount by which options are "in-the-money") may not exceed 5% of the
Fund's net assets.
Transactions using options and futures contracts (other than
options that the Fund has purchased) expose the Fund to an obligation to
another party. A Fund will not enter into any such transactions unless it
owns either (1) an offsetting ("covered") position in securities or other
options or futures contracts or (2) cash, receivables and short-term debt
securities with a value sufficient at all times to cover its potential
obligations not covered as provided in (1) above. Each Fund will comply
with SEC guidelines regarding cover for these instruments and, if the
guidelines so require, set aside cash, U.S. Government securities or other
liquid, high-grade debt securities in a segregated account with its
custodian in the prescribed amount.
All options purchased or written by a Fund must be listed on a
national securities or futures exchange or traded in the over-the-counter
("OTC") market. A Fund will not purchase or write OTC options if, as a
result of such transaction, the sum of (i) the market value of outstanding
OTC options purchased by the Fund, (ii) the market value of the underlying
securities covered by outstanding OTC call options written by the Fund,
and (iii) the market value of other assets of the Fund that are illiquid
or are not otherwise readily marketable, would exceed 15% of the net
assets of the Fund, taken at market value. However, if an OTC option is
sold by a Fund to a primary U.S. Government securities dealer recognized
by the Federal Reserve Bank of New York and the Fund has the unconditional
contractual right to repurchase such OTC option from the dealer at a
predetermined price, then the Fund will treat as illiquid such amount of
the underlying securities as is equal to the repurchase price less the
amount by which the option is "in-the-money" (the difference between
current market value of the underlying security and the option's strike
price). The repurchase price with primary dealers is typically a formula
price which is generally based on a multiple of the premium received for
the option plus the amount by which the option is "in-the-money."
Each Fund may write only covered options. A call option is covered
if the Fund owns the underlying security or a call option on the same
security with a lower strike price. A put option is covered if the Fund
segregates cash and/or short-term debt securities in an amount necessary
to pay the strike price of the option or purchases a put option on the
same underlying security with a higher strike price.
Each Fund will not purchase puts, calls, straddles, spreads or any
combination thereof, if as a result of such purchase the value of the
Fund's aggregate investment in such securities would exceed 5% of the
Fund's total assets.
Risk Factors in Futures and Options Transactions (All Funds).
There can be no assurance that a liquid secondary market will exist for
any particular futures or option contract at any specific time. Thus, it
may not be possible to close a futures or option position. In the event
of adverse price movements, each Fund would continue to be required to
make daily cash payments to maintain its required margin with respect to
open futures or written options positions. In such a situation, if the
Fund has insufficient cash, it may have to sell portfolio securities to
meet daily margin requirements at a time when it may be disadvantageous to
do so. In addition, a Fund may be required to make or take delivery of
the securities underlying futures contracts that it holds and options
contracts that it has written.
Each Fund will seek to minimize the risk that it will be unable to
close out a futures contract by entering into only those futures contracts
that are listed on national futures exchange and for which there appears
to be a liquid secondary market. Likewise, each Fund will enter into only
those option contracts that are listed on a national securities exchange
or traded in the OTC market for which there appears to be a liquid
secondary market.
The risk of loss in trading futures contracts in some strategies
can be substantial, due both to the low margin deposits required, and the
extremely high degree of leverage involved in futures pricing. As a
result, a relatively small price movement in a futures contract may result
in immediate and substantial loss (as well as gain) to the investor. For
example, if at the time of purchase, 10% of the value of the futures
contract is deposited as margin, a subsequent 10% decrease in the value of
the futures contract would result in a total loss of margin deposit,
before any deduction for the transaction costs, if the account were then
closed out. A 15% decrease would result in a loss equal to 150% if the
original margin deposit for the contract were closed out. Thus, a
purchase or sale of a futures contract may result in losses in excess of
the amount invested in the contract. Options transactions are subject to
similar risks. However, because each Fund will not engage in futures or
options transactions for speculative purposes, the Manager believes that a
Fund's risk of loss is less than the risk of loss associated with
speculative transactions. Moreover, in the foregoing example, the Fund
would presumably have sustained comparable losses if, instead of the
futures contract, it had invested in the underlying security and sold it
after the decline.
Utilization of futures contracts and options transactions by each
Fund does involve the risk of imperfect or no correlation where the
securities underlying futures and options contracts are different from the
portfolio securities being hedged. It is also possible that a Fund could
both lose money on futures and options contracts and also experience a
decline in value of its portfolio securities. There is also the risk of
loss by a Fund of margin deposits in the event of bankruptcy of a broker
with whom the Fund has an open position in a futures contract or option
thereon.
Most futures exchanges limit the amount of fluctuation permitted in
futures contract prices during a single trading day. The daily limit
establishes the maximum amount that the price of a futures contract may
vary either up or down from the previous day's settlement price at the end
of a trading session. Once the daily limit has been reached in a
particular type of contract, no trade may be made on that day at a price
beyond that limit. The daily limit governs only price movement during a
particular trading day and therefore does not limit potential losses,
because the limit may prevent the liquidation of unfavorable positions.
Futures contract prices have occasionally moved to the daily limit for
several consecutive trading days with little or no trading thereby
preventing prompt liquidation of future positions and subjecting some
futures traders to substantial losses.
Futures and options contracts involve special tax considerations.
See "Dividends, Other Distributions and Taxes" for further information.
Commercial Paper (All Funds). The Funds may invest in commercial
paper issued in reliance on the so called "private placement" exemption
from registration afforded by Section 4(2) of the Securities Act of 1933
("Section 4(2) paper"). Section 4(2) paper is restricted as to
disposition under the federal securities laws and generally is sold to
investors who agree that they are purchasing the paper for an investment
and not with a view to public distribution. Any resale by the purchaser
must be in an exempt transaction. Section 4(2) paper is normally resold
to other investor through or with the assistance of the issuer or
investment dealers who make a market in Section 4(2) paper, thus providing
liquidity. Pursuant to guidelines established by Dreyfus/Laurel's Board
of Directors, the Manager may determine that Section 4(2) paper is liquid
for the purposes of complying with the Fund's investment restriction
relating to investments in illiquid securities.
INVESTMENT LIMITATIONS
The following limitations have been adopted by each Fund. A Fund
may not change any of these fundamental investment limitations without the
consent of: (a) 67% or more of the shares present at a meeting of
shareholders duly called if the holders of more than 50% of the
outstanding shares of the Fund are present or represented by proxy; or (b)
more than 50% of the outstanding shares of a Fund, whichever is less.
Each Fund may not:
1. Purchase any securities which would cause more than 25% of the
value of a Fund's total assets at the time of such purchase to be
invested in the securities of one or more issuers conducting their
principal activities in the same industry. (For purposes of this
limitation, U.S. Government securities, and state or municipal
governments and their political subdivisions are not considered
members of any industry. In addition, this limitation does not
apply to investments in domestic banks, including U.S. branches of
foreign banks and foreign branches of U.S. banks).
2. Borrow money or issue senior securities as defined in the 1940 Act
except that (a) a Fund may borrow money in an amount not exceeding
one-third of the Fund's total assets at the time of such
borrowings, and (b) a Fund may issue multiple classes of shares.
The purchase or sale of futures contracts and related options shall
not be considered to involve the borrowing of money or issuance of
senior securities.
3. Purchase with respect to 75% of a Fund's total assets securities of
any one issuer (other than securities issued or guaranteed by the
U.S. Government, its agencies or instrumentalities) if, as a
result, (a) more than 5% of a Fund's total assets would be invested
in the securities of that issuer, or (b) a Fund would hold more
than 10% of the outstanding voting securities of that issuer.
4. Make loans or lend securities, if as a result thereof more than
one-third of the Fund's total assets would be subject to all such
loans. For purposes of this limitation debt instruments and
repurchase agreements shall not be treated as loans.
5. Purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (but this shall not
prevent a Fund from investing in securities or other instruments
backed by real estate, including mortgage loans, or securities of
companies that engage in real estate business or invest or deal in
real estate or interests therein).
6. Underwrite securities issued by any other person, except to the
extent that the purchase of securities and later disposition of
such securities in accordance with the Fund's investment program
may be deemed an underwriting.
7. Purchase or sell commodities except that each Fund may enter into
futures contracts and related options, forward currency contracts
and other similar instruments.
Each Fund may:
Notwithstanding any other fundamental investment policy or
limitation, invest all of its investable assets in securities of a
single open-end management investment company with substantially
the same investment objectives, policies and limitations as the
Fund.
The Funds above have adopted the following additional non-
fundamental restrictions. These non-fundamental restrictions may be
changed without shareholder approval, in compliance with applicable law
and regulatory policy.
1. No Fund shall sell securities short, unless it owns or has the
right to obtain securities equivalent in kind and amount to the
securities sold short, and provided that transactions in futures
contracts are not deemed to constitute selling short.
2. No Fund shall purchase securities on margin, except that a Fund may
obtain such short-term credits as are necessary for the clearance
of transactions, and provided that margin payments in connection
with futures contracts and options on futures contracts shall not
constitute purchasing securities on margin.
3. No Fund shall purchase oil, gas or mineral leases.
4. Each Fund will not purchase or retain the securities of any issuer
if the officers or Directors of the Fund, its advisers, or
managers, owning beneficially more than one half of one percent of
the securities of such issuer, together own beneficially more than
five percent of such securities.
5. No Fund will purchase securities of issuers (other than securities
issued or guaranteed by domestic or foreign governments or
political subdivisions thereof), including their predecessors, that
have been in operation for less than three years, if by reason
thereof, the value of such Fund's investment in securities would
exceed 5% of such Fund's total assets. For purposes of this
limitation, sponsors, general partners, guarantors and originators
of underlying assets may be treated as the issuer of a security.
6. No Fund will invest more than 15% of the value of its net assets in
illiquid securities, including repurchase agreements with remaining
maturities in excess of seven days, time deposits with maturities
in excess of seven days and other securities which may be resold
under Rule 144A under the Securities Act of 1933, provided that the
Board of Directors, or its delegate, determines that such
securities are liquid based upon trading markets for the specific
security.
7. No Fund may invest in securities of other investment companies,
except as they may acquired as part of a merger, consolidation or
acquisition of assets and except to the extent otherwise permitted
by the 1940 Act.
8. No Fund shall purchase any security while borrowings representing
more than 5% of Fund's total assets are outstanding.
9. No Fund will purchase warrants if at the time of such purchase: (a)
more than 5% of value of such Fund's assets would be invested in
warrants, or (b) more than 2% of the value of the Fund's assets
would be invested in warrants that are not listed on the New York
Stock Exchange ("NYSE") or American Stock Exchange (for purposes of
this limitation, warrants acquired by a Fund in units or attached
to securities will be deemed to have no value).
10. No Fund will purchase puts, calls, straddles, spreads and any
combination thereof if by reason thereof the value of its aggregate
investment in such classes of securities would exceed 5% of its
total assets except that: (a) this limitation shall not apply to
standby commitments, and (b) this limitation shall not apply to a
Fund's transactions in future contracts and related options.
As an operating policy, no Fund, will invest more than 25% of the value of
the Fund's total assets, at the time of such purchase, in domestic banks,
including U.S. branches of foreign banks and foreign branches of U.S.
banks. The Board of Directors may change this operating policy without
shareholder approval. Notice will be given to shareholders if this policy
is changed by the Board of Directors.
CONTROLLING SHAREHOLDERS
Mellon Bank Corporation, a Pennsylvania corporation registered as a
bank holding company under the Bank Holding Company Act of 1956, as
amended, owned of record, through its direct and indirect subsidiaries,
more than 25% of the issued and outstanding voting shares of
Dreyfus/Laurel as of January 31, 1995, and is, as a consequence, deemed to
be a controlling shareholder of Dreyfus/Laurel as that term is defined
under the 1940 Act. The address of Mellon Bank Corporation is: Mellon
Bank Corporation, Mutual Funds Department, 2 Mellon Bank Center,
Pittsburgh, PA 15259.
PRINCIPAL SHAREHOLDERS
The following shareholder(s) owned 5% or more of the outstanding
voting shares of the Funds at January 31, 1995:
Balanced Fund: Mac & Co. 853-924, Mellon Bank, N.A., as Nominee for Trust
Custodian, P.O. Box 320, Pittsburgh, PA 15230, 28% record; Bank of New
York Trustee, The Penn Central Master Trust, One Wall Street MT/MC - 7th
Floor, New York, NY 10286, 22% record; Mac & Co. 97A-W02, Mellon Bank,
N.A., as Nominee for Trust Custodian, P.O. Box 320, Pittsburgh, PA 15230,
15% record; Mac & Co. 180-174, Mellon Bank, N.A., as Nominee for Trust
Custodian, P.O. Box 320, Pittsburgh, PA 15230, 8% record.
Small Company: Mac & Co. 080-056, Mellon Bank, N.A., as Nominee for Trust
Custodian, P.O. Box 320, Pittsburgh, PA 15230, 36% record.
DIRECTORS AND OFFICERS
Dreyfus/Laurel has a Board composed of thirteen Directors which
supervises Dreyfus/Laurel's investment activities and reviews contractual
arrangements with companies that provide the Funds with services. The
following lists the Directors and officers and their positions with
Dreyfus/Laurel and their present and principal occupations during the past
five years. Each Director who is an "interested person" of Dreyfus/Laurel
(as defined in the Investment Company Act of 1940, as amended (the "Act"))
is indicated by an asterisk. Each of the Directors also serves as a
Trustee of The Dreyfus/Laurel Funds Trust, The Dreyfus/Laurel Investment
Series and The Dreyfus/Laurel Tax-Free Municipal Funds (collectively "The
Dreyfus/Laurel Funds").
o + RUTH MARIE ADAMS. Director of Dreyfus/Laurel; Professor of English
and Vice President Emeritus, Dartmouth College; Senator, United
Chapters of Phi Beta Kappa; Trustee, Woods Hole Oceanographic
Institution. Age: 79 years old. Address: 1026 Kendal Lyme Road,
Hanover, New Hampshire 03755.
o + FRANCIS P. BRENNAN. Chairman of the Board of Directors and Assistant
Treasurer of Dreyfus/Laurel; Director and Chairman, Massachusetts
Business Development Corp.; Director, Boston Mutual Insurance
Company; Director and Vice Chairman of the Board, Home Owners Federal
Savings and Loan (prior to May 1990). Age: 76 years old. Address:
Massachusetts Business Development Corp., One Liberty Square, Boston,
Massachusetts 02109.
o * JOSEPH S. DiMARTINO. Director of Dreyfus/Laurel since February 1995.
Since January 1995, Mr. DiMartino has served as Chairman of the Board
for various funds in the Dreyfus Family of Funds. For more than five
years prior thereto, he was President, a director and, until August
1994, Chief Operating Officer of the Manager and Executive Vice
President and a director of Dreyfus Service Corporation, a wholly-
owned subsidiary of the Manager and, until August 1994, the Fund's
distributor. Mr. DiMartino is a director and former Treasurer of the
Muscular Dystrophy Association; a trustee of Bucknell University; and
a director of the Noel Group, Inc. He is 51 years old and his
address is 200 Park Avenue, New York, New York 10166.
o + JAMES M. FITZGIBBONS. Director of Dreyfus/Laurel; President and
Director, Amoskeag Company; Chairman, Howes Leather Company, Inc.;
Director, Fiduciary Trust Company; Chairman, CEO and Director,
Fieldcrest-Cannon Inc.; Age: 59 years old. Director, Lumber Mutual
Insurance Company; Director, Barrett Resources, Inc. Address: 40
Norfolk Road, Brookline, Massachusetts 02167.
o * J. TOMLINSON FORT. Director of Dreyfus/Laurel; Partner, Reed, Smith,
Shaw & McClay (law firm). Age: 65 years old. Address: 204
Woodcock Drive, Pittsburgh, Pennsylvania 15215.
o + ARTHUR L. GOESCHEL. Director of Dreyfus/Laurel; Director, Chairman
of the Board and Director, Rexene Corporation; Director, Calgon
Carbon Corporation; Director, National Picture Frame Corporation;
Chairman of the Board and Director, Tetra Corporation 1991-1993;
Director, Medalist Corporation 1992-1993; From 1988-1989 Director,
Rexene Corporation. Age: 71 years old. Address: Way Hallow Road
and Woodland Road, Sewickley, Pennsylvania 15143.
o + KENNETH A. HIMMEL. Director of Dreyfus/Laurel; Former Director, The
Boston Company, Inc. and Boston Safe Deposit and Trust Company;
President and Chief Executive Officer, Himmel & Co., Inc.; Vice
Chairman, Sutton Place Gourmet, Inc. and Florida Hospitality Group;
Managing Partner, Himmel/MKDG, Franklin Federal Partners, Reston Town
Center Associates and Grill 23 & Bar. Age: 47 years old. Address:
Himmel and Company, Inc., 101 Federal Street, 22nd Floor, Boston,
Massachusetts 02110.
o + ARCH S. JEFFERY. Director of Dreyfus/Laurel; Financial Consultant.
Age: 76 years old. Address: 1817 Foxcroft Lane, Allison Park,
Pennsylvania 15101.
o + STEPHEN J. LOCKWOOD. Director of Dreyfus/Laurel; President and CEO,
LDG Management Company Inc.; CEO, LDG Reinsurance Underwriters, SRRF
Management Inc. and Medical Reinsurance Underwriters Inc. Age: 46
years old. Address: 401 Edgewater Place, Wakefield, Massachusetts
01880.
o + ROBERT D. MCBRIDE. Director of Dreyfus/Laurel; Director, Chairman
and CEO, McLouth Steel; Director, Salem Corporation. Director,
SMS/Concast, Inc. (1983-1991). Age: 66 years old. Address: 15
Waverly Lane, Grosse Pointe Farms, Michigan 48236.
o + JOHN L. PROPST. Director of Dreyfus/Laurel: Of Counsel, Reed, Smith,
Shaw & McClay (law firm). Age: 79 years old. Address: 5521
Dunmoyle Street, Pittsburgh, Pennsylvania 15217.
o + JOHN J. SCIULLO. Director of Dreyfus/Laurel; Dean Emeritus and
Professor of Law, Duquesne University Law School; Director, Urban
Redevelopment Authority of Pittsburgh. Age: 62 years old. Address:
321 Gross Street, Pittsburgh, Pennsylvania 15224
o + ROSLYN M. WATSON. Director of Dreyfus/Laurel; Principal, Watson
Ventures, Inc., prior to February, 1993; Real Estate Development
Project Manager and Vice President, The Gunwyn Company. Age: 44
years old. Address: 25 Braddock Park, Boston, Massachusetts 02116-
-5816.
# MARIE E. CONNOLLY. President and Treasurer of Dreyfus/Laurel, The
Dreyfus/Laurel Investment Series, The Dreyfus/Laurel Funds Trust and
The Dreyfus/Laurel Tax-Free Municipal Funds (since September 1994);
Vice President of Dreyfus/Laurel, The Dreyfus/Laurel Investment
Series, The Dreyfus/Laurel Funds Trust and The Dreyfus/Laurel Tax-
Free Municipal Funds (March 1994 to September 1994); President, Funds
Distributor, Inc. (since 1992); Treasurer, Funds Distributor, Inc.
(July 1993 to April 1994); COO, Funds Distributor, Inc. (since April
1994); Director, Funds Distributor, Inc. (since July 1992);
President, COO and Director, Premier Mutual Fund Services, Inc.
(since April 1994); Senior Vice President and Director of Financial
Administration, The Boston Company Advisors, Inc. (December 1988 to
May 1993). Address: One Exchange Place, Boston, Massachusetts 02109.
# FREDERICK C. DEY. Vice President of Dreyfus/Laurel, The
Dreyfus/Laurel Investment Series, The Dreyfus/Laurel Funds Trust and
The Dreyfus/Laurel Tax-Free Municipal Funds (since September 1994);
Senior Vice President, Premier Mutual Fund Services, Inc. (since
August 1994); Vice President, Funds Distributor, Inc. (since August
1994); Fundraising Manager, Swim Across America (October 1993 to
August 1994); General Manager, Spring Industries (August 1988 to
October 1993). Address: Premier Mutual Fund Services, Inc., 200 Park
Avenue New York, New York 10166.
# ERIC B. FISCHMAN. Vice President of Dreyfus/Laurel, The
Dreyfus/Laurel Investment Series, The Dreyfus/Laurel Funds Trust and
The Dreyfus/Laurel Tax-Free Municipal Funds (since September 1994);
Vice President and Associate General Counsel, Premier Mutual Fund
Services, Inc. (Since August 1994); Vice President and Associate
General Counsel, Funds Distributor, Inc. (since August 1994); Staff
Attorney, Federal Reserve Board (September 1992 to June 1994); Summer
Associate, Venture Economics (May 1991 to September 1991); Summer
Associate, Suffolk County District Attorney (June 1990 to August
1990). Address: Premier Mutual Fund Services, Inc., 200 Park Avenue,
New York, New York 10166.
# LESLIE M. GAYNOR. Assistant Treasurer of Dreyfus/Laurel, The
Dreyfus/Laurel Investment Series, The Dreyfus/Laurel Funds Trust and
The Dreyfus/Laurel Tax-Free Municipal Funds (since October 1994);
Assistant Treasurer/Manager of Treasury Services, Funds Distributor,
Inc. (since July 1994); Vice President, The Boston Company, Inc.
(1989 to July 1994). Address: One Exchange Place, Boston,
Massachusetts 02109.
RICHARD W. HEALEY. Vice President of Dreyfus/Laurel, The
Dreyfus/Laurel Investment Series, The Dreyfus/Laurel Tax-Free
Municipal Funds and The Dreyfus/Laurel Funds Trust (since March
1994); Senior Vice President, Funds Distributor, Inc. (since March
1993); Vice President, The Boston Company Inc., (March 1993 to May
1993); Vice President of Marketing, Calvert Group (1989 to March
1993); Fidelity Investments (prior to 1989). Address: One Exchange
Place, Boston, Massachusetts 02109.
# JOHN E. PELLETIER. Vice President and Secretary of Dreyfus/Laurel,
The Dreyfus/Laurel Investment Series, The Dreyfus/Laurel Funds Trust
and The Dreyfus/Laurel Tax-Free Municipal Funds (since September
1994); Senior Vice President, General Counsel and Secretary, Funds
Distributor, Inc. (since April 1994); Senior Vice President, General
Counsel and Secretary, Premier Mutual Fund Services, Inc. (since
August 1994); Counsel, The Boston Company Advisors, Inc. (February
1992 to March 1994); Associate, Ropes & Gray (August 1990 to February
1992); Associate, Sidley & Austin (June 1989 to August 1990).
Address: One Exchange Place, Boston, Massachusetts 02109.
___________________________________________________
* "Interested person" of Dreyfus/Laurel defined in the 1940 Act.
o Member of the Audit Committee.
+ Member of the Nominating Committee.
# Officer also serves as an officer for other investment companies
advised by The Dreyfus Corporation.
The officers and Directors of Dreyfus/Laurel as a group owned
beneficially less than 1% of the total shares of each Fund outstanding as
of January 31, 1995.
No officer or employee of Premier (or of any parent, subsidiary or
affiliate thereof) receives any compensation from Dreyfus/Laurel for
serving as an officer or Director of the Dreyfus/Laurel. In addition, no
officer or employee of The Dreyfus Corporation (or of any parent or
subsidiary thereof) serves as an officer or Director of Dreyfus/Laurel.
The Dreyfus/Laurel Funds pay each Director/Trustee who is not an officer
or employee of Premier or any of its affiliate thereof) or of Dreyfus,
$27,000 per annum (and an additional $75,000 for the Chairman of the Board
of Directors/Trustees of the Dreyfus/Laurel Funds), $1,000 for each
Dreyfus/Laurel Funds meeting attended, plus $750 per joint Dreyfus/Laurel
Funds Audit Committee meeting attended, and reimburses each
Director/Trustee for travel and out-of-pocket expenses. For the fiscal
year ended October 31, 1994 the fees for meetings and expenses totaled
$25,897.
For the fiscal year ended October 31, 1994, the aggregate amount of
fees and expenses received by each Director from the Company and all other
Funds in The Dreyfus/Laurel Family of Funds for which such person is a
Board member were as follows:
<TABLE>
<CAPTION>
Total
Pension of Compensation
Retirement From the
Benefits Estimated Company
Aggregate Accrued as Annual and Fund
Compensation Part of Benefits Complex Paid
From the the Company's Upon to Board
Name of Board Member Company # Expenses Retirement Member
____________________ ____________ _____________ __________ _____________
<S> <C> <C> <C> <C>
Ruth Marie Adams $19,685 None None $ 37,500
Francis P. Brennan* 52,809 None None 112,500
Joseph S. DiMartino** N/A N/A N/A N/A
James M. Fitzgibbons 17,685 None None 31,750
J. Tomlinson Fort 7,500 None None 7,500
Arthur L. Goeschel 26,185 None None 32,500
Kenneth A. Himmel 18,685 None None 35,750
Arch S. Jeffrey 27,185 None None 33,500
Steven J. Lockwood 18,685 None None 35,750
Robert D. McBride 27,185 None None 33,500
John L. Propst 27,185 None None 33,500
John J. Sciullo 27,185 None None 33,500
Roslyn M. Watson 19,685 None None 36,750
</TABLE>
# Amount does not include reimbursed expenses for attending Board
meetings, which amounted to $10,876 for the Company.
* Compensation of Francis Brennan includes $75,000 paid by The
Dreyfus/Laurel Fund Family to be Chairman of the Board.
** Joseph S. DiMartino was not a director of the Company as of October
31, 1994.
INVESTMENT MANAGEMENT AND OTHER SERVICES
Advisory Services. The Dreyfus Corporation ("Dreyfus") serves as the
investment manager (the "Manager") for the Funds pursuant to an Investment
Management Agreement with Dreyfus/Laurel dated April 4, 1994 ("Management
Agreement"), transferred from Mellon Bank N.A. (One Mellon Bank Center,
Pittsburgh, PA 15258) ("Mellon Bank"), to Dreyfus effective October 17,
1994. Dreyfus is a wholly-owned subsidiary of Mellon Bank. Pursuant to
the Management Agreement, Dreyfus provides, or arranges for one or more
third parties to provide investment advisory, administrative, custody,
fund accounting and transfer agency services to each Fund. As Manager,
Dreyfus manages each Fund by making investment decisions based on the
Fund's investment objectives, policies and restrictions. For these
services, each Fund pays a fee to Dreyfus at the rates stated in the
Prospectus.
The current Management Agreement with Dreyfus provides for a "unitary
fee." Under the unitary fee structure, Dreyfus pays all expenses of the
Funds except: (i) brokerage commissions, (ii) taxes, interest, fees and
expenses of the non-interested Directors (including counsel expenses), and
extraordinary expenses (which are expected to be minimal), and (iii) the
Rule 12b-1 fees described in this Statement of Additional Information.
Under the unitary fee, Dreyfus provides, or arranges for one or more third
parties to provide, investment advisory, administrative, custody, fund
accounting and transfer agency services to each Fund. For the provision
of such services directly, or through one or more third parties, Dreyfus
receives as full compensation for all services and facilities provided by
it, a fee computed daily and paid monthly at the annual rate set forth in
each Fund's Prospectus, applied to the average daily net assets of the
Fund's investment portfolio, less the accrued fees and expenses (including
counsel fees) of the non-interested Directors of the Company. Previously,
the payments to the investment manager covered merely the provision of
investment advisory services (and payment for sub-advisory services) and
certain specified administrative services. Under this previous
arrangement, each Fund also paid for additional non-investment advisory
expenses, such as custody and transfer agency services, that were not paid
by the investment adviser.
For the last three fiscal years, each Fund had the following
expenses:
For the Fiscal Years Ended
October 31,
1994 1993 1992
Limited Term Income
Advisory fees (gross of waiver) $455,919 $118,161 $ 58,933
Expense reimbursement from Adviser 8,622 142,319 161,200
Advisory fees waived -- -- 8,972
Balanced
Advisory fees (gross of waiver) 601,694 $22,519 (1) --
Expense reimbursement from Adviser 26,589 31,076 --
Advisory fees waived -- -- (1) --
Small Company (3) 21,306 (2) -- --
Advisory fees (gross of waiver) -- -- --
Expense reimbursement from Adviser -- -- --
Advisory fees waived
(1) For the period September 15, 1993, (commencement of operations) to
October 31, 1993.
(2) For the period September 1, 1994 (commencement of operations) to
October 31, 1994.
DISTRIBUTION AND SERVICE PLANS
The Distributor; Sub-Administrator. Premier, a wholly-owned
subsidiary of Institutional Administration Services, Inc., serves as the
Funds' distributor pursuant to an agreement which is renewable annually.
Premier also acts as distributor for the other funds in the Premier Family
of Funds, for funds in the Dreyfus Family of Funds and for certain other
investment companies. Premier also serves as sub-administrator to the
Funds pursuant to a Sub-Administration Agreement effective October, 17,
1994.
Custodian, Fund Accountant. Mellon Bank, serves as custodian and
fund accountant with respect to each Fund. Mellon Bank provides portfolio
and shareholder recordkeeping required for regulatory and financial
reporting purposes. Mellon Bank, as Custodian and Fund Accountant, has no
part in determining the investment policies of a Fund or which securities
are to be purchased or sold by a Fund.
Prior to the effectiveness of the Management Agreement for its
services as custodian and fund accountant Mellon Bank was paid an annual
fee of $30,000 per portfolio and, for all portfolios, an annual
administrative account maintenance fee of $ 10,000, an annual on-line fee
of $3,600, an asset-based fee of .02% of the first $500 million of
Dreyfus/Laurel's net assets and .01% of net assets over $500 million, plus
a specified transaction fee for each transaction.
Prior to September 23, 1994, Frank Russell Investment Management
Company acted as Administrator for the Balanced and Limited Term Income
Funds only. Frank Russell was paid $5,721 and $760 by the Balanced Fund
for the years ended October 31, 1994 and 1993, respectively, and $11,048,
$8,757 and $5,144 by Limited Term Income Fund for the years ended October
31, 1994, 1993 and 1992, respectively.
Transfer and Dividend Disbursing Agent. The Shareholder Services
Group, Inc. ("TSSG"), a subsidiary of First Data Corporation, is each
Fund's transfer and dividend disbursing agent. TSSG has no part in
determining the investment policies of a Fund or which securities are to
be purchased or sold by the Fund.
Distribution Plan--Class A shares. The Securities and Exchange
Commission ("SEC") has adopted Rule 12b-l under the 1940 Act ("Rule")
regulating the circumstances under which investment companies such as
Dreyfus/Laurel may, directly or indirectly, bear the expenses of
distributing their shares. The Rule defines distribution expenses to
include expenditures for "any activity which is primarily intended to
result in the sale of fund shares." The Rule, among other things,
provides that an investment company may bear such expenses only pursuant
to a plan adopted in accordance with the Rule. With respect to the Class
A shares of the Funds, Dreyfus/Laurel has adopted a Distribution Plan
("Class A Plan"), and may enter into Selling Agreements with Service
Agents pursuant to the Class A Plan.
Under the Class A Plan, each Fund may spend annually up to 0.25% of
its average daily net assets attributable to Class A shares for costs and
expenses incurred in connection with the distribution of, and shareholder
servicing with respect to, the Fund's Class A shares.
The Class A Plan provides that a report of the amounts expended under
the Class A Plan, and the purposes for which such expenditures were
incurred, must be made to Dreyfus/Laurel's Directors for their review at
least quarterly. In addition, the Class A Plan provides that it may not
be amended to increase materially the costs which a Fund may bear for
distribution pursuant to the Class A Plan without approval of a Fund's
shareholders, and that other material amendments of the Class A Plan must
be approved by the vote of a majority of the Directors and of the
Directors who are not "interested persons" of the Funds or the Manager (as
defined in the 1940 Act) and who do not have any direct or indirect
financial interest in the operation the Class A Plan, cast in person at a
meeting called for the purpose of considering such amendments. The Class
A Plan is subject to annual approval by the entire Board of Directors and
by the Directors who are neither interested persons nor have any direct or
indirect financial interest in the operation of the Class A Plan, by vote
cast in person at a meeting called for the purpose of voting on the Class
A Plan. The Class A Plan is terminable, as to a Fund's class of shares,
at any time by vote of a majority of the Directors who are not interested
persons and have no direct or indirect financial interest in the operation
of the Class A Plan or by vote of the holders of a majority of the
outstanding shares of Class A of the Fund.
For the period from October 17, 1994 (inception date of Class A
shares) to October 31, 1994, the Small Company, Balanced and Limited Term
Income Funds paid the Distributor $12, $630 and $527, respectively,
pursuant to the Class A Plans.
Distribution and Service Plans -- Class B and C shares. The Fund
also offers Class B and Class C shares, described in the Prospectus,
pursuant to a separate Prospectus and a separate network associated with
Dreyfus. In addition to the above described Class A Plan for Class A
shares, the Board of Directors has adopted a Service Plan (the "Service
Plan") under the Rule for Class B and Class C shares, pursuant to which
the Fund pays Premier and Dreyfus Service Corporation for the provision of
certain services to the holders of Class B and Class C shares. The Board
of Directors has also adopted a Distribution Plan pursuant to the Rule
with respect to Class B and Class C shares (the "Distribution Plan"). The
Board of Directors believes that there is a reasonable likelihood that the
Distribution and Service Plans (the "Plans") will benefit the Fund and the
holders of Class B and Class C shares.
A quarterly report of the amounts expended under each Plan, and the
purposes for which such expenditures were incurred, must be made to the
Directors for their review. In addition, each Plan provides that it may
not be amended to increase materially the cost which holders of Class B or
C shares may bear pursuant to the Plan without the approval of the holders
of such Classes and that other material amendments of the Plan must be
approved by the Board of Directors and by the Directors who are not
interested persons of the Fund and have no direct or indirect financial
interest in the operation of the Plan or in any agreements entered into in
connection with the Plan, by vote cast in person at a meeting called for
the purpose of considering such amendments. The Plan is subject to annual
approval by such vote of the Directors cast in person at a meeting called
for the purpose of voting on the Plan. Each Plan was so approved by the
Directors at a meeting held on September 23, 1994. Each Plan may be
terminated at any time by vote of a majority of the Directors who are not
interested persons and have no direct or indirect financial interest in
the operation of the Plan or in any agreements entered into in connection
with the Plan or by vote of the holders of a majority of Class B and C
shares.
Class B and C shares of the Funds were not offered as of October 31,
1994.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Sales Loads--Class A. 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 ("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 Class A shares. The example assumes a purchase of Class A
shares aggregating less than $50,000 with respect to the Balanced and
Small Company Funds and less than $100,000 with respect to the Limited
Term Income Fund subject to the schedule of sales charges set forth in the
Prospectus at a price based upon the net asset value of the Class A shares
as of October 31, 1994.
Net Asset Value per Share $12.50
Per Share Sales Charge - 4.5%
of offering price (4.7% of
net asset value per share) $ 0.59
Per Share Offering Price to
the Public $13.09
Suspension of Redemptions. The right of redemption may be suspended
or the date of payment postponed (a) during any period when the NYSE is
closed (other than customary weekend and holiday closings), (b) when
trading in the markets the Funds ordinarily utilize is restricted, or when
an emergency exists as determined by the SEC so that disposal of the
Funds' investments or determination of their net asset value is not
reasonably practicable, or (c) for such other periods as the SEC by order
may permit to protect the Funds' shareholders.
Redemption Commitment. Each Fund has committed itself to pay in cash
all redemption requests by any shareholder of record of the Fund, 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 SEC. In the
case of requests for redemption in excess of such amount, the Board of
Directors 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 Funds to the detriment of
the existing shareholders. In this event, the securities would be valued
in the same manner as the Funds' portfolios are valued. If the recipient
sold such securities, brokerage charges would be incurred.
FEDERAL LAW AFFECTING MELLON BANK
The Glass-Steagall Act of 1933 prohibits national banks from engaging
in the business of underwriting, selling or distributing securities and
prohibits a member bank of the Federal Reserve System from having certain
affiliations with an entity engaged principally in the business. The
activities of Mellon Bank in informing its customers of, and performing,
investment and redemption services in connection with a Fund, and in
providing services to a Fund as custodian and Fund accountant, as well as
Dreyfus' investment advisory activities, may raise issues under these
provisions. Mellon Bank has been advised by counsel that these activities
are consistent with Mellon Bank's statutory and regulatory obligations.
Changes in either federal or state statutes and regulations relating
to the permissible activities of banks and their subsidiaries or
affiliates, as well as further judicial or administrative decisions or
interpretations of such future statutes and regulations could prevent
Mellon Bank or Dreyfus from continuing to perform all or a part of the
above services for its customers and/or a Fund. If Mellon Bank or Dreyfus
were prohibited from serving a Fund in any of its present capacities, the
Directors would seek an alternative provider(s) of such services.
PORTFOLIO TRANSACTIONS
All portfolio transactions of each Fund are placed on behalf of a
Fund by the Manager. Debt securities purchased and sold by a Fund are
generally traded on a net basis (i.e., without commission) through dealers
acting for their own account and not as brokers, or otherwise involve
transactions directly with the issuer of the instrument. This means that
a dealer (the securities firm or bank dealing with a Fund) makes a market
for securities by offering to buy at one price and sell at a slightly
higher price. The difference between the prices is known as a spread.
Other portfolio transactions may be executed through brokers acting as
agent. A Fund will pay a spread or commission in connection with such
transactions. The Manager uses its best efforts to obtain execution of
portfolio transactions at prices which are advantageous to a Fund and at
spreads and commission rates, if any, which are reasonable in relation to
the benefits received. The Manager also places transactions for other
accounts that it provides with investment advice.
Brokers and dealers involved in the execution of portfolio
transactions on behalf of Fund are selected on the basis of their
professional capability and the value and quality of their services. In
selecting brokers or dealers, the Manager will consider various relevant
factors, including, but not limited to, the size and type of the
transaction; the nature and character of the markets for the security to
be purchased or sold; the execution efficiency, settlement capability, and
financial condition of the broker-dealer; the broker-dealer's execution
services rendered on a continuing basis; and the reasonableness of any
spreads (or commissions, if any). Any spread, commission, fee or other
remuneration paid to an affiliated broker-dealer is paid pursuant to
Dreyfus/Laurel's procedures adopted in accordance with Rule 17e-1 of the
1940 Act.
Brokers or dealers may be selected who provide brokerage and/or
research services to a Fund and/or other accounts over which the Manager
or its affiliates exercise investment discretion. Such services may
include advice concerning the value of securities; the advisability of
investing in, purchasing or selling securities; the availability of
securities or the purchasers or sellers of securities; furnishing analyses
and reports concerning issuers, industries, securities, economic factors
and trends, portfolio strategy and performance of accounts; and effecting
securities transactions and performing functions incidental thereto (such
as clearance and settlement).
The receipt of research services from broker-dealers may be useful to
the Manager in rendering investment management services to a Fund and/or
its other clients; and, conversely, such information provided by brokers
or dealers who have executed transaction orders on behalf of other clients
of the Manager may be useful to these organizations in carrying out their
obligations to a Fund. The receipt of such research services does not
reduce these organizations' normal independent research activities;
however, it enables these organizations to avoid the additional expenses
which might otherwise be incurred if these organizations were to attempt
to develop comparable information through their own staffs.
The Directors periodically review the Manager's performance of
responsibilities in connection with the placement of portfolio
transactions on behalf of a Fund and review the prices paid by the Funds
over representative periods of time to determine if they are reasonable in
relation to the benefits to the Funds.
Although the Manager manages other accounts in addition to the Funds,
investment decisions for each Fund are made independently from decisions
made for these other accounts. It sometimes happens that the same security
is held by more than one of the accounts managed by the Manager.
Simultaneous transactions may occur when several accounts are managed by
the same investment adviser, particularly when the same investment
instrument is suitable for the investment objective of more than one
account.
When more than one account is simultaneously engaged in the purchase
or sale of the same investment instrument, the prices and amounts are
allocated in accordance with a formula considered by the Manager to be
equitable to each account. In some cases this system could have a
detrimental effect on the price or volume of the investment instrument as
far as a particular Fund is concerned. In other cases, however, the
ability of the Fund to participate in volume transactions will produce
better executions for the Fund. While the Directors will continue to
review simultaneous transactions, it is their present opinion that the
desirability of retaining the Manager as investment adviser to the Funds
outweighs any disadvantages that may be said to exist from exposure to
simultaneous transactions.
Except as noted below, none of the Funds pay a stated brokerage
commission.
For the period September 15, 1993 (commencement of operations) to
October 31, 1993, and for the fiscal year ended October 31, 1994, Balanced
Fund paid brokerage commissions amounting to $24,670 and
$168,311,respectively. For the fiscal years ended October 31, 1994, 1993
and 1992, Limited Term Income Fund paid $9,550, $4,858 and $563,
respectively, in brokerage commissions. For the period from September 1,
1994 to October 31, 1994, the Small Company Fund paid $13,899 in brokerage
commissions. The Limited Term Income Fund typically does not pay a stated
brokerage fee on transactions.
Portfolio Turnover. The portfolio turnover rate for each Fund is
calculated by dividing the lesser of a Fund's annual sales or purchases of
portfolio securities (exclusive of purchases and sales of securities whose
maturities at the time of acquisition were one year or less) by the
monthly average value of securities in the Fund during the year.
The portfolio turnover rates for the last three years for each Fund
were:
Fiscal Year Ended October 31,
1994 1993 1992
Small Company Fund (1) 8% -- --
Balanced Fund (2) 83% -- --
Limited Term Income Fund 117% 112% 67%
(1) Commenced operations on September 1, 1994.
(2) For the period September 15, 1993 (commencement of operations) to
October 31, 1993.
NET ASSET VALUE
The Funds' net asset values per share are calculated on each business
day. A business day is any day on which the NYSE is open for business.
The Funds determine net asset value as of the close of business of the
regular session of NYSE (currently 4:00 p.m. Eastern time). The holidays
(as observed) on which the NYSE is closed currently are: New Years Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas.
Equity securities listed or traded on a stock exchange, are valued at
the latest sale price. If no sale is reported, the mean of the latest bid
and asked prices is used. Securities traded over-the-counter are priced
at the mean of the latest bid and asked prices but will be valued at the
last sale price if required by regulations of the SEC. When market
quotations are not readily available, securities and other assets are
valued at fair value as determined in good faith in accordance procedures
established by the Board of Directors.
Bonds are valued through valuations obtained from a commercial
pricing service or the most recent mean of the bid and asked prices
provided by investment dealers in accordance with procedures established
by the Board of Directors. Pursuant to a determination by
Dreyfus/Laurel's Board of Directors that such value represents fair value,
debt securities with maturities of 60 days or less are valued at amortized
cost.
For purposes of determining a Fund's net asset value, all assets and
liabilities initially expressed in foreign currency values will be
converted into U.S. dollar values at the mean between the bid and offered
quotations of such currencies against U.S. dollars as last quoted by any
recognized dealer. If an event were to occur after the value of a
portfolio instrument was so established but before the net asset value per
share is determined which is likely to materially change the net asset
value, then the portfolio instrument would be valued using fair value
considerations established by Dreyfus/Laurel's Board of Directors.
Securities for which market quotations are not readily available are
valued at fair value as determined in good faith and pursuant to
procedures approved by the Board of Directors. Because of the need to
obtain prices as of the close of trading on the exchanges on which
portfolio securities are most frequently traded, the calculation of net
asset value may not take place contemporaneously with the determination of
the prices of the majority of a Fund's portfolio securities.
PERFORMANCE CALCULATIONS
Each Fund computes average annual total return by using a
standardized method required by the SEC. Average annual total return is
computed by finding the average annual compounded rates of return on
hypothetical initial investment of $1,000 over the periods that would
equate the initial amount invested to the ending redeemable value,
according to the following formula:
P(1+T)n = ERV
Where: P = $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a $1,000
payment made at the beginning of the
1, 5 or 10 year periods at the
end of the year or period
The calculation assumes (1) the deduction of the maximum sales load
(and any other charges deducted, if any, from payment) and all recurring
fees that are charged to all shareholder account, and (2) the reinvestment
of all dividends and other distributions by the Fund at the price stated
in the Prospectus on the reinvestment dates during the period.
Aggregate total return (expressed as a percentage) for Class A shares
of each Fund for the periods noted were:
Aggregate Total Return for the
Periods Ended October 31, 1994
Fund:
1 Year 5 Years 10 Years Inception
0.70
Small Company -- -- -- (9/2/94)
4.68
Balanced -- -- -- (4/14/94)
0.11
Limited Term Income -- -- -- (4/7/94)
Inception dates appear in parenthesis following the aggregate total return
since inception.
Average annual or aggregate total return (expressed as a percentage)
for Class R shares of each Fund for the periods noted were:
Annual Total Return for the
Periods Ended October 31, 1994
Fund:
1 Year 5 Years 10 Years Inception
0.70(1)
Small Company -- -- -- (9/1/94)
2.21
Balanced 0.68 -- -- (9/15/93)
Limited Term Income (2.46) -- -- 6. 40 (7/11/91)
(1) Represents aggregate total return
Inception dates appear in parenthesis following the annual total return
since inception.
Certain Funds may also advertise yield from time to time. Yields are
computed by using standardized methods of calculation required by the SEC.
Yields are calculated by dividing the net investment income per share earn
during a 30-day (or one month) period by the maximum offering price per
share on the last day of the period, according to the following formula:
YIELD = 2[(a-b+1)6]
cd
Where: a = dividends and interests earned during
the period;
b = expenses accrued for the period (net of
reimbursements);
c = average daily number of shares outstanding
during the period that were entitled to receive
dividends; and
d = the maximum offering price per share
on the last day of the period.
The 30-day yield for each Fund quoting yield for the period ended
October 31, 1994 was:
Limited Term Income Fund (Class R)
6.50%
(Investor Shares) 6.24%
Performance information for the Funds may be compared, in reports and
promotional literature, to indexes including, but not limited to: (i) the
Morgan Stanley European Index; (ii) the Standard & Poor's 500 Composite
Stock Price Index, the Dow Jones Industrial Average, or other appropriate
unmanaged domestic or foreign indices of performance of various types of
investments so that investors may compare the Fund's results with those of
indices widely regarded by investors as representative of the securities
markets in general; (iii) other groups of mutual funds tracked by Lipper
Analytical Services, a widely used independent research firm which ranks
mutual funds by overall performance, investment objectives and assets, or
tracked by other services, companies, publications, or persons who rank
mutual funds on overall performance or other criteria; (iv) the Consumer
Price Index (a measure of inflation) to assess the real rate of return
from an investment in the Fund; and (v) products managed by a universe of
money managers with similar country allocation and performance objectives.
Unmanaged indices may assume the reinvestment of dividends but generally
do not reflect deductions or administrative and management costs and
expenses.
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
The term "regulated investment company" does not imply the supervision of
management or investment practices or policies by a government agency.
Federal Tax--General. To qualify for treatment as a regulated
investment company ("RIC") under the Internal Revenue Code of 1986, as
amended, ("Code") each Fund -- each of which is treated as a separate
corporation for federal tax purposes-- must distribute to shareholders for
each taxable year at least 90% of its investment company taxable income
(generally consisting of taxable net investment income, net short-term
capital gain and must meet several additional requirements. For each Fund
these requirements include the following: (1) the Fund must derive at
least 90% of its gross income each taxable year from dividends, interest,
payments with respect to securities loans and gains from the sale or other
disposition of securities or foreign currencies or other income (including
gains from options, futures, or forward contracts) derived with respect to
its business of investing in securities or other currencies ("Income
Requirement"); (2) the Fund must derive less than 30% of its gross income
each taxable year from the sale or other disposition of securities held
for less than three months - options, futures, or forward contracts (other
than those on foreign currencies), or foreign currencies (or options,
futures or forward contacts thereon) that are not directly related to the
Fund's principal business of investing in securities (or options and
futures with respect thereto) ("Short-Short Limitation"); (3) at the close
of each quarter of the Fund's taxable year, at least 50% of the value of
its total assets must be represented by cash and cash items, U.S.
government securities, securities of other RICs and other securities, with
those other securities limited, in respect of any one issuer, to an amount
that does not exceed 5% of the value of the Fund's total assets and that
does not represent more than 10% of the issuer's outstanding voting
securities; and (4) at the close of each quarter of the Fund's taxable
year, not more than 25% of the value its total assets may be invested in
securities (other than U.S. government securities or securities of other
RICs) of any one issuer.
Dividends and other distributions declared by a Fund in October,
November or December of any year and payable to shareholders of record on
a date in any of those months are deemed to have been paid by the Fund and
received by the shareholders on December 31 of the year if the
distributions are paid by the Fund during the following January.
Accordingly, those distributions will be taxed to shareholders for the
year in which that December 31 falls.
If Fund shares are sold at a loss after being held six months or less
the loss will be treated as a long-term, instead of short-term, capital
loss to the extent of capital gain distributions on those shares.
Investors also should be aware that if shares are purchased shortly before
the record date for any distribution, the shareholder will pay full price
for the shares and receive some portion of the price back as a taxable
dividend or capital gain distribution.
If a Fund retains net capital gain (the excess of net long-term
capital gains over net short-term capital loss) for reinvestment, although
it has no plans to do so, the Fund may elect to treat such amounts as
having been distributed to its shareholders. As a result, the Fund's
shareholders would be subject to tax on the undistributed net capital
gain, would be able to claim their proportionate share of the federal
income tax paid by the Fund on that gain as a credit against their own
federal income tax liabilities, and would be entitled to an increase in
their basis for their Fund shares.
Hedging Transactions. Certain Funds may employ hedging strategies,
such as writing (selling) and purchasing options and futures contracts and
entering into forward contracts. The use of these strategies involves
complex rules that will determine for income tax purposes the character
and timing of recognition of the gains and losses a Fund realizes in
connection therewith. Income from foreign currencies (except certain
gains therefrom may be excluded by future regulations) and income from
transactions in options, futures and forward contracts derived by a Fund
with respect to its business of investing in securities or foreign
currencies will qualify as permissible income under the Income
Requirement. However, income from disposition of options and futures
contracts, other than those on foreign currencies, will be subject to the
Short-Short Limitation if they are held for less than three months.
Income from the disposition of foreign currencies, and options, futures
and forward contracts thereon, that are not directly related to a Fund's
principal business of investing in securities (or options and futures with
respect thereto) also will be subject to the Short-Short Limitation if
they are held for less than three months.
If a Fund satisfies certain requirements, any increase in value of a
position that is part of a "designated hedge" will be offset by any
decrease in value (whether realized or not) of an offsetting hedging
position during the period of the hedge for purposes of determining
whether the Fund satisfies the Short-Short Limitation. Thus, only the net
gain (if any) from the designated hedge will be included in gross income
for purposes of that limitation. Each Fund will consider, when it engages
in hedging strategies, whether it should seek to qualify for this
treatment. To the extent a Fund does not qualify therefor, it may be
forced to defer the closing out of certain options, futures and forward
contracts beyond the time when it otherwise would be advantageous to do
so, in order for the Fund to continue to qualify as a RIC.
Certain futures contracts in which some Funds may invest are "section
1256 contracts." Section 1256 contracts held by a Fund at the end of each
taxable year are "marked-to-market" (that is, treated as sold for their
fair market value) for federal income tax purposes, with the result that
unrealized gains or losses are treated as though they were realized.
Sixty percent of any net gain or loss recognized on these deemed sales,
and 60% of any net realized gain or loss from any actual sales of section
1256 contracts, are treated as long-term capital gain or loss, and the
balance is treated as short-term capital gain or loss. These contracts
also may be marked-to-market for purposes of the 4% excise tax described
in the Prospectuses ("Excise Tax") and for other purposes.
Certain futures contracts entered into by a Fund may result in
"straddles" for federal income tax purposes. The straddle rules may
affect the character of gains (or losses) realized by a Fund on straddle
positions. In addition, losses realized by a Fund on straddle positions
may be deferred under the straddle rules. If a Fund makes certain
elections, the amount, character and timing of the recognition of gains
and losses from the affected straddle positions will determined under
rules that vary according to the elections made.
State and Local Taxes. Depending upon a Fund's activities in states
and localities in which its offices are maintained, in which its agents or
independent contractors are located, or in which it is otherwise deemed to
be conducting business, the Fund may be subject to the tax laws of such
states or localities. Shareholders are advised to consult their tax
advisers concerning the application of state and local taxes.
Foreign Shareholders - U.S. Federal Income Taxation. U.S. federal
income taxation of a shareholder who, as to the United States, is a non-
resident alien individual, a foreign trust or estate, a foreign
corporation or a foreign partnership (a "foreign shareholder"), depends on
whether the income from a Fund is "effectively connected" with a U.S.
trade or business carried on by the shareholder, as discussed generally
below. Special U.S. federal income tax rules that differ from those
described below may apply to certain foreign persons who invest in a Fund.
For example, the tax consequences to a foreign shareholder entitled to
claim the benefits of a applicable tax treaty may be different from those
described below. Foreign shareholders are advised to consult their own
tax advisers with respect to the particular tax consequences to them of an
investment in a Fund.
Foreign Shareholders - Income Not Effectively Connected. If the
income from a Fund is not effectively connected with a U.S. trade or
business carried on by the foreign shareholder, distributions of
investment company taxable income generally will be subject to U.S.
federal withholding tax of 30% (or lower treaty rate) on the gross amount
of the distribution. Foreign shareholders also may be subject to U.S.
federal withholding tax on income resulting from any election by a Fund to
treat foreign taxes paid by it as paid by shareholders (see discussion
above), but foreign shareholders will not be able to claim a credit or
deduction for the foreign taxes treated as having been paid by them.
Capital gains realized by foreign shareholders on the sale of Fund
shares and distributions to them of net capital gain, as well as amounts
retained by the Fund that are designated as undistributed capital gains,
generally will not be subject to U.S. federal income tax unless the
foreign shareholder is a non-resident alien individual and is physically
present in the United States for more than 182 days during the taxable
year. However, this rule only applies in exceptional cases, because any
individual present in the United States for more than 182 days during the
taxable year generally is treated as a resident for U.S. federal income
tax purposes on his worldwide income at the graduated rates applicable to
U.S. citizens, rather than the 30% U.S. federal withholding tax rate. In
the case of certain foreign shareholders, a Fund may be required to
withhold U.S. Federal income tax at a rate of 31% of capital gain
distributions and of the gross proceeds from a redemption of Fund shares
unless the shareholder furnishes the Fund with a certificate regarding the
shareholder's foreign status.
Foreign Shareholders - Effectively Connected Income. If income from a
Fund effectively connected with a U.S. trade or business carried on by a
foreign shareholder, then distributions to that shareholder and any gains
realized by that shareholder on the disposition the Fund shares will be
subject to U.S. federal income tax at the graduated rates applicable to
U.S. citizens and domestic corporations, as the case may be. Foreign
shareholders also may be subject to the branch profits tax.
Foreign Shareholders - Estate Tax. Foreign individuals generally are
subject to U.S. federal estate tax on their U.S. situs property, such as
shares of a Fund, that they own at the time of their death. Certain
credits against that tax and relief under applicable tax treaties may be
available.
Pennsylvania Personal Property Tax Exemption. Dreyfus/Laurel has
obtained a Certificate of Authority to do business as a foreign
corporation in Pennsylvania. In the opinion of counsel, shares of
Dreyfus/Laurel are exempt from Pennsylvania personal property taxes.
FINANCIAL STATEMENTS
The financial statements for the fiscal year ended October 31, 1994,
including notes to the financial statements and supplementary information
and the Report of Independent Auditors, are included in the Annual Report
to shareholders. A copy of the Annual Report accompanies this Statement
of Additional Information. The financial statements from the Annual Report
are incorporated herein by reference.
OTHER INFORMATION
Auditor. KPMG Peat Marwick LLP was appointed by the Directors to serve
as each Fund's independent auditors for the year ending October 31, 1995,
providing audit services including (1) examination of the annual financial
statements, (2) assistance, review and consultation in connection with the
SEC and (3) review of the annual federal income tax return and the
Pennsylvania excise tax return filed on behalf of Dreyfus/Laurel.
Legal Counsel. Kirkpatrick & Lockhart, 1800 M Street, N.W., South
Lobby - 9th Floor, Washington, D.C. 20036, has passed upon the legality of
the shares offered by the Prospectuses and this Statement of Additional
Information.
APPENDIX
DESCRIPTION OF SECURITIES RATINGS
Debt Instruments Rating
Moody's Investors Service, Inc. (Moody's):
A -- Bonds rated AAA are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to
as "gilt-edge." Interest payments are protected by a large or
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position
of such issues.
Aa -- Bonds rated AA are judged to be of high quality by all
standards. Together with the AAA group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in AAA Securities or
fluctuation of protective elements may be of greater amplitude or there
may be other elements present which make the long-term risks appear
somewhat larger than in AAA securities.
A -- Bonds rated A possess many favorable investment attributes
and are considered "upper medium grade obligations."
Baa -- bonds rated Baa are considered medium-grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics as
well.
Those Bonds in the Aa and A group which Moody's believes possess
the strongest investment attributes are designated by the symbols AA 1 and
A 1.
Standard & Poor's Ratings Group ("S&P"):
AAA -- This is the highest rating assigned by S&P to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.
AA -- Bonds rated AA also qualify as high-quality debt obligations.
Capacity to pay principal and interest is very strong, and in the majority
of instances they differ from AAA issues only in small degree.
A -- Bonds rated A have a strong capacity to pay principal and
interest, although they are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions.
BBB -- Bonds rated BBB are regarded as having an adequate capacity
to pay interest and repay principal. Whereas it mostly exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a reduced capacity to pay
interest and repay principal for debt in this category then in higher-
rated categories.
Plus (+) or Minus (-): The AA rating may be modified by the
addition of a plus or minus sign to show relative standing within the AA
rating category.
Commercial Paper Ratings
Moody's:
Commercial paper rated Prime by Moody's is based upon its
evaluation of many factors including: (1) management of the issuer; (2)
the issuer's industry or industries and the speculative-type risks which
may be inherent in certain areas; (3) the issuer's products in relation to
competition and customer acceptance; (4) liquidity; (5) amount and quality
of long-term debt; (6) trend of earnings over a period of ten years; (7)
financial strength of a parent company and the relationships which exist
with the issue; and (8) recognition by the management of obligations which
may be present or may arise as a result of public interest questions and
preparations to meet such obligations. Relative differences in these
factors determine whether the issuer's commercial paper is rated Prime-1,
Prime-2, or Prime-3.
Prime-1 indicates a superior capacity for repayment of short-term
promissory obligations. Prime-1 repayment capacity will normally be
evidenced by the following characteristics: (1) leading market positions
in well established industries; (2) high rates of return on funds
employed; (3) conservative capitalization structures with moderate
reliance on debt and ample asset protection; (4) broad margins in earnings
coverage of fixed financial charges and high internal cash generation; and
(5) well established access to a range of financial markets and assured
sources of alternative liquidity.
S&P
Commercial paper rated by S&P has the following characteristics:
liquidity ratios adequate to meet cash requirements. Long-term senior
debt is rated A or better. The issuer has access to at least two
additional channels of borrowing. Basic earnings and cash flow have an
upward trend with allowance made for unusual circumstances. Typically,
the issuer's industry is well established and the issuer has a strong
position within the industry. The reliability and quality of management
are unquestioned. Relative strength or weakness of the above factors
determine whether the issuer's commercial paper is rated A-1, A-2, or A-3.
A-1 -- This designation indicates that the degree of safety
regarding timely payment is either overwhelming or very strong. Those
issues determined to possess overwhelming safety characteristics are
denoted with a plus (+) sign designation.
A-2 -- Capacity for timely payment on issues with this designation
is strong. However, the relative degree of safety is not as high as for
issues designated A-2.
Fitch Investors Service, Inc. ("Fitch"):
Commercial paper rated by Fitch reflects Fitch's current appraisal
of the degree of assurance of timely payment of such debt. An appraisal
results in the rating of an issuer's paper as F-1, F-2, F-3, or F-4.
F 1 -- This designation indicates that the commercial paper is
regarded as having the strongest degree of assurance for timely payment.
Duff and Phelps, Inc.:
Duff & Phelps' short-term ratings are consistent with the rating
criteria utilized by money market participants. The ratings apply to all
obligations with maturities of under one year including commercial paper,
the uninsured portion of certificates of deposit, unsecured bank loans,
master notes, bankers' acceptances, irrevocable letters of credit, and
current maturities of long-term debt. Asset-backed commercial paper is
also rated according to this scale.
Emphasis is placed on liquidity which is defined as not only cash
from operations, but also access to alternative sources of funds including
trade credit, bank lines, and the capital markets. An important
consideration is the level of an obligor's reliance on short-term funds on
an ongoing basis.
The distinguishing feature of Duff & Phelps' short-term ratings is
the refinement of the traditional '1' category. The majority of short-
term debt issuers carry the highest rating, yet quality differences exist
within that tier. As a consequence, Duff & Phelps has incorporated
gradations of 'l+' (one plus) and '1-' (one minus) to assist investors in
recognizing those differences.
Duff l+-- Highest certainty of timely payment. Short-term
liquidity, including internal operating factors and/or access to
alternative sources of funds, is outstanding, and safety is just below
risk-free U.S. Treasury short-term obligations.
Duff 1-- Very high certainty of timely payment. Liquidity factors
are excellent and supported by good fundamental protection factors. Risk
factors are minor.
Duff 1-- High certainty of timely payment. Liquidity factors are
strong and supported by good fundamental protection factors. Risk factors
are very small.
IBCA Inc.:
In addition to conducting a careful review of an institution's
reports and publish figures, IBCA's analysts regularly visit the companies
for discussions with senior management. These meetings are fundamental to
the preparation of individual reports and ratings. To keep abreast of any
changes that may affect assessments, analysts maintain contact throughout
the year with the management of the companies they cover.
IBCA's analysts speak the languages of the countries they cover,
which is essential to maximize the value of their meetings with management
and to properly analyze a company's written materials. They also have a
thorough knowledge of the laws and accounting practices that govern the
operations and reporting of companies within the various countries.
Often, in order to ensure a full understanding of their position,
companies entrust IBCA with confidential data. While these data cannot be
disclosed in reports, they are taken into account when assigning IBCA's
ratings. Before dispatch to subscribers, a draft of the report submitted
to each company to permit correction of any factual errors and to enable
clarification of issues raised.
IBCA's Rating Committees meet at regular intervals to review all
ratings and to ensure that individual ratings are assigned consistently
for institutions in all the countries covered. Following the Committee
meetings, ratings are issued directly to subscribers. At the same time
the company is informed of the ratings as a matter of courtesy, but not
for discussion.
Al+-- Obligations supported by the highest capacity for timely
repayment.
Al-- Obligations supported by a very strong capacity for timely
repayment.
__________________________________________________________________________
PREMIER LIMITED TERM INCOME FUND
CLASS A, CLASS B, CLASS C AND CLASS R SHARES
PREMIER BALANCED FUND
CLASS A, CLASS B, CLASS C AND CLASS R SHARES
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
March 1, 1995
__________________________________________________________________________
This Statement of Additional Information ("SAI"), which is not a
prospectus, supplements and should be read in conjunction with the current
Prospectuses of the Premier Limited Term Income Fund (formerly the Laurel
Intermediate Income Fund) and the Premier Balanced Fund (formerly the
Laurel Balanced Fund) (the "Funds"), dated March 1, 1995, as they may be
revised from time to time. The Funds are separate portfolios of The
Dreyfus/Laurel Funds, Inc. (formerly The Laurel Funds, Inc.), an open-end,
diversified management investment company (the "Company"), known as a
mutual fund. To obtain a copy of a Fund's Prospectus, please write to the
Fund at 144 Glenn Curtiss Boulevard, Uniondale, New York 11556-0144, or
call the following numbers:
Call Toll Free 1-800-645-6561
In New York City -- Call 1-718-895-1206
On Long Island -- Call 794-5452
The Dreyfus Corporation ("Dreyfus") serves as the Funds' investment
manager.
Premier Mutual Fund Services, Inc. (the "Distributor") is the
distributor of the Funds' shares.
TABLE OF CONTENTS
Page
Investment Objective and Management Policies . . . . . . . . . . . . . .B-2
Management of the Fund . . . . . . . . . . . . . . . . . . . . . . . . .B-10
Management Arrangements. . . . . . . . . . . . . . . . . . . . . . . . .B-16
Purchase of Fund Shares. . . . . . . . . . . . . . . . . . . . . . . . .B-17
Distribution and Service Plans . . . . . . . . . . . . . . . . . . . . .B-19
Redemption of Fund Shares. . . . . . . . . . . . . . . . . . . . . . . .B-21
Shareholder Services . . . . . . . . . . . . . . . . . . . . . . . . . .B-22
Determination of Net Asset Value . . . . . . . . . . . . . . . . . . . .B-25
Dividends, Other Distributions and Taxes . . . . . . . . . . . . . . . .B-25
Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . . . . .B-29
Performance Information. . . . . . . . . . . . . . . . . . . . . . . . .B-31
Information About the Funds. . . . . . . . . . . . . . . . . . . . . . .B-33
Custodian, Transfer and Dividend Disbursing Agent, Counsel
and Independent Auditors . . . . . . . . . . . . . . . . . . . . . . .B-33
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . .B-34
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The following information supplements and should be read in
conjunction with the section in each Fund's Prospectus entitled
"Description of the Fund."
Portfolio Securities
Floating Rate Securities (Premier Limited Term Income Fund Only). A
floating rate security is one whose terms provide for the automatic
adjustment of interest rates whenever a specified interest rate changes.
The interest on floating rate securities is ordinarily tied to and is a
percentage of the prime rate of a specified bank or some similar objective
standard such as the 90-day U.S. Treasury bill rate and may change daily.
Generally, changes in interest rates on floating rate securities will
reduce changes in the security's market value from the original purchase
price resulting in the potential for capital appreciation or capital
market depreciation being less than for fixed income obligations with a
fixed interest rate.
ECDs, ETDs, and Yankee CDs (Each Fund). The Funds may purchase
Eurodollar certificates of deposit ("ECDs"), which are U.S. dollar-
denominated certificates of deposit issued by foreign branches of domestic
banks, Eurodollar time deposits ("ETDs"), which are U.S. dollar
denominated deposits in a foreign branch of a domestic bank or foreign
bank, and Yankee-Dollar certificates of deposit ("Yankee CDs") which are
certificates of deposit issued by a domestic branch of a foreign bank
denominated in U.S. dollars and held in the United States. ECDs, ETDs,
and Yankee CDs are subject to somewhat different risks than domestic
obligations of domestic banks. These risks are discussed in each Fund's
Prospectus.
Government Obligations (Each Fund). Each Fund may invest in a
variety of U.S. Treasury obligations, which differ only in their interest
rates, maturities and times of issuance: (a) U.S. Treasury bills have a
maturity of one year or less, (b) U.S. Treasury notes have maturities of
one to ten years, and (c) U.S. Treasury bonds generally have maturities of
greater than ten years.
In addition to U.S. Treasury obligations, each Fund may invest in
obligations issued or guaranteed by U.S. Government agencies and
instrumentalities which are supported by any of the following: (a) the
full faith and credit of the U.S. Treasury (such as Government National
Mortgage Association ("GNMA") participation certificates), (b) the right
of the issuer to borrow an amount limited to a specific line of credit
from the U.S. Treasury, (c) discretionary authority of the U.S. Government
agency or instrumentality, or (d) the credit of the instrumentality.
(Examples of agencies and instrumentalities are: Federal Land Banks,
Federal Housing Administration, Farmers Home Administration, Export-Import
Bank of the United States, Central Bank for Cooperatives, Federal
Intermediate Credit Banks, Federal Home Loan Banks, General Services
Administration, Maritime Administration, Tennessee Valley Authority,
District of Columbia Armory Board, Inter-American Development Bank, Asian-
American Development Bank, Student Loan Marketing Association,
International Bank for Reconstruction and Development and Federal National
Mortgage Association ("FNMA")). No assurance can be given that the U.S.
Government will provide financial support to such U.S. Government agencies
or instrumentalities described in (b), (c) and (d) in the future, other
than as set forth above, since it is not obligated to do so by law.
Repurchase Agreements (Each Fund). The Funds may enter into
repurchase agreements with U.S. Government securities dealers recognized
by the Federal Reserve Board, with member banks of the Federal Reserve
System, or with such other brokers or dealers that meet the credit
guidelines of the Board of Directors. In a repurchase agreement, the Fund
buys a security from a seller that has agreed to repurchase the same
security at a mutually agreed upon date and price. A Fund's resale price
will be in excess of the purchase price, reflecting an agreed upon
interest rate. This interest rate is effective for the period of time the
Fund is invested in the agreement and is not related to the coupon rate on
the underlying security. Repurchase agreements may also be viewed as a
fully collateralized loan of money by the Fund to the seller. The period
of these repurchase agreements will usually be short, from overnight to
one week, and at no time will a Fund invest in repurchase agreements for
more than one year. A Fund will always receive as collateral securities
whose market value including accrued interest is, and during the entire
term of the agreement remains, at least equal to 100% of the dollar amount
invested by the Fund in each agreement, and the Fund will make payment for
such securities only upon physical delivery or upon evidence of book entry
transfer to the account of the Custodian. If the seller defaults, the Fund
might incur a loss if the value of the collateral securing the repurchase
agreement declines and might incur disposition costs in connection with
liquidating the collateral. In addition, if bankruptcy proceedings are
commenced with respect to the seller of a security which is the subject of
a repurchase agreement, realization upon the collateral by the Fund may be
delayed or limited. Dreyfus seeks to minimize the risk of loss through
repurchase agreements by analyzing the creditworthiness of the obligors
under repurchase agreements, in accordance with the credit guidelines of
the Company's Board of Directors.
Reverse Repurchase Agreements (Each Fund). A Fund may enter into
reverse repurchase agreements to meet redemption requests where the
liquidation of portfolio securities is deemed by Dreyfus to be
inconvenient or disadvantageous. A reverse repurchase agreement is a
transaction whereby a Fund transfers possession of a portfolio security to
a bank or broker-dealer in return for a percentage of the portfolio
security's market value. The Fund retains record ownership of the security
involved including the right to receive interest and principal payments.
At an agreed upon future date, the Fund repurchases the security by paying
an agreed upon purchase price plus interest. Cash or liquid high-grade
debt obligations of the Fund equal in value to the repurchase price
including any accrued interest will be maintained in a segregated account
while a reverse repurchase agreement is in effect.
When-Issued Securities (Each Fund). New issues of U.S. Treasury and
Government securities are often offered on a when-issued basis. This means
that delivery and payment for the securities normally will take place
approximately 7 to 15 days after the date the buyer commits to purchase
them. The payment obligation and the interest rate that will be received
on securities purchased on a when-issued basis are each fixed at the time
the buyer enters into the commitment. Each Fund will make commitments to
purchase such securities only with the intention of actually acquiring the
securities, but the Fund may sell these securities or dispose of the
commitment before the settlement date if it is deemed advisable as a
matter of investment strategy. Cash or marketable high-grade debt
securities equal to the amount of the above commitments will be segregated
on each Fund's records. For the purpose of determining the adequacy of
these securities the segregated securities will be valued at market. If
the market value of such securities declines, additional cash or
securities will be segregated on the Fund's records on a daily basis so
that the market value of the account will equal the amount of such
commitments by the Fund.
Securities purchased on a when-issued basis and the securities held
by each Fund are subject to changes in market value based upon the
public's perception of changes in the level of interest rates. Generally,
the value of such securities will fluctuate inversely to changes in
interest rates -- i.e., they will appreciate in value when interest rates
decline and decrease in value when interest rates rise. Therefore, if in
order to achieve higher interest income each Fund remains substantially
fully invested at the same time that it has purchased securities on a
"when-issued" basis, there will be a greater possibility of fluctuation in
the Fund's net asset value.
When payment for when-issued securities is due, each Fund will meet
its obligations from then-available cash flow, the sale of segregated
securities, the sale of other securities or, and although it would not
normally expect to do so, from the sale of the when-issued securities
themselves (which may have a market value greater or less than the Fund's
payment obligation). The sale of securities to meet such obligations
carries with it a greater potential for the realization of capital gains,
which are subject to federal income taxes.
Commercial Paper (Each Fund). The Funds may invest in commercial
paper issued in reliance on the so-called "private placement" exemption
from registration afforded by Section 4(2) of the Securities Act of 1933
("Section 4(2) paper"). Section 4(2) paper is restricted as to disposition
under the federal securities laws and generally is sold to investors who
agree that they are purchasing the paper for an investment and not with a
view to public distribution. Any resale by the purchaser must be in an
exempt transaction. Section 4(2) paper is normally resold to other
investors through or with the assistance of the issuer or investment
dealers who make a market in Section 4(2) paper, thus providing liquidity.
Pursuant to guidelines established by the Company's Board of Directors,
Dreyfus may determine that Section 4(2) paper is liquid for the purposes
of complying with the Fund's investment restriction relating to
investments in illiquid securities.
Management Policies
The Funds engage, except as noted, in the following practices in
furtherance of their investment objectives.
Loans of Fund Securities (Each Fund). Each Fund has authority to lend
its portfolio securities provided (1) the loan is secured continuously by
collateral consisting of U.S. Government securities or cash or cash
equivalents adjusted daily to make a market value at least equal to the
current market value of these securities loaned; (2) the Fund may at any
time call the loan and regain the securities loaned; (3) the Fund will
receive any interest or dividends paid on the loaned securities; and (4)
the aggregate market value of securities loaned will not at any time
exceed one-third of the total assets of the Fund. In addition, it is
anticipated that a Fund may share with the borrower some of the income
received on the collateral for the loan or that it will be paid a premium
for the loan. In determining whether to lend securities, Dreyfus considers
all relevant factors and circumstances including the creditworthiness of
the borrower.
Futures Contracts and Options (Each Fund). For the purpose of
creating market exposure for uncommitted cash balances, reducing
transaction costs associated with rebalancing a Fund, facilitating trading
or seeking higher investment returns when a futures contract is priced
more attractively than the underlying security or each index of the above-
referenced Funds may enter into futures contracts, options, and options on
futures contracts with respect to securities in which the Funds may invest
and indices comprised of such securities.
Futures contracts provide for the future sale by one party and
purchase by another party of a specified amount of a specific security or
securities index at a specified future time and at a specified price.
Where the underlying security is an index, no physical transfer of
securities takes place; rather, upon expiration of the contract, the
parties settle by exchanging cash in an amount equal to the difference
between the contract price and the closing value of the index at
expiration, net of variation margin previously paid. Futures contracts
that are standardized as to maturity date and underlying interest are
traded on national futures exchanges.
Futures traders are required to make a good faith margin deposit in
cash or government securities with a broker or custodian to initiate and
maintain open positions in futures contracts. A margin deposit is intended
to assure completion of the contract (delivery or acceptance of the
underlying security) if it is not terminated prior to the specified
delivery date. Minimal initial margin requirements are established by the
futures exchange and may be changed. Brokers may establish deposit
requirements which are higher than the exchange minimums.
After a futures contract position is opened, the value of the
contract is marked to market daily. If the futures contract price changes
to the extent that the margin on deposit does not satisfy margin
requirements, payment of additional "variation" margin will be required.
Conversely, change in the contract value may reduce the required margin,
resulting in a repayment of excess margin to the contract holder.
Variation margin payments are made to and from the futures broker for as
long as the contract remains open. Each Fund expects to earn interest
income on its margin deposits.
Options are of two basic types, either call or put options, and may
relate to a single security or a securities index or a futures contract. A
call option on a security permits the holder of the option to purchase the
underlying security at a specified price ("strike price") at any time
during the term of the option. Thus, in exchange for the premium paid to
the writer, the purchaser obtains the right to profit from any
appreciation in the value of the underlying security above the strike
price. A put option permits the holder to sell the underlying security to
the writer at the strike price at any time during the term of the
contract. Thus, in exchange for the premium paid to the writer, the
purchaser is relieved of the risk of a decline in the value of the
underlying security below the strike price. An option on a securities
index gives the holder the right to receive cash from the writer in an
amount equal to the difference between the strike price of the option and
the value of the underlying index multiplied by a factor established by
the exchange upon which the option is traded. An option on a futures
contract gives the holder, in return for the premium paid to the writer,
the right to assume a position in the underlying futures contract at a
specified price at any time during the term of the option.
Although futures and options contracts by their terms call for actual
delivery or acceptance of the underlying securities, in most cases the
contracts are closed out before the settlement date without the making or
taking of delivery. Closing out an open futures position is done by taking
an opposite position ("buying" a contract which has previously been
"sold," or "selling" a contract previously purchased) in an identical
contract to terminate the position. An option purchased may be closed out
by selling the option. An option written is closed out by purchasing an
option identical to that written. Brokerage commissions are incurred when
futures and options contracts are bought and sold.
Restrictions on the Use of Futures Contracts and Options (Each Fund).
Neither Fund will enter into futures contracts to the extent that its
outstanding obligations under these contracts would exceed 25% of the
Fund's total assets. To the extent that a Fund enters into futures
contracts and options on futures positions that are not for bona fide
hedging purposes (as defined by the Commodity Futures Trading Commission),
the aggregate initial margin and premiums on these positions (excluding
the amount by which options are "in-the-money") may not exceed 5% of the
Fund's net assets.
Transactions using options and futures contracts (other than options
that the Fund has purchased) expose the Fund to an obligation to another
party. A Fund will not enter into any such transactions unless it owns
either (1) an offsetting ("covered") position in securities or other
options or futures contracts or (2) cash, receivables and short-term debt
securities with a value sufficient at all times to cover its potential
obligations not covered as provided in (1) above. Each Fund will comply
with Securities and Exchange Commission ("SEC") guidelines regarding cover
for these instruments and, if the guidelines so require, set aside cash,
U.S. Government securities or other liquid, high-grade debt securities in
a segregated account with its custodian in the prescribed amount.
All options purchased or written by a Fund must be listed on a
national securities or futures exchange or traded in the over-the-counter
("OTC") market. A Fund will not purchase or write OTC options if, as a
result of such transaction, the sum of (i) the market value of outstanding
OTC options purchased by the Fund, (ii) the market value of the underlying
securities covered by outstanding OTC call options written by the Fund,
and (iii) the market value of all other assets of the Fund that are
illiquid or are not otherwise readily marketable, would exceed 15% of the
net assets of the Fund, taken at market value. However, if an OTC option
is sold by a Fund to a primary U.S. Government securities dealer
recognized by the Federal Reserve Bank of New York and the Fund has the
unconditional contractual right to repurchase such OTC option from the
dealer at a predetermined price, then the Fund will treat as illiquid such
amount of the underlying securities as is equal to the repurchase price
less the amount by which the option is "in-the-money" (the difference
between current market value of the underlying security and the option's
strike price). The repurchase price with primary dealers is typically a
formula price which is generally based on a multiple of the premium
received for the option plus the amount by which the option is
"in-the-money."
Each Fund may write only covered options. A call option is covered if
the Fund owns the underlying security or a call option on the same
security with a lower strike price. A put option is covered if the Fund
segregates cash and/or short-term debt securities in an amount necessary
to pay the strike price of the option or purchases a put option on the
same underlying security with a higher strike price.
Each Fund will not purchase puts, calls, straddles, spreads or any
combination thereof, if as a result of such purchase the value of the
Fund's aggregate investment in such securities would exceed 5% of the
Fund's total assets.
Risk Factors in Futures and Options Transactions (Each Fund). There
can be no assurance that a liquid secondary market will exist for any
particular futures or option contract at any specific time. Thus, it may
not be possible to close a futures or option position. In the event of
adverse price movements, each Fund would continue to be required to make
daily cash payments to maintain its required margin with respect to open
futures or written options positions. In such a situation, if the Fund has
insufficient cash, it may have to sell portfolio securities to meet daily
margin requirements at a time when it may be disadvantageous to do so. In
addition, a Fund may be required to make or take delivery of the
securities underlying futures contracts that it holds and options
contracts that it has written.
Each Fund will seek to minimize the risk that it will be unable to
close out a futures contract by entering into only those futures contracts
that are listed on national futures exchanges and for which there appears
to be a liquid secondary market. Likewise, each Fund will enter into only
those option contracts that are listed on a national securities exchange
or traded in the OTC market for which there appears to be a liquid
secondary market.
The risk of loss in trading futures contracts in some strategies can
be substantial, due both to the low margin deposits required, and the
extremely high degree of leverage involved in futures pricing. As a
result, a relatively small price movement in a futures contract may result
in immediate and substantial loss (as well as gain) to the investor. For
example, if at the time of purchase, 10% of the value of the futures
contract is deposited as margin, a subsequent 10% decrease in the value of
the futures contract would result in a total loss of margin deposit,
before any deduction for the transaction costs, if the account were then
closed out. A 15% decrease would result in a loss equal to 150% if the
original margin deposit for the contract were closed out. Thus, a purchase
or sale of a futures contract may result in losses in excess of the amount
invested in the contract. Options transactions are subject to similar
risks. However, because the Fund will not engage in futures or options
transactions for speculative purposes, Dreyfus believes that a Fund's risk
of loss is less than the risk of loss associated with speculative
transactions. Moreover, in the foregoing example, the Fund would
presumably have sustained comparable losses if, instead of the futures
contract, it had invested in the underlying security and sold it after the
decline.
Utilization of futures contracts and options transactions by each
Fund does involve the risk of imperfect or no correlation where the
securities underlying futures and options contracts are different from the
portfolio securities being hedged. It is also possible that the Fund could
both lose money on futures and options contracts and also experience a
decline in value of its portfolio securities. There is also the risk of
loss by a Fund of margin deposits in the event of bankruptcy of a broker
with whom the Fund has an open position in a futures contract or option
thereon.
Most futures exchanges limit the amount of fluctuation permitted in
futures contract prices during a single trading day. The daily limit
establishes the maximum amount that the price of a futures contract may
vary either up or down from the previous day's settlement price at the end
of a trading session. Once the daily limit has been reached in a
particular type of contract, no trades may be made on that day at a price
beyond that limit. The daily limit governs only price movement during a
particular trading day and therefore does not limit potential losses,
because the limit may prevent the liquidation of unfavorable positions.
Futures contract prices have occasionally moved to the daily limit for
several consecutive trading days with little or no trading, thereby
preventing prompt liquidation of future positions and subjecting some
futures traders to substantial losses.
Futures and options contracts involve special tax considerations. See
"Dividends, Other Distributions and Taxes" for further information.
Investment Restrictions
The following limitations have been adopted by each Fund. A Fund may
not change any of these fundamental investment limitations without the
consent of: (a) 67% or more of the shares present at a meeting of
shareholders duly called if the holders of more than 50% of the
outstanding shares of a Fund are present or represented by proxy; or (b)
more than 50% of the outstanding shares of a Fund, whichever is less. Each
Fund may not:
1. Purchase any securities which would cause more than 25% of the value
of a Fund's total assets at the time of such purchase to be invested
in the securities of one or more issuers conducting their principal
activities in the same industry. (For purposes of this limitation,
U.S. Government securities, and state or municipal governments and
their political subdivisions are not considered members of any
industry. ln addition, this limitation does not apply to investments
in domestic banks, including U.S. branches of foreign banks and
foreign branches of U.S. banks).
2. Borrow money or issue senior securities as defined in the 1940 Act
except that (a) a Fund may borrow money in an amount not exceeding
one-third of the Fund's total assets at the time of such borrowings,
and (b) a Fund may issue multiple classes of shares. The purchase or
sale of futures contracts and related options shall not be considered
to involve the borrowing of money or issuance of senior securities.
3. Purchase with respect to 75% of a Fund's total assets securities of
any one issuer (other than securities issued or guaranteed by the
U.S. Government, its agencies or instrumentalities) if, as a result,
(a) more than 5% of a Fund's total assets would be invested in the
securities of that issuer, or (b) a Fund would hold more than 10% of
the outstanding voting securities of that issuer.
4. Make loans or lend securities, if as a result thereof more than
one-third of the Fund's total assets would be subject to all such
loans. For purposes of this limitation debt instruments and
repurchase agreements shall not be treated as loans.
5. Purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent a Fund
from investing in securities or other instruments backed by real
estate, including mortgage loans, or securities of companies that
engage in real estate business or invest or deal in real estate or
interests therein).
6. Underwrite securities issued by any other person, except to the
extent that the purchase of securities and later disposition of such
securities in accordance with the Fund's investment program may be
deemed an underwriting.
7. Purchase or sell commodities except that each Fund may enter into
futures contracts and related options, forward currency contacts and
other similar instruments.
Each Fund may, notwithstanding any other fundamental investment
policy or limitation, invest all of its investable assets in securities of
a single open-end management investment company with substantially the
same investment objectives, policies and limitations as the Fund.
Each Fund has adopted the following additional non-fundamental
restrictions. These non-fundamental restrictions may be changed without
shareholder approval, in compliance with applicable law and regulatory
policy.
1. No Fund shall sell securities short, unless it owns or has the right
to obtain securities equivalent in kind and amounts to the securities
sold short, and provided that transactions in futures contracts are
not deemed to constitute selling short.
2. No Fund shall purchase securities on margin, except that a Fund may
obtain such short-term credits as are necessary for the clearance of
transactions, and provided that margin payments in connection with
futures contracts and options on futures contracts shall not
constitute purchasing securities on margin.
3. No Fund shall purchase oil, gas or mineral leases.
4. Each Fund will not purchase or retain the securities of any issuer if
the officers or Directors of the Fund, its advisers, or managers,
owning beneficially more than one half of one percent of the
securities of such issuer, together own beneficially more than 5% of
such securities.
5. No Fund will purchase securities of issuers (other than securities
issued or guaranteed by domestic or foreign governments or political
subdivisions thereof), including their predecessors, that have been
in operation for less than three years, if by reason thereof, the
value of such Fund's investment in securities would exceed 5% of such
Fund's total assets. For purposes of this limitation, sponsors,
general partners, guarantors and originators of underlying assets may
be treated as the issuer of a security.
6. No Fund will invest more than 15% of the value of its net assets in
illiquid securities, including repurchase agreements with remaining
maturities in excess of seven days, time deposits with maturities in
excess of seven days and other securities which are not readily
marketable. For purposes of this limitation, illiquid securities
shall not include Section 4(2) Paper and securities which may be
resold under Rule 144A under the Securities Act of 1933, provided
that the Board of Directors, or its delegate, determines that such
securities are liquid based upon the trading markets for the specific
security.
7. No Fund may invest in securities of other investment companies,
except as they may be acquired as part of a merger, consolidation or
acquisition of assets and except to the extent otherwise permitted by
the 1940 Act.
8. No Fund shall purchase any security while borrowings representing
more than 5% of the Fund's total assets are outstanding.
9. No Fund will purchase warrants if at the time of such purchase: (a)
more than 5% of the value of such Fund's assets would be invested in
warrants, or (b) more than 2% of the value of the Fund's assets would
be invested in warrants that are not listed on the New York or
American Stock Exchange (for purposes of this undertaking, warrants
acquired by a Fund in units or attached to securities will be deemed
to have no value).
10. No Fund will purchase puts, calls, straddles, spreads and any
combination thereof if by reason thereof the value of its aggregate
investment in such classes of securities would exceed 5% of its total
assets except that: (a) this limitation shall not apply to standby
commitments, and (b) this limitation shall not apply to a Fund's
transactions in futures contracts and related options.
As an operating policy, each Fund will not invest more than 25% of
the value of its total assets, at the time of such purchase in domestic
banks, including U.S. branches of foreign banks and foreign branches of
U.S. banks. The Company's Board of Directors may change this policy
without shareholder approval. Notice will be given to shareholders if this
policy is changed by the Board of Directors.
MANAGEMENT OF THE FUND
CONTROLLING SHAREHOLDERS
Mellon Bank Corporation, a Pennsylvania corporation registered as a
bank holding company under the Bank Holding Company Act of 1956, as
amended, owned of record, through its direct and indirect subsidiaries,
more than 25% of the issued and outstanding voting shares of the Company,
as of January 31, 1995, and is, as a consequence, deemed to be a
controlling shareholder of the Company as that term is defined under the
1940 Act. The address of Mellon Bank Corporation is: Mellon Bank
Corporation, Mutual Fund Department, 3 Mellon Bank Center, Pittsburgh, PA
15259.
PRINCIPAL SHAREHOLDERS
The following shareholder(s) owned 5% or more of the outstanding
voting shares of the Fund at January 31, 1995:
Limited Term Income Fund: InvestNet Corporation, 2 Mellon Bank Center,
Pittsburgh, PA 15259-0001, 72% record.
Balanced Fund: Mac & Co. 853-924, Mellon Bank, N.A., as Nominee for Trust
Custodian, Mutual Funds, P.O. Box 320, Pittsburgh, PA 15230-0320, 28%
record; Bank of New York Trustee, The Penn Central Master Trust, One Wall
Street MT/MC - 7th Floor, New York, NY 10286, 22% record; Mac & Co. 97A-
W02, Mellon Bank, N.A., as Nominee for Trust Custodian, Mutual Funds, P.O.
Box 320, Pittsburgh, PA 15230-0320, 15% record; Mac & Co. 180-174, Mellon
Bank, N.A., as Nominee for Trust Custodian, Mutual Funds, P.O. Box 320,
Pittsburgh, PA 15230-0320, 8% record.
FEDERAL LAW AFFECTING MELLON BANK
The Glass-Steagall Act of 1933 prohibits national banks from engaging
in the business of underwriting, selling or distributing securities and
prohibits a member bank of the Federal Reserve System from having certain
affiliations with an entity engaged principally in that business. The
activities of Mellon Bank, N.A. ("Mellon Bank") in informing its customers
of, and performing, investment and redemption services in connection with
the Funds, and in providing services to the Funds as custodian and fund
accountant, as well as Dreyfus' investment advisory activities, may raise
issues under these provisions. Mellon Bank has been advised by counsel
that the activities are consistent with its statutory and regulatory
obligations.
Changes in either federal or state statutes and regulations relating
to the permissible activities of banks and their subsidiaries or
affiliates, as well as further judicial or administrative decisions or
interpretations of such future statutes and regulations, could prevent
Mellon Bank or Dreyfus from continuing to perform all or a part of the
above services for its customers and/or a Fund. If Mellon Bank or Dreyfus
were prohibited from serving a Fund in any of its present capacities, the
Board of Directors would seek an alternative provider(s) of such services.
DIRECTORS AND OFFICERS
The Company has a Board composed of thirteen Directors which
supervises the Company's investment activities and reviews contractual
arrangements with companies that provide the Funds with services. The
following lists the Directors and officers and their positions with the
Company and their present and principal occupations during the past five
years. Each Director who is an "interested person" of the Company (as
defined in the Investment Company Act of 1940, as amended (the "Act")) is
indicated by an asterisk. Each of the Directors also serves as a Trustee
of The Dreyfus/Laurel Funds Trust, The Dreyfus/Laurel Investment Series
and The Dreyfus/Laurel Tax-Free Municipal Funds (collectively "The Dreyfus
Family of Funds").
o + RUTH MARIE ADAMS. Director of the Company; Professor of English and
Vice President Emeritus, Dartmouth College; Senator, United Chapters
of Phi Beta Kappa; Trustee, Woods Hole Oceanographic Institution.
Age: 79 years old. Address: 1026 Kendal Lyme Road, Hanover, New
Hampshire 03755.
o + FRANCIS P. BRENNAN. Chairman of the Board of Directors and Assistant
Treasurer of the Company; Director and Chairman, Massachusetts
Business Development Corp.; Director, Boston Mutual Insurance
Company; Director and Vice Chairman of the Board, Home Owners Federal
Savings and Loan (prior to May 1990). Age: 76 years old. Address:
Massachusetts Business Development Corp., One Liberty Square, Boston,
Massachusetts 02109.
o * JOSEPH S. DiMARTINO. Director of the Company since February 1995.
Since January 1995, Mr. DiMartino has served as Chairman of the Board
for various funds in the Dreyfus Family of Funds. For more than five
years prior thereto, he was President, a director and, until August
1994, Chief Operating Officer of the Manager and Executive Vice
President and a director of Dreyfus Service Corporation, a wholly-
owned subsidiary of the Manager and, until August 1994, the Fund's
distributor. From August 1994 to December 31, 1994, he was a
director of Mellon Bank Corporation. Mr. DiMartino is a director and
former Treasurer of the Muscular Dystrophy Association; a trustee of
Bucknell University; and a director of the Noel Group, Inc. Mr.
DiMartino is also a Board member of 58 other funds in the Dreyfus
Family of Funds. He is 51 years old and his address is 200 Park
Avenue, New York, New York 10166.
o + JAMES M. FITZGIBBONS. Director of the Company; President and
Director, Amoskeag Company; Chairman, Howes Leather Company, Inc.;
Director, Fiduciary Trust Company; Chairman, CEO and Director,
Fieldcrest-Cannon Inc.; Director, Lumber Mutual Insurance Company;
Director, Barrett Resources, Inc. Age: 59 years old. Address: 40
Norfolk Road, Brookline, Massachusetts 02167.
o * J. TOMLINSON FORT. Director of the Company; Partner, Reed, Smith,
Shaw & McClay (law firm). Age: 65 years old. Address: 204 Woodcock
Drive, Pittsburgh, Pennsylvania 15215.
o + ARTHUR L. GOESCHEL. Director of Company; Director, Chairman of the
Board and Director, Rexene Corporation; Director, Calgon Carbon
Corporation; Director, National Picture Frame Corporation; Chairman
of the Board and Director, Tetra Corporation 1991-1993; Director,
Medalist Corporation 1992-1993. Age: 71 years old. Address: Way
Hallow Road and Woodland Road, Sewickley, Pennsylvania 15143.
o + KENNETH A. HIMMEL. Director of the Company; Former Director, The
Boston Company, Inc. and Boston Safe Deposit and Trust Company;
President and Chief Executive Officer, Himmel & Co., Inc.; Vice
Chairman, Sutton Place Gourmet, Inc. and Florida Hospitality Group;
Managing Partner, Himmel/MKDG, Franklin Federal Partners, Reston Town
Center Associates and Grill 23 & Bar. Age: 47 years old. Address:
Himmel and Company, Inc., 101 Federal Street, 22nd Floor, Boston,
Massachusetts 02110.
o + ARCH S. JEFFERY. Director of the Company; Financial Consultant. Age:
76 years old. Address: 1817 Foxcroft Lane, Allison Park,
Pennsylvania 15101.
o + STEPHEN J. LOCKWOOD. Director of the Company; President and CEO, LDG
Management Company Inc.; CEO, LDG Reinsurance Underwriters, SRRF
Management Inc. and Medical Reinsurance Underwriters Inc. Age: 46
years old. Address: 401 Edgewater Place, Wakefield, Massachusetts
01880.
o + ROBERT D. MCBRIDE. Director of the Company; Director, Chairman and
CEO, McLouth Steel; Director, Salem Corporation. Director,
SMS/Concast, Inc. (1983-1991). Age: 66 years old. Address: 15
Waverly Lane, Grosse Pointe Farms, Michigan 48236.
o + JOHN L. PROPST. Director of the Company; Of Counsel, Reed, Smith,
Shaw & McClay (law firm). Age: 79 years old. Address: 5521
Dunmoyle Street, Pittsburgh, Pennsylvania 15217.
o + JOHN J. SCIULLO. Director of the Company; Dean Emeritus and Professor
of Law, Duquesne University Law School; Director, Urban Redevelopment
Authority of Pittsburgh. Age: 62 years old. Address: 321 Gross
Street, Pittsburgh, Pennsylvania 15224
o + ROSLYN M. WATSON. Director of the Company; Principal, Watson
Ventures, Inc., prior to February, 1993; Real Estate Development
Project Manager and Vice President, The Gunwyn Company. Age: 44 years
old. Address: 25 Braddock Park, Boston, Massachusetts 02116-5816.
# MARIE E. CONNOLLY. President and Treasurer of the Company, The
Dreyfus/Laurel Investment Series, The Dreyfus/Laurel Funds Trust and
The Dreyfus/Laurel Tax-Free Municipal Funds (since September 1994);
Vice President of The Dreyfus/Laurel Funds, Inc. (March 1994 to
September 1994); President, Funds Distributor, Inc. (since 1992);
Treasurer, Funds Distributor, Inc. (July 1993 to April 1994); COO,
Funds Distributor, Inc. (since April 1994); Director, Funds
Distributor, Inc. (since July 1992); President, COO and Director,
Premier Mutual Fund Services, Inc. (since April 1994); Senior Vice
President and Director of Financial Administration, The Boston
Company Advisors, Inc. (December 1988 to May 1993). Address: One
Exchange Place, Boston, Massachusetts 02109.
# FREDERICK C. DEY. Vice President of the Company, The Dreyfus/Laurel
Investment Series, The Dreyfus/Laurel Funds Trust and The
Dreyfus/Laurel Tax-Free Municipal Funds (since September 1994);
Senior Vice President, Premier Mutual Fund Services, Inc. (since
August 1994); Vice President, Funds Distributor, Inc. (since August
1994); Fundraising Manager, Swim Across America (October 1993 to
August 1994); General Manager, Spring Industries (August 1988 to
October 1993). Address: Premier Mutual Fund Services, Inc., 200 Park
Avenue New York, New York 10166.
# ERIC B. FISCHMAN. Vice President of the Company, The Dreyfus/Laurel
Investment Series, The Dreyfus/Laurel Funds Trust and The
Dreyfus/Laurel Tax-Free Municipal Funds (since September 1994); Vice
President and Associate General Counsel, Premier Mutual Fund
Services, Inc. (Since August 1994); Vice President and Associate
General Counsel, Funds Distributor, Inc. (since August 1994); Staff
Attorney, Federal Reserve Board (September 1992 to June 1994); Summer
Associate, Venture Economics (May 1991 to September 1991); Summer
Associate, Suffolk County District Attorney (June 1990 to August
1990). Address: Premier Mutual Fund Services, Inc., 200 Park Avenue,
New York, New York 10166.
LESLIE M. GAYNOR. Assistant Treasurer of the Company, The Dreyfus/Laurel
Investment Series, The Dreyfus/Laurel Funds Trust and The
Dreyfus/Laurel Tax-Free Municipal Funds (since October 1994);
Assistant Treasurer/Manager of Treasury Services, Funds Distributor,
Inc. (since July 1994); Vice President, The Boston Company, Inc.
(1989 to July 1994). Address: One Exchange Place, Boston,
Massachusetts 02109.
RICHARD W. HEALEY. Vice President of the Company, The Dreyfus/Laurel
Investment Series, The Dreyfus/Laurel Tax-Free Municipal Funds Trust
and The Dreyfus/Laurel Funds Trust (since March 1994); Senior Vice
President, Funds Distributor, Inc. (since March 1993); Vice
President, The Boston Company Inc., (March 1993 to May 1993); Vice
President of Marketing, Calvert Group (1989 to March 1993); Fidelity
Investments (prior to 1989). Address: One Exchange Place, Boston,
Massachusetts 02109.
# JOHN E. PELLETIER. Vice President and Secretary of the Company; The
Dreyfus/Laurel Investment Series, The Dreyfus/Laurel Funds Trust and
The Dreyfus/Laurel Tax-Free Municipal Funds (since September 1994);
Senior Vice President, General Counsel and Secretary, Funds
Distributor, Inc. (since April 1994); Senior Vice President, General
Counsel and Secretary, Premier Mutual Fund Services, Inc. (since
August 1994); Counsel, The Boston Company Advisors, Inc. (February
1992 to March 1994); Associate, Ropes & Gray (August 1990 to February
1992); Associate, Sidley & Austin (June 1989 to August 1990).
Address: One Exchange Place, Boston, Massachusetts 02109.
____________________________
* "Interested person" of the Company, as defined in the 1940 Act.
o Member of the Audit Committee.
+ Member of the Nominating Committee.
# Officer also serves as an officer for other investment companies
advised by Dreyfus.
The officers and Directors of the Company as a group owned
beneficially less than 1% of the Fund's total shares outstanding as of
January 31, 1995.
No officer or employee of Premier (or of any parent, subsidiary or
affiliate thereof) receives any compensation from each Fund for serving as
an officer or Director of the Fund. In addition, no officer or employee of
Dreyfus (or of any parent or subsidiary thereof) serves as an officer or
Director of the Company. The Dreyfus/Laurel Funds pay each
Director/Trustee who is not an officer or employee of Premier (or of any
parent, subsidiary or of its affiliate, thereof) or of Dreyfus, $27,000
per annum (and an additional $75,000 for the Chairman of the Board of
Directors/Trustees of the Dreyfus/Laurel Funds), $1,000 for each
Dreyfus/Laurel Funds meeting attended and $750 for each Dreyfus/Laurel
Funds Audit Committee meeting attended, and reimburses each
Director/Trustee for travel and out-of-pocket expenses. For the fiscal
year ended October 31, 1994 the fees for meetings and expenses totaled
$25,551.
For the fiscal year ended October 31, 1994, the aggregate amount of
fees and expenses received by each Director from the Company and all other
Funds in The Dreyfus/Laurel Family of Funds for which such person is a
Board member were as follows:
<TABLE>
<CAPTION>
Total
Pension of Compensation
Retirement From the
Benefits Estimated Company
Aggregate Accrued as Annual and Fund
Compensation Part of Benefits Complex Paid
From the the Company's Upon to Board
Name of Board Member Company # Expenses Retirement Member
____________________ ____________ _____________ __________ ____________
<S> <C> <C> <C> <C>
Ruth Marie Adams $19,685 None None $ 37,500
Francis P. Brennan* 52,809 None None 112,500
Joseph S. DiMartino** N/A N/A N/A N/A
James M. Fitzgibbons 17,685 None None 31,750
J. Tomlinson Fort 7,500 None None 7,500
Arthur L. Goeschel 26,185 None None 32,500
Kenneth A. Himmel 18,685 None None 35,750
Arch S. Jeffrey 27,185 None None 33,500
Steven J. Lockwood 18,685 None None 35,750
Robert D. McBride 27,185 None None 33,500
John L. Propst 27,185 None None 33,500
John J. Sciullo 27,185 None None 33,500
Roslyn M. Watson 19,685 None None 36,750
</TABLE>
# Amount does not include reimbursed expenses for attending Board
meetings, which amounted to $10,876 for the Company.
* Compensation of Francis Brennan includes $75,000 paid by The
Dreyfus/Laurel Fund Family to be Chairman of the Board.
** Joseph S. DiMartino was not a director of the Company as of October
31, 1994.
MANAGEMENT ARRANGEMENTS
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "Management
of the Fund."
Management Agreement. Dreyfus serves as the investment manager for
the Funds pursuant to an Investment Management Agreement with the Company
dated April 4, 1994 ("Management Agreement"), transferred to Dreyfus as of
October 17, 1994. Pursuant to the Management Agreement, Dreyfus provides,
or arranges for one or more third parties to provide investment advisory,
administrative, custody, fund accounting and transfer agency services to
each Fund. As investment manager, Dreyfus manages the Funds by making
investment decisions based on each Fund's investment objectives, policies
and restrictions. The Management Agreement is subject to review and
approval at least annually by the Board of Directors.
The current Management Agreement with Dreyfus provides for a "unitary
fee." Under the unitary fee structure, Dreyfus pays all expenses of the
Funds except: (i) brokerage commissions, (ii) taxes, interest, fees and
expenses of the non-interested Directors (including counsel expenses), and
extraordinary expenses (which are expected to be minimal), and (iii) the
Rule 12b-1 fees described in this Statement of Additional Information.
Under the unitary fee, Dreyfus provides, or arranges for one or more third
parties to provide, investment advisory, administrative, custody, fund
accounting and transfer agency services to each Fund. For the provision
of such services directly, or through one or more third parties, Dreyfus
receives as full compensation for all services and facilities provided by
it, a fee computed daily and paid monthly at the annual rate set forth in
each Fund's Prospectus, applied to the average daily net assets of the
Fund's investment portfolio, less the accrued fees and expenses (including
counsel fees) of the non-interested Directors of the Company. Previously,
the payments to the investment manager covered merely the provision of
investment advisory services (and payment for sub-advisory services) and
certain specified administrative services. Under this previous
arrangement, each Fund also paid for additional non-investment advisory
expenses, such as custody and transfer agency services, that were not paid
by the investment adviser.
The Management Agreement will continue from year to year provided
that a majority of the Directors who are not interested persons of the
Company or Dreyfus and either a majority of all Directors or a majority of
the shareholders of the respective Fund approve its continuance. The
Company may terminate the Management Agreement, without prior notice to
Dreyfus, upon the vote of a majority of the Board of Directors or upon the
vote of a majority of the respective Fund's outstanding voting securities.
Dreyfus may terminate the Management Agreement upon sixty (60) days'
written notice to the Company. The Management Agreement will terminate
immediately and automatically upon its assignment.
The following persons are officers and/or directors of Dreyfus:
Howard Stein, Chairman of the Board and Chief Executive Officer; W. Keith
Smith, Vice Chairman of the Board; Robert E. Riley, President, Chief
Operating Officer and a director; Lawrence S. Kash, Vice Chairman--
Distribution and director; Philip L. Toia, Vice Chairman--Operations and
Administration; Paul H. Snyder, Vice President and Chief Financial
Officer; Daniel C. Maclean, Vice President and General Counsel; Barbara E.
Casey, Vice President--Retirement Services; Henry D. Gottmann, Vice
President--Retail; Elie M. Genadry, Vice President--Wholesale; Mark N.
Jacobs, Vice President--Fund Legal and Compliance; Jeffrey N. Nachman,
Vice President-Mutual Fund Accounting; Diane M. Coffey, Vice-President--
Corporate Communications; Katherine C. Wickham, Vice President--Human
Resources; Maurice Bendrihem, Controller; and Mandell L. Berman, Frank V.
Cahouet, Alvin E. Friedman, Lawrence M. Greene, Julian M. Smerling and
David B. Truman, Directors.
For the last three fiscal years, each Fund had the following
expenses:
For the Fiscal Years Ended October 31,
--------------------------------------------------
1994 1993 1992
____ ____ ____
Limited Term Income
- - - ------------------
Advisory fees (gross of waiver) $455,919 $118,161 $ 58,933
Expense reimbursement from Adviser 8,622 142,319 161,200
Advisory fees waived -- -- 8,972
Balanced
- - - --------
Advisory fees (gross of waiver) $601,694 $ 22,519 (1) --
Expense reimbursement from Adviser 26,589 31,076 (1) --
Advisory fees waived -- -- (1) --
(1) For the period September 15, 1993 (commencement of operations) to
October 31, 1993.
PURCHASE OF FUND SHARES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "How to Buy
Fund Shares."
The Distributor. The Distributor serves as the Funds' distributor
pursuant to an agreement which is renewable annually. The Distributor
also acts as distributor for the other funds in the Premier Family of
Funds, for funds in the Dreyfus Family of Funds and for certain other
investment companies.
Sales Loads--Class A. 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 ("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 Class A shares for each fund. The example assumes a purchase
of Class A shares for each Fund aggregating less than $50,000 with respect
to Premier Balanced Fund and less than $100,000 with respect to Premier
Limited Term Income Fund subject to the schedule of sales charges set
forth in each Prospectus at a price based upon the net asset value of the
Class A shares for each fund.
For Premier Balanced Fund:
Net Asset Value per Share $12.50
Per Share Sales Charge - 4.5%
of offering price (4.7% of
net asset value per share) $ 0.59
Per Share Offering Price to
the Public $13.09
For Premier Limited Term Income Fund:
Net Asset Value per Share $12.50
Per Share Sales Charge - 3.0%
of offering price (3.1% of
net asset value per share) $0.39
Per Share Offering Price to
the Public $12.89
Class B and Class C shares, which are subject to a contingent
deferred sales charge, were not offered as of the fiscal year ended
October 31, 1994.
TeleTransfer Privilege--All Classes, except Class R. TeleTransfer
purchase orders may be made between the hours of 8:00 a.m. and 4:00 p.m.,
New York time, on any business day that The Shareholder Services Group,
Inc., the Fund's transfer and dividend disbursing agent (the "Transfer
Agent"), and the New York Stock Exchange ("NYSE") are open. Such
purchases will be credited to the shareholder's Fund account on the next
bank business day. To qualify to use the TeleTransfer Privilege, the
initial payment for purchase of shares must be drawn on, and redemption
proceeds paid to, the same bank and account as are designated on the
Account Application or Shareholder Services Form on file. If the proceeds
of a particular redemption are to be wired to an account at any other
bank, the request must be in writing and signature-guaranteed. See
"Redemption of Fund Shares--TeleTransfer Privilege--All Classes, except
Class R."
Reopening an Account. An investor may reopen an account with a
minimum investment of $100 without filing a new Account Application during
the calendar year the account is closed or during the following calendar
year, provided the information on the old Account Application is still
applicable.
DISTRIBUTION AND SERVICE PLANS
The following information supplements and should be read in
conjunction with the section in each Fund's Prospectus entitled
"Distribution and Service Plans."
Class A, B and C shares are subject to annual fees for distribution
and shareholder services.
Distribution Plan--Class A Shares. The SEC has adopted Rule 12b-1
under the 1940 Act ("Rule") regulating the circumstances under which
investment companies such as the Company may, directly or indirectly, bear
the expenses of distributing their shares. The Rule defines distribution
expenses to include expenditures for "any activity which is primarily
intended to result in the sale of fund shares." The Rule, among other
things, provides that an investment company may bear such expenses only
pursuant to a plan adopted in accordance with the Rule. With respect to
the Class A shares of each Fund, the Company has adopted a Distribution
Plan ("Class A Plan"), and may enter into Selling Agreements with Service
Agents pursuant to the Class A Plan.
Under the Class A Plan, Class A shares of a Fund may spend annually
up to 0.25% of the average of its net assets for costs and expenses
incurred in connection with the distribution of, and shareholder servicing
with respect to Class A shares.
The Class A Plan provides that a report of the amounts expended under
the Class A Plan, and the purposes for which such expenditures were
incurred, must be made to the Company's Directors for their review at
least quarterly. In addition, the Class A Plan provides that it may not
be amended to increase materially the costs which a Fund may bear for
distribution pursuant to the Class A Plan without approval of a Fund's
shareholders, and that other material amendments of the Class A Plan must
be approved by the vote of a majority of the Directors and of the
Directors who are not "interested persons" of the Funds or Dreyfus (as
defined in the 1940 Act) and who do not have any direct or indirect
financial interest in the operation of the Class A Plan, cast in person at
a meeting called for the purpose of considering such amendments. The Class
A Plan is subject to annual approval by the entire Board of Directors and
by the Directors who are neither interested persons nor have any direct or
indirect financial interest in the operation of the Class A Plan, by vote
cast in person at a meeting called for the purpose of voting on the Plan.
The Class A Plan is terminable, as to a Fund's Class A shares, at any time
by vote of a majority of the Directors who are not interested persons and
have no direct or indirect financial interest in the operation of the Plan
or by vote of the holders of a majority of the outstanding shares of such
class of the Fund.
For the period from October 17, 1994 (inception date of Class A
shares) to October 31, 1994, the Balanced Fund paid the Distributor $630
pursuant to the Class A Plan and the Limited Term Income Fund paid the
Distributor $527 pursuant to the Class A Plan.
Distribution and Service Plans -- Class B and C Shares. In addition
to the above described Class A Plan for Class A shares, the Company's
Board of Directors has adopted a Service Plan (the "Service Plan") under
the Rule for Class B and Class C shares, pursuant to which the Fund pays
the Distributor and Dreyfus Service Corporation, an affiliate of Dreyfus,
for the provision of certain services to the holders of Class B and Class
C shares. The Company's Board of Directors has also adopted a
Distribution Plan pursuant to the Rule with respect to Class B and Class C
shares (the "Distribution Plan"). The Funds' Board of Directors believes
that there is a reasonable likelihood that the Distribution and Service
Plans (the "Plans") will benefit the Fund and the holders of Class B and
Class C shares.
A quarterly report of the amounts expended under each Plan, and the
purposes for which such expenditures were incurred, must be made to the
Directors for their review. In addition, each Plan provides that it may
not be amended to increase materially the cost which holders of Class B or
C shares may bear pursuant to the Plan without the approval of the holders
of such Classes and that other material amendments of the Plan must be
approved by the Board of Directors and by the Directors who are not
interested persons of the Fund and have no direct or indirect financial
interest in the operation of the Plan or in any agreements entered into in
connection with the Plan, by vote cast in person at a meeting called for
the purpose of considering such amendments. The Plan is subject to annual
approval by such vote of the Directors cast in person at a meeting called
for the purpose of voting on the Plan. Each Plan was so approved by the
Directors at a meeting held on September 23, 1994. Each Plan may be
terminated at any time by vote of a majority of the Directors who are not
interested persons and have no direct or indirect financial interest in
the operation of the Plan or in any agreements entered into in connection
with the Plan or by vote of the holders of a majority of Class B and C
shares.
Class B and Class C shares were not offered as of October 31, 1994.
Prior to September 23, 1994, Frank Russell Investment Management
Company acted as Administrator to the Funds and for the fiscal year ended
October 31, 1994, 1993 and 1992 was paid $11,048, $8,757 and $5,144,
respectively, by Premier Limited Term Income Fund and, for the years ended
October 31, 1994 and 1993, was paid $5,721 and $760, respectively, by
Premier Balanced Fund.
REDEMPTION OF FUND SHARES
The following information supplements and should be read in
conjunction with the section in each Fund's Prospectus entitled "How to
Redeem Fund Shares."
Stock 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 NYSE
Medallion Signature Program, the Securities Transfer Agents Medallion
Program ("STAMP") and the Stock Exchanges Medallion Program. Guarantees
must be signed by an authorized signatory of the guarantor and "Signature-
Guaranteed" must appear with the signature. The Transfer Agent may
request additional documentation from corporations, executors,
administrators, trustees or guardians, and may accept other suitable
verification arrangements from foreign investors, such as consular
verification. For more information with respect to signature-guarantees,
please call one of the telephone numbers listed on the cover.
TeleTransfer Privilege--All Classes, except Class R. Investors
should be aware that if they have selected the TeleTransfer Privilege, any
request for a wire redemption will be effected as a TeleTransfer
transaction through the Automated Clearing House system unless more prompt
transmittal specifically is requested. Redemption proceeds will be on
deposit in the investor's account at an ACH member bank ordinarily two
business days after receipt of the redemption request. See "Purchase of
Fund Shares--TeleTransfer Privilege--All Classes, except Class R."
Redemption Commitment. Each Fund has committed itself to pay in cash
all redemption requests by any shareholder of record of the Fund, 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 SEC. In the
case of requests for redemption in excess of such amount, the Board of
Directors 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 this event, the securities would be valued
in the same manner as each Fund's portfolio is valued. If the recipient
sold such securities, brokerage charges would be incurred.
Suspension of Redemptions. The right of redemption may be suspended
or the date of payment postponed (a) during any period when the NYSE is
closed (other than customary weekend and holiday closings), (b) when
trading in the markets a Fund ordinarily utilizes is restricted, or when
an emergency exists as determined by the SEC so that disposal of a Fund's
investments or determination of its net asset value is not reasonably
practicable, or (c) for such other periods as the SEC by order may permit
to protect a Fund's shareholders.
SHAREHOLDER SERVICES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled
"Shareholder Services."
Fund Exchanges. Shares of any Class of a Fund may be exchanged for
shares of the respective Class of certain other funds advised or
administered by Dreyfus. 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. Exchanges for shares of funds that are offered without a sales
load will be made without a sales load.
B. Shares of funds purchased without a sales load may be exchanged
for shares of other funds sold with a sales load, and the
applicable sales load will be deducted.
C. Shares of funds purchased with a sales load may be exchanged
without a sales load for shares of other funds sold without a
sales load.
D. Shares of funds purchased with a sales load, shares of funds
acquired by a previous exchange from shares purchased with a
sales load and additional shares acquired through reinvestment
of dividends or other distributions of any such funds
(collectively referred to herein as "Purchased Shares") may be
exchanged for shares of other funds sold with a sales load
(referred to herein as "Offered Shares"), provided that, if the
sales load applicable to the Offered Shares exceeds the maximum
sales load that could have been imposed in connection with the
Purchased Shares (at the time the Purchased Shares were
acquired), without giving effect to any reduced loads, the
difference will be deducted.
E. Shares of funds subject to a contingent deferred sales charge
("CDSC") that are exchanged for shares of another fund will be
subject to the higher applicable CDSC of the two funds, and for
purposes of calculating CDSC rates and conversion periods, if
any, will be deemed to have been held since the date the shares
being exchanged were initially purchased.
To accomplish an exchange under item D above, shareholders must
notify the Transfer Agent of their prior ownership of fund shares and
their account number.
Exchanges of Class R shares held by a Retirement Plan may be made
only between the investor's Retirement Plan account in one fund and such
investor's Retirement Plan account in another fund.
To establish a personal retirement plan by exchange, shares of the
fund being exchanged must have a value of at least the minimum initial
investment required for the fund into which the exchange is being made.
For Dreyfus-sponsored Keogh Plans, IRAs and SEP-IRAs with only one
participant, the minimum initial investment is $750. To exchange shares
held in Corporate Plans, 403(b)(7) Plans and IRAs set up under a
Simplified Employee Pension Plan ("SEP-IRAs") with more than one
participant, the minimum initial investment is $100 if the plan has at
least $2,500 invested among the funds in the Premier Family of Funds or
the Dreyfus Family of Funds. To exchange shares held in a personal
retirement plan account, the shares exchanged must have a current value of
at least $100.
Auto-Exchange Privilege. The Auto-Exchange Privilege permits an
investor to purchase, in exchange for shares of a Fund, shares of the same
Class of another fund in the Premier Family of Funds or the Dreyfus Family
of Funds. This privilege is available only for existing accounts. With
respect to Class R shares held by a Retirement Plan, exchanges may be made
only between the investor's Retirement Plan account in one fund and such
investor's Retirement Plan account in another fund. Shares will be
exchanged on the basis of relative net asset value as described above
under "Fund Exchanges." Enrollment in or modification or cancellation of
this privilege is effective three business days following notification by
the investor. An investor will be notified if the investor's account
falls below the amount designated to be exchanged under this privilege.
In this case, an investor's account will fall to zero unless additional
investments are made in excess of the designated amount prior to the next
Auto-Exchange transaction. Shares held under IRA and other retirement
plans are eligible for this privilege. Exchanges of IRA shares may be
made between IRA accounts and from regular accounts to IRA accounts, but
not from IRA accounts to regular accounts. With respect to all other
retirement accounts, exchanges may be made only among those accounts.
Fund exchanges and Auto-Exchange Privilege are available to
shareholders resident in any state in which shares of the fund being
acquired may legally be sold. Shares may be exchanged only between
accounts having identical names and other identifying designations.
Shareholder Services Forms and prospectuses of the other funds may be
obtained from the Distributor. The Funds reserve the right to reject any
exchange request in whole or in part. The Fund exchange service or Auto-
Exchange Privilege may be modified or terminated at any time upon notice
to shareholders.
Automatic Withdrawal. The Automatic Withdrawal Plan permits an
investor with a $5,000 minimum account to request withdrawal of a
specified dollar amount (minimum of $50) on either a monthly or quarterly
basis. Withdrawal payments are the proceeds from sales of Fund shares,
not the yield on the shares. If withdrawal payments exceed reinvested
dividends and distributions, the investor's shares will be reduced and
eventually may be depleted. An Automatic Withdrawal Plan may be
established by completing the appropriate application available from the
Distributor. There is a service charge of $.50 for each withdrawal check.
Automatic Withdrawal may be terminated at any time by the investor, a Fund
or the Transfer Agent. Shares for which certificates have been issued may
not be redeemed through the Automatic Withdrawal Plan.
Dividend Sweep. Dividend Sweep allows investors to invest on the
payment date their dividends or dividends and capital gain distributions,
if any, from a Fund in shares of the same Class of another fund in the
Premier Family of Funds or the Dreyfus Family of Funds of which the
investor is 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 by a fund may be invested
without imposition of a sales load in shares of other funds that
are offered without a sales load.
B. Dividends and distributions paid by a fund which does not charge
a sales load may be invested in shares of other funds sold with
a sales load, and the applicable sales load will be deducted.
C. Dividends and distributions paid by a fund which charges a sales
load may be invested in shares of other funds sold with a sales
load (referred to herein as "Offered Shares"), provided that, if
the sales load applicable to the Offered Shares exceeds the
maximum sales load charged by the fund from which dividends or
distributions are being swept, without giving effect to any
reduced loads, the difference will be deducted.
D. Dividends and distributions paid by a fund may be invested in
shares of other funds that impose a CDSC and the applicable
CDSC, if any, will be imposed upon redemption of such shares.
Corporate Pension/Profit-Sharing and Retirement Plans. Each Fund
makes available to corporations a variety of prototype pension and profit-
sharing plans including a 401(k) Salary Reduction Plan. In addition, each
Fund makes available Keogh Plans, IRAs, including SEP-IRAs and IRA
"Rollover Accounts," and 403(b)(7) Plans. Plan support services also are
available.
Investors who wish to purchase Fund shares in conjunction with a
Keogh Plan, a 403(b)(7) Plan or an IRA, including an SEP-IRA, may request
from the Distributor forms for adoption of such plans.
The entity acting as custodian for Keogh Plans, 403(b)(7) Plans or
IRAs may charge a fee, payment of which could require the liquidation of
shares. All fees charged are described in the appropriate form.
Shares may be purchased in connection with these plans only by direct
remittance to the entity acting as custodian. Purchases for these plans
may not be made in advance of receipt of funds.
The minimum initial investment for corporate plans, Salary Reduction
Plans, 403(b)(7) Plans and SEP-IRAs with more than one participant, is
$1,000 with no minimum on subsequent purchases. The minimum initial
investment for Dreyfus-sponsored Keogh Plans, IRAs, SEP-IRAs and 403(b)(7)
Plans with only one participant, is normally $750, with no minimum on
subsequent purchases. Individuals who open an IRA may also open a non-
working spousal IRA with a minimum investment of $250.
The investor should read the Prototype Retirement Plan and the
appropriate form of Custodial Agreement for further details on
eligibility, service fees and tax implications, and should consult a tax
adviser.
DETERMINATION OF NET ASSET VALUE
The following information supplements and should be read in
conjunction with the section in the Funds' Prospectus entitled "How to Buy
Fund Shares."
Restricted securities, as well as securities or other assets for
which market quotations are not readily available, or are not valued by a
pricing service approved by the Board of Directors, are valued at fair
value as determined in good faith by the Board of Directors. The Board of
Directors will review the method of valuation on a current basis. In
making their good faith valuation of restricted securities, the Directors
generally will take the following factors into consideration: restricted
securities which are securities of the same class of securities for which
a public market exists usually will be valued at market value less the
same percentage discount at which purchased. This discount will be
revised periodically by the Board of Directors if the Directors believe
that it no longer reflects the value of the restricted securities.
Restricted securities not of the same class as securities for which a
public market exists usually will be valued initially at cost. Any
subsequent adjustment from cost will be based upon considerations deemed
relevant by the Board of Directors.
New York Stock Exchange Closings. The holidays (as observed) on
which the NYSE is closed currently are: New Year's Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and
Christmas.
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
The following information supplements and should be read in
conjunction with the section in the Funds' Prospectus entitled "Dividends,
Other Distributions and Taxes."
The term "regulated investment company" does not imply the
supervision of management or investment practices or policies by any
government agency.
To qualify as a regulated investment company ("RIC"), each Fund
(1) must distribute to its shareholders each year at least 90% of its
investment company taxable income (generally consisting of net investment
income, net short-term capital gains and net gains from certain foreign
currency transactions), (2) must derive at least 90% of its annual gross
income from specified sources ("Income Requirement"), (3) must derive less
than 30% of its annual gross income from gain on the sale or disposition
of any of the following that are held for less than three months --
(i) securities, (ii) non-foreign-currency options and futures and
(iii) foreign currencies (or foreign currency options, futures and forward
contracts) that are not directly related to a Fund's principal business of
investing in securities (or options and futures with respect thereto)
("Short-Short Limitation") -- and (4) must meet certain asset
diversification and other requirements. Accordingly, a Fund may be
restricted in the selling of securities held for less than three months.
Any dividend or other distribution paid shortly after an investor's
purchase may have the effect of reducing the net asset value of the shares
below the cost of his investment. Such a dividend or other distribution
would be a return on investment in an economic sense, although taxable as
stated in the Funds' Prospectus. In addition, the Code provides that if a
shareholder holds shares of the Fund for six months or less and has
received a capital gain distribution with respect to those shares, any
loss incurred on the sale of those shares will be treated as a long-term
capital loss to the extent of the capital gain distribution received.
Dividends and other distributions declared by a Fund in October,
November or December of any year and payable to shareholders of record on
a date in that month any of those months are deemed to have been paid by a
Fund and received by the shareholders on December 31 of that year if the
distributions are paid by a Fund during the following January.
Accordingly, those distributions will be taxed to shareholders for the
year in which that December 31 falls.
A portion of the dividends paid by a Fund, whether received in cash
or reinvested in additional Fund shares, may be eligible for the
dividends-received deduction allowed to corporations. The eligible
portion may not exceed the aggregate dividends received by a Fund from
U.S. corporations. However, dividends received by a corporate shareholder
and deducted by it pursuant to the dividends-received deduction are
subject indirectly to the alternative minimum tax.
Dividends and interest received by a Fund may be subject to income,
withholding or other taxes imposed by foreign countries and U.S.
possessions that would reduce the yield on its securities. Tax
conventions between certain countries and the United States may reduce or
eliminate these foreign taxes, however, and many foreign countries do not
impose taxes on capital gains in respect of investments by foreign invest-
ors.
Income from foreign currencies (except certain gains therefrom that
may be excluded by future regulations), and income from transactions in
options, futures and forward contracts derived by the Fund with respect to
its business of investing in securities or foreign currencies, will
qualify as permissible income under the Income Requirement. However,
income from the disposition of options and futures contracts (other than
those on foreign currencies) will be subject to the Short-Short Limitation
if they are held for less than three months. Income from the disposition
of foreign currencies, and options, futures and forward contracts thereon,
that are not directly related to a Fund's principal business of investing
in securities (or options and futures with respect to securities) also
will be subject to the Short-Short Limitation if they are held for less
than three months.
If a Fund satisfies certain requirements, any increase in value of a
position that is part of a "designated hedge" will be offset by any
decrease in value (whether realized or not) of the offsetting hedging
position during the period of the hedge for purposes of determining
whether a Fund satisfies the Short-Short Limitation. Thus, only the net
gain (if any) from the designated hedge will be included in gross income
for purposes of that limitation. Each Fund will consider whether it
should seek to qualify for this treatment for its hedging transactions.
To the extent a Fund does not so qualify, it may be forced to defer the
closing out of certain options, futures and forward contracts beyond the
time when it otherwise would be advantageous to do so, in order for such
Fund to qualify as a RIC.
Ordinarily, gains and losses realized from portfolio transactions
will be treated as capital gain and loss. However, a portion of the gain
or loss from the disposition of foreign currencies and non-U.S. dollar
denominated securities (including debt instruments, certain financial
forward, futures and option contracts and certain preferred stock) may be
treated as ordinary income or loss under Section 988 of the Code. In
addition, all or a portion of any gain realized from the sale or other
disposition of certain market discount bonds will be treated as ordinary
income. Moreover, all or a portion of the gain realized from engaging in
"conversion transactions" may be treated as ordinary income under Section
1258. "Conversion transactions" are defined to include certain forward,
futures, option and straddle transactions, transactions marketed or sold
to produce capital gains, or transactions described in Treasury
regulations to be issued in the future.
Under Section 1256 of the Code, any gain or loss realized by a Fund
from certain futures and forward contracts and options transactions will
be treated as 60% long-term capital gain or loss and 40% short-term
capital gain or loss. Gain or loss will arise upon exercise or lapse of
such contracts and options as well as from closing transactions. In
addition, any such contracts or options remaining unexercised at the end
of a Fund's taxable year will be treated as sold for their then fair
market value (a process known as "marking to market"), resulting in
additional gain or loss to the Fund characterized in the manner described
above.
Offsetting positions held by a Fund involving certain contracts or
options may constitute "straddles." "Straddles" are defined to include
"offsetting positions" in actively traded personal property. The tax
treatment of "straddles" is governed by Sections 1092 and 1258 of the
Code, which, in certain circumstances, override or modify Sections 1256
and 988. As such, all or a portion of any short-term or long-term capital
gain from certain "straddle" transactions may be recharacterized to
ordinary income. If the Fund were treated as entering into "straddles" by
reason of its engaging in certain forward contracts or options
transactions, such "straddles" would be characterized as "mixed straddles"
if the forward contracts or options transactions comprising a part of such
"straddles" were governed by Section 1256. Each Fund may make one or more
elections with respect to "mixed straddles." Depending on which election
is made, if any, the results to a Fund may differ. If no election is
made, then to the extent the "straddle" and conversion transactions rules
apply to positions established by a Fund, losses realized by a Fund will
be deferred to the extent of unrealized gain in the offsetting position.
Moreover, as a result of the "straddle" rules, short-term capital loss on
"straddle" positions may be recharacterized as long-term capital loss, and
long-term capital gains may be treated as short-term capital gains or
ordinary income.
Investment by a Fund in securities issued or acquired at a discount
(for example, zero coupon securities) or providing for deferred interest
or for payment of interest in the form of additional obligations (for
example, "pay-in-kind" or "PIK" securities) could, under special tax
rules, affect the amount, timing and character of distributions to
shareholders by causing the Fund to recognize income prior to the receipt
of cash payments. For example, a Fund could be required to take into
gross income annually a portion of the discount (or deemed discount) at
which the securities were issued and to distribute such income in order to
maintain its qualification for treatment as a RIC. In such case, the Fund
may have to dispose of securities it might otherwise have continued to
hold in order to generate cash to satisfy these distribution requirements.
If a Fund invests in an entity that is classified as a "passive
foreign investment company" ("PFIC") for federal income tax purposes, the
operation of certain provisions of the Code applying to PFICs could result
in the imposition of certain federal income taxes on the Fund. In
addition, gain realized from the sale or other disposition of PFIC
securities may be treated as ordinary income under Section 1291 of the
Code.
State and Local Taxes. Depending upon the extent of a Fund's
activities in states and localities in which its offices are maintained,
in which its agents or independent contractors are located, or in which it
is otherwise deemed to be conducting business, the Fund may be subject to
the tax laws of such states or localities. Shareholders are advised to
consult their tax advisers concerning the application of state and local
taxes.
Foreign Shareholders - U.S. Federal Income Taxation. U.S. federal
income taxation of a shareholder who, as to the United States, is a
non-resident alien individual, a foreign trust or estate, a foreign
corporation or a foreign partnership (a "foreign shareholder"), depends on
whether the income from a Fund is "effectively connected" with a U.S.
trade or business carried on by the shareholder, as discussed generally
below. Special U.S. federal income tax rules that differ from those
described below may apply to certain foreign persons who invest in the
Fund. For example, the tax consequences to a foreign shareholder entitled
to claim the benefits of an applicable tax treaty may be different from
those described below. Foreign shareholders are advised to consult their
own tax advisers with respect to the particular tax consequences to them
of an investment in a Fund.
Foreign Shareholders - Income Not Effectively Connected. If the
income from the Fund is not effectively connected with a U.S. trade or
business carried on by the foreign shareholder, distributions of
investment company taxable income generally will be subject to a U.S.
federal withholding tax of 30% (or lower treaty rate) on the gross amount
of the distribution. Foreign shareholders also may be subject to U.S.
federal withholding tax on income resulting from any election by a Fund to
treat foreign taxes paid by it as paid by its shareholders (see discussion
above), but foreign shareholders will not be able to claim a credit or
deduction for the foreign taxes treated as having been paid by them.
Capital gains realized by foreign shareholders on the sale of Fund
shares and distributions to them of net capital gain, as well as amounts
retained by a Fund that are designated as undistributed capital gains,
generally will not be subject to U.S. federal income tax unless the
foreign shareholder is a non-resident alien individual and is physically
present in the United States for more than 182 days during the taxable
year. However, this rule only applies in exceptional cases, because any
individual present in the United States for more than 182 days during the
taxable year generally is treated as a resident for U.S. federal income
tax purposes on his worldwide income at the graduated rates applicable to
U.S. citizens, rather than the 30% U.S. federal withholding tax rate. In
the case of certain foreign shareholders, the Fund may be required to
withhold U.S. Federal income tax at a rate of 31% of capital gain
distributions and of the gross proceeds from a redemption of Fund shares
unless the shareholder furnishes the Fund with a certificate regarding the
shareholder's foreign status.
Foreign Shareholders - Effectively Connected Income. If income from a
Fund is effectively connected with a U.S. trade or business carried on by
a foreign shareholder, then all distributions to that shareholder and any
gains realized by that shareholder on the disposition of the Fund shares
will be subject to U.S. federal income tax at the graduated rates
applicable to U.S. citizens and domestic corporations, as the case may be.
Foreign shareholders also may be subject to the branch profits tax.
Foreign Shareholders - Estate Tax. Foreign individuals generally are
subject to U.S. federal estate tax on their U.S. situs property, such as
shares of a Fund, that they own at the time of their death. Certain
credits against that tax and relief under applicable tax treaties may be
available.
Pennsylvania Personal Property Tax Exemption. The Company has
obtained a Certificate of Authority to do business as a foreign
corporation in Pennsylvania. In the opinion of counsel, shares of the
Company are exempt from Pennsylvania personal property taxes.
PORTFOLIO TRANSACTIONS
All portfolio transactions of each Fund are placed on behalf of each
Fund by Dreyfus. Debt securities purchased and sold by each Fund are
generally traded on a net basis (i.e., without commission) through dealers
acting for their own account and not as brokers, or otherwise involve
transactions directly with the issuer of the instrument. This means that
a dealer (the securities firm or bank dealing with a Fund) makes a market
for securities by offering to buy at one price and sell at a slightly
higher price. The difference between the prices is known as a spread.
Other portfolio transactions may be executed through brokers acting as
agent. Each Fund will pay a spread or commissions in connection with such
transactions. Dreyfus uses its best efforts to obtain execution of
portfolio transactions at prices which are advantageous to each Fund and
at spreads and commission rates, if any, which are reasonable in relation
to the benefits received. Dreyfus also places transactions for other
accounts that it provides with investment advice.
Brokers and dealers involved in the execution of portfolio
transactions on behalf of a Fund are selected on the basis of their
professional capability and the value and quality of their services. In
selecting brokers or dealers, Dreyfus will consider various relevant
factors, including, but not limited to, the size and type of the
transaction; the nature and character of the markets for the security to
be purchased or sold; the execution efficiency, settlement capability, and
financial condition of the broker-dealer; the broker-dealer's execution
services rendered on a continuing basis; and the reasonableness of any
spreads (or commissions, if any). Any spread, commission, fee or other
remuneration paid to an affiliated broker-dealer is paid pursuant to the
Company's procedures adopted in accordance with Rule 17e-1 of the 1940
Act.
Brokers or dealers may be selected who provide brokerage and/or
research services to a Fund and/or other accounts over which Dreyfus or
its affiliates exercise investment discretion. Such services may include
advice concerning the value of securities; the advisability of investing
in, purchasing or selling securities; the availability of securities or
the purchasers or sellers of securities; furnishing analyses and reports
concerning issuers, industries, securities, economic factors and trends,
portfolio strategy and performance of accounts; and effecting securities
transactions and performing functions incidental thereto (such as
clearance and settlement).
The receipt of research services from broker-dealers may be useful to
Dreyfus in rendering investment management services to a Fund and/or its
other clients; and, 2conversely, such information provided by brokers or
dealers who have executed transaction orders on behalf of other clients of
Dreyfus may be useful to these organizations in carrying out their
obligations to the Fund. The receipt of such research services does not
reduce these organizations' normal independent research activities;
however, it enables these organizations to avoid the additional expenses
which might otherwise be incurred if these organizations were to attempt
to develop comparable information through their own staffs.
The Company's Board of Directors periodically review Dreyfus'
performance of its responsibilities in connection with the placement of
portfolio transactions on behalf of a Fund and review the prices paid by
the Fund over representative periods of time to determine if they are
reasonable in relation to the benefits to the Fund.
Although Dreyfus manages other accounts in addition to the Funds,
investment decisions for the Funds are made independently from decisions
made for these other accounts. It sometimes happens that the same security
is held by more than one of the accounts managed by Dreyfus. Simultaneous
transactions may occur when several accounts are managed by the same
investment manager, particularly when the same investment instrument is
suitable for the investment objective of more than one account.
When more than one account is simultaneously engaged in the purchase
or sale of the same investment instrument, the prices and amounts are
allocated in accordance with a formula considered by Dreyfus to be
equitable to each account. In some cases this system could have a
detrimental effect on the price or volume of the investment instrument as
far as a particular Fund is concerned. In other cases, however, the
ability of a Fund to participate in volume transactions will produce
better executions for the Fund. While the Directors will continue to
review simultaneous transactions, it is their present opinion that the
desirability of retaining Dreyfus as investment manager to a Fund
outweighs any disadvantages that may be said to exist from exposure to
simultaneous transactions.
For the fiscal years ended October 31, 1994, 1993 and 1992, Premier
Limited Term Income Fund paid $9,550, $4,885 and $563, respectively, in
brokerage commissions. The increase in brokerage commissions paid was
related to the acquisition in fiscal year 1993 of a few securities of
which brokerage was charged. The Premier Limited Term Income Fund
typically does not pay a stated brokerage fee on transactions.
For the period September 15, 1993 (commencement of operations) to
October 31, 1993, and the fiscal year ended October 31, 1994, Balanced
Fund paid brokerage commissions amounting to $24,670 and $168,311,
respectively.
Portfolio Turnover. The portfolio turnover rate for each Fund is
calculated by dividing the lesser of the Fund's annual sales or purchases
of portfolio securities (exclusive of purchases and sales of securities
whose maturities at the time of acquisition were one year or less) by the
monthly average value of securities in the Fund during the year.
The portfolio turnover rates for the last two years of each Fund
were:
Fiscal Year Ended October 31,
--------------------------------------
1994 1993
____ ----
Premier Limited Income 117% 112%
Balanced (1) 83% --
(1) Balanced Fund commenced operations 9/15/93.
PERFORMANCE INFORMATION
The following information supplements and should be read in
conjunction with the section in the Funds' Prospectus entitled
"Performance Information."
Class B and Class C shares had not been offered as of the date of the
financials and, accordingly, no performance dates are available for Class
B or Class C.
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 other distributions), dividing by the amount
of the initial investment, taking the "n"th root of the quotient (where
"n" is the number of years in the period) and subtracting 1 from the
result. A Class's average annual total return figures calculated in
accordance with such formula assume that in the case of Class A 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 C the
maximum applicable CDSC has been paid upon redemption at the end of the
period.
Total return is calculated by subtracting the amount of a 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 (maximum
offering price in the case of Class A) per share at the end of the period
(after giving effect to the reinvestment of dividends and other
distributions during the period and any applicable CDSC), and dividing the
result by the net asset value (maximum offering price in the case of Class
A) 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 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 C
shares, which, if reflected would reduce the performance quoted.
Aggregate annual total return (expressed as a percentage) for Class A
shares of each Fund for the periods noted were:
Aggregate Total Return for the
Periods Ended October 31, 1994
Fund:
1 Year 5 Years 10 Years Inception
------ ------- -------- ---------
Balanced -- -- -- 4.68%
(4/14/94)
Limited Term -- -- -- 0.11%
(4/7/94)
Income
Inception dates appear in parentheses following the aggregate total return
since inception.
Average annual total return (expressed as a percentage) for Class R shares
of each Fund for the periods noted were:
Annualized Total Return for the
Periods Ended April 30, 1994
Fund:
1 Year 5 Years 10 Years Inception
Balanced 0.68 -- -- 2.21
(9/15/93)
Limited Term (2.46) -- -- 6.40
Income (7/11/91)
The dates in parentheses under the column headed "Inception" reflect the
date of each Fund's inception.
The Funds may also advertise yield from time to time. Yields are
computed by using standardized methods of calculation required by the SEC.
Yields are calculated by dividing the net investment income per share earn
during a 30-day (or one month) period by the maximum offering price per
share on the last day of the period, according to the following formula:
YIELD = 2[a-b/cd+1)-1]
Where: a = dividends and interest earned during
the period;
b = expenses accrued for the period (net of
reimbursements);
c = average daily number of shares outstanding
during the period that were entitled to
receive dividends; and
d = the maximum offering price per share
on the last day of the period.
The 30-day yield for each Fund quoting yield for the period ended
October 31, 1994 was:
Limited Term Income Fund (Class R) 6.50%
(Investor Shares) 6.24%
Performance information for the Funds may be compared, in reports and
promotional literature, to indexes including, but not limited to: (i) the
Morgan Stanley European Index; (ii) the Standard & Poor's 500 Composite
Stock Price Index, the Dow Jones Industrial Average, or other appropriate
unmanaged domestic or foreign indices of performance of various types of
investments so that investors may compare the Fund's results with those of
indices widely regarded by investors as representative of the securities
markets in general; (iii) other groups of mutual funds tracked by Lipper
Analytical Services, a widely used independent research firm which ranks
mutual funds by overall performance, investment objectives and assets, or
tracked by other services, companies, publications, or persons who rank
mutual funds on overall performance or other criteria; (iv) the Consumer
Price Index (a measure of inflation) to assess the real rate of return
from an investment in the Fund; and (v) products managed by a universe of
money managers with similar country allocation and performance objectives.
Unmanaged indices may assume the reinvestment of dividends but generally
do not reflect deductions or administrative and management costs and
expenses.
INFORMATION ABOUT THE FUNDS
The following information supplements and should be read in
conjunction with the section in the Funds' Prospectus entitled "General
Information."
Each Fund share has one vote and, when issued and paid for in
accordance with the terms of the offering, is fully paid and non-
assessable. Fund shares have no preemptive or subscription rights and are
freely transferable.
Each Fund will send annual and semi-annual financial statements to
all its shareholders.
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT, COUNSEL
AND INDEPENDENT AUDITORS
Mellon Bank, One Mellon Bank Center, Pittsburgh, PA 15258, is the
Funds' custodian and fund accountant. The Shareholder Services Group,
Inc., a subsidiary of First Data Corporation, P.O. Box 9692, Providence,
Rhode Island 09240-9830, is each Fund's transfer and dividend disbursing
agent. The Shareholder Services Group, Inc. and Mellon Bank as custodian,
have no part in determining the investment policies of a Fund or which
securities are to be purchased or sold by the Fund. Prior to the
effectiveness of the Investment Management Agreement for its services as
custodian and fund accountant, Mellon Bank was paid an annual fee of
$30,000 per portfolio, and, for all portfolios, an annual administrative
account maintenance fee of $10,000, an annual on-line fee of $3,600, an
asset-based fee of .02% of the first $500 million of the Company's net
assets and .01% of net assets over $500 million, plus a specified
transaction fee for each transaction. For its services as transfer and
dividend disbursing agent, Mellon Bank was paid an annual fee of $13.00
per shareholder account, with a minimum monthly fee of $3,000 per
portfolio. Mellon Bank was reimbursed for certain out-of-pocket expenses
including wire fees, and postage, stationery and telephone expenses.
Kirkpatrick & Lockhart, 1800 M Street, N.W., South Lobby - 9th Floor,
Washington, D.C. 20036, has passed upon the legality of the shares offered
by the Prospectuses and this Statement of Additional Information.
KPMG Peat Marwick LLP was appointed by the Directors to serve as the
Funds' independent auditors for the year ending October 31, 1995,
providing audit services including (1) examination of the annual financial
statements, (2) assistance, review and consultation in connection with the
SEC and (3) review of the annual federal income tax return and the
Pennsylvania excise tax return filed on behalf of each Fund.
FINANCIAL STATEMENTS
The financial statements for the fiscal year ended October 31, 1994,
including notes to the financial statements and supplementary information
and the Report of Independent Auditors, are included in the Annual Report
to shareholders. A copy of the Annual Report accompanies this Statement
of Additional Information. The financial statements for the Annual Report
and the Semi-Annual Report are incorporated herein by reference.
APPENDIX
DESCRIPTION OF SECURITIES RATINGS
Debt Instruments Ratings
Moody's Investors Service, Inc. (Moody's):
A Bonds rated AAA are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as
"gilt-edge." Interest payments are protected by a large or exceptionally
stable margin and principal is secure. While the various protective
elements are likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such issues.
Aa Bonds rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa Securities or
fluctuation of protective elements may be of greater amplitude or there
may be other elements present which make the long-term risks appear
somewhat larger than in Aaa securities.
A Bonds rated A possess many favorable investment attributes and
are considered "upper medium grade obligations."
Baa Bonds rated Baa are considered medium-grade obligations, i.e.
they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable
on any great length of time. Such bonds lack outstanding investment
characteristics and in fact has speculative characteristics as well.
Those Bonds in the Aa and A group which Moody's believes possess the
strongest investment attributes are designated by the symbols Aa 1 and A
1.
Standard & Poor's Ratings Group ("S&P"):
AAA This is the highest rating assigned by S&P to a debt obligation
and indicates an extremely strong capacity to pay principal and interest.
AA Bonds rated AA also qualify as high-quality debt obligations.
Capacity to pay principal and interest is very strong, and in the majority
of instances they differ from AAA issues only in small degree.
A Bonds rated A have a strong capacity to pay principal and
interest, although they are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions.
BBB Bonds rated BBB are regarded as having an adequate capacity to
pay interest and repay principal. Whereas it instantly exhibits adequate
protection or changing circumstances are more likely to lead a weakened
capacity to pay interest and repay principal for debt in this category
than in higher rated categories.
Plus (+) or Minus (-): The AA rating may be modified by the addition
of a plus or minus sign to show relative standing within the AA rating
category.
Commercial Paper Ratings
Moody's:
Commercial paper rated Prime by Moody's is based upon its evaluation
of many factors, including: (1) management of the issuer; (2) the issuer's
industry or industries and the speculative-type risks which may be
inherent in certain areas; (3) the issuer's products in relation to
competition and customer acceptance; (4) liquidity; (5) amount and quality
of long-term debt; (6) trend of earnings over a period of ten years; (7)
financial strength of a parent company and the relationships which exist
with the issue; and (8) recognition by the management of obligations which
may be present or may arise as a result of public interest questions and
preparations to meet such obligations. Relative differences in these
factors determine whether the issuer's commercial paper is rated Prime-l,
Prime-2, or Prime-3.
Prime-1 indicates a superior capacity for repayment of short-term
promissory obligations. Prime-l repayment capacity will normally be
evidenced by the following characteristics: (1) leading market positions
in well established industries; (2) high rates of return on funds
employed; (3) conservative capitalization structures with moderate
reliance on debt and ample asset protection; (4) broad margins in earnings
coverage of fixed financial charges and high internal cash generation; and
(5) well established access to a range of financial markets and assured
sources of alternative liquidity.
S&P:
Commercial paper rated by S&P has the following characteristics:
liquidity ratios are adequate to meet cash requirements. Long-term senior
debt is rated A or better. The issuer has access to at least two
additional channels of borrowing. Basic earnings and cash flow have an
upward trend with allowance made for unusual circumstances. Typically, the
issuer's industry is well established and the issuer has a strong position
within the industry. The reliability and quality of management are
unquestioned. Relative strength or weakness of the above factors determine
whether the issuer's commercial paper is rated A-l, A-2, or A-3.
A-1 This designation indicates that the degree of safety regarding
timely payment is either overwhelming or very strong. Those issues
determined to possess overwhelming safety characteristics are denoted with
a plus (+) sign designation.
A-2 Capacity for timely payment on issues with this designation is
strong. However, the relative degree of safety is not as high as for
issues designated A- 1.
Fitch Investors Service. Inc. ("Fitch"):
Commercial paper rated by Fitch reflects Fitch's current appraisal of
the degree of assurance of timely payment of such debt. An appraisal
results in the rating of an issuer's paper as F-l, F-2, F-3, or F-4.
F-1 This designation indicates that the commercial paper is
regarded as having the strongest degree of assurance for timely payment.
Duff and Phelps, Inc.:
Duff & Phelps' short-term ratings are consistent with the rating
criteria utilized by money market participants. The ratings apply to all
obligations with maturities of under one year, including commercial paper,
the uninsured portion of certificates of deposit, unsecured bank loans,
master notes, bankers acceptances, irrevocable letters of credit, and
current maturities of long-term debt. Asset-backed commercial paper is
also rated according to this scale.
Emphasis is placed on liquidity which is defined as not only cash
from operations, but also access to alternative sources of funds including
trade credit, bank lines, and the capital markets. An important
consideration is the level of an obligor's reliance on short-term funds on
an ongoing basis.
The distinguishing feature of Duff & Phelps' short-term ratings is
the refinement of the traditional '1' category. The majority of short-term
debt issuers carry the highest rating, yet quality differences exist
within that tier. As a consequence, Duff & Phelps has incorporated
gradations of '1+' (one plus) and '1-' (one minus) to assist investors in
recognizing those differences.
Duff 1+ Highest certainty of timely payment. Short-term liquidity,
including internal operating factors and/or access to alternative sources
of funds, is outstanding, and safety is just below risk-free U.S. Treasury
short-term obligations.
Duff 1 Very high certainty of timely payment. Liquidity factors are
excellent and supported by good fundamental protection factors. Risk
factors are minor.
Duff 1 High certainty of timely payment. Liquidity factors are
strong and supported by good fundamental protection factors. Risk factors
are very small.
IBCA, Inc.:
In addition to conducting a careful review of an institution's
reports and published figures, IBCA's analysts regularly visit the
companies for discussions with senior management. These meetings are
fundamental to the preparation of individual reports and ratings. To keep
abreast of any changes that may affect assessments, analysts maintain
contact throughout the year with the management of the companies they
cover.
IBCA's analysts speak the languages of the countries they cover,
which is essential to maximize the value of their meetings with management
and to properly analyze a company's written materials. They also have a
thorough knowledge of the laws and accounting practices that govern the
operations and reporting of companies within the various countries.
Often, in order to ensure a full understanding of their position,
companies entrust IBCA with confidential data. While these data cannot be
disclosed in reports, they are taken into account when assigning our
ratings. Before dispatch to subscribers, a draft of the report is
submitted to each company to permit correction of any factual errors and
to enable clarification of issues raised.
IBCA's Rating Committees meet at regular intervals to review all
ratings and to ensure that individual ratings are assigned consistently
for institutions in all the countries covered. Following the Committee
meetings, ratings are issued directly to subscribers. At the same time,
the company is informed of the ratings as a matter of courtesy, but not
for discussion.
A1+ Obligations supported by the highest capacity for timely
repayment.
A1 Obligations supported by a very strong capacity for timely
repayment.
<PAGE>
PORTFOLIO OF INVESTMENTS
.........................................................................
- - - -------------------------------------------------------------------------
DREYFUS DISCIPLINED STOCK FUND OCTOBER 31, 1994
- - - -------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<C> <S> <C>
COMMON STOCKS -- 96.9%
OIL & GAS -- 9.7%
60,800 Amoco Corporation $ 3,853,200
41,800 El Paso Natural Gas 1,301,025
18,100 Enron Corporation 585,988
114,200 EXXON Corporation 7,180,325
7,500 MAPCO, Inc. 409,688
22,500 Mobil Corporation 1,935,000
46,800 Phillips Petroleum Company 1,725,750
38,200 Pogo Producing Company 854,725
34,500 Royal Dutch Petroleum, N.V. 4,019,250
30,100 Sonat, Inc. 978,250
45,000 Ultramar Corporation 1,164,375
55,600 USX-Marathon Group 1,042,500
--------------
25,050,076
--------------
TELECOMMUNICATIONS -- 8.9%
126,000 AT&T Corporation 6,930,000
42,000 Bell Atlantic Corporation 2,199,750
42,700 BellSouth Corporation 2,273,775
46,200 ECI Telecom, Ltd. 895,125
17,000 HBO & Company 552,500
79,900 MCI Communications Corporation 1,837,700
51,500 PacificTelesis Group 1,628,688
66,400 Southwestern Bell Corporation 2,780,500
61,500 Sprint Corporation 2,006,438
10,800 Telefonos De Mexico S.A., ADR 595,350
32,725 US West, Inc. 1,231,278
--------------
22,931,104
--------------
ELECTRONICS -- 8.3%
12,600 Avnet, Inc. 472,500
135,400 General Electric Company 6,617,675
35,300 Corning, Inc. 1,200,200
40,200 General Instruments Corporation+ 1,346,700
20,900 Hewlett Packard Company 2,042,975
43,600 Intel Corporation 2,708,650
17,900 LSI Logic Corporation+ 760,750
</TABLE>
See Notes to Financial Statements. 7
.........................................................................
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
..............................................................................
- - - ------------------------------------------------------------------------------
DREYFUS DISCIPLINED STOCK FUND OCTOBER 31, 1994
- - - ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<C> <S> <C>
COMMON STOCKS (continued)
ELECTRONICS (CONTINUED)
55,200 Motorola, Inc. $ 3,249,900
16,900 Raychem Corporation 625,300
12,000 Raytheon Company 765,000
22,900 Thermo Electron Corporation+ 1,044,812
14,400 Tyco Laboratories, Inc. 694,800
--------------
21,529,262
--------------
DRUGS & COSMETICS -- 7.4%
19,700 Colgate Palmolive Company 1,201,700
25,500 Columbia/HCA Healthcare Corporation 1,061,437
15,700 Elan, PLC, ADR+ 578,938
11,500 Forest Laboratories, Inc. 529,000
21,800 Gillette Company 1,621,375
103,400 Merck & Company, Inc. 3,696,550
24,000 Mylan Labs, Inc. 672,000
32,700 Pfizer, Inc. 2,423,887
69,600 Procter & Gamble Company 4,350,000
28,900 Schering-Plough Corporation 2,059,125
12,300 Warner Lambert Company 937,875
--------------
19,131,887
--------------
MERCHANDISING -- 7.2%
53,000 Albertsons, Inc. 1,590,000
15,900 American Stores Company 431,288
15,400 Dayton-Hudson Corporation 1,193,500
37,800 Federated Department Stores, Inc.+ 784,350
33,500 Gap, Inc. 1,130,625
59,400 Limited (The), Inc. 1,091,475
55,400 May Department Stores Company 2,084,425
19,800 Newell Company 415,800
27,400 Nordstrom, Inc. 1,349,450
40,600 Penney ( J.C.) Company, Inc. 2,055,375
18,400 Safeway, Inc.+ 542,800
43,500 Sears Roebuck & Company 2,153,250
</TABLE>
8 See Notes to Financial Statements.
..............................................................................
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
..............................................................................
- - - ------------------------------------------------------------------------------
DREYFUS DISCIPLINED STOCK FUND OCTOBER 31, 1994
- - - ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<C> <S> <C>
COMMON STOCKS (continued)
MERCHANDISING (CONTINUED)
164,700 Wal-Mart Stores, Inc. $ 3,870,450
--------------
18,692,788
--------------
BANKING -- 5.9%
42,180 Banc One Corporation 1,217,947
62,000 Bank Of New York, Inc. 1,968,500
44,100 BankAmerica Corporation 1,918,350
57,200 Chase Manhattan Corporation 2,059,200
39,500 Citicorp 1,886,125
38,500 CoreStates Financial Corporation 996,187
12,600 First Bank System, Inc. 469,350
10,900 First Interstate BanCorporation 872,000
37,500 First Union Corporation 1,687,500
33,200 MBNA Corporation 888,100
36,500 PNC Financial Corporation 857,750
13,400 Standard Federal Bank 355,100
--------------
15,176,109
--------------
FOODS -- 5.7%
86,680 Archer Daniels Midland 2,481,215
16,100 Campbell Soup Company 664,125
95,800 Coca-Cola Company 4,813,950
33,800 ConAgra, Inc. 1,052,025
35,000 IBP, Inc. 1,194,375
67,900 PepsiCo, Inc. 2,376,500
35,400 Tyson Foods, Inc., Class A 823,050
11,600 Unilever, N.V. 1,377,500
--------------
14,782,740
--------------
OFFICE EQUIPMENT -- 5.0%
29,100 Adaptec, Inc.+ 676,575
22,800 Computer Associates International, Inc. 1,131,450
11,700 Compuware Corporation+ 457,763
14,800 Dell Computer+ 658,600
42,300 International Business Machines 3,151,350
33,200 Microsoft Corporation 2,091,600
</TABLE>
See Notes to Financial Statements. 9
................................................................................
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
.............................................................................
- - - -----------------------------------------------------------------------------
DREYFUS DISCIPLINED STOCK FUND OCTOBER 31, 1994
- - - -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<C> <S> <C>
COMMON STOCKS (continued)
OFFICE EQUIPMENT (CONTINUED)
20,300 Reynolds & Reynolds Company, Class A $ 504,963
20,100 Stratus Computer, Inc.+ 748,725
29,600 Sun Microsystems, Inc.+ 969,400
45,300 Tandem Computers, Inc.+ 798,413
16,200 Xerox Corporation 1,660,500
--------------
12,849,339
--------------
CHEMICALS & FERTILIZERS -- 4.2%
70,700 du Pont (E.I.) de Nemours & Company 4,215,487
21,000 Eastman Chemical Corporation 1,134,000
23,200 Engelhard Corporation 545,200
33,900 Lyondell Petrochemical Company 928,012
20,200 Monsanto Company 1,537,725
55,300 Praxair, Inc. 1,278,813
40,400 WMX Technologies, Inc. 1,186,750
--------------
10,825,987
--------------
MEDICAL SERVICES & SUPPLIES -- 4.1%
76,800 Abbott Laboratories 2,380,800
10,000 Amgen, Inc.+ 557,500
7,600 Genentech, Inc.+ 385,700
22,000 Healthtrust, Inc. (The Hospital Company)+ 770,000
56,600 Johnson & Johnson 3,091,775
16,700 Medtronic, Inc. 870,488
40,400 National Medical Enterprises, Inc.+ 585,800
20,100 United Healthcare Corporation 1,060,275
21,200 Value Health, Inc.+ 821,500
--------------
10,523,838
--------------
PUBLIC UTILITY -- 3.6%
36,000 CMS Energy Corporation 828,000
46,600 Consolidated Edison Company, Inc. 1,159,175
33,300 DQE, Inc. 1,007,325
65,400 Entergy Corporation 1,528,725
24,400 FPL Group, Inc. 808,250
64,800 Peco Energy Company 1,660,500
</TABLE>
10 See Notes to Financial Statements.
................................................................................
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
..............................................................................
- - - ------------------------------------------------------------------------------
DREYFUS DISCIPLINED STOCK FUND OCTOBER 31, 1994
- - - ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<C> <S> <C>
COMMON STOCKS (continued)
PUBLIC UTILITY (CONTINUED)
121,500 Southern Company $ 2,399,625
--------------
9,391,600
--------------
AUTOMOTIVE -- 3.3%
58,700 Chrysler Corporation 2,861,625
17,300 Echlin, Inc. 531,975
45,800 Ford Motor Company 1,351,100
36,200 General Motors Corporation 1,429,900
22,100 General Motors Corporation, Class E 809,412
28,600 General Motors Corporation, Class H 1,029,600
16,200 Superior Industries International, Inc. 477,900
-------------
8,491,512
--------------
BUILDING & CONSTRUCTION -- 2.5%
23,500 Georgia Pacific Corporation 1,736,062
29,100 Louisiana-Pacific Corporation 891,187
46,600 PPG Industries, Inc. 1,898,950
24,000 Sherwin Williams Company 783,000
28,500 Weyerhaeuser Company 1,118,625
--------------
6,427,824
--------------
FINANCE -- 2.5%
31,100 Dean Witter, Discover & Company 1,201,237
22,300 Federal National Mortgage Association 1,694,800
23,384 KeyCorp 669,367
27,900 PaineWebber Group, Inc. 425,475
24,400 Reuters Holdings, PLC, ADR 1,149,850
36,200 Travelers, Inc. 1,257,950
--------------
6,398,679
--------------
INSURANCE -- 2.3%
44,600 American General Corporation 1,226,500
10,600 American International Group, Inc. 992,425
12,800 Chubb Corporation (The) 894,400
23,100 Old Republic International Corporation 470,662
20,100 Providian Corporation 638,175
</TABLE>
See Notes to Financial Statements. 11
.............................................................................
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
..............................................................................
- - - ------------------------------------------------------------------------------
DREYFUS DISCIPLINED STOCK FUND OCTOBER 31, 1994
- - - ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<C> <S> <C>
COMMON STOCKS (continued)
INSURANCE (CONTINUED)
20,600 SAFECO Corporation $ 1,032,575
17,000 St. Paul Companies 741,625
--------------
5,996,362
--------------
PAPER & PRINTING -- 2.1%
25,300 Gannett Company, Inc. 1,214,400
30,700 International Paper Company 2,287,150
24,600 News Corporation, Ltd., ADR 1,202,325
13,400 Tribune Company 705,175
--------------
5,409,050
--------------
TOBACCO & VENDING -- 2.0%
83,000 Philip Morris Companies, Inc. 5,083,750
--------------
MULTI-INDUSTRY -- 1.8%
73,200 Horsham Corporation, Quebec, Subvoting 1,134,600
13,100 ITT Corporation 1,156,075
26,500 Textron, Inc. 1,351,500
14,200 United Technologies 894,600
--------------
4,536,775
--------------
AEROSPACE & AVIATION -- 1.6%
14,800 Lockheed Corporation 1,065,600
12,500 McDonnell Douglas Corporation 1,762,500
19,000 Northrop Corporation 833,625
13,000 Sunstrand Corporation 591,500
--------------
4,253,225
--------------
MACHINERY & HEAVY EQUIPMENT -- 1.6%
26,500 Caterpillar, Inc. 1,583,375
13,500 Deere & Company 968,625
11,700 Lam Research Corporation+ 526,500
12,500 Magna International, Class A 443,750
18,100 Varity Corporation 692,325
--------------
4,214,575
--------------
</TABLE>
12 See Notes to Financial Statements.
..............................................................................
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
..............................................................................
- - - ------------------------------------------------------------------------------
DREYFUS DISCIPLINED STOCK FUND OCTOBER 31, 1994
- - - ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<C> <S> <C>
COMMON STOCKS (continued)
HOTEL & RESTAURANT -- 1.4%
57,600 Brinker International, Inc. $ 1,332,000
38,200 Morrison Restaurants, Inc. 1,117,350
22,300 Outback Steakhouse, Inc. 688,512
24,000 Sbarro, Inc. 597,000
--------------
3,734,862
--------------
METALS & MINING -- 1.4%
6,200 Aluminum Company Of America 528,550
49,900 American Barrick Resources Corporation 1,191,363
26,800 Inland Steel Industries, Inc.+ 958,100
13,600 Phelps Dodge Corporation 834,700
--------------
3,512,713
--------------
BROADCASTING & ENTERTAINMENT -- 1.3%
24,100 Acclaim Entertainment, Inc.+ 418,737
21,600 Capital Cities ABC, Inc. 1,795,500
9,065 CBS, Inc. 542,767
15,000 PolyGram, N.V. 660,000
--------------
3,417,004
--------------
RAILROADS -- 1.1%
13,500 Burlington Northern, Inc. 673,313
32,400 Conrail, Inc. 1,761,750
16,700 Illinois Central Corporation 536,488
--------------
2,971,551
--------------
BEVERAGES -- 0.8%
15,900 Anheuser-Busch Companies 806,925
36,800 Seagram Company, Ltd. 1,136,200
--------------
1,943,125
--------------
AIR TRANSPORT -- 0.5%
14,600 AMR Corporation+ 804,825
9,400 Federal Express Corporation+ 571,050
--------------
1,375,875
--------------
</TABLE>
See Notes to Financial Statements. 13
..............................................................................
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
..............................................................................
- - - ------------------------------------------------------------------------------
DREYFUS DISCIPLINED STOCK FUND OCTOBER 31, 1994
- - - ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<C> <S> <C>
COMMON STOCKS (continued)
TIRE & RUBBER -- 0.4%
32,100 Goodyear Tire & Rubber Company $ 1,123,500
------------
TRUCKING -- 0.3%
15,800 Consolidated Freightways, Inc. 353,525
18,300 Ryder System 430,050
------------
783,575
------------
TOTAL COMMON STOCKS
(Cost $245,156,990) 250,558,687
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<C> <S> <C>
REPURCHASE AGREEMENT -- 2.3%
(Cost $5,927,975)
$ 5,927,975 Agreement with Barclays de Zoete Wedd, 4.780%
dated 10/31/94, to be repurchased at
$5,928,762 on 11/1/94, collateralized by
$5,885,000 U.S. Treasury Notes, 5.875% due
5/15/95 5,927,975
------------
TOTAL INVESTMENTS
(Cost $251,084,965*) 99.2% 256,486,662
OTHER ASSETS AND LIABILITIES (NET) 0.8 2,162,648
----- ------------
NET ASSETS 100.0% $258,649,310
===== ============
- - - --------------------------------------------------------------------------------
<FN>
* Aggregate cost for Federal tax purposes.
+ Non-income producing security.
</TABLE>
14 See Notes to Financial Statements.
................................................................................
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
................................................................................
- - - --------------------------------------------------------------------------------
DREYFUS DISCIPLINED STOCK FUND OCTOBER 31, 1994
- - - --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
Investments, at value (Cost $251,084,965) (Note 1)
See accompanying schedule $256,486,662
Cash 15,010
Receivable for investment securities sold 7,544,090
Receivable for Fund shares sold 3,096,231
Dividends and interest receivable 398,257
Receivable from investment adviser (Note 2) 56,646
------------
TOTAL ASSETS 267,596,896
============
LIABILITIES:
Payable for investment securities purchased $8,373,143
Payable for Fund shares redeemed 340,952
Investment management fee payable (Note 2) 206,120
Accrued Directors' fees and expenses (Note 2) 26,719
Distribution fee payable (Note 3) 652
----------
TOTAL LIABILITIES 8,947,586
------------
NET ASSETS $258,649,310
============
NET ASSETS consist of:
Undistributed net investment income $ 1,030,549
Accumulated net realized gain on investments sold 6,361,982
Unrealized appreciation of investments 5,401,697
Par value 13,949
Paid-in capital in excess of par value 245,841,133
------------
TOTAL NET ASSETS $258,649,310
============
NET ASSET VALUE
INVESTOR SHARES:
Net asset value, offering and redemption price per
share ($19,579,827 / 1,056,307 shares of capital
stock outstanding) $ 18.54
============
CLASS R SHARES:
Net asset value, offering and redemption price per
share ($239,069,483 / 12,892,635 shares of
capital stock outstanding) $ 18.54
============
</TABLE>
See Notes to Financial Statements. 15
..............................................................................
<PAGE>
STATEMENT OF OPERATIONS
................................................................................
- - - --------------------------------------------------------------------------------
DREYFUS DISCIPLINED STOCK FUND
- - - --------------------------------------------------------------------------------
FOR THE YEAR ENDED OCTOBER 31, 1994
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends $ 4,817,679
Interest 381,322
-----------
TOTAL INVESTMENT INCOME 5,199,001
-----------
EXPENSES:
Investment management fee (Note 2) $1,145,288
Investment advisory fee (Note 2) 747,134
Custodian fees (Note 2) 40,029
Transfer agent fees (Note 2) 35,719
Directors' fees and expenses (Note 2) 29,319
Administration fee (Note 2) 23,663
Distribution fee (Note 3) 10,732
Legal and audit fees 9,381
Other 19,728
Expenses reimbursed by investment adviser
(Note 2) (131,810)
----------
TOTAL EXPENSES 1,929,183
-----------
NET INVESTMENT INCOME 3,269,818
-----------
REALIZED AND UNREALIZED GAIN/(LOSS) ON
INVESTMENTS (Notes 1 and 4):
Net realized gain on investments during
the year 7,508,638
-----------
Net change in unrealized depreciation of
investments during the year (2,678,128)
-----------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS 4,830,510
-----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS 8,100,328
===========
</TABLE>
16 See Notes to Financial Statements.
...............................................................................
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
................................................................................
- - - --------------------------------------------------------------------------------
DREYFUS DISCIPLINED STOCK FUND
- - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR YEAR
ENDED ENDED
10/31/94 10/31/93
<S> <C> <C>
Net investment income $ 3,269,818 $ 1,159,443
Net realized gain on investments sold during
the year 7,508,638 3,766,992
Net unrealized appreciation/(depreciation) on
investments during the year (2,678,128) 5,205,042
------------ -----------
Net increase in net assets resulting from
operations 8,100,328 10,131,477
Distributions to shareholders from net
investment income:
Class R Shares (2,567,476) (1,004,702)
Distribution to shareholders from net realized
gain on investments:
Class R Shares (4,454,514) (2,893,531)
Net increase in net assets from Fund share
transactions (Note 5):
Investor Shares 19,054,127 --
Class R Shares 145,594,026 42,979,499
------------ -----------
Net increase in net assets 165,694,596 49,212,743
NET ASSETS:
Beginning of year 92,954,714 43,741,971
------------- -----------
End of year (including undistributed net
investment income of $1,030,549 and $360,102,
respectively) $258,649,310 $92,954,714
============ ===========
</TABLE>
See Notes to Financial Statements. 17
................................................................................
<PAGE>
FINANCIAL HIGHLIGHTS
.............................................................................
- - - -----------------------------------------------------------------------------
DREYFUS DISCIPLINED STOCK FUND
- - - -----------------------------------------------------------------------------
FOR AN INVESTOR SHARE OUTSTANDING THROUGHOUT THE PERIOD.
Please refer to page 5 of the Prospectus dated March 1, 1995.
18 See Notes to Financial Statements.
...............................................................................
<PAGE>
[This Page Intentionally Left Blank]
19
..............................................................................
<PAGE>
FINANCIAL HIGHLIGHTS
..............................................................................
- - - ------------------------------------------------------------------------------
DREYFUS DISCIPLINED STOCK FUND
- - - ------------------------------------------------------------------------------
Please refer to page 5 of the Prospectus dated March 1, 1995.
20 See Notes to Financial Statements.
................................................................................
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
........................................................................
- - - ------------------------------------------------------------------------
- - - ------------------------------------------------------------------------
Please refer to page 5 of the Prospectus dated March 1, 1995.
- - - ------------------------------------------------------------------------
See Notes to Financial Statements. 21
........................................................................
<PAGE>
NOTES TO FINANCIAL STATEMENTS
................................................................................
1. SIGNIFICANT ACCOUNTING POLICIES
The Dreyfus/Laurel Funds, Inc. (the "Investment Company"), The Dreyfus/Laurel
Funds Trust, The Dreyfus/Laurel Tax-Free Municipal Funds and The
Dreyfus/Laurel Investment Series are all registered open-end management
investment companies that are now part of The Dreyfus Family of Funds. The
Investment Company is a series mutual fund with 19 separate investment
portfolios. These financial statements report on the Dreyfus Disciplined
Stock Fund (the "Fund"). The Investment Company was incorporated on August 6,
1987 as a Maryland corporation and is registered with the Securities and
Exchange Commission under the Investment Company Act of 1940, as amended (the
"1940 Act"), as a diversified open-end management investment company. The
Fund commenced operations on December 31, 1987. The Fund currently offers two
classes of shares: Investor Shares and Class R Shares (effective October 17,
1994, the Trust Shares were redesignated Class R Shares). Investor Shares are
sold primarily to retail investors and bear a distribution fee. Class R
Shares are sold primarily to bank trust departments and other financial
service providers acting on behalf of customers having a qualified trust or
investment account or relationship at such institutions and bear no
distribution fee. Each class of shares has identical rights and privileges,
except with respect to distribution fees and voting rights on matters
affecting a single class. The following is a summary of significant
accounting policies consistently followed by the Fund in the preparation of
its financial statements in accordance with generally accepted accounting
principals.
(A) PORTFOLIO VALUATION
Investments in securities traded on a national securities exchange are valued
at the last reported sales price or, in the absence of a recorded sale, at
the mean of the latest bid and asked prices. Over-the-counter securities are
valued at the mean of the latest bid and asked prices. When market quotations
are not readily available, securities are valued at fair value as determined
in good faith by the Board of Directors. Bonds are valued through valuations
obtained from a commercial pricing service or at the most recent mean of the
bid and asked prices provided by investment dealers in accordance with
procedures established by the Board of Directors. Debt securities with
maturities of 60 days or less from the valuation day are valued on the basis
of amortized cost.
(B) REPURCHASE AGREEMENTS
The Fund may engage in repurchase agreement transactions. Under the terms of
a typical repurchase agreement, the Fund, through its custodian, takes
possession of an underlying debt obligation, subject to an obligation of the
seller to repurchase, and the Fund to resell, the obligation at an
agreed-upon price and time, thereby determining the yield during the Fund's
holding period. This arrangement results in a fixed rate of return that is
not subject to market fluctuations during the Fund's holding period. The
value of the collateral is at least equal at all times to the total amount of
the repurchase obligations, including interest. In the event of counterparty
default, the Fund has the right to use the
22
................................................................................
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
................................................................................
collateral to offset losses incurred. There is potential loss to the Fund in
the event the Fund is delayed or prevented from exercising its rights to
dispose of the collateral securities, including the risk of a possible
decline in the value of the underlying securities during the period while the
Fund seeks to assert its rights. The Fund's investment manager, acting under
the supervision of the Board of Directors, reviews the value of the
collateral and the creditworthiness of those banks and dealers with which the
Fund enters into repurchase agreements to evaluate potential risks.
(C) SECURITY TRANSACTIONS AND INVESTMENT INCOME
Securities transactions are recorded as of the trade date. Dividend income is
recorded on the ex-dividend date. Interest income is recorded on the accrual
basis. Realized gains and losses from securities transactions are recorded on
the identified cost basis. Investment income and realized and unrealized
gains and losses are allocated based upon relative average daily net assets
of each class.
(D) EXPENSE ALLOCATION
Expenses of the Fund not directly attributable to the operations of any class
of shares are pro rated between the classes based upon the relative average
daily net assets of each class. Distribution expense is directly attributable
to a particular class of shares and is charged only to that class'
operations.
(E) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income, if any, are determined on a class
level, and are declared and paid quarterly. Distributions from net realized
capital gains, if any, are determined on a Fund level and are declared and
paid annually. Additional distributions of net investment income and capital
gains for the Fund may be made at the discretion of the Board of Directors in
order to avoid the 4% nondeductible federal excise tax. Income distributions
and capital gain distributions on a Fund level are determined in accordance
with income tax regulations, which may differ from generally accepted
accounting principles. These differences are primarily due to differing
treatments of income and gains on various investment securities held by the
Fund, timing differences and differing characterization of distributions made
by the Fund as a whole.
(F) FEDERAL INCOME TAXES
The Fund intends to qualify as a regulated investment company by complying
with the requirements of the Internal Revenue Code applicable to regulated
investment companies and by distributing substantially all of its taxable
income to its shareholders. Therefore, no federal income tax provision is
required.
2. INVESTMENT MANAGEMENT FEE, DIRECTORS' FEES AND OTHER RELATED PARTY
TRANSACTIONS
Effective as of October 17, 1994, the Investment Company's investment
management agreement with Mellon Bank, N.A.("Mellon Bank"), a wholly-owned
subsidiary of Mellon
23
................................................................................
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
................................................................................
Bank Corporation, was transferred to The Dreyfus Corporation (the "Manager"),
a wholly-owned subsidiary of Mellon Bank. The Manager provides, or arranges
for one or more third parties to provide, investment advisory,
administrative, custody, fund accounting and transfer agency services to the
Investment Company. The Manager also directs the investments of the Fund in
accordance with its investment objective, policies and limitations. For these
services, the Fund pays the Manager a fee, calculated daily and paid monthly,
at the annual rate of 0.90% of the value of the Fund's average daily net
assets. Out of its fee, the Manager pays all of the expenses of the Fund
except brokerage, taxes, interest, Rule 12b-1 distribution fees and expenses,
fees and expenses of non-interested Directors (including counsel fees) and
extraordinary expenses. In addition, the Manager is required to reduce its
fee in an amount equal to the Fund's allocable portion of fees and expenses
of the non-interested Directors (including counsel).
For the period from April 4, 1994 to October 16, 1994, Mellon Bank served as
the Investment Company's investment manager pursuant to the investment
management agreement described above. Prior to April 4, 1994, the Investment
Company had individual contracts with Mellon Bank to provide custody,
accounting, and transfer agency services to the Fund. Effective April 4,
1994, custody, accounting, and transfer agency services are covered by the
investment management agreement described above.
Prior to April 4, 1994, the Investment Company had an investment advisory
agreement under which the Fund paid Mellon Bank an annual fee of 0.90% of the
value of the Fund's average daily net assets for investment advisory
services. For the period from November 1, 1993 through April 3, 1994, Mellon
Bank, as investment adviser, voluntarily agreed to reimburse expenses in the
amount of $131,810.
Prior to September 23, 1994, Frank Russell Investment Management Company (the
"Administrator") served as the Fund's administrator and provided, pursuant to
an administration agreement, various administrative and corporate secretarial
services to the Fund. For the period from April 4, 1994 to September 23,
1994, Mellon Bank, as investment manager, paid the Administrator's fee out of
the management fee described above. Prior to April 4, 1994, the Investment
Company paid the Administrator the following fees for the services supplied
by the Administrator pursuant to the administration agreement: (i) an annual
fee of $500,000; (ii) an annual asset-based fee, payable monthly on a pro
rata basis, based on the following percentages of the aggregate average daily
net assets of the Investment Company: up to and including $10 billion --
0.01%, over $10 billion -- 0.005%; and (iii) all start-up costs (including
out-of-pocket, blue sky registration and personnel costs) for new portfolios
(prior to and for 6 months following commencement of operations).
For the year ended October 31, 1994, the Fund incurred total brokerage
commissions of $620,361, of which $29,235 was paid to InvestNet Corporation,
a subsidiary of Mellon Bank Corporation.
24
................................................................................
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
................................................................................
Prior to April 4, 1994, the Investment Company had a contract with Russell
Fund Distributors, Inc. to serve as distributor of its shares. Effective
April 4, 1994 through October 16, 1994, Funds Distributor, Inc. served as
distributor of the Investment Company's shares. Effective as of October 17,
1994, Premier Mutual Fund Services, Inc. ("Premier") serves as the Investment
Company's distributor. Premier also serves as the Investment Company's
sub-administrator and, pursuant to a sub-administration agreement with the
Manager, provides various administrative and corporate secretarial services
to the Investment Company.
No officer or employee of Premier (or of any parent, subsidiary or affiliate
thereof) receives any compensation from The Dreyfus/Laurel Funds, Inc., The
Dreyfus/Laurel Funds Trust, The Dreyfus/Laurel Tax Free Municipal Funds or
The Dreyfus/Laurel Investment Series (collectively, "The Dreyfus/Laurel
Funds") for serving as an officer, Director or Trustee of The Dreyfus/Laurel
Funds. In addition, no officer or employee of the Manager (or of any parent,
subsidiary or affiliate thereof) serves as an officer, Director or Trustee of
the Dreyfus/Laurel Funds. The Dreyfus/Laurel Funds pay each Director or
Trustee who is not an officer or employee of Premier (or any parent,
subsidiary or affiliate thereof), $27,000 per annum, $1,000 for each Board
meeting attended and $750 for each Audit Committee meeting attended, and
reimburse each Director or Trustee for travel and out-of-pocket expenses.
Prior to April 4, 1994, the Investment Company paid each Director $15,000 per
annum plus reimbursement for travel and out-of-pocket expenses.
3. DISTRIBUTION PLAN
The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b-1
under the 1940 Act relating to its Investor Shares. Under the Plan, the Fund
may pay annually up to 0.25% of the value of the average daily net assets
attributable to its Investor Shares to compensate Premier and Dreyfus Service
Corporation, an affiliate of the Manager, for shareholder servicing
activities and Premier for activities primarily intended to result in the
sale of Investor Shares. Class R Shares bear no distribution fee. Prior to
April 4, 1994, the Fund had a distribution and shareholder services plan
under which the Fund was authorized to spend annually up to 0.35% of its
average daily net assets on distribution and shareholder servicing expenses.
Under its terms, the Plan shall remain in effect from year to year, provided
such continuance is approved annually by a vote of a majority of those
Directors who are not "interested persons" of the Investment Company and who
have no direct or indirect financial interest in the operation of the Plan or
in any agreement related to the Plan.
25
................................................................................
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
................................................................................
4. SECURITIES TRANSACTIONS
The cost of purchases and proceeds from sales of securities, excluding
short-term investments and U.S. government securities, for the year ended
October 31, 1994 were $370,206,463 and $214,121,742, respectively.
At October 31, 1994, aggregate gross unrealized appreciation for all
securities in which there was an excess of value over tax cost and aggregate
gross unrealized depreciation for all securities in which there was an excess
of tax cost over value were $16,659,531 and $11,257,834, respectively.
<TABLE>
<CAPTION>
5. SHARES OF CAPITAL STOCK
The Investment Company has authority to issue 25 billion shares of capital
stock with a par value of $.001. The table below summarizes the transactions
in Fund shares for the year or period indicated:
- - - -------------------------------------------------------------------------------
DREYFUS DISCIPLINED STOCK FUND
- - - -------------------------------------------------------------------------------
PERIOD ENDED
October 31, 1994*
SHARES AMOUNT
<S> <C> <C>
- - - --------------------------------------------------------------------------------
INVESTOR SHARES:
Sold 1,098,681 $19,823,569
Issued as reinvestment of
dividends and
distributions 575 10,293
Redeemed (42,949) (779,735)
--------- -----------
Net increase 1,056,307 $19,054,127
========= ===========
</TABLE>
- - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
October 31, 1994* October 31, 1993
SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
- - - --------------------------------------------------------------------------------
CLASS R SHARES:
Sold 10,921,206 $200,565,074 2,656,025 $47,053,656
Issued as reinvestment of
dividends and
distributions 308,851 5,583,366 166,982 2,860,596
Redeemed (3,310,422) (60,554,414) (391,193) (6,934,753)
---------- ----------- -------- ----------
Net increase 7,919,635 $145,594,026 2,431,814 $42,979,499
========== ============ ========= ===========
- - - --------------------------------------------------------------------------------
<FN>
* The Fund commenced selling Investor Shares on April 6, 1994. Those shares
outstanding prior to April 4, 1994 were designated Trust Shares. Effective as
of October 17, 1994, the Fund's Trust Shares were redesignated Class R
Shares.
</TABLE>
26
................................................................................
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
................................................................................
6. DIVIDENDS
On November 2, 1994, the Board of Directors declared a dividend from net
investment income for the Investor and Class R Shares in the amount of
$0.0631 and $0.0748 per share, respectively, payable on November 9, 1994 to
shareholders of record on November 2, 1994.
27
................................................................................
<PAGE>
INDEPENDENT AUDITORS' REPORT
................................................................................
The Board of Directors and Shareholders
The Dreyfus/Laurel Funds, Inc.
We have audited the accompanying statement of assets and liabilities of the
Dreyfus Disciplined Stock Fund of The Dreyfus/Laurel Funds, Inc., including
the portfolio of investments, as of October 31, 1994, and the related
statement of operations for the year then ended, the statement of changes in
net assets for each of the two years in the period then ended, and the
financial highlights for each of the periods indicated herein. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of October 31, 1994, by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of The
Dreyfus Disciplined Stock Fund of The Dreyfus/Laurel Funds, Inc., as of
October 31, 1994, the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period then ended,
and the financial highlights for each of the periods indicated herein, in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Pittsburgh, Pennsylvania
December 9, 1994
28
................................................................................
<PAGE>
<PAGE>
PORTFOLIO OF INVESTMENTS
...............................................................................
<TABLE>
- - - ------------------------------------------------------------------------------------
DREYFUS DISCIPLINED MIDCAP STOCK FUND
OCTOBER 31, 1994
- - - ------------------------------------------------------------------------------------
<CAPTION>
VALUE
SHARES (NOTE 1)
<C> <S> <C>
COMMON STOCKS -- 93.6%
FINANCIAL SERVICES -- 16.6%
3,500 Allied Group, Inc. $ 102,375
2,789 American National Insurance Company 131,083
9,360 Bank of New York Company, Inc. 297,180
3,700 BayBanks, Inc. 213,675
3,878 Capital Re Corporation 85,316
4,900 Crestar Financial Corporation 202,125
3,200 Dean Witter, Discover & Company 123,600
3,800 Equifax, Inc. 110,675
4,800 First Bank System, Inc. 178,800
3,994 First Chicago Corporation 195,706
2,586 First Interstate Bancorp 206,880
3,500 Franklin Resources, Inc. 143,062
3,900 Fremont General Corporation 96,037
4,800 Household International Corporation 168,600
5,500 MBNA Corporation 147,125
6,800 Midlantic Corporation 190,400
1,791 Phoenix Re Corporation 44,103
2,600 Provident Bancorp, Inc. 87,100
3,400 Regions Financial Corporation 107,738
2,500 Transamerica Corporation 122,813
2,623 United Companies Financial Corporation 87,215
-----------
3,041,608
-----------
BASIC INDUSTRIES -- 12.5%
1,800 Alumax, Inc.+ 53,550
4,000 BMC West Corporation+ 67,500
2,600 Briggs & Stratton Corporation 180,700
2,346 Cleveland-Cliffs, Inc. 89,441
1,800 Cyprus Minerals, Inc. 47,925
3,000 Eastman Chemical 162,000
2,100 Fleetwood Enterprises, Inc. 48,300
2,300 Greenfield Industries, Inc. 54,625
4,400 Homestake Mining Company 82,500
9,000 Jefferson Smurfit Corporation+ 146,250
3,700 Litton Industries, Inc. 135,975
3,000 Louisiana Pacific Corporation 91,875
3,300 Olin Corporation 181,088
</TABLE>
See Notes to Financial Statements. 7
................................................................................
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
...............................................................................
<TABLE>
- - - -----------------------------------------------------------------------------------
DREYFUS DISCIPLINED MIDCAP STOCK FUND OCTOBER 31, 1994
- - - -----------------------------------------------------------------------------------
<CAPTION>
VALUE
SHARES (NOTE 1)
<C> <S> <C>
COMMON STOCKS (continued)
BASIC INDUSTRIES (CONTINUED)
7,800 Praxair, Inc. $ 180,375
2,216 Sherwin-Williams Company 72,297
6,000 Smith International, Inc.+ 100,500
2,500 TriMas Corporation 57,813
5,200 Trinova Corporation 182,000
6,000 U.S. Can Corporation+ 94,500
6,141 Wellman, Inc. 201,885
2,400 Western Waste Industries+ 42,000
-----------
2,273,099
-----------
CONSUMER SERVICES -- 10.8%
3,000 American Stores Company 81,375
2,100 Ann Taylor Stores Corporation+ 87,150
1,847 A. O. Smith Corporation 45,021
3,200 Caldor Corporation+ 91,600
4,700 Carson Pirie Scott & Company+ 90,475
6,500 Circuit City Stores, Inc. 165,750
6,300 Coors (Adolph) Company, Class B 108,675
2,000 DeVry, Inc.+ 59,000
4,200 Manpower, Inc. 122,325
1,400 Michaels Stores, Inc.+ 56,788
6,372 Morrison Restaurants, Inc. 186,381
1,900 Nordstrom, Inc. 93,575
4,832 Outback Steakhouse, Inc.+ 149,188
5,500 Pittston Services Group 151,938
3,200 Players International, Inc.+ 72,000
2,800 Ralston Purina Company 119,000
2,800 Reebok International, Ltd. 111,650
2,000 Royal Caribbean Cruises, Ltd., ADR 59,500
2,700 Scientific Games Holdings Corporation+ 118,800
-----------
1,970,191
-----------
UTILITIES -- 10.8%
13,298 Baltimore Gas & Electric Company 309,178
7,554 Boston Edison Company 176,575
7,018 Commonwealth Energy Systems 264,929
6,021 DQE, Inc. 182,135
9,604 General Public Utilities Corporation 247,303
</TABLE>
8 See Notes to Financial Statements.
...............................................................................
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
................................................................................
<TABLE>
- - - ----------------------------------------------------------------------------------
DREYFUS DISCIPLINED MIDCAP STOCK FUND OCTOBER 31, 1994
- - - ----------------------------------------------------------------------------------
<CAPTION>
VALUE
SHARES (NOTE 1)
<C> <S> <C>
COMMON STOCKS (continued)
UTILITIES (CONTINUED)
8,740 LDDS Communications, Inc.+ $ 205,390
2,000 MCN Corporation 76,000
12,374 Portland General Corporation 214,998
6,800 SCANA Corporation 293,250
-----------
1,969,758
-----------
TECHNOLOGY -- 10.8%
6,500 Augat, Inc. 129,187
5,400 COMPAQ Computer Corporation+ 216,675
1,600 Compuware Corporation+ 62,600
249 Harris Computer Systems+ 3,486
3,450 Keane, Inc.+ 70,725
4,000 Komag, Inc.+ 99,437
4,802 Loral Corporation 190,279
3,000 Micron Technology, Inc. 118,875
3,500 Northrop Corporation 153,563
2,600 Novellus Systems, Inc.+ 141,700
5,526 Seagate Technology+ 140,222
6,000 Sequent Computer Systems, Inc.+ 114,000
4,500 Stratus Computer, Inc.+ 167,625
5,900 Sun Microsystems, Inc.+ 193,225
2,200 Sybase, Inc.+ 115,225
1,200 Teradyne, Inc.+ 39,450
-----------
1,956,274
-----------
HEALTH CARE/PHARMACEUTICALS -- 7.4%
824 American Cyanamid Company 81,370
2,200 Becton, Dickinson & Company 103,950
3,750 Cardinal Health, Inc. 175,312
3,006 Columbia/HCA Healthcare Corporation 125,125
2,100 Elan Plc Ireland, ADR+ 77,437
6,900 Healthcare Compare Corporation+ 192,337
5,300 Health Management Associates, Inc., Class A 137,800
4,400 Mallinckrodt Group, Inc. 133,650
2,000 Medtronic, Inc. 104,250
2,600 Mylan Labs, Inc. 72,800
800 Pacificare Health Systems, Inc.+ 59,600
</TABLE>
See Notes to Financial Statements. 9
................................................................................
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
...............................................................................
<TABLE>
- - - ----------------------------------------------------------------------------------
DREYFUS DISCIPLINED MIDCAP STOCK FUND OCTOBER 31, 1994
- - - ----------------------------------------------------------------------------------
<CAPTION>
VALUE
SHARES (NOTE 1)
<C> <S> <C>
COMMON STOCKS (continued)
HEALTH CARE/PHARMACEUTICALS (CONTINUED)
4,200 Patterson Dental Company+ $ 79,800
-----------
1,343,431
-----------
ENERGY -- 6.4%
1,570 Ashland Coal, Inc. 47,885
3,800 Helmerich & Payne, Inc. 118,750
3,200 LTV Corporation+ 61,200
1,551 Murphy Oil Corporation 73,866
5,200 National Fuel Gas Company 154,700
5,000 Peco Energy Company 128,125
6,200 Pogo Producing Company 138,725
3,694 Questar Corporation 106,203
5,894 UltraMar Corporation 152,507
6,095 Williams Companies, Inc. 176,755
-----------
1,158,716
-----------
COMMUNICATIONS -- 6.0%
6,800 ALC Communications Corporation+ 257,550
1,694 Andrew Corporation+ 87,664
4,284 DSC Communications Corporation+ 131,733
2,586 General Instrument Corporation+ 86,631
4,987 Harris Corporation 213,818
5,500 Intervoice, Inc.+ 85,938
4,278 Sprint Corporation 139,570
1,740 Tellabs, Inc.+ 84,825
-----------
1,087,729
-----------
CONSUMER BASICS -- 3.0%
2,200 Alberto-Culver Company, Class B 55,825
3,940 Lancaster Colony Corporation 136,915
1,995 Thorn Apple Valley, Inc. 55,860
6,610 Tyson Foods, Inc., Class A 153,683
9,000 Whitman Corporation 148,500
-----------
550,783
-----------
GENERAL BUSINESS -- 3.0%
5,803 Acclaim Entertainment, Inc.+ 100,822
6,556 Bowne & Company, Inc. 104,896
</TABLE>
10 See Notes to Financial Statements.
................................................................................
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
...............................................................................
<TABLE>
- - - ----------------------------------------------------------------------------------
DREYFUS DISCIPLINED MIDCAP STOCK FUND OCTOBER 31, 1994
- - - ----------------------------------------------------------------------------------
<CAPTION>
VALUE
SHARES (NOTE 1)
<C> <S> <C>
COMMON STOCKS (continued)
GENERAL BUSINESS (CONTINUED)
2,401 King World Productions, Inc.+ $ 85,236
7,000 Robert Half International, Inc.+ 150,500
1,955 SPS Transaction Services, Inc.+ 106,059
-----------
547,513
-----------
TRANSPORTATION -- 2.8%
2,300 Airborne Freight Corporation 43,987
5,100 Chicago & North Western Transportation Company+ 103,912
3,400 Illinois Central Corporation 109,225
3,200 Landstar System, Inc.+ 106,400
3,000 XTRA Corporation 153,000
-----------
516,524
-----------
CONSUMER DURABLES -- 2.7%
3,005 Cummins Engine Company, Inc. 127,712
3,600 Harley Davidson, Inc. 100,800
3,675 Leggett & Platt, Inc. 136,894
7,500 Maytag Corporation 119,063
-----------
484,469
-----------
CONSUMER NON-DURABLES -- 0.8%
2,600 Haggar Corporation 62,400
1,750 V. F. Corporation 88,594
-----------
150,994
-----------
TOTAL COMMON STOCKS
(Cost $16,719,068) 17,051,089
-----------
</TABLE>
See Notes to Financial Statements. 11
...............................................................................
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
...............................................................................
<TABLE>
- - - -----------------------------------------------------------------------------------
DREYFUS DISCIPLINED MIDCAP STOCK FUND OCTOBER 31, 1994
- - - -----------------------------------------------------------------------------------
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
<C> <S> <C>
U.S. TREASURY OBLIGATIONS -- 0.3%
(Cost $59,650)
$ 60,000 U.S. Treasury Bills, 4.550%# due 12/15/94 $ 59,656
-----------
REPURCHASE AGREEMENT -- 7.5%
(Cost $1,366,926)
1,366,926 Agreement with Barclays de Zoete Wedd, 4.780% dated
10/31/94, to be repurchased at $1,367,107 on
11/01/94, collateralized by $1,109,019 U.S.
Treasury Bills, 4.360% due 11/10/94 and by
$257,908 U.S. Treasury Notes, 5.875% due 05/15/95 1,366,926
-----------
TOTAL INVESTMENTS
(Cost $18,145,644*) 101.4% 18,477,671
OTHER ASSETS AND LIABILITIES (NET) (1.4) (254,676)
----- -----------
NET ASSETS 100.0% $18,222,995
===== ===========
<CAPTION>
SCHEDULE OF
FUTURES
CONTRACTS
<C> <S> <C>
FUTURES -- LONG POSITION
(Cost $443,125)
5 S&P Midcap 400, December 1994 $443,000
<FN>
- - - --------------------------------------------------------------------------------
* Aggregate cost for Federal tax purposes.
+ Non-income producing security.
# Annualized yield at date of purchase (unaudited)
</TABLE>
12 See Notes to Financial Statements.
................................................................................
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
..............................................................................
<TABLE>
- - - ----------------------------------------------------------------------------------------------
DREYFUS DISCIPLINED MIDCAP STOCK FUND OCTOBER 31, 1994
- - - ----------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS:
Investments, at value (Cost $18,145,644) (Note 1)
See accompanying schedule $18,477,671
Receivable from investment adviser (Note 2) 35,595
Receivable for investment securities sold 27,504
Dividends and interest receivable 19,036
Receivable for Fund shares sold 1,548
-----------
TOTAL ASSETS 18,561,354
-----------
LIABILITIES:
Payable for investment securities purchased $278,237
Due to custodian 36,807
Investment management fee payable (Note 2) 18,053
Daily variation margin on open futures contracts (Note 1) 2,375
Accrued Directors' fees and expenses (Note 2) 2,287
Payable for Fund shares redeemed 598
Distribution fee payable (Note 3) 2
--------
TOTAL LIABILITIES 338,359
-----------
NET ASSETS $18,222,995
===========
NET ASSETS consist of:
Undistributed net investment income $ 49,639
Accumulated net realized loss on investments sold and
futures contracts (763,921)
Net unrealized appreciation of investments and futures
contracts 331,902
Par value 1,866
Paid-in capital in excess of par value 18,603,509
-----------
TOTAL NET ASSETS $18,222,995
===========
NET ASSET VALUE
INVESTOR SHARES:
Net asset value, offering and redemption price per share
($53,821 / 5,519 shares of capital stock outstanding) $ 9.75
===========
CLASS R SHARES:
Net asset value, offering and redemption price per share
($18,169,174 / 1,860,722 shares of capital stock
outstanding) $ 9.76
===========
</TABLE>
See Notes to Financial Statements. 13
................................................................................
<PAGE>
STATEMENT OF OPERATIONS
...............................................................................
<TABLE>
- - - ----------------------------------------------------------------------------------------
DREYFUS DISCIPLINED MIDCAP STOCK FUND
- - - ----------------------------------------------------------------------------------------
FOR THE PERIOD ENDED OCTOBER 31, 1994*
<S> <C> <C>
INVESTMENT INCOME:
Dividends $ 303,978
Interest 44,112
-----------
TOTAL INVESTMENT INCOME 348,090
-----------
EXPENSES:
Investment management fee (Note 2) $106,540
Investment advisory fee (Note 2) 63,913
Transfer agent fees (Note 2) 22,711
Custodian fees (Note 2) 17,243
Registration and filing fees 12,289
Legal and audit fees 6,287
Directors' fees and expenses (Note 2) 4,665
Amortization of organization costs (Note 6) 3,690
Administration fee (Note 2) 1,818
Distribution fee (Note 3) 49
Other 10,723
Expenses reimbursed by investment adviser (Note 2) (61,475)
--------
TOTAL EXPENSES 188,453
-----------
NET INVESTMENT INCOME 159,637
-----------
REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS
(Notes 1 and 4):
Net realized gain/(loss) on:
Securities transactions (774,520)
Futures contracts 10,599
-----------
Net realized loss on investments during the period (763,921)
Net change in unrealized
appreciation/(depreciation) of:
Securities 332,027
Futures contracts (125)
-----------
Net unrealized appreciation of investments during
the period 331,902
-----------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS (432,019)
-----------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS (272,382)
===========
<FN>
- - - ---------------------------------------------------------------------------------------
* THE FUND COMMENCED OPERATIONS ON NOVEMBER 12, 1993.
</TABLE>
14 See Notes to Financial Statements.
................................................................................
<PAGE>
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
............................................................................................
- - - --------------------------------------------------------------------------------------------
DREYFUS DISCIPLINED MIDCAP STOCK FUND
- - - --------------------------------------------------------------------------------------------
<CAPTION>
PERIOD
ENDED
10/31/94*
-----------
<S> <C>
Net investment income $ 159,637
Net realized loss on investments and futures contracts during
the period (763,921)
Net unrealized appreciation of investments and futures contracts
during the period 331,902
-----------
Net decrease in net assets resulting from operations (272,382)
Distributions to shareholders from net investment income:
Investor Shares (94)
Class R Shares (109,904)
Net increase in net assets from Fund share transactions (Note 5):
Investor Shares 53,937
Class R Shares 18,551,438
-----------
Net increase in net assets 18,222,995
NET ASSETS:
Beginning of period --
-----------
End of period (including undistributed net investment income of $49,639
at October 31, 1994) $18,222,995
===========
<FN>
- - - --------------------------------------------------------------------------------------------
* The Fund commenced operations on November 12, 1993.
</TABLE>
See Notes to Financial Statements. 15
................................................................................
<PAGE>
FINANCIAL HIGHLIGHTS
...............................................................................
Please refer to page 5 of the Prospectus dated March 1, 1995.
16 See Notes to Financial Statements.
...............................................................................
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
...............................................................................
Please refer to page 5 of the Prospectus dated March 1, 1995.
See Notes to Financial Statements. 17
................................................................................
<PAGE>
NOTES TO FINANCIAL STATEMENTS
...............................................................................
1. SIGNIFICANT ACCOUNTING POLICIES
The Dreyfus/Laurel Funds, Inc. (the "Investment Company"), The Dreyfus/Laurel
Funds Trust, The Dreyfus/Laurel Tax-Free Municipal Funds and The
Dreyfus/Laurel Investment Series are all registered open-end management
investment companies that are now part of The Dreyfus Family of Funds. The
Investment Company is a series mutual fund with 19 separate investment
portfolios. This report contains financial statements for the Dreyfus
Disciplined Midcap Stock Fund (the "Fund"). The Investment Company was
incorporated on August 6, 1987 as a Maryland corporation and is registered
with the Securities and Exchange Commission under the Investment Company Act
of 1940, as amended (the "1940 Act"), as a diversified, open-end management
investment company. The Fund commenced operations on November 12, 1993. The
Fund currently offers two classes of shares: Investor Shares and Class R
Shares (effective October 17, 1994, the Trust Shares were redesignated as
Class R Shares). Investor Shares are sold primarily to retail investors and
bear a distribution fee. Class R Shares are sold primarily to bank trust
departments and other financial service providers acting on behalf of
customers having a qualified trust or investment account or relationship at
such institution, and bear no distribution fee. Each class of shares has
identical rights and privileges, except with respect to the distribution fee
and voting rights on matters affecting a single class. The following is a
summary of significant accounting policies consistently followed by the Fund
in the preparation of its financial statements in accordance with generally
accepted accounting principles.
(A) PORTFOLIO VALUATION
Investments in securities traded on a national securities exchange are valued
at the last reported sales price or, in the absence of a recorded sale, at
the mean of the latest bid and asked prices. Over-the-counter securities are
valued at the mean of the latest bid and asked prices. When market quotations
are not readily available, securities are valued at fair value as determined
in good faith by the Board of Directors. Bonds are valued through valuations
obtained from a commercial pricing service or at the most recent mean of the
bid and asked prices provided by investment dealers in accordance with
procedures established by the Board of Directors. Debt securities with
maturities of 60 days or less from the valuation day are valued on the basis
of amortized cost.
(B) REPURCHASE AGREEMENTS
The Fund may engage in repurchase agreement transactions. Under the terms of
a typical repurchase agreement, the Fund, through its custodian, takes
possession of an underlying debt obligation subject to an obligation of the
seller to repurchase, and the Fund to resell, the obligation at an
agreed-upon price and time, thereby determining the yield during the Fund's
holding period. This arrangement results in a fixed rate of return that is
not subject to market fluctuations during the Fund's holding period. The
value of the collateral is at least equal, at all times, to the total amount
of the repurchase obligations,
18
...............................................................................
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
...............................................................................
including interest. In the event of counterparty default, the Fund has the
right to use the collateral to offset losses incurred. There is potential
loss to the Fund in the event the Fund is delayed or prevented from
exercising its rights to dispose of the collateral securities, including the
risk of a possible decline in the value of the underlying securities during
the period while the Fund seeks to assert its rights. The Fund's investment
manager, acting under the supervision of the Board of Directors, reviews the
value of the collateral and the creditworthiness of those banks and dealers
with which the Fund enters into repurchase agreements to evaluate potential
risks.
(C) FUTURES CONTRACTS ACCOUNTING PRINCIPLES
The Fund may enter into futures contracts to hedge against fluctuations in
the value of its portfolio. Upon entering into a futures contract, the Fund
is required to deposit with the broker an amount of cash or cash equivalents
equal to a certain percentage of the contract amount. This is known as the
initial margin. Subsequent payments ("variation margin") are made or received
by the Fund each day, depending on the daily fluctuation of the value of the
contract. The daily changes in the contract are recorded as unrealized gains
or losses. The Fund recognizes a realized gain or loss when the contract is
closed.
The use of future contracts as a hedging device involves several risks. The
change in value of the futures contracts primarily corresponds with the value
of their underlying instruments, which may not correlate with the change in
value of the hedged investments. In addition, the Fund may not be able to
enter into a closing transaction because of an illiquid secondary market.
(D) SECURITY TRANSACTIONS AND INVESTMENT INCOME
Securities transactions are recorded as of the trade date. Dividend income is
recorded on the ex-dividend date. Interest income is recorded on the accrual
basis. Realized gains and losses from securities sold are recorded on the
identified cost basis. Investment income and realized and unrealized gains
and losses are allocated based upon relative average daily net assets of each
class.
(E) EXPENSE ALLOCATION
Expenses of the Fund not directly attributable to the operations of any class
of shares are pro rated between the classes based upon the relative average
daily net assets of each class. Distribution expense is directly attributable
to a particular class of shares and is charged only to that class'
operations.
(F) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income, if any, are declared on a class level
and paid quarterly. Distributions from net realized capital gains, if any,
are determined on a Fund level and are declared and paid annually. Additional
distributions of net investment income and capital gains for the Fund may be
made at the discretion of the Board of Directors in order to avoid the 4%
nondeductible federal excise tax. Income distributions and capital gain
distributions on a Fund level are determined in accordance with income
19
................................................................................
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
..............................................................................
tax regulations, which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments of
income and gains on various investment securities held by the Fund, timing
differences and differing characterization of distributions made by the Fund
as a whole.
(G) FEDERAL INCOME TAXES
The Fund intends to qualify as a regulated investment company by complying
with the requirements of the Internal Revenue Code applicable to regulated
investment companies and by distributing substantially all of its taxable
income to its shareholders. Therefore, no federal income tax provision is
required.
2. INVESTMENT MANAGEMENT FEE, DIRECTORS' FEES AND OTHER RELATED PARTY
TRANSACTIONS
Effective as of October 17, 1994, the Investment Company's investment
management agreement with Mellon Bank, N.A. ("Mellon Bank"), a wholly-owned
subsidiary of Mellon Bank Corporation, was transferred to The Dreyfus
Corporation (the "Manager"), a wholly-owned subsidiary of Mellon Bank. The
Manager provides, or arranges for one or more third parties to provide,
investment advisory, administrative, custody, fund accounting and transfer
agency services to the Investment Company. The Manager also directs the
investments of the Fund in accordance with its investment objective, policies
and limitations. For these services, the Fund pays the Manager a fee,
calculated daily and paid monthly, at the annual rate of 1.10% of the value
of the Fund's average daily net assets. Out of its fee, the Manager pays all
of the expenses of the Fund except brokerage, taxes, interest, Rule 12b-1
distribution fees and expenses, fees and expenses of non-interested Directors
(including counsel fees) and extraordinary expenses. In addition, the Manager
is required to reduce its fee in an amount equal to the Fund's allocable
portion of fees and expenses of the non-interested Directors (including
counsel).
For the period from April 4, 1994 to October 16, 1994, Mellon Bank served as
the Investment Company's investment manager pursuant to the investment
management agreement described above. Prior to April 4, 1994, the Investment
Company had individual contracts with Mellon Bank to provide custody,
accounting, and transfer agency services to the Fund. Effective April 4,
1994, custody, accounting, and transfer agency services are covered by the
investment management agreement described above.
Prior to April 4, 1994, the Investment Company had an investment advisory
agreement under which the Fund paid Mellon Bank an annual fee of 1.00% of the
value of the Fund's average daily net assets for investment advisory
services. For the period from November 12, 1993 through April 3, 1994, Mellon
Bank, as investment adviser, voluntarily agreed to reimburse expenses in the
amount of $61,475.
Prior to September 23, 1994, Frank Russell Investment Management Company (the
"Administrator") served as the Fund's administrator and provided, pursuant to
an
20
...............................................................................
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
...............................................................................
administration agreement, various administrative and corporate secretarial
services to the Fund. For the period from April 4, 1994 to September 23,
1994, Mellon Bank, as investment manager, paid the Administrator's fee out of
the management fee described above. Prior to April 4, 1994, the Investment
Company paid the Administrator the following fees for the services supplied
by the Administrator pursuant to the administration agreement: (i) an annual
fee of $500,000; (ii) an annual asset-based fee, payable monthly on a pro
rata basis, based on the following percentages of the aggregate average daily
net assets of the Investment Company: up to and including $10 billion --
0.01%, over $10 billion -- 0.005%; and (iii) all start-up costs (including
out-of-pocket, blue sky registration and personnel costs) for new portfolios
(prior to and for 6 months following commencement of operations).
Prior to April 4, 1994, the Investment Company had a contract with Russell
Fund Distributors, Inc. to serve as distributor of its shares. Effective
April 4, 1994 through October 16, 1994, Funds Distributor, Inc. served as
distributor of the Investment Company's shares. Effective as of October 17,
1994, Premier Mutual Fund Services, Inc. ("Premier") serves as the Investment
Company's distributor. Premier also serves as the Investment Company's
sub-administrator and, pursuant to a sub-administration agreement with the
Manager, provides various administrative and corporate secretarial services
to the Investment Company.
No officer or employee of Premier (or of any parent, subsidiary or affiliate
thereof) receives any compensation from The Dreyfus/Laurel Funds, Inc., The
Dreyfus/Laurel Funds Trust, The Dreyfus/Laurel Tax-Free Municipal Funds or
The Dreyfus/Laurel Investment Series (collectively "The Dreyfus/Laurel
Funds") for serving as an officer or Director/Trustee of The Dreyfus/Laurel
Funds. In addition, no officer or employee of the Manager (or of any parent,
subsidiary or affiliate thereof) serves as an officer or Director/Trustee of
The Dreyfus/Laurel Funds. The Dreyfus/Laurel Funds pay each Director/Trustee
who is not an officer or employee of Premier (or any parent, subsidiary or
affiliate thereof), $27,000 per annum, $1,000 for each Board meeting
attended, and $750 for each Audit Committee meeting attended, and reimburses
each Director or Trustee for travel and out-of-pocket expenses. Prior to
April 4, 1994, the Investment Company paid each Director or Trustee $15,000
per annum plus reimbursement for travel and out-of-pocket expenses.
3. DISTRIBUTION PLAN
The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b-1
under the 1940 Act relating to its Investor Shares. Under the Plan, the Fund
may pay annually up to 0.25% of the value of the average daily net assets
attributable to its Investor Shares to compensate Premier and Dreyfus Service
Corporation, an affiliate of the Manager, for shareholder servicing
activities and Premier for activities primarily intended to result in the
sale of Investor Shares. The Class R Shares bear no distribution fee. Prior
to April 4,
21
................................................................................
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
...............................................................................
1994, the Fund had a distribution and shareholder services plan under which
the Fund was authorized to spend annually up to 0.35% of its average daily
net assets on distribution and shareholder servicing expenses.
Under its terms, the Plan shall remain in effect from year to year, provided
such continuance is approved annually by a vote of a majority of those
Directors who are not "interested persons" of the Investment Company and who
have no direct or indirect financial interest in the operation of the Plan or
in any agreement related to the Plan.
4. SECURITIES TRANSACTIONS
The cost of purchases and proceeds from sales of securities, excluding
short-term investments and U.S. government securities, for the period ended
October 31, 1994 were $29,799,919 and $12,301,332, respectively.
At October 31, 1994, aggregate gross unrealized appreciation for all
securities in which there was an excess of value over tax cost amounted to
$1,310,031, and aggregate gross unrealized depreciation for all securities in
which there was an excess of tax cost over value amounted to $978,004.
5. SHARES OF CAPITAL STOCK
<TABLE>
The Investment Company has authority to issue 25 billion shares of capital
stock with a par value of $.001. The Fund has authority to issue two classes
of shares. The table below summarizes transactions in Fund shares for the
period indicated:
- - - ----------------------------------------------------------------------
DREYFUS DISCIPLINED MIDCAP STOCK FUND
- - - ----------------------------------------------------------------------
<CAPTION>
PERIOD ENDED
October 31, 1994*
SHARES AMOUNT
- - - ----------------------------------------------------------------------
<S> <C> <C>
INVESTOR SHARES:
Sold 6,048 $59,087
Issued as reinvestment of dividends
and distributions 7 66
Redeemed (536) (5,216)
----- -------
Net increase 5,519 $53,937
===== =======
- - - ----------------------------------------------------------------------
</TABLE>
22
...............................................................................
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
...............................................................................
<TABLE>
<CAPTION>
PERIOD ENDED
October 31, 1994*
SHARES AMOUNT
- - - ---------------------------------------------------------------------
<S> <C> <C>
CLASS R SHARES:
Sold 2,122,927 $21,172,051
Issued as reinvestment of dividends
and distributions 11,107 109,104
Redeemed (273,312) (2,729,717)
--------- -----------
Net increase 1,860,722 $18,551,438
========= ===========
- - - ---------------------------------------------------------------------
<FN>
* The Fund commenced operations on November 12, 1993. The Fund commenced selling
Investor Shares on April 6, 1994. Any shares outstanding prior to April 4,
1994 were designated as Trust Shares. Effective October 17, 1994, the Fund's
Trust Shares were redesignated as Class R Shares.
</TABLE>
6. ORGANIZATION COSTS
The Fund paid all costs in connection with the Fund's organization including
the fees and expenses of registering and qualifying the Fund's shares for
distribution under Federal and state securities regulations. Prior to April
4, 1994, all such costs were being amortized on the straight-line method over
a period of five years. On April 4, 1994, the remaining unamortized
organization costs were reimbursed by Mellon Bank as the investment adviser.
7. CAPITAL LOSS CARRYFORWARD
At October 31, 1994, the Fund had available for federal income tax purposes
an unused capital loss carryforward of $764,046 expiring in 2002.
8. DIVIDENDS
On November 2, 1994 the Board of Directors declared dividends from net
investment income for the Investor and Class R Shares in the amount of $.0205
and $.0266 per share, respectively, payable on November 9, 1994 to
shareholders of record on November 2, 1994.
23
................................................................................
<PAGE>
INDEPENDENT AUDITORS' REPORT
...............................................................................
[KPMG LOGO]
The Board of Directors and Shareholders
The Dreyfus/Laurel Funds, Inc.
We have audited the accompanying statement of assets and liabilities of the
Dreyfus Disciplined Midcap Stock Fund of The Dreyfus/Laurel Funds, Inc.,
including the portfolio of investments, as of October 31, 1994, and the related
statement of operations, statement of changes in net assets, and the financial
highlights for the period then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of October 31, 1994, by
correspondence with the custodian and brokers. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Dreyfus Disciplined Midcap Stock Fund of The Dreyfus/Laurel Funds, Inc., as of
October 31, 1994, and the results of its operations, changes in its net assets,
and the financial highlights for the period then ended, in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
Pittsburgh, Pennsylvania
December 9, 1994
PORTFOLIO OF INVESTMENTS
DREYFUS S&P 500 STOCK INDEX FUND OCTOBER 31, 1994
<TABLE>
<CAPTION>
SHARES VALUE
(NOTE 1)
<S> <C> <C>
COMMON STOCKS -- 96.3%
OIL & GAS -- 10.4%
17,498 Amoco Corporation $ 1,108,936
2,140 Ashland Oil, Inc. 83,193
5,598 Atlantic Richfield 606,683
4,820 Baker Hughes, Inc. 98,810
22,626 Chevron Corporation 1,018,170
3,649 Coastal Corporation 103,997
8,659 Enron Corporation 280,335
2,201 Enserch Corporation 31,364
43,476 EXXON Corporation 2,733,554
1,186 Foster Wheeler Corporation 42,696
4,117 Halliburton Company 152,329
842 Helmerich & Payne, Inc. 26,313
1,747 Kerr-McGee Corporation 85,821
1,105 Louisiana Land & Exploration Company 50,139
4,664 Maxus Energy Corporation+ 22,154
1,782 McDermott International, Inc. 45,664
13,701 Mobil Corporation 1,178,286
10,785 Occidental Petroleum Corporation 235,922
3,511 Oryx Energy Company 50,910
4,285 Panhandle Eastern Corporation 100,698
1,635 Pennzoil Company 84,203
9,065 Phillips Petroleum Company 334,272
18,736 Royal Dutch Petroleum 2,182,744
3,044 Santa Fe Energy Resources, Inc.+ 27,777
8,535 Schlumberger, Ltd. 501,431
3,084 Sonat, Inc. 100,230
3,774 Sun Company, Inc. 121,240
5,900 Tenneco, Inc. 261,075
9,144 Texaco, Inc. 597,789
8,370 Unocal Corporation 244,823
10,202 USX-Marathon Group 191,288
1,600 Western Atlas+ 73,600
3,400 Williams Companies, Inc. 98,600
12,875,046
TELECOMMUNICATIONS -- 8.5%
54,500 AT&T Corporation 2,997,500
17,046 Airtouch Communications+ 509,249
19,386 Ameritech Corporation 782,710
14,774 Bell Atlantic Corporation 773,788
17,053 BellSouth Corporation 908,072
3,694 D.S.C. Communications Corporation 113,591
33,281 GTE Corporation 1,023,391
22,852 MCI Communications Corporation 525,596
14,777 Nynex Corporation 579,997
14,846 Pacific Telesis Group 469,505
21,205 Southwestern Bell Corporation 887,959
12,231 Sprint Corporation 399,036
15,712 U S West, Inc. 591,164
10,561,558
DRUGS & COSMETICS -- 7.9%
967 Alberto-Culver Company, Class B 24,537
2,393 Allergan, Inc. 63,115
2,714 Alza Corporation+ 48,174
10,572 American Home Products Corporation 671,322
2,329 Avon Products, Inc. 147,309
2,759 Beverly Enterprises, Inc.+ 41,730
17,759 Bristol Myers Squibb Company 1,036,682
1,903 Clorox Company 102,762
5,117 Colgate Palmolive Company 312,136
12,512 Columbia/HCA Healthcare Corporation 520,812
3,278 Dial Corporation 67,609
2,262 Ecolab, Inc. 48,350
7,794 Gillette Company 579,679
4,230 International Flavors & Fragrance, Inc. 185,591
10,208 Lilly (Eli) & Company 632,896
2,766 Mallinckrodt, Inc. 84,017
43,840 Merck & Company, Inc. 1,567,280
11,012 Pfizer, Inc. 816,265
2,252 Premark International, Inc. 100,777
24,088 Procter & Gamble Company 1,505,500
5,678 Rubbermaid, Inc. 156,145
6,720 Schering-Plough Corporation 478,800
1,600 Sigma-Aldrich Corporation 55,600
5,899 Upjohn Company 194,667
4,591 Warner Lambert Company 350,064
9,791,819
FOODS -- 6.3%
11,998 Archer Daniels Midland 343,443
1,000 Ball Corporation 28,250
4,888 Borden, Inc. 65,985
2,761 Brunos, Inc. 26,575
8,711 Campbell Soup Company 359,329
45,200 Coca-Cola Company 2,271,300
8,442 Conagra, Inc. 262,757
5,018 CPC International, Inc. 268,463
5,399 General Mills, Inc. 302,344
2,132 Giant Food, Inc., Class A 49,035
8,676 Heinz (H.J.) Company 322,097
3,263 Hershey Foods Corporation 154,174
7,703 Kellogg Company 452,551
27,452 Pepsico, Inc. 960,820
3,709 Pet, Inc. 63,980
3,200 Pioneer Hi-Bred International, Inc. 107,200
2,499 Quaker Oats Company 187,113
3,663 Ralston Purina Group 155,678
17,210 Sara Lee Corporation 423,796
6,243 Sysco Corporation 155,295
5,676 Unilever N.V. 674,025
4,210 Wrigley (W.M.) Jr. Company 189,976
7,824,186
OFFICE EQUIPMENT -- 5.2%
3,522 Amdahl Corporation+ 35,660
3,936 Apple Computer, Inc. 169,986
1,638 Autodesk, Inc. 56,511
4,684 Automatic Data Processing, Inc. 273,429
1,824 Avery Dennison Corporation 61,332
9,200 Cisco Systems, Inc. 277,150
9,107 Compaq Computer Corporation 365,418
5,458 Computer Associates International, Inc. 270,853
1,734 Computer Sciences Corporation 80,631
928 Cray Resh, Inc.+ 17,748
1,002 Data General Corporation+ 9,770
3,900 First Data Corporation 195,488
4,389 Honeywell, Inc. 141,545
1,588 Intergraph Corporation+ 13,697
20,569 International Business Machines 1,532,391
1,796 Lotus Development Corporation+ 68,697
20,300 Microsoft Corporation 1,278,900
3,631 Moore Corporation, Ltd. 65,812
13,048 Novell, Inc.+ 241,388
9,560 Oracle Systems Corporation 439,760
5,480 Pitney Bowes, Inc. 184,950
751 Shared Medical Systems Corporation 22,155
3,563 Sun Microsystems, Inc.+ 116,688
4,554 Tandem Computers, Inc.+ 80,264
5,683 Unisys Corporation+ 60,382
3,618 Xerox Corporation 370,845
6,431,450
BANKING -- 5.1%
14,190 Banc One Corporation 409,736
3,643 Bank of Boston Corporation 104,735
13,617 BankAmerica Corporation 592,340
2,888 Bankers Trust, New York Corporation 192,774
3,713 Barnett Banks Inc. 154,090
3,686 Boatmen's Bancshares Inc. 109,198
6,550 Chase Manhattan Corporation 235,800
9,136 Chemical Banking Corporation 347,168
13,340 Citicorp 636,985
5,062 CoreStates Financial Corporation 130,979
3,333 First Chicago Corporation 163,317
2,697 First Fidelity Bancorp 121,365
3,023 First Interstate Bancorp 241,840
5,662 First Union Corporation 254,790
4,476 Great Western Financial Corporation 80,009
5,040 MBNA Corporation 134,820
6,587 Morgan (J.P.) & Company, Inc. 407,571
5,116 NBD Bancorp, Inc. 157,317
5,400 National City Corporation 147,150
10,266 NationsBank Corporation 508,167
11,336 Norwest Corporation 277,732
8,123 PNC Financial Corporation 190,891
3,333 Shawmut National Corporation 68,742
4,556 SunTrust Banks, Inc. 230,648
6,200 Wachovia Corporation 207,700
2,013 Wells Fargo & Company 299,182
6,405,046
MERCHANDISING -- 5.1%
8,920 Albertsons, Inc. 267,600
5,032 American Stores Company 136,493
3,424 Charming Shoppes, Inc. 24,824
2,416 Dayton-Hudson Corporation 187,240
4,014 Dillard Department Stores, Class A 106,371
1,277 Fleming Companies, Inc. 30,648
4,973 Gap, Inc. 167,839
1,306 Great Atlantic & Pacific Tea Company, Inc. 34,119
16,081 K Mart Corporation 263,326
3,714 Kroger Company+ 97,028
12,038 Limited, Inc. 221,198
651 Longs Drug Stores Corporation 22,622
8,759 May Dept Stores Company 329,557
3,667 Melville Corporation 122,386
1,298 Mercantile Stores Company, Inc. 59,059
2,902 Nordstrom, Inc. 142,924
8,072 Penney (J.C.) Company, Inc. 408,645
2,137 Pep Boys -- Manny Moe & Jack 76,398
7,879 Price/Costco, Inc.+ 124,094
3,137 Rite Aid Corporation 75,288
12,215 Sears Roebuck & Company 604,643
2,514 Super Value, Inc. 60,965
2,265 Tandy Corporation 100,226
2,634 TJX Companies, Inc. 41,486
10,035 Toys "R" Us, Inc.+ 386,348
78,069 Wal-Mart Stores, Inc. 1,834,622
4,404 Walgreen Company 182,766
3,791 Whitman Corporation 62,552
2,512 Winn Dixie Stores, Inc. 132,822
4,670 Woolworth Corporation 72,385
6,376,474
ELECTRONIC TECHNOLOGY -- 4.8%
3,163 Advanced Micro Devices, Inc.+ 83,424
3,277 Amerada Hess Corporation 163,031
3,575 AMP, Inc. 270,358
813 Andrew Corporation 42,072
7,581 Corning, Inc. 257,754
4,857 Digital Equipment Corporation+ 148,746
1,086 E-System, Inc. 45,069
2,661 Eaton Corporation 139,370
2,167 EG&G, Inc. 34,943
69 Harris Computer Systems+ 966
1,381 Harris Corporation 59,210
8,885 Hewlett Packard Company 868,509
14,644 Intel Corporation 909,759
2,852 Loral Corporation 113,010
1,063 M/A-COM, Inc.+ 7,441
3,800 Micron Technology, Inc. 150,575
19,590 Motorola, Inc. 1,153,361
4,635 National Semiconductor Corporation+ 81,693
8,665 Northern Telecom, Ltd. 313,023
1,447 Perkin Elmer Corporation 42,688
4,631 Raytheon Company 295,226
1,073 Tektronix, Inc. 40,774
21,762 Tele-Communications, Class A+ 492,363
1,898 Teledyne, Inc. 32,503
3,210 Texas Instruments, Inc. 240,349
1,150 Zenith Electronics Corporation+ 16,100
6,002,317
PUBLIC UTILITY -- 4.0%
6,555 American Electric Power, Inc. 209,760
5,129 Baltimore Gas & Electric 119,249
5,780 Carolina Power & Light Company 152,448
6,681 Central & Southwest Corporation 150,323
5,153 Cinergy Corporation 119,163
1,672 Columbia Gas Systems, Inc.+ 46,607
8,413 Consolidated Edison Company, Inc. 209,273
3,242 Consolidated Natural Gas Company 117,523
5,279 Detroit Edison Company 139,234
6,107 Dominion Resources, Inc. 226,722
7,304 Duke Power Company 289,421
7,886 Entergy Corporation 184,335
6,652 FPL Group, Inc. 220,348
4,493 Houston Industries, Inc. 156,693
5,021 Niagara Mohawk Power Corporation 69,039
2,009 Nicor, Inc. 48,969
4,259 Noram Energy 25,554
2,400 Northern States Power Company 106,500
5,420 Ohio Edison Company 104,335
877 Oneok, Inc. 15,457
2,786 Pacific Enterprises 59,899
15,090 Pacific Gas & Electric Company 339,525
10,142 PacifiCorp. 178,753
8,269 PECO Energy Company 211,893
1,185 Peoples Energy Corporation 33,476
8,865 Public Service Enterprise Group, Inc. 232,706
15,587 SCE Corporation 216,270
21,994 Southern Company 434,382
7,840 Texas Utilities Company 255,780
1,497 TransCo Energy Company 21,519
7,970 Unicom Corporation 172,351
3,645 Union Electric Company 130,764
4,998,271
CHEMICALS & FERTILIZERS -- 3.8%
3,785 Air Products & Chemicals, Inc. 180,734
1,810 Alco Standard Corporation 103,170
4,809 Amgen, Inc.+ 268,102
9,467 Dow Chemical Company 695,825
23,711 du Pont (E.I.) de Nemours & Company 1,413,767
2,916 Eastman Chemical 157,464
3,276 Engelhard Corporation 76,986
853 First Mississippi Corporation 17,912
3,315 Grace (W.R.) & Company 131,357
2,542 Great Lakes Chemical Corporation 149,343
1,240 Hercules, Inc. 144,770
4,107 Monsanto Company 312,645
5,244 Morton International, Inc. 149,454
2,493 Nalco Chemical Company 80,398
4,641 Praxair, Inc. 107,323
2,288 Rohm & Haas Company 138,137
5,111 Union Carbide Corporation 169,302
16,607 WMX Technologies, Inc. 487,831
4,784,520
ELECTRICAL EQUIPMENT -- 3.5%
3,366 Circuit City Stores, Inc. 85,832
4,000 Cooper Industries, Inc. 149,500
7,679 Emerson Electric Company 466,499
59,778 General Electric Company 2,921,650
1,793 Grainger (W.W.), Inc. 98,615
3,718 Maytag Corporation 59,023
1,406 Raychem Corporation 52,022
2,580 Scientific Atlanta, Inc. 55,793
689 Thomas & Betts Corporation 49,091
1,636 Tyco Laboratories, Inc. 78,937
12,245 Westinghouse Electric Corporation 172,961
2,505 Whirlpool Corporation 130,260
4,320,183
MEDICAL SERVICES & SUPPLIES -- 3.0%
28,119 Abbott Laboratories 871,689
1,889 Bard (C.R.), Inc. 46,281
2,136 Bausch & Lomb, Inc. 69,420
9,944 Baxter International, Inc. 258,544
2,470 Becton Dickinson & Company 116,708
3,971 Biomet, Inc.+ 45,667
1,376 Community Psychiatric Centers 13,588
22,746 Johnson & Johnson 1,242,500
2,296 Manor Care, Inc. 63,140
3,914 Medtronic, Inc. 204,017
495 Millipore Corporation 25,431
5,918 National Medical Enterprises, Inc.+ 85,811
1,822 St. Jude Medical, Inc. 67,870
5,600 U.S. Healthcare 264,600
2,009 U.S. Surgical Corporation 45,203
6,200 United Healthcare Corporation 327,050
3,747,519
FINANCE -- 2.8%
4,355 Ahmanson (H.F.) & Company 83,289
16,894 American Express Company 519,491
1,880 Beneficial Corporation 73,556
6,118 Dean Witter, Discover & Company 236,305
9,554 Federal National Mortgage Association 726,104
6,217 Federal Home Loan Mortgage Corporation 338,827
4,749 Fleet Financial Group, Inc. 162,653
2,267 Golden West Financial Corporation 88,416
3,242 Household International Corporation 113,875
8,853 KeyCorp 253,416
7,234 Merrill Lynch & Company, Inc. 284,839
3,683 Salomon, Inc. 144,557
11,171 Travelers, Inc. 388,192
3,501 U.S. Bancorp 86,650
3,500,170
INSURANCE -- 2.7%
3,997 Aetna Life & Casualty Company 184,362
7,694 American General Corporation 211,585
10,921 American International Group, Inc. 1,022,479
2,993 Chubb Corporation (The) 209,136
2,649 Cigna Corporation 174,503
1,977 Continental Corporation 29,902
2,816 General Reinsurance Corporation 315,392
1,711 Jefferson Pilot Corporation 92,822
3,583 Lincoln National Corporation 129,884
2,487 Marsh & McLennan Company 186,525
3,596 Providian Corporation 114,173
2,059 Safeco Corporation 103,207
3,000 St. Paul's Companies, Inc. 130,875
2,641 Torchmark Corporation 97,387
2,628 Transamerica Corporation 129,101
2,600 UNUM Corporation 119,275
2,975 USF&G Corporation 40,534
813 USLIFE Corporation 26,626
3,317,768
AUTOMOTIVE -- 2.6%
12,357 Chrysler Corporation 602,404
1,598 Cummins Engine Company, Inc. 67,915
3,930 Dana Corporation 100,706
2,113 Echlin, Inc. 64,975
34,978 Ford Motor Company 1,031,851
26,183 General Motors Corporation 1,034,229
4,382 Genuine Parts Company 158,300
3,033 Navistar International Corporation+ 39,807
1,435 PACCAR, Inc. 64,216
436 SPX Corporation 7,576
3,171,979
METALS & MINING -- 2.1%
7,937 Alcan Aluminum, Ltd. 212,315
3,078 Aluminum Company of America 262,400
12,500 American Barrick Resources Corporation 298,438
1,427 ASARCO, Inc. 44,772
3,294 Cyprus Minerals 87,703
3,916 Echo Bay Mines, Ltd. 47,971
5,001 Homestake Mining Company 93,769
4,008 Inco, Ltd. 120,741
14,634 Minnesota Mining & Manufacturing Company 810,358
320 Nacco Industries, Inc., Class A 18,880
2,817 Newmont Mining Corporation 116,553
2,519 Phelps Dodge Corporation 154,604
1,600 Pittston Services Group 44,200
8,472 Placer Dome, Inc. 183,207
2,129 Reynolds Metal Company 117,893
2,613,804
BUILDING MATERIALS -- 1.9%
1,298 Armstrong World Industries, Inc. 53,867
1,303 Boise Cascade Corporation 34,530
3,270 Champion International Corporation 120,990
1,036 Crane Company 28,102
3,154 Georgia Pacific Corporation 233,002
15,224 Home Depot, Inc. 692,692
3,845 Louisiana-Pacific Corporation 117,752
5,076 Lowes Companies, Inc. 201,771
5,388 Masco Corporation 127,965
1,482 Owens Corning Fiberglass Corporation+ 47,980
949 Potlatch Corporation 36,299
7,292 PPG Industries, Inc. 297,149
2,844 Sherwin Williams Company 92,785
7,276 Weyerhaeuser Company 285,582
2,370,466
TOBACCO & VENDING -- 1.8%
6,831 American Brands, Inc. 237,377
29,977 Philip Morris Companies, Inc. 1,836,091
6,895 UST, Inc. 182,718
2,256,186
PRINTING & PUBLISHING -- 1.8%
2,626 American Greetings Corporation, Class A 71,887
2,929 Deluxe Corporation 82,744
5,334 Donnelley (R.R.) & Sons Company 167,354
3,612 Dow Jones & Company, Inc. 107,909
5,900 Dun & Bradstreet Corporation 345,888
5,076 Gannett Company, Inc. 243,648
2,736 Harcourt General, Inc. 101,232
1,005 Harland (John H.) Company 21,482
1,953 Knight Ridder, Inc. 100,580
1,756 Mcgraw-Hill, Inc. 131,261
468 Meredith Corporation 22,932
3,681 New York Times Company 83,283
13,086 Time Warner, Inc. 464,553
4,041 Times Mirror Companies 131,838
2,582 Tribune Company 135,878
2,212,469
MULTI-INDUSTRY -- 1.3%
9,696 Allied Signal, Inc. 335,724
1,770 Bemis, Inc. 43,808
4,700 Burlington Resources, Inc. 198,575
764 Eastern Enterprises 19,864
1,544 Fleetwood Enterprises, Inc. 35,512
1,191 FMC Corporation+ 72,651
3,982 ITT Corporation 351,412
7,767 Rockwell International Corporation 270,874
2,937 Rowan Companies, Inc.+ 22,395
3,143 Textron, Inc. 160,293
2,223 TRW, Inc. 158,389
431 Zurn Industries, Inc. 7,866
1,677,363
AEROSPACE & AVIATION -- 1.2%
11,883 Boeing Corporation 521,367
2,216 General Dynamics Corporation 93,902
2,214 Lockheed Corporation 159,407
2,994 Martin Marietta Corporation 137,350
1,385 McDonnell Douglas Corporation 195,285
1,705 Northrop Corporation 74,807
4,311 United Technologies Corporation 271,593
1,453,711
RAILROADS -- 1.2%
3,012 Burlington Northern, Inc. 150,224
2,728 Conrail, Inc. 148,335
3,746 CSX Corporation 271,585
1,616 General Signal Corporation 58,176
4,637 Norfolk Southern Corporation 292,131
6,942 Santa Fe Pacific Corporation 106,733
4,165 Santa Fe Pacific Gold Corporation+ 59,872
7,095 Union Pacific Corporation 346,768
1,433,824
MACHINERY & HEAVY EQUIPMENT -- 1.1%
2,997 Black & Decker Corporation 75,300
478 Briggs & Stratton Corporation 33,221
1,124 Cincinnati Milacron, Inc. 30,770
3,033 Deere & Co. Common 217,618
6,146 Dresser Industries, Inc. 129,834
1,172 Giddings & Lewis, Inc. 18,166
1,455 Harnischfeger Industries, Inc. 36,375
4,024 Illinois Tool Works 180,577
3,722 Ingersoll Rand Company 132,596
1,483 Johnson Controls, Inc. 73,779
4,138 Pall Corporation 75,001
1,652 Parker-Hannifin Corporation 77,231
1,999 Safety Kleen Corporation 27,736
1,596 Snap-On Tools Corporation 50,673
1,698 Stanley Works Company 67,496
1,051 Timken Company 36,654
951 Trinova Corporation 33,285
1,507 Varity Corporation+ 57,643
1,353,955
PAPER & FOREST PRODUCTS -- 1.0%
1,421 Federal Paper Board Company, Inc. 42,630
4,319 International Paper Company 321,766
2,995 James River Corporation 68,511
5,600 Kimberly-Clark Corporation 288,400
2,090 Mead Corporation 103,716
2,643 Scott Paper Company 174,768
2,006 Temple Inland, Inc. 94,784
2,409 Union Camp Corporation 114,428
2,370 Westvaco Corporation 82,950
1,291,953
BROADCASTING & ENTERTAINMENT -- 1.0%
5,410 Capital Cities/ABC, Inc. 449,706
2,120 CBS, Inc. 126,935
7,800 Comcast Corporation, Class K 127,725
1,290 King World Productions, Inc.+ 45,795
12,400 Viacom, Inc., Class B+ 486,700
1,236,861
HOTEL & RESTAURANT -- 1.0%
1,644 Hilton Hotels Corporation 99,668
1,000 Luby's Cafeterias, Inc. 23,125
4,513 Marriott International Corporation 132,005
24,758 McDonald's Corporation 711,793
3,639 Promus Companies, Inc.+ 107,805
1,040 Pulte Corporation 21,450
1,713 Ryans Family Steak Houses, Inc.+ 10,706
1,600 Shoney's, Inc.+ 24,000
3,594 Wendy's International, Inc. 53,012
1,183,564
AMUSEMENT -- 0.9%
1,600 Bally Entertainment Corporation+ 11,200
3,200 Brunswick Corporation 65,600
18,684 Disney (Walt) Productions 735,682
1,097 Handleman Company 12,341
3,089 Hasbro, Inc. 101,937
1,533 Jostens, Inc. 26,444
5,730 Mattel, Inc. 167,602
647 Outboard Marine Corporation 13,344
434 Skyline Corporation 8,572
1,142,722
BEVERAGE -- 0.8%
1,478 Adolph Coors Company, Class B 25,495
9,344 Anheuser-Busch Companies 474,208
2,206 Brown Forman Corporation, Class B 67,835
13,186 Seagram Company, Ltd. 407,117
974,655
CONSTRUCTION & MATERIALS HANDLING -- 0.6%
7,186 Caterpillar, Inc. 429,364
1,091 Centex Corporation 24,275
625 Clark Equipment Company+ 43,828
2,027 Dover Corporation 112,499
2,898 Fluor Corporation 143,451
1,249 Kaufman & Broad Corporation 16,237
1,113 Morrison Knudsen Corporation 17,391
787,045
BUSINESS SERVICES -- 0.6%
1,399 Alexander & Alexander Services, Inc. 28,330
3,882 Block (H&R), Inc. 172,264
6,907 Browing Ferris Industries, Inc. 219,297
1,607 Ceridian Corporation+ 41,782
2,702 Interpub Group Companies 89,165
517 JWP, Inc.+ 10
1,352 National Education Corporation+ 6,591
1,667 National Service Industries 44,592
1,490 Ogden Corporation 32,035
1,971 Rollins Environmental Services, Inc.+ 11,580
2,927 Service Corporation International 77,931
723,577
PHOTOGRAPHIC -- 0.5%
11,467 Eastman Kodak Company 551,849
1,567 Polaroid Corporation 52,690
604,539
APPAREL AND TEXTILES -- 0.5%
534 Brown Group, Inc. 18,089
1,366 Hartmarx Corporation+ 7,855
2,924 Liz Claiborne, Inc. 67,617
2,627 Nike, Inc., Class B 159,919
543 Oshkosh B' Gosh, Inc., Class A 8,145
2,837 Reebok International, Ltd. 113,125
1,405 Russell Corporation 42,150
603 Springs Industries, Inc. 24,346
1,801 Stride Rite Corporation 24,989
2,262 V.F. Corporation 114,514
580,749
STEEL -- 0.4%
3,355 Armco, Inc.+ 23,904
3,623 Bethlehem Steel Corporation+ 68,837
1,338 Inland Steel Industries, Inc.+ 47,834
2,972 Nucor Corporation 183,521
2,450 USX-US Steel Group 91,875
3,257 Worthington Industries, Inc. 72,468
488,439
AIR TRANSPORTATION -- 0.4%
2,632 AMR Corporation+ 145,089
1,766 Delta Air Lines, Inc. 92,052
2,001 Federal Express Corporation+ 121,561
4,800 Southwest Airlines Company 113,400
1,947 U S Air Group, Inc. 8,517
480,619
TIRE & RUBBER -- 0.2%
3,012 Cooper Tire & Rubber Company 74,171
835 Goodrich (B.F.) Company 37,471
4,998 Goodyear Tire & Rubber Company 174,930
286,572
TRUCKING -- 0.2%
1,079 Consolidated Freightways, Inc.+ 24,143
1,444 Roadway Services, Inc. 82,669
2,708 Ryder System 63,638
882 Yellow Corporation 17,199
187,649
CONTAINERS -- 0.1%
2,939 Crown Cork & Seal Company, Inc.+ 114,254
3,115 Stone Container Corporation+ 52,175
166,429
HOME FURNISHINGS -- 0.1%
439 Bassett Furniture Industries, Inc. 11,963
5,728 Newell Company 120,288
132,251
TOTAL COMMON STOCKS
(Cost $118,397,244) 119,747,708
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
<S> <C> <C>
U.S. TREASURY BILL -- 0.2%
(Cost $178,967)
$ 180,000 U.S. Treasury Bill,
4.550%# due 12/15/94 $ 178,967
REPURCHASE AGREEMENT -- 3.2%
(Cost $4,031,614)
4,031,614 Agreement with Barclays de Zoete Wedd, 4.780%
dated 10/31/94, to be repurchased at $4,032,149
on 11/1/94, collateralized by $4,002,000 U.S.
Treasury Notes, 5.875% due 5/15/95 4,031,614
TOTAL INVESTMENTS
(Cost $122,607,825*) 99.7% 123,958,289
OTHER ASSETS AND LIABILITIES (NET) 0.3 416,740
NET ASSETS 100.0% $124,375,029
<CAPTION>
SCHEDULE
OF FUTURES
CONTRACTS
<S> <C> <C>
FUTURES CONTRACTS -- LONG POSITION -- 3.2%
(Cost $3,983,550)
17 S&P 500 Stock Index Future,
December 1994 $ 4,015,825
<FN>
* Aggregate cost for Federal tax purposes.
+ Non-income producing security.
# Represents annualized yield to maturity (unaudited).
</TABLE>
See Notes to Financial Statements.
STATEMENT OF ASSETS AND LIABILITIES
DREYFUS S&P 500 STOCK INDEX FUND OCTOBER 31, 1994
<TABLE>
<S> <C> <C>
ASSETS
Investments, at value (Cost $122,607,825) (Note 1)
See accompanying schedule $123,958,289
Cash 14,342
Receivable for investment securities sold 360,713
Dividends and interest receivable 222,832
Receivable from investment adviser (Note 2) 47,392
Receivable for Fund shares sold 3,543
TOTAL ASSETS 124,607,111
LIABILITIES:
Payable for Fund shares redeemed 74,900
Payable for investment securities purchased 67,995
Investment management fee payable (Note 2) 43,190
Daily variation margin on open futures contracts (Note
1) 31,875
Accrued Directors' fees and expenses (Note 2) 14,112
Distribution fee payable (Note 3) 10
TOTAL LIABILITIES 232,082
NET ASSETS $124,375,029
NET ASSETS consist of:
Undistributed net investment income $ 775,257
Accumulated net realized gain on investments sold 479,290
Net unrealized appreciation of securities and futures
contracts 1,382,739
Par value 11,940
Paid-in capital in excess of par value 121,725,803
TOTAL NET ASSETS $124,375,029
NET ASSET VALUE
INVESTOR SHARES
Net asset value, offering and redemption price per
share ($380,652 / 36,577 shares of capital stock
outstanding) $10.41
CLASS R SHARES
Net asset value, offering and redemption price per
share ($123,994,377 / 11,903,386 shares of capital
stock outstanding) $10.42
</TABLE>
See Notes to Financial Statements.
STATEMENT OF OPERATIONS
DREYFUS S&P 500 STOCK INDEX FUND
FOR THE YEAR ENDED OCTOBER 31, 1994
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends $ 2,855,289
Interest 92,708
TOTAL INVESTMENT INCOME 2,947,997
EXPENSES:
Investment management fee (Note 2) 257,527
Investment advisory fee (Note 2) 113,981
Transfer agent fees (Note 2) 25,062
Custodian fees (Note 2) 21,753
Directors' fees and expenses (Note 2) 16,832
Administration fee (Note 2) 10,838
Legal and audit fees 6,877
Amortization of organization costs (Note 6) 3,137
Distribution fee (Note 3) 308
Other 19,250
Expenses reimbursed by investment adviser
(Note 2) (52,201)
TOTAL EXPENSES 423,364
NET INVESTMENT INCOME 2,524,633
REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS
(Notes 1 and 4):
Net realized gain on:
Securities transactions 468,523
Futures contracts 10,648
Net realized gain on investments during the year 479,171
Net change in unrealized appreciation of:
Securities 844,163
Futures contracts 32,275
Net unrealized appreciation of investments during the
year 876,438
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 1,355,609
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 3,880,242
</TABLE>
See Notes to Financial Statements.
STATEMENT OF CHANGES IN NET ASSETS
DREYFUS S&P 500 STOCK INDEX FUND
<TABLE>
<CAPTION>
YEAR PERIOD
ENDED ENDED
10/31/94 10/31/93*
<S> <C> <C>
Net investment income $ 2,524,633 $ 24,137
Net realized gain on securities and
futures contracts during the year 479,171 13,960
Net unrealized appreciation on securi-
ties and futures contracts during
the year 876,438 506,301
Net increase in net assets resulting
from operations 3,880,242 544,398
Distributions to shareholders from net
investment income:
Investor Shares (1,186) --
Class R Shares (1,772,327) --
Distribution to shareholders from net
realized gain on investments:
Class R Shares (13,841) --
Net increase in net assets from Fund
share transactions (Note 5):
Investor Shares 380,301 --
Class R Shares 97,897,647 23,459,795
Net increase in net assets 100,370,836 24,004,193
NET ASSETS:
Beginning of year 24,004,193 --
End of year (including undistributed
net investment income of $775,257
and $24,137, respectively) $124,375,029 $24,004,193
<FN>
* The Fund commenced operations on September 30, 1993.
</TABLE>
See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
DREYFUS S&P 500 STOCK INDEX FUND
Please refer to page 5 of the Prospectus dated March 1, 1995.
See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
DREYFUS S&P 500 STOCK INDEX FUND
Please refer to page 5 of the Prospectus dated March 1, 1995.
See Notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Dreyfus/Laurel Funds, Inc. (the "Investment Company"), The Dreyfu-
s/Laurel Funds Trust, The Dreyfus/Laurel Tax-Free Municipal Funds and The
Dreyfus/Laurel Investment Series are all registered open-end management
investment companies that are now part of The Dreyfus Family of Funds. The
Investment Company is a series mutual fund with 19 separate investment
portfolios. These financial statements report on the Dreyfus S&P 500 Stock
Index Fund (the "Fund"). The Investment Company was incorporated on August
6, 1987 as a Maryland corporation and is registered with the Securities
and Exchange Commission under the Investment Company Act of 1940, as
amended (the "1940 Act"), as a diversified, open-end management investment
company. The Fund commenced operations on September 30, 1993. The Fund
currently offers two classes of shares: Investor Shares and Class R Shares
(effective October 17, 1994, the Trust Shares were redesignated Class R
Shares). Investor Shares are sold primarily to retail investors and bear a
distribution fee. Class R Shares are sold primarily to bank trust depart-
ments and other financial service providers acting on behalf of customers
having a qualified trust or investment account or relationship at such in-
stitutions and bear no distribution fee. Each class of shares has identi-
cal rights and privileges, except with respect to distribution fees and
voting rights on matters affecting a single class. The following is a sum-
mary of significant accounting policies consistently followed by the Fund
in the preparation of its financial statements in accordance with gener-
ally accepted accounting principles.
(A) PORTFOLIO VALUATION
Investments in securities traded on a national securities exchange are
valued at the last reported sales price or, in the absence of a recorded
sale, at the mean of the latest bid and asked prices. Over-the-counter se-
curities are valued at the mean of the latest bid and asked prices. When
market quotations are not readily available, securities are valued at fair
value as determined in good faith by the Board of Directors. Bonds are
valued through valuations obtained from a commercial pricing service or at
the most recent mean of the bid and asked prices provided by investment
dealers in accordance with procedures established by the Board of Direc-
tors. Debt securities with maturities of 60 days or less are valued at am-
ortized cost.
(B) REPURCHASE AGREEMENTS
The Fund may engage in repurchase agreement transactions. Under the terms
of a typical repurchase agreement, the Fund, through its custodian, takes
possession of an underlying debt obligation, subject to an obligation of
the seller to repurchase, and the Fund to resell, the obligation at an
agreed-upon price and time, thereby determining the yield during the
Fund's holding period. This arrangement results in a fixed rate of return
that is not subject to market fluctuations during the Fund's holding pe-
riod. The value of the collateral is at least equal at all times to the
total amount of the repurchase obligations, including interest. In the
event of counterparty default, the Fund has the right to use the collat-
eral to offset losses incurred. There is potential loss to the Fund in the
event the Fund is delayed or prevented from exercising its rights to dis-
pose of the collateral securities, including the risk of a possible de-
cline in the value of the underlying securities during the period while
the Fund seeks to assert its rights. The Fund's investment manager, acting
under the supervision of the Board of Directors, reviews the value of the
collateral and the creditworthiness of those banks and dealers with which
the Fund enters into repurchase agreements to evaluate potential risks.
(C) FUTURES CONTRACTS ACCOUNTING PRINCIPLES
The Fund may enter into futures contracts to hedge against fluctuations in
the value of its portfolio. Upon entering into a futures contract, the
Fund is required to deposit with the broker an amount of cash or cash
equivalents equal to a certain percentage of the contract amount. This is
known as the initial margin. Subsequent payments ("variation margin") are
made or received by the Fund each day, depending on the daily fluctuation
of the value of the contract. The daily changes in the contract are re-
corded as unrealized gains or losses. The Fund recognizes a realized gain
or loss when the contract is closed.
The use of futures contracts as a hedging device involves several risks.
The change in value of futures contracts primarily corresponds with the
value of their underlying instruments, which may not correlate with the
change in value of the hedged investments. In addition, the Fund may not
be able to enter into a closing transaction because of an illiquid second-
ary market.
(D) SECURITY TRANSACTIONS AND INVESTMENT INCOME
Securities transactions are recorded as of the trade date. Dividend income
is recorded on the ex-dividend date. Interest income is recorded on the
accrual basis. Realized gains and losses from securities transactions are
recorded on the identified cost basis. Investment income and realized and
unrealized gains and losses are allocated based upon relative average
daily net assets of each class.
(E) EXPENSE ALLOCATION
Expenses of the Fund not directly attributable to the operations of any
class of shares are pro rated between the classes based upon the relative
average daily net assets of each class. Distribution expense is directly
attributable to a particular class of shares and is charged only to that
class' operations.
(F) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income, if any, are determined on a class
level, and are declared and paid four times annually. Distributions from
net realized capital gains, if any, are determined on a Fund level and are
declared and paid annually. Additional distributions of net investment in-
come and capital gains for the Fund may be made at the discretion of the
Board of Directors in order to avoid the 4% nondeductible federal excise
tax. Income distributions and capital gain distributions on a Fund level
are determined in accordance with income tax regulations, which may differ
from generally accepted accounting principles. These differences are pri-
marily due to differing treatments of income and gains on various invest-
ment securities held by the Fund, timing differences and differing charac-
terization of distributions made by the Fund as a whole.
(G) FEDERAL INCOME TAXES
The Fund intends to qualify as a regulated investment company by complying
with the requirements of the Internal Revenue Code applicable to regulated
investment companies and by distributing substantially all of its taxable
income to its shareholders. Therefore, no federal income tax provision is
required.
2. INVESTMENT MANAGEMENT FEE, DIRECTORS' FEES AND OTHER RELATED PARTY
TRANSACTIONS
Effective as of October 17, 1994, the Investment Company's investment man-
agement agreement with Mellon Bank, N.A. ("Mellon Bank"), a wholly-owned
subsidiary of Mellon Bank Corporation was transferred to The Dreyfus Cor-
poration (the "Manager"), a wholly-owned subsidiary of Mellon Bank. The
Manager provides, or arranges for one or more third parties to provide,
investment advisory, administrative, custody, fund accounting and transfer
agency services to the Investment Company. The Manager also directs the
investments of the Fund in accordance with its investment objective, poli-
cies and limitations. For these services, the Fund pays the Manager a fee,
calculated daily and paid monthly, at the annual rate of 0.40% of the
value of the Fund's average daily net assets. Out of its fee, the Manager
pays all of the expenses of the Fund except brokerage, taxes, interest,
Rule 12b-1 distribution fees and expenses, fees and expenses of non-
interested Directors (including counsel fees) and extraordinary expenses.
In addition, the Manager is required to reduce its fee in an amount equal
to the Fund's allocable portion of fees and expenses of the non-interested
Directors (including counsel).
For the period from April 4, 1994 to October 16, 1994, Mellon Bank served
as the Investment Company's investment manager pursuant to the investment
management agreement described above. Prior to April 4, 1994, the Invest-
ment Company had individual contracts with Mellon Bank to provide custody,
accounting, and transfer agency services to the Fund. Effective April 4,
1994, custody, accounting, and transfer agency services are covered by the
investment management agreement described above.
Prior to April 4, 1994, the Investment Company had an investment advisory
agreement under which the Fund paid Mellon Bank an annual fee of 0.30% of
the value of the Fund's average daily net assets for investment advisory
services. For the period from November 1, 1993 through April 3, 1994, Mel-
lon Bank, as investment adviser, voluntarily agreed to reimburse expenses
in the amount of $52,201.
Prior to September 23, 1994, Frank Russell Investment Management Company
(the "Administrator") served as the Fund's administrator and provided,
pursuant to an administration agreement, various administrative and corpo-
rate secretarial services to the Fund. For the period from April 4, 1994
to September 23, 1994, Mellon Bank, as investment manager, paid the Admin-
istrator's fee out of the management fee described above. Prior to April
4, 1994, the Investment Company paid the Administrator the following fees
for the services supplied by the Administrator pursuant to the administra-
tion agreement: (i) an annual fee of $500,000; (ii) an annual asset-based
fee, payable monthly on a pro rata basis, based on the following percent-
ages of the aggregate average daily net assets of the Investment Company:
up to and including $10 billion -- 0.01%, over $10 billion -- 0.005%; and
(iii) all start-up costs (including out- of-pocket, blue sky registration
and personnel costs) for new portfolios (prior to and for 6 months follow-
ing commencement of operations).
Prior to April 4, 1994, the Investment Company had a contract with Russell
Fund Distributors, Inc. to serve as distributor of its shares. Effective
April 4, 1994, through October 16, 1994, Funds Distributor, Inc. served as
distributor of the Investment Company's shares. Effective as of October
17, 1994, Premier Mutual Fund Services, Inc. ("Premier") serves as the In-
vestment Company's distributor. Premier also serves as the Investment Com-
pany's sub-administrator and, pursuant to a sub-administration agreement
with the Manager, provides various administrative and corporate secre-
tarial services to the Investment Company.
No officer or employee of Premier (or of any parent, subsidiary or affili-
ate thereof) receives any compensation from The Dreyfus/Laurel Funds,
Inc., The Dreyfus/Laurel Funds Trust, The Dreyfus/Laurel Tax-Free Munici-
pal Funds or The Dreyfus/Laurel Investment Series (collectively, "The
Dreyfus/Laurel Funds") for serving as an officer, Director or Trustee of
The Dreyfus/Laurel Funds. In addition, no officer or employee of the Man-
ager (or of any parent, subsidiary or affiliate thereof) serves as an of-
ficer, Director or Trustee of The Dreyfus/Laurel Funds. The Dreyfus/Laurel
Funds pay each Director or Trustee who is not an officer or employee of
Premier (or any parent, subsidiary or affiliate thereof), $27,000 per
annum, $1,000 for each Board meeting attended and $750 for each Audit Com-
mittee meeting attended, and reimburse each Director or Trustee for travel
and out-of-pocket expenses. Prior to April 4, 1994, the Investment Company
paid each Director $15,000 per annum plus reimbursement for travel and
out-of-pocket expenses.
3. DISTRIBUTION PLAN
The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule
12b-1 under the 1940 Act relating to its Investor Shares. Under the Plan,
the Fund may pay annually up to 0.25% of the value of the average daily
net assets attributable to its Investor Shares to compensate Premier and
Dreyfus Service Corporation, an affiliate of the Manager, for shareholder
servicing activities and Premier for activities primarily intended to re-
sult in the sale of Investor Shares. Class R Shares bear no distribution
fee. Prior to April 4, 1994, the Fund had a distribution and shareholder
services plan under which the Fund was authorized to spend annually up to
0.35% of its average daily net assets on distribution and shareholder ser-
vicing expenses.
Under its terms, the Plan shall remain in effect from year to year, pro-
vided such continuance is approved annually by a vote of a majority of
those Directors who are not "interested persons" of the Investment Company
and who have no direct or indirect financial interest in the operation of
the Plan or in any agreement related to the Plan.
4. SECURITIES TRANSACTIONS
The cost of purchases and proceeds from sales of securities, excluding
short-term investments and U.S. government securities, for the year ended
October 31, 1994 were $108,326,116 and $13,817,502, respectively.
At October 31, 1994, aggregate gross unrealized appreciation for all secu-
rities in which there was an excess of value over tax cost and aggregate
gross unrealized depreciation for all securities in which there was an ex-
cess of tax cost over value were $8,105,402 and $6,754,938, respectively.
5. SHARES OF CAPITAL STOCK
The Investment Company has authority to issue 25 billion shares of capital
stock with a par value of $0.001. The table below summarizes the transac-
tions in Fund shares for the year or period indicated:
DREYFUS S&P 500 STOCK INDEX FUND
<TABLE>
<CAPTION>
PERIOD ENDED
10/31/94*
SHARES AMOUNT
<S> <C> <C>
INVESTOR SHARES:
Sold 77,042 $ 775,958
Issued as reinvestment of
dividends and distributions 117 1,172
Redeemed (40,582) (396,829)
Net increase 36,577 $ 380,301
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
10/31/94* 10/31/93**
SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
CLASS R SHARES:
Sold 12,100,667 $123,501,816 2,371,252 $23,719,270
Issued as reinvestment
of dividends and dis-
tributions 177,979 1,784,732 -- --
Redeemed (2,720,889) (27,388,901) (25,523) (259,475)
Net increase 9,557,757 $ 97,897,647 2,345,629 $23,459,795
<FN>
* The Fund commenced selling Investor Shares on April 18, 1994. Those
shares outstanding prior to April 4, 1994 were designated Trust Shares.
Effective as of October 17, 1994, the Fund's Trust Shares were redesig-
nated Class R Shares.
** The Fund commenced operations on September 30, 1993.
</TABLE>
6. ORGANIZATION COSTS
The Fund paid all costs in connection with the Fund's organization includ-
ing the fees and expenses of registering and qualifying the Fund's shares
for distribution under federal and state securities regulations. Prior to
April 4, 1994, all such costs were being amortized on the straight-line
method over a period of five years. On April 4, 1994, the remaining unam-
ortized organization costs were reimbursed by Mellon Bank as the invest-
ment adviser.
7. DIVIDENDS
On November 2, 1994, the Board of Directors declared a dividend from net
investment income for the Investor and Class R Shares in the amount of
$0.0584 and $0.0650 per share, respectively, payable on November 9, 1994
to shareholders of record on November 2, 1994.
INDEPENDENT AUDITORS' REPORT
KPMG
The Board of Directors and Shareholders
The Dreyfus/Laurel Funds, Inc.
We have audited the accompanying statement of assets and liabilities of
the Dreyfus S&P 500 Stock Index Fund of The Dreyfus/Laurel Funds, Inc.,
including the portfolio of investments, as of October 31, 1994, and the
related statement of operations for the year then ended, the statement of
changes in net assets for each of the two years in the period then ended,
and the financial highlights for each of the periods indicated herein.
These financial statements and financial highlights are the responsibility
of the Fund's management. Our responsibility is to express an opinion on
these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and fi-
nancial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclo-
sures in the financial statements. Our procedures included confirmation of
securities owned as of October 31, 1994, by correspondence with the custo-
dian and brokers. An audit also includes assessing the accounting princi-
ples used and significant estimates made by management, as well as evalu-
ating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
of the Dreyfus S&P 500 Stock Index Fund of The Dreyfus/Laurel Funds, Inc.,
as of October 31, 1994, and the results of its operations for the year
then ended, changes in its net assets for each of the two years in the pe-
riod then ended, and the financial highlights for each of the periods in-
dicated herein, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Pittsburgh, Pennsylvania
December 9, 1994
<TABLE>
DREYFUS EQUITY INCOME FUND
PORTFOLIO OF INVESTMENTS
<CAPTION>
OCTOBER 31, 1994
VALUE
SHARES (NOTE 1)
<S> <C> <C>
COMMON STOCKS - 89.1%
OIL & GAS - 11.7%
1,200 Amoco Corporation $ 76,050
500 Atlantic Richfield 54,188
2,250 Exxon Corporation 141,469
850 Mobil Corporation 73,100
900 Phillips Petroleum Company 33,187
750 Royal Dutch Petroleum 87,375
500 Sonat Inc. 16,250
800 Texaco Inc. 52,300
1,400 Ultramar Corporation 36,225
800 USX-Marathon Group 15,000
--------
585,144
--------
TELECOMUNICATIONS - 10.1%
1,350 A T & T Corporation 74,250
1,100 BCE Inc. 38,500
1,400 Bell Atlantic Corporation 73,325
1,300 Bellsouth Corporation 69,225
1,250 Nynex Corporation 49,062
1,650 Pacific Telesis Group 52,181
1,550 Southwestern Bell Corporation 64,906
950 Sprint Corporation 30,994
1,400 U S West Inc. 52,675
--------
505,118
--------
DRUGS & COSMETICS - 7.7%
200 Avon Products Inc. 12,650
650 Bristol-Myers Squibb Company 37,944
300 Colgate-Palmolive Company 18,300
350 Gillette Company 26,031
2,100 Merck & Company Inc. 75,075
900 Pfizer Inc. 66,713
1,350 Procter & Gamble Company 84,375
550 Schering-Plough Corporation 39,187
300 Warner Lambert Company 22,875
--------
383,150
--------
MERCHANDISING - 6.1%
900 Albertsons Inc. 27,000
750 American Stores Company 20,344
250 Dayton-Hudson Corporation 19,375
600 Gap Inc. 20,250
1,050 Limited Inc. 19,294
1,650 May Department Stores Company 62,081
300 Nordstrom Inc. 14,775
1,400 Penney J C Company Inc. 70,875
2,200 Wal-Mart Stores Inc. 51,700
--------
305,694
--------
</TABLE>
See Notes to Financial Statements.
4
<PAGE>
<TABLE>
DREYFUS EQUITY INCOME FUND
PORTFOLIO OF INVESTMENTS (continued)
<CAPTION>
OCTOBER 31, 1994
VALUE
SHARES (NOTE 1)
<S> <C> <C>
COMMON STOCKS (CONTINUED)
CHEMICALS & FERTILIZERS - 5.8%
300 American Cyanamid Company $ 29,625
1,500 Du Pont (EI) De Nemours & Company 89,437
650 Eastman Chemical 35,100
500 Engelhard Corporation 11,750
500 Lyondell Petrochemical Company 13,687
650 Monsanto Company 49,481
1,100 Union Carbide Corporation 36,438
800 WMX Technologies Inc. 23,500
--------
289,018
--------
BANKING - 5.7%
1,600 Bank Of New York Company Inc. 50,800
750 BankAmerica Corporation 32,625
1,400 Chase Manhattan Corporation 50,400
1,650 Corestates Financial Corporation 42,694
200 First Bank System Inc. 7,450
800 First Union Corporation 36,000
1,150 MBNA Corporation 30,763
400 National City Corporation 10,900
1,100 PNC Financial Corporation 25,850
--------
287,482
--------
FOOD - 4.6%
550 Campbell Soup Company 22,687
1,450 Coca-Cola Company 72,862
550 Conagra Inc. 17,119
250 CPC International Inc. 13,375
300 IBP Inc. 10,237
1,600 Pepsico Inc. 56,000
350 Tyson Foods Inc., Class A 8,137
250 Unilever N V 29,687
--------
230,104
--------
PUBLIC UTILITIES - 4.4%
1,750 CINergy Corporation 40,469
1,500 Consolidated Edison Company Inc. 37,312
900 Entergy Corporation 21,037
300 FPL Group Inc. 9,937
550 Pacific Enterprises 11,825
1,350 Peco Energy Company 34,594
3,200 Southern Company 63,200
--------
218,374
--------
OFFICE EQUIPMENT - 3.3%
800 International Business Machines 59,600
600 Pitney Bowes Inc. 20,250
1,200 Reynolds & Reynolds Company 29,850
550 Xerox Corporation 56,375
--------
166,075
--------
</TABLE>
See Notes to Financial Statements.
5
<PAGE>
<TABLE>
DREYFUS EQUITY INCOME FUND
PORTFOLIO OF INVESTMENTS (continued)
<CAPTION>
OCTOBER 31, 1994
VALUE
SHARES (NOTE 1)
<S> <C> <C>
COMMON STOCKS (CONTINUED)
ELECTRICAL EQUIPMENT - 3.0%
250 Avnet Inc. $ 9,375
2,850 General Electric Company 139,294
--------
148,669
--------
INSURANCE - 2.6%
1,100 American General Corporation 30,250
750 American National Insurance Company 35,250
250 Chubb Corporation 17,469
350 Providian Corporation 11,112
500 Safeco Corporation 25,062
300 St. Paul Companies 13087
--------
132,230
--------
ELECTRONICS - 2.6%
650 Corning Inc. 22,100
400 Hewlett Packard Company 39,100
850 Motorola Inc. 50,044
300 Raytheon Company 19,125
--------
130,369
--------
MEDICAL - 2.5%
1,900 Abbott Labs 58,900
350 Baxter International Inc. 9,100
1,050 Johnson & Johnson 57,356
--------
125,356
--------
AUTOMOTIVE - 2.4%
1,100 Chrysler Corporation 53,625
300 Echlin Inc. 9225
500 General Motors Corporation 19,750
1,000 General Motors Corporation, Class H 36,000
--------
118,600
--------
AEROSPACE & AVIATION - 2.2%
450 Lockheed Corporation 32,400
200 McDonnell Douglas Corporation 28,200
450 Northrop Corporation 19,744
250 Sunstrand 11,375
250 United Technologies 15750
--------
107,469
--------
BUILDING MATERIALS - 2.0%
300 Georgia Pacific Corporation 22,162
800 PPG Industries Inc. 32,600
1,200 Weyerhaeuser Company 47,100
--------
101,862
--------
TOBACCO & VENDING - 1.7%
1,400 Philip Morris Companies Inc. 85,750
--------
</TABLE>
See Notes to Financial Statements.
6
<PAGE>
<TABLE>
DREYFUS EQUITY INCOME FUND
PORTFOLIO OF INVESTMENTS (continued)
<CAPTION>
OCTOBER 31, 1994
VALUE
SHARES (NOTE 1)
<S> <C> <C>
COMMON STOCKS (CONTINUED)
FINANCE - 1.6%
200 Dean Witter Discover & Company $ 7,725
400 Federal National Mortgage Association 30,400
750 KeyCorp 21,469
400 Reuters Holdings Plc ADR 18,850
-------
78,444
-------
PRINTING & PUBLISHING - 1.2%
500 Gannett Company Inc. 24,000
150 McGraw-Hill Inc. 11,213
450 Tribune Company 23,681
-------
58,894
-------
RAILROADS - 1.1%
700 Conrail Inc. 38,063
600 Illinois Central 19,275
-------
57,338
-------
BUSINESS SERVICES - 1.1%
1,200 Block H & R Inc. 53,250
-------
BEVERAGES - 0.9%
600 Anheuser-Busch Companies 30,450
450 Seagram Company Ltd. 13,894
-------
44,344
-------
RESTAURANTS - 0.8%
950 Morrison Restaurants Inc. 27,788
525 Sbarro Inc. 13,059
-------
40,847
-------
MULTI-INDUSTRY - 0.8%
200 ITT Corporation 17,650
450 Textron Inc. 22,950
-------
40,600
-------
MACHINERY & HEAVY EQUIPMENT - 0.6%
400 Deere & Company 28,700
-------
METALS - 0.5%
100 Aluminum Company Of America 8,525
300 Phelps Dodge Corporation 18,413
-------
26,938
-------
</TABLE>
See Notes to Financial Statements.
7
<PAGE>
<TABLE>
DREYFUS EQUITY INCOME FUND
PORTFOLIO OF INVESTMENTS (continued)
<CAPTION>
OCTOBER 31, 1994
VALUE
SHARES (NOTE 1)
<S> <C> <C>
COMMON STOCKS (CONTINUED)
PAPER - 0.5%
300 International Paper Company $ 22,350
----------
PHOTOGRAPHY & PHOTOGRAPHIC EQUIPMENT - 0.4%
450 Eastman Kodak Company 21,656
----------
ELECTRICAL POWER - 0.4%
700 DQE, Inc. 21,175
----------
TIRE & RUBBER - 0.3%
500 Goodyear Tire & Rubber 17,500
----------
NATURAL GAS - 0.2%
350 El Paso Natural Gas 10,894
----------
TRUCKING - 0.2%
350 Ryder System 8,225
----------
HOME FURNISHINGS - 0.1%
300 Newell Company 6,300
----------
TOTAL COMMON STOCKS (Cost $4,553,337) 4,457,919
----------
CONVERTIBLE PREFERRED STOCKS - 5.8%
300 Ahmanson H F & Company, Depositary Shares,
representing 1/10 share, 6.000%, Series D, C 13,763
300 Ashland Oil Inc.,
6.250% Conv. Pfd. 18,975
200 Barnett Banks Inc.,
$4.50 Series A, Conv. Pfd. 16,050
650 Burlington Northern Inc.,
6.250% Series A, Conv. Pfd. 38,513
1,200 Citicorp, Depositary Shares representing
1/12 share, Series 15, Conv. Pfd. 23,550
650 Ford Motor Company, Depositary Shares
representing 1/1000 share, $4.20, Series A 62,888
350 General Motors Corporation, Depositary Shares
representing 1/10 share Series C, Conv. Pfd. 19,644
2,300 RJR Nabisco Holdings, Depositary Shares
representing 1/10 share, 9.250% Series C, Co 15,813
</TABLE>
See Notes to Financial Statements.
8
<PAGE>
<TABLE>
DREYFUS EQUITY INCOME FUND
PORTFOLIO OF INVESTMENTS (continued)
<CAPTION>
OCTOBER 31, 1994
VALUE
SHARES (NOTE 1)
<S> <C> <C>
CONVERTIBLE PREFERRED STOCKS (CONTINUED)
950 Sears Roebuck & Company, Depositary Shares
representing 1/4 share, Series A, Conv. Pfd. $ 53,794
500 Travelers Inc.,
5.500% Series B, Conv. Pfd. 27,625
--------
TOTAL CONVERTIBLE PREFFERRED STOCKS 290,615
(Cost $233,531) --------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C> <C>
CONVERTIBLE BONDS AND NOTES - 1.0%
$18,000 General Instrument, Convertible Subordinate Notes
5.000% due 6/15/00 25,650
11,000 Pogo Producing Company, Convertible Subordinate Notes
5.500% due 3/15/04 12,595
10,000 Wendy's International Inc., Convertible Subordinate Debent
7.000% due 4/1/06 12,950
-----------
TOTAL CONVERTIBLE BONDS AND NOTES (COST $49,733) 51,195
-----------
REPURCHASE AGREEMENT - 4.7% (COST $234,957)
234,957 Agreement Barclays de Zoete Wedd,
dated 10/31/94, bearing 4.780% to be repurchased at
$234,988 on 11/1/94, collateralized by $241,000
U.S Treasury Bill, 4.360% due 11/10/94 234,957
-----------
TOTAL INVESTMENTS (Cost $5,071,558*) 100.6% $5,034,686
OTHER ASSETS AND LIABILITIES (Net) (0.6)% (29,005)
---------------------------
NET ASSETS 100.0% $5,005,681
===========================
<FN>
_______________________________________________________________________
* Aggregate cost for Federal tax purposes.
</TABLE>
See Notes to Financial Statements.
9
<PAGE>
<TABLE>
-----------------------------------------------------------------------------------------
Dreyfus Equity Income Fund
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1994
-----------------------------------
<S> <C> <C>
ASSETS:
Investments, at value (Cost $5,071,558)(Note 1)
See accompanying schedule............................. $5,034,686
Cash .................................................... 388
Receivable for investment securities sold................ 35,770
Dividends and interest receivable........................ 13,462
----------
Total Assets.......................................... 5,084,306
LIABILITIES:
Payable for investment securities purchased.............. $74,225
Investment management fee payable (Note 2)............... 4,038
Payable for Fund shares redeemed......................... 200
Accrued Directors' fees and expenses (Note 2)............ 162
-------
Total Liabilities..................................... 78,625
----------
NET ASSETS.................................................. $5,005,681
==========
NET ASSETS consist of:
Undistributed net investment income...................... $ 23,451
Accumulated net realized loss on investments sold........ (9,599)
Net unrealized depreciation of investments............... (36,872)
Par value................................................ 503
Paid-in capital in excess of par value................... 5,028,198
----------
Total Net Assets...................................... $5,005,681
==========
NET ASSET VALUE:
Investor Shares:
Net asset value, offering and redemption price per share
($1,015 - 102 shares of capital stock outstanding ) ........ $ 9.95
==========
Class R Shares:
Net asset value, offering and redemption price per share
($5,004,666 - 502,815 shares of capital stock outstanding).. $ 9.95
==========
</TABLE>
See Notes to Financial Statements
10
<PAGE>
<TABLE>
-----------------------------------------------------------------------------------------
Dreyfus Equity Income Fund
STATEMENT OF OPERATIONS
For the Period Ended October 31, 1994*
<S> <C> <C>
INVESTMENT INCOME:
Dividends ............................................... $ 22,688
Interest ................................................ 8,070
---------
Total Investment Income............................... 30,758
EXPENSES:
Investment management fee (Note 2)....................... $7,144
Directors' fees and expenses (Note 2).................... 162
Distribution fee (Note 3)................................ 1
------
Total Expenses........................................ 7,307
---------
NET INVESTMENT INCOME....................................... 23,451
---------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS
(Notes 1 and 4):
Net realized loss on investments sold during the period.. (9,599)
Net unrealized depreciation of investments during
the period............................................ (36,872)
---------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS............. (46,471)
---------
NET DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................................ $(23,020)
=========
<FN>
_________________________
* The Fund commenced operations on September 2, 1994.
</TABLE>
See Notes to Financial Statements
11
<PAGE>
<TABLE>
Dreyfus Equity Income Fund
STATEMENT OF CHANGES IN NET ASSETS
<CAPTION>
Period
Ended
10/31/94*
-----------
<S> <C>
Net investment income............................................ $ 23,451
Net realized loss on investments sold during the period.......... (9,599)
Net unrealized depreciation of investments during the period..... (36,872)
-----------
Net decrease in net assets resulting from operations............. (23,020)
Net increase in net assets from Fund share transactions (Note 5):
Investor Shares............................................... 1,001
Class R Shares................................................ 5,027,700
-----------
Net increase in net assets....................................... 5,005,681
NET ASSETS:
Beginning of period.............................................. 0
-----------
End of period (including undistributed net investment
income of $23,451)............................................ $5,005,681
===========
<FN>
________________________
* The Fund commenced operations on September 2, 1994.
</TABLE>
See Notes to Financial Statements.
12
<PAGE>
Dreyfus Equity Income Fund
FINANCIAL HIGHLIGHTS
Please refer to page 5 of the Prospectus dated March 1, 1995.
See Notes to Financial Statements.
13
<PAGE>
Dreyfus Equity Income Fund
FINANCIAL HIGHLIGHTS
Please refer to page 5 of the Prospectus dated March 1, 1995.
See Notes to Financial Statements.
14
<PAGE>
DREYFUS EQUITY INCOME FUND
Notes to Financial Statements
1. SIGNIFICANT ACCOUNTING POLICIES
The Dreyfus/Laurel Funds, Inc. (the "Investment Company"), The Dreyfus/Laurel
Funds Trust, The Dreyfus/Laurel Tax-Free Municipal Funds and The Dreyfus/Laurel
Investment Series are all registered open-end management investment companies
that are now part of The Dreyfus Family of Funds. The Investment Company is a
series mutual fund with 19 separate investment portfolios. These financial
statements report on the Dreyfus Equity Income Fund (the "Fund"). The Investment
Company was incorporated on August 6, 1987 as a Maryland corporation and is
registered with the Securities and Exchange Commission under the Investment
Company Act of 1940, as amended (the "1940 Act"), as a diversified, open-end
management investment company. The Fund commenced operations on September 2,
1994. The Fund currently offers two classes of shares: Investor Shares and Class
R Shares (effective October 17, 1994 Trust Shares were redesignated as Class R
Shares). Investor Shares are sold primarily to retail investors and bear a
distribution fee. Class R Shares are sold primarily to bank trust departments
and other financial services providers acting on behalf of customers having a
qualified trust or investment account or relationship at such institution and
bear no distribution fee. Each class of shares has identical rights and
privileges, except with respect to the distribution fee and voting rights on
matters affecting a single class. The following is a summary of significant
accounting policies consistently followed by the Fund in the preparation of its
financial statements in accordance with generally accepted accounting
principles.
(A) PORTFOLIO VALUATION
Investments in securities traded on a national securities exchange are valued at
the last reported sales price or, in the absence of a recorded sale, at the mean
of the latest bid and asked prices. Over-the-counter securities are valued at
the mean of the latest bid and asked prices. When market quotations for such
securities are not readily available, securities are valued at fair value, as
determined in good faith by the Board of Directors. Bonds are valued through
valuations obtained from a commercial pricing service or at the most recent mean
of the bid and asked prices provided by investment dealers in accordance with
procedures established by the Board of Directors. Debt securities with
maturities of 60 days or less from the valuation day are valued at amortized
cost.
(B) REPURCHASE AGREEMENTS
The Fund may engage in repurchase agreement transactions. Under the terms of a
typical repurchase agreement, the Fund, through its custodian, takes possession
of an underlying debt obligation subject to an obligation of the seller to
repurchase, and the Fund to resell, the obligation at an agreed-upon price and
time, thereby determining the yield during the Fund's holding period. This
arrangement results in a fixed rate of return that is not subject to market
fluctuations during the Fund's holding period. The value of the collateral is at
least equal, at all times, to the total amount of the repurchase obligations,
including interest. In the event of counterparty default, the Fund has the right
to use the collateral to offset losses incurred. There is potential loss to the
Fund in the event the Fund is delayed or prevented from exercising its rights to
dispose of the collateral securities, including the risk of a possible decline
in the value of the underlying securities during the period while the Fund seeks
to assert its rights. The Fund's investment manager, acting under the
supervision of the Board of Directors, reviews the value of the collateral and
the creditworthiness of those banks and dealers with which the Fund enters into
repurchase agreements to evaluate potential risks.
15
<PAGE>
DREYFUS EQUITY INCOME FUND
Notes to Financial Statements
(C) SECURITY TRANSACTIONS AND INVESTMENT INCOME
Securities transactions are recorded as of the trade date. Dividend income is
recorded on the ex-dividend date. Interest income is recorded on the accrual
basis. Realized gains and losses from securities sold are recorded on the
identified cost basis. Investment income and realized and unrealized gains and
losses are allocated based upon relative average daily net assets of each class.
(D) EXPENSE ALLOCATION
Expenses of the Fund not directly attributable to the operations of any class of
shares are pro rated between the classes based upon the relative average
daily net assets of each class. Distribution expense is directly attributable to
a particular class of shares and is charged only to that class's operations.
(E) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income, if any, are determined on a class level
and are declared and paid quarterly. Distributions from net realized capital
gains, if any, are determined on a Fund level and are declared and paid
annually. Additional distributions of net investment income and capital gains
for the Fund may be made at the discretion of the Board of Directors in order to
avoid the 4% nondeductible federal excise tax. Income distributions and capital
gain distributions on a Fund level are determined in accordance with income tax
regulations, which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments of income and gains
on various investment securities held by the Fund, timing differences and
differing characterization of distributions made by the Fund as a whole.
(F) FEDERAL INCOME TAXES
The Fund intends to qualify as a regulated investment company by complying with
the requirements of the Internal Revenue Code applicable to regulated
investment companies and by distributing substantially all of its taxable income
to its shareholders. Therefore, no federal income tax provision is required.
2. INVESTMENT MANAGEMENT FEE, DIRECTORS' FEES AND OTHER PARTY
TRANSACTIONS
Effective as of October 17, 1994, the Investment Company's investment management
agreement with Mellon Bank, N.A. ("Mellon Bank"), a wholly owned subsidiary of
Mellon Bank Corporation, was transferred to The Dreyfus Corporation (the
"Manager"), a wholly owned subsidiary of Mellon Bank. The Manager provides, or
arranges for one or more third parties to provide, investment advisory,
administrative, custody, fund accounting and transfer agency services to the
Investment Company. The Manager also directs the investments of the Fund in
accordance with its investment objective, policies and limitations. For these
services, the Fund pays the Manager a fee, calculated daily and paid monthly, at
the annual rate of 0.90% of the value of the Fund's average daily net assets.
Out of its fee, the Manager pays all of the expenses of the Fund except
brokerage, taxes, interest, Rule 12b-1 distribution fees and expenses, fees and
expenses of non-interested Directors (including counsel fees) and extraordinary
expenses. In addition, the Manager is required to reduce its fee in an amount
equal to the Fund's allocable portion of fees and expenses of the non-interested
Directors (including counsel).
For the period from September 2, 1994 (commencement of operations), through
October 16, 1994, Mellon Bank served as the Fund's investment manager pursuant
to the investment management agreement described above.
16
<PAGE>
DREYFUS EQUITY INCOME FUND
Notes to Financial Statements
Prior to September 23, 1994, Frank Russell Investment Management Company (the
"Administrator") served as the Fund's administrator and provided, pursuant to
an administration agreement, various administrative and corporate secretarial
services to the Fund. For the period from September 2, 1994 (commencement of
operations), to September 23, 1994, Mellon Bank, as investment manager, paid the
Administrator's fee out of the management fee described above.
For the period from September 2, 1994 (commencement of operations), through
October 16, 1994, Funds Distributor, Inc. served as distributor of the
Investment Company's shares. Effective as of October 17, 1994, Premier Mutual
Fund Services, Inc. ("Premier") serves as the Investment Company's distributor.
Premier also serves as the Investment Company's sub-administrator and, pursuant
to a sub-administration agreement with the Manager, provides various
administrative and corporate secretarial services to the Investment Company.
No officer or employee of Premier (or of any parent, subsidiary or affiliate
thereof) receives any compensation from The Dreyfus/Laurel Funds, Inc., The
Dreyfus/Laurel Funds Trust, The Dreyfus Laurel Tax-Free Municipal Funds or The
Dreyfus/Laurel Investment Series (collectively, "The Dreyfus/Laurel Funds") for
serving as an officer or Director/Trustee of The Dreyfus/Laurel Funds. In
addition, no officer or employee of the Manager (or of any parent, subsidiary or
affiliate thereof), serves as an officer or Director/Trustee of The
Dreyfus/Laurel Funds. The Dreyfus/Laurel Funds pays each Director/Trustee who is
not an officer or employee of Premier (or any parent, subsidiary or affiliate
thereof), $27,000 per annum, $1,000 for each Board meeting attended, and $750
for each Audit Committee meeting attended, and $750 for each Audit Committee
meeting attended, and reimburse each Director or Trustee for travel and
out-of-pocket expenses.
3. DISTRIBUTION PLAN
The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b-1
under the 1940 Act relating to its Investor Shares. Under the Plan, the Fund may
pay annually up to 0.25% of the value of the average daily net assets
attributable to its Investor Shares to compensate Premier and Dreyfus Service
Corporation, an affiliate of the Manager, for shareholder servicing activities
and Premier for activities primarily intended to result in the sale of Investor
Shares. The Class R Shares bear no distribution fee.
Under its terms, the Plan shall remain in effect from year to year, provided
such continuance is approved annually by a vote of a majority of those
Directors who are not "interested persons" of the Investment Company and who
have no direct or indirect financial interest in the operation of the Plan or in
any agreement related to the Plan.
17
<PAGE>
DREYFUS EQUITY INCOME FUND
Notes to Financial Statements
4. SECURITIES TRANSACTIONS
The cost of purchases and proceeds from sales of securities, excluding
short-term investments and U.S. government securities, for the period ended
October 31, 1994 aggregated $5,009,508 and $163,219, respectively.
At October 31, 1994, the aggregate gross unrealized appreciation for all
securities in which there was an excess of value over tax cost amounted to
$113, 101. The aggregate gross unrealized depreciation for all securities in
which there was an excess of tax cost over value amounted to $149,973.
<TABLE>
5. SHARES OF CAPITAL STOCK
The Investment Company has authority to issue 25 billion shares of capital
stock with a par value of $0.001. The Fund has authority to issue two classes of
shares. The table below summarizes transactions in Fund shares for the period
indicated:
<CAPTION>
PERIOD ENDED
OCTOBER 31, 1994*
SHARES AMOUNT
------ ------
<S> <C> <C>
INVESTOR SHARES:
Sold ................................. 132 $1,300
Redeemed ............................. (30) (299)
---- -------
Net increase ......................... 102 $1,001
==== =======
</TABLE>
<TABLE>
<CAPTION>
PERIOD ENDED
OCTOBER 31, 1994*
SHARES AMOUNT
------ ------
<S> <C> <C>
CLASS R SHARES:
Sold ................................. 502,825 $5,027,800
Redeemed ............................. (10) (100)
-------- -----------
Net increase ......................... 502,815 $5,027,700
======== ===========
<FN>
________________
*The Fund commenced operations on September 2, 1994. Effective as of
October 17, 1994, the Fund's Trust Shares were redesignated as Class R Shares.
</TABLE>
6. CAPITAL LOSS CARRYFORWARDS
At October 31, 1994, the Fund had available for federal income tax
purposes unused capital losses of $9,599 expiring in the year 2002.
7. DIVIDENDS
On November 2, 1994, the Board of Directors declared dividends from net
investment income for Investor and Class R Shares in the amount of $.0425 and
$.0466 per share, respectively, payable on November 9, 1994 to shareholders of
record on November 2, 1994.
18
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
The Dreyfus/Laurel Funds, Inc.
We have audited the accompanying statement of assets and liabilities of the
Dreyfus Equity Income Fund of The Dreyfus/Laurel Funds, Inc., as of October 31,
1994, and the related statement of operations, statement of changes in net
assets, and the financial highlights for the period then ended. These financial
statements and financial highlights are the responsibility of the Fund' s
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of October 31, 1994, by
correspondence with the custodian and brokers. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Dreyfus Equity Income Fund of The Dreyfus/Laurel Funds, Inc. as of October 31,
1994, and the results of its operations, the changes in its net assets, and the
financial highlights for the period then ended, in conformity with generally
accepted accounting principles.
KPMG Peat Marwick LLP
Pittsburgh, Pennsylvania
December 9, 1994
19
................................................................................
<PAGE>
PORTFOLIO of INVESTMENTS
................................................................................
- - - --------------------------------------------------------------------------------
DREYFUS EUROPEAN FUND OCTOBER 31, 1994
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
COMMON STOCKS -- 97.0%
<C> <S> <C>
UNITED KINGDOM -- 36.6%
1 Argyll Group PLC $ 4
9,000 Associated British Foods PLC 81,534
28,585 B.A.T. Industries PLC 204,796
17,100 Bank of Ireland PLC 79,135
13,452 Barclays Bank PLC 128,685
13,871 Boots Company PLC 120,218
25,700 British Gas PLC 122,296
15,350 British Petroleum Company PLC 109,441
34,970 British Telecommunications PLC 224,736
30,498 BTR PLC 152,857
18,625 Cable & Wireless PLC 127,917
18,393 General Electric Company PLC 83,013
18,691 Glaxo Holdings PLC 182,775
7,820 Great Universal Stores PLC 71,611
12,739 Greencore PLC 79,160
15,600 Guinness PLC 119,131
48,345 Hanson PLC 182,225
6,200 Imperial Chemical Industries PLC 81,311
22,500 Irish Life PLC 69,171
11,280 Kerry Group PLC 64,191
12,857 Lasmo PLC 31,537
6,234 Lloyds Bank PLC 58,616
26,125 Marks & Spencer PLC 176,437
19,632 MB Caradon PLC 84,753
9,500 National Power PLC 77,364
9,918 Pearson PLC 102,825
29,043 Prudential Corporation PLC 150,552
12,400 Reuters PLC 97,584
41,344 Royal Bank of Scotland Group PLC 297,474
8,919 Sainsbury PLC 58,193
174 Smithkline Beecham PLC 1,059
17,000 Southern Water PLC 168,185
2,722 Thames Water PLC 23,814
35 Thorn-EMI PLC 556
38,289 Vodafone Group PLC 132,112
29,714 Williams Holding PLC 168,121
4,400 Zeneca Group PLC 61,806
-----------
3,975,195
-----------
FRANCE -- 18.7%
2,449 Air Liquide (L') 345,271
1,236 Alcatel Alsthom Cie Generale d' Electric 113,291
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS. 7
................................................................................
<PAGE>
PORTFOLIO of INVESTMENTS (continued)
................................................................................
- - - --------------------------------------------------------------------------------
DREYFUS EUROPEAN FUND OCTOBER 31, 1994
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
COMMON STOCKS (continued)
<C> <S> <C>
FRANCE (CONTINUED)
2,035 AXA Company $ 94,330
1,100 Cie Financiale (Paribas) 73,162
1,026 Compagnie de St. Gobain 130,105
1,875 Compagnie Financiere de Suez 89,681
300 Credit Local FDFE France 22,960
660 Danone (EX BSN) 92,922
1,140 Eaux (Cie Generale Des) 104,381
200 Esso Francaise 28,158
477 GTM-Entrepose 36,404
630 L'Oreal 136,778
1,212 Lafarge Coppee SA 96,099
100 Legrand 133,994
869 LVMH Moet Hennessey 140,066
763 Lyonnaise des Eaux Dumez 69,343
962 Societe Generale 108,539
2,837 Societe National Elf Aquitaine 209,628
-----------
2,025,112
-----------
GERMANY -- 13.9%
150 Allianz Holdings AG 230,109
218 Bayerische Motoren Werke AG 112,345
600 Commerzbank AG 126,276
100 Heidelberg (Portland-Zementwerke) 83,652
123 Hochtief AG 75,410
166 Karstadt AG 68,548
200 Kaufhof AG 67,826
250 Linde AG 149,533
300 M.A.N. AG 81,291
250 Preussag AG 73,229
300 RWE Aktiengesellschaft 91,964
100 Schering AG 66,795
380 Siemens AG 158,812
50 Strabag Bau AG 15,128
310 Veba AG 103,893
-----------
1,504,811
-----------
SPAIN -- 7.0%
3,150 Autopista Cesa 26,184
3,494 Banco Bilbao Vizcaya 91,878
1,000 Banco Central Hispano Americano 23,978
1,400 Banco de Santander SA 56,956
600 Banco Intercontinental Espanol SA 55,437
</TABLE>
8 SEE NOTES TO FINANCIAL STATEMENTS.
................................................................................
<PAGE>
PORTFOLIO of INVESTMENTS (continued)
................................................................................
- - - --------------------------------------------------------------------------------
DREYFUS EUROPEAN FUND OCTOBER 31, 1994
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
COMMON STOCKS (continued)
<C> <S> <C>
SPAIN (CONTINUED)
1,000 Corporacion Mapfre St. $ 44,199
2,100 Empresa Nacional de Elec (Endesa) 96,343
400 Fomento de Construcciones y Contratas SA 40,283
600 Gas Natural S.D.G. SA 50,833
8,500 Iberdrola SA 56,048
3,400 Repsol SA 108,836
8,300 Telefonica de Espana 112,445
-----------
763,420
-----------
ITALY -- 6.0%
4,361 Assicurazioni Generali SPA 109,179
15,600 Banca Commerciale Italiana 36,113
3,400 Benetton 44,439
2,900 Cartiere Burgo 17,990
7,000 Credito Italiano SPA 7,433
11,200 Edison 47,922
20,000 Fiat SPA 81,673
3,800 I.F.I.L. 13,343
3,800 Instituto Banca San Paolo Torino 22,560
10,100 Italgas 30,868
7,115 Mediobanca SPA 59,128
3,600 Parmalat Finanziaria SPA 3,673
800 RAS 9,988
800 Rinascente 4,289
3,900 S.A.I. (Societa Assicuratrice Industraile) 50,721
2,400 Sasib 12,384
1,700 Sirti SPA 11,441
2,400 SME (Meridionale Finanziaria) 6,110
28,460 Telecom Italia SPA 78,098
-----------
647,352
-----------
SWITZERLAND -- 4.9%
70 Ciba Geigy AG 41,332
140 Credit Suisse Holdings 61,245
100 Nestle SA 93,550
5 Roche Holdings AG 45,022
225 Sandoz AG 112,236
60 Schweizerische Bankgesellschaft 56,273
170 Schweizerischer Bankverein 49,038
200 SMH AG Nuenberg 26,296
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS. 9
................................................................................
<PAGE>
PORTFOLIO of INVESTMENTS (continued)
................................................................................
- - - --------------------------------------------------------------------------------
DREYFUS EUROPEAN FUND OCTOBER 31, 1994
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
COMMON STOCKS (continued)
<C> <S> <C>
SWITZERLAND (CONTINUED)
50 Zurich Versicherung $ 45,540
-----------
530,532
-----------
DENMARK -- 3.1%
2,200 Carlsberg, Class B 106,542
1,700 International Service Systems AS, Class B 46,797
400 Novo Nordisk AS, Class B 37,519
1,230 Sophus Berenden, Class B 107,906
500 Superfos AS 33,305
-----------
332,069
-----------
BELGIUM -- 2.5%
1,480 Fortis AG 118,788
210 Generale de Banque 51,006
652 Glaverbal NPV 94,764
13 Glaverbal NPV VVPR 1,927
-----------
266,485
-----------
NETHERLANDS -- 1.8%
1,700 Royal Dutch Petroleum Company 197,911
-----------
FINLAND -- 0.9%
3,100 Kesko 37,871
250 Kone Corporation, Class B, Free 29,727
1,800 Pohjola, Class B, Free 26,559
-----------
94,157
-----------
NORWAY -- 0.8%
4,650 Aker AS, Series A Free 54,417
1,600 Bergesen DY AS, Series B 35,001
-----------
89,418
-----------
SWEDEN -- 0.8%
2,700 Atlas Copco AB, Series A Free 37,007
1,890 Svenska Cellulosa, Series B Free 30,770
1,600 Svenska Handelsbanken, Series A 21,596
-----------
89,373
-----------
TOTAL COMMON STOCKS (Cost $9,023,535) 10,515,835
-----------
</TABLE>
10 SEE NOTES TO FINANCIAL STATEMENTS.
................................................................................
<PAGE>
PORTFOLIO of INVESTMENTS (continued)
................................................................................
- - - --------------------------------------------------------------------------------
DREYFUS EUROPEAN FUND OCTOBER 31, 1994
<TABLE>
<CAPTION>
VALUE
(NOTE 1)
SHARES
RIGHTS AND WARRANTS -- 0.0%
<C> <S> <C>
2,600 Banco Commerciale Italiana SPA Warrants, expires 12/31/95** $ 1,302
7,000 Credito Italiano Di Risp Rights, expires 11/04/94** 519
7,000 Credito Italiano Di Risp Rights, expires 11/04/94** 23
140 CS Holdings Warrants, expires 12/16/94** 1,171
-----------
TOTAL RIGHTS AND WARRANTS (Cost $3,687) 3,015
-----------
<CAPTION>
FACE
VALUE
<C> <S> <C>
COMMERCIAL PAPER -- 2.5% (Cost $276,000)
$276,000 Ford Motor Company, 4.72% due 11/01/94 276,000
-----------
TOTAL INVESTMENTS (Cost $9,303,222*) 99.5% 10,794,850
OTHER ASSETS AND LIABILITIES (NET) 0.5 50,291
------ ----------
NET ASSETS 100.0% $10,845,141
------ ----------
------ ----------
-----------------------------------------------------------------------------------
<FN>
* AGGREGATE COST FOR FEDERAL TAX PURPOSES.
** NON-INCOME PRODUCING SECURITY.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS. 11
................................................................................
<PAGE>
PORTFOLIO of INVESTMENTS (continued)
................................................................................
- - - --------------------------------------------------------------------------------
DREYFUS EUROPEAN FUND
<TABLE>
<CAPTION>
% OF NET VALUE
SECTOR DIVERSIFICATION (UNAUDITED) ASSETS (NOTE 1)
<S> <C> <C>
COMMON STOCKS:
Financial Services 20.8% $ 2,251,043
Utilities 11.3 1,221,128
Consumer Services 7.8 846,886
Manufacturing 7.0 756,605
Durable Goods 6.9 748,175
Communication 6.3 687,595
Food and Kindred Products 6.2 674,458
Engineering and Construction 5.1 552,779
Insurance 4.2 450,380
Health Care Services 4.1 441,717
Oil and Gas 3.8 414,364
Non-Durable Goods 2.7 290,618
Retail 2.6 284,108
Chemicals 1.8 198,792
Technology 1.8 190,017
Transportation 1.7 189,521
Forestry Products and Paper 1.2 133,513
Printing and Publishing 0.9 102,825
Basic Industries 0.8 81,311
------ -----------
TOTAL COMMON STOCKS 97.0% 10,515,835
RIGHTS AND WARRANTS 0.0% 3,015
COMMERCIAL PAPER 2.5% 276,000
------ -----------
TOTAL INVESTMENTS 99.5% 10,794,850
OTHER ASSETS AND LIABILITIES (Net) 0.5% 50,291
------ -----------
NET ASSETS 100.0% $10,845,141
------ -----------
------ -----------
</TABLE>
12 SEE NOTES TO FINANCIAL STATEMENTS.
................................................................................
<PAGE>
STATEMENT of ASSETS and LIABILITIES
................................................................................
- - - --------------------------------------------------------------------------------
DREYFUS EUROPEAN FUND OCTOBER 31, 1994
<TABLE>
<CAPTION>
ASSETS:
<S> <C> <C>
Investments, at value (Cost $9,303,222) (Note 1)
See accompanying schedule $10,794,850
Cash and foreign currency (Cost $70,135) 71,629
Dividends and interest receivable 42,501
-----------
TOTAL ASSETS 10,908,980
-----------
-----------
LIABILITIES:
Investment management fee payable (Note 2) $61,893
Accrued Directors' fees and expenses (Note 2) 1,744
Payable for Fund shares redeemed 200
Distribution fee payable (Note 3) 2
-------
TOTAL LIABILITIES 63,839
-----------
NET ASSETS $10,845,141
-----------
-----------
NET ASSETS consist of:
Undistributed net investment income $ 86,482
Accumulated net realized gain on investments sold,
foreign currency transactions and net other
assets 1,276,113
Net unrealized appreciation of investments,
foreign currency transactions and net other
assets 1,495,204
Par value 868
Paid-in capital in excess of par value 7,986,474
-----------
TOTAL NET ASSETS $10,845,141
-----------
-----------
NET ASSET VALUE
INVESTOR SHARES
Net asset value, offering and redemption price per
share ($48,036 DIVIDED BY 3,843 shares of
capital stock outstanding) $12.50
------
------
CLASS R SHARES
Net asset value, offering and redemption price per
share ($10,797,105 DIVIDED BY 863,821 shares
of capital stock outstanding) $12.50
------
------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS. 13
................................................................................
<PAGE>
STATEMENT of OPERATIONS
................................................................................
- - - --------------------------------------------------------------------------------
DREYFUS EUROPEAN FUND
FOR THE YEAR ENDED OCTOBER 31, 1994
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of
$42,213) $ 270,696
Interest 10,909
----------
TOTAL INVESTMENT INCOME 281,605
----------
EXPENSES:
Investment management fee (Note 2) $102,670
Investment advisory fee (Note 2) 44,467
Registration and filing fees 30,299
Transfer agent fees (Note 2) 19,476
Directors' fees and expenses (Note 2) 4,325
Administration fee (Note 2) 1,231
Distribution fee (Note 3) 47
Custodian fees (Note 2) 3
Other 6,451
Expenses reimbursed by investment adviser (Note 2) (28,625)
--------
TOTAL EXPENSES 180,344
----------
NET INVESTMENT INCOME 101,261
----------
REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS
(Notes 1 and 4):
Net realized gain on:
Securities transactions 1,276,113
Forward foreign exchange contracts 21,318
Foreign currencies 17,967
----------
Net realized gain on investments during the
year 1,315,398
Net change in unrealized
appreciation/(depreciation) of:
Securities (840,122)
Currencies and net other assets 5,767
----------
Net unrealized depreciation of investments
during the year (834,355)
----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 481,043
----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $ 582,304
----------
----------
</TABLE>
14 SEE NOTES TO FINANCIAL STATEMENTS.
................................................................................
<PAGE>
STATEMENT of CHANGES in NET ASSETS
................................................................................
- - - --------------------------------------------------------------------------------
DREYFUS EUROPEAN FUND
<TABLE>
<CAPTION>
YEAR YEAR
ENDED ENDED
10/31/94 10/31/93
<S> <C> <C>
Net investment income $ 101,261 $ 70,608
Net realized gain on securities transactions,
foward foreign exchange contracts and foreign
currencies during the year 1,315,398 661,455
Net unrealized appreciation/(depreciation) on
securities, currencies and net other assets
during the year (834,355) 934,383
----------- -----------
Net increase in net assets resulting from
operations 582,304 1,666,446
Distributions to shareholders from net investment
income:
Class R Shares (95,131) (128,747)
Distribution to shareholders from net realized
gain on investments:
Class R Shares (670,815) --
Net increase/(decrease) in net assets from Fund
share transactions (Note 5):
Investor Shares 47,089 --
Class R Shares 500,854 (6,705,278)
----------- -----------
Net increase/(decrease) in net assets 364,301 (5,167,579)
NET ASSETS:
Beginning of year 10,480,840 15,648,419
----------- -----------
End of year (including undistributed net
investment income of $86,482 and $41,067,
respectively) $10,845,141 $10,480,840
----------- -----------
----------- -----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS. 15
................................................................................
<PAGE>
FINANCIAL HIGHLIGHTS
................................................................................
- - - --------------------------------------------------------------------------------
DREYFUS EUROPEAN FUND
FOR AN INVESTOR SHARE OUTSTANDING THROUGHOUT THE PERIOD.
Please refer to page 5 of the Prospectus dated March 1, 1995.
16 SEE NOTES TO FINANCIAL STATEMENTS.
................................................................................
<PAGE>
FINANCIAL HIGHLIGHTS
................................................................................
- - - --------------------------------------------------------------------------------
DREYFUS EUROPEAN FUND
FOR A CLASS R SHARE OUTSTANDING THROUGHOUT EACH YEAR.
Please refer to page 5 of the Prospectus dated March 1, 1995.
SEE NOTES TO FINANCIAL STATEMENTS. 17
................................................................................
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
................................................................................
- - - --------------------------------------------------------------------------------
DREYFUS EUROPEAN FUND
FOR A CLASS R SHARE OUTSTANDING THROUGHOUT EACH YEAR.
Please refer to page 5 of the Prospectus dated March 1, 1995.
18 SEE NOTES TO FINANCIAL STATEMENTS.
................................................................................
<PAGE>
NOTES to FINANCIAL STATEMENTS
................................................................................
1. SIGNIFICANT ACCOUNTING POLICIES
The Dreyfus/Laurel Funds, Inc. (the "Investment Company"), The Dreyfus/Laurel
Funds Trust, The Dreyfus/Laurel Tax-Free Municipal Funds and The
Dreyfus/Laurel Investment Series are all registered open-end management
investment companies that are now part of The Dreyfus Family of Funds. The
Investment Company is a series mutual fund with 19 separate investment
portfolios. These financial statements report on the Dreyfus European Fund
(the "Fund"). The Investment Company was incorporated on August 6, 1987 as a
Maryland corporation and is registered with the Securities and Exchange
Commission under the Investment Company Act of 1940, as amended (the "1940
Act"), as a diversified open-end management investment company. The Fund
commenced operations on January 5, 1987. On November 1, 1993, pursuant to an
Agreement and Plan of Reorganization and Liquidation between the Fund and the
Capstone European Fund, the Fund acquired substantially all of the assets of
the Capstone European Fund, and the shareholders of the Capstone European Fund
became shareholders of the Fund. The Fund offers two classes of shares:
Investor Shares and Class R Shares (effective October 17, 1994, the Fund's
Trust Shares were reclassified as Class R Shares). The Investor Shares are
sold primarily to retail investors and bear a distribution fee. Class R Shares
are sold primarily to bank trust departments and other financial service
providers acting on behalf of customers having a qualified trust or investment
account or relationship at such institution, and bear no distribution fee.
Each class of shares has identical rights and privileges, except with respect
to distribution fees and voting rights on matters affecting a single class.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements.
(A) PORTFOLIO VALUATION
Investments in equity securities traded on a Western European securities
exchange are valued at the last reported sales price or, in the absence of a
recorded sale, at the last current bid price. A security which is listed or
traded on more than one exchange is valued at the quotation on the exchange
determined to be the primary market for such security. International
securities traded principally over-the-counter are valued on the basis of the
last sales price. When market quotations are not readily available, securities
are valued at fair value as determined in good faith by the Board of
Directors. Debt securities with maturities of 60 days or less are valued at
amortized cost.
(B) FORWARD FOREIGN CURRENCY CONTRACTS
The Fund engages in forward foreign currency contracts. Forward foreign
currency contracts are valued at the forward rate and are marked-to-market
daily. The change in market value is recorded by the Fund as an unrealized
gain or loss. When the contract is closed, the Fund records a realized gain or
loss equal to the difference between the value of the contract at the time it
was opened and the value at the time it was closed.
19
................................................................................
<PAGE>
NOTES to FINANCIAL STATEMENTS (continued)
................................................................................
The use of forward foreign currency contracts does not eliminate fluctuations
in the underlying prices of the Fund's portfolio securities, but it does
establish a rate of exchange that can be achieved in the future. Although
forward foreign currency contracts limit the risk of loss due to a decline in
the value of the hedged currency, they also limit any potential gain that
might result should the value of the currency increase. In addition, the Fund
could be exposed to risks if the counterparties to the contracts are unable to
meet the terms of their contracts.
(C) FOREIGN CURRENCY
The books and records of the Fund are maintained in United States (U.S.)
dollars. Any foreign currencies, investments and other assets and liabilities
are translated into U.S. dollars at the exchange rates prevailing at the end
of the period. Purchases and sales of investment securities, income and
expenses are translated on the respective dates of such transactions.
Unrealized gains and losses which result from changes in foreign currency
exchange rates have been included in the unrealized
appreciation/(depreciation) of investments and net other assets. Net realized
foreign currency gains and losses resulting from changes in exchange rates
include foreign currency gains and losses between trade date and settlement
date on investment securities transactions, foreign currency transactions and
the difference between the amounts of interest and dividends recorded on the
books and the amount actually received. The portion of foreign currency gains
and losses related to fluctuation in exchange rates between the initial
purchase trade date and subsequent sale trade date is included in realized
gains and losses on investment securities sold.
(D) SECURITY TRANSACTIONS AND INVESTMENT INCOME
Securities transactions are recorded as of the trade date. Dividend income is
recorded on the ex-dividend date. Interest income is recorded on the accrual
basis. Realized gains and losses from securities transactions are recorded on
the identified cost basis. Investment income and realized and unrealized gains
and losses are allocated based upon relative daily net assets of each class.
(E) EXPENSE ALLOCATION
Expenses of the Fund not directly attributable to the operations of any class
of shares are pro rated between its classes based upon the relative average
daily net assets of each class. Distribution expense is directly attributable
to a particular class of shares and is charged only to that class's
operations.
(F) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income, if any, are determined on a class level
and are declared and paid annually. Distributions from net realized capital
gains, if any, are determined on a Fund level and are declared and paid
annually. Additional distributions of net investment income and capital gains
for the Fund may be made at the discretion of the Board of Directors in order
to avoid the 4% nondeductible federal excise tax.
20
................................................................................
<PAGE>
NOTES to FINANCIAL STATEMENTS (continued)
................................................................................
Income distributions and capital gain distributions on a Fund level are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. These differences are primarily due
to differing treatments of income and gains on various investment securities
held by the Fund, timing differences and differing characterization of
distributions made by the Fund as a whole. Permanent differences incurred
during the year ended October 31, 1994 resulting from currency gains have been
reclassified to undistributed net investment income at year end.
(G) FEDERAL INCOME TAXES
The Fund intends to qualify as a regulated investment company by complying
with the requirements of the Internal Revenue Code applicable to regulated
investment companies and by distributing substantially all of its taxable
income to its shareholders. Therefore, no federal income tax provision is
required.
2. INVESTMENT MANAGEMENT FEE, DIRECTORS' FEES
AND OTHER PARTY TRANSACTIONS
Effective October 17, 1994, the Investment Company's investment management
agreement with Mellon Bank, N.A. ("Mellon Bank"), a wholly-owned subsidiary of
Mellon Bank Corporation ("Mellon"), was transferred to The Dreyfus Corporation
(the "Manager"), a wholly-owned subsidiary of Mellon Bank. The Manager
provides, or arranges for one or more third parties to provide, investment
advisory, administrative, custody, fund accounting and transfer agency
services to the Investment Company. The Manager also directs the investments
of the Fund in accordance with its investment objective, policies and
limitations. For these services, the Fund pays the Manager a fee, calculated
daily and paid monthly, at the annual rate of 1.75% of the value the Fund's
average daily net assets. Out of its fee, the Manager pays all of the expenses
of the Fund except brokerage, taxes, interest, Rule 12b-1 distribution fees
and expenses, fees and expenses of non-interested directors (including counsel
fees) and extraordinary expenses. In addition, the Manager is required to
reduce its fee in an amount equal to the Fund's allocable portion of fees and
expenses of the non-interested directors (including counsel).
For the period from April 4, 1994 to October 16, 1994, Mellon Bank served as
the Investment Company's investment manager pursuant to the investment
management agreement described above. Prior to April 4, 1994, the Investment
Company had individual contracts with Mellon Bank to provide custody,
accounting, and transfer agency services to the Fund. Effective April 4, 1994,
custody, accounting, and transfer agency services are covered by the
investment management agreement described above.
Prior to April 4, 1994, the Investment Company had an investment advisory
agreement under which the Fund paid Mellon Bank an annual fee of 1.00% of the
value of the Fund's average daily net assets for investment advisory services.
For the period from November 1, 1993 through April 3, 1994, Mellon Bank, as
investment adviser, voluntarily agreed to reimburse expenses in the amount of
$28,625.
21
................................................................................
<PAGE>
NOTES to FINANCIAL STATEMENTS (continued)
................................................................................
S.A.M. Finance, S.A. ("Sub-Advisor"), a wholly-owned subsidiary of Credit
Commercial de France, serves as the Fund's Sub-Advisor pursuant to a
sub-advisory agreement among the Fund, the Sub-Advisor and the Manager. For
its services, the Sub-Advisor is paid an annual fee of 0.60% of the value of
the Fund's average daily net assets and is paid by the Manager out of its fee.
Prior to September 23, 1994, Frank Russell Investment Management Company (the
"Administrator") served as the Fund's administrator and provided, pursuant to
an administration agreement, various administrative and corporate secretarial
services to the Fund. For the period from April 4, 1994 to September 23, 1994,
Mellon Bank, as investment manager, paid the Administrator's fee out of the
management fee described above. Prior to April 4, 1994, the Investment Company
paid the Administrator the following fees for the services supplied by the
Administrator pursuant to the administration agreement: (i) an annual fee of
$500,000; (ii) an annual asset-based fee, payable monthly on a pro rata basis,
based on the following percentages of the aggregate average daily net assets
of the Investment Company: up to and including $10 billion-- 0.01%, over $10
billion--0.005%, and (iii) all start-up costs (including out-of-pocket, blue
sky registration and personnel costs) for new portfolios (prior to and for 6
months following commencement of operations).
Prior to April 4, 1994, the Investment Company had a contract with Russell
Fund Distributors, Inc. to serve as distributor of its shares. Effective April
4, 1994 through October 16, 1994, Funds Distributor, Inc. served as
distributor of the Investment Company's shares. Effective as of October 17,
1994, Premier Mutual Fund Services, Inc. ("Premier") serves as the Investment
Company's distributor. Premier also serves as the Investment Company's
sub-administrator and, pursuant to a sub-administration agreement with the
Manager, provides various administrative and corporate secretarial services to
the Investment Company.
No officer or employee of Premier (or of any parent, subsidiary or affiliate
thereof) receives any compensation from The Dreyfus/Laurel Funds, Inc., The
Dreyfus/Laurel Funds Trust, The Dreyfus/Laurel Tax-Free Municipal Funds or The
Dreyfus/Laurel Investment Series (collectively, "The Dreyfus/Laurel Funds")
for serving as an officer or Director/Trustee of The Dreyfus/Laurel Funds. In
addition, no officer or employee of the Manager (or of any parent, subsidiary
or affiliate thereof) serves as an officer or Director/ Trustee of The
Dreyfus/Laurel Funds. The Dreyfus/Laurel Funds pay each Director/Trustee who
is not an officer or employee of Premier (or any parent, subsidiary or
affiliate thereof) $27,000 per annum, $1,000 for each Board meeting attended
and $750 for each Audit Committee meeting attended, and reimburse each
Director/Trustee for travel and out-of-pocket expenses. Prior to April 4,
1994, the Investment Company paid each Director $15,000 per annum plus
reimbursement for travel and out-of-pocket expenses.
22
................................................................................
<PAGE>
NOTES to FINANCIAL STATEMENTS (continued)
................................................................................
3. DISTRIBUTION PLAN
The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b-1
under the 1940 Act relating to its Investor Shares. Under the Plan, the Fund
may pay annually up to 0.25% of the value of the average daily net assets
attributable to its Investor Shares to compensate Premier and Dreyfus Service
Corporation, an affiliate of the Manager, for shareholder servicing activities
and Premier for activities primarily intended to result in the sale of
Investor Shares. Class R Shares bear no distribution fee. Prior to April 4,
1994, the Fund had a distribution and shareholder services plan under which
the Fund was authorized to spend annually up to 0.35% of its average daily net
assets on distribution and shareholder servicing expenses.
Under its terms, the Plan shall remain in effect from year to year, provided
such continuance is approved annually by a vote of a majority of those
Directors who are not "interested persons" of the Investment Company and who
have no direct or indirect financial interest in the operation of the Plan or
in any agreement related to the Plan.
4. PORTFOLIO SECURITIES
The cost of purchases and proceeds from sales of securities, excluding
short-term investments and U.S. Government Securities, for the year ended
October 31, 1994 aggregated $5,068,151 and $5,208,155, respectively. At
October 31, 1994, aggregate gross unrealized appreciation for all securities
in which there was an excess of value over tax cost and aggregate gross
unrealized depreciation for all securities in which there was an excess of tax
cost over value were $1,916,643 and $425,015, respectively.
23
................................................................................
<PAGE>
NOTES to FINANCIAL STATEMENTS (continued)
................................................................................
5. SHARES OF CAPITAL STOCK
The Investment Company has authority to issue 25 billion shares of capital
stock with a par value of $.001. The Fund has authority to issue two classes
of shares. The table below summarizes the transactions in Fund shares for the
year or period indicated.:
-------------------------------------------------------------------
DREYFUS EUROPEAN FUND
<TABLE>
<CAPTION>
PERIOD ENDED
OCTOBER 31, 1994*
SHARES AMOUNT
<S> <C> <C> <C> <C>
-----------------------------------------------------------------------------
INVESTOR SHARES:
Sold 6,054 $ 73,438
Redeemed (2,211 ) (26,349)
------- -----------
------- -----------
Net increase 3,843 $ 47,089
------- -----------
------- -----------
-----------------------------------------------------------------------------
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1994* OCTOBER 31, 1993
SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
-----------------------------------------------------------------------------
CLASS R SHARES:
Sold 65,212 $ 811,065 18,180 $ 206,453
Issued as reinvestment of
dividends
and distributions 60,719 752,008 7,721 84,849
Redeemed (87,074) (1,062,219) (628,206) (6,996,580)
------- ----------- --------- ------------
------- ----------- --------- ------------
Net increase/(decrease) 38,857 $ 500,854 (602,305) $ (6,705,278)
------- ----------- --------- ------------
------- ----------- --------- ------------
-----------------------------------------------------------------------------
<FN>
* THE FUND COMMENCED SELLING INVESTOR SHARES ON APRIL 14, 1994. THOSE SHARES
OUTSTANDING PRIOR TO APRIL 4, 1994 WERE DESIGNATED AS TRUST SHARES. EFFECTIVE
OCTOBER 17, 1994, THE FUND'S TRUST SHARES WERE RECLASSIFIED AS CLASS R SHARES.
</TABLE>
6. FOREIGN SECURITIES
The Fund purchases securities of foreign issuers. Investing in securities of
foreign companies and foreign governments involves special risks and
considerations not typically associated with investing in U.S. companies and
the U.S. government. These risks include revaluation of currencies and future
adverse political and economic developments. Moreover, securities of many
foreign companies and foreign governments and their markets may be less liquid
and their prices more volatile than those of securities of comparable U.S.
companies and the U.S. government.
24
................................................................................
<PAGE>
INDEPENDENT AUDITORS' REPORT
................................................................................
[LOGO]
The Board of Directors and Shareholders
The Dreyfus/Laurel Funds, Inc.
We have audited the accompanying statements of assets and liabilities, including
the portfolio of investments, of the Dreyfus European Fund of The Dreyfus/Laurel
Funds, Inc. (formerly the Laurel Funds, Inc.), as of October 31, 1994, and the
related statement of operations, statement of changes in net assets, and the
financial highlights for the year then ended. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits. The statement of changes in net assets
for the year ended October 31, 1993 and financial highlights for the six year
period ended October 31, 1993 and for the period from January 5, 1987
(commencement of operations) to October 31, 1987 were audited by other auditors
whose reports thereon, dated November 30, 1993 and November 22, 1991, expressed
unqualified opinions on that statement and those financial highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit also includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements. Our procedures included confirmation of securities owned
as of October 31, 1994, by correspondence with the custodian. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Dreyfus European Fund of The Dreyfus/Laurel Funds, Inc. as of October 31, 1994,
the results of operations, the changes in net assets, and financial highlights
for the year then ended in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Pittsburgh, Pennsylvania
December 9, 1994
25
................................................................................
<PAGE>
Tax Information (unaudited)
................................................................................
DREYFUS EUROPEAN FUND
YEAR ENDED OCTOBER 31, 1994
During the fiscal year the Fund paid $670,815 of Long Term Capital Gains to
its shareholders.
26
................................................................................
THE DREYFUS/LAUREL FUNDS, INC.
PORTFOLIO OF INVESTMENTS
DREYFUS BOND MARKET INDEX FUND OCTOBER 31, 1994
<TABLE>
<CAPTION>
PRINCIPAL COUPON MATURITY VALUE
AMOUNT RATE DATE (NOTE 1)
U.S. TREASURY
OBLIGATIONS - 74.9%
<C> <S> <C> <C> <C>
$100,000 U.S. Treasury Bonds 11.750% 02/15/01 $ 120,968
100,000 U.S. Treasury Bonds 10.750 05/15/03 118,485
150,000 U.S. Treasury Bonds 8.750 11/15/08 157,135
200,000 U.S. Treasury Bonds 7.250 05/15/16 183,048
100,000 U.S. Treasury Bonds 7.500 11/15/16 93,908
130,000 U.S. Treasury Bonds 8.750 05/15/20 138,969
150,000 U.S. Treasury Bonds 8.125 08/15/21 150,447
200,000 U.S. Treasury Bonds 7.125 02/15/23 179,324
100,000 U.S. Treasury Bonds 6.250 08/15/23 80,054
100,000 U.S. Treasury Notes 4.625 08/15/95 98,917
300,000 U.S. Treasury Notes 5.125 11/15/95 296,586
300,000 U.S. Treasury Notes 4.250 05/15/96 289,665
100,000 U.S. Treasury Notes 6.500 11/30/96 99,305
100,000 U.S. Treasury Notes 6.250 01/31/97 98,612
100,000 U.S. Treasury Notes 5.625 08/31/97 96,213
100,000 U.S. Treasury Notes 6.000 11/30/97 96,756
100,000 U.S. Treasury Notes 5.125 04/30/98 93,421
100,000 U.S. Treasury Notes 4.750 08/31/98 91,408
100,000 U.S. Treasury Notes 6.375 01/15/99 96,380
150,000 U.S. Treasury Notes 5.875 03/31/99 141,462
100,000 U.S. Treasury Notes 6.375 01/15/00 95,188
100,000 U.S. Treasury Notes 5.500 04/15/00 91,153
100,000 U.S. Treasury Notes 7.750 02/15/01 100,808
100,000 U.S. Treasury Notes 5.768 02/15/03 90,987
200,000 U.S. Treasury Notes 5.750 08/15/03 174,458
100,000 U.S. Treasury Notes 7.250 05/15/04 96,345
TOTAL U.S. GOVERNMENT AGENCY
OBLIGATIONS
(Cost $3,664,527) 3,370,002
CORPORATE BONDS AND NOTES - 19.9%
FINANCIAL SERVICES - 7.9%
20,000 American General, Inc. 6.625 06/01/97 19,600
50,000 Associate Corporation of North
America 7.500 05/15/99 49,062
50,000 AVCO Financial Services, Inc. 7.500 11/15/96 50,250
25,000 BankAmerica Corporation 7.750 07/15/02 24,031
50,000 Beneficial Corporation 9.125 02/15/98 52,188
25,000 Commercial Credit Group 6.700 08/01/99 23,937
40,000 Ford Motor Credit Company 8.000 06/15/02 39,150
50,000 International Lease Finance
Corporation 4.750 01/15/97 47,375
25,000 NationsBank Corporation 6.625 01/15/98 24,406
25,000 Norwest Financial, Inc. 5.500 04/15/98 23,375
353,374
UTILITIES - 4.9%
20,000 B.P. North America, Inc. 9.875 03/15/04 22,100
25,000 Consolidated Edison 6.250 04/01/98 23,938
50,000 Duke Power Company 7.500 04/01/99 49,313
25,000 General Electric Capital
Corporation 8.750 11/26/96 25,781
25,000 New Jersey Bell Telephone
Company 8.000 06/01/22 23,562
25,000 Public Service Electric & Gas
Company 8.750 07/01/99 25,688
50,000 Union Electric Company 5.500 03/01/97 48,000
218,382
RETAIL - 3.2%
100,000 Sears Roebuck & Company 8.550 08/01/96 102,000
50,000 Wal-Mart Stores, Inc. 5.500 03/01/98 46,875
148,875
BASIC INDUSTRIES - 2.1%
50,000 Aluminum Company of America 5.750 02/01/01 44,188
55,000 Gannett, Inc. 5.850 05/01/00 50,463
94,651
CONSUMER NON-DURABLES - 1.8%
25,000 Hershey Foods Corporation 8.800 02/15/21 25,469
25,000 PepsiCo, Inc. 7.625 12/18/98 24,875
30,000 Procter & Gamble Company 8.700 08/01/01 31,087
81,431
TOTAL CORPORATE BONDS AND NOTES
(Cost $958,746) 896,713
REPURCHASE AGREEMENT - 1.0%
(Cost $45,446)
45,446 Agreement with Barclays de Zoete Wedd,
dated 10/31/94 bearing 4.780% to be
repurchased at $45,452 on 11/01/94,
collateralized by $46,005 U.S. Treasury
Bills, 4.360% due 11/10/94 45,446
TOTAL INVESTMENTS (Cost $4,668,719*) 95.8% 4,312,161
OTHER ASSETS AND LIABILITIES (NET) 4.2 189,928
NET ASSETS 100.0% $4,502,089
<FN>
* Aggregate cost for Federal tax purposes.
</TABLE>
See Notes to Financial Statements.
THE DREYFUS/LAUREL FUNDS, INC.
STATEMENT OF ASSETS AND LIABILITIES
DREYFUS BOND MARKET INDEX FUND OCTOBER 31, 1994
<TABLE>
<S> <C> <C>
ASSETS
Investments, at value (Cost $4,668,719) (Note 1)
See accompanying schedule $4,312,161
Interest receivable 92,985
Receivable for investment securities sold 52,188
Receivable from investment adviser (Note 2) 45,107
Receivable for Fund shares sold 1,976
TOTAL ASSETS 4,504,417
LIABILITIES
Investment management fee payable (Note 2) $ 1,625
Accrued Directors' fees and expenses (Note 2) 621
Dividends payable 81
Distribution fee payable (Note 3) 1
TOTAL LIABILITIES 2,328
NET ASSETS $4,502,089
NET ASSETS consist of:
Accumulated net realized loss on investments
sold $ (68,933)
Unrealized depreciation of investments (356,558)
Par value 492
Paid-in capital in excess of par value 4,927,088
TOTAL NET ASSETS $4,502,089
NET ASSET VALUE
INVESTOR SHARES
Net asset value, offering and redemption price per
share ($38,186 / 4,175 shares of capital stock
outstanding) $9.15
CLASS R SHARES
Net asset value, offering and redemption price per
share ($4,463,903 / 488,054 shares of capital stock
outstanding) $9.15
</TABLE>
See Notes to Financial Statements.
THE DREYFUS/LAUREL FUNDS, INC.
STATEMENT OF OPERATIONS
DREYFUS BOND MARKET INDEX FUND
FOR THE PERIOD ENDED OCTOBER 31, 1994*
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest $ 313,147
EXPENSES
Transfer agent fees (Note 2) $ 18,762
Custodian fees (Note 2) 11,701
Registration and filing fees 11,340
Investment management fee (Note 2) 10,268
Investment advisory fee (Note 2) 9,253
State tax expense 5,693
Legal and audit fees 5,307
Amortization of organization costs (Note 6) 3,202
Directors' fees and expenses (Note 2) 2,664
Administration fee (Note 2) 876
Distribution fee (Note 3) 30
Other 1,701
Expenses reimbursed by investment adviser (Note 2) (57,622)
Total Expenses 23,175
NET INVESTMENT INCOME 289,972
REALIZED AND UNREALIZED LOSS ON INVESTMENTS
(Notes 1 and 4):
Net realized loss on investments sold during the period (68,933)
Net unrealized depreciation of investments during the period (356,558)
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS (425,491)
NET DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS $(135,519)
<FN>
* The Fund commenced operations on November 30, 1993.
</TABLE>
See Notes to Financial Statements.
THE DREYFUS/LAUREL FUNDS, INC.
STATEMENT OF CHANGES IN NET ASSETS
DREYFUS BOND MARKET INDEX FUND
<TABLE>
<CAPTION>
PERIOD
ENDED
10/31/94*
<S> <C>
Net investment income $ 289,972
Net realized loss on investments sold (68,933)
Net unrealized depreciation of investments during
the period (356,558)
Net decrease in net assets resulting from operations (135,519)
Distributions to shareholders from net investment:
Investor Shares (622)
Class R Shares (289,350)
Net increase in net assets from Fund share transactions
(Note 5):
Investor Shares 39,119
Class R Shares 4,888,461
Net increase in net assets 4,502,089
NET ASSETS
Beginning of period --
End of period $4,502,089
<FN>
* The Fund commenced operations on November 30, 1993.
</TABLE>
See Notes to Financial Statements.
THE DREYFUS/LAUREL FUNDS, INC.
FINANCIAL HIGHLIGHTS
DREYFUS BOND MARKET INDEX FUND
FOR AN INVESTOR SHARE OUTSTANDING THROUGHOUT THE PERIOD
Please refer to page 6 of the Prospectus dated March 1, 1995.
See Notes to Financial Statements.
THE DREYFUS/LAUREL FUNDS, INC.
FINANCIAL HIGHLIGHTS
DREYFUS BOND MARKET INDEX FUND
FOR A CLASS R SHARE OUTSTANDING THROUGHOUT THE PERIOD.
Please refer to page 6 of the Prospectus dated March 1, 1995.
See Notes to Financial Statements.
THE DREYFUS/LAUREL FUNDS, INC.
DREYFUS BOND MARKET INDEX FUND
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Dreyfus/Laurel Funds, Inc. (the
"Investment Company"), The Dreyfus/Laurel
Funds Trust, The Dreyfus/Laurel Tax-Free
Municipal Funds and The Dreyfus/Laurel
Investment Series are all registered open-end
management investment companies that are now
part of The Dreyfus Family of Funds. The
Investment Company is a series mutual fund
with 19 separate investment portfolios. This
report contains financial statements for the
Dreyfus Bond Market Index Fund (the "Fund").
The Investment Company was incorporated on
August 6, 1987 as a Maryland corporation and
is registered with the Securities and
Exchange Commission under the Investment
Company Act of 1940, as amended (the "1940
Act"), as a diversified, open-end management
investment company. The Fund commenced
operations on November 30, 1993. The Fund
offers two classes of shares: Investor Shares
and Class R Shares (effective October 17,
1994, the Trust Shares were redesignated as
Class R Shares). Investor Shares are sold
primarily to retail investors and bear a
distribution fee. Class R Shares are sold
primarily to bank trust departments and other
financial service providers acting on behalf
of customers having a qualified trust or
investment account or relationship at such
institution, and bear no distribution fee.
Each class of shares has identical rights and
privileges, except with respect to the
distribution fee and voting rights on matters
affecting a single class. The following is a
summary of significant accounting policies
consistently followed by the Fund in the
preparation of its financial statements in
accordance with generally accepted accounting
principles.
(A) PORTFOLIO VALUATION
Investments in securities traded on a
national securities exchange are valued at
the last reported sales price or, in the
absence of a recorded sale, at the mean of
the closing bid and asked prices. Over-the-
counter securities are valued at the mean of
the latest bid and asked prices. When market
quotations are not readily available,
securities are valued at fair value as
determined in good faith by the Board of
Directors. Bonds are valued through
valuations obtained from a commercial pricing
service or at the most recent mean of the bid
and asked prices provided by investment
dealers in accordance with procedures
established by the Board of Directors.
Investments in U.S. Government securities
(other than short-term securities) are valued
at the most recent quoted bid price in the
over-the-counter market. Debt securities
with maturities of 60 days or less from the
valuation day are valued on the basis of
amortized cost.
(B) REPURCHASE AGREEMENTS
The Fund may engage in repurchase agreement
transactions. Under the terms of a typical
repurchase agreement, the Fund, through its
custodian, takes possession of an underlying
debt obligation subject to an obligation of
the seller to repurchase, and the Fund to
resell, the obligation at an agreed-upon
price and time, thereby determining the yield
during the Fund's holding period. This
arrangement results in a fixed rate of return
that is not subject to market fluctuations
during the Fund's holding period. The value
of the collateral is at least equal, at all
times, to the total amount of the repurchase
obligations, including interest. In the
event of counterparty default, the Fund has
the right to use the collateral to offset
losses incurred. There is potential loss to
the Fund in the event the Fund is delayed or
prevented from exercising its rights to
dispose of the collateral securities,
including the risk of a possible decline in
the value of the underlying securities during
the period while the Fund seeks to assert its
rights. The Fund's investment manager, acting
under the supervision of the Board of
Directors, reviews the value of the
collateral and the creditworthiness of those
banks and dealers with which the Fund enters
into repurchase agreements to evaluate
potential risks.
(C) SECURITY TRANSACTIONS AND INVESTMENT INCOME
Securities transactions are recorded as of
the trade date. Interest income is recorded
on the accrual basis. Realized gains and
losses from securities sold are recorded on
the identified cost basis. Investment income
and realized and unrealized gains and losses
are allocated based upon relative average
daily net assets of each class.
(D) EXPENSE ALLOCATION
Expenses of the Fund not directly
attributable to the operations of any class
of shares are prorated between the classes
based upon the relative average daily net
assets of each class. Distribution expense
is directly attributable to a particular
class of shares and is charged only to that
class' operations.
(E) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income, if any,
are determined on a class level and are
declared daily and paid monthly.
Distributions from net realized capital
gains, if any, are determined on Fund level
and are declared and paid annually.
Additional distributions of net investment
income and capital gains for the Fund may be
made at the discretion of the Board of
Directors in order to avoid the 4%
nondeductible Federal excise tax. Income
distributions and capital gain distributions
on a Fund level are determined in accordance
with income tax regulations, which may differ
from generally accepted accounting
principles. These differences are primarily
due to differing treatments of income and
gains on various investment securities held
by the Fund, timing differences and differing
characterization of distributions made by the
Fund as a whole.
(F) FEDERAL INCOME TAXES
The Fund intends to qualify as a regulated
investment company by complying with the
requirements of the Internal Revenue Code
applicable to regulated investment companies
and by distributing substantially all of its
taxable income to its shareholders.
Therefore, no federal income tax provision is
required.
2. INVESTMENT MANAGEMENT FEE, DIRECTORS' FEES AND
OTHER RELATED PARTY TRANSACTIONS
Effective as of October 17, 1994, the
Investment Company's investment management
agreement with Mellon Bank, N.A. ("Mellon
Bank"), a wholly-owned subsidiary of Mellon
Bank Corporation, was transferred to The
Dreyfus Corporation (the "Manager"), a wholly-
owned subsidiary of Mellon Bank. The Manager
provides, or arranges for one or more third
parties to provide, investment advisory,
administrative, custody, fund accounting and
transfer agency services to the Investment
Company. The Manager also directs the
investments of the Fund in accordance with its
investment objective, policies and
limitations. For these services, the Fund
pays the Manager a fee, calculated daily and
paid monthly, at the annual rate of 0.40% of
the value of the Fund's average daily net
assets. Out of its fee, the Manager pays all
of the expenses of the Fund except brokerage,
taxes, interest, Rule 12b-1 distribution fees
and expenses, fees and expenses of non-
interested Directors (including counsel fees)
and extraordinary expenses. In addition, the
Manager is required to reduce its fee in an amount
equal to the Fund's allocable portion of fees and
expenses of the non-interested Directors (including
counsel).
For the period from April 4, 1994 to October 16,
1994, Mellon Bank served as the Investment
Company's investment manager pursuant to the
investment management agreement described
above. Prior to April 4, 1994, the Investment
Company had individual contracts with Mellon
Bank to provide custody, accounting, and
transfer agency services to the Fund.
Effective April 4, 1994, custody, accounting,
and transfer agency services are covered by
the investment management agreement described
above.
Prior to April 4, 1994, the Investment
Company had an investment advisory agreement
under which the Fund paid Mellon Bank an
annual fee of 0.40% of the value of the Fund's
average daily net assets for investment
advisory services. For the period from
November 30, 1993 through April 3, 1994,
Mellon Bank, as investment adviser,
voluntarily agreed to reimburse expenses in
the amount of $57,622.
Prior to September 23, 1994, Frank Russell
Investment Management Company (the
"Administrator") served as the Fund's
administrator and provided, pursuant to an
administration agreement, various
administrative and corporate secretarial
services to the Fund. For the period from
April 4, 1994 to September 23, 1994, Mellon
Bank, as investment manager, paid the
Administrator's fee out of the management fee
described above. Prior to April 4, 1994, the
Investment Company paid the Administrator the
following fees for the services supplied by the
Administrator pursuant to the administration
agreement: (i) an annual fee of $500,000; (ii)
an annual asset-based fee, payable monthly on a
pro rata basis, based on the following
percentages of the aggregate average daily net
assets of the Investment Company: up to and
including $10 billion -- 0.01%, over $10
billion -- 0.005%; and (iii) all start-up costs
(including out-of-pocket, blue sky registration
and personnel costs) for new portfolios (prior
to and for 6 months following commencement of
operations).
Prior to April 4, 1994, the Investment Company
had a contract with Russell Fund Distributors,
Inc. to serve as distributor of its shares.
Effective April 4, 1994 through October 16,
1994, Funds Distributor, Inc. served as
distributor of the Investment Company's shares.
Effective as of October 17, 1994, Premier
Mutual Fund Services, Inc. ("Premier") serves
as the Investment Company's distributor.
Premier also serves as the Investment Company's
sub-administrator and, pursuant to a sub-
administration agreement with the Manager,
provides various administrative and corporate
secretarial services to the Investment Company.
No officer or employee of Premier (or of any
parent, subsidiary or affiliate thereof)
receives any compensation from The
Dreyfus/Laurel Funds, Inc., The Dreyfus/Laurel
Funds Trust, The Dreyfus/Laurel Tax-Free
Municipal Funds or The Dreyfus/Laurel
Investment Series (collectively, "The
Dreyfus/Laurel Funds") for serving as an
officer or Director/Trustee of The
Dreyfus/Laurel Funds. In addition, no officer
or employee of the Manager (or of any parent,
subsidiary or affiliate thereof) serves as an
officer or Director/Trustee of The
Dreyfus/Laurel Funds. The Dreyfus/Laurel Funds
pay each Director/Trustee who is not an officer
or employee of Premier (or any parent,
subsidiary or affiliate thereof), $27,000 per
annum, $1,000 for each Board meeting attended
and $750 for each Audit Committee meeting
attended, and reimburse each Director/Trustee
for travel and out-of-pocket expenses. Prior
to April 4, 1994, the Investment Company paid
each Director $15,000 per annum plus
reimbursement for travel and out-of-pocket
expenses.
3. DISTRIBUTION PLAN
The Fund has adopted a Distribution Plan (the
"Plan") pursuant to Rule 12b-1 under the 1940
Act relating to its Investor Shares. Under the
Plan, the Fund may pay annually up to 0.25% of
the value of the average daily net assets
attributable to its Investor Shares to
compensate Premier and Dreyfus Service
Corporation, an affiliate of the Manager, for
shareholder servicing activities and Premier
for activities primarily intended to result in
the sale of Investor Shares. Class R Shares
bear no distribution fee. Prior to April 4,
1994, the Fund had a distribution and
shareholder services plan under which the Fund
was authorized to spend annually up to 0.35% of
its average daily net assets on distribution
and shareholder servicing expenses.
Under its terms, the Plan shall remain in
effect from year to year, provided such
continuance is approved annually by a vote of a
majority of those Directors who are not
"interested persons" of the Investment Company
and who have no direct or indirect financial
interest in the operation of the Plan or in any
agreement related to the Plan.
4. SECURITIES TRANSACTIONS
The cost of purchases of securities excluding
short-term investments and U.S. government
securities, for the period ended October 31,
1994 was $963,949. There were no proceeds from
sales of securities excluding short-term
investments and U.S. government securities, for
the period ended October 31, 1994.
The cost of purchases and proceeds from sales
of long-term U.S. government securities, for
the period ended October 31, 1994, aggregated
$13,205,540 and $9,449,038, respectively.
At October 31, 1994, aggregate gross unrealized
depreciation for all securities in which there
was an excess of tax cost over value amounted
to $356,558. There was no gross unrealized
appreciation for any securities in which there
was an excess of value over tax cost.
5. SHARES OF CAPITAL STOCK
The Investment Company has authority to issue
25 billion shares of capital stock with a par
value of $.001.
The Fund has authority to issue two classes of
shares. The table below summarizes
transactions in Fund shares for the periods
indicated:
<TABLE>
<CAPTION>
PERIOD ENDED
OCTOBER 31, 1994*
SHARES AMOUNT
<S> <C> <C>
INVESTOR SHARES:
Sold 4,136 $38,751
Issued as reinvestment
dividends and distributions 50 468
Redeemed (11) (100)
Net increase 4,175 $39,119
</TABLE>
<TABLE>
<CAPTION>
PERIOD ENDED
OCTOBER 31, 1994*
SHARES AMOUNT
<S> <C> <C>
CLASS R SHARES:
Sold 1,448,406 $14,406,896
Issued as reinvestment of
dividends and distributions 27,373 261,497
Redeemed (987,725) (9,779,932)
Net increase 488,054 $ 4,888,461
<FN>
*The Fund commenced operations on November 30,
1993 and began selling Investor Shares on April
28, 1994. Those shares outstanding prior to
April 4, 1994 were designated as Trust Shares.
Effective as of October 17, 1994, the Fund's
Trust Shares were redesignated as Class R
Shares.
</TABLE>
6. ORGANIZATION COSTS
The Fund paid all costs in connection with the
Fund's organization including the fees and
expenses of registering and qualifying the
Fund's shares for distribution under Federal
and state securities regulations. Prior to
April 4, 1994, all such costs were being
amortized on the straight-line method over a
period of five years. On April 4, 1994, the
remaining unamortized organization costs were
reimbursed by Mellon Bank as the investment
adviser.
7. CAPITAL LOSS CARRYFORWARD
At October 31, 1994, the Fund had available for
federal income tax purposes unused capital loss
carryforward of $68,933 expiring in the year
2002.
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
The Dreyfus/Laurel Funds, Inc.
We have audited the accompanying statement of
assets and liabilities of the Dreyfus Bond
Market Index Fund of The Dreyfus/Laurel Funds,
Inc., including the portfolio of investments,
as of October 31, 1994, and the related
statements of operations, statement of changes
in net assets, and the financial highlights
for the period then ended. These financial
statements and financial highlights are the
responsibility of the Fund's management. Our
responsibility is to express an opinion on
these financial statements and financial
highlights based on our audit.
We conducted our audit in accordance with
generally accepted auditing standards. Those
standards require that we plan and perform the
audit to obtain reasonable assurance about
whether the financial statements and financial
highlights are free of material misstatement.
An audit includes examining, on a test basis,
evidence supporting the amounts and
disclosures in the financial statements. Our
procedures included confirmation of securities
owned as of October 31, 1994, by
correspondence with the custodian and brokers.
An audit also includes assessing the
accounting principles used and significant
estimates made by management, as well as
evaluating the overall financial statement
presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the financial statements and
financial highlights referred to above present
fairly, in all material respects, the
financial position of the Dreyfus Bond Market
Index Fund of The Dreyfus/Laurel Funds, Inc.,
as of October 31, 1994, and the results of its
operations, changes in its net assets, and the
financial highlights for the period then
ended, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Pittsburgh, Pennsylvania
December 9, 1994
<PAGE>
PORTFOLIO OF INVESTMENTS
...............................................................................
- - - --------------------------------------------------------------------------------
DREYFUS/LAUREL PRIME MONEY MARKET FUND OCTOBER 31, 1994
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
<C> <S> <C>
DOMESTIC COMMERCIAL PAPER -- 51.9%
$ 5,000,000 Anheuser-Busch Companies, Inc.
4.850% due 11/01/94 $ 5,000,000
4,000,000 Bausch & Lomb Inc.
4.850% due 11/21/94 3,989,222
5,000,000 Bear Stearns Company, Inc.
5.440% due 01/19/95 4,940,311
4,000,000 Ciesco LP
4.850% due 12/05/94 3,981,678
5,000,000 Gannett Company, Inc.
4.850% due 11/28/94+ 4,981,812
5,000,000 Goldman Sachs Group, Inc.
5.320% due 03/13/95 4,902,467
5,000,000 Hewlett Packard Company
5.020% due 02/27/95 4,917,728
5,000,000 New Center Asset Series A-1
5.020% due 12/20/94 4,965,836
5,000,000 Norfolk Southern Corporation
4.830% due 11/18/94 4,988,596
4,000,000 Sara Lee Corporation
4.900% due 11/29/94 3,984,756
5,000,000 Schering Corporation
4.800% due 12/14/94 4,971,333
5,000,000 Student Loan Corporation
5.000% due 11/07/94 4,995,833
5,000,000 Toys R Us
4.870% due 11/29/94 4,981,061
5,000,000 Warner Lambert Company
4.880% due 12/19/94 4,967,467
---------------
TOTAL DOMESTIC COMMERCIAL PAPER
(Cost $66,568,100) 66,568,100
---------------
</TABLE>
See Notes to Financial Statements. 5
...............................................................................
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
...............................................................................
- - - --------------------------------------------------------------------------------
DREYFUS/LAUREL PRIME MONEY MARKET FUND OCTOBER 31, 1994
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
<C> <S> <C>
FOREIGN COMMERCIAL PAPER -- 15.5%
$ 5,000,000 CSR America, Inc.
5.100% due 01/27/95 $ 4,938,375
5,000,000 Kingdom of Sweden
4.600% due 11/03/94 4,998,722
5,000,000 Hanson Finance PLC
4.630% due 11/02/94 4,999,357
5,000,000 National Provincial Building Society
4.850% due 12/20/94 4,966,993
---------------
TOTAL FOREIGN COMMERCIAL PAPER
(Cost $19,903,447) 19,903,447
---------------
U.S. GOVERNMENT AGENCIES -- 11.6%
5,000,000 Federal National Mortgage Association
4.720% due 11/23/94 4,985,578
5,000,000 Federal National Mortgage Association
5.010% due 12/19/94 4,966,600
5,000,000 Student Loan Marketing Association
4.920% due 12/08/94 5,000,000
---------------
TOTAL U.S. GOVERNMENT AGENCIES
(Cost $14,952,178) 14,952,178
---------------
EURO-CERTIFICATES OF DEPOSIT -- 7.8%
5,000,000 National Westminster Bank PLC
4.880% due 12/05/94 5,000,093
5,000,000 Royal Bank of Canada
4.890% due 11/30/94 5,000,802
---------------
TOTAL EURO-CERTIFICATES OF DEPOSIT
(Cost $10,000,895) 10,000,895
---------------
</TABLE>
6 See Notes to Financial Statements.
...............................................................................
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
...............................................................................
- - - --------------------------------------------------------------------------------
DREYFUS/LAUREL PRIME MONEY MARKET FUND OCTOBER 31, 1994
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
<C> <S> <C>
U.S. TREASURY OBLIGATIONS -- 7.7%
$ 5,000,000 U.S. Treasury Bill
5.145%# due 05/04/95 $ 4,868,517
5,000,000 U.S. Treasury Strip
4.815%# due 11/15/94 4,990,990
---------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $9,859,507) 9,859,507
---------------
REPURCHASE AGREEMENT -- 5.5%
(Cost $7,056,916)
7,056,916 Agreement with Barclays de Zoete Wedd, dated
10/31/94 bearing 4.780% to be repurchased at
$7,057,853 on 11/01/94, collateralized by
$7,005,000 U.S. Treasury Note, 5.875% due
05/15/95 7,056,916
---------------
TOTAL INVESTMENTS
(Cost $128,341,043*) 100.0% 128,341,043
OTHER ASSETS AND LIABILITIES (NET) 0.0 23,907
----- --------------
NET ASSETS 100.0% $128,364,950
----- --------------
----- --------------
-----------------------------------------------------------------------------------
<FN>
* Aggregate cost for Federal tax purposes.
# Annualized yield to maturity (unaudited).
+ Commercial paper sold within terms of a private placement memorandum, exempt from
registration under Section 4(2) of the Securities Act of 1933, as amended, and may
be resold to dealers in that program or other "accredited investors." These securities
have been determined to be liquid under guidelines established by the Board of Directors.
</TABLE>
See Notes to Financial Statements. 7
...............................................................................
<PAGE>
PORTFOLIO OF INVESTMENTS
...............................................................................
- - - --------------------------------------------------------------------------------
DREYFUS/LAUREL U.S. TREASURY MONEY MARKET FUND OCTOBER 31, 1994
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
<C> <S> <C>
U.S. TREASURY OBLIGATIONS -- 76.3%
$ 10,000,000 U.S. Treasury Bills
4.516%# due 11/03/94 $ 9,997,556
5,000,000 U.S. Treasury Bills
4.418%# due 11/03/94 4,998,803
10,000,000 U.S. Treasury Bills
4.597%# due 11/10/94 9,988,812
2,000,000 U.S. Treasury Bills
4.051%# due 11/17/94 1,996,524
10,000,000 U.S. Treasury Bills
4.684%# due 11/17/94 9,979,756
10,000,000 U.S. Treasury Bills
4.560%# due 12/08/94 9,953,133
5,000,000 U.S. Treasury Bills
4.580%# due 12/15/94 4,972,011
5,000,000 U.S. Treasury Bills
4.683%# due 12/15/94 4,971,950
15,000,000 U.S. Treasury Bills
4.825%# due 12/15/94 14,913,467
5,000,000 U.S. Treasury Bills
4.600%# due 12/22/94 4,967,417
5,000,000 U.S. Treasury Bills
4.718%# due 12/22/94 4,967,488
10,000,000 U.S. Treasury Bills
4.890%# due 01/12/95 9,902,200
5,000,000 U.S. Treasury Bills
4.832%# due 01/19/95 4,948,650
10,000,000 U.S. Treasury Bills
4.952%# due 01/19/95 9,895,325
10,000,000 U.S. Treasury Bills
5.140%# due 01/19/95 9,890,058
5,000,000 U.S. Treasury Bills
4.907%# due 01/26/95 9,886,408
10,000,000 U.S. Treasury Bills
5.187%# due 01/26/95 9,879,361
10,000,000 U.S. Treasury Bills
5.018%# due 02/02/95 9,874,450
</TABLE>
8 See Notes to Financial Statements.
...............................................................................
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
..............................................................................
<TABLE>
- - - --------------------------------------------------------------------------------
DREYFUS/LAUREL U.S. TREASURY MONEY MARKET FUND OCTOBER 31, 1994
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
<C> <S> <C>
U.S. TREASURY OBLIGATIONS (continued)
$10,000,000 U.S. Treasury Bills
5.165%# due 02/02/95 $ 9,870,317
10,000,000 U.S. Treasury Bills
5.170%# due 02/16/95 9,851,389
5,000,000 U.S. Treasury Bills
5.155%# due 05/04/95 4,868,261
5,000,000 U.S. Treasury Strip
4.815%# due 11/15/94 4,990,990
------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $175,564,326) 175,564,326
------------
REPURCHASE AGREEMENTS -- 23.9%
4,976,961 Agreement with Barclays de Zoete Wedd,
dated 10/31/94 bearing 4.780% to be
repurchased at $4,977,622 on 11/01/94,
collateralized by $4,941,000 U.S. Treasury
Note, 5.875% due 05/15/95 4,976,961
50,000,000 Agreement with Donaldson Lufkin & Jenrette,
dated 10/31/94 bearing 4.780% to be
repurchased at $50,006,639 on 11/01/94,
collateralized by $49,734,000 U.S. Treasury
Note, 7.000% due 04/15/99 and by $1,921,000
U.S. Treasury Note, 3.875% due 08/31/95 50,000,000
------------
TOTAL REPURCHASE AGREEMENTS
(Cost $54,976,961) 54,976,961
------------
TOTAL INVESTMENTS
(Cost $230,541,287*) 100.2% 230,541,287
OTHER ASSETS AND LIABILITIES (NET) (0.2) (420,615)
----- ------------
NET ASSETS 100.0% $230,120,672
===== ============
- - - ------------------------------------------------------------------------------------
<FN>
* Aggregate cost for Federal tax purposes.
# Annualized yield to maturity (unaudited).
</TABLE>
See Notes to Financial Statements. 9
................................................................................
<PAGE>
PORTFOLIO OF INVESTMENTS
...............................................................................
- - - --------------------------------------------------------------------------------
DREYFUS/LAUREL TAX-EXEMPT MONEY MARKET FUND OCTOBER 31, 1994
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
<C> <S> <C>
MUNICIPAL BONDS AND NOTES -- 100.8%
ALABAMA -- 0.4%
$ 900,000 Alabama, Heatherbrook Housing
Financial Authority
3.400% due 10/01/13++ $ 900,000
--------------
ALASKA -- 0.6%
1,250,000 Alaska, Sitka School Improvement Project
3.150% due 02/01/06++ 1,250,000
--------------
ARIZONA -- 2.9%
1,200,000 Arizona, Apache County, Industrial
Development Authority, (Tucson Electric)
3.500% due 12/15/18++ 1,200,000
1,300,000 Arizona, Chandler County,
Industrial Development Authority
3.250% due 12/15/08+++ 1,300,000
2,000,000 Arizona, City of Mesa, Municipal
Development Corporation
3.200% due 12/08/94 2,000,000
1,500,000 Arizona, Cochise County, Pollution Control
Corporation, (Arizona Electric Power
Company)
3.800% due 03/01/95++++ 1,500,000
--------------
6,000,000
--------------
ARKANSAS -- 0.1%
195,000 Arkansas Hospital Equipment Finance Authority
3.600% due 12/01/05++ 195,000
--------------
CALIFORNIA -- 5.6%
100,000 California, Los Angeles County,
Metropolitan Sales Tax
3.250% due 07/01/20++ 100,000
2,000,000 California, Orange County Tax and
Revenue Anticipation Notes
4.500% due 07/19/95 2,010,277
</TABLE>
10 See Notes to Financial Statements.
...............................................................................
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
...............................................................................
- - - --------------------------------------------------------------------------------
DREYFUS/LAUREL TAX-EXEMPT MONEY MARKET FUND OCTOBER 31, 1994
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
<C> <S> <C>
MUNICIPAL BONDS AND NOTES (continued)
CALIFORNIA (CONTINUED)
$ 1,935,000 California, Rural Home Mortgage Finance
Authority, Single Family Mortgage Revenue
Bonds,
Series 1993
3.380% due 12/01/99++++ $ 1,935,000
3,000,000 California, Santa Clara County Tax and Revenue
Anticipation Notes
4.250% due 07/07/95 3,011,778
3,000,000 California, State Floating LIBOR Index Note
3.600% due 06/28/95 3,000,000
1,500,000 California, Statewide Communities Development
Corporation
3.550% due 08/01/19++ 1,500,000
--------------
11,557,055
--------------
COLORADO -- 2.5%
700,000 Colorado, Arapahoe County
3.290% due 05/15/13+++ 700,000
1,000,000 Colorado, Arapahoe County, Capital Improvement
3.900% due 02/28/95++++ 1,000,000
1,200,000 Colorado, City of Lakewood
3.350% due 12/15/99+++ 1,200,000
200,000 Colorado, Health Facilities Authority Revenue
3.400% due 05/15/20++ 200,000
2,000,000 Colorado, South Denver Metropolitan District
3.600% due 12/01/05++++ 2,000,000
--------------
5,100,000
--------------
CONNECTICUT -- 0.8%
1,560,000 Connecticut State Housing Finance Authority,
Series H-1
4.300% due 09/01/95++++# 1,560,000
--------------
</TABLE>
See Notes to Financial Statements. 11
................................................................................
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
...............................................................................
- - - --------------------------------------------------------------------------------
DREYFUS/LAUREL TAX-EXEMPT MONEY MARKET FUND OCTOBER 31, 1994
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
<C> <S> <C>
MUNICIPAL BONDS AND NOTES (continued)
DELAWARE -- 1.0%
$ 1,700,000 Delaware, Economic Development Authority
3.700% due 10/01/17+ $ 1,700,000
300,000 Delaware, New Castle County
3.800% due 12/01/00++ 300,000
--------------
2,000,000
--------------
DISTRICT OF COLUMBIA -- 3.0%
District of Columbia:
2,000,000 9.375% due 06/01/95 2,090,167
4,000,000 4.050% due 07/01/95 4,000,000
--------------
6,090,167
--------------
FLORIDA -- 5.1%
1,800,000 Florida, Hillsborough County, Port District
Authority
3.400% due 02/01/04++ 1,800,000
4,300,000 Florida, Housing Finance Agency
3.900% due 06/15/95++++ 4,300,000
1,000,000 Florida, Housing M/F Kings Colony, Series D
3.125% due 10/01/06++ 1,000,000
1,500,000 Florida, Putnam County, Development Authority
3.550% due 03/15/14++ 1,500,000
2,000,000 Florida, Putnam County, Pollution Control
Revenue, (Seminole Electric Corporation)
3.150% due 12/15/94++++ 2,000,000
--------------
10,600,000
--------------
GEORGIA -- 6.2%
1,900,000 Georgia, Cobb County, Development Authority
3.500% due 01/01/08++ 1,900,000
1,000,000 Georgia, Dekalb County, Housing Authority
3.500% due 06/01/04++ 1,000,000
1,900,000 Georgia, Fulton County, Development Authority
3.250% due 09/01/12+++ 1,900,000
</TABLE>
12 See Notes to Financial Statements.
................................................................................
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
...............................................................................
- - - --------------------------------------------------------------------------------
DREYFUS/LAUREL TAX-EXEMPT MONEY MARKET FUND OCTOBER 31, 1994
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
<C> <S> <C>
MUNICIPAL BONDS AND NOTES (continued)
GEORGIA (CONTINUED)
$ 2,000,000 Georgia, Glynn Brunswick Memorial Hospital
Authority, (Southeast Regional Medical
Center)
3.500% due 08/01/09++ $ 2,000,000
2,000,000 Georgia, Hart County, Industrial Building
3.550% due 05/01/09++ 2,000,000
4,000,000 Georgia, Municipal Electric Authority,
Project One
3.450% due 11/08/94 4,000,000
--------------
12,800,000
--------------
HAWAII -- 0.5%
1,000,000 Hawaii, Budget & Finance, (Kaiser Permanente)
3.650% due 03/01/95 1,000,000
--------------
ILLINOIS -- 16.1%
1,675,000 Illinois, Alsip Industrial Development
Revenue (Ardco Inc. Project)
3.600% due 07/01/13++ 1,675,000
400,000 Illinois, City of Burbank
3.250% due 09/15/24+++ 400,000
2,700,000 Illinois, City of Chicago, General Obligation
Bonds, Series A-2
4.150% due 07/18/95 2,700,000
1,000,000 Illinois, City of Chicago, Tender Notes
3.300% due 10/31/95++ 1,000,000
3,200,000 Illinois, City of Lockport
3.600% due 04/01/25++ 3,200,000
1,500,000 Illinois Development Columbia Graphics
3.600% due 06/01/04++ 1,500,000
Illinois Development Finance Authority:
1,300,000 3.700% due 05/01/10++ 1,300,000
1,700,000 3.600% due 02/01/19++ 1,700,000
1,000,000 3.600% due 04/01/24++ 1,000,000
1,100,000 3.500% due 12/01/28++ 1,100,000
</TABLE>
See Notes to Financial Statements. 13
................................................................................
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
...............................................................................
- - - --------------------------------------------------------------------------------
DREYFUS/LAUREL TAX-EXEMPT MONEY MARKET FUND OCTOBER 31, 1994
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
<C> <S> <C>
MUNICIPAL BONDS AND NOTES (continued)
ILLINOIS (CONTINUED)
$ 2,100,000 Illinois Development Finance Authority,
Industrial
Development Revenue, (Overton Gear & Tool)
3.600% due 10/01/08++ $ 2,100,000
1,700,000 Illinois Development Finance Authority,
Residential Rental Revenue
3.500% due 04/01/24++ 1,700,000
Illinois Educational Facilities Authority:
500,000 2.900% due 01/01/18++ 500,000
1,000,000 3.450% due 05/01/22++ 1,000,000
3,400,000 3.500% due 12/01/25++ 3,400,000
2,615,000 3.500% due 03/01/28++ 2,615,000
Illinois Health Facilities Authority Revenue:
(Franciscan Sisters Health)
3,800,000 3.000% due 11/01/05++ 3,800,000
500,000 3.700% due 01/01/18+ 500,000
700,000 (Dupage Health)
3.700% due 11/01/20+ 700,000
1,300,000 Illinois, New Lenox
3.600% due 07/01/15++ 1,300,000
--------------
33,190,000
--------------
INDIANA -- 5.9%
3,500,000 Indiana, Auburn Economic Development Authority
3.500% due 07/01/10+++ 3,500,000
2,600,000 Indiana, City of Gary
3.250% due 07/15/02+++ 2,600,000
400,000 Indiana, Fort Wayne Economic Development
Authority
3.700% due 07/01/09++ 400,000
1,700,000 Indiana, Fort Wayne Hospital Parkview
Memorial, Series B
3.550% due 01/01/16++ 1,700,000
400,000 Indiana Health Facilities Finance Authority
3.500% due 12/01/02++ 400,000
</TABLE>
14 See Notes to Financial Statements.
................................................................................
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
...............................................................................
- - - --------------------------------------------------------------------------------
DREYFUS/LAUREL TAX-EXEMPT MONEY MARKET FUND OCTOBER 31, 1994
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
<C> <S> <C>
MUNICIPAL BONDS AND NOTES (continued)
INDIANA (CONTINUED)
$ 300,000 Indiana Hospital Equipment Finance Authority,
Series A
3.500% due 12/01/15++ $ 300,000
2,300,000 Indiana, Logansport, Economic Development
Authority
3.750% due 10/01/03++ 2,300,000
900,000 Indiana Secondary Market, Series B
3.450% due 12/01/13++ 900,000
--------------
12,100,000
--------------
IOWA -- 1.2%
400,000 Iowa, Cedar Rapids Pollution Control Revenue
3.500% due 11/01/03++ 400,000
2,000,000 Iowa Municipalities Workers Compensation
Association
3.950% due 07/01/95++++ 2,000,000
--------------
2,400,000
--------------
KANSAS -- 0.8%
1,000,000 Kansas, City of Burlington, Pollution
Control Revenue
3.300% due 12/06/94 1,000,000
700,000 Kansas, City of Wamego
3.200% due 11/15/14+++ 700,000
--------------
1,700,000
--------------
KENTUCKY -- 3.6%
1,900,000 Kentucky, Mason County
3.550% due 10/15/14++ 1,900,000
1,500,000 Kentucky, Pendleton County
3.750% due 07/01/95 1,500,000
2,000,000 Kentucky, Pendleton County, Multicounty
Lease Revenue
3.050% due 11/02/94 2,000,000
</TABLE>
See Notes to Financial Statements. 15
...............................................................................
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
................................................................................
- - - --------------------------------------------------------------------------------
DREYFUS/LAUREL TAX-EXEMPT MONEY MARKET FUND OCTOBER 31, 1994
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
<C> <S> <C>
MUNICIPAL BONDS AND NOTES (continued)
KENTUCKY (CONTINUED)
$ 2,000,000 Kentucky, Pulaski County, Solid Waste
3.650% due 02/15/95++++ $ 2,000,000
--------------
7,400,000
--------------
LOUISIANA -- 0.6%
1,300,000 Louisiana, Public Facilities Authority
3.700% due 12/01/05++ 1,300,000
--------------
MARYLAND -- 0.1%
200,000 Maryland, Anne Arundel County
General Improvement
6.900% due 01/15/95 201,362
--------------
MICHIGAN -- 0.4%
500,000 Michigan, Meridian Economic Development
3.350% due 12/15/99+++ 500,000
300,000 Michigan State Housing Development Authority
3.400% due 10/01/07++ 300,000
--------------
800,000
--------------
MINNESOTA -- 2.5%
100,000 Minnesota, City of New Brighton, Industrial
Development Revenue
3.500% due 12/01/14++ 100,000
3,100,000 Minnesota, Saint Cloud Hospital Facilities
Authority
3.400% due 07/01/20++ 3,100,000
2,000,000 Minnesota, University Of Minnesota Regents
3.600% due 02/01/95++++ 2,000,000
--------------
5,200,000
--------------
MISSISSIPPI -- 0.1%
300,000 Mississippi, Jackson, Industrial Development
Revenue (McCarthy Project)
3.550% due 12/01/15++ 300,000
--------------
</TABLE>
16 See Notes to Financial Statements.
................................................................................
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
................................................................................
- - - --------------------------------------------------------------------------------
DREYFUS/LAUREL TAX-EXEMPT MONEY MARKET FUND OCTOBER 31, 1994
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
<C> <S> <C>
MUNICIPAL BONDS AND NOTES (continued)
MISSOURI -- 1.2%
$ 2,570,000 Missouri, Saint Charles County, Industrial
Development Authority
3.150% due 10/01/07++ $ 2,570,000
--------------
MONTANA -- 0.0%
100,000 Montana, Butte, Silver Bow Pollution
Control Revenue
3.550% due 03/01/16++ 100,000
--------------
NORTH CAROLINA -- 0.4%
200,000 North Carolina, Bladen County
3.500% due 11/01/20++ 200,000
400,000 North Carolina, City of Winston-Salem
3.550% due 07/01/09++ 400,000
200,000 North Carolina, Craven County, Industrial
Finance Authority
3.850% due 05/01/11+ 200,000
--------------
800,000
--------------
NORTH DAKOTA -- 0.9%
1,000,000 North Dakota, Grand Forks Hospital Facilities
Revenue Bonds
3.700% due 12/01/16+ 1,000,000
950,000 North Dakota, Mercer County
3.550% due 08/15/14++ 950,000
--------------
1,950,000
--------------
OREGON -- 2.3%
1,300,000 Oregon, Portland, Forsyth Mont Pollution
Control Revenue
3.500% due 06/01/13++ 1,300,000
3,345,000 Oregon, Portland, Multifamily Revenue,
(University Park Apartments)
3.550% due 10/01/11++ 3,345,000
--------------
4,645,000
--------------
</TABLE>
See Notes to Financial Statements. 17
...............................................................................
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
................................................................................
- - - --------------------------------------------------------------------------------
DREYFUS/LAUREL TAX-EXEMPT MONEY MARKET FUND OCTOBER 31, 1994
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
<C> <S> <C>
MUNICIPAL BONDS AND NOTES (continued)
PENNSYLVANIA -- 13.9%
Pennsylvania, Allegheny County, Hospital
Development Authority:
$ 800,000 3.450% due 07/01/07+ $ 800,000
700,000 3.450% due 03/01/18+ 700,000
660,000 3.450% due 03/01/20+ 660,000
3,500,000 Pennsylvania, Allegheny County, Industrial
Development Authority
3.450% due 01/18/95 3,500,000
1,200,000 Pennsylvania, Chartiers Valley, Industrial
Development Authority
3.450% due 12/01/16+++ 1,200,000
1,700,000 Pennsylvania, Chester County, Industrial
Development Authority
3.200% due 10/15/99+++ 1,700,000
3,000,000 Pennsylvania, City of Philadelphia, General
Obligation Bonds
3.250% due 12/12/94 3,000,000
3,000,000 Pennsylvania, Clarion County, Industrial
Development Authority
3.500% due 12/01/12++ 3,000,000
1,000,000 Pennsylvania, Gettysburg Area, Industrial
Development Authority
3.650% due 03/01/04++ 1,000,000
5,000,000 Pennsylvania, Infrastructure Investment
Authority Revenue
3.500% due 02/01/95++++ 5,001,218
1,250,000 Pennsylvania, Moon Industrial Development
Authority
3.500% due 11/01/10++ 1,250,000
Pennsylvania, State Higher Educational
Assistance Agency:
2,900,000 3.600% due 01/01/18++ 2,900,000
1,500,000 3.450% due 07/01/18++ 1,500,000
</TABLE>
18 See Notes to Financial Statements.
...............................................................................
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
................................................................................
- - - --------------------------------------------------------------------------------
DREYFUS/LAUREL TAX-EXEMPT MONEY MARKET FUND OCTOBER 31, 1994
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
<C> <S> <C>
MUNICIPAL BONDS AND NOTES (continued)
PENNSYLVANIA (CONTINUED)
$ 2,000,000 Pennsylvania, Washington County, Higher
Education Agency
3.500% due 11/01/05++ $ 2,000,000
500,000 Pennsylvania, Washington County, Industrial
Development Authority, (Wetterau Finance
Company)
3.500% due 11/01/14++ 500,000
--------------
28,711,218
--------------
SOUTH CAROLINA -- 1.1%
400,000 South Carolina, Lexington County
3.400% due 12/01/09++ 400,000
150,000 South Carolina, Richland County
3.700% due 10/01/08++ 150,000
1,000,000 South Carolina, Walhaila Revenue,
(Avondale Mills, Inc.)
3.500% due 12/01/00++ 1,000,000
800,000 South Carolina, York County
3.550% due 09/15/14++ 800,000
--------------
2,350,000
--------------
TENNESSEE -- 0.5%
1,000,000 Tennessee, Knox County, Industrial Revenue
3.550% due 11/01/05++ 1,000,000
--------------
TEXAS -- 11.1%
1,100,000 Texas, Dallas, Industrial Development
Corporation
3.500% due 10/01/25+++ 1,100,000
3,000,000 Texas, Harris County, Tax Anticipation Notes
4.000% due 02/28/95 3,003,760
2,780,000 Texas, Higher Education Authority
3.500% due 12/01/25++ 2,780,000
350,000 Texas, Hospital Equipment Financing Council
3.500% due 04/07/05++ 350,000
</TABLE>
See Notes to Financial Statements. 19
................................................................................
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
................................................................................
- - - --------------------------------------------------------------------------------
DREYFUS/LAUREL TAX-EXEMPT MONEY MARKET FUND OCTOBER 31, 1994
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
<C> <S> <C>
MUNICIPAL BONDS AND NOTES (continued)
TEXAS (CONTINUED)
$ 2,395,000 Texas, Nueces County, Health Facility
Development Corporation
3.550% due 07/01/15++ $ 2,395,000
1,000,000 Texas, Public Building Authority, Building
Revenue
9.375% due 08/01/95++++ 1,053,568
4,050,000 Texas, Rockwell, Industrial Development
Corporation, (Columbia)
3.600% due 07/01/14++ 4,050,000
2,500,000 Texas, Small Business Industrial Development
Corporation
3.550% due 07/01/26++ 2,500,000
1,000,000 Texas, South Columbia Basin Irrigation
District
10.500% due 06/01/95 1,038,222
2,700,000 Texas, State General Obligation Bonds
3.500% due 02/09/95 2,700,000
2,000,000 Texas, Tyler, Health Facilities Development
Corporation
3.650% due 12/08/94 2,000,000
--------------
22,970,550
--------------
UTAH -- 0.5%
700,000 Utah, State Board Regents
3.150% due 11/01/00++ 700,000
300,000 Utah, State Board of Regents, Student Loans
3.250% due 11/01/13++ 300,000
--------------
1,000,000
--------------
</TABLE>
20 See Notes to Financial Statements.
................................................................................
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
................................................................................
- - - --------------------------------------------------------------------------------
DREYFUS/LAUREL TAX-EXEMPT MONEY MARKET FUND OCTOBER 31, 1994
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
<C> <S> <C>
MUNICIPAL BONDS AND NOTES (continued)
VIRGINIA -- 3.2%
Virginia, State Housing Development Authority:
$ 1,000,000 2.900% due 11/04/94 $ 1,000,000
3,300,000 3.900% due 05/10/95++++ 3,300,000
2,200,000 4.200% due 05/11/95++++ 2,200,000
--------------
6,500,000
--------------
WASHINGTON -- 1.6%
800,000 Washington, Pierce County, Economic
Development
3.600% due 10/01/07++ 800,000
1,500,000 Student Loan Finance
3.550% due 01/01/04++ 1,500,000
1,000,000 Washington, Student Loan Financial Association
3.550% due 12/01/02++ 1,000,000
--------------
3,300,000
--------------
WEST VIRGINIA -- 1.5%
3,000,000 West Virginia, Public Energy Authority
3.400% due 11/07/94 3,000,000
--------------
WISCONSIN -- 2.0%
1,160,000 Wisconsin, City of Milwaukee
5.600% due 12/15/94 1,164,114
3,000,000 Wisconsin, Health & Education Facilities,
(Alexian Village Project)
3.300% due 12/12/94 3,000,000
--------------
4,164,114
--------------
</TABLE>
See Notes to Financial Statements. 21
................................................................................
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
................................................................................
- - - --------------------------------------------------------------------------------
DREYFUS/LAUREL TAX-EXEMPT MONEY MARKET FUND OCTOBER 31, 1994
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
<C> <S> <C>
MUNICIPAL BONDS AND NOTES (continued)
WYOMING -- 0.6%
$ 1,300,000 Wyoming, Platte County, Pollution Control
Revenue
3.600% due 07/01/14+ $ 1,300,000
--------------
TOTAL INVESTMENTS
(Cost $208,004,466*) 100.8% 208,004,466
OTHER ASSETS AND LIABILITIES (NET) (0.8) (1,738,776)
----- --------------
NET ASSETS 100.0% $ 206,265,690
----- --------------
----- --------------
- - - ------------------------------------------------------------------------------------
<FN>
* Aggregate cost for Federal tax purposes.
+ Variable rate demand notes are payable upon not more than one business day's
notice. The interest rate shown reflects the rate currently in effect.
++ Variable rate demand notes are payable upon not more than seven business days'
notice. The interest rate shown reflects the rate currently in effect.
+++ Variable rate demand notes are payable upon not more than thirty business days'
notice. The interest rate shown reflects the rate currently in effect.
++++ "Put" bonds and notes have demand features which mature within one year. The
interest rate shown reflects the rate currently in effect.
# When-issued security (Note 1).
</TABLE>
22 See Notes to Financial Statements.
................................................................................
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
................................................................................
<TABLE>
- - - --------------------------------------------------------------------------------
THE DREYFUS/LAUREL FUNDS, INC. OCTOBER 31, 1994
<CAPTION>
DREYFUS/ DREYFUS/ DREYFUS/
LAUREL LAUREL LAUREL
PRIME U.S. TREASURY TAX-EXEMPT
MONEY MONEY MONEY
MARKET MARKET MARKET
FUND FUND FUND
<S> <C> <C> <C>
ASSETS
Investments, at value (Cost
$128,341,043, $230,541,287 and
$208,004,466, respectively) (Note 1)
See accompanying schedule
Securities $121,284,127 $175,564,326 $208,004,466
Repurchase Agreements 7,056,916 54,976,961 --
------------ ------------ ------------
TOTAL INVESTMENTS 128,341,043 230,541,287 208,004,466
Cash -- -- 953,911
Interest receivable 231,881 7,300 1,128,031
Receivable from investment adviser
(Note 2) 25,737 26,005 85,761
Receivable for Fund shares sold 82,412 1,961 249,957
------------ ------------ ------------
TOTAL ASSETS 128,681,073 230,576,553 210,422,126
------------ ------------ ------------
LIABILITIES
Due to custodian -- 570 --
Dividends payable 187,584 334,447 199,442
Payable for investment securities
purchased -- -- 3,760,000
Payable for Fund shares redeemed 57,707 -- 77,492
Investment management fee payable
(Note 2) 56,150 102,321 94,786
Accrued Directors' fees and expenses 14,584 18,506 24,684
Distribution fee payable (Note 3) 98 37 32
------------ ------------ ------------
TOTAL LIABILITIES 316,123 455,881 4,156,436
------------ ------------ ------------
NET ASSETS $128,364,950 $230,120,672 $206,265,690
============ ============ ============
NET ASSETS consist of:
Distributions in excess of net
investment income $ -- $ (46) $ (2,335)
Par value 128,365 230,120 206,267
Paid-in capital in excess of par value 128,236,585 229,890,598 206,061,758
------------ ------------ ------------
TOTAL NET ASSETS $128,364,950 $230,120,672 $206,265,690
============ ============ ============
</TABLE>
See Notes to Financial Statements. 23
................................................................................
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
...............................................................................
<TABLE>
- - - --------------------------------------------------------------------------------
THE DREYFUS/LAUREL FUNDS, INC. OCTOBER 31, 1994
<CAPTION>
DREYFUS/ DREYFUS/ DREYFUS/
LAUREL LAUREL LAUREL
PRIME U.S. TREASURY TAX-EXEMPT
MONEY MONEY MONEY
MARKET MARKET MARKET
FUND FUND FUND
<S> <C> <C> <C>
NET ASSETS:
Investor Shares $ 3,611,442 $ 1,323,502 $ 1,160,708
============ ============ ============
Class R Shares $124,753,508 $228,797,170 $205,104,982
============ ============ ============
SHARES OUTSTANDING:
Investor Shares 3,611,442 1,323,500 1,160,717
============ ============ ============
Class R Shares 124,753,508 228,796,647 205,106,705
============ ============ ============
INVESTOR SHARES
Net asset value, offering and
redemption price per share of
capital stock outstanding $ 1.00 $ 1.00 $ 1.00
============ ============ ============
CLASS R SHARES
Net asset value, offering and
redemption price per share of
capital stock outstanding $ 1.00 $ 1.00 $ 1.00
============ ============ ============
</TABLE>
24 See Notes to Financial Statements.
................................................................................
<PAGE>
STATEMENT OF OPERATIONS
...............................................................................
<TABLE>
- - - --------------------------------------------------------------------------------
THE DREYFUS/LAUREL FUNDS, INC.
FOR THE YEAR ENDED OCTOBER 31, 1994
<CAPTION>
DREYFUS/ DREYFUS/ DREYFUS/
LAUREL LAUREL LAUREL
PRIME U.S. TREASURY TAX-EXEMPT
MONEY MONEY MONEY
MARKET MARKET MARKET
FUND FUND FUND
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $4,670,504 $4,918,478 $5,930,412
---------- ---------- ----------
EXPENSES:
Investment advisory fee (Note 2) 241,885 152,242 563,317
Administration fee (Note 2) 13,821 8,701 26,810
Investment management fee (Note 2) 333,700 427,595 576,681
Custodian fees (Note 2) 22,183 20,059 26,299
Transfer agency fees (Note 2) 74,252 43,441 24,767
Distribution fee (Note 3) 2,268 564 939
Legal and audit fees 8,008 7,310 11,044
Directors' fees and expenses
(Note 2) 17,196 21,107 27,321
Amortization of organization costs
(Note 5) -- 3,657 --
Other 26,417 24,895 20,719
Expenses reimbursed by investment
adviser (Note 2) (147,972) (111,352) (206,817)
---------- ---------- ----------
TOTAL EXPENSES 591,758 598,219 1,071,080
---------- ---------- ----------
NET INVESTMENT INCOME 4,078,746 4,320,259 4,859,332
---------- ---------- ----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $4,078,746 $4,320,259 $4,859,332
========== ========== ==========
</TABLE>
See Notes to Financial Statements. 25
...............................................................................
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
...............................................................................
<TABLE>
- - - --------------------------------------------------------------------------------
THE DREYFUS/LAUREL FUNDS, INC.
FOR THE YEAR ENDED OCTOBER 31, 1994
<CAPTION>
DREYFUS/ DREYFUS/ DREYFUS/
LAUREL LAUREL LAUREL
PRIME U.S. TREASURY TAX-EXEMPT
MONEY MONEY MONEY
MARKET MARKET MARKET
FUND FUND FUND
<S> <C> <C> <C>
Net investment income $ 4,078,746 $ 4,320,259 $ 4,859,332
------------ ------------ ------------
Net increase in net assets
resulting from operations 4,078,746 4,320,259 4,859,332
Distributions to shareholders from
net investment income:
Investor Shares (44,787) (10,949) (10,965)
Class R Shares (4,033,959) (4,308,785) (4,850,099)
Net increase in net assets from
Fund share transactions
(Note 4):
Investor Shares 3,611,442 1,323,500 1,160,717
Class R Shares 20,993,449 159,011,800 17,277,012
------------ ------------ ------------
Net increase in net assets 24,604,891 160,335,825 18,435,997
NET ASSETS:
Beginning of year 103,760,059 69,784,847 187,829,693
------------ ------------ ------------
End of year (including
distributions in excess of net
investment income of $0, $46 and
$2,335, respectively) $128,364,950 $230,120,672 $206,265,690
============ ============ ============
</TABLE>
26 See Notes to Financial Statements.
................................................................................
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
...............................................................................
<TABLE>
- - - --------------------------------------------------------------------------------
THE DREYFUS/LAUREL FUNDS, INC.
FOR THE YEAR ENDED OCTOBER 31, 1993
<CAPTION>
DREYFUS/ DREYFUS/ DREYFUS/
LAUREL LAUREL LAUREL
PRIME U.S. TREASURY TAX-EXEMPT
MONEY MONEY MONEY
MARKET MARKET MARKET
FUND FUND FUND
<S> <C> <C> <C>
Net investment income $ 2,964,150 $ 1,829,078 $ 4,014,781
------------ ----------- ------------
Net increase in net assets
resulting from operations 2,964,150 1,829,078 4,014,781
Distributions to shareholders
from net investment income:
Trust Shares (2,964,150) (1,829,078) (4,014,781)
Net increase in net assets from
Fund share transactions
(Note 4):
Trust Shares 11,911,669 597,401 3,110,805
------------ ----------- ------------
Net increase in net assets 11,911,669 597,401 3,110,805
NET ASSETS:
Beginning of year 91,848,390 69,187,446 184,718,888
------------ ----------- ------------
End of year $103,760,059 $69,784,847 $187,829,693
============ =========== ============
</TABLE>
See Notes to Financial Statements. 27
...............................................................................
<PAGE>
FINANCIAL HIGHLIGHTS
..............................................................................
- - - --------------------------------------------------------------------------------
DREYFUS/LAUREL PRIME MONEY MARKET FUND
FOR AN INVESTOR SHARE OUTSTANDING THROUGHOUT THE PERIOD.
Please refer to page 6 of the Prospectus dated March 1, 1995.
<PAGE>
[This Page Intentionally Left Blank]
29
...............................................................................
<PAGE>
FINANCIAL HIGHLIGHTS CONTINUED
................................................................................
- - - --------------------------------------------------------------------------------
DREYFUS/LAUREL PRIME MONEY MARKET FUND
FOR A CLASS R SHARE OUTSTANDING THROUGHOUT EACH YEAR.
Please refer to page 6 of the Prospectus dated March 1, 1995.
30 See Notes to Financial Statements.
...............................................................................
<PAGE>
FINANCIAL HIGHLIGHTS CONTINUED
..............................................................................
- - - --------------------------------------------------------------------------------
Please refer to page 6 of the Prospectus dated March 1, 1995.
See Notes to Financial Statements. 31
...............................................................................
<PAGE>
FINANCIAL HIGHLIGHTS
..............................................................................
- - - --------------------------------------------------------------------------------
DREYFUS/LAUREL U.S. TREASURY MONEY MARKET FUND
FOR AN INVESTOR SHARE OUTSTANDING THROUGHOUT THE PERIOD.
Please refer to page 6 of the Prospectus dated March 1, 1995.
32 See Notes to Financial Statements
..............................................................................
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
..............................................................................
- - - --------------------------------------------------------------------------------
DREYFUS/LAUREL U.S. TREASURY MONEY MARKET FUND
FOR A CLASS R SHARE OUTSTANDING THROUGHOUT EACH YEAR.
Please refer to page 6 of the Prospectus dated March 1, 1995.
See Notes to Financial Statements 33
...............................................................................
<PAGE>
FINANCIAL HIGHLIGHTS
...............................................................................
- - - --------------------------------------------------------------------------------
DREYFUS/LAUREL TAX-EXEMPT MONEY MARKET FUND
FOR AN INVESTOR SHARE OUTSTANDING THROUGHOUT THE PERIOD.
Please refer to page 6 of the Prospectus dated March 1, 1995.
34 See Notes to Financial Statements
...............................................................................
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
..............................................................................
- - - --------------------------------------------------------------------------------
DREYFUS/LAUREL TAX-EXEMPT MONEY MARKET FUND
FOR A CLASS R SHARE OUTSTANDING THROUGHOUT EACH YEAR.
Please refer to page 6 of the Prospectus dated March 1, 1995.
See Notes to Financial Statements. 35
...............................................................................
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
..............................................................................
- - - --------------------------------------------------------------------------------
DREYFUS/LAUREL TAX-EXEMPT MONEY MARKET FUND CONTINUED
FOR A CLASS R SHARE OUTSTANDING THROUGHOUT EACH YEAR.
Please refer to page 6 of the Prospectus dated March 1, 1995.
36 See Notes to Financial Statements.
..............................................................................
<PAGE>
NOTES TO FINANCIAL STATEMENTS
..............................................................................
1. SIGNIFICANT ACCOUNTING POLICIES
The Dreyfus/Laurel Funds, Inc. (the "Investment Company"), The Dreyfus/Laurel
Funds Trust, The Dreyfus/Laurel Tax-Free Municipal Funds and The
Dreyfus/Laurel Investment Series are all registered open-end management
investment companies that are now part of The Dreyfus Family of Funds. The
Investment Company is a series mutual fund with 19 separate investment
portfolios. These financial statements report on the Dreyfus/Laurel Prime
Money Market Fund, the Dreyfus/Laurel U.S. Treasury Money Market Fund and the
Dreyfus/Laurel Tax-Exempt Money Market Fund (each a "Fund" and collectively
the "Funds"). The Investment Company was incorporated on August 6, 1987 as a
Maryland corporation and is registered with the Securities and Exchange
Commission under the Investment Company Act of 1940, as amended (the "1940
Act"), as a diversified, open-end management investment company. The
Dreyfus/Laurel Prime Money Market Fund, the Dreyfus/Laurel U.S. Treasury
Money Market Fund and the Dreyfus/Laurel Tax-Exempt Money Market Fund
commenced operations on November 18, 1987, February 4, 1991, and December 10,
1987, respectively. Each Fund offers two classes of shares: Investor Shares
and Class R Shares (effective October 17, 1994, each Fund's Trust Shares were
reclassified as Class R shares of that Fund). Investor Shares are sold
primarily to retail investors and bear a distribution fee. Class R Shares are
sold primarily to bank trust departments and other financial service
providers acting on behalf of customers having a qualified trust or
investment account or relationship at such institution, and bear no
distribution fee. Each class of shares has identical rights and privileges,
except with respect to distribution fees and voting rights on matters
affecting a single class. The following is a summary of significant
accounting policies consistently followed by each Fund in the preparation of
its financial statements.
(A) PORTFOLIO VALUATION
Short-term investments with maturities of 60 days or less from the valuation
day are valued on the basis of amortized cost. Amortized cost valuation
involves valuing an instrument at its cost initially and thereafter assuming
a constant amortization to maturity of any discount or premium, regardless of
the effect of fluctuating interest rates on the market value of the
instrument.
(B) REPURCHASE AGREEMENTS
Each Fund may engage in repurchase agreement transactions. Under the terms of
a typical repurchase agreement, a Fund, through its custodians takes
possession of an underlying debt obligation, subject to an obligation of the
seller to repurchase, and the Fund to resell the obligation at an agreed-upon
price and time, thereby determining the yield during the Fund's holding
period. This arrangement results in a fixed rate of return that is not
subject to market fluctuations during the Fund's holding period. The value of
the collateral is at least equal at all times to the total amount of the
repurchase obligations, including interest. In the event of counterparty
default, the Fund has the right to use the collateral to offset losses
incurred. There is potential loss to a Fund in the
37
...............................................................................
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
..............................................................................
event the Fund is delayed or prevented from exercising its rights to dispose
of the collateral securities including the risk of a possible decline in the
value of the underlying securities during the period while the Fund seeks to
assert its rights. Each Fund's investment manager, acting under the
supervision of the Board of Directors, reviews the value of the collateral
and the creditworthiness of those banks and dealers with which a Fund enters
into repurchase agreements to evaluate potential risks.
(C) SECURITY TRANSACTIONS AND INVESTMENT INCOME
Securities transactions are recorded as of the trade date. Interest income is
recorded on the accrual basis. Securities purchased or sold on a when-issued
or delay-delivery basis may be settled a month or more after the trade date.
Realized gains and losses from securities transactions are recorded on the
identified cost basis. Investment income and realized and unrealized gains
and losses are allocated based upon relative daily net assets of each class.
(D) EXPENSE ALLOCATION
Expenses of a Fund not directly attributable to the operations of any class
of shares of the Fund are pro rated between its classes based upon the
relative average daily net assets of each class. Distribution expense is
directly attributable to a particular class of shares and is charged only to
that class' operations.
(E) DIVIDENDS TO SHAREHOLDERS
Dividends from net investment income, if any, of a Fund are determined on a
class level and are declared daily and paid monthly. Additional distributions
of net investment income and capital gains for each Fund may be made at the
discretion of the Board of Directors in order to avoid the 4% nondeductible
federal excise tax. Income distributions on a Fund level are determined in
accordance with income tax regulations which may differ from generally
accepted accounting principles. These differences are primarily due to
differing treatments of income on various investment securities held by a
Fund, timing differences and differing characterization of distributions made
by a Fund as a whole.
(F) FEDERAL INCOME TAXES
Each Fund intends to qualify as a regulated investment company by complying
with the requirements of the Internal Revenue Code applicable to regulated
investment companies and by distributing substantially all of its taxable
income to its shareholders. Therefore, no Federal income tax provision is
required.
2. INVESTMENT MANAGEMENT FEE, DIRECTORS' FEES AND OTHER PARTY TRANSACTIONS
Effective as of October 17, 1994, the Investment Company's investment
management agreement with Mellon Bank, N.A.("Mellon Bank"), a wholly-owned
subsidiary of Mellon Bank Corporation, was transferred to The Dreyfus
Corporation (the "Manager"), a wholly-owned subsidiary of Mellon Bank. The
Manager provides, or arranges for one or
38
..............................................................................
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
..............................................................................
more third parties to provide, investment advisory, administrative, custody,
fund accounting and transfer agency services to the Investment Company. The
Manager also directs the investments of each Fund in accordance with its
investment objective, policies and limitations. For these services, each Fund
pays the Manager a fee, calculated daily and paid monthly, at the annual rate
of 0.50% of the value of that Fund's average daily net assets. Out of its
fee, the Manager pays all of the expenses of each Fund except brokerage,
taxes, interest, Rule 12b-1 distribution fees and expenses, fees and expenses
of non-interested Directors (including counsel fees) and extraordinary
expenses. In addition, the Manager is required to reduce its fee in an amount
equal to each Fund's allocable portion of fees and expenses of the
non-interested Directors (including counsel).
For the period from April 4, 1994 to October 16, 1994, Mellon Bank served as
the Investment Company's investment manager pursuant to the investment
management agreement described above. Prior to April 4, 1994, the Investment
Company had individual contracts with Mellon Bank to provide custody,
accounting, and transfer agency services to each Fund. Effective April 4,
1994, custody, accounting, and transfer agency services are covered by the
investment management agreement described above.
Prior to April 4, 1994, the Investment Company had an investment advisory
agreement under which each Fund paid Mellon Bank an annual fee of 0.50% of
the value of that Fund's average daily net assets for investment advisory
services. For the period from November 1, 1993 through April 3, 1994, Mellon
Bank, as investment adviser, voluntarily agreed to reimburse expenses in the
amount of $147,972 for the Dreyfus/Laurel Prime Money Market Fund, $111,352
for the Dreyfus/Laurel U.S. Treasury Money Market Fund and $206,817 for the
Dreyfus/Laurel Tax-Exempt Money Market Fund.
Prior to September 23, 1994, Frank Russell Investment Management Company (the
"Administrator") served as each Fund's administrator and provided, pursuant
to an administration agreement, various administrative and corporate
secretarial services to each Fund. For the period from April 4, 1994 to
September 23, 1994, Mellon Bank, as investment manager, paid the
Administrator's fee out of the management fee described above. Prior to April
4, 1994, the Investment Company paid the Administrator the following fees for
the services supplied by the Administrator pursuant to the administration
agreement: (i) an annual fee of $500,000; (ii) an annual asset-based fee,
payable monthly on a pro rata basis, based on the following percentages of
the aggregate average daily net assets of the Investment Company: up to and
including $10 billion -- 0.01%, over $10 billion -- 0.005%; and (iii) all
start-up costs (including out-of-pocket, blue sky registration and personnel
costs) for new portfolios (prior to and for 6 months following commencement
of operations).
Prior to April 4, 1994, the Investment Company had a contract with Russell
Fund Distributors, Inc. to serve as distributor of its shares. Effective
April 4, 1994 through October 16, 1994, Funds Distributor, Inc. served as
distributor of the Investment
39
................................................................................
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
..............................................................................
Company's shares. Effective as of October 17, 1994, Premier Mutual Fund
Services, Inc. ("Premier") serves as the Investment Company's distributor.
Premier also serves as the Investment Company's sub-administrator and,
pursuant to a sub-administration agreement with the Manager, provides various
administrative and corporate secretarial services to the Investment Company.
No officer or employee of Premier (or of any parent, subsidiary or affiliate
thereof) receives any compensation from The Dreyfus/Laurel Funds, Inc., The
Dreyfus/Laurel Funds Trust, The Dreyfus/Laurel Tax-Free Municipal Funds or
The Dreyfus/Laurel Investment Series (collectively, "The Dreyfus/Laurel
Funds") for serving as an officer or Director/Trustee of The Dreyfus/Laurel
Funds. In addition, no officer or employee of the Manager (or of any parent,
subsidiary or affiliate thereof) serves as an officer or Director or Trustee
of The Dreyfus/Laurel Funds. The Dreyfus/Laurel Funds pays each
Director/Trustee who is not an officer or employee of Premier (or any parent,
subsidiary or affiliate thereof), $27,000 per annum, $1,000 for each Board
meeting attended and $750 for each Audit Committee meeting attended, and
reimburse each Director or Trustee for travel and out-of-pocket expenses.
Prior to April 4, 1994, the Investment Company paid each Director $15,000 per
annum plus reimbursement for travel and out-of-pocket expenses.
3. DISTRIBUTION PLAN
Each Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b-1
under the 1940 Act relating to its Investor Shares. Under the Plan, each Fund
may pay annually up to 0.25% of the value of the average daily net assets
attributable to its Investor Shares to compensate Premier and Dreyfus Service
Corporation, an affiliate of the Manager, for shareholder servicing
activities and Premier for activities primarily intended to result in the
sale of Investor Shares. Class R Shares bear no distribution fee. Prior to
April 4, 1994, each Fund had a distribution and shareholder services plan
under which each Fund was authorized to spend annually up to 0.35% of its
average daily net assets on distribution and shareholder servicing expenses.
Under its terms, the Plan shall remain in effect from year to year, provided
such continuance is approved annually by a vote of a majority of those
Directors who are not "interested persons" of the Investment Company and who
have no direct or indirect financial interest in the operation of the Plan or
in any agreement related to the Plan.
40
..............................................................................
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
..............................................................................
4. SHARES OF CAPITAL STOCK
The Investment Company has authority to issue 25 billion shares of capital
stock with a par value of $.001. Each Fund has authority to issue two classes
of shares. The table below summarizes the transactions in Fund shares for the
year or period indicated. Because each Fund has sold shares, issued shares of
reinvestments of dividends, and redeemed shares only at a constant net asset
value of $1.00 per share, the number of shares represented by such sales,
reinvestments and redemptions is the same as the amounts shown below for such
transactions.
<TABLE>
- - - ------------------------------------------------------------------------------------
DREYFUS/LAUREL PRIME MONEY MARKET FUND
<CAPTION>
PERIOD ENDED
October 31, 1994*
- - - ------------------------------------------------------------------------------------
<S> <C>
INVESTOR SHARES:
Sold $6,781,761
Issued as reinvestment of dividends 31,002
Redeemed (3,201,321)
----------
Net increase $3,611,442
==========
</TABLE>
<TABLE>
- - - ------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED YEAR ENDED
October 31, 1994* October 31, 1993
- - - ------------------------------------------------------------------------------------
<S> <C> <C>
CLASS R SHARES:
Sold $ 214,477,712 $ 232,407,797
Issued as reinvestment of dividends 2,593,570 2,111,620
Redeemed (196,077,833) (222,607,748)
--------------- --------------
Net increase $ 20,993,449 $ 11,911,669
=============== ==============
- - - ------------------------------------------------------------------------------------
</TABLE>
41
................................................................................
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
..............................................................................
<TABLE>
- - - ------------------------------------------------------------------------------------
DREYFUS/LAUREL U.S. TREASURY MONEY MARKET FUND
<CAPTION>
PERIOD ENDED
October 31, 1994*
- - - ------------------------------------------------------------------------------------
<S> <C>
INVESTOR SHARES:
Sold $2,966,555
Issued as reinvestment of dividends 9,219
Redeemed (1,652,274)
----------
Net increase $1,323,500
==========
- - - ------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
October 31, 1994* October 31, 1993
- - - ------------------------------------------------------------------------------------
<S> <C> <C>
CLASS R SHARES:
Sold $801,362,826 $155,014,611
Issued as reinvestment of dividends 2,669,895 854,856
Redeemed (645,020,921) (155,272,066)
------------ ------------
Net increase $159,011,800 $ 597,401
============ ============
- - - ------------------------------------------------------------------------------------
</TABLE>
<TABLE>
- - - ------------------------------------------------------------------------------------
DREYFUS/LAUREL TAX-EXEMPT MONEY MARKET FUND
<CAPTION>
PERIOD ENDED
October 31, 1994*
- - - ------------------------------------------------------------------------------------
<S> <C>
INVESTOR SHARES:
Sold $1,304,565
Issued as reinvestment of dividends 9,953
Redeemed (153,801)
----------
Net increase $1,160,717
==========
- - - ------------------------------------------------------------------------------------
</TABLE>
42
................................................................................
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
..............................................................................
- - - --------------------------------------------------------------------------------
DREYFUS/LAUREL TAX-EXEMPT MONEY MARKET FUND CONTINUED
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
October 31, 1994* October 31, 1993
- - - ------------------------------------------------------------------------------------
<S> <C> <C>
CLASS R SHARES:
Sold $ 639,468,498 $548,669,523
Issued as reinvestment of dividends 1,778,576 1,498,241
Redeemed (623,970,062) (547,056,959)
-------------- ------------
Net increase $ 17,277,012 $ 3,110,805
============== ============
- - - ------------------------------------------------------------------------------------
<FN>
* Dreyfus/Laurel Prime Money Market Fund commenced selling Investor Shares on
April 6, 1994, Dreyfus/Laurel U.S. Treasury Money Market Fund commenced
selling Investor Shares on April 18, 1994, and Dreyfus/Laurel Tax-Exempt Money
Market Fund commenced selling Investor Shares on April 20, 1994. Those shares
outstanding prior to April 4, 1994, for the Dreyfus/Laurel Prime Money Market
Fund, Dreyfus/Laurel U.S. Treasury Money Market Fund, and Dreyfus/Laurel
Tax-Exempt Money Market Fund were designated as Trust Shares of the respective
Fund. Effective October 17, 1994, the Trust Shares of each Fund were
reclassified as Class R Shares of that Fund.
</TABLE>
5. ORGANIZATION COSTS
Each Fund paid all costs in connection with the Fund's organization including
the fees and expenses of registering and qualifying the Fund's shares for
distribution under Federal and state securities regulations. Prior to April
4, 1994, all such costs were being amortized on the straight-line method over
a period of five years. On April 4, 1994, the remaining unamortized
organization costs were reimbursed by Mellon Bank as the investment adviser.
6. SUBSEQUENT EVENT
On November 4, 1994, a reorganization took place pursuant to which
substantially all of the assets of the Cash Management, Government Money and
Tax-Free Money Funds were acquired by the Prime Money Market, U.S. Treasury
Money Market and Tax-Exempt Money Market Funds, respectively.
43
...............................................................................
<PAGE>
INDEPENDENT AUDITORS REPORT
..............................................................................
[LOGO KPMG]
The Board of Directors and Shareholders
The Dreyfus/Laurel Funds, Inc.
We have audited the accompanying statements of assets and liabilities,
including the portfolios of investments of the Dreyfus/Laurel Prime Money
Market Fund, the Dreyfus/Laurel U.S. Treasury Money Market Fund and the
Dreyfus/Laurel Tax-Exempt Money Market Fund of The Dreyfus/Laurel Funds, Inc.
as of October 31, 1994, and the related statements of operations for the year
then ended, the statements of changes in net assets for each of the two years
in the period then ended, and the financial highlights for each of the
periods indicated herein. These financial statements and financial highlights
are the responsibility of each Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of October 31, 1994, by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statements presentation. We believe that our audits
provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Dreyfus/Laurel Prime Money Market Fund, the Dreyfus/Laurel U.S. Treasury
Money Market Fund and the Dreyfus/Laurel Tax-Exempt Money Market Fund of The
Dreyfus/Laurel Funds, Inc. as of October 31, 1994, the results of their
operations for the year then ended, the changes in their net assets for each
of the two years in the period then ended, and the financial highlights for
each of the periods indicated herein, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Pittsburgh, Pennsylvania
December 9, 1994
44
<PAGE>
PORTFOLIO of INVESTMENTS
................................................................................
- - - --------------------------------------------------------------------------------
DREYFUS/LAUREL INSTITUTIONAL
PRIME MONEY MARKET FUND OCTOBER 31, 1994
<TABLE>
<CAPTION>
PRINCIPAL COUPON MATURITY VALUE
AMOUNT RATE DATE (NOTE 1)
COMMERCIAL PAPER -- 71.6%
<C> <S> <C> <C> <C>
DOMESTIC COMMERCIAL PAPER -- 49.2%
$15,000,000 Ameritech Corporation 4.600% 11/18/94 $ 14,967,417
8,000,000 Anheuser-Busch Cos., Inc. 4.850 11/01/94 8,000,000
5,000,000 Bankers Trust New York 5.060 11/14/94 4,990,864
10,625,000 Bausch & Lomb Inc. 4.850 11/21/94 10,596,372
10,000,000 Bear Stearns Company 5.440 01/19/95 9,880,622
10,000,000 Ciesco LP 4.850 12/05/94 9,954,195
15,000,000 Corporate Receivables Corporation 4.875 12/06/94 14,928,906
25,000,000 Dun & Bradstreet Corporation 4.870 12/13/94 24,857,958
15,000,000 Equitable Resources Inc. 4.920 11/03/94 14,995,900
18,800,000 Gannet Company Inc.** 4.850 11/28/94 18,731,615
14,000,000 GTE Hawaiian Telephone Company 5.050 11/18/94 13,966,614
25,000,000 Hewlett Packard Company 5.020 02/27/95 24,588,639
5,000,000 HJ Heinz Company 4.770 11/01/94 5,000,000
15,000,000 JP Morgan Company 4.800 11/16/94 14,970,000
5,500,000 Laclede Gas Company 5.000 11/09/94 5,493,889
15,782,000 McGraw Hill Inc. 4.820 12/06/94 15,708,044
20,000,000 New Center Asset 5.020 12/20/94 19,863,345
15,000,000 Pitney Bowes Credit Corporation 4.800 11/17/94 14,968,000
12,000,000 Pitney Bowes Credit Corporation 4.850 11/29/94 11,954,733
14,000,000 Schering Corporation 4.800 12/14/94 13,919,733
4,379,000 Southern California Gas Company 4.890 12/05/94 4,358,776
10,000,000 Toys "R" Us 4.870 11/29/94 9,962,122
25,000,000 United Technologies 5.060 11/22/94 24,926,209
24,000,000 US West Communications Inc. 5.450 01/17/95 23,720,233
------------
TOTAL DOMESTIC COMMERCIAL PAPER (Cost $335,304,186)
335,304,186
------------
FOREIGN COMMERCIAL PAPER -- 22.4%
11,750,000 Aegon 4.880 12/07/94 11,692,660
8,000,000 Aegon 4.950 11/14/94 7,985,700
10,000,000 CSR America Inc. 5.100 01/27/95 9,876,750
10,000,000 Kingdom of Sweden 4.600 11/01/94 10,000,000
20,000,000 National Provincial Building
Society 4.850 12/20/94 19,867,972
15,000,000 National Westminster Bank PLC 4.900 12/05/94 15,000,280
20,000,000 New South Wales Treasury
Corporation 5.100 11/29/94 19,920,667
10,000,000 Royal Bank of Canada 4.890 11/30/94 10,001,605
10,000,000 RTZ America Inc.** 5.470 01/25/95 9,870,847
8,835,000 Sandoz Corporation 4.850 12/01/94 8,799,292
20,000,000 Toshiba America Inc. 5.070 01/05/95 19,816,917
4,500,000 Toshiba America Inc. 5.140 02/10/95 4,435,108
5,400,000 Toshiba America Inc. 5.220 04/17/95 5,269,239
------------
TOTAL FOREIGN COMMERCIAL PAPER (Cost $152,537,037)
152,537,037
------------
</TABLE>
6 SEE NOTES TO FINANCIAL STATEMENTS.
................................................................................
<PAGE>
PORTFOLIO of INVESTMENTS (continued)
................................................................................
- - - --------------------------------------------------------------------------------
DREYFUS/LAUREL INSTITUTIONAL
PRIME MONEY MARKET FUND OCTOBER 31, 1994
<TABLE>
<CAPTION>
PRINCIPAL COUPON MATURITY VALUE
AMOUNT RATE DATE (NOTE 1)
U.S. GOVERNMENT AGENCIES -- 13.1%
<C> <S> <C> <C> <C>
$10,000,000 Federal Farm Credit Bank Agency
Discount Notes 4.750% 12/14/94 $ 9,943,264
10,000,000 Federal Home Loan Bank Agency
Discount Note 4.900 12/19/94 9,934,667
35,000,000 Federal National Mortgage
Association Discount Note 4.720 11/23/94 34,899,045
25,000,000 Federal National Mortgage
Association Discount Note 4.750 11/30/94 24,904,340
10,000,000 Federal National Mortgage
Association Discount Note 5.010 12/19/94 9,933,200
------------
TOTAL U.S. GOVERNMENT AGENCIES (Cost $89,614,516)
89,614,516
------------
VARIABLE RATE NOTES -- 5.1%
15,000,000 Ford Motor Credit Company 3.750 02/27/95 15,013,111
10,000,000 Pepsico Inc. 5.325 04/13/95 9,999,870
5,000,000 PNC Bank Pennsylvania 5.310 05/09/95 4,996,573
5,000,000 Student Loan Marketing Association 4.250 12/08/94 5,000,000
------------
TOTAL VARIABLE RATE NOTES (Cost $35,009,554) 35,009,554
------------
<CAPTION>
ANNUALIZED
YIELD
AT
DATE
OF
PURCHASE
<C> <S> <C> <C> <C>
U.S. TREASURY OBLIGATIONS -- 1.4% (Cost $9,655,000)
10,000,000 U.S. Treasury Bills 5.175 06/29/95 9,655,000
------------
REPURCHASE AGREEMENT -- 9.1% (Cost $62,000,655)
62,000,655 Agreement with Barclays de Zoete Wedd dated 10/31/94
bearing 4.780% to be repurchased at $62,008,887 on
11/01/94 collateralized by: $6,423,188, U.S.
Treasury Notes, 5.500% due on 04/15/00; $7,637,825,
U.S. Treasury Notes, 5.500% due 02/28/99;
$33,459,177, U.S. Treasury Notes, 11.250% due
05/15/95; $14,481,054, U.S. Treasury Notes, 7.625%
due 12/31/94 62,000,655
------------
TOTAL INVESTMENTS (Cost $684,120,948*) 100.3% $684,120,948
OTHER ASSETS AND LIABILITIES (NET) (0.3) (2,340,416)
------ ------------
NET ASSETS 100.0% $681,780,532
------ ------------
------ ------------
---------------------------------------------------------------------------------
<FN>
* AGGREGATE COST FOR FEDERAL TAX PURPOSES.
** COMMERCIAL PAPER SOLD WITHIN TERMS OF A PRIVATE PLACEMENT MEMORANDUM, EXEMPT
FROM REGISTRATION UNDER SECTION 4(2) OF THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY BE SOLD ONLY TO DEALERS IN THAT PROGRAM OR OTHER "ACCREDITED
INVESTORS." THESE SECURITIES HAVE BEEN DETERMINED TO BE LIQUID UNDER
GUIDELINES ESTABLISHED BY THE BOARD OF DIRECTORS.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS. 7
................................................................................
<PAGE>
PORTFOLIO of INVESTMENTS
................................................................................
- - - --------------------------------------------------------------------------------
DREYFUS/LAUREL INSTITUTIONAL
GOVERNMENT MONEY MARKET FUND OCTOBER 31, 1994
<TABLE>
<CAPTION>
ANNUALIZED
YIELD AT
PRINCIPAL DATE OF MATURITY VALUE
AMOUNT PURCHASE DATE (NOTE 1)
U.S. GOVERNMENT AGENCIES -- 64.8%
<C> <S> <C> <C> <C>
$ 13,000,000 Federal Farm Credit Bank Discount
Note 4.750% 12/14/94 $ 12,926,243
15,000,000 Federal Farm Credit Bank Discount
Note 5.010 12/22/94 14,893,538
13,585,000 Federal Home Loan Bank Discount
Note 4.750 12/09/94 13,516,886
10,000,000 Federal Home Loan Bank Discount
Note 4.900 12/20/94 9,933,306
25,000,000 Federal Home Loan Bank Discount
Note 5.290 01/20/95 24,706,111
15,000,000 Federal Home Loan Bank Discount
Note 5.320 01/23/95 14,816,017
20,000,000 Federal Home Loan Mortgage Agency
Discount Note 4.530 11/03/94 19,994,967
15,000,000 Federal Home Loan Mortgage Agency
Discount Note 4.730 11/21/94 14,960,583
17,000,000 Federal Home Loan Mortgage Agency
Discount Note 4.730 11/25/94 16,946,393
15,000,000 Federal National Mortgage
Association Discount Note 4.740 11/10/94 14,982,225
29,820,000 Federal National Mortgage
Association Discount Note 4.720 11/17/94 29,757,444
7,735,000 Federal National Mortgage
Association Discount Note 4.870 11/21/94 7,714,073
15,190,000 Federal National Mortgage
Association Discount Note 4.660 11/29/94 15,134,945
20,000,000 Federal National Mortgage
Association Discount Note 4.720 11/29/94 19,926,578
25,000,000 Federal National Mortgage
Association Discount Note 4.750 11/30/94 24,904,340
10,000,000 Federal National Mortgage
Association Discount Note 4.750 12/13/94 9,944,583
10,000,000 Federal National Mortgage
Association Discount Note 4.700 12/16/94 9,941,250
10,000,000 Federal National Mortgage
Association Discount Note 4.750 12/16/94 9,940,625
10,000,000 Federal National Mortgage
Association Discount Note 5.010 12/19/94 9,933,200
10,000,000 Federal National Mortgage
Association Discount Note 4.900 02/22/95 9,846,195
------------
TOTAL U.S. GOVERNMENT AGENCIES (Cost $304,719,502)
304,719,502
------------
</TABLE>
8 SEE NOTES TO FINANCIAL STATEMENTS.
................................................................................
<PAGE>
PORTFOLIO of INVESTMENTS (continued)
................................................................................
- - - --------------------------------------------------------------------------------
DREYFUS/LAUREL INSTITUTIONAL
GOVERNMENT MONEY MARKET FUND OCTOBER 31, 1994
<TABLE>
<CAPTION>
ANNUALIZED
YIELD AT
PRINCIPAL DATE OF MATURITY VALUE
AMOUNT PURCHASE DATE (NOTE 1)
U.S. TREASURY OBLIGATIONS -- 8.4%
<C> <S> <C> <C> <C>
$ 15,000,000 U.S. Treasury Bills 4.770% 12/15/94 $ 14,915,758
10,000,000 U.S. Treasury Bills 5.425 05/04/95 9,737,033
5,000,000 U.S. Treasury Bills 5.180 06/29/95 4,827,333
10,000,000 U.S. Treasury Strip 4.815 11/15/94 9,981,980
------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $39,462,104) 39,462,104
------------
REPURCHASE AGREEMENTS -- 27.2%
27,763,286 Agreement with Barclays de Zoete Wedd dated 10/31/94 bearing
4.780% to be repurchased at $27,766,972 on 11/01/94
collateralized by: $27,763,537, U.S. Treasury Bill, 5.180%
due 01/26/95 27,763,286
100,000,000 Agreement with Donaldson Lufkin & Jenrette Securities
Corporation dated 10/31/94 bearing 4.780% to be
repurchased at $100,013,278 on 11/01/94 collateralized by:
$49,106,999, U.S. Treasury Notes, 6.750% due 05/31/99;
$1,619,631, U.S. Treasury Notes, 3.875% due 08/31/95;
$49,274,147, U.S. Treasury Notes, 4.250% due 07/31/95 100,000,000
------------
TOTAL REPURCHASE AGREEMENTS
(Cost $127,763,286) 127,763,286
------------
TOTAL INVESTMENTS
(Cost $471,944,892*) 100.4% 471,944,892
OTHER ASSETS AND LIABILITIES (NET) (0.4) (1,938,022)
------ ------------
NET ASSETS 100.0% $470,006,870
------ ------------
------ ------------
------------------------------------------------------------------------------------
<FN>
* AGGREGATE COST FOR FEDERAL TAX PURPOSES.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS. 9
................................................................................
<PAGE>
PORTFOLIO of INVESTMENTS
................................................................................
- - - --------------------------------------------------------------------------------
DREYFUS/LAUREL INSTITUTIONAL
U.S. TREASURY MONEY MARKET FUND OCTOBER 31, 1994
<TABLE>
<CAPTION>
ANNUALIZED
YIELD AT
PRINCIPAL DATE OF MATURITY VALUE
AMOUNT PURCHASE DATE (NOTE 1)
U.S. TREASURY OBLIGATIONS -- 71.8%
<C> <S> <C> <C> <C>
$ 40,000,000 U.S. Treasury Bills 4.310% 11/03/94 $ 39,990,422
5,000,000 U.S. Treasury Bills 4.400 11/03/94 4,998,778
10,000,000 U.S. Treasury Bills 4.340 11/10/94 9,989,150
10,000,000 U.S. Treasury Bills 3.910 11/17/94 9,982,622
25,000,000 U.S. Treasury Bills 4.470 11/17/94 24,950,334
25,000,000 U.S. Treasury Bills 4.560 12/08/94 24,882,834
15,000,000 U.S. Treasury Bills 4.580 12/15/94 14,916,033
15,000,000 U.S. Treasury Bills 4.720 12/15/94 14,913,467
20,000,000 U.S. Treasury Bills 4.847 12/15/94 19,887,678
25,000,000 U.S. Treasury Bills 4.600 12/22/94 24,837,084
10,000,000 U.S. Treasury Bills 4.080 01/12/95 9,918,400
25,000,000 U.S. Treasury Bills 4.890 01/12/95 24,755,500
25,000,000 U.S. Treasury Bills 4.680 01/19/95 24,743,250
35,000,000 U.S. Treasury Bills 5.010 01/19/95 34,615,204
20,000,000 U.S. Treasury Bills 4.755 01/26/95 19,772,816
35,000,000 U.S. Treasury Bills 5.050 01/26/95 34,577,764
25,000,000 U.S. Treasury Bills 5.020 02/02/95 24,675,792
25,000,000 U.S. Treasury Bills 5.000 02/16/95 24,628,472
10,000,000 U.S. Treasury Bills 4.820 03/09/95 9,828,622
20,000,000 U.S. Treasury Bills 5.436 05/04/95 19,473,045
5,000,000 U.S. Treasury Strip 4.776 11/15/94 4,990,990
------------
TOTAL U.S. TREASURY OBLIGATIONS (Cost $421,328,257)
421,328,257
------------
REPURCHASE AGREEMENTS -- 28.5%
66,956,071 Agreement with Barclays de Zoete Wedd dated 10/31/94 bearing
4.780% to be repurchased at $66,964,961 on 11/01/94
collateralized by: $8,778,620, U.S. Treasury Notes, 5.750%
due 10/31/97; $7,527,027, U.S. Treasury Notes, 7.500% due
01/31/96; $20,366,209, U.S. Treasury Notes, 11.625% due
11/15/94; $4,800,742, U.S. Treasury Bonds, 8.875% due
08/15/17; $5,046,199, U.S. Treasury Bonds, 10.750% due
05/15/03; $20,398,136, U.S. Treasury Bill, 5.180% due
01/26/95 66,956,071
100,000,000 Agreement with Donaldson Lufkin & Jenrette Securities
Corporation dated 10/31/94 bearing 4.780% to be
repurchased at $100,013,278 on 11/01/94 collateralized by:
$47,419,072, U.S. Treasury Notes, 8.750% due 10/15/97;
$52,581,618, U.S. Treasury Notes, 5.500% due 4/30/96 100,000,000
------------
TOTAL REPURCHASE AGREEMENTS (Cost $166,956,071) 166,956,071
------------
TOTAL INVESTMENTS (Cost $588,284,328*) 100.3% 588,284,328
OTHER ASSETS AND LIABILITIES (0.3) (1,506,043)
------ ------------
NET ASSETS 100.0% $586,778,285
------ ------------
------ ------------
------------------------------------------------------------------------------------
<FN>
* AGGREGATE COST FOR FEDERAL TAX PURPOSES.
</TABLE>
10 SEE NOTES TO FINANCIAL STATEMENTS.
................................................................................
<PAGE>
PORTFOLIO of INVESTMENTS
................................................................................
- - - --------------------------------------------------------------------------------
DREYFUS/LAUREL INSTITUTIONAL
U.S. TREASURY ONLY MONEY MARKET FUND OCTOBER 31, 1994
<TABLE>
<CAPTION>
ANNUALIZED
YIELD AT
PRINCIPAL DATE OF MATURITY VALUE
AMOUNT PURCHASE DATE (NOTE 1)
U.S. TREASURY OBLIGATIONS -- 100.3%
<C> <S> <C> <C> <C>
$ 4,834,000 U.S. Treasury Bills 4.380% 11/03/94 $ 4,832,824
37,000 U.S. Treasury Bills 4.340 11/10/94 36,958
1,633,000 U.S. Treasury Bills 4.435 11/10/94 1,631,189
7,546,000 U.S. Treasury Bills 4.470 11/10/94 7,537,567
1,038,000 U.S. Treasury Bills 4.390 11/17/94 1,035,975
10,250,000 U.S. Treasury Bills 4.450 11/17/94 10,229,728
521,000 U.S. Treasury Bills 4.540 11/17/94 519,949
1,371,000 U.S. Treasury Bills 4.580 11/17/94 1,368,209
2,032,000 U.S. Treasury Bills 4.450 12/08/94 2,022,706
16,000 U.S. Treasury Bills 4.550 12/08/94 15,925
92,000 U.S. Treasury Bills 4.590 12/08/94 91,566
170,000 U.S. Treasury Bills 4.650 12/08/94 169,188
454,000 U.S. Treasury Bills 4.780 12/08/94 451,770
4,205,000 U.S. Treasury Bills 4.580 12/15/94 4,181,461
70,000 U.S. Treasury Bills 4.570 12/22/94 69,547
147,000 U.S. Treasury Bills 4.585 12/22/94 146,045
5,000,000 U.S. Treasury Bills 4.600 12/22/94 4,967,417
7,929,000 U.S. Treasury Bills 4.750 12/22/94 7,875,644
3,381,000 U.S. Treasury Bills 4.820 12/22/94 3,357,913
4,024,000 U.S. Treasury Bills 4.660 01/12/95 3,986,496
1,256,000 U.S. Treasury Bills 4.700 01/19/95 1,243,046
131,000 U.S. Treasury Bills 4.730 01/19/95 129,640
106,000 U.S. Treasury Bills 4.750 01/19/95 104,895
1,114,000 U.S. Treasury Bills 4.895 01/19/95 1,102,034
1,279,000 U.S. Treasury Bills 4.790 02/23/95 1,259,600
2,000,000 U.S. Treasury Bills 5.110 05/04/95 1,947,765
338,000 U.S. Treasury Bills 5.150 06/29/95 326,395
562,000 U.S. Treasury Bills 5.280 07/27/95 539,910
------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $61,181,362) 61,181,362
------------
TOTAL INVESTMENTS
(Cost $61,181,362*) 100.3% 61,181,362
OTHER ASSETS AND LIABILITIES (NET) (0.3) (181,228)
------ ------------
NET ASSETS 100.0% $61,000,134
------ ------------
------ ------------
------------------------------------------------------------------------------------
<FN>
* AGGREGATE COST FOR FEDERAL TAX PURPOSES.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS. 11
................................................................................
<PAGE>
PORTFOLIO of INVESTMENTS
................................................................................
- - - --------------------------------------------------------------------------------
DREYFUS/LAUREL INSTITUTIONAL
SHORT-TERM BOND FUND OCTOBER 31, 1994
<TABLE>
<CAPTION>
PRINCIPAL COUPON MATURITY VALUE
AMOUNT RATE DATE (NOTE 1)
COMMERCIAL PAPER -- 35.3%
<C> <S> <C> <C> <C>
DOMESTIC COMMERCIAL PAPER -- 23.6%
$200,000 Golden Peanut Company 5.080% 12/09/94 $ 198,899
200,000 Goldman Sachs Group 4.980 11/16/94 199,557
200,000 Kimberly Clark Corporation 4.920 11/17/94 199,535
200,000 Pitney Bowes Credit Corporation 5.100 12/08/94 198,863
209,000 Sara Lee Corporation 5.070 12/01/94 208,087
200,000 US Bancorp 5.120 12/08/94 198,919
----------
TOTAL DOMESTIC COMMERCIAL PAPER (Cost $1,204,091) 1,203,860
----------
FOREIGN COMMERCIAL PAPER -- 11.7%
200,000 British Telecommunications PLC 4.980 11/29/94 199,198
200,000 Canadian Wheat Board 5.500 03/10/95 195,955
200,000 Grand Metropolitan Investment 4.820 11/21/94 199,417
----------
TOTAL FOREIGN COMMERCIAL PAPER
(Cost $594,748) 594,570
----------
CORPORATE BONDS AND NOTES -- 27.5%
Banking and Finance -- 15.1%
175,000 C.I.T. Group Holdings, Inc. 5.500 11/01/95 173,031
150,000 International Lease Finance
Corporation 6.625 06/01/96 149,063
155,000 John Deere Capital Corporation 5.000 01/15/95 154,613
210,000 NationsBank Corporation 5.375 12/01/95 207,638
90,000 Republic National Bank of New York 4.750 10/15/95 88,650
----------
772,995
----------
Machinery -- 4.0%
200,000 Ingersoll Rand Company 8.250 11/01/96 203,500
----------
Aerospace -- 4.6%
230,000 Martin Marietta Corporation 8.500 03/01/96 234,025
----------
Utilities -- 3.8%
195,000 General Electric Company 5.875 12/01/94 195,000
----------
TOTAL CORPORATE BONDS AND NOTES
(Cost $1,422,212) 1,405,520
----------
</TABLE>
12 SEE NOTES TO FINANCIAL STATEMENTS.
................................................................................
<PAGE>
PORTFOLIO of INVESTMENTS (continued)
................................................................................
- - - --------------------------------------------------------------------------------
DREYFUS/LAUREL INSTITUTIONAL
SHORT-TERM BOND FUND OCTOBER 31, 1994
<TABLE>
<CAPTION>
PRINCIPAL COUPON MATURITY VALUE
AMOUNT RATE DATE (NOTE 1)
U.S. TREASURY OBLIGATIONS -- 9.7%
<C> <S> <C> <C> <C>
(Cost $492,345)
$500,000 U.S. Treasury Notes 5.500% 04/30/96 $ 492,275
----------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 5.8%
(Cost $298,773)
300,000 Federal National Mortgage
Association 4.910 12/01/94 298,732
----------
REPURCHASE AGREEMENT -- 17.5%
(Cost $891,912)
Agreement with Barclays de Zoete Wedd dated 10/31/94 bearing
4.780% to be repurchased at $892,030 on 11/01/94,
collateralized by: $892,697, U.S. Treasury Bill, 5.720%
due 11/10/94 891,912
891,912
----------
TOTAL INVESTMENTS
(Cost $4,904,081*) 95.8% 4,886,869
OTHER ASSETS AND LIABILITIES (NET) 4.2 212,585
------ ----------
NET ASSETS 100.0% $5,099,454
------ ----------
------ ----------
------------------------------------------------------------------------------------
<FN>
* AGGREGATE COST FOR FEDERAL TAX PURPOSES.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS. 13
................................................................................
<PAGE>
STATEMENT of ASSETS and LIABILITIES
................................................................................
- - - --------------------------------------------------------------------------------
OCTOBER 31, 1994
<TABLE>
<CAPTION>
DREYFUS/LAUREL
INSTITUTIONAL
PRIME
MONEY MARKET
FUND
<S> <C>
-------------------------------------------------------------------
ASSETS
Investments, at value (Cost $684,120,948,
$471,944,892, $588,284,328, $61,181,362 and
$4,904,081, respectively.)
(Note 1) See accompanying schedules
Securities $622,120,293
Repurchase agreements 62,000,655
---------------
Total Investments 684,120,948
Cash --
Interest receivable 644,567
Receivable from investment adviser (Note 2) 70,823
Receivable for investment securities sold --
Receivable for Fund shares sold 179,302
Other assets --
---------------
TOTAL ASSETS 685,015,640
---------------
---------------
LIABILITIES
Dividends payable 2,985,051
Payable for Fund shares redeemed 54,897
Investment management fee payable (Note 2) 91,634
Shareholder service fee payable (Note 3) 14,909
Accrued Directors' fees and expenses (Note 2) 88,617
---------------
TOTAL LIABILITIES 3,235,108
---------------
NET ASSETS $681,780,532
---------------
---------------
NET ASSETS consist of:
Distribution in excess of net investment income $ --
Accumulated net realized loss on investments sold --
Unrealized depreciation of investments --
Par value 681,781
Paid-in capital in excess of par value 681,098,751
---------------
TOTAL NET ASSETS $681,780,532
---------------
---------------
NET ASSETS:
Class I Shares $681,780,532
---------------
---------------
Class II Shares $ --
---------------
---------------
Class III Shares $ --
---------------
---------------
SHARES OUTSTANDING:
Class I Shares 681,780,532
---------------
---------------
Class II Shares --
---------------
---------------
Class III Shares --
---------------
---------------
CLASS I SHARES
Net assets value, offering and redemption price
per share $1.00
-------
-------
CLASS II SHARES
Net asset value, offering and redemption price per
share $--
-------
-------
CLASS III SHARES
Net asset value, offering and redemption price per
share $--
-------
-------
</TABLE>
14 SEE NOTES TO FINANCIAL STATEMENTS.
................................................................................
<PAGE>
STATEMENT of ASSETS and LIABILITIES (continued)
................................................................................
- - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DREYFUS/LAUREL DREYFUS/LAUREL DREYFUS/LAUREL
INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL DREYFUS/LAUREL
GOVERNMENT U.S. TREASURY U.S. TREASURY ONLY INSTITUTIONAL
MONEY MARKET MONEY MARKET MONEY MARKET SHORT-TERM BOND
FUND FUND FUND FUND
<S> <C> <C> <C>
--------------------------------------------------------------------------
$344,181,606 $421,328,257 $ 61,181,362 $ 3,994,957
127,763,286 166,956,071 -- 891,912
--------------- --------------- ------------------- ----------------
471,944,892 588,284,328 61,181,362 4,886,869
-- -- 9 --
16,964 22,169 -- 32,716
23,667 30,735 -- 83,093
-- -- -- 103,304
-- 876,252 52,796 614
6,629 -- -- --
--------------- --------------- ------------------- ----------------
471,992,152 589,213,484 61,234,167 5,106,596
--------------- --------------- ------------------- ----------------
--------------- --------------- ------------------- ----------------
1,861,675 2,201,952 218,357 474
-- 90,000 -- 3,219
58,883 70,810 7,082 1,153
9,532 12,435 204 104
55,192 60,002 8,390 2,192
--------------- --------------- ------------------- ----------------
1,985,282 2,435,199 234,033 7,142
--------------- --------------- ------------------- ----------------
$470,006,870 $586,778,285 $ 61,000,134 $ 5,099,454
--------------- --------------- ------------------- ----------------
--------------- --------------- ------------------- ----------------
$ -- $ -- $ (1,827) $ --
-- -- -- (158,643)
-- -- -- (17,212)
470,007 586,778 61,001 516
469,536,863 586,191,507 60,940,960 5,274,793
--------------- --------------- ------------------- ----------------
$470,006,870 $586,778,285 $ 61,000,134 $ 5,099,454
--------------- --------------- ------------------- ----------------
--------------- --------------- ------------------- ----------------
$470,006,870 $586,778,285 $ -- $ 5,099,454
--------------- --------------- ------------------- ----------------
--------------- --------------- ------------------- ----------------
$ -- $ -- $ 30,300,775 $ --
--------------- --------------- ------------------- ----------------
--------------- --------------- ------------------- ----------------
$ -- $ -- $ 30,699,359 $ --
--------------- --------------- ------------------- ----------------
--------------- --------------- ------------------- ----------------
470,006,870 586,778,285 -- 516,299
--------------- --------------- ------------------- ----------------
--------------- --------------- ------------------- ----------------
-- -- 30,301,400 --
--------------- --------------- ------------------- ----------------
--------------- --------------- ------------------- ----------------
-- -- 30,700,000 --
--------------- --------------- ------------------- ----------------
--------------- --------------- ------------------- ----------------
$1.00 $1.00 $-- $9.88
------- ------- --------- --------
------- ------- --------- --------
$-- $-- $1.00 $--
------- ------- --------- --------
------- ------- --------- --------
$-- $-- $1.00 $--
------- ------- --------- --------
------- ------- --------- --------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS. 15
................................................................................
<PAGE>
STATEMENT of OPERATIONS
................................................................................
- - - --------------------------------------------------------------------------------
FOR THE YEAR OR PERIOD ENDED OCTOBER 31, 1994
<TABLE>
<CAPTION>
DREYFUS/LAUREL
INSTITUTIONAL
PRIME
MONEY MARKET
FUND
<S> <C>
------------------------------------------------------------------
INVESTMENT INCOME
Interest $30,976,305
--------------
EXPENSES
Investment advisory fee (Note 2) 719,248
Administration fee (Note 2) 102,688
Investment management fee (Note 2) 572,835
Custodian fees (Note 2) 60,862
Transfer agent fees (Note 2) 24,766
Shareholder service fee (Note 3) 660,963
Legal and audit fees 31,847
Directors' fees and expenses (Note 2) 91,431
Registration and filing fees 10,139
Amortization of organization costs (Note 6) --
Other expenses 64,636
Expenses reimbursed by investment adviser (Note 2) --
--------------
TOTAL EXPENSES 2,339,415
--------------
NET INVESTMENT INCOME 28,636,890
--------------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS
(Notes 1 and 4)
Net realized loss on investments during the year --
Net unrealized depreciation of investments
during the year --
--------------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS --
--------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $28,636,890
--------------
--------------
------------------------------------------------------------------
<FN>
* THE DREYFUS/LAUREL INSTITUTIONAL SHORT-TERM BOND FUND COMMENCED OPERATIONS ON
NOVEMBER 5, 1993.
</TABLE>
16 SEE NOTES TO FINANCIAL STATEMENTS.
................................................................................
<PAGE>
STATEMENT of OPERATIONS (continued)
................................................................................
- - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DREYFUS/LAUREL DREYFUS/LAUREL DREYFUS/LAUREL
INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL DREYFUS/LAUREL
GOVERNMENT U.S. TREASURY U.S. TREASURY ONLY INSTITUTIONAL
MONEY MARKET MONEY MARKET MONEY MARKET SHORT-TERM BOND
FUND FUND FUND FUND*
<S> <C> <C> <C>
------------------------------------------------------------------------------
$ 18,066,349 $ 19,165,474 $ 2,434,871 $ 616,754
--------------- --------------- ------------------- ----------------
380,929 404,422 55,152 11,572
54,384 57,738 7,882 1,649
354,884 386,511 50,321 15,477
41,999 45,824 18,793 19,438
24,766 24,766 24,848 23,976
409,481 445,973 11,732 12,898
19,141 23,184 6,701 4,957
57,893 62,762 11,031 4,698
11,834 11,117 13,154 11,402
-- 7,744 3,699 5,907
31,844 50,103 3,147 3,298
-- (21,564 ) (81,512) (85,177)
--------------- --------------- ------------------- ----------------
1,387,155 1,498,580 124,948 30,095
--------------- --------------- ------------------- ----------------
16,679,194 17,666,894 2,309,923 586,659
--------------- --------------- ------------------- ----------------
-- -- -- (158,643)
-- -- -- (17,212)
--------------- --------------- ------------------- ----------------
-- -- -- (175,855)
--------------- --------------- ------------------- ----------------
$ 16,679,194 $ 17,666,894 $ 2,309,923 $ 410,804
--------------- --------------- ------------------- ----------------
--------------- --------------- ------------------- ----------------
------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS. 17
................................................................................
<PAGE>
STATEMENT of CHANGES in NET ASSETS
................................................................................
- - - --------------------------------------------------------------------------------
FOR THE YEAR OR PERIOD ENDED OCTOBER 31, 1994
<TABLE>
<CAPTION>
DREYFUS/LAUREL
INSTITUTIONAL
PRIME
MONEY MARKET
FUND
<S> <C>
----------------------------------------------------------------
Net investment income $ 28,636,890
Net realized loss on securities during the year --
Net unrealized depreciation of investments during
the year --
--------------
Net increase in net assets resulting from
operations 28,636,890
Distributions to shareholders from net investment
income:
Class I Shares (28,636,890)
Class II Shares --
Class III Shares --
Net increase/(decrease) in net assets from Fund
share transactions (Note 5):
Class I Shares (142,299,818)
Class II Shares --
Class III Shares --
--------------
Net increase/(decrease) in net assets (142,299,818)
NET ASSETS:
Beginning of year 824,080,350
--------------
End of year (including distributions in excess of
net investment income of $1,827 at October 31,
1994 for the Dreyfus/Laurel Institutional U.S.
Treasury Only Money Market Fund) $681,780,532
--------------
--------------
----------------------------------------------------------------
<FN>
* THE DREYFUS/LAUREL INSTITUTIONAL SHORT-TERM BOND FUND COMMENCED OPERATIONS ON
NOVEMBER 5, 1993.
</TABLE>
18 SEE NOTES TO FINANCIAL STATEMENTS.
................................................................................
<PAGE>
STATEMENT of CHANGES in NET ASSETS (continued)
................................................................................
- - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DREYFUS/LAUREL DREYFUS/LAUREL DREYFUS/LAUREL
INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL DREYFUS/LAUREL
GOVERNMENT U.S. TREASURY U.S. TREASURY ONLY INSTITUTIONAL
MONEY MARKET MONEY MARKET MONEY MARKET SHORT-TERM BOND
FUND FUND FUND FUND*
<S> <C> <C> <C>
-------------------------------------------------------------------------------
$ 16,679,194 $ 17,666,894 $ 2,309,923 $ 586,659
-- -- -- (158,643)
-- -- -- (17,212)
--------------- --------------- ------------------- ---------------
16,679,194 17,666,894 2,309,923 410,804
(16,679,194) (17,666,894) -- (586,659)
-- -- (1,777,705) --
-- -- (533,484) --
63,317,245 86,124,993 -- 5,275,309
-- -- (34,620,667) --
-- -- 30,700,000 --
--------------- --------------- ------------------- ---------------
63,317,245 86,124,993 (3,921,933) 5,099,454
406,689,625 500,653,292 64,922,067 --
--------------- --------------- ------------------- ---------------
$470,006,870 $586,778,285 $ 61,000,134 $5,099,454
--------------- --------------- ------------------- ---------------
--------------- --------------- ------------------- ---------------
-------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS. 19
................................................................................
<PAGE>
STATEMENT of CHANGES in NET ASSETS
................................................................................
- - - --------------------------------------------------------------------------------
FOR THE YEAR ENDED OCTOBER 31, 1993
<TABLE>
<CAPTION>
DREYFUS/LAUREL
INSTITUTIONAL
PRIME
MONEY MARKET
FUND
<S> <C>
--------------------------------------------------------------------
Net investment income $ 31,164,917
--------------
Net increase in net assets resulting from
operations 31,164,917
Distributions to shareholders from net investment
income (31,164,917)
Net increase/(decrease) in net assets from Fund
transactions (Note 5):
Class I Shares (126,241,187)
Class II Shares --
--------------
Net increase/(decrease) in net assets (126,241,187)
NET ASSETS:
Beginning of year 950,321,537
--------------
End of year $ 824,080,350
--------------
--------------
</TABLE>
20 SEE NOTES TO FINANCIAL STATEMENTS.
................................................................................
<PAGE>
STATEMENT of CHANGES in NET ASSETS (continued)
................................................................................
- - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DREYFUS/LAUREL DREYFUS/LAUREL DREYFUS/LAUREL
INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL
GOVERNMENT U.S. TREASURY U.S. TREASURY ONLY
MONEY MARKET MONEY MARKET MONEY MARKET
FUND FUND FUND
<S> <C> <C>
----------------------------------------------------------
$ 12,276,030 $ 17,958,489 $ 1,679,864
-------------- --------------- -------------------
12,276,030 17,958,489 1,679,864
(12,276,030) (17,958,489) (1,679,864)
15,325,408 (165,724,915) --
-- -- 21,140,185
-------------- --------------- -------------------
15,325,408 (165,724,915) 21,140,185
391,364,217 666,378,207 43,781,882
-------------- --------------- -------------------
$406,689,625 $500,653,292 $64,922,067
-------------- --------------- -------------------
-------------- --------------- -------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS. 21
................................................................................
<PAGE>
FINANCIAL HIGHLIGHTS
................................................................................
- - - --------------------------------------------------------------------------------
DREYFUS/LAUREL
INSTITUTIONAL PRIME MONEY MARKET FUND
FOR A CLASS I SHARE OUTSTANDING THROUGHOUT EACH YEAR.
Please refer to page 7 of the Prospectus dated March 1, 1995.
22 SEE NOTES TO FINANCIAL STATEMENTS.
................................................................................
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
................................................................................
- - - --------------------------------------------------------------------------------
Please refer to page 7 of the Prospectus dated March 1, 1995.
SEE NOTES TO FINANCIAL STATEMENTS. 23
................................................................................
<PAGE>
FINANCIAL HIGHLIGHTS
................................................................................
- - - --------------------------------------------------------------------------------
DREYFUS/LAUREL
INSTITUTIONAL GOVERNMENT MONEY MARKET FUND
FOR A CLASS I SHARE OUTSTANDING THROUGHOUT EACH YEAR.
Please refer to page 7 of the Prospectus dated March 1, 1995.
24 SEE NOTES TO FINANCIAL STATEMENTS.
................................................................................
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
................................................................................
- - - --------------------------------------------------------------------------------
Please refer to page 7 of the Prospectus dated March 1, 1995.
SEE NOTES TO FINANCIAL STATEMENTS. 25
................................................................................
<PAGE>
FINANCIAL HIGHLIGHTS
................................................................................
- - - --------------------------------------------------------------------------------
DREYFUS/LAUREL
INSTITUTIONAL U.S. TREASURY MONEY MARKET FUND
FOR A CLASS I SHARE OUTSTANDING THROUGHOUT EACH YEAR.
Please refer to page 7 of the Prospectus dated March 1, 1995.
26 SEE NOTES TO FINANCIAL STATEMENTS.
................................................................................
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
................................................................................
- - - --------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 27
................................................................................
<PAGE>
FINANCIAL HIGHLIGHTS
................................................................................
- - - --------------------------------------------------------------------------------
DREYFUS/LAUREL
INSTITUTIONAL U.S. TREASURY ONLY MONEY MARKET FUND
FOR A CLASS II SHARE OUTSTANDING THROUGHOUT EACH YEAR.
Please refer to page 7 of the Prospectus dated March 1, 1995.
28 SEE NOTES TO FINANCIAL STATEMENTS.
................................................................................
<PAGE>
FINANCIAL HIGHLIGHTS
................................................................................
- - - --------------------------------------------------------------------------------
DREYFUS/LAUREL
INSTITUTIONAL U.S. TREASURY ONLY MONEY MARKET FUND
FOR A CLASS III SHARE OUTSTANDING THROUGHOUT THE PERIOD.
Please refer to page 7 of the Prospectus dated March 1, 1995.
SEE NOTES TO FINANCIAL STATEMENTS. 29
................................................................................
<PAGE>
FINANCIAL HIGHLIGHTS
................................................................................
- - - --------------------------------------------------------------------------------
DREYFUS/LAUREL INSTITUTIONAL SHORT-TERM BOND FUND
FOR A CLASS I SHARE OUTSTANDING THROUGHOUT THE PERIOD.
Please refer to page 7 of the Prospectus dated March 1, 1995.
30 SEE NOTES TO FINANCIAL STATEMENTS.
................................................................................
<PAGE>
NOTES to FINANCIAL STATEMENTS
................................................................................
1. SIGNIFICANT ACCOUNTING POLICIES
The Dreyfus/Laurel Funds, Inc. (the "Investment Company"), The Dreyfus/Laurel
Funds Trust, The Dreyfus/Laurel Tax-Free Municipal Funds and The
Dreyfus/Laurel Investment Series are all registered open-end management
investment companies that compose The Dreyfus Family of Funds. The Investment
Company is a series mutual fund with 19 separate investment portfolios. These
financial statements report on five funds: the Dreyfus/Laurel Institutional
Prime Money Market Fund, the Dreyfus/Laurel Institutional Government Money
Market Fund, the Dreyfus/Laurel Institutional U.S. Treasury Money Market Fund,
the Dreyfus/Laurel Institutional U.S. Treasury Only Money Market Fund and the
Dreyfus/Laurel Institutional Short-Term Bond Fund (the "Funds"). The
Investment Company was incorporated on August 6, 1987 as a Maryland
corporation and is registered with the Securities and Exchange Commission
under the Investment Company Act of 1940, as amended (the "1940 Act"), as a
diversified open-end management investment company. The Dreyfus/Laurel
Institutional Prime Money Market Fund, the Dreyfus/Laurel Institutional
Government Money Market Fund, the Dreyfus/Laurel Institutional U.S. Treasury
Money Market Fund, the Dreyfus/Laurel Institutional U.S. Treasury Only Money
Market Fund and the Dreyfus/Laurel Institutional Short-Term Bond Fund
commenced operations on April 15, 1988, October 8, 1987, December 22, 1988,
January 22, 1992 and November 5, 1993, respectively. Each Fund offers three
classes of shares: Class I, Class II and Class III Shares. Each class of
shares has identical rights and privileges, except with respect to the
effective shareholder servicing fees borne by each class and voting rights on
matters affecting a single class. The following is a summary of significant
accounting policies consistently followed by the Funds in the preparation of
their financial statements.
(A) PORTFOLIO VALUATION
With respect to the Dreyfus/Laurel Institutional Short-Term Bond Fund
investments in securities traded on a national securities exchange are valued
at the last reported sales price or, in the absence of a recorded sale, at the
mean of the latest bid and asked prices. Over-the-counter securities are
valued at the mean of the latest bid and asked prices. When market quotations
are not readily available, securities are valued at fair value as determined
in good faith by the Board of Directors. Bonds are valued through valuations
obtained from a commercial pricing service or at the most recent mean of the
bid and asked prices provided by investment dealers in accordance with
procedures established by the Board of Directors. Investments in U.S.
government securities (other than short-term securities) are valued at the
most recent quoted bid price in the over-the-counter market. Short-term
investments with maturities of 60 days or less from the valuation day are
valued on the basis of amortized cost. Amortized cost valuation involves
valuing an instrument at its cost initially and thereafter assuming a constant
amortization to maturity of any discount or premium, regardless of the effect
of fluctuating interest rates on the market value of the instrument.
31
................................................................................
<PAGE>
NOTES to FINANCIAL STATEMENTS (continued)
................................................................................
(B) REPURCHASE AGREEMENTS
Each Fund other than the Dreyfus/Laurel Institutional U.S. Treasury Only Money
Market Fund may engage in repurchase agreement transactions. Under the terms
of a typical repurchase agreement, a Fund, through its custodian, takes
possession of an underlying debt obligation, subject to an obligation of the
seller to repurchase, and the Fund to resell the obligation at an agreed-upon
price and time, thereby determining the yield during the Fund's holding
period. This arrangement results in a fixed rate of return that is not subject
to market fluctuations during the Fund's holding period. The value of the
collateral is at least equal, at all times, to the total amount of the
repurchase obligations, including interest. In the event of counterparty
default, the Fund has the right to use the collateral to offset losses
incurred. There is potential loss to a Fund in the event the Fund is delayed
or prevented from exercising its rights to dispose of the collateral
securities including the risk of a possible decline in the value of the
underlying securities during the period while the Fund seeks to assert its
rights. Each Fund's investment manager, acting under the supervision of the
Board of Directors, reviews the value of the collateral and the
creditworthiness of those banks and dealers with which a Fund enters into
repurchase agreements to evaluate potential risks.
(C) SECURITY TRANSACTIONS AND INVESTMENT INCOME
Securities transactions are recorded as of the trade date. Interest income is
recorded on the accrual basis. Realized gains and losses from securities
transactions are recorded on the identified cost basis. Investment income and
realized and unrealized gains and losses are allocated based upon relative
average daily net assets of each class of shares.
(D) EXPENSE ALLOCATION
Expenses of a Fund not directly attributable to the operations of any class of
shares of the Fund are pro rated between its classes based upon the relative
average daily net assets of each class. Shareholder servicing expense directly
attributable to a particular class of shares is charged only to that class's
operations.
(E) DIVIDENDS TO SHAREHOLDERS
Dividends from net investment income, if any, of a Fund are determined on a
class level and are declared daily and paid monthly. Distributions from net
realized capital gains, if any, are determined on a Fund level and are
declared and paid annually. Additional distributions of net investment income
and capital gains for the Funds may be made at the discretion of the Board of
Directors in order to avoid the 4% nondeductible Federal excise tax. Income
distributions and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments of
income and gains on various investment securities held by a Fund, timing
differences and differing characterization of distributions made by a Fund as
a whole.
32
................................................................................
<PAGE>
NOTES to FINANCIAL STATEMENTS (continued)
................................................................................
(F) FEDERAL INCOME TAXES
Each Fund intends to qualify as a regulated investment company by complying
with the requirements of the Internal Revenue Code applicable to regulated
investment companies and by distributing substantially all of its taxable
income to its shareholders. Therefore, no federal income tax provision is
required.
2. INVESTMENT MANAGEMENT FEE, DIRECTORS' FEES
AND OTHER PARTY TRANSACTIONS
Effective as of October 17, 1994, the Investment Company's investment
management agreement with Mellon Bank, N.A. ("Mellon Bank"), a wholly owned
subsidiary of Mellon Bank Corporation, was transferred to The Dreyfus
Corporation (the "Manager"), a wholly owned subsidiary of Mellon Bank. The
Manager provides, or arranges for one or more third parties to provide,
investment advisory, administrative, custody, fund accounting and transfer
agency services to the Investment Company. The Manager also directs the
investments of each Fund in accordance with its investment objective, policies
and limitations. For these services, the Dreyfus/Laurel Institutional Prime
Money Market Fund, the Dreyfus/Laurel Institutional Government Money Market
Fund, the Dreyfus/Laurel Institutional U.S. Treasury Money Market Fund, the
Dreyfus/Laurel Institutional U.S. Treasury Only Money Market Fund and the
Dreyfus/Laurel Institutional Short-Term Bond Fund each pay a fee to the
manager, calculated daily and paid monthly, at an annual rate of 0.15%, 0.15%,
0.15% 0.15%, and 0.20% of the value of the Fund's average daily net assets,
respectively. Out of its fee, the Manager pays all of the expenses of each
Fund except brokerage, taxes, interest, shareholder servicing fees and
expenses, fees and expenses of non-interested directors (including counsel
fees) and extraordinary expenses. In addition, the Manager is required to
reduce its fee in an amount equal to the Fund's allocable portion of fees and
expenses of the non-interested directors (including counsel).
For the period from April 4, 1994 to October 16, 1994, Mellon Bank served as
the Investment Company's investment manager pursuant to the investment
management agreement described above. Prior to April 4, 1994, the Investment
Company had individual contracts with Mellon Bank to provide custody,
accounting, and transfer agency services to each Fund. Effective April 4,
1994, custody, accounting, and transfer agency services are covered by the
investment management agreement described above.
Prior to April 4, 1994, the Investment Company had an investment advisory
agreement under which the Fund paid Mellon Bank an annual fee of 0.20% of the
value of the Fund's average daily net assets for investment advisory services.
For the period from November 1, 1993 through April 3, 1994, Mellon Bank, as
investment adviser, voluntarily agreed to reimburse expenses of the
Dreyfus/Laurel Institutional U.S. Treasury Money Market Fund and the
Dreyfus/Laurel Institutional U.S. Treasury Only Money Market Fund in the
amounts of $21,564 and $81,512, as investment adviser, respectively. For the
33
................................................................................
<PAGE>
NOTES to FINANCIAL STATEMENTS (continued)
................................................................................
period from November 5, 1993 through April 3, 1994 Mellon Bank voluntarily
agreed to reimburse expenses of the Dreyfus/Laurel Institutional Short-Term
Bond Fund in the amount of $85,177.
Prior to September 23, 1994, Frank Russell Investment Management Company (the
"Administrator") served as each Funds' administrator and provided, pursuant to
an administration agreement, various administrative and corporate secretarial
services to each Funds. For the period from April 4, 1994 to September 23,
1994, Mellon Bank, as investment manager, paid the Administrator's fee out of
the management fee described above. Prior to April 4, 1994, the Investment
Company paid the Administrator the following fees for the services supplied by
the Administrator pursuant to the administration agreement: (i) an annual fee
of $500,000; (ii) an annual asset-based fee, payable monthly on a pro rata
basis, based on the following percentages of the aggregate average daily net
assets of the Investment Company: up to and including $10 billion -- 0.01%,
over $10 billion -- 0.005%; and (iii) all start-up costs (including
out-of-pocket, blue sky registration and personnel costs) for new portfolios
(prior to and for 6 months following commencement of operations).
No officer or employee of Premier (or of any parent, subsidiary or affiliate
thereof) receives any compensation from The Dreyfus/Laurel Funds, Inc., The
Dreyfus/Laurel Funds Trust, The Dreyfus/Laurel Tax-Free Municipal Funds or The
Dreyfus/Laurel Investment Series (collectively, "The Dreyfus/Laurel Funds")
for serving as an officer or Director/Trustee of The Dreyfus/Laurel Funds. In
addition, no officer or employee of the Manager (or of any parent, subsidiary
or affiliate thereof) serves as an officer or Director/ Trustee of The
Dreyfus/Laurel Funds. The Dreyfus/Laurel Funds pay each Director/Trustee who
is not an officer or employee of Premier (or any parent, subsidiary or
affiliate thereof) $27,000 per annum, $1,000 for each Board meeting attended
and $750 for each Audit Committee meeting attended, and reimburses each
Director/Trustee for travel and out-of-pocket expenses. Prior to April 4,
1994, the Investment Company paid each Director $15,000 per annum plus
reimbursement for travel and out-of-pocket expenses.
Prior to April 4, 1994, the Investment Company had a contract with Russell
Fund Distributors, Inc. to serve as distributor of its shares. Effective April
4, 1994 through October 16, 1994, Funds Distributor, Inc. served as
distributor of the Investment Company's shares. Effective as of October 17,
1994, Premier Mutual Fund Services, Inc. ("Premier") serves as the Investment
Company's distributor. Premier also serves as the Investment Company's
sub-administrator and, pursuant to a sub-administration agreement with the
Manager, provides various administrative and corporate secretarial services to
the Investment Company.
3. SHAREHOLDER SERVICING PLAN
On April 4, 1994, each Fund adopted a Shareholder Servicing Plan (the "Plan").
Under the Plan, each Fund may pay up to 0.15% and 0.05%, of the value of the
average daily
34
................................................................................
<PAGE>
NOTES to FINANCIAL STATEMENTS (continued)
................................................................................
net assets attributable to its Class I and Class II shares, respectively,
annually to compensate Premier, certain banks, brokers, dealers or other
financial institutions for shareholder services. Class III shares are not
subject to the Plan. Prior to April 4, 1994, each Fund had a distribution and
shareholder services plan under which the Fund was authorized to spend
annually up to 0.35% of its average daily net assets on distribution and
shareholder servicing expenses.
Under its terms, the shareholder servicing plan shall remain in effect from
year to year, provided such continuance is approved annually by a vote of a
majority of those Directors who are not "interested persons" of the Investment
Company and who have no direct or indirect financial interest in the operation
of the Plan or in any agreement related to the Plan.
4. SECURITIES TRANSACTIONS
For the Dreyfus/Laurel Institutional Short-Term Bond Fund, the cost of
purchases and proceeds from sales of securities, excluding short-term
investments and U.S. government securities, for the period ended October 31,
1994 were $7,958,905 and $6,466,204, respectively.
For the Dreyfus/Laurel Institutional Short-Term Bond Fund, the cost of
purchases and proceeds from sales of long-term U.S. government securities for
the period ended October 31, 1994 were $5,782,611 and $4,282,813,
respectively.
At October 31, 1994, The Dreyfus/Laurel Institutional Short-Term Bond Fund had
aggregate gross unrealized depreciation for all securities in which there was
an excess of tax cost over value of $17,212. There was no aggregate gross
unrealized appreciation for all securities in which there was an excess of
value over tax cost.
5. SHARES OF CAPITAL STOCK
The Investment Company has authority to issue 25 billion shares of capital
stock with a par value of $.001. Each Fund has authority to issue three
classes of shares (Class I, Class II, Class III Shares). The table below
summarizes the transactions in Fund shares for the years or period indicated.
Because the Dreyfus/Laurel Institutional Prime Money Market Fund, the
Dreyfus/Laurel Institutional Government Money Market Fund, the Dreyfus/Laurel
Institutional U.S. Treasury Money Market Fund and the Dreyfus/Laurel
Institutional U.S. Treasury Only Money Market Fund have sold shares, issued
shares of reinvestments of dividends, and redeemed shares only at a constant
net asset value of $1.00 per share, the number of shares represented by such
sales, reinvestments, and redemptions is the same as the amounts shown below
for such transactions.
35
................................................................................
<PAGE>
NOTES to FINANCIAL STATEMENTS (continued)
................................................................................
-------------------------------------------------------------------
DREYFUS/LAUREL
INSTITUTIONAL PRIME MONEY MARKET FUND
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1994+ OCTOBER 31, 1993
<S> <C> <C>
--------------------------------------------------------------------------------
CLASS I SHARES:
SOLD $ 6,346,280,548 $ 7,059,606,006
ISSUED AS REINVESTMENT OF DIVIDENDS 9,455,788 12,603,078
REDEEMED (6,498,036,154) (7,198,450,271)
------------------- -----------------
NET DECREASE $ (142,299,818) $ (126,241,187)
------------------- -----------------
------------------- -----------------
--------------------------------------------------------------------------------
</TABLE>
- - - --------------------------------------------------------------------------------
DREYFUS/LAUREL
INSTITUTIONAL GOVERNMENT MONEY MARKET FUND
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1994+ OCTOBER 31, 1993
<S> <C> <C>
--------------------------------------------------------------------------------
CLASS I SHARES:
SOLD $ 2,621,818,115 $ 2,449,481,559
ISSUED AS REINVESTMENT OF DIVIDENDS 2,072,225 1,144,061
REDEEMED (2,560,573,095) (2,435,300,212)
------------------- -----------------
NET INCREASE $ 63,317,245 $ 15,325,408
------------------- -----------------
------------------- -----------------
--------------------------------------------------------------------------------
</TABLE>
- - - --------------------------------------------------------------------------------
DREYFUS/LAUREL
INSTITUTIONAL U.S. TREASURY MONEY MARKET FUND
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1994+ OCTOBER 31, 1993
<S> <C> <C>
--------------------------------------------------------------------------------
CLASS I SHARES:
SOLD $ 3,029,275,330 $ 3,219,306,510
ISSUED AS REINVESTMENT OF DIVIDENDS 2,102,357 1,875,568
REDEEMED (2,945,252,694) (3,386,906,993)
------------------- -----------------
NET INCREASE/(DECREASE) $ 86,124,993 $ (165,724,915)
------------------- -----------------
------------------- -----------------
--------------------------------------------------------------------------------
</TABLE>
- - - --------------------------------------------------------------------------------
DREYFUS/LAUREL
INSTITUTIONAL U.S. TREASURY ONLY MARKET FUND
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1994+ OCTOBER 31, 1993
<S> <C> <C>
--------------------------------------------------------------------------------
CLASS II SHARES:
SOLD $ 112,306,805 $ 121,609,303
ISSUED AS REINVESTMENT OF DIVIDENDS 525,692 722,547
REDEEMED (147,453,164) (101,191,665)
------------------- -----------------
NET INCREASE/(DECREASE) $ (34,620,667) $ 21,140,185
------------------- -----------------
------------------- -----------------
--------------------------------------------------------------------------------
</TABLE>
36
................................................................................
<PAGE>
NOTES to FINANCIAL STATEMENTS (continued)
................................................................................
- - - --------------------------------------------------------------------------------
DREYFUS/LAUREL
INSTITUTIONAL U.S. TREASURY ONLY MONEY MARKET FUND
<TABLE>
<CAPTION>
PERIOD ENDED
OCTOBER 31, 1994**
<S> <C> <C>
--------------------------------------------------------------------------------
CLASS III SHARES:
Sold $ 35,035,694
Issued as reinvestment of dividends 506,140
Redeemed (4,841,834)
-------------------
Net increase $ 30,700,000
-------------------
-------------------
--------------------------------------------------------------------------------
</TABLE>
- - - --------------------------------------------------------------------------------
DREYFUS/LAUREL INSTITUTIONAL SHORT-TERM BOND FUND
(UNAUDITED)
<TABLE>
<CAPTION>
PERIOD ENDED
OCTOBER 31, 1994*+
SHARES AMOUNT
<S> <C> <C>
---------------------------------------------------------------------
CLASS I SHARES:
Sold 3,988,741 $ 39,701,901
Issued as reinvestment of dividends 58,421 580,265
Redeemed (3,530,863) (35,006,857)
------------ ------------
Net increase 516,299 $ 5,275,309
------------ ------------
------------ ------------
---------------------------------------------------------------------
<FN>
* THE DREYFUS/LAUREL INSTITUTIONAL SHORT-TERM BOND FUND COMMENCED OPERATIONS ON
NOVEMBER 5, 1993.
** THE DREYFUS/LAUREL INSTITUTIONAL U.S. TREASURY ONLY MONEY MARKET FUND
COMMENCED SELLING CLASS III SHARES ON MAY 12, 1994.
+ ON APRIL 4, 1994, EXISTING SHARES OF THE DREYFUS/LAUREL INSTITUTIONAL PRIME
MONEY MARKET FUND, THE DREYFUS/LAUREL INSTITUTIONAL GOVERNMENT MONEY MARKET
FUND, THE DREYFUS/LAUREL INSTITUTIONAL U.S. TREASURY MONEY MARKET FUND AND
THE DREYFUS/LAUREL INSTITUTIONAL SHORT-TERM BOND FUND WERE DESIGNATED CLASS I
SHARES. ON APRIL 4, 1994, EXISTING SHARES OF THE DREYFUS/LAUREL INSTITUTIONAL
U.S. TREASURY ONLY MONEY MARKET FUND WERE DESIGNATED CLASS II SHARES.
</TABLE>
6. ORGANIZATION COSTS
Each Fund paid all costs in connection with the Fund's organization including
the fees and expenses of registering and qualifying the Fund's shares for
distribution under Federal and state securities regulations. Prior to April 4,
1994, all such costs were being amortized on the straight-line method over a
period of five years. On April 4, 1994, the remaining unamortized organization
costs were reimbursed by Mellon Bank as the investment adviser.
37
................................................................................
<PAGE>
NOTES to FINANCIAL STATEMENTS (continued)
................................................................................
7. CAPITAL LOSS CARRYFORWARD
At October 31, 1994, the Dreyfus/Laurel Institutional Short-Term Bond
Portfolio had available for federal income tax purposes an unused capital loss
carryforward of $158,643, to offset future gains expiring in 2002.
38
................................................................................
<PAGE>
INDEPENDENT AUDITORS' REPORT
................................................................................
[LOGO]
The Board of Directors and Shareholders
The Dreyfus/Laurel Funds, Inc.
We have audited the accompanying statements of assets and liabilities of
the Dreyfus/Laurel Institutional Prime Money Market Fund, the Dreyfus/Laurel
Institutional Government Money Market Fund, the Dreyfus/Laurel Institutional
U.S. Treasury Money Market Fund, the Dreyfus/Laurel Institutional U.S.
Treasury Only Money Market Fund and the Dreyfus/Laurel Institutional
Short-Term Bond Fund of The Dreyfus/ Laurel Funds, Inc., including the
portfolios of investments, as of October 31, 1994, and the related statements
of operations for the period then ended and the statements of changes in net
assets and the financial highlights for each of the periods indicated herein.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of October 31, 1994 by correspondence with the custodian and brokers.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Dreyfus/Laurel Institutional Prime Money Market Fund, the Dreyfus/Laurel
Institutional Government Money Market Fund, the Dreyfus/Laurel Institutional
U.S. Treasury Money Market Fund, the
Dreyfus/Laurel Institutional U.S. Treasury Only Money Market Fund and the
Dreyfus/Laurel Institutional Short-Term Bond Fund of The Dreyfus/Laurel Funds,
Inc. as of October 31, 1994, the results of their operations for the period
then ended and the changes in their net assets and the financial highlights
for each of the periods indicated herein, in conformity with generally
accepted accounting principles.
KPMG Peat Marwick LLP
Pittsburgh, Pennsylvania
December 9, 1994
39
PORTFOLIO OF INVESTMENTS
PREMIER BALANCED FUND OCTOBER 31, 1994
<TABLE>
<CAPTION>
SHARES VALUE
(NOTE 1)
<S> <C> <C>
COMMON STOCKS -- 78.0%
CONSUMER BASICS -- 15.4%
15,900 Abbott Laboratories $ 492,900
15,300 Amgen, Inc.+ 852,975
31,290 Archer Daniels Midland 895,676
27,600 Coca-Cola Company 1,386,900
26,400 ConAgra, Inc. 821,700
10,800 Dial Corporation 222,750
9,900 IBP, Inc. 337,838
25,500 Johnson & Johnson 1,392,938
6,000 Mattel Inc. 175,500
12,900 McDonald's Corporation 370,875
5,100 Medtronic, Inc. 265,838
19,800 Merck & Company, Inc. 707,850
7,500 Outback Steakhouse Inc.+ 231,563
20,100 Philip Morris Companies, Inc. 1,231,125
10,800 Premark International, Inc. 483,300
3,000 Procter & Gamble Company 187,500
15,600 Schering-Plough Corporation 1,111,500
13,200 Seagram Company 407,550
7,800 Tyson Foods, Inc., Class A 181,350
9,300 Whitman Corporation 153,450
11,911,078
TECHNOLOGY -- 9.8%
6,900 Applied Materials Inc. 358,800
29,100 COMPAQ Computer Corporation+ 1,167,638
16,500 Computer Associates International, Inc. 818,813
385 Harris Computer System+ 5,390
7,700 Harris Corporation 330,138
3,300 Hewlett-Packard Company 322,575
8,100 Intel Corporation 503,213
11,400 International Business Machines Corporation 849,300
12,000 Litton Industries 441,000
2,700 Lockheed Corporation 194,400
5,400 Martin-Marietta Corporation 247,725
3,900 Oracle Systems Corporation+ 179,400
6,300 Raytheon Company 401,625
16,800 Reynolds & Reynolds Company, Class A 417,900
10,500 Rockwell International Corporation 366,188
4,800 Texas Instruments Inc. 359,400
8,100 Textron, Inc. 413,100
5,100 Transamerica Corporation 250,538
7,627,143
UTILITIES -- 8.3%
35,700 Ameritech Corporation 1,441,388
12,900 Baltimore Gas & Electric Company 299,925
10,800 BellSouth Corporation 575,100
20,700 Consolidated Edison Company, Inc. 514,913
6,300 DQE, Inc. 190,575
16,200 General Public Ultilies Corporation 417,150
13,600 Panhandle Eastern Corporation 319,600
18,900 Public Service Enterprise Group, Inc. 496,125
26,400 Southwestern Bell Corporation 1,105,500
33,000 Sprint Corporation 1,076,625
6,436,901
ENERGY -- 8.1%
21,600 Amoco Corporation 1,368,900
7,200 Eastern Enterprises 187,200
12,900 EXXON Corporation 811,088
14,100 Mobil Corporation 1,212,600
12,600 Peco Energy Company 322,875
16,200 Royal Dutch Petroleum Company 1,887,300
17,100 Williams Companies, Inc. 495,900
6,285,863
FINANCIAL SERVICES -- 7.7%
13,200 Ahmanson (H F) & Company 252,450
4,700 American National Insurance Company 220,900
26,400 Bank of New York Company, Inc. 838,200
22,200 Chase Manhattan Corporation 799,200
12,900 Citicorp 615,975
10,800 Dean Witter Discover & Company 417,150
2,400 Federal National Mortgage Association 182,400
8,400 First Chicago Corporation 411,600
8,700 First Interstate Bancorp 696,000
3,600 GATX Corporation 151,650
2,500 MBNA Corporation 66,875
10,500 NationsBank Corporation 519,750
17,100 Travelers, Inc. 594,225
5,600 USLIFE Corporation 183,400
5,949,775
CONSUMER NON-DURABLES -- 6.7%
6,600 American Greetings Corporation, Class A 180,675
10,200 Champion International Corporation 377,400
11,100 Colgate Palmolive Company 677,100
16,200 Federated Department Stores 336,150
6,300 Gillette Company 468,563
3,600 Gymboree Corporation+ 117,000
13,800 May Department Stores Company (The) 519,225
7,800 Newell Company 163,800
3,600 Nike Inc., Class B 219,150
12,900 Nordstrom Inc. 635,325
16,000 Penney (J.C.) Company, Inc. 810,000
8,400 Sears Roebuck & Company 415,800
5,700 V.F. Corporation 288,563
5,208,751
CAPITAL GOODS -- 4.1%
13,200 Caterpillar Inc. 788,700
7,700 Clark Equipment Company+ 539,963
6,000 Cummins Engine, Inc. 255,000
6,900 Deere & Company 495,075
3,600 Dover Corporation 199,800
17,400 General Electric Company 850,425
3,128,963
BASIC INDUSTRIES -- 4.0%
12,000 ASARCO, Inc. 376,500
3,900 Armstrong World Industries Inc. 161,850
7,500 Federal Paper Board Company 225,000
9,600 Inland Steel Industries 343,200
3,000 International Paper Company 223,500
4,200 Monsanto Company 319,725
4,800 Phelps Dodge Corporation 294,600
3,600 Reynolds Metal Company 199,350
2,700 Temple-Inland, Inc. 127,575
24,900 Union Carbide Corporation 824,813
3,096,113
CHEMICAL -- 2.6%
3,900 Dow Chemical Company 286,650
17,100 du Pont (E. I.) de Nemours & Company 1,019,588
13,500 Eastman Chemical 729,000
2,035,238
ENTERTAINMENT -- 2.6%
8,100 Capital Cities ABC Inc. 673,313
6,000 King World Productions+ 213,000
36,300 Pacific Telesis Group 1,147,988
2,034,301
TRANSPORTATION -- 2.3%
3,000 Conrail Inc. 163,125
4,000 Consolidated Freightways, Inc. 89,500
5,100 Federal Express Corporation+ 309,825
7,200 Harley Davidson Inc. 201,600
9,300 Illinois Central Corporation 298,763
6,900 Northrop Corporation 302,738
7,200 Pittston Services Group 198,900
10,500 Ryder System 246,750
1,811,201
CONSUMER DURABLES -- 2.2%
15,000 Chrysler Corporation 731,250
16,300 Ford Motor Company 480,850
10,500 General Motors Corporation 414,750
1,800 Magna International, Class A 63,900
1,690,750
INSURANCE -- 1.3%
10,200 CIGNA Corporation 671,925
8,500 Exel Ltd. 334,688
1,006,613
CONSUMER SERVICES -- 1.3%
6,900 Beneficial Corporation 269,962
12,300 Manpower Inc. 358,237
11,400 Safeway, Inc.+ 336,300
964,499
HEALTHCARE -- 1.2%
17,700 Baxter International Inc. 460,200
3,900 Lincare Holding Inc.+ 106,275
12,900 Mallinkrodt Inc. 391,838
958,313
SHELTER -- 0.2%
5,400 Louisiana Pacific Corporation 165,375
GENERAL BUSINESS -- 0.2%
4,600 Coastal Corporation 131,100
TOTAL COMMON STOCKS
(Cost $57,969,889) 60,441,977
</TABLE>
<TABLE>
<CAPTION>
ANNUALIZED
YIELD AT
DATE OF
PRINCIPAL PURCHASE MATURITY
AMOUNT (UNAUDITED) DATE
<S> <C> <C> <C> <C>
U.S. TREASURY OBLIGATIONS -- 10.4%
$200,000 U.S. Treasury Bills 5.125% 12/31/98 183,992
<CAPTION>
COUPON
RATE
<S> <C> <C> <C> <C>
100,000 U.S. Treasury Bond 12.375 05/15/04 130,391
1,150,000 U.S. Treasury Notes 8.625 10/15/95 1,175,426
300,000 U.S. Treasury Notes 4.250 11/30/95 293,657
500,000 U.S. Treasury Notes 4.250 12/31/95 488,440
200,000 U.S. Treasury Notes 4.625 02/15/96 195,487
650,000 U.S. Treasury Notes 7.500 02/29/96 658,300
200,000 U.S. Treasury Notes 4.250 05/15/96 193,110
500,000 U.S. Treasury Notes 6.000 06/30/96 494,750
700,000 U.S. Treasury Notes 4.375 11/15/96 667,525
200,000 U.S. Treasury Notes 5.125 11/30/98 184,350
500,000 U.S. Treasury Notes 5.625 01/31/98 476,920
400,000 U.S. Treasury Notes 7.000 04/15/99 393,743
1,000,000 U.S. Treasury Notes 6.875 07/31/99 976,550
400,000 U.S. Treasury Notes 6.375 01/15/00 380,751
800,000 U.S. Treasury Notes 6.250 02/15/03 727,896
500,000 U.S. Treasury Notes 5.750 08/15/03 436,145
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $8,366,323) 8,057,433
CORPORATE BONDS AND NOTES -- 7.3%
FINANCIAL SERVICES -- 3.9%
250,000 American General Finance 6.625 06/01/97 245,000
100,000 Associates Corporation of North America 7.500 05/15/99 98,125
190,000 AVCO Financial Services, Inc. 7.500 11/15/96 190,950
500,000 Chemical Banking Corporation 8.625 05/01/02 505,625
75,000 Commercial Credit Group 6.700 08/01/99 71,812
150,000 First Chicago Corporation 9.875 08/15/00 161,811
100,000 Ford Motor Credit Corporation 5.625 12/15/98 92,000
500,000 General Motors Acceptance Corporation 7.750 01/15/99 491,250
100,000 International Lease Finance Corporation 4.750 01/15/97 94,750
150,000 Norwest Financial, Inc. 7.000 01/15/03 139,311
500,000 Republic New York Corporation 7.750 05/15/02 484,375
500,000 Wells Fargo & Company 6.125 11/01/03 426,250
3,001,259
UTILITIES -- 1.5%
150,000 Consolidated Edison
Company, Inc. 6.375 04/01/03 132,000
125,000 Duke Power Company 7.500 04/11/99 123,281
500,000 Duke Power Company 6.125 07/22/03 432,500
500,000 Virginia Electric & Power Company 7.250 03/01/97 499,375
1,187,156
ENERGY -- 1.3%
500,000 BP North America 9.875 03/15/04 552,500
500,000 Texaco Capital, Inc. 6.875 07/15/99 482,500
1,035,000
RETAIL -- 0.4%
175,000 Sears Roebuck Company 6.250 01/15/04 151,375
150,000 Wal-Mart Stores, Inc. 5.500 03/01/98 140,625
292,000
CONSUMER BASICS -- 0.1%
100,000 Heinz (H.J.) Company 6.875 01/15/03 92,500
BASIC INDUSTRY -- 0.1%
100,000 Aluminum Company of America 5.750 02/01/01 88,375
TOTAL CORPORATE BONDS AND NOTES (Cost $6,181,521) 5,696,290
REPURCHASE AGREEMENT -- 3.2%
(Cost $2,480,748)
2,480,748 Agreement with Barclays de Zoete Wedd, dated 10/31/94 bearing 4.780%, to be re-
purchased at $2,481,077 on 11/01/94, collateralized by $2,463,000 U.S. Treasury
Notes, 5.875% due 05/15/95 2,480,748
TOTAL INVESTMENTS (Cost $74,998,481*) 98.9% 76,676,448
OTHER ASSETS AND LIABILITIES (NET) 1.1 847,893
NET ASSETS 100% $77,524,341
<FN>
* Aggregate cost for Federal tax purposes.
+ Non-income producing security.
</TABLE>
See Notes to Financial Statements.
STATEMENT OF ASSETS AND LIABILITIES
PREMIER BALANCED FUND OCTOBER 31, 1994
<TABLE>
<S> <C> <C>
ASSETS
Investments, at value (Cost $74,998,481) (Note 1)
See accompanying schedule $76,676,448
Cash 7,718
Receivable for investment securities sold 2,900,847
Interest receivable 248,932
Dividends receivable 119,481
Receivable from investment adviser (Note 2) 38,819
Receivable for Fund shares sold 12,009
TOTAL ASSETS 80,004,254
LIABILITIES
Payable for investment securities purchased $2,383,848
Investment management fee payable (Note 2) 70,485
Payable for Fund shares redeemed 16,399
Accrued Directors' fees and expenses (Note 2) 9,147
Distribution fee payable (Note 3) 34
TOTAL LIABILITIES 2,479,913
NET ASSETS $77,524,341
NET ASSETS consist of:
Undistributed net investment income $ 485,775
Accumulated net realized loss on investments sold (2,221,015)
Unrealized appreciation of investments 1,677,967
Par value 7,686
Paid-in capital in excess of par value 77,573,928
TOTAL NET ASSETS $77,524,341
NET ASSET VALUE
CLASS A SHARES
Net asset value, offering and redemption price per
share ($1,797,905 / 178,413 shares of capital stock
outstanding) $ 10.08
CLASS R SHARES
Net asset value, offering and redemption price per
share ($75,726,436 / 7,507,294 shares of capital
stock outstanding) $ 10.09
</TABLE>
See Notes to Financial Statements.
STATEMENT OF OPERATIONS
PREMIER BALANCED FUND
FOR THE YEAR ENDED OCTOBER 31, 1994
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends $ 1,300,607
Interest 773,175
TOTAL INVESTMENT INCOME 2,073,782
EXPENSES
Investment management fee (Note 2) $421,326
Investment advisory fee (Note 2) 180,368
Transfer agent fees (Note 2) 25,364
Custodian fees (Note 2) 17,429
Directors' fees and expenses (Note 2) 11,883
Legal and audit fees 6,601
Administration fee (Note 2) 5,721
Amortization of organization costs (Note 6) 3,161
Distribution fee (Note 3) 630
Other 15,132
Expenses reimbursed by investment adviser
(Note 2) (26,589)
TOTAL EXPENSES 661,026
NET INVESTMENT INCOME $ 1,412,756
REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS
(Notes 1 and 4):
Net realized loss on investments during the year (2,221,015)
Net change in unrealized appreciation of invest-
ments during the year 1,375,144
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS (845,871)
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 566,885
</TABLE>
See Notes to Financial Statements.
STATEMENT OF CHANGES IN NET ASSETS
PREMIER BALANCED FUND
<TABLE>
<CAPTION>
YEAR PERIOD
ENDED ENDED
10/31/94 10/31/93*
<S> <C> <C>
Net investment income $ 1,412,756 $ 49,090
Net realized loss on investments sold during the pe-
riod (2,221,015) --
Net unrealized appreciation on investments during the
period 1,375,144 302,823
Net increase in net assets resulting from operations 566,885 351,913
Distributions to shareholders from net investment in-
come:
Class A Shares (4,401) --
Class R Shares (971,670) --
Net increase in net assets from Fund share transac-
tions (Note 5):
Class A Shares 1,781,199 --
Class R Shares 47,248,223 28,552,192
Net increase in net assets 48,620,236 28,904,105
NET ASSETS:
Beginning of period 28,904,105 --
End of period (including undistributed net investment
income of $485,775 and $49,090, respectively) $77,524,341 $28,904,105
<FN>
* The Fund commenced operations on September 15, 1993.
</TABLE>
See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
PREMIER BALANCED FUND
FOR A CLASS A SHARE OUTSTANDING THROUGHOUT THE PERIOD.
Please refer to page 5 of the Prospectus dated March 1, 1995.
See Notes to Financial Statements.
PREMIER BALANCED FUND
FOR A CLASS R SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
Please refer to page 5 of the Prospectus dated March 1, 1995.
See Notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Dreyfus/Laurel Funds, Inc. (the "Investment Company"), The Dreyfu-
s/Laurel Funds Trust, The Dreyfus/Laurel Tax-Free Municipal Funds and The
Dreyfus/Laurel Investment Series are all registered open-end management
investment companies that are now part of The Dreyfus Family of Funds. The
Investment Company is a series mutual fund with 19 separate investment
portfolios. These financial statements report on the Premier Balanced Fund
(formerly known as the Laurel Balanced Fund) (the "Fund"). The Investment
Company was incorporated on August 6, 1987 as a Maryland corporation and
is registered with the Securities and Exchange Commission under the In-
vestment Company Act of 1940, as amended (the "1940 Act"), as a diversi-
fied open-end management investment company. The Fund commenced operations
on September 15, 1993. As of October 31, 1994, the Fund offered two
classes of shares: Class A Shares and Class R Shares (effective October
17, 1994, the Investor Shares have been redesignated as Class A Shares and
Trust Shares were redesignated as Class R Shares). Class A Shares are sold
primarily to the retail investors and bear a distribution fee. Class R
Shares are sold primarily to bank trust departments and other financial
service providers acting on behalf of customers having a qualified trust
or investment account or relationship at such institution, and bear no
distribution fee. Each class of shares has identical rights and privi-
leges, except with respect to distribution fees and voting rights on mat-
ters affecting a single class. The following is a summary of significant
accounting policies consistently followed by the Fund in the preparation
of its financial statements.
(A) PORTFOLIO VALUATION
Investments in securities traded on a national securities exchange are
valued at the last reported sales price or, in the absence of a recorded
sale, at the mean of the latest bid and asked prices. Over-the-counter se-
curities are valued at the mean of the latest bid and asked prices. When
market quotations are not readily available, securities are valued at fair
value as determined in good faith by the Board of Directors. Bonds are
valued through valuations obtained from a commercial pricing service or at
the most recent mean of the bid and asked prices provided by investment
dealers in accordance with procedures established by the Board of Direc-
tors. Investments in U.S. Government securities (other than short-term se-
curities) are valued at the most recent quoted bid price in the over-the-
counter market. Debt securities with maturities of 60 days or less are
valued at amortized cost.
(B) REPURCHASE AGREEMENTS
The Fund may engage in repurchase agreement transactions. Under the terms
of a typical repurchase agreement, the Fund, through its custodian, takes
possession of an underlying debt obligation, subject to an obligation of
the seller to repurchase, and the Fund to resell, the obligation at an
agreed-upon price and time, thereby determining the yield during the
Fund's holding period. This arrangement results in a fixed rate of return
that is not subject to market fluctuations during the Fund's holding pe-
riod. The value of the collateral is at least equal at all times to the
total amount of the repurchase obligations, including interest. In the
event of counterparty default, the Fund has the right to use the collat-
eral to offset losses incurred. There is potential loss to the Fund in the
event the Fund is delayed or prevented from exercising its rights to dis-
pose of the collateral securities including the risk of a possible decline
in the value of the underlying securities during the period while the Fund
seeks to assert its rights. The Fund's investment manager, acting under
the supervision of the Board of Directors, reviews the value of the col-
lateral and the creditworthiness of those banks and dealers with which the
Fund enters into repurchase agreements to evaluate potential risks.
(C) SECURITY TRANSACTIONS AND INVESTMENT INCOME
Securities transactions are recorded as of the trade date. Dividend income
is recorded on the ex-dividend date. Interest income is recorded on the
accrual basis. Realized gains and losses from securities transactions are
recorded on the identified cost basis. Investment income and realized and
unrealized gains and losses are allocated based upon relative average
daily net assets of each class.
(D) EXPENSE ALLOCATION
Expenses of the Fund not directly attributable to the operations of any
class of shares are pro rated between the classes based upon the relative
average daily net assets of each class. Distribution expense is directly
attributable to a particular class of shares and is charged only to that
class's operations.
(E) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income, if any, are determined on a class
level and are declared and paid quarterly. Distributions from net realized
capital gains, if any, are determined on a Fund level and are declared and
paid annually. Additional distributions of net investment income and capi-
tal gains for the Fund may be made at the discretion of the Board of Di-
rectors in order to avoid the 4% nondeductible federal excise tax. Income
distributions and capital gain distributions on a Fund level are deter-
mined in accordance with income tax regulations, which may differ from
generally accepted accounting principles. These differences are primarily
due to differing treatments of income and gains on various investment se-
curities held by the Fund, timing differences and differing characteriza-
tion of distributions made by the Fund as a whole.
(F) FEDERAL INCOME TAXES
The Fund intends to qualify as a regulated investment company by complying
with the requirements of the Internal Revenue Code applicable to regulated
investment companies and by distributing substantially all of its taxable
income to its shareholders. Therefore, no federal income tax provision is
required.
2. INVESTMENT MANAGEMENT FEE, DIRECTORS' FEES AND OTHER RELATED PARTY
TRANSACTIONS
Effective as of October 17, 1994, the Investment Company's investment man-
agement agreement with Mellon Bank, N.A.("Mellon Bank"), a wholly-owned
subsidiary of Mellon Bank Corporation, was transferred to The Dreyfus Cor-
poration (the "Manager"), a wholly-owned subsidiary of Mellon Bank. The
Manager provides, or arranges for one or more third parties to provide,
investment advisory, administrative, custody, fund accounting and transfer
agency services to the Investment Company. The Manager also directs the
investments of the Fund in accordance with its investment objective, poli-
cies and limitations. For these services, the Fund pays the Manager a fee,
calculated daily and paid monthly, at the annual rate of 1.00% of the
value of the Fund's average daily net assets. Out of its fee, the Manager
pays all of the expenses of the Fund except brokerage, taxes, interest,
Rule 12b-1 distribution fees and expenses, fees and expenses of non-
interested Directors (including counsel fees) and extraordinary expenses.
In addition, the Manager is required to reduce its fee in an amount equal
to the Fund's allocable portion of fees and expenses of the non-interested
Directors (including counsel).
For the period from April 4, 1994 to October 16, 1994, Mellon Bank served
as the Investment Company's investment manager pursuant to the investment
management agreement described above. Prior to April 4, 1994, the Invest-
ment Company had individual contracts with Mellon Bank to provide custody,
accounting, and transfer agent services to the Fund. Effective April 4,
1994, custody, accounting, and transfer agent services are covered by the
investment management agreement described above.
Prior to April 4, 1994, the Investment Company had an investment advisory
agreement under which the Fund paid Mellon Bank an annual fee of 0.90% of
the value of the Fund's average daily net assets for investment advisory
services. For the period from November 1, 1993 through April 3, 1994, Mel-
lon Bank, as investment adviser, voluntarily agreed to reimburse expenses
in the amount of $26,589.
Prior to September 23, 1994, Frank Russell Investment Management Company
(the "Administrator") served as the Fund's administrator and provided,
pursuant to an administration agreement, various administrative and corpo-
rate secretarial services to the Fund. For the period from April 4, 1994
to September 23, 1994, Mellon Bank, as investment manager, paid the Admin-
istrator's fee out of the management fee described above. Prior to April
4, 1994, the Investment Company paid the Administrator the following fees
for the services supplied by the Administrator pursuant to the administra-
tion agreement: (i) an annual fee of $500,000; (ii) an annual asset-based
fee, payable monthly on a pro rata basis, based on the following percent-
ages of the aggregate average daily net assets of the Investment Company:
up to and including $10 billion -- 0.01%, over $10 billion -- 0.005%; and
(iii) all start-up costs (including out- of-pocket, blue sky registration
and personnel costs) for new portfolios (prior to and for 6 months follow-
ing commencement of operations).
Prior to April 4, 1994, the Investment Company had a contract with Russell
Fund Distributors, Inc. to serve as distributor of its shares. Effective
April 4, 1994 through October 16, 1994, Funds Distributor, Inc. served as
distributor of the Investment Company's shares. Effective October 17,
1994, Premier Mutual Fund Services, Inc. ("Premier") serves as the Invest-
ment Company's distributor. Premier also serves as the Investment Compa-
ny's sub-administrator and, pursuant to a sub-administration agreement
with the Manager, provides various administrative and corporate secre-
tarial services to the Investment Company.
No officer or employee of Premier (or of any parent, subsidiary or affili-
ate thereof) receives any compensation from The Dreyfus/Laurel Funds,
Inc., The Dreyfus/Laurel Funds Trust, The Dreyfus/Laurel Tax-Free Munici-
pal Fund's or The Dreyfus/Laurel Investment Series (collectively, "The
Dreyfus/Laurel Fund's") for serving as an officer or Director/Trustee of
The Dreyfus/Laurel Funds. In addition, no officer or employee of the Man-
ager (or of any parent, subsidiary or affiliate thereof) serves as an of-
ficer or Director/Trustee of the Dryefus/Laurel Funds. The Dreyfus/Laurel
Funds pay each Director/Trustee who is not an officer or employee of Pre-
mier (or any parent, subsidiary or affiliate thereof) $27,000 per annum,
$1,000 for each Board meeting attended and $750 for each Audit Committee
meeting attended, and reimburse each Director/Trustee for travel and out-
of-pocket expenses. Prior to April 4, 1994, the Investment Company paid
each Director $15,000 per annum plus reimbursement for travel and out-of-
pocket expenses.
3. DISTRIBUTION PLAN
The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule
12b-1 under the 1940 Act relating to its Class A Shares. Under the Plan,
the Fund may pay annually up to 0.25% of the value of the average daily
net assets attributable to its Class A Shares to compensate Premier and
Dreyfus Service Corporation, an affiliate of the Manager, for shareholder
servicing activities and Premier for activities primarily intended to re-
sult in the sale of Class A Shares. Class R Shares bear no distribution
fee. Prior to April 4, 1994, the Fund had a distribution and shareholder
services plan under which the Fund was authorized to spend annually up to
0.35% of its average daily net assets on distribution and shareholder ser-
vicing expenses.
Under its terms, the Plan shall remain in effect from year to year, pro-
vided such continuance is approved annually by a vote of a majority of
those Directors who are not "interested persons" of the Investment Company
and who have no direct or indirect financial interest in the operation of
the Plan or in any agreement related to the Plan.
4. SECURITIES TRANSACTIONS
The cost of purchases and proceeds from sales of securities, excluding
short-term investments and U.S. government securities, for the year ended
October 31, 1994 were $88,105,095 and $42,371,515, respectively.
The cost of purchases and proceeds from sales of long-term U.S. government
securities for the year ended October 31, 1994 were $10,626,244 and
6,564,062, respectively.
At October 31, 1994, aggregate gross unrealized appreciation for all secu-
rities in which there was an excess of value over tax cost and aggregate
gross unrealized depreciation for all securities in which there was an ex-
cess of tax cost over value were $4,448,713 and $2,770,746, respectively.
5. SHARES OF CAPITAL STOCK
The Investment Company has authority to issue 25 billion shares of capital
stock with a par value of $.001. As of October 31, 1994, the Fund offered
two classes of shares. The table below summarizes the transactions in Fund
shares for the year or period indicated:
PREMIER BALANCED FUND
<TABLE>
<CAPTION>
PERIOD ENDED
OCTOBER 31, 1994*
SHARES AMOUNT
<S> <C> <C>
CLASS A SHARES:***
Sold 181,775 $1,814,520
Issued as reinvestment of
dividends and distributions 328 3,242
Redeemed (3,690) (36,563)
Net increase 178,413 $1,781,199
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
OCTOBER 31, 1994* OCTOBER 31, 1993**
SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
CLASS R SHARES:***
Sold 5,842,428 $ 58,817,291 2,850,656 $28,660,825
Issued as reinvestment
of dividends and dis-
tributions 97,922 969,095 -- --
Redeemed (1,272,959) (12,538,163) (10,753) (108,633)
Net increase 4,667,391 $ 47,248,223 2,839,903 $28,552,192
<FN>
* The Fund commenced selling Investor Shares on April 14, 1994. Those
shares outstanding prior to April 4, 1994 were designated as Trust
Shares.
** The Fund commenced operations on September 15, 1993.
*** Effective October 17, 1994, the Investor Shares and Trust Shares were
redesignated as the Class A Shares and Class R Shares, respectively.
</TABLE>
6. ORGANIZATION COSTS
The Fund paid all costs in connection with the Fund's organization includ-
ing the fees and expenses of registering and qualifying the Fund's shares
for distribution under Federal and state securities regulations. Prior to
April 4, 1994, all such costs were being amortized on the straight-line
method over a period of five years. On April 4, 1994, the remaining unam-
ortized organization costs were reimbursed by Mellon Bank as the invest-
ment adviser.
7. CAPITAL LOSS CARRYFORWARDS
At October 31, 1994, the Fund had available for federal income tax pur-
poses unused capital loss carryforwards of $2,187,496 expiring in the year
2002.
8. DIVIDENDS
On November 2, 1994, the Board of Directors declared dividends from net
investment income for the Class A Shares and Class R Shares in the amount
of $0.0570 and $0.0634 per share, respectively, payable on November 9,
1994 to shareholders of record on November 2, 1994.
INDEPENDENT AUDITORS' REPORT
KPMG
The Board of Directors and Shareholders
The Dreyfus/Laurel Funds, Inc.
We have audited the accompanying statement of assets and liabilities of
the Premier Balanced Fund of The Dreyfus/Laurel Funds, Inc., including the
portfolio of investments, as of October 31, 1994, and the related state-
ment of operations for the year then ended, and the statement of changes
in net assets and the financial highlights for each of the periods indi-
cated herein. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and fi-
nancial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclo-
sures in the financial statements. Our procedures included confirmation of
securities owned as of October 31, 1994, by correspondence with the custo-
dian and brokers. An audit also includes assessing the accounting princi-
ples used and significant estimates made by management, as well as evalu-
ating the overall financial statement presentation. We believe that our
audits provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
of the Premier Balanced Fund of The Dreyfus/Laurel Funds, Inc., as of Oc-
tober 31, 1994, and the results of its operations for the year then ended,
and the changes in its net assets and the financial highlights for each of
the periods indicated herein, in conformity with generally accepted ac-
counting principles.
KPMG Peat Marwick LLP
Pittsburgh, Pennsylvania
December 9, 1994
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<S> <C> <C>
COMMON STOCKS -- 92.9%
FINANCIAL SERVICES -- 18.7%
1,600 Acordia, Inc. $ 45,000
1,500 ADVANTA Corporation, Class B 39,375
1,500 AMBAC, Inc. 52,500
3,600 AMRESCO, Inc. 32,175
4,250 A.G. Edwards, Inc. 78,625
800 Columbia First Savings Bank+ 31,600
1,800 Crestar Financial Corporation 74,250
2,300 Firstar Corporation 68,137
1,700 Franklin Quest Company+ 60,137
1,900 Fremont General Corporation 46,787
2,600 Green Tree Financial Corporation 71,175
1,600 John Alden Financial Corporation 48,000
1,700 Kimco Realty 62,262
2,600 Mercantile Bancorporation, Inc. 90,350
1,300 Michigan National Corporation 101,075
3,500 Midlantic Corporation 98,000
5,500 Money Stores, Inc. 112,063
3,600 Mutual Risk Management, Ltd. 98,550
2,100 Old Kent Financial Corporation 67,463
3,300 Old Republic International Corporation 67,238
3,000 People Bank of Bridgeport 39,000
4,600 Pinnacle West Capital Corporation 85,675
1,500 PXRE Corporation 36,938
2,700 Regions Financial Corporation 85,556
1,500 Rochester Community Savings Bank 27,750
2,400 Standard Federal Bank 63,600
3,100 UJB Financial, Inc. 83,700
1,500 United Companies Financial Corporation 49,875
1,600 United Wisconsin Services, Inc. 58,800
1,900 USLIFE Corporation 62,225
3,000 West One Bancorp 82,500
2,020,381
TECHNOLOGY -- 15.3%
2,100 Altera Corporation+ 82,819
1,600 Analysts International Corporation 32,800
3,800 Electronics for Imaging, Inc.+ 99,750
3,100 Exabyte Corporation+ 68,200
1,900 Harman International Industries, Inc. 67,925
4,900 Informix Corporation+ 134,750
2,700 Integrated Device Technology, Inc.+ 76,612
2,000 International Game Technology, Inc. 37,000
2,100 Kenetech Corporation+ 26,775
5,200 LSI Logic Corporation+ 221,000
2,400 Loral Corporation 95,100
2,500 Minerals Technologies, Inc. 74,375
3,800 Quantum Corporation+ 58,425
4,600 Silicon Valley Group, Inc.+ 90,275
2,600 Sterling Software, Inc.+ 81,250
1,700 SunGard Data System, Inc.+ 66,088
5,300 Tech Data Corporation+ 104,675
1,800 Thermo Electronics Corporation+ 82,125
2,600 Thiokol Corporation 64,025
2,200 Zebra Technologies Corporation, Class A+ 88,550
1,652,519
BASIC INDUSTRIES -- 12.6%
3,200 Birmingham Steel Corporation 82,800
3,500 Brush Wellman, Inc. 58,625
2,800 Chesapeake Corporation of Virginia 86,800
4,300 Clayton Homes, Inc.+ 77,937
1,800 Cytec Industries, Inc.+ 73,800
2,100 C.D.I. Corporation+ 35,700
3,500 Federal Paper Board Company, Inc. 105,000
5,200 Haverty Furniture Companies, Inc. 65,000
5,000 Horsham Corporation 77,500
2,200 IMCO Recycling, Inc.+ 31,900
4,700 International Specialty Products, Inc. 34,663
2,100 Medusa Corporation 47,775
4,100 Pittston Services Group 113,263
2,200 Ply-Gem Industries, Inc. 47,300
2,000 Potash Corp. Saskatchewan, Inc. 70,750
2,300 Shorewood Packaging Group+ 46,288
1,000 Standard Products Company 24,125
4,600 Sterling Chemicals, Inc.+ 55,775
1,300 Stewart & Stevenson Services, Inc. 50,050
1,700 Tredegar Industries, Inc. 30,813
3,800 Watts Industries, Inc. Class A 91,200
3,900 WHX Corporation+ 58,500
1,365,564
CONSUMER SERVICES -- 11.4%
5,100 Adaptec, Inc.+ 118,575
2,800 Apple South, Inc. 45,500
2,700 Big B, Inc. 33,412
2,300 Brinker International, Inc.+ 53,187
2,500 Burlington Coat Factory Warehouse Corporation+ 32,500
900 Bush Industries, Inc. Class A 23,512
3,100 Danka Business Systems Plc., ADR 60,450
2,100 Dollar General Corporation 60,900
2,600 Dr Pepper/Seven-Up Companies, Inc. 65,975
2,000 Eckerd Corporation+ 62,000
2,600 Fieldcrest Cannon, Inc. 66,300
2,400 Haggar Corporation 57,600
2,000 Hometown Buffet, Inc.+ 23,000
2,700 Interface, Inc., Class A 30,713
2,200 Loewen Group, Inc. 54,450
2,300 Morrison Restaurants, Inc. 67,275
1,700 PHH Corporation 63,750
2,800 Ralcorp Holdings, Inc.+ 58,100
1,900 Rex Stores Corporation+ 36,100
4,400 Ross Stores, Inc. 61,050
3,150 Staples, Inc.+ 72,450
2,000 Stop & Shop Companies, Inc.+ 50,000
850 Sunglass Hut International, Inc.+ 35,434
1,232,233
HEALTHCARE/PHARMACEUTICALS -- 10.1%
1,400 Cardinal Health, Inc. 65,450
2,500 Cerner Corporation+ 101,875
3,000 Circa Pharmaceuticals, Inc.+ 44,625
2,000 Community Health Systems, Inc.+ 52,500
1,100 Cordis Corporation+ 63,387
1,400 DENTSPLY International, Inc. 43,400
3,700 Elan Plc Ireland, ADR 136,437
2,100 Health Care Properties, Inc. 61,687
3,200 Hillhaven Corporation+ 71,200
1,600 Lancaster Colony Corporation 55,600
3,300 Lincare Holding, Inc.+ 89,925
4,100 OrNda Healthcorp+ 65,088
1,300 Pacificare Health Systems+ 94,900
2,200 Universal Health Services, Inc. 58,575
3,200 Vivra, Inc.+ 90,400
1,095,049
ENERGY -- 6.9%
2,900 Cabot Corporation 82,650
3,200 DQE, Inc. 96,800
1,750 Equitable Resources, Inc. 53,375
3,400 Illinova Corporation 67,150
2,000 KN Energy, Inc. 49,250
700 Magma Power Company+ 26,163
8,000 Nabors Industries+ 59,000
2,900 Pogo Producing Company 64,888
2,600 Questar Corporation 74,750
1,700 Seagull Energy Corporation+ 44,200
2,700 Smith International, Inc.+ 45,225
3,100 Ultramar Corporation 80,213
743,664
COMMUNICATIONS -- 5.5%
1,100 Clear Channel Communications, Inc.+ 55,412
3,350 ECI Telecommunications, Ltd.+ 64,906
2,100 Heritage Media Corporation, Class A+ 50,925
1,900 Infinity Broadcasting Corporation, Class A+ 57,713
2,800 LCI International, Inc.+ 67,200
2,700 LDDS Communications, Inc.+ 63,450
4,700 Tellabs, Inc.+ 229,125
588,731
UTILITIES -- 3.4%
3,600 Eastern Utilities Associates 78,750
4,000 Iowa Illinois Gas & Electric Company 82,000
3,300 Pacific Enterprises Company 70,950
2,300 Southern Indiana Gas & Electric Company 61,525
4,500 Southwestern Energy Company 77,625
370,850
CONSUMER BASICS -- 2.6%
5,100 IBP, Inc. 174,038
3,600 Richfood Holdings, Inc. 58,500
1,500 Smithfield Foods, Inc.+ 43,125
275,663
CONSUMER DURABLES -- 2.2%
2,100 Borg Warner Automotive, Inc. 47,250
2,100 Gentex Corporation+ 50,400
2,000 Harley Davidson, Inc. 56,000
1,400 Superior Industries International, Inc. 41,300
1,600 Toro Company 44,400
239,350
GENERAL BUSINESS -- 2.1%
3,500 Acclaim Entertainment, Inc.+ 60,812
3,800 Bowne & Company, Inc. 60,800
1,100 Caesars World, Inc.+ 48,262
1,700 King World Productions, Inc.+ 60,350
230,224
TRANSPORTATION -- 2.1%
3,500 Arkansas Best Corporation 45,281
1,400 Atlantic Southeast Airlines, Inc. 24,500
2,200 Consolidated Freightways, Inc. 49,225
1,600 Kansas City Southern Industries, Inc. 54,000
2,500 Skywest, Inc. 51,250
224,256
TOTAL COMMON STOCKS 10,038,484
(Cost $9,969,692)
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
<S> <C> <C>
REPURCHASE AGREEMENT -- 6.0%
(Cost $646,162)
Agreement with Barclays de Zoete Wedd,
dated 10/31/94 bearing 4.780% to be re-
purchased at $646,248 on 11/01/94, col-
lateralized by $647,009
$646,162 U.S. Treasury Bill, 4.360% due 11/30/94 $646,162
TOTAL INVESTMENTS
(Cost $10,615,854*) 98.9% 10,684,646
OTHER ASSETS AND LIABILITIES (NET) 1.1 121,813
NET ASSETS 100.0% $10,806,459
* Aggregate cost for Federal tax purposes.
+ Non-income producing security.
</TABLE>
See Notes to Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
PREMIER SMALL COMPANY STOCK FUND
OCTOBER 31, 1994
<TABLE>
<S> <C> <C>
ASSETS
Investments, at value (Cost $10,615,854) (Note 1)
See accompanying schedule $10,684,646
Receivable for Fund shares sold , 240,000
Receivable for investment securities sold 218,658
Dividends and interest receivable 10,020
TOTAL ASSETS 11,153,324
LIABILITIES
Payable for investment securities purchased $228,375
Due to custodian 106,091
Investment management fee payable (Note 2) 11,851
Accrued Directors' fees and expenses (Note 2) 346
Payable for Fund shares redeemed 200
Distribution fee payable (Note 3) 2
TOTAL LIABILITIES 346,865
NET ASSETS $10,806,459
NET ASSETS consist of:
Undistributed net investment income $18,644
Accumulated net realized loss on investments sold (28,275)
Net unrealized appreciation of investments 68,792
Par value 1,073
Paid-in capital in excess of par value 10,746,225
TOTAL NET ASSETS $10,806,459
NET ASSET VALUE
CLASS A SHARES
Net asset value, offering and redemption price per share
($59,747 / 5,936 shares of capital stock outstanding) $10.07
CLASS R SHARES
Net asset value, offering and redemption price per share
($10,746,712 / 1,067,368 shares of capital stock out-
standing) $10.07
</TABLE>
STATEMENT of OPERATIONS
PREMIER SMALL COMPANY STOCK FUND
FOR THE PERIOD ENDED OCTOBER 31, 1994*
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends $20,896
Interest 19,412
TOTAL INVESTMENT INCOME 40,308
EXPENSES
Investment management fee (Note 2) $21,306
Directors' fees and expenses (Note 2) 346
Distribution fee (Note 3) 12
TOTAL EXPENSES 21,664
NET INVESTMENT INCOME 18,644
REALIZED AND UNREALIZED GAIN/(LOSS) ON
INVESTMENTS (Notes 1 and 4):
Net realized loss on investments
sold during the period (28,275)
Net unrealized appreciation of in-
vestments during the period 68,792
NET REALIZED AND UNREALIZED GAIN ON IN-
VESTMENTS 40,517
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $59,161
* The Fund commenced operations on September 2, 1994.
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
PREMIER SMALL COMPANY STOCK FUND
<TABLE>
<CAPTION>
PERIOD
ENDED
10/31/94*
<S> <C>
Net investment income $18,644
Net realized loss on investments sold
during the period (28,275)
Net unrealized appreciation of invest-
ments during the period 68,792
Net increase in net assets resulting
from operations 59,161
Net increase in net assets from Fund
share transactions (Note 5):
Class A Shares 58,919
Class R Shares 10,688,379
Net increase in net assets 10,806,459
NET ASSETS
Beginning of period --
End of period (including undistributed
net investment income of $18,644 at
October 31, 1994) $10,806,459
* The Fund commenced operations on September 2, 1994.
</TABLE>
See Notes to Financial Statements
FINANCIAL HIGHLIGHTS
PREMIER SMALL COMPANY STOCK FUND
FOR A CLASS A SHARE OUTSTANDING THROUGHOUT THE PERIOD.
Please refer to page 4 of the Prospectus dated March 1, 1995.
See Notes to Financial Statements
FINANCIAL HIGHLIGHTS
PREMIER SMALL COMPANY STOCK FUND
FOR A CLASS R SHARE OUTSTANDING THROUGHOUT THE PERIOD.
Please refer to page 4 of the Prospectus dated March 1, 1995.
See Notes to Financial Statements
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Dreyfus/Laurel Funds, Inc. (the "Investment Company"), The Dreyfu-
s/Laurel Funds Trust, The Dreyfus/Laurel Tax-Free Municipal Funds and The
Dreyfus/Laurel Investment Series are all registered open-end management
investment companies that are now part of The Dreyfus Family of Funds. The
Investment Company is a series mutual fund with 19 separate investment
portfolios. This report contains financial statements for the Premier
Small Company Stock Fund (the "Fund"). The Investment Company was incorpo-
rated on August 6, 1987 as a Maryland corporation and is registered with
the Securities and Exchange Commission under the Investment Company Act of
1940, as amended (the "1940 Act"), as a diversified, open-end management
investment company. The Fund commenced operations on September 2, 1994. As
of October 31, 1994, the Fund offers two classes of shares: Class A Shares
and Class R Shares (effective October 17, 1994, the Investor Shares and
Trust Shares were reclassified as the Class A Shares and Class R Shares,
respectively). Class A Shares are sold primarily to retail investors and
bear a distribution fee. Class R Shares are sold primarily to bank trust
departments and other financial service providers acting on behalf of cus-
tomers having a qualified trust or investment accounts or relationship at
such institutions, and bear no distribution fee. Each class of shares has
identical rights and privileges, except with respect to the distribution
fee and voting rights on matters affecting a single class. The following
is a summary of significant accounting policies consistently followed by
the Fund in the preparation of its financial statements in accordance with
generally accepted accounting principles.
(A) PORTFOLIO VALUATION
Investments in securities traded on a national securities exchange are
valued at the last reported sales price or, in the absence of a recorded
sale, at the mean of the latest bid and asked prices. Over-the-counter se-
curities are valued at the mean of the latest bid and asked prices. When
market quotations are not readily available, securities are valued at fair
value as determined in good faith by the Board of Directors. Bonds are
valued through valuations obtained from a commercial pricing service or at
the most recent mean of the bid and asked prices provided by investment
dealers in accordance with procedures established by the Board of Direc-
tors. Debt securities with maturities of 60 days or less from the valua-
tion day are valued on the basis of amortized cost.
(B) REPURCHASE AGREEMENTS
The Fund may engage in repurchase agreement transactions. Under the terms
of a typical repurchase agreement, the Fund, through its custodian takes
possession of an underlying debt obligation subject to an obligation of
the seller to repurchase, and the Fund to resell, the obligation at an
agreed-upon price and time, thereby determining the yield during the
Fund's holding period. This arrangement results in a fixed rate of return
that is not subject to market fluctuations during the Fund's holding pe-
riod. The value of the collateral is at least equal, at all times, to the
total amount of the repurchase obligations, including interest. In the
event of counterparty default, the Fund has the right to use the collat-
eral to offset losses incurred. There is potential loss to the Fund in the
event the Fund is delayed or prevented from exercising its rights to dis-
pose of the collateral securities, including the risk of a possible de-
cline in the value of the underlying securities during the period while
the Fund seeks to assert its rights. The Fund's investment manager, acting
under the supervision of the Board of Directors, reviews the value of the
collateral and the creditworthiness of those banks and dealers with which
the Fund enters into repurchase agreements to evaluate potential risks.
(C) SECURITY TRANSACTIONS AND INVESTMENT INCOME
Securities transactions are recorded as of the trade date. Dividend income
is recorded on the ex-dividend date. Interest income is recorded on the
accrual basis. Realized gains and losses from securities sold are recorded
on the identified cost basis. Investment income and realized and unreal-
ized gains and losses are allocated based upon relative average daily net
assets of each class.
(D) EXPENSE ALLOCATION
Expenses of the Fund not directly attributable to the operations of any
class of shares are pro rated between the classes based upon the relative
average daily net assets of each class. Distribution expense is directly
attributable to a particular class of shares and is charged only to that
class' operations.
(E) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income, if any, are determined on a class
level and are declared daily and paid quarterly. Distributions from any
net realized capital gains, if any, are determined on a Fund level and are
declared and paid annually. Additional distributions of net investment in-
come and capital gains for the Fund may be made at the discretion of the
Board of Directors in order to avoid the 4% nondeductible federal excise
tax. Income distributions and capital gain distributions on a Fund level
are determined in accordance with income tax regulations, which may differ
from generally accepted accounting principles. These differences are pri-
marily due to differing treatments of income and gains on various invest-
ment securities held by the Fund, timing differences and differing charac-
terization of distributions made by the Fund as a whole.
(F) FEDERAL INCOME TAXES
The Fund intends to qualify as a regulated investment company by complying
with the requirements of the Internal Revenue Code applicable to regulated
investment companies and by distributing substantially all of its taxable
income to its shareholders. Therefore, no federal income tax provision is
required.
2. INVESTMENT MANAGEMENT FEE, DIRECTORS' FEES AND OTHER RELATED PARTY
TRANSACTIONS
Effective as of October 17, 1994, the Investment Company's investment man-
agement agreement with Mellon Bank, N.A. ("Mellon Bank"), a wholly-owned
subsidiary of Mellon Bank Corporation, was transferred to The Dreyfus
Corporation (the "Manager"), a wholly-owned subsidiary of Mellon Bank. The
Manager provides, or arranges for one or more third parties to provide,
investment advisory, administrative, custody, fund accounting and transfer
agency services to the Investment Company. The Manager also directs the
investments of the Fund in accordance with its investment objective, poli-
cies and limitations. For these services, the Fund pays the Manager a fee,
calculated daily and paid monthly, at the annual rate of 1.25% of the
value of the Fund's average daily net assets. Out of its fee, the Manager
pays all of the expenses of the Fund except brokerage, taxes, interest,
Rule 12b-1 distribution fees and expenses, fees and expenses of non-
interested Directors (including counsel fees) and extraordinary expenses.
In addition, the Manager is required to reduce its fee in an amount equal
to the Fund's allocable portion of fees and expenses of the non-interested
Directors (including counsel). For the period from September 2, 1994 (com-
mencement of operations) through October 16, 1994, Mellon Bank served as
the Fund's investment manager pursuant to the investment management agree-
ment described above.
Prior to September 23, 1994, Frank Russell Investment Management Company
(the "Administrator") served as the Fund's administrator and provided,
pursuant to an administration agreement, various administrative and corpo-
rate secretarial services to the Fund. For the period from September 2,
1994 (commencement of operations) through September 23, 1994, Mellon Bank,
as investment manager, paid the Administrator's fee out of the management
fee described above.
For the period from September 2, 1994 (commencement of operations) through
October 16, 1994, Funds Distributor, Inc. served as distributor of the In-
vestment Company's shares. Effective as of October 17, 1994, Premier Mu-
tual Fund Services, Inc. ("Premier") serves as the Investment Company's
distributor. Premier also serves as the Investment Company's sub- adminis-
trator and, pursuant to a sub-administration agreement with the Manager,
provides various administrative and corporate secretarial services to the
Investment Company.
No officer or employee of Premier or of any parent, subsidiary or affili-
ate thereof receives any compensation from The Dreyfus/Laurel Funds, Inc.,
The Dreyfus/Laurel Funds Trust, The Dreyfus/Laurel Tax-Free Municipal
Funds or The Dreyfus/Laurel Investment Series (collectively "The Dreyfu-
s/Laurel Funds") for serving as an officer or Director/Trustee of The
Dreyfus/Laurel Funds. In addition, no officer or employee of the Manager
(or of any parent, subsidiary or affiliate thereof) serves as an officer
or Director/Trustee of The Dreyfus/Laurel Funds. The Dreyfus/Laurel Funds
pay each Director/Trustee who is not an officer or employee of Premier (or
any parent, subsidiary or affiliate thereof) $27,000 per annum, $1,000 for
each Board meeting attended and $750 for each Audit Committee meeting at-
tended, and reimburse each Director/Trustee for travel and out-of-pocket
expenses.
3. DISTRIBUTION PLAN
The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule
12b-1 under the 1940 Act relating to its Class A Shares. Under the Plan,
the Fund may pay annually up to 0.25% of the value of the average daily
net assets attributable to its Class A Shares to compensate Premier and
Dreyfus Service Corporation, an affiliate of the Manager, for shareholder
servicing activities and Premier for activities primarily intended to re-
sult in the sale of Class A Shares. Class R Shares bear no distribution
fee.
Under its terms, the Plan shall remain in effect from year to year, pro-
vided such continuance is approved annually by a vote of a majority of
those Directors who are not "interested persons" of the Investment Company
and who have no direct or indirect financial interest in the operation of
the Plan or in any agreement related to the Plan.
4. SECURITIES TRANSACTIONS
The cost of purchases and proceeds from sales of securities, excluding
short-term investments and U.S. government securities, for the period
ended October 31, 1994 aggregated $10,538,699 and $540,732, respectively.
At October 31, 1994, aggregate gross unrealized appreciation for all secu-
rities in which there was an excess of value over tax cost amounted to
$501,666, and aggregate gross unrealized depreciation for all securities
in which there was an excess of tax cost over value amounted to $432,874.
5. SHARES OF CAPITAL STOCK
The Investment Company has authority to issue 25 billion shares of capital
stock with a par value of $.001. The Fund currently offers two classes of
shares. The table below summarizes transactions in Fund shares for the pe-
riod indicated:
PREMIER SMALL COMPANY STOCK FUND
<TABLE>
<CAPTION>
PERIOD ENDED
October 31, 1994*
SHARES AMOUNT
<S> <C> <C>
CLASS A SHARES:
Sold 5,966 $59,219
Redeemed (30) (300)
Net increase 5,936 $58,919
</TABLE>
<TABLE>
<CAPTION>
PERIOD ENDED
October 31, 1994*
SHARES AMOUNT
<S> <C> <C>
CLASS R SHARES:
Sold 1,330,335 $13,289,944
Redeemed (262,967) (2,601,565)
Net increase 1,067,368 $10,688,379
* The Fund commenced operations on September 2, 1994. Effective October
17, 1994, the Fund's Investor Shares and Trust Shares were redesig-
nated as Class A Shares and Class R Shares, respectively.
</TABLE>
6. CAPITAL LOSS CARRYFORWARD
At October 31, 1994, the Fund had available for federal income tax pur-
poses an unused capital loss carryforward of $28,275 expiring in 2002.
7. DIVIDENDS
On November 2, 1994, the Board of Directors declared dividends from net
investment income for the Class A and Class R Shares in the amount of
$.0133 and $.0174 per share, respectively, payable on November 9, 1994 to
shareholders of record on November 2, 1994.
INDEPENDENT AUDITORS' REPORT
[LOGO]
The Board of Directors and Shareholders
The Dreyfus/Laurel Funds, Inc.
We have audited the accompanying statement of assets and liabilities of
the Premier Small Company Stock Fund of The Dreyfus/Laurel Funds, Inc.,
including the portfolio of investments, as of October 31, 1994, and the
related statement of operations, statement of changes in net assets, and
the financial highlights for the period then ended. These financial state-
ments and financial highlights are the responsibility of the Fund's man-
agement. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and fi-
nancial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclo-
sures in the financial statements. Our procedures included confirmation of
securities owned as of October 31, 1994, by correspondence with the custo-
dian and brokers. An audit also includes assessing the accounting princi-
ples used and significant estimates made by management, as well as evalu-
ating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
of the Premier Small Company Stock Fund of The Dreyfus/Laurel Funds, Inc.,
as of October 31, 1994, and the results of its operations, changes in its
net assets, and the financial highlights for the period then ended, in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Pittsburgh, Pennsylvania
December 9, 1994
<PAGE>
PORTFOLIO of INVESTMENTS
................................................................................
- - - --------------------------------------------------------------------------------
PREMIER LIMITED TERM INCOME FUND OCTOBER 31, 1994
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
CORPORATE BONDS AND NOTES -- 49.5%
<C> <S> <C>
FINANCIAL SERVICES -- 14.2%
$2,500,000 Advanta Corporation
5.125% due 11/15/96 $ 2,390,625
500,000 American Express Company
8.500% due 08/15/01 515,000
2,100,000 Commercial Credit Group
7.375% due 11/15/96 2,107,875
250,000 Ford Motor Credit Company
8.875% due 08/01/96 256,875
972,105 Ford Motor Credit Company
6.500% due 11/15/96 972,397
1,000,000 Ford Motor Credit Company
7.125% due 12/01/97 987,500
1,500,000 General Motors Acceptance Corporation
7.875% due 02/28/97 1,509,375
1,154,871 General Motors Acceptance Corporation
4.500% due 09/15/97 1,139,050
2,000,000 U.S. Leasing Corporation
7.000% due 11/01/97 1,967,500
-----------
11,846,197
-----------
BANKING AND FINANCE -- 9.6%
500,000 American General Finance Corporation
8.100% due 08/15/95 506,250
500,000 Associates Corporation of North America
6.000% due 12/01/95 496,875
1,500,000 BankAmerica Corporation
6.850% due 03/01/03 1,351,875
3,000,000 Chemical Banking Corporation
7.625% due 01/15/03 2,835,000
500,000 International Lease Finance Corporation
6.625% due 06/01/96 496,875
2,500,000 International Lease Finance Corporation
5.750% due 03/15/98 2,350,000
-----------
8,036,875
-----------
UTILITIES -- 6.7%
4,000,000 Bell Atlantic New Jersey
5.875% due 02/01/04 3,430,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS. 7
................................................................................
<PAGE>
PORTFOLIO of INVESTMENTS (continued)
................................................................................
- - - --------------------------------------------------------------------------------
PREMIER LIMITED TERM INCOME FUND OCTOBER 31, 1994
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
CORPORATE BONDS AND NOTES (continued)
<C> <S> <C>
UTILITIES (CONTINUED)
$2,000,000 Texas Utilities Company
6.375% due 08/01/97 $ 1,940,000
200,000 Virginia Electric & Power Company
6.375% due 03/01/95 200,250
-----------
5,570,250
-----------
ENERGY -- 5.4%
940,000 Du Pont (E.I.) de Nemours & Company
8.450% due 10/15/96 961,150
2,500,000 Exxon Capital Corporation
8.250% due 11/01/99 2,546,875
1,000,000 Shell Oil Company
7.700% due 02/01/96 1,011,250
-----------
4,519,275
-----------
CONSUMER NON-DURABLES -- 3.7%
2,000,000 McDonald's Corporation
8.375% due 10/29/99 2,052,500
1,000,000 Warner-Lambert Company
8.000% due 09/01/98 1,013,750
-----------
3,066,250
-----------
TECHNOLOGY -- 3.7%
3,000,000 Rockwell International Corporation
8.375% due 02/15/01 3,052,500
-----------
CONSUMER SERVICES -- 2.6%
2,100,000 Wal-Mart Stores, Inc.
8.625% due 04/01/01 2,163,000
-----------
CONSUMER DURABLES -- 0.9%
500,000 Gillette Company
4.750% due 08/15/96 481,250
250,000 Johnson & Johnson
8.500% due 08/15/95 254,062
-----------
735,312
-----------
</TABLE>
8 SEE NOTES TO FINANCIAL STATEMENTS.
................................................................................
<PAGE>
PORTFOLIO of INVESTMENTS (continued)
................................................................................
- - - --------------------------------------------------------------------------------
PREMIER LIMITED TERM INCOME FUND OCTOBER 31, 1994
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
CORPORATE BONDS AND NOTES (continued)
<C> <S> <C>
OTHER -- 2.7%
$ 500,000 BP America, Inc.
7.875% due 05/15/02 $ 492,500
2,000,000 Hoechst-Celanese Corporation
7.125% due 03/15/09 1,762,500
-----------
2,255,000
-----------
TOTAL CORPORATE BONDS AND NOTES
(Cost $44,112,594) 41,244,659
-----------
U.S. TREASURY BONDS AND NOTES -- 35.9%
1,060,000 U.S. Treasury Bonds, 12.375% due 05/15/04 1,382,155
1,000,000 U.S. Treasury Bonds, 12.000% due 05/15/05 1,293,110
3,090,000 U.S. Treasury Notes, 4.250% due 07/31/95 3,050,663
2,000,000 U.S. Treasury Notes, 4.625% due 08/15/95 1,978,340
3,000,000 U.S. Treasury Notes, 8.500% due 08/15/95 3,055,080
7,550,000 U.S. Treasury Notes, 9.250% due 01/15/96 7,793,638
5,000,000 U.S. Treasury Notes, 9.375% due 04/15/96 5,192,050
5,000,000 U.S. Treasury Notes, 8.875% due 11/15/98 5,260,650
1,000,000 U.S. Treasury Notes, 7.250% due 05/15/04 963,450
-----------
TOTAL U.S. TREASURY BONDS AND NOTES
(Cost $30,534,068) 29,969,136
-----------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION -- 4.3%
1,375,245 Government National Mortgage Association
7.000% due 11/15/23 1,232,992
1,406,879 Government National Mortgage Association
7.000% due 03/15/24 1,261,355
1,194,711 Government National Mortgage Association
7.500% due 03/15/24 1,109,588
-----------
TOTAL GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (Cost
$4,074,421) 3,603,935
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS. 9
................................................................................
<PAGE>
PORTFOLIO of INVESTMENTS (continued)
................................................................................
- - - --------------------------------------------------------------------------------
PREMIER LIMITED TERM INCOME FUND OCTOBER 31, 1994
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
REPURCHASE AGREEMENT -- 9.1% (Cost $7,549,964)
<C> <S> <C>
$7,549,964 Agreement with Barclays de Zoete Wedd dated 10/31/94 bearing
4.780% to be repurchased at $7,550,966 on 11/01/94,
collateralized by $7,495,000 U.S. Treasury Notes,
5.875% due 05/15/95 $ 7,549,964
-----------
TOTAL INVESTMENTS (Cost $86,271,047*) 98.8% 82,367,694
OTHER ASSETS AND LIABILITIES (NET) 1.2 970,423
------ ----------
NET ASSETS 100.0% $83,338,117
------ -----------
------ -----------
------------------------------------------------------------------------------------
<FN>
* AGGREGATE COST FOR FEDERAL TAX PURPOSES.
</TABLE>
10 SEE NOTES TO FINANCIAL STATEMENTS.
................................................................................
<PAGE>
STATEMENT of ASSETS and LIABILITIES
................................................................................
- - - --------------------------------------------------------------------------------
PREMIER LIMITED TERM INCOME FUND OCTOBER 31, 1994
<TABLE>
<CAPTION>
ASSETS
<S> <C> <C>
Investments, at value (Cost $86,271,047) (Note 1)
See accompanying schedule $82,367,694
Interest receivable 1,510,635
Receivable for Fund shares sold 55,206
Receivable from investment adviser (Note 2) 16,734
-----------
TOTAL ASSETS 83,950,269
-----------
-----------
LIABILITIES
Payable for Fund shares redeemed 438,997
Dividends payable 116,721
Investment management fee payable (Note 2) 45,326
Accrued Directors' fees and expenses (Note 2) 11,078
Distribution fee payable (Note 3) 30
--------
TOTAL LIABILITIES 612,152
-----------
NET ASSETS $83,338,117
-----------
-----------
NET ASSETS consist of:
Distributions in excess of net investment income $ (22,636)
Accumulated net realized loss on investments sold (1,854,346)
Unrealized depreciation on investments (3,903,353)
Par value 8,156
Paid-in capital in excess of par value 89,110,296
-----------
TOTAL NET ASSETS $83,338,117
-----------
-----------
NET ASSET VALUE
CLASS A SHARES
Net asset value, offering and redemption price per share
($932,275 DIVIDED BY 91,241 shares of capital stock
outstanding) $10.22
------
------
CLASS R SHARES
Net asset value, offering and redemption price per share
($82,405,842 DIVIDED BY 8,064,772 shares of capital
stock outstanding) $10.22
------
------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS. 11
................................................................................
<PAGE>
STATEMENT of OPERATIONS
................................................................................
- - - --------------------------------------------------------------------------------
PREMIER LIMITED TERM INCOME FUND
FOR THE YEAR ENDED OCTOBER 31, 1994
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest $ 4,811,000
-----------
EXPENSES
Investment management fee (Note 2) $300,989
Investment advisory fee (Note 2) 154,930
Transfer agent fees (Note 2) 24,766
Custodian fees (Note 2) 22,751
Directors' fees and expenses (Note 2) 13,668
Administration fee (Note 2) 11,049
Legal and audit fees 7,099
Amortization of organization costs (Note 6) 3,533
Distribution fee (Note 3) 527
Other 13,598
Expenses reimbursed by investment adviser (Note 2) (8,622)
--------
TOTAL EXPENSES 544,288
-----------
NET INVESTMENT INCOME 4,266,712
-----------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS
(Notes 1 and 4):
Net realized loss on investments sold during the year (1,876,669)
Net change in unrealized depreciation of investments
during
the year (4,583,309)
-----------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS (6,459,978)
-----------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $(2,193,266)
-----------
-----------
</TABLE>
12 SEE NOTES TO FINANCIAL STATEMENTS.
................................................................................
<PAGE>
STATEMENT of CHANGES in NET ASSETS
................................................................................
- - - --------------------------------------------------------------------------------
PREMIER LIMITED TERM INCOME FUND
<TABLE>
<CAPTION>
YEAR YEAR
ENDED ENDED
10/31/94 10/31/93
<S> <C> <C>
Net investment income $ 4,266,712 $ 1,420,169
Net realized gain/(loss) on investments sold during the year (1,876,669) 490,042
Net unrealized appreciation/(depreciation) of investments
during the year (4,583,309) 402,009
----------- -----------
Net increase/(decrease) in net assets resulting from
operations (2,193,266) 2,312,220
Distribution to shareholders from net investment income:
Class A Shares (10,352) --
Class R Shares (4,462,330) (1,306,236)
----------- -----------
Distribution to shareholders from net realized gain:
Class R Shares (490,042) (190,884)
Net increase in net assets from Fund share transactions
(Note 5):
Class A Shares 944,565 --
Class R Shares 30,016,014 38,099,357
----------- -----------
Net increase in net assets 23,804,589 38,099,357
NET ASSETS:
Beginning of year 59,533,528 20,619,071
----------- -----------
End of year (including undistributed net investment income
of $205,994 at October 31, 1993) $83,338,117 $59,533,528
----------- -----------
----------- -----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS. 13
................................................................................
<PAGE>
FINANCIAL HIGHLIGHTS
................................................................................
- - - --------------------------------------------------------------------------------
PREMIER LIMITED TERM INCOME FUND
FOR A CLASS A SHARE OUTSTANDING THROUGHOUT THE PERIOD.
Please refer to page 5 of the Prospectus dated March 1, 1995.
14 SEE NOTES TO FINANCIAL STATEMENTS.
................................................................................
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
................................................................................
- - - --------------------------------------------------------------------------------
PREMIER LIMITED TERM INCOME FUND
FOR A CLASS R SHARE OUTSTANDING THROUGHOUT EACH YEAR.
Please refer to page 5 of the Prospectus dated March 1, 1995.
SEE NOTES TO FINANCIAL STATEMENTS. 15
................................................................................
<PAGE>
NOTES to FINANCIAL STATEMENTS
................................................................................
1. SIGNIFICANT ACCOUNTING POLICIES
The Dreyfus/Laurel Funds, Inc. (the "Investment Company"), The Dreyfus/Laurel
Funds Trust, The Dreyfus/Laurel Tax-Free Municipal Funds and The
Dreyfus/Laurel Investment Series are all registered open-end management
investment companies that are now part of The Dreyfus Family of Funds. The
Investment Company is a series mutual fund with 19 separate investment
portfolios. These financial statements report on the Premier Limited Term
Income Fund (formerly the Laurel Intermediate Income Fund) (the "Fund"). The
Investment Company was incorporated on August 6, 1987 as a Maryland
corporation and is registered with the Securities and Exchange Commission
under the Investment Company Act of 1940, as amended (the "1940 Act"), as a
diversified open-end management investment company. The Fund commenced
operations on July 11, 1991. As of October 31, 1994, the Fund offers two
classes of shares: Class A Shares and Class R Shares (effective October 17,
1994, the Investor Shares and Trust Shares were redesignated as the Class A
Shares and Class R Shares, respectively). Class A Shares are sold primarily to
retail investors and bear a distribution fee. Class R Shares are sold
primarily to bank trust departments and other financial service providers
acting on behalf of customers having a qualified trust or investment account
or relationship at such institution, and bear no distribution fee. Each class
of shares has identical rights and privileges, except with respect to
distribution fees and voting rights on matters affecting a single class. The
following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements.
(A) PORTFOLIO VALUATION
Investments in securities traded on a national securities exchange are valued
at the last reported sales price or, in the absence of a recorded sale, at the
mean of the latest bid and asked prices. Over-the-counter securities are
valued at the mean of the latest bid and asked prices. When market quotations
are not readily available, securities are valued at fair value as determined
in good faith by the Board of Directors. Bonds are valued through valuations
obtained from a commercial pricing service or at the most recent mean of the
bid and asked prices provided by investment dealers in accordance with
procedures established by the Board of Directors. Investments in U.S.
government securities (other than short-term securities) are valued at the
most recent quoted bid price in the over-the-counter market. Debt securities
with maturities of 60 days or less from the valuation day are valued on the
basis of amortized cost.
(B) REPURCHASE AGREEMENTS
The Fund may engage in repurchase agreement transactions. Under the terms of a
typical repurchase agreement, the Fund, through its custodian, takes
possession of an underlying debt obligation, subject to an obligation of the
seller to repurchase, and the Fund to resell, the obligation at an agreed-upon
price and time, thereby determining the yield during the Fund's holding
period. This arrangement results in a fixed rate of return that is not subject
to market fluctuations during the Fund's holding period. The value of the
16
................................................................................
<PAGE>
NOTES to FINANCIAL STATEMENTS (continued)
................................................................................
collateral is at least equal at all times to the total amount of the
repurchase obligations, including interest. In the event of counterparty
default, the Fund has the right to use the collateral to offset losses
incurred. There is potential loss to the Fund in the event the Fund is delayed
or prevented from exercising its rights to dispose of the collateral
securities including the risk of a possible decline in the value of the
underlying securities during the period while the Fund seeks to assert its
rights. The Fund's investment manager, acting under the supervision of the
Board of Directors, reviews the value of the collateral and the
creditworthiness of those banks and dealers with which the Fund enters into
repurchase agreements to evaluate potential risks.
(C) SECURITY TRANSACTIONS AND INVESTMENT INCOME
Securities transactions are recorded as of the trade date. Interest income is
recorded on the accrual basis. Realized gains and losses from securities
transactions are recorded on the identified cost basis. Investment income and
realized and unrealized gains and losses are allocated based upon relative
average daily net assets of each class.
(D) EXPENSE ALLOCATION
Expenses of the Fund not directly attributable to the operations of any class
of shares are pro rated between the classes based upon the relative average
daily net assets of each class. Distribution expense is directly attributable
to a particular class of shares and is charged only to that class' operations.
(E) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income, if any, are determined on a class level
and are declared daily and paid monthly. Distributions from net realized
capital gains, if any, are determined on a Fund level and are declared and
paid annually. Additional distributions of net investment income and capital
gains for the Fund may be made at the discretion of the Board of Directors in
order to avoid the 4% nondeductible federal excise tax. Income distributions
and capital gain distributions on a Fund level are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to differing
treatments of income and gains on various investment securities held by the
Fund, timing differences and differing characterization of distributions made
by the Fund as a whole. Permanent differences incurred during the year ended
October 31, 1994 resulting from a reclassification of income to gains.
(F) FEDERAL INCOME TAXES
The Fund intends to qualify as a regulated investment company by complying
with the requirements of the Internal Revenue Code applicable to regulated
investment companies and by distributing substantially all of its taxable
income to its shareholders. Therefore, no federal income tax provision is
required.
17
................................................................................
<PAGE>
NOTES to FINANCIAL STATEMENTS (continued)
................................................................................
2. INVESTMENT MANAGEMENT FEE, DIRECTORS' FEES
AND OTHER RELATED PARTY TRANSACTIONS
Effective as of October 17, 1994, the Investment Company's investment
management agreement with Mellon Bank, N.A.("Mellon Bank"), a wholly-owned
subsidiary of Mellon Bank Corporation, was transferred to The Dreyfus
Corporation (the "Manager"), a wholly-owned subsidiary of Mellon Bank. The
Manager provides, or arranges for one or more third parties to provide,
investment advisory, administrative, custody, fund accounting and transfer
agency services to the Investment Company. The Manager also directs the
investments of the Fund in accordance with its investment objective, policies
and limitations. For these services, the Fund pays the Manager a fee,
calculated daily and paid monthly, at the annual rate of 0.60% of the value of
the Fund's average daily net assets. Out of its fee, the Manager pays all of
the expenses of the Fund except brokerage, taxes, interest, Rule 12b-1
distribution fees and expenses, fees and expenses of non-interested Directors
(including counsel fees) and extraordinary expenses. In addition, the Manager
is required to reduce its fee in an amount equal to the Fund's allocable
portion of fees and expenses of the non-interested Directors (including
counsel).
For the period from April 4, 1994 to October 16, 1994, Mellon Bank served as
the Investment Company's investment manager pursuant to the investment
management agreement described above. Prior to April 4, 1994, the Investment
Company had individual contracts with Mellon Bank to provide custody,
accounting, and transfer agent services to the Fund. Effective April 4, 1994,
custody, accounting, and transfer agent services are covered by the investment
management agreement described above.
Prior to April 4, 1994, the Investment Company had an investment advisory
agreement under which the Fund paid Mellon Bank an annual fee of 0.30% of the
value of the Fund's average daily net assets for investment advisory services.
For the period from November 1, 1993 through April 3, 1994, Mellon Bank, as
investment adviser, voluntarily agreed to reimburse expenses in the amount of
$8,622.
Prior to September 23, 1994, Frank Russell Investment Management Company (the
"Administrator") served as the Fund's administrator and provided, pursuant to
an administration agreement, various administrative and corporate secretarial
services to the Fund. For the period from April 4, 1994 to September 23, 1994,
Mellon Bank, as investment manager, paid the Administrator's fee out of the
management fee described above. Prior to April 4, 1994, the Investment Company
paid the Administrator the following fees for the services supplied by the
Administrator pursuant to the administration agreement: (i) an annual fee of
$500,000; (ii) an annual asset-based fee, payable monthly on a pro rata basis,
based on the following percentages of the aggregate average daily net assets
of the Investment Company: up to and including $10 billion -- 0.01%, over $10
billion -- 0.005%; and (iii) all start-up costs (including out-of-pocket, blue
sky registration and personnel costs) for new portfolios (prior to and for 6
months following commencement of operations).
18
................................................................................
<PAGE>
NOTES to FINANCIAL STATEMENTS (continued)
................................................................................
Prior to April 4, 1994, the Investment Company had a contract with Russell
Fund Distributors, Inc. to serve as distributor of its shares. Effective April
4, 1994 through October 16, 1994, Funds Distributor, Inc. served as
distributor of the Investment Company's shares. Effective as of October 17,
1994, Premier Mutual Fund Services, Inc. ("Premier") serves as the Investment
Company's distributor. Premier also serves as the Investment Company's
sub-administrator and, pursuant to a sub-administration agreement with the
Manager, provides various administrative and corporate secretarial services to
the Investment Company.
No officer or employee of Premier (or of any parent, subsidiary or affiliate
thereof) receives any compensation from The Dreyfus/Laurel Funds, Inc., The
Dreyfus/Laurel Funds Trust, The Dreyfus/Laurel Tax-Free Municipal Funds or The
Dreyfus/Laurel Investment Series (collectively, "The Dreyfus/Laurel Funds")
for serving as an officer or Director/Trustee of The Dreyfus/Laurel Funds. In
addition, no officer or employee of the Manager (or any parent, subsidiary or
affiliate thereof) serves as an officer or Director/ Trustee of the
Dreyfus/Laurel Funds. The Dreyfus/Laurel Funds pay each Director/Trustee who
is not an officer or employee of Premier (or any parent, subsidiary or
affiliate thereof) $27,000 per annum, $1,000 for each Board meeting attended
and $750 for each Audit Committee meeting attended, and reimburse each
Director/Trustee for travel and out-of-pocket expenses. Prior to April 4,
1994, the Investment Company paid each Director $15,000 per annum plus
reimbursement for travel and out-of-pocket expenses.
3. DISTRIBUTION PLAN
The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b-1
under the 1940 Act relating to its Class A Shares. Under the Plan, the Fund
may pay annually up to 0.25% of the value of the average daily net assets
attributable to its Class A Shares to compensate Premier and Dreyfus Service
Corporation, an affiliate of the Manager, for shareholder servicing activities
and Premier for activities primarily intended to result in the sale of Class A
Shares. Class R Shares bear no distribution fee. Prior to April 4, 1994, the
Fund had a distribution and shareholder services plan, under which the Fund
was authorized to spend annually up to 0.35% of the value of its average daily
net assets on distribution and shareholder servicing expenses.
Under its terms, the Plan shall remain in effect from year to year, provided
such continuance is approved annually by a vote of a majority of those
Directors who are not "interested persons" of the Investment Company and who
have no direct or indirect financial interest in the operation of the Plan or
in any agreement related to the Plan.
19
................................................................................
<PAGE>
NOTES to FINANCIAL STATEMENTS (continued)
................................................................................
4. SECURITIES TRANSACTIONS
The cost of purchases and proceeds from sales of securities, excluding
short-term investments and U.S. government securities, for the year ended
October 31, 1994 were $45,331,313 and $16,666,615, respectively.
The cost of purchases and proceeds from sales of long-term U.S. government
securities for the year ended October 31, 1994 were $76,226,491 and
$77,485,470, respectively.
At October 31, 1994, aggregate gross unrealized appreciation for all
securities in which there was an excess of value over tax cost and aggregate
gross unrealized depreciation for all securities in which there was an excess
of tax cost over value were $1,709 and $3,905,062, respectively.
5. SHARES OF CAPITAL STOCK
The Investment Company has authority to issue 25 billion shares of capital
stock with a par value of $.001. As of October 31, 1994, the Fund offered two
classes of shares. The table below summarizes the transactions in Fund shares
for the years or period indicated:
-------------------------------------------------------------------
PREMIER LIMITED TERM INCOME FUND
<TABLE>
<CAPTION>
PERIOD ENDED
OCTOBER 31, 1994*
SHARES AMOUNT
<S> <C> <C> <C> <C>
----------------------------------------------------------------------------------
CLASS A SHARES:
Sold 91,768 $ 950,058
Issued as reinvestment of
dividends
and distributions 390 4,011
Redeemed (917) (9,504)
---------- ------------
---------- ------------
Net increase 91,241 $ 944,565
---------- ------------
---------- ------------
----------------------------------------------------------------------------------
</TABLE>
20
................................................................................
<PAGE>
NOTES to FINANCIAL STATEMENTS (continued)
................................................................................
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1994* OCTOBER 31, 1993
SHARES AMOUNT SHARES AMOUNT
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS R SHARES:
Sold 6,051,387 $ 65,415,979 4,667,037 $ 51,383,142
Issued as reinvestment of
dividends
and distributions 352,406 3,726,095 85,459 923,840
Redeemed (3,716,619) (39,126,060) (1,300,206) (14,207,625)
---------- ------------ ---------- ------------
---------- ------------ ---------- ------------
Net increase 2,687,174 $ 30,016,014 3,452,290 $ 38,099,357
---------- ------------ ---------- ------------
---------- ------------ ---------- ------------
----------------------------------------------------------------------------------
<FN>
* THE FUND COMMENCED SELLING INVESTOR SHARES ON APRIL 7, 1994. THOSE SHARES
OUTSTANDING PRIOR TO APRIL 4, 1994 WERE DESIGNATED AS TRUST SHARES. EFFECTIVE
AS OF OCTOBER 17, 1994, THE INVESTOR SHARES AND TRUST SHARES WERE
REDESIGNATED AS THE CLASS A SHARES AND CLASS R SHARES, RESPECTIVELY.
</TABLE>
6. ORGANIZATION COSTS
The Fund paid all costs in connection with the Fund's organization including
the fees and expenses of registering and qualifying the Fund's shares for
distribution under federal and state securities regulations. Prior to April 4,
1994, all such costs were being amortized on the straight-line method over a
period of five years. On April 4, 1994, the remaining unamortized organization
costs were reimbursed by Mellon Bank as the investment adviser.
7. CAPITAL LOSS CARRYFORWARDS
At October 31, 1994, the Fund had available for federal income tax purposes
unused capital loss carryforwards of $1,854,347 expiring in the year 2002.
21
................................................................................
<PAGE>
INDEPENDENT AUDITORS' REPORT
................................................................................
[LOGO]
The Board of Directors and Shareholders
The Dreyfus/Laurel Funds, Inc.
We have audited the accompanying statement of assets and liabilities of the
Premier Limited Term Income Fund of The Dreyfus/Laurel Funds, Inc., including
the portfolio of investments, as of October 31, 1994, and the related
statement of operations for the year then ended, the statement of changes in
net assets for each of the two years in the period then ended, and the
financial highlights for each of the periods indicated herein. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of October 31, 1994, by correspondence with the custodian and
brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provides a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Premier Limited Term Income Fund of The Dreyfus/Laurel Funds, Inc. as of
October 31, 1994, the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period then ended,
and the financial highlights for each of the periods indicated herein, in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Pittsburgh, Pennsylvania
December 9, 1994
22
................................................................................
<PAGE>
TAX INFORMATION (unaudited)
................................................................................
PREMIER LIMITED TERM INCOME FUND
YEAR ENDED OCTOBER 31, 1994
During the fiscal year the Fund paid $154,195 of Long Term Capital Gains to
its shareholders.
23
PART C
-------
OTHER INFORMATION
-----------------
Item 24. Financial Statements and Exhibits
---------------------------------
(a) Financial Statements:
Included in Part A.
Financial Highlights for each of the periods
indicated therein.
Included in Part B: The following are incorporated by
reference to the Registrant's Annual Reports to Shareholders for the period
ended October 31, 1994 filed on January 4, 1995 in the case of Dreyfus
International Equity Allocation Fund and January 5, 1995 in the case of
Dreyfus/Laurel Short Term Government Securities Fund:
- Reports of Independent Accountants.
- Portfolio of Investments.
- Statements of Assets and Liabilities.
- Statements of Operations.
- Statements of Changes in Net Assets.
- Notes to Financial Statements.
(b) Exhibits:
1(a) Articles of Incorporation. (Incorporated by
reference to Post-Effective Amendment No. 29
("Post-Effective Amendment No. 29") to the
Registrant's Registration Statement on Form N-1A
filed May 19, 1994 -- Registration No. 33-16338
("Registration Statement").
1(b) Articles Supplementary increasing number of
shares registered. Incorporated by reference to
Post-Effective Amendment No. 29.
1(c) Articles of Amendment. Incorporated by reference
to Post-Effective Amendment No. 31 Filed on
December 13, 1994.
1(d) Articles Supplementary designating classes.
Incorporated by reference to Post-Effective
Amendment No. 32 Filed on December 19, 1994.
- 1 -
2 Bylaws. Incorporated by reference to the
Registration Statement.
3 Not applicable.
4 Specimen security. To be filed by amendment.
5(a) Investment Sub-Advisory Agreement among Mellon
Bank, N.A., S.A.M. Finance S.A. and the
Registrant for the European Fund. Incorporated
by reference to Post-Effective Amendment No. 22
filed September 3, 1993.
5(b) Investment Management Agreement between Mellon
Bank, N.A. and the Registrant. Incorporated by
reference to Post-Effective Amendment No. 29.
5(c) Investment Sub-Advisory Agreement among Mellon
Bank, N.A., S.A.M. Finance S.A. and the
Registrant for the International Equity
Allocation Fund. Incorporated by reference to
Post-Effective Amendment No. 31 filed on December
13, 1994.
5(d) Assignment and Assumption Agreement among Mellon
Bank, N.A., The Dreyfus Corporation and the
Registrant (relating to Investment Management
Agreement). Incorporated by reference to Post-
Effective Amendment No. 31 filed on December 13,
1994.
5(e) Assignment Agreement among Mellon Bank, N.A., The
Dreyfus Corporation, S.A.M. Finance S.A. and the
Registrant (relating to Investment Sub-Advisory
Agreement for the European Fund). To be filed by
amendment.
5(f) Assignment Agreement among Mellon Bank, N.A., The
Dreyfus Corporation, S.A.M. Finance S.A. and the
Registrant (relating to Investment Sub-Advisory
Agreement for the International Equity Allocation
Fund). To be filed by amendment.
6 Distribution Agreement between Premier Mutual
Fund Services, Inc. and the Registrant.
Incorporated by reference to Post-Effective
Amendment No. 31 filed on December 13, 1994.
7 Not applicable.
8(a) Custody Agreement with Boston Safe Deposit and
Trust Company with respect to the European Fund.
- 2 -
Incorporated by reference to Post-Effective
Amendment No. 23 filed December 30, 1993.
8(b) Custody and Fund Accounting Agreement between the
Registrant and Mellon Bank, N.A. Incorporated by
reference to Post-Effective Amendment No. 29.
8(c) Supplement to Custody Agreement with Boston Safe
Deposit and Trust Company with respect to the
European Fund. Incorporated by reference to
Post-Effective Amendment No. 29.
9(a) Fund Accounting Services Agreement. Incorporated
by reference to the Registration Statement.
9(b) Fund Accounting Services Agreement with Boston
Safe Deposit and Trust Company with respect to
the European Fund. Incorporated by reference to
Post-Effective Amendment No. 23 filed December
30, 1993.
9(c) Supplement to Fund Accounting Services Agreement
with Boston Safe Deposit and Trust Company with
respect to the European Fund. Incorporated by
reference to Post-Effective Amendment No. 29.
10 Opinion of counsel is incorporated by reference
to the Registration Statement and to Post-
Effective Amendment No.32 filed on December 19,
1994. Consent of Counsel is filed herewith.
11 Consent of KPMG Peat Marwick LLP. Filed herewith.
12 Not applicable.
13 Letter of Investment Intent. Incorporated by
reference to the Registration Statement.
- 3 -
14 Not applicable.
15(a) Restated Distribution Plan (relating to Investor
Shares and Class A Shares). Incorporated by
reference to Post-Effective Amendment No. 31
filed on December 13, 1994.
15(b) Form of Distribution and Service Plans (relating
to Class B Shares and Class C Shares).
Incorporated by reference to Post-Effective
Amendment No. 32 Filed on December 19, 1994.
16 Schedule for Computation of Performance
Calculation. Incorporated by reference to Post-
Effective Amendment No. 26 filed March 1,
1994.
Item 25. Persons Controlled by or Under Common Control with
Registrant
--------------------------------------------------
Not Applicable.
Item 26. Number of Holders of Securities
-------------------------------
Set forth below are the number of recordholders of
securities of each series of the Registrant as of
January 31, 1995:
<TABLE>
<CAPTION>
Number of Record Holders
Title of Class
Investor
Class A Class Class R Class I Class II Class
III
<S> <C> <C> <C> <C> <C>
Dreyfus/Laurel
Prime N/A 18,245 1,340 N/A N/A
N/A Money Market Fund
Dreyfus/Laurel U.S.
Treasury Money N/A 2,395 266 N/A N/A
N/A Market Fund
Dreyfus/Laurel
Tax-Exempt Money N/A 1,345 884 N/A N/A
N/A Market Fund
Dreyfus/Laurel
Institutional Prime N/A N/A N/A 197 1
N/A Money Market Fund
- 4 -
Number of Record Holders
Title of Class
Dreyfus/Laurel
Institutional N/A N/A N/A 27 N/A
Government Money
Market Fund
Dreyfus/Laurel
Institutional U.S.
N/A N/A N/A 55 N/A
Treasury Money
Market Fund
Dreyfus/Laurel
Institutional N/A N/A N/A 10 N/A
Short-Term Bond Fund
Dreyfus/Laurel
Institutional U.S. N/A N/A N/A 2 4
Treasury Only Money
Market Fund
Dreyfus Disciplined N/A 393 3,754 N/A N/A
Stock Fund
Dreyfus Disciplined
N/A 28 76 N/A N/A
N/A Midcap Stock Fund
Dreyfus Bond Market
N/A 10 22 N/A N/A
N/A Index Fund
Dreyfus S&P 500 N/A 83 42 N/A N/A
N/A Stock Index Fund
Dreyfus European
Fund N/A 16 152 N/A N/A
N/A
Dreyfus Equity N/A 32 4 N/A N/A
N/A Income Fund
Premier Limited Term
Income Fund 22 N/A 853 N/A N/A
N/A
Premier Balanced 36 N/A 86 N/A N/A
N/A Fund
Premier Small
Company Stock Fund 22 N/A 153 N/A N/A
N/A
</TABLE>
- 5 -
Item 27.
Indemnification
Incorporated by reference to Registration Statement.
Item 28.
Business and Other Connections of Investment Adviser
----------------------------------------------------
Investment Adviser -- The Dreyfus Corporation
------------------
The Dreyfus Corporation ("Dreyfus") and subsidiary companies
comprise a financial service organization whose business consists
primarily of providing investment management services as the investment
adviser, manager and distributor for sponsored investment companies
registered under the Investment Company Act of 1940 and as an investment
adviser to institutional and individual accounts. Dreyfus also serves as
sub-investment adviser to and/or administrator of other investment
companies. Dreyfus Service Corporation, a wholly-owned subsidiary of
Dreyfus, serves primarily as a registered broker-dealer of shares of
investment companies sponsored by Dreyfus and of other investment
companies for which Dreyfus acts as investment adviser, sub-investment
adviser or administrator. Dreyfus Management, Inc., another wholly-owned
subsidiary, provides investment management services to various pension
plans, institutions and individuals.
Officers and Directors of Investment Adviser
---------------------------------------------
Name and Position
with Dreyfus Other Businesses
----------------- ----------------
MANDELL L. BERMAN Real estate consultant and private investor
Director
29100 Northwestern Highway, Suite 370
Southfield, Michigan 48034
Past Chairman of the Board of Trustees of
Skillman Foundation.
Member of The Board of Vintners Intl.
FRANK V. CAHOUET Chairman of the Board, President and Chief
Director Executive Officer:
Mellon Bank Corporation
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258;
Mellon Bank, N.A.
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258
- 6 -
Name and Position
with Dreyfus Other Businesses
----------------- ----------------
Director:
Avery Dennison Corporation
150 North Orange Grove Boulevard
Pasadena, California 9103;
Saint-Gobain Corporation
750 East Swedesford Road
Valley Forge, Pennsylvania 19482;
Teledyne, Inc.
1901 Avenue of the Stars
Los Angeles, California 90067
ALVIN E. FRIEDMAN Senior Adviser to Dillon, Read & Co. Inc.
Director
535 Madison Avenue
New York, New York 10022;
Director and member of the Executive Committee of
Avnet, Inc.**
Lawrence M. Greene Director:
Director Dreyfus America Fund
DAVID B. TRUMAN Educational consultant;
Director
Past President of the Russell Sage Foundation
230 Park Avenue
New York, New York 10017;
Past President of Mount Holyoke College
South Hadley, Massachusetts 01075;
Former Director:
Student Loan Marketing Association
1055 Thomas Jefferson Street, N.W.
Washington, D.C. 20006;
Former Trustee:
College Retirement Equities Fund
730 Third Avenue
New York, New York 10017
HOWARD STEIN Chairman of the Board:
Chairman of the
Board and Chief Dreyfus Acquisition Corporation*;
Executive Officer
The Dreyfus Consumer Credit Corporation*;
Dreyfus Land Development Corporation*;
- 7 -
Name and Position
with Dreyfus Other Businesses
----------------- ----------------
Dreyfus Management, Inc.*;
Dreyfus Service Corporation;
Chairman of the Board and Chief Executive
Officer:
Major Trading Corporation*;
Director:
Avnet, Inc.**;
Dreyfus America Fund++++
The Dreyfus Fund International Limited+++++
World Balanced Fund+++
Dreyfus Partnership Management, Inc.*;
Dreyfus Personal Management, Inc. *;
Dreyfus Precious Metals, Inc.*;
Dreyfus Realty Advisors, Inc.+++;
Dreyfus Service Organization, Inc.*;
The Dreyfus Trust Company++;
Seven Six Seven Agency, Inc.*;
Trustee:
Corporate Property Investors
New York, New York;
JULIAN M. SMERLING None
Director
- 8 -
Name and Position
with Dreyfus Other Businesses
----------------- ----------------
Robert E. Riley Director:
President, Chief Dreyfus Service Corporation
Operating Officer
and Director
W. KEITH SMITH Chairman and Chief Executive Officer:
Vice Chairman of
the Board The Boston Company
One Boston Place
Boston, Massachusetts 02108
Vice Chairman of the Board:
- 9 -
Name and Position
with Dreyfus Other Businesses
----------------- ----------------
Mellon Bank Corporation
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258;
Mellon Bank, N.A.
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258
Director:
Dentsply International, Inc.
570 West College Avenue
York, Pennsylvania 17405
LAWRENCE S. KASH Chairman, President and Chief Executive Officer:
Vice Chairman,
Distribution The Boston Advisers, Inc.
and a Director 53 State Street
Exchange Place
Boston, Massachusetts 02109
President:
The Boston Company
One Boston Place
Boston, Massachusetts 02108;
Laurel Capital Advisors
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258;
Boston Group Holdings, Inc.
Executive Vice President
Mellon Bank, N.A.
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258;
Boston Safe Deposit & Trust
One Boston Place
Boston, Massachusetts 02108
PAUL H. SNYDER Director:
Vice President and
Chief Financial Pennsylvania Economy League
Officer Philadelphia, Pennsylvania;
Children's Crisis Treatment Center
Philadelphia, Pennsylvania;
Director and Vice President:
Financial Executives Institute
Philadelphia Chapter
Philadelphia, Pennsylvania;
- 10 -
Name and Position
with Dreyfus Other Businesses
----------------- ----------------
BARBARA E. CASEY President:
Vice President,
Retirement Services Dreyfus Retirement Services;
Executive Vice President:
Boston Safe Deposit & Trust Co.
One Boston Place
Boston, Massachusetts 02108;
DIANE M. COFFEY None
Vice President,
Corporate
Communications
- 11 -
Name and Position
with Dreyfus Other Businesses
----------------- ----------------
Henry D. Gottman Executive Vice President
Vice President-Retal Dreyfus Service Corporation
Sales and Service Vice President:
Dreyfsu Precious Metals
ELIE M. GENADRY President:
Vice President,
Institutioanl Sales
Institutional Services Division of Dreyfus
Service Corporation*;
Broker-Dealer Division of Dreyfus Service
Corporation*:
Group Retirement Plans Division of Dreyfus
Service Corporation;
Executive Vice President:
Dreyfus Service Corporation *:
Dreyfus Service Organization, Inc.*;
Vice President:
The Dreyfus Trust Company++;
Vice President-Sales:
The Dreyfus Trust Company (N.J.)++;
- 12 -
Name and Position
with Dreyfus Other Businesses
----------------- ----------------
DANIEL C. MACLEAN Director, Vice President and Secretary:
Vice President and
General Counsel Dreyfus Previous Metals, Inc.*;
Director and Vice President:
The Dreyfus Consumer Credit Corporation*;
The Dreyfus Trust Company (N.J.)++;
Director and Secretary:
Dreyfus Partnership Management, Inc.*;
Major Trading Corporation *;
The Truepenny Corporation+;
Director:
The Dreyfus Trust Company++;
Secretary:
Seven Six Seven Agency, Inc.*;
JEFFREY N. NACHMAN None
Vice President,
Mutual Fund Accounting
PHILIP L. TOIA Chairman of the Board and Vice President;
Vice Chairman,
Operations and Dreyfus Thrift & Commerce****;
Administration
Director:
The Dreyfus Security Savings Bank F.S.B.+;
Senior Loan Officer and Director:
The Dreyfus Trust Company++;
Vice President:
The Dreyfus Consumer Credit Corporation*;
President and Director:
Dreyfus Personal Management, Inc.*;
Director:
Dreyfus Realty Advisors, Inc.+++;
Formerly, Senior Vice President:
- 13 -
Name and Position
with Dreyfus Other Businesses
----------------- ----------------
The Chase Manhattan Bank, N.A. and The Chase
Manhattan Capital Markets Corporation
One Chase Manhattan Plaza
New York, New York 10081
KATHERINE C. Formerly, Assistant Commissioner:
WICKHAM Department of Parks and Recreation of the City of
Vice President, New York
Human Resources 830 Fifth Avenue
New York, New York 10022
MAURICE BENDRIHEM Treasurer:
Controller
Dreyfus Partnership Management, Inc.*;
Dreyfus Service Organization, Inc.*;
Seven Six Seven Agency, Inc.*;
The Truepenny Corporation*;
Controller:
Dreyfus Acquisition Corporation*;
The Dreyfus Trust Company++;
The Dreyfus Trust Company (N.J.)++;
The Dreyfus Consumer Credit Corporation*;
Assistant Treasurer:
Dreyfus Precious Metals*
Formerly, Vice President-Financial Planning,
Administration and Tax:
Showtime/The Movie Channel, Inc.
1633 Broadway
New York, New York 10019
MARK N. JACOBS Secretary:
Vice President,
Fund Legal and The Dreyfus Consumer Credit Corporation*;
Compliance, and
Secretary Dreyfus Management, Inc.*;
Assistant Secretary:
Dreyfus Service Organization, Inc.*;
Major Trading Corporation*;
- 14 -
Name and Position
with Dreyfus Other Businesses
----------------- ----------------
The Truepenny Corporation*
___________________________
* The address of the business so indicated is 200 Park Avenue, New
York, New York 10166.
** The address of the business so indicated is 80 Cutter Mill Road,
Great Neck, New York 11021.
*** The address of the business so indicated is 45 Broadway, New
York, New York 10006.
**** The address of the business so indicated is Five Triad Center,
Salt Lake City, Utah 84180.
+ The address of the business so indicated is Atrium Building, 80
Route 4 East, Paramus, New Jersey 07652.
++ The address of the business so indicated is 144 Glenn Curtiss
Boulevard, Uniondale, New York 11556-0144.
+++ The address of the business so indicated is One Rockefeller
Plaza, New York, New York 10020.
++++ The address of the business so indicated is 2 Boulevard Royal,
Luxembourg.
+++++ The address of the business so indicated is Nassau, Bahama
Islands.
Item 29. Principal Underwriter
---------------------
(a) Premier Mutual Fund Services, Inc. ("Premier") currently serves as
the exclusive distributor for The Dreyfus/Laurel Funds, Inc. Premier is
registered with the Securities and Exchange Commission as a broker-dealer
and is a member of the National Association of Securities Dealers, Inc.
Premier is a wholly-owned subsidiary of Institutional Administration
Services, Inc., the parent company of which is Boston Institutional Group,
Inc.
Premier also currently serves as the exclusive distributor or principal
underwriter for the following investment companies:
1) Comstock Partners Strategy Fund, Inc.
2) Dreyfus A Bonds Plus, Inc.
3) Dreyfus Appreciation Fund, Inc.
4) Dreyfus Asset Allocation Fund, Inc.
- 15 -
5) Dreyfus Balanced Fund, Inc.
6) Dreyfus BASIC Money Market Fund, Inc.
7) Dreyfus BASIC Municipal Fund, Inc.
8) Dreyfus BASIC U.S. Government Money Market Fund
9) Dreyfus California Intermediate Municipal Bond Fund
10) Dreyfus California Tax Exempt Bond Fund, Inc.
11) Dreyfus California Tax Exempt Money Market Fund
12) Dreyfus Capital Value Fund, Inc.
13) Dreyfus Cash Management
14) Dreyfus Cash Management Plus, Inc.
15) Dreyfus Connecticut Intermediate Municipal Bond Fund
16) Dreyfus Connecticut Municipal Money Market Fund, Inc.
17) The Dreyfus Convertible Securities Fund, Inc.
18) Dreyfus Edison Electric Index Fund, Inc.
19) Dreyfus Florida Intermediate Municipal Bond Fund
20) Dreyfus Florida Municipal Money Market Fund
21) Dreyfus Focus Funds, Inc.
22) The Dreyfus Fund Incorporated
23) Dreyfus Global Bond Fund, Inc.
24) Dreyfus Global Growth, L.P. (A Strategic Fund)
25) Dreyfus Global Investing, Inc.
26) Dreyfus GNMA Fund, Inc.
27) Dreyfus Government Cash Management
28) Dreyfus Growth and Income Fund, Inc.
29) Dreyfus Growth Opportunity Fund, Inc.
30) Dreyfus Institutional Money Market Fund
31) Dreyfus Institutional Short Term Treasury Fund
32) Dreyfus Insured Municipal Bond Fund, Inc.
33) Dreyfus Intermediate Municipal Bond Fund, Inc.
34) Dreyfus International Equity Fund, Inc.
35) Dreyfus Investors GNMA Fund
36) The Dreyfus Leverage Fund, Inc.
37) Dreyfus Life and Annuity Index Fund, Inc.
38) Dreyfus Liquid Assets, Inc.
39) Dreyfus Massachusetts Intermediate Municipal Bond Fund
40) Dreyfus Massachusetts Municipal Money Market Fund
41) Dreyfus Massachusetts Tax Exempt Bond Fund
42) Dreyfus Michigan Municipal Money Market Fund, Inc.
43) Dreyfus Money Market Instruments, Inc.
44) Dreyfus Municipal Bond Fund, Inc.
45) Dreyfus Municipal Cash Management Plus
46) Dreyfus Municipal Money Market Fund, Inc.
47) Dreyfus New Jersey Intermediate Municipal Bond Fund
48) Dreyfus New Jersey Municipal Bond Fund, Inc.
49) Dreyfus New Jersey Municipal Money Market Fund, Inc.
50) Dreyfus New Leaders Fund, Inc.
51) Dreyfus New York Insured Tax Exempt Bond Fund
52) Dreyfus New York Municipal Cash Management
53) Dreyfus New York Tax Exempt Bond Fund, Inc.
54) Dreyfus New York Tax Exempt Intermediate Bond Fund
55) Dreyfus New York Tax Exempt Money Market Fund
56) Dreyfus Ohio Municipal Money Market Fund, Inc.
- 16 -
57) Dreyfus 100% U.S. Treasury Intermediate Term Fund
58) Dreyfus 100% U.S. Treasury Long Term Fund
59) Dreyfus 100% U.S. Treasury Money Market Fund
60) Dreyfus 100% U.S. Treasury Short Term Fund
61) Dreyfus Pennsylvania Intermediate Municipal Bond Fund
62) Dreyfus Short-Intermediate Government Fund
63) Dreyfus Short-Intermediate Municipal Bond Fund
64) Dreyfus Short-Term Income Fund, Inc.
65) The Dreyfus Socially Responsible Growth Fund, Inc.
66) Dreyfus Strategic Growth, L.P.
67) Dreyfus Strategic Income
68) Dreyfus Strategic Investing
69) Dreyfus Tax Exempt Cash Management
70) Dreyfus Treasury Cash Management
71) Dreyfus Treasury Prime Cash Management
72) Dreyfus Variable Investment Fund
73) Dreyfus-Wilshire Target Funds, Inc.
74) Dreyfus Worldwide Dollar Money Market Fund, Inc.
75) General California Municipal Bond Fund, Inc.
76) General California Municipal Money Market Fund
77) General Government Securities Money Market Fund, Inc.
78) General Money Market Fund, Inc.
79) General Municipal Bond Fund, Inc.
80) General Municipal Money Market Fund, Inc.
81) General New York Municipal Bond Fund, Inc.
82) General New York Municipal Money Market Fund
83) Pacific American Fund
84) Peoples Index Fund, Inc.
85) Peoples S&P MidCap Index Fund, Inc.
86) Premier Insured Municipal Bond Fund
87) Premier California Municipal Bond Fund
88) Premier GNMA Fund
89) Premier Growth Fund, Inc.
90) Premier Municipal Bond Fund
91) Premier New York Municipal Bond Fund
92) Premier State Municipal Bond Fund
93) The Dreyfus/Laurel Funds Trust
94) The Dreyfus/Laurel Tax-Free Municipal Funds
95) The Dreyfus/Laurel Investment Series
(b) The names of the principal executive officers of Premier together
with their respective positions with Premier and their positions and
offices with the Registrant, are set forth below.
<TABLE>
- 17 -
<CAPTION>
Position and Position and
Name Office(s) with Office(s)
and Address Premier with Registrant
----------- ----------------- ----------------
<S> <C> <C>
Marie E. Connolly* Director, President & President & Treasurer
Chief Operating Officer
John E. Pelletier* Senior Vice President Vice President &
& General Counsel Secretary
Joseph F. Tower, III* Senior Vice President & Assistant Treasurer
Chief Financial Officer
John J. Pyburn** Vice President Assistant Treasurer
Jean M. O'Leary* Assistant Secretary N/A
Lynn H. Johnson+ Vice President None
Eric B. Fischman** Vice President & Vice President &
Associate General Assistant Secretary
Counsel
Frederic C. Dey** Senior Vice President Vice President &
Assistant Treasurer
Ruth D. Leibert** Assistant Vice President Assistant Secretary
Paul D. Furcinito** Assistant Vice President Assistant Secretary
Paul Prescott+ Assistant Vice President None
Leslie M. Gaynor+ Assistant Treasurer None
Mary Nelson+ Assistant Treasurer None
John W. Gomez+ Director None
William J. Nutt+ Director None
</TABLE>
*Address: Funds Distributor, Inc., Exchange Place, Boston, MA 02109.
**Address: Premier Mutual Fund Services, Inc., 200 Park Avenue, New York,
NY 10166.
Item 30. Location of Accounts and Records
(1) The Dreyfus/Laurel Funds, Inc.
144 Glenn Curtiss Boulevard
Uniondale, NY 11556-0144
(2) Mellon Bank, N.A.
c/o The Boston Company Advisers, Inc.
4th Floor
One Exchange Place
Boston, MA 02109
(3) Mellon Bank, N.A.
c/o The Boston Company, Inc.
5th Floor
- 18 -
One Boston Place
Boston, MA 02108
(4) Mellon Bank,
The Park Square Building
31 St. James Avenue
Boston, MA 02116
(5) The Shareholder Services Group, Inc.
1 American Express Plaza
Providence, RI 02903
(6) Mellon Bank, N.A.
One Mellon Bank Center
39th Floor
Pittsburgh, PA 15258
(7) The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
Item 31. Management Services
Not Applicable.
Item 32. Undertakings
------------
(a) Not Applicable.
(b) Registrant has elected to include its Management's discussion of
fund performance required under Form N-1A, Item 5A in its annual
report. Registrant therefore undertakes to provide annual reports
without charge to any recipient of a Prospectus who requests the
information.
- 19 -
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, and the Investment Company Act of 1940, as amended, the
Registrant, The Dreyfus/Laurel Funds, Inc. (formerly The Laurel Funds,
Inc.), certifies that it meets all of the requirements for effectiveness
of this Amendment to its Registration Statement pursuant to Rule 485(b)
under the Securities Act of 1933 and has duly caused this Amendment to the
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the City of Pittsburgh, the Commonwealth
of Pennsylvania on the 28h day of February, 1995.
THE DREYFUS/LAUREL FUNDS, INC.
/s/ Marie E. Connolly
____________________________
Marie E. Connolly
President
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Amendment to the Registration Statement has been signed
below by the following persons in the capacities and on the dates
indicated.
Signature Title Date
--------- ----- ----
/s/ Marie E. Connolly
__________________ President, Treasurer 2/28/95
Marie E. Connolly
Signature Title Date
-------- ----- -----
/s/ Francis P. Brennan
_______________________ Director,
Francis P. Brennan Chairman of the Board 2/28/95
/s/ Ruth Marie Adams
_____________________ Director 2/28/95
Ruth Marie Adams
________________________ Director
- 20 -
James M. Fitzgibbons
________________________ Director 2/28/95
Kenneth A. Himmel
________________________ Director 2/28/95
Stephen J. Lockwood
/s/ Roslyn M. Watson
________________________ Director 2/28/95
Roslyn M. Watson
/s/ J. Tomlinson Fort
________________________ Director 2/28/95
J. Tomlinson Fort
/s/ Arthur L. Goeschel
________________________ Director 2/28/95
Arthur L. Goeschel
/s/ Arch S. Jeffery
________________________ Director 2/28/95
Arch S. Jeffery
/s/ Robert D. McBride
________________________ Director 2/28/95
Robert D. McBride
/s/ John L. Propst
________________________ Director 2/28/95
John L. Propst
/s/ John J. Sciullo
________________________ Director 2/28/95
John J. Sciullo
- 21 -
- 22 -
Independent Auditors' Consent
-----------------------------
To the Board of Directors and Shareholders of
The Dreyfus/Laurel Funds, Inc.:
We consent to the use of our reports dated December 9, 1994, included
herein and to the references to our firm under the headings "Financial
Highlights" and "Other Information" in the Prospectus and Statement of
Additional Information filed with the Securities and Exchange Commission
in this Post-Effective Amendment No. 34 to the Registration Statement
under the Securities Act of 1933 and in this Amendment No. 35 to the
Registration Statement under the Investment Company Act of 1940.
/s/ KPMG Peat Marwick LLP
_________________________
KPMG Peat Marwick LLP
Pittsburgh, Pennsylvania
February 28, 1995
