Registration Nos. 811-5270
33-16338
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. 41 /X/
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /_/
Amendment No. 41 /X/
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):
/_/ immediately upon filing pursuant to paragraph (b)
/_/ on (date) pursuant to paragraph (b)
/X/ 60 days after filing pursuant to paragraph (a)(1)
/_/ on (date) pursuant to paragraph (a)(1)
/_/ 75 days after filing pursuant to paragraph (a)(2)
/_/ on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
/_/ this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
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, 1995
was filed with the Commission on December 27, 1995.
The Dreyfus/Laurel Funds, Inc.
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 Description of the Fund--Investment
Registrant Objective, Management Policies,
Investment Techniques, Certain
Portfolio Securities; General
Information
5. Management of the Fund Management of the Fund
6. Capital Stock and Other Description of the Fund--General;
Securities Dividends, Other Distributions and
Taxes; Shareholder Services--
Dreyfus Dividend Options; General
Information
7. Purchase of Securities Expense Summary; Management of the
Being Offered Fund; How to Buy Fund Shares;
Distribution Plan (Investor Shares
Only); Shareholder Services
8. Redemption or How to Redeem Fund Shares;
Repurchase Shareholder Services--Automatic
Withdrawal Plan
9. Pending Legal Not Applicable
Proceedings
The Dreyfus/Laurel Funds, Inc.
Cross-Reference Sheet Pursuant to Rule 495(a)
Items in
Part B of Statement of Additional
Form N-1A Caption Information Caption
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information Cover Page
History
13. Investment Objectives Investment Objective and Management
and Policies Policies--Portfolio Securities,
Management Policies, Investment
Restrictions
14. Management of the Fund Directors and Officers
15. Control Persons and Controlling Shareholder;
Principal Holders of Directors and Officers
Securities
16. Investment Advisory Management Arrangements;
and Other Services Distribution Plan; Custodian,
Transfer and Dividend Disbursing
Agent, Counsel and Independent
Auditors
17. Brokerage Allocation Portfolio Transactions
and Other Practices
18. Capital Stock and Other Cover Page; Information About the
Securities Fund; (See Prospectus Captions:
Description of the Fund--General;
General Information)
19. Purchase, Redemption Purchase of Fund Shares; Redemption
and Pricing of of Fund Shares; Shareholder
Securities Being Services; Determination of Net
Offered Asset Value
20. Tax Status Dividends, Other Distributions and
Taxes
21. Underwriters (See Prospectus Caption: Management
of the Fund)
22. Calculation of Performance Information
Performance Data
23. Financial Statements Not Applicable
The Dreyfus/Laurel Funds, Inc.
Contents of Post-Effective Amendment
This Post-Effective Amendment to the Registration Statement on Form N-1A
for The Dreyfus/Laurel Funds, Inc. (the "Registrant") contains the
following documents:
Facing Sheet
Cross-Reference Sheet
Part A - Prospectus
- Dreyfus Disciplined Intermediate Bond Fund
- Dreyfus Bond Market Index Fund
- Dreyfus Disciplined Stock Fund
- Dreyfus Disciplined Midcap Stock Fund
- Dreyfus Institutional S&P 500 Stock Index Fund
- Dreyfus Disciplined Equity Income Fund
- Dreyfus European Fund
- Dreyfus International Equity Allocation Fund
- Dreyfus Money Market Reserves
- Dreyfus Municipal Reserves
- Dreyfus U.S. Treasury Reserves
- Dreyfus Institutional Prime Money Market Fund
- Dreyfus Institutional U.S. Treasury Money Market Fund
- Dreyfus Institutional Government Money Market Fund
- Premier Balanced Fund
- Premier Limited Term Income Fund
- Premier Small Company Stock Fund
Part B - Statement of Additional Information
- Dreyfus Disciplined Intermediate Bond Fund
- Dreyfus Bond Market Index Fund
- Dreyfus Disciplined Stock Fund
- Dreyfus Disciplined Midcap Stock Fund
- Dreyfus Disciplined Equity Income Fund
- Dreyfus European Fund
- Dreyfus Institutional S&P 500 Stock Index Fund
- Dreyfus International Equity Allocation Fund
- Dreyfus Money Market Reserves
- Dreyfus Municipal Reserves
- Dreyfus U.S. Treasury Reserves
- Dreyfus Institutional Prime Money Market Fund
- Dreyfus Institutional U.S. Treasury Money Market Fund
- Dreyfus Institutional Government Money Market Fund
- Premier Balanced Fund
- Premier Limited Term Income Fund
- Premier Small Company Stock Fund
Part C - Other Information
Signatures
- -------------------------------------------------------------------------------
PROSPECTUS MARCH 1, 1996
DREYFUS EUROPEAN FUND
- -------------------------------------------------------------------------------
DREYFUS EUROPEAN FUND (THE "FUND"), FORMERLY CALLED THE "LAUREL
EUROPEAN FUND," IS A SEPARATE, DIVERSIFIED PORTFOLIO OF THE DREYFUS/LAUREL
FUNDS, INC., AN OPEN-END 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. ("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 SOLD PRIMARILY TO
RETAIL INVESTORS BY THE FUND'S DISTRIBUTOR AND BY BANKS, SECURITIES BROKERS
AND DEALERS AND OTHER FINANCIAL INSTITUTIONS (COLLECTIVELY, "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 FUND 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."
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.
THE STATEMENT OF ADDITIONAL INFORMATION ("SAI"), DATED MARCH 1,
1996, WHICH MAY BE REVISED FROM TIME TO TIME, PROVIDES A FURTHER DISCUSSION
OF CERTAIN AREAS IN THIS PROSPECTUS AND OTHER MATTERS WHICH MAY BE OF
INTEREST TO SOME INVESTORS. IT HAS BEEN FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION ("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 144.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
AGENCY. THE NET ASSET VALUE OF FUNDS OF THIS TYPE WILL FLUCTUATE FROM TIME TO
TIME.
THE FEES TO WHICH THE FUND IS SUBJECT ARE SUMMARIZED IN THE
"EXPENSE SUMMARY" SECTION OF THE FUND'S PROSPECTUS. THE FUND PAYS AN
AFFILIATE OF MELLON BANK 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................................... 13
SHAREHOLDER SERVICES..................................... 16
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>
<CAPTION>
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%
</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 $20 $ 18
3 Years $63 $ 55
5 Years $108 $ 95
10 Years $233 $206
</TABLE>
(1) See "Distribution Plan (Investor Shares Only)" for a description of the
Fund's Distribution Plan for Investor shares.
(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 by an amount equal to the Fund's allocable portion
of such fees and expenses, which are estimated to be 0.01% 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 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
clients 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 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, 1995, which is incorporated by
reference in the SAI. The financial statements included in the Fund's Annual
Report for the year ended October 31, 1995 have been audited by ______________
__________, independent auditors, whose report appears in the Fund's Annual
Report. Further information about, and management's discussion of, the Fund's
performance is contained in the Fund's Annual Report, which may be obtained
without charge by writing to the address or calling the number set forth on
the cover page of this Prospectus.
<TABLE>
<CAPTION>
DREYFUS EUROPEAN FUND
For an Investor share outstanding throughout each year or period.
YEAR PERIOD
ENDED ENDED
10/31/95 10/31/94*#
Net asset value, beginning of period $12.50 $11.78
------- -------
<S> <C> <C>
Income from investment operations:
Net investment income 0.01 0.05
Net realized and unrealized gain on investments 0.67 0.67
------- -------
Total from investment operations 0.68 0.72
Less distributions:
Distributions from net investment income (0.07) ._
------- -------
Dividends from net realized gain on investments (1.51) ._
------- -------
Total distributions (1.58) ._
------- -------
Net asset value, end of period $11.60 $12.50
============ ===========
Total return 7.16% 6.11%
============ ===========
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $591 $ 48
Ratio of operating expenses to average net assets 2.00% 2.00%**
Ratio of net investment income to average net assets 0.45% 0.73%**
Portfolio turnover rate 41.66% .46%
</TABLE>
* 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 served as the Fund's
investment manager. Effective October 17, 1994, Dreyfus began serving as the
Fund's investment manager.
(Page 5)
#
<TABLE>
<CAPTION>
DREYFUS EUROPEAN FUND
For a Class R share outstanding throughout each year or period.
YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
10/31/95 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> <C>
Net asset value, beginning of
year $12.50 $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 0.12 0.11 0.12 (0.02) 0.21 (0.13) (0.58) (0.01)
Net realized and unrealized
gain/(loss) on investments 0.57 0.63 1.73 (0.10) 0.57 1.53 0.21 1.10 (1.06)
Total from investment
operations 0.69 0.75 1.84 0.02 0.55 1.74 0.08 0.52 (1.07)
_________ ______________ ________ _________ ________ _________ _________ _______ ________
Less distributions:
Distributions from net
investment income (0.10) (0.12) (0.10) ----- (0.08) (0.03) ----- ----- ----
Distributions from net realized
capital gains (1.51) (0.83) ------ (0.18) (0.36) ------ ----- ----- -----
Distributions from capital ------ ------- ------ ------ ------ ------ (0.23) ----- -----
Total Distributions (1.61) (0.95) (0.10) (0.18) (0.44) (0.03) ------ (0.23) -----
Net asset value, end of year $11.58 $12.50 $12.70 $10.96 $11.12 $11.01 $ 9.30 $9.22 $8.93
===== ====== ====== ======= ======= ======== ======= ======= =======
Total return 7.29% 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) $10,622 $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% 1.75%# 1.83%# 1.57% #1.67% 1.52% 4.75%# 7.27%# 2.62%**#
Ratio of net investment income
to average net assets 1.02% 0.98% 0.59%# 0.92%# (0.16)% 1.96% (1.68)%# (4.67)%# (0.06)%**#
Portfolio turnover rate 41.66% 46% 12% 7% 5% 16% 69% 102% 99%
</TABLE>
* 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 (November 1, 1993 to October 16,
1994); and Dreyfus (October 17, 1994 to present).
** Annualized.
Audited by the Fund's prior auditors.
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 return 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 served as the Fund's invest-
ment manager. Effective October 17, 1994, Dreyfus began serving as the Fund's
investment manager.
(1) 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.
(2) Unaudited.
(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, 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 sold
primarily to retail investors by the Fund's distributor and by Agents that
have entered into an 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 servicing fees paid by Investor shares will
cause Investor shares to have a higher expense ratio and to pay lower
dividends than Class R shares.
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. The Fund is not (nor will it be
operated as) an index fund, and the Fund's portfolio investments will not be
limited to issues included in the Benchmark.
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
top two 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 or 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 also lend fund
securities (although it does not intend to do so at this time), and may
invest in commercial paper. 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 DELAYED DELIVERY TRANSACTIONS. To
secure advantageous prices or yields, the Fund may purchase 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
(Page 8)
#
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
at least equal at all times 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 Company's Board of Directors determines 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 also deal in forward foreign currency exchange contracts
as described below. Forward foreign currency exchange contracts may
substantially change the Fund's investment exposure to changes in currency
exchange rates and could result in losses if a counterparty defaults or
currencies do not perform as CCF S.A.M anticipates. CCF S.A.M seeks to
minimize the risk of loss by analyzing the creditworthiness of the
counterparty under forward contracts. There is no assurance that CCF S.A.M's
use of forward currency contracts will be advantageous to the Fund or that it
will hedge at an appropriate time.
Futures, Options and Other Derivative Instruments. The Fund may
purchase and sell various financial instruments ("Derivative Instruments"),
such as financial futures contracts (such as interest rate, index and foreign
currency futures contracts), options (such as options on securities, indices,
foreign currencies and futures contracts), forward currency contracts and
interest rate, equity index and currency swaps, caps, collars and floors. The
index Derivative Instruments the Fund may use may be based on indices of U.S.
or foreign equity or debt securities. These Derivative Instruments may be
used, for example, to preserve a return or spread, to lock in unrealized
market value gains or losses, to facilitate or substitute for the sale or
purchase of securities, to adjust its risk exposure relative to the
Benchmark, or to alter the exposure of a particular investment or portion of
the Fund's portfolio to fluctuations in interest rates or currency rates.
The Fund's ability to use these instruments may be limited by market
conditions, regulatory limits and tax considerations. The Fund might not use
any of these strategies and there can be no assurance that any strategy that
is used will succeed. See the SAI for more information regarding these
instruments and the risks relating thereto.
The Fund may not purchase put or call options that are traded on a
national stock exchange in an amount exceeding 5% of its net assets.
Risks of Derivative Instruments. The use of Derivative Instruments
involves special risks, including: (1) possible imperfect or no correlation
between price movements of the portfolio investments (held or intended to be
purchased) involved in the transaction and price movements of the Derivative
Instruments involved in the transaction; (2) possible lack of a liquid
secondary market for any particular Derivative Instrument at a particular
time; (3) the need for additional portfolio management skills and techniques;
(4) losses due to unanticipated market price movements; (5) the fact that,
while such strategies can reduce the risk of loss, they can also reduce the
opportunity for gain, or
(Page 9)
#
even result in losses, by offsetting favorable price movements in portfolio
investments: (6) incorrect forecasts by CCF S.A.M or Dreyfus concerning
interest or currency exchange rates or direction of price fluctuations of the
investment involved in the transaction, which may result in the strategy
being ineffective; (7) loss of premiums paid by the Fund on options it
purchases; and (8) the possible inability of the Fund to purchase or sell a
portfolio security at a time when it would otherwise be favorable for it to
do so, or the need to sell a portfolio security at a disadvantageous time,
due to the need for the Fund to maintain "cover" or to segregate securities
in connection with such transactions and the possible inability of the Fund
to close out or liquidate its positions.
CCF S.A.M or Dreyfus may use Derivative Instruments for hedging
purposes (to adjust the risk characteristics of the Fund's portfolio) and may
use these instruments to adjust the return characteristics of the Fund's
portfolio of investments. This can increase the investment risk. If CCF S.A.M
or Dreyfus judges market conditions incorrectly or employs a strategy that
does not correlate well with the Fund's investments, these techniques could
result in a loss, regardless of whether the intent was to reduce risk or
increase return. These techniques may increase the volatility of the Fund and
may involve a small investment of cash relative to the magnitude of the risk
assumed. In addition, these techniques could result in a loss if the
counterparty to the transaction does not perform as promised or if there is
not a liquid secondary market to close out a position that the Fund has
entered into.
Options and futures transactions may increase portfolio turnover
rates, which results in correspondingly greater commission expenses and
transaction costs, and may result in certain tax consequences.
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 at the time of purchase at least A-1 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.
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 adverse 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 generally are not 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.
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).
(Page 10)
#
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 investment 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 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
(Page 11)
#
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 November 30, 1995, Dreyfus managed or administer
ed approximately $83 billion in assets for more than 1.7 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 one or more third parties to provide, 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 $209 billion in assets as of
September 30, 1995, including $80 billion in mutual fund assets. As of
September 30, 1995, Mellon, through various subsidiaries, provided
non-investment services, such as custodial or administration services, for
more than $717 billion in assets, including approximately $55 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 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 by
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. For the fiscal year ended
October 31, 1995, the Fund paid Dreyfus 1.75% 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, 1995, total operating
expenses (excluding Rule 12b-1 fees) of the Fund were 1.75% of the average
daily net assets of each class for both the Investor Class and Class R.
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 over 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
(Page 12)
#
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. 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, 1995, Dreyfus paid CCF
S.A.M. advisory fees of .60% of the Fund's average daily net assets.
In addition, Investor shares may be subject to certain
distribution and shareholder servicing fees. See "Distribution Plan (Investor
Shares Only)."
Dreyfus may pay the Fund's distributor for shareholder services
from Dreyfus' 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 subsidiary of FDI
Distribution Services, Inc., a provider of mutual fund administration
services, which in turn is a wholly-owned subsidiary of FDI Holdings, Inc.,
the parent company of which is Boston Institutional Group, Inc.
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT, AND
SUB-ADMINISTRATOR--Boston Safe Deposit and Trust Company (One Boston Place,
Boston, MA 02109), an indirect wholly-owned subsidiary of Mellon, serves as
the Fund's custodian. As custodian, Boston Safe Deposit and Trust Company
maintains possession of the Fund's investment securities and provides
portfolio recordkeeping services. Boston Safe Deposit and Trust Company is
authorized to deposit securities in securities depositories or to use the
service of subcustodians.
The Fund's transfer and dividend disbursing agent is Dreyfus
Transfer, Inc., One American Express Plaza, Providence, Rhode Island 02903
(the "Transfer Agent"), a wholly-owned subsidiary of Dreyfus. Premier Mutual
Fund Services, Inc. serves as 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 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, hold
(page 13)
#
ers 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 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. 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.
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.
Investor shares are also offered without regard to the minimum
initial investment requirements through Dreyfus-AUTOMATIC Asset Builder,
Dreyfus Government Direct Deposit Privilege or Dreyfus Payroll Savings Plan
pursuant to the Dreyfus Step Program (described under "Shareholder
Services"). These services enable you to make regularly scheduled investments
and may provide you with a convenient way to invest for long-term financial
goals. You should be aware, however, that periodic investment plans do not
guarantee a profit and will not protect an investor against loss in a
declining market.
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 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
(Page 14)
#
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 the telephone number 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 Boston Safe Deposit and Trust Company, together with
the applicable Class' DDA # as shown below, for purchase of Fund shares in
your name:
DDA# 044253 Dreyfus European Fund/Investor shares;
DDA# 044245 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.
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 Boston Safe Deposit and Trust Company with instructions to
credit your Fund account. The instructions must specify your Fund account
registration and Fund account number PRECEDED BY THE DIGITS "4090" for
Investor shares and "4080" for Class R shares.
The Distributor may pay dealers a fee of up to .5% of the amount
invested through such dealers in Fund shares by employees participating in
qualified or non-qualified employee benefit plans or other programs where (i)
the employers or affiliated employers maintaining such plans or programs have
a minimum of 250 employees eligible for participation in such plans or
programs or (ii) such plan's or program's aggregate investment in the Dreyfus
Family of Funds or certain other products made available by the Distributor
to such plans or programs exceeds 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 PER SHARE ("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,
(Page 15)
#
deducting liabilities of the Class and dividing the result by the
number of shares of that Class outstanding. Shares of each Class of the Fund
are offered on a continuous basis. 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. When market quotations are not readily
available, equity securities are valued at fair value or determined 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.
For purposes of determining the Fund's NAV, 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 NAV is determined which is likely to materially
change the NAV, 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 NAV 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 such close of business are effective on, and will receive the price
determined on, that day. Investment, exchange and redemption requests
received after such close of business are effective on, and will receive the
share price determined on, the next business day.
The public offering price of Investor shares and Class R shares,
which are sold on a continuous basis, is the NAV of that Class.
DREYFUS TELETRANSFER PRIVILEGE--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 Transfe
r 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 Fund shares by telephoning
1-800-645-6561 or, if calling from overseas, 516-794-5452.
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
(Page 16)
#
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
1-800-645-6561 or, if calling from overseas, 516-794-5452. 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, Dreyfus
TELETRANSFER Privilege and the dividends and distributions payment option
(except for Dreyfus 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
(Page 17)
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 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 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
(Page 18)
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 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.
Dreyfus Step Program - Dreyfus Step Program enables you to purchase Investor
shares without regard to the Fund's minimum initial investment requirements
through Dreyfus-AUTOMATIC Asset Builder, Dreyfus Government Direct Deposit
Privilege or Dreyfus Payroll Savings Plan. To establish a Dreyfus Step
Program account, you must supply the necessary information on the Fund's
Account Application and file the required authorization form(s) with the
Transfer Agent. For more information concerning this Program, or to request
the necessary authorization form(s), please call toll free
1-800-782-6620. You may terminate your participation in this Program at any
time by discontinuing your participation in Dreyfus-AUTOMATIC Asset Builder,
Dreyfus Government Direct Deposit Privilege or Dreyfus Payroll Savings Plan,
as the case may be, as provided under the terms of such Privilege(s). The
Fund reserves the right to redeem your account if you have terminated your
participation in the Program and your account's net asset value is $500 or
less. See "How to Redeem Fund Shares." The Fund may modify or terminate this
Program at any time. Investors who wish to purchase Investor shares through
Dreyfus Step Program in conjunction with a Dreyfus-sponsored retirement plan
may do so only for IRAs, SEP-IRAs and IRA "Rollover Accounts."
(Page 19)
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 from 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 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.
(Page 20)
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 the Dreyfus TELETRANSFER Priv
ilege. 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 telephone redemption
privilege or telephone exchange privilege, which is granted automatically
unless you refuse it, you authorize the Transfer Agent to act on telephone
instructions from any person representing himself or herself to be you, 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,
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 the telephone number 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
(Page 21)
to $250,000 wired within any 30-day period. You may telephone
redemption requests by calling 1-800-645-6561 or, if calling from overseas,
516-794-5452. 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 1-800-645-6561 or, if calling from overseas, 516-794-5452. 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. 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 a bank 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 TELETR
ANSFER 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
1-800-645-6561 or, if calling from overseas, 516-794-5452. 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"). 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 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.
(Page 22)
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, to
receive dividends in cash and reinvest other distributions in additional Fund
shares, or to reinvest both dividends and other distributions 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 for treatment 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 that 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 (collectively, "Dividend Distributions"), 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 capital gain (the excess of
net long-term capital gain over net short-term capital loss) 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.
Dividend Distributions paid by the Fund to a non-resident foreign
investor generally will be 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 capital gain paid by the Fund to a
non-resident foreign investor, as well as the proceeds of any redemptions
from a non-resident 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 capital gain, if any, paid during the year.
(Page 23)
Dividends and other distributions 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 distributions 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. If a distributee of an "eligible rollover distribution" from a
qualified Retirement Plan does not elect to have the eligible rollover
distributor paid directly from the plan to an eligible retirement plan in a
"direct rollover," the eligible rollover distribution is subject to 20%
income tax withholding.
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 capital gain 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 that the TIN furnished in
connection with opening an account is correct and 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 distribution and
shareholder servicing fees. As a result, at any given time, the performance
of Investor shares should be expected to be lower than that of Class R
shares. 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
(Page 24)
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 share of such Class 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 SEC under
the 1940 Act, as an open-end 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 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.
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
(Page 25)
the election of Directors or the appointment of auditors.
However, 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 D
irectors 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
Copy Rights 1996 Dreyfus Service Corporation
308/708p3030196
Registration Mark
PREMIER BALANCED FUND
PROSPECTUS MARCH 1, 1996
Premier Balanced Fund (the "Fund"), formerly called the
"Laurel Balanced Fund," is a separate, diversified
portfolio of The Dreyfus/Laurel Funds, Inc., an open-end management
investment company (the "Company"), known as a mutual fund. The 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.
By this Prospectus, the Fund is offering four Classes of
shares_Class A, Class B, Class C and Class R.
The Dreyfus Corporation serves as the Fund's investment
manager. The Dreyfus Corporation is referred to as "Dreyfus."
________
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.
The Statement of Additional Information ("SAI") dated March
1, 1996, which may be revised from time to time, provides a further
discussion of certain areas in this Prospectus and other matters which
may be of interest to some investors. It has been filed with the
Securities and Exchange Commission ("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 1-800-554-4611.
When telephoning, ask for Operator 144.
________
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY
OTHER AGENCY. ALL MUTUAL FUND SHARES INVOLVE CERTAIN INVESTMENT 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 AN
AFFILIATE OF MELLON BANK, N.A. ("MELLON BANK") 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.
Page 1
(Continued from page 1)
Class A shares are subject to a sales charge imposed at the
time of purchase. (Class A shares of the Fund were formerly called
Investor Shares.) Class B shares are subject to a maximum 4% contingent
deferred sales charge imposed on redemptions made within six years of
purchase. Class C shares are subject to a 1% contingent deferred sales
charge imposed on redemptions made within the first year of purchase.
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 R shares of the Fund
were formerly called Trust Shares.) Other differences between the Classes
include the services offered to and the expenses borne by each Class and
certain voting rights, as described herein. These alternatives are
offered so an investor may choose the method of purchasing shares that is
most beneficial given the amount of purchase, the length of time the
investor expects to hold the shares and other circumstances.
Each Class of shares may be purchased or redeemed by
telephone using the TELETRANSFER Privilege.
# Page 2
TABLE OF CONTENTS
Expense Summary.................................... 4
Financial Highlights............................... 5
Alternative Purchase Methods....................... 9
Description of the Fund............................ 10
Management of the Fund............................. 17
How to Buy Fund Shares............................. 19
Shareholder Services............................... 23
How to Redeem Fund Shares.......................... 27
Distribution Plans (Class A Plan and Class B and C Plan) 31
Dividends, Other Distributions and Taxes........... 31
Performance Information............................ 33
General Information................................ 34
# Page 3
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
EXPENSE SUMMARY
CLASS A CLASS B CLASS C CLASS R
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases
...... (as a percentage of offering price) 4.50% none none none
Maximum Contingent 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 Fee1.............................. .25% 1.00% 1.00% none
Other Expenses ......................... .00% 00% 00% 00%
_____ _____ _____ _____
Total Fund Operating Expenses........... 1.25% 2.00% 2.00% 1.00%
Example:
You would pay the following expenses on a $1,000 investment,
assuming (1) a 5% annual return and (2) except where noted,
redemption at the end of each time period:
1 YEAR $ 57 $ 60/$20 3 $ 30/$20 2 $ 0
3 YEARS $ 83 $ 93/$63 3 $ 63 $ 32
5 YEARS $111 $128/$108 2 $108 $ 55
10 YEARS $189 $196** $233 $122
</TABLE>
* "A contingent deferred sales charge may be imposed on the redemption of
Class A shares that are purchased without an initial sales charge. See "How
to Buy Fund Shares -- Class A shares."
** Assumes conversion of Class B shares to Class A shares approximately six
years after the date of purchase and, therefore, reflects Class A expenses
for years seven through ten.
(1) See "Distribution Plans (Class A Plan and Class B and C Plan)" for a
description of the Fund's Distribution Plans and Service Plan for Class A,
B and C shares.
(2) Assuming no redemption of shares.
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. Other Expenses for Class B and C shares are based on amounts for Class
A for the Fund's last fiscal year. 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 below) may charge their clients direct fees for effecting
transactions in Fund shares; such fees are not reflected in the foregoing
table. See "Management of the Fund," "How to Buy Fund Shares" and
"Distribution Plans (Class A Plan and Class B and C Plan)."
The Company understands that banks, securities dealers and brokers
("Selected 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. (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 clients for various services provided in connection with their
accounts.
# Page 4
FINANCIAL HIGHLIGHTS
The tables below are based upon a single Class A, Class B,
Class C and Class R share outstanding throughout the 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, 1995,
which is incorporated by reference in the SAI. The financial statements
included in the Fund's Annual Report for the year or period ended October
31, 1995, have been audited by , independent
auditors, whose report appears in the Fund's Annual Report. Further
information about, and management's discussion of, the Fund's performance
is contained in the Fund's Annual Report, which may be obtained without
charge by writing to the address or calling the number set forth on the
cover page of this Prospectus.
<TABLE>
<CAPTION>
PREMIER BALANCED FUND
FOR A CLASS A SHARE OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.
YEAR ENDED PERIOD ENDED
10/31/95 10/31/94*#
----------- ------------
<S> <C> <C>
Net asset value, beginning of period $10.08 $ 9.73
----------- ------------
Income from investment operations:
Net investment income 0.28 0.11
Net realized and unrealized gain on investments 1.82 0.34
----------- ------------
Total from investment operations 2.10 0.45
----------- ------------
Less distributions:
Distributions from net investment income (0.27) (0.10)
----------- ------------
Net asset value, end of period $11.91 $10.08
============ -============
Total return 21.17% 4.68%
----------- ------------
Ratios to average net assets/supplemental data:
Net assets, end of period (000's) $1,650 $1,798
Ratio of operating expenses to average net assets 1.25% 1.29%**
Ratio of net investment income to average net assets 2.65% 1.98%**
Portfolio turnover rate 53.20% 83%
</TABLE>
*The Fund commenced selling Investor shares on April 14, 1994. On October
17, 1994, the Investor shares were redesignated as Class A shares.
** Annualized.
Total return represents aggregate total return for the period indicated.
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.
#Prior to October 17, 1994, Mellon Bank served as the Fund's investment
manager. Effective October 17, 1994, Dreyfus began serving as the Fund's
investment manager.
# Page 5
<TABLE>
<CAPTION>
PREMIER BALANCED FUND
FOR A CLASS B SHARE OUTSTANDING THROUGHOUT THE PERIOD.
PERIOD ENDED
10/31/95*
-----------
<S> <C>
Net asset value, beginning of period $ 9.76
-------
Income from investment operations:
Net investment income 0.14
Net realized and unrealized gain on investments 2.11
-------
Total from investment operations 2.25
-------
Less distributions:
Distributions from net investment income (0.12)
-------
Net asset value, end of period $11.89
=======
Total return 23.19%
-------
Ratios to average net assets/supplemental data:
Net assets, end of period (000's) $3,118
Ratio of operating expenses to average net assets 2.00%**
Ratio of net investment income to average net assets 2.50%
Portfolio turnover rate 53.20%
*The Fund commenced operations on September 15, 1993. The Fund commenced
selling Class B shares on December 20, 1994.
** Annualized.
</TABLE>
# Page 6
<TABLE>
<CAPTION>
PREMIER BALANCED FUND
FOR A CLASS C SHARE OUTSTANDING THROUGHOUT THE PERIOD.
PERIOD ENDED
10/31/95*
-----------
<S> <C>
Net asset value, beginning of period $9.76
-------
Income from investment operations:
Net investment income 0.11
Net realized and unrealized gain on investments 2.15
-------
Total from investment operations 2.26
-------
Less distributions:
Distributions from net investment income (0.12)
-------
Net asset value, end of period $11.90
========
Total return 23.29%
-------
Ratios to average net assets/supplemental data:
Net assets, end of period (000's) $6
Ratio of operating expenses to average net assets 2.00%
Ratio of net investment income to average net assets 2.50%**
Portfolio turnover rate 53.20%
*The Fund commenced operations on September 15, 1993. The Fund commenced
selling Class C shares on December 20, 1994. On October 17, 1994, the
Investor shares were redesignated as Class A shares.
** Annualized.
</TABLE>
# Page 7
<TABLE>
<CAPTION>
PREMIER BALANCED FUND
FOR A CLASS R SHARE OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.
YEAR YEAR PERIOD
ENDED ENDED ENDED
10/31/95 10/31/94## 10/31/93*
Net asset value, beginning or period $10.09 $10.18 $10.00
-------- -------- --------
<S> <C> <C> <C>
Income from investment operations:
Net investment income 0.31 0.20** 0.02
Net realized and unrealized gain/(loss) on investments 1.81 (0.13) 0.16
-------- -------- --------
Total from investment operations 2.12 0.07 0.18
-------- -------- --------
Less distributions:
Distributions from net investment income (0.29) (0.16) ._
=========== ======== ========
Net asset value, end of period $11.92 $10.09 $10.18
Total return 21.46% .68% 1.80%
-------- -------- --------
Ratios to average net assets/supplemental data:
Net Assets, end of period (000's) $97,881 $75,720 $28,904
Ratio of operating expenses to average net assets 1.00% 1.04%*** 1.15%#
Ratio of net investment income to average net assets 2.89% 2.23% 1.96%
Portfolio turnover rate 53.20% 83% -_
* The Fund commenced operations on September 15, 1993.
On April 14, 1994, the Fund commenced selling Investor shares. Those
shares outstanding prior to April 14, 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 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 period indicated.
Annualized.
# For the period September 15, 1993 (commencement of operations) to
October 31, 1993, the adviser reimbursed expenses of the Fund amounting
to $0.0109.
##
Prior to October 17, 1994, Mellon Bank served as the Fund's investment
manager. Effective October 17, 1994, Dreyfus began serving as the
Fund's investment manager.
</TABLE>
# Page 8
ALTERNATIVE PURCHASE METHODS
The Fund offers you four methods of purchasing Fund shares; you
may choose the Class of shares that best suits your needs, given the
amount of your purchase, the length of time you expect to hold your
shares and any other relevant circumstances. Each Fund share represents
an identical pro rata interest in the Fund's investment portfolio.
Class A shares are sold at net asset value per share plus a
maximum initial sales charge of 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 shares."
Class B shares are sold at net asset value per share with no
initial sales charge at the time of purchase; as a result, the entire
purchase price is immediately invested in the Fund. Class B shares are
subject to a maximum 4% contingent deferred sales charge ("CDSC"), which
is assessed only if you redeem Class B shares within 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 (or, in the case of Class B shares of the Fund
acquired through exchange of Class B shares of another fund advised by
Dreyfus, the date of purchase of the original Class B shares of the fund
exchanged), Class B shares will automatically convert to Class A shares,
based on the relative net asset values for shares of each such Class, and
will no longer be subject to the distribution fee. (Such conversion is
subject to suspension by the Board of Directors if adverse tax
consequences might result.) Class B shares that have been acquired
through the reinvestment of dividends and other distributions will be
converted on a pro rata basis together with other Class B shares, in the
proportion that a shareholder's Class B shares converting to Class A
shares bears to the total Class B shares not acquired through the
reinvestment of dividends and other distributions.
Class C shares are sold at net asset value per share with no
initial sales charge at the time of purchase; as a result, the entire
purchase price is immediately invested in the Fund. Class C shares are
subject to a 1% CDSC, which is assessed only if you redeem Class C shares
within one year of 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. In addition, Class C 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 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.
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 net
asset value per share 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.
Class A, Class B and Class C shares are sold primarily to retail
investors by Agents that have entered into Agreements with the
Distributor.
The decision as to which Class of shares is most beneficial
to you depends on the amount and the intended length of your investment.
You should consider whether, during the anticipated life of your
investment in the Fund, the accumulated distribution fee and CDSC, if
any, on Class B or Class C shares would be less than the initial sales
charge on Class A shares purchased at the same time, and to what extent,
if any, such differential would be offset by the return of Class A
shares.
# Page 9
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, you should consider the effect of the CDSC period and any
conversion rights of the Classes in the context of your own investment
time frame. For example, while Class C shares have a shorter CDSC period
than Class B shares, Class C shares do not have a conversion feature and,
therefore, are subject to an ongoing distribution fee. Thus, Class 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.
DESCRIPTION OF THE FUND
INVESTMENT OBJECTIVE
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 investing in common stocks and bonds in proportions
consistent with their expected returns and risks as determined by
Dreyfus. There can be no assurance that the Fund will meet its stated
objective.
MANAGEMENT POLICIES
To outperform the hybrid index, Dreyfus first employs a
disciplined valuation methodology to the return and risks of common
stocks and bonds. Dreyfus considers various factors in determining the
relative attractiveness of investing in common stocks and bonds. The
factors which are evaluated include an interest-rate adjusted market
price/earnings ratio, interest rate spreads reflecting the term structure
of interest rates, and the level and volatility of the return premium for
common stocks. The final decision as to which asset class is relatively
more attractive is determined by a formal decision rule process based on
extensive research by Dreyfus.
After developing the expected return and risks of each asset
class, Dreyfus utilizes computer models designed to identify imbalances
in the pricing of common stocks and bonds. Dreyfus 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. However, the Fund is permitted to invest up to 75%, and as little
as 40%, of its total assets in common stocks and up to 60%, and as little
as 25%, of its total assets in bonds, as deemed advisable by Dreyfus.
Allocation 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 characteristics 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 volatility), 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 together 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 selection is the foundation upon which
Dreyfus seeks to implement the investment objective and policies of the
equity portion of the Fund. Dreyfus collects information from diverse
sources from which Dreyfus 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 measures of changes in earnings and relative
value based on present and historical price-to-earnings ratios, as well as
dividend discount cal
# Page 10
culations. Once the ranking of common stocks is complete,
Dreyfus' experienced 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. Investment selections are based on fundamental economic, market,
and other factors leading to valuation by sector, maturity, and quality.
The Fund invests in investment grade bonds rated at least Baa by Moody's
Investors Service, Inc. ("Moody's") or BBB by Standard & Poor's , or if
unrated, determined to be of comparable quality by Dreyfus. 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 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. 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.
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 instrumentalities; (3) mortgage-related securities
backed by the U.S. Government, its agencies and instrumentalities, or by
private organizations; (4) corporate obligations rated at least Baa by
Moody's or BBB by Standard & Poor's, or if unrated, determined to be of
comparable quality by Dreyfus; (5) 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"); (6) foreign securities evidenced by American Depository
Receipts ("ADRs"); (7) Eurodollar bonds and notes; (8) when-issued
transactions; (9) repurchase agreements; and (10) commercial paper.
The Fund may utilize securities lending and reverse
repurchase agreements. It may also enter into option and futures
contracts subject to certain limitations.
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 approximate 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,
represent approximately 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 security 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 out
# Page 11
standing 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 Indices. 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 Corporate Bond Index. The Yankee Bond Index includes
U.S. dollar denominated, SEC registered, public, non-convertible debt
issued or guaranteed by foreign sovereign governments, foreign
municipalities, foreign governmental agencies, or international agencies.
The Government Bond Index is a combination 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.
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.
WHEN-ISSUED 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 at least equal at all times 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 Company's Board of Directors
determines it to be in the best interest of the Fund and its
shareholders. In making that determination, the Board of 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 Board of Directors will not approve
an
# Page 12
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 purchase and sell various financial instruments ("Derivative
Instruments"), such as financial futures contracts (including interest
rate and index futures contracts) and options (including options on
securities, indices and futures contracts). The index Derivative
Instruments the Fund may use may be based on indices of U.S. or foreign
equity or debt securities. These Derivative Instruments may be used, for
example, to preserve a return or spread, to lock in unrealized market
value gains or losses, to facilitate or substitute for the sale or
purchase of securities, or to alter the exposure of a particular
investment or portion of the Fund's portfolio to fluctuations in interest
rates.
The Fund's ability to use these instruments may be limited by
market conditions, regulatory limits and tax considerations. The Fund might
not use and of these strategies and there can be no assurance that any
strategy that is used will succeed. See the SAI for more information
regarding these instruments and the risks relating thereto.
The Fund may not purchase put or call options that are traded
on a national stock exchange in an amount exceeding 5% of its net assets.
RISKS OF DERIVATIVE INSTRUMENTS. The use of Derivative
Instruments involves special risks, including: (1) possible imperfect or
no correlation between price movements of the portfolio investments (held
or intended to be purchased) involved in the transaction and price
movements of the Derivative Instruments involved in the transaction; (2)
possible lack of a liquid secondary market for any particular Derivative
Instrument at a particular time; (3) the need for additional portfolio
management skills and techniques; (4) losses due to unanticipated market
price movements; (5) the fact that, while such strategies can reduce the
risk of loss, they can also reduce the opportunity for gain, or even
result in losses, by offsetting favorable price movements in portfolio
investments; (6) incorrect forecasts by Dreyfus concerning interest or
currency exchange rates or direction of price fluctuations of the
investment involved in the transaction, which may result in the strategy
being ineffective; (7) loss of premiums paid by the Fund on options it
purchases; and (8) the possible inability of the Fund to purchase or sell
a portfolio security at a time when it would otherwise be favorable for
it to do so, or the need to sell a portfolio security at a
disadvantageous time, due to the need for the Fund to maintain "cover" or
to segregate securities in connection with such transactions and the
possible inability of the Fund to close out or liquidate its positions.
Dreyfus may use Derivative Instruments for hedging purposes
(to adjust the risk characteristics of the Fund's portfolio) and may use
these instruments to adjust the return characteristics of the Fund's
portfolio of investments. This can increase investment risk. If Dreyfus
judges market conditions incorrectly or employs a strategy that does not
correlate well with the Fund's investments, these techniques could result
in a loss, regardless of whether the intent was to reduce risk or
increase return. These techniques may increase the volatility of the Fund
and may involve a small investment of cash relative to the magnitude of
the risk assumed. In addition, these techniques could result in a loss if
the counterparty to the transaction does not perform as promised or if
there is not a liquid secondary market to close out a position that the
Fund has entered into.
Options and futures transactions may increase portfolio
turnover rates, which results in correspondingly greater commission
expenses and transaction costs, and may result in certain tax
consequences.
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.
# Page 13
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
at the time of purchase at least A-1 by Standard & Poor's, Prime-1 by
Moody's, F-1 by Fitch, 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,
adverse 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.
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 of Directors 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.
# Page 14
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 investment 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 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 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.
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.
EURODOLLAR BONDS AND NOTES. The Fund may invest in Eurodollar
bonds and notes. Eurodollar bonds and notes are obligations that 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.
FIXED-INCOME SECURITIES. The Fund may invest in fixed-income
securities. 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 Fund's yield may tend to be lower than prevailing interest
rates. Also, in periods of falling interest rates, the inflow of net new
money to the Fund from the continuous sale of its shares will likely be
invested in portfolio instruments producing lower yields 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 of a 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.
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
# Page 15
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 of 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.
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 deemed "pass-through" securities
because they provide investors with monthly payments of principal and
interest that, 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 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. 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 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.
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 ("U.S. Government Securities"). In addition to direct obligations
of the U.S. Treasury, U.S. Government Securities 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 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 between their issuers and holders. The agreements permit the
holders to increase (subject to an agreed maximum) and the holders and
issuers to decrease
# Page 16
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 both stocks and other 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 for stocks and/or other securities 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, Fund
transactions in stocks and other securities 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.
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 November 30, 1995, Dreyfus managed or
administered approximately $ 83 billion in assets for more than 1.7
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 one or more third parties to provide,
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 fixed income portion of the Fund is managed by Laurie
Carroll. Ms. Carroll has managed the fixed income portion of the Fund
since September 15, 1993. Ms. Carroll is a Senior Vice President and
portfolio manager at Mellon Bank. Ms. Carroll has been employed by Mellon
Bank since 1986. The equity portion of the Fund is managed by Ron Gala.
Mr. Gala
# Page 17
has managed the equity portion of the Fund since September
15, 1993. 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 Associates' asset allocation. Mr. Gala
has been employed by Mellon Bank in various capacities since 1982. Ms.
Carroll and Mr. Gala have been employed by Dreyfus as portfolio managers
since October 17, 1994.
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 more than $ 209 billion in assets as of
September 30, 1995, including $ 80 billion in mutual fund assets. As of
September 30, 1995, Mellon, through various subsidiaries, provided
non-investment services, such as custodial or administration services,
for more than $717 billion in assets, including approximately $55 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 1.00 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, Rule 12b-1 fees
(if applicable) and extraordinary 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. For the
fiscal year ended October 31, 1995, the Fund paid Dreyfus 1.00% 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, 1995, for Class A and Class R shares,
total operating expenses (excluding Rule 12b-1 fees) of the Fund were
1.00% of the average daily net assets for each of the Fund's Class A and
Class R shares. For the period from December 19, 1994 through October 31,
1995 for Class B and Class C shares, total operating expenses (excluding
Rule 12b-1 fees) of the Fund were 1.00% (annualized) of the average daily
net assets for each of the Fund's Class B and Class C shares.
In addition, Class A, B and C shares are subject to certain
Rule 12b-1 distribution and shareholder servicing fees. See "Distribution
Plans (Class A Plan and Class B and C Plan)."
Dreyfus may pay the Fund's distributor for shareholder
services from Dreyfus' 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 subsidiary
of FDI Distribution Services, Inc., a provider of mutual fund
administration services, which in turn is a wholly-owned subsidiary of
FDI Holdings, Inc., the
# Page 18
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, PA
15258 is the Fund's custodian. The Fund's transfer and dividend
disbursing agent is Dreyfus Transfer, Inc. (the "Transfer Agent"), a
wholly-owned subsidiary of Dreyfus, 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-Administration Agreement
with Dreyfus, provides various administrative and corporate secretarial
services to the Fund.
HOW TO BUY FUND SHARES
GENERAL -- Class A shares, Class B shares and Class C shares
may be purchased only by clients of Agents, except that full-time or
part-time employees or directors of Dreyfus or any of its affiliates or
subsidiaries, 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 may purchase Class A shares directly through the
Distributor. Subsequent purchases may be sent directly to the Transfer
Agent or your Agent.
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. 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.
When purchasing Fund shares, you must specify which Class is
being purchased. Stock certificates are issued only upon your written
request. No certificates are issued for fractional shares. The Fund
reserves the right to reject any purchase order.
Agents may receive different levels of compensation for
selling different Classes of shares. Management understands that some
Agents may impose certain conditions on their clients which are different
from those described in this Prospectus, and, to the extent permitted by
applicable regulatory authority, may charge their clients direct fees
which would be in addition to any amounts which might be received under
the Distribution and Service Plans. Each Agent has agreed to transmit to
its clients a schedule of such fees. You should consult your Agent in
this regard.
The minimum initial investment is $1,000. 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. 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
certain qualified or non-qualified employee benefit plans or other
programs, including pension, profit-sharing and other deferred
compensation plans, whether established by corporations, partnerships,
non-profit entities or state and local governments ("Retirement Plans").
These limitations apply with respect to participants at the plan level
and, therefore, do not directly affect the amount that may be
# Page 19
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 through the
TELETRANSFER Privilege described below. Checks should be made payable to
"Premier Balanced Fund." Payments to open new accounts which are mailed
should be sent to Premier Balanced Fund, 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 Premier Balanced Fund, P.O. Box 105,
Newark, New Jersey 07101-0105. Neither initial nor subsequent investments
should be made by third party check.
Wire payments may be made if your bank account is in a
commercial bank that is a member of the Federal Reserve System or any
other bank having a correspondent bank in New York City. Immediately
available funds may be transmitted by wire to Boston Safe Deposit and
Trust Company, together with the applicable Class' DDA # as shown below,
for purchase of Fund shares in your name:
DDA# 044318 Premier Balanced Fund/Class A shares;
DDA# 044326 Premier Balanced Fund/Class B shares;
DDA# 044342 Premier Balanced Fund/Class C shares;
DDA# 044350 Premier Balanced 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 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 Boston Safe Deposit and Trust Company with
instructions to credit your Fund account. The instructions must specify
your Fund account registration and Fund account number PRECEDED BY THE
DIGITS "4130" for Class A shares, "4140" for Class B shares, "4150" for
Class C shares and "4160" for Class R shares.
The Distributor may pay dealers a fee of up to 0.5% 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.
# Page 20
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 PER SHARE ("NAV") -- An investment
portfolio's NAV refers to the worth of one share. The NAV for shares of
each Class of the Fund 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 number of shares of that Class outstanding. Shares
of each Class of the Fund are offered on a continuous basis. 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 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.
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 such close of business 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
such close of business are effective on, and receive the share price
determined on, the next business day.
Orders for the purchase of Fund shares received by dealers by
the close of trading on the floor of the NYSE on any business day and
transmitted to the Distributor or its designee by the close of its
business day (normally 5:15 p.m., New York time) will be based on the
public offering price per share determined as of the close of trading on
the floor of the NYSE on that day. Otherwise, the orders will be based on
the next determined public offering price. It is the dealer's
responsibility to transmit orders so that they will be received by the
Distributor or its designee before the close of its business day.
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
-------------------------------------
As a % of As a % of Dealers' Reallowance
Offering Price Net Asset Value as a % of
Amount of Transaction Per Share Per Share Offering Price
---------------------- ------------- ------------- ----------------------
<S> <C> <C> <C>
Less than $50,000......... ..... 4.50 ..... 4.70 ..... 4.25
$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
# Page 21
in the sections of the Fund's Prospectus entitled "How to
Redeem Fund Shares _ Contingent Deferred Sales Charge _ Class B" (other
than the amount of the CDSC and its time periods) and "How to Redeem Fund
Shares_Waiver of CDSC" are applicable to the Class A shares subject to a
CDSC. Letter of Intent and Right of Accumulation apply to such purchases
of Class A shares.
Full-time employees of NASD member firms and full-time
employees of other financial institutions which have entered into an
agreement with the Distributor pertaining to the sale of Fund shares (or
which otherwise have a brokerage related or clearing arrangement with an
NASD member firm or financial institution with respect to the sale of
such shares) may purchase Class A shares for themselves directly or
pursuant to an employee benefit plan or other program, or for their
spouses or minor children, at net asset value, provided that they have
furnished the Distributor with such information as it may request from
time to time in order to verify eligibility for this privilege. This
privilege also applies to full-time employees of financial institutions
affiliated with NASD member firms whose full-time employees are eligible
to purchase Class A shares at NAV. In addition, Class A shares are
offered at NAV to 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.
Class A shares will be offered at NAV without a sales load to
employees participating in Eligible Benefit Plans. Class A shares also
may be purchased (including by exchange) at NAV without a sales load for
Dreyfus-sponsored IRA "Rollover Accounts" with the distribution proceeds
from a qualified retirement plan or a Dreyfus-sponsored 403(b)(7) plan,
provided that, at the time of such distribution, such qualified
retirement plan or Dreyfus-sponsored 403(b)(7) plan (a) met the
requirements of an Eligible Benefit Plan and all or a portion of such
plan's assets were invested in funds in the Dreyfus Family of Funds or
certain other products made available by the Distributor to such plans,
or (b) invested all of its assets in certain funds in the Premier Family
of Funds or the Dreyfus Family of Funds or certain other products made
available by the Distributor to such plans.
Holders of Class A accounts of the Fund as of December 19,
1994 may continue to purchase Class A shares of the Fund at NAV. However,
investments by such holders in OTHER funds advised by Dreyfus will be
subject to any applicable front-end sales load.
Class A shares may be purchased at NAV through certain
broker-dealers and other financial institutions which have entered into
an agreement with the Distributor, which includes a requirement that such
shares be sold for the benefit of clients participating in a "wrap
account" or a similar program under which such clients pay a fee to such
broker-dealer or other financial institution.
Class A shares also may be purchased at NAV, subject to
appropriate documentation, through a broker-dealer or other financial
institution with the proceeds from the redemption of shares of a
registered open-end management investment company not managed by Dreyfus
or its affiliates. The purchase of Class A shares of the Fund must be
made within 60 days of such redemption and the shareholder must have
either (i) paid an initial sales charge or a CDSC or (ii) been obligated
to pay at any time during the holding period, but did not actually pay on
redemption, a deferred sales charge with respect to such redeemed shares.
Class A shares also may be purchased at NAV, subject to
appropriate documentation, by
(i) qualified separate accounts maintained by an insurance
company pursuant to the laws of any State or territory of the United
States, (ii) a State, county or city or instrumentality thereof, (iii) a
charitable organization (as defined in Section 501(c)(3) of the Code)
investing $50,000 or more in Fund shares, and (iv) a charitable remainder
trust (as defined in Section 501(c)(3) of the Code).
The dealer reallowance may be changed from time to time but
will remain the same for all
# Page 22
dealers. The Distributor, at its expense, may provide
additional promotional incentives to dealers that sell shares of funds
advised by Dreyfus 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 the
Distributor than they receive for selling most other funds.
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." The Distributor
compensates certain Agents for selling Class B shares at the time of
purchase from the Distributor's own assets. The proceeds of the CDSC and
the distribution fee, in part, are used to defray these expenses.
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 is imposed, however, on redemptions of Class C shares
made within the first year of purchase. See "Class B shares" above and
"How to Redeem Fund Shares."
CLASS R SHARES--The public offering price for Class R shares
is the NAV of that Class.
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 Dreyfus
which are sold with a sales load and shares acquired by a previous
exchange of such shares (hereinafter referred to as "Eligible Funds"), by
you and any related "purchaser" as defined in the 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 the Distributor if orders are made by wire,
or the Transfer Agent if orders are made by mail. The reduced sales load
is subject to confirmation of your holdings through a check of
appropriate records.
TELETRANSFER PRIVILEGE -- 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 a filed 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 TELETRANSFER Privilege, you may
request a TELETRANSFER purchase of Fund shares by telephoning
1-800-645-6561 or, if calling from overseas, 516-794-5452.
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
# Page 23
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, 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 1-800-645-6561 or, if calling from overseas,
516-794-5452. 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,
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 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 other
distributions paid with respect to the foregoing categories of shares. To
qualify, at the time of the exchange 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.
AUTO-EXCHANGE PRIVILEGE
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 other funds in the Premier
Family of Funds or certain other funds in the Dreyfus Family of
# Page 24
Funds of which you are currently an investor. WITH RESPECT TO
CLASS R SHARES HELD BY RETIREMENT PLANS, EXCHANGES PURSUANT TO THE
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 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. See "Shareholder
Services" in the SAI. 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 Premier Balanced Fund, P.O. Box 6587, Providence, Rhode
Island 02940-6587. 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 Premier Family of Funds or the Dreyfus Family of Funds
eligible to participate in this privilege, or to obtain an Auto-Exchange
Authorization Form, please call toll free 1-800-645-6561.
AUTOMATIC ASSET BUILDER
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 an 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 Premier Balanced Fund, P.O.
Box 6587, Providence, Rhode Island 02940-6587, 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.
DIVIDEND OPTIONS
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 another fund in the Premier Family of Funds
or certain of 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 a sales load. If you are investing in a fund
that charges a sales load, you may qualify for share prices which do not
include the sales load or which reflect a reduced sales load. If you are
investing in a fund or class that charges a CDSC, the shares purchased
will be subject on redemption to the CDSC, if any, applicable to the
purchased shares. See "Shareholder Services" in the SAI. 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.
# Page 25
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 Dividend Options Form, please call toll free 1-800-645-6561.
You may cancel these Privileges by mailing written notification to
Premier Balanced Fund, P.O. Box 6587, Providence, Rhode Island
02940-6587. To select a new fund after cancellation, you must submit a
new Dividend Options Form. Enrollment in or cancellation of these
Privileges is effective three business days following receipt. These
Privileges are available only for existing accounts and may not be used
to open new accounts. Minimum subsequent investments do not apply for
Dividend Sweep. The Fund may modify or terminate these Privileges at any
time or charge a service fee. No such fee currently is contemplated.
Shares held under Keogh Plans, IRAs or other retirement plans are not
eligible for Dividend Sweep.
GOVERNMENT DIRECT DEPOSIT PRIVILEGE
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 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.
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 from the Automatic Withdrawal Plan. An
application for the Automatic Withdrawal Plan can be obtained from the
Distributor 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.
Shares withdrawn pursuant to the Automatic Withdrawal Plan
will be subject to any applicable CDSC. Purchases of additional Class A
shares where the sales load is imposed concurrently with withdrawals of
Class A shares generally are undesirable.
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.
LETTER OF INTENT--CLASS A SHARES
By signing a Letter of Intent form, available from the
Distributor, 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
mini
# Page 26
mum 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.
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 (other than any applicable CDSC)
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. HOWEVE
R, IF YOU HAVE PURCHASED FUND SHARES BY CHECK, BY THE TELETRANSFER PRIVILEGE
OR THROUGH 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,
TELETRANSFER PURCHASE OR AUTOMATIC ASSET BUILDER ORDER, WHICH MAY TAKE UP
TO EIGHT BUSINESS DAYS OR MORE. IN ADDITION, THE FUND WILL REJECT
REQUESTS TO REDEEM SHARES BY WIRE OR TELEPHONE OR PURSUANT TO THE
TELETRANSFER PRIVILEGE FOR A PERIOD OF EIGHT BUSINESS DAYS AFTER RECEIPT
BY THE TRANSFER AGENT OF THE PURCHASE CHECK, THE TELETRANSFER PURCHASE OR
THE 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.
# Page 27
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.
CONTINGENT DEFERRED SALES CHARGE--CLASS B SHARES--A CDSC
payable to the Distributor is imposed on any redemption of Class B shares
which reduces the current net asset value of your Class B shares to an
amount which is lower than the dollar amount of all payments by you for
the purchase of Class B shares of the Fund held by you at the time of
redemption. No CDSC will be imposed to the extent that the net asset
value of the Class B shares redeemed does not exceed (i) the current net
asset value of Class B shares acquired through reinvestment of dividends
or other distributions, plus (ii) increases in the net asset value of
your Class B shares above the dollar amount of all your payments for the
purchase of Class B shares held by you at the time of redemption.
If the aggregate value of Class B shares redeemed has
declined below their original cost as a result of the Fund's performance,
a CDSC may be applied to the then-current net asset value rather than the
purchase price.
In circumstances where the CDSC is imposed, the amount of the
charge will depend on the number of years 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>
<S> <C>
Year Since CDSC as a % of Amount
Purchase Payment Invested or Redemption
Was Made Proceeds
----------------- ------------------------
First.................................................... 4.00
Second................................................... 4.00
Third.................................................... 3.00
Fourth................................................... 3.00
Fifth.................................................... 2.00
Sixth.................................................... 1.00
</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 other distributions; then of amounts
representing the increase in net asset value of Class B shares above the
total amount of payments for the purchase of Class B shares made during
the preceding six years; then of amounts representing the cost of shares
purchased six years prior to the redemption; and finally, of amounts
representing the cost of shares held for the longest period of time
within the applicable six-year period.
For example, assume an investor purchased 100 shares at $10
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 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 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.
For purposes of determining the applicable CDSC payable with
respect to redemption of Class B shares of the Fund where such shares
were acquired through exchange of Class B shares of another fund advised
by Dreyfus, the year since purchase payment was made is based on the date
of purchase of the original Class B shares of the fund exchanged.
# Page 28
CONTINGENT DEFERRED SALES CHARGE--CLASS C SHARES--A CDSC of
1% payable to the Distributor is imposed on any redemption of Class C
shares within one year of the date of purchase. The basis for calculating
the payment of any such CDSC will be the method used in calculating the
CDSC for Class B shares. See "Contingent Deferred Sales Charge_Class B
shares" above.
WAIVER OF CDSC--The CDSC applicable to Class B and Class C
shares (and to certain Class A 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 Eligible Benefit Plans, (c) redemptions as a
result of a combination of any investment company with the Fund by
merger, acquisition of assets or otherwise, (d) a distribution following
retirement under a tax-deferred retirement plan or upon attaining age 701\2
in the case of an IRA or Keogh plan or custodial account pursuant to
Section 403(b) of the Code, and (e) redemptions by such shareholders as
the SEC or its staff may permit. If the Company's Board of Directors
determines 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 you must notify the Transfer Agent or your Agent must notify
the Distributor. Any such qualification is subject to confirmation of
your entitlement.
PROCEDURES--You may redeem Fund shares by using the regular
redemption procedure through the Transfer Agent, or, through the
TELETRANSFER Privilege or, if you are a client of a Selected Dealer,
through the Selected Dealer. If you have given your Agent authority to
instruct the Transfer Agent to redeem shares and to credit the proceeds of
such redemptions to a designated account at your Agent, you may redeem
shares only in this manner and in accordance with the regular redemption
procedure described below. If you wish to use the other redemption
methods described below, you must arrange with your Agent for delivery of
the required application(s) to the Transfer Agent. 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 TELETRANSFER 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 TELETRANSFER 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 Premier Balanced
Fund, P.O. Box 6587, Providence, Rhode Island 02940-6587. 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
adopt
# Page 29
ed 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
1-800-554-4611.
Redemption proceeds of at least $1,000 will be wired to any
member bank of the Federal Reserve System in accordance with a written
signature-guaranteed request.
TELETRANSFER PRIVILEGE. You may 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 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 TELETRANSFER Privilege, you may
request a TELETRANSFER redemption of Fund shares by telephoning
1-800-645-6561 or, if calling from overseas, 516-794-5452. Shares held
under Keogh Plans, IRAs or other retirement plans, and shares issued in
certificate form, are not eligible for this Privilege.
REDEMPTION THROUGH A SELECTED DEALER. If you are a customer
of a Selected Dealer, you may make redemption requests to your Selected
Dealer. If the Selected Dealer transmits the redemption request so that
it is received by the Transfer Agent prior to the close of trading on the
floor of the NYSE (currently 4:00 p.m., New York time), the redemption
request will be effective on that day. If a redemption request is
received by the Transfer Agent after the close of trading on the floor of
the NYSE, the redemption request will be effective on the next business
day. It is the responsibility of the Selected Dealer to transmit a
request so that it is received in a timely manner. The proceeds of the
redemption are credited to your account with the Selected Dealer. See
"How to Buy Fund Shares" for a discussion of additional conditions or
fees that may be imposed upon redemption.
In addition, the Distributor will accept orders from Selected
Dealers with which it has sales agreements for the repurchase of shares
held by shareholders. Repurchase orders received by dealers by the close
of trading on the floor of the NYSE on any business day and transmitted
to the Distributor or its designee prior to the close of its business day
(normally 5:15 p.m., New York time) are effected at the price determined
as of the close of trading on the floor of the NYSE on that day.
Otherwise, the shares will be redeemed at the next determined NAV. It is
the responsibility of the Selected Dealer to transmit orders on a timely
basis. The Selected Dealer may charge the shareholder a fee for executing
the order. This repurchase arrangement is discretionary and may be
withdrawn at any time.
REINVESTMENT PRIVILEGE--CLASS A SHARES. Upon written request,
you may reinvest up to the number of Class A shares you have redeemed,
within 30 days of redemption, at the then-prevailing net asset value
without a sales load, or reinstate your account for the purpose of
exercising Fund Exchanges. The Reinvestment Privilege may be exercised
only once.
# Page 30
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 different compensation with respect to one
class of shares over another.
DISTRIBUTION PLAN--CLASS A SHARES--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 Dreyfus, for
shareholder servicing activities and the Distributor for shareholder
servicing activities and expenses primarily intended to result in the
sale of Class A 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 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 Class A 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.
DISTRIBUTION AND SERVICE PLANS--CLASS B AND C SHARES-- Under
a Distribution Plan adopted pursuant to Rule 12b-1, the Fund pays the
Distributor 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 Service Plan adopted pursuant to Rule
12b-1, the Fund pays Dreyfus Service Corporation or the Distributor 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 maintenance 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 their clients in connection with the
investment of their assets in Class B and C shares. The Distributor may
pay one or more Agents in respect of distribution and other services for
these Classes of shares. The Distributor 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 and Service Plans are payable without regard to actual
expenses incurred.
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
The Fund declares and pays dividends from its net investment
income, if any, four times yearly 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, to receive dividends in cash and
reinvest other distributions in additional Fund shares, or to reinvest
both dividends and other distributions in additional Fund shares;
dividends and other distributions paid to qualified Retirement Plans are
reinvested automatically in additional Fund shares at net asset value.
All expenses are accrued daily and deducted before declaration of
dividends to investors. Dividends paid by each Class
# Page 31
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.
Class B and C shares will receive lower per share dividends than Class A
shares which will receive lower per share dividends than Class R shares,
because of the higher expenses borne by the relevant Class. See "Expense
Summary."
It is expected that the Fund will qualify for treatment 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 (collectively, "Dividend Distributions"),
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
capital gain (the excess of net long-term capital gain over net
short-term capital loss) 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.
Dividend Distributions paid by the Fund to a non-resident
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 capital gain paid
by the Fund to a non-resident foreign investor, as well as the proceeds
of any redemptions from a non-resident 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 capital gain, if any, paid during
the year.
The Code provides for the "carryover" of some or all of the
sales load imposed on Class A shares if (1) an investor redeems those
shares or exchanges those shares for shares of another fund advised or
administered by Dreyfus within 91 days of purchase and (2) in the case of
a redemption, acquires other Fund Class A shares through exercise of the
Reinvestment Privilege or, in the case of an exchange, such other fund
reduces or eliminates its otherwise applicable sales load for the purpose
of the exchange. In this case, the amount of the sales load charged the
investor for the original Class A shares, up to the amount of the
reduction of the sales load pursuant to the Reinvestment Privilege or on
the exchange, as the case may be, is not included in the basis of such
shares for purposes of computing gain or loss on the redemption or the
exchange, and instead is added to the basis of the fund shares received
pursuant to the Reinvestment Privilege or the exchange.
Dividends and other distributions 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 distributions 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,
# Page 32
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. If a distributee of an "eligible rollover distribution" from a
qualified Retirement Plan does not elect to have the eligible rollover
distribution paid directly from the plan to an eligible retirement plan
in a "direct rollover," the eligible rollover distribution is subject to
a 20% income tax withholding.
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 capital gain 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 that
the TIN furnished in connection with opening an account is correct and
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 distribution and shareholder servicing fees. As a
result, at any given time, the performance of Class B and C should be
expected to be lower than that of Class A and the performance of Class A,
B and C 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
net asset value (or maximum offering price in the case of Class A 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
# Page 33
the application of the percentage rate of total return. Total
return also may be calculated by using the net asset value per share at
the beginning of the period instead of the maximum offering price per
share at the beginning of the period for Class A shares or without giving
effect to any applicable CDSC at the end of the period for Class B or C
shares. Calculations based on the net asset value per share do not
reflect the deduction of the sales load on the Fund's Class A shares,
which, if reflected, would reduce the performance quoted.
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 share of such Class 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 & Poor's Composite Index of 500 Stocks,
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,
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 SEC under the 1940 Act, as an open-end 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 four
classes_Class A, Class B, Class C 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 Class are entitled to vote, each
as a separate class. Only holders of Class A, B or C shares, as the case
may be, will be entitled to vote on matters submitted to shareholders
pertaining to the Distribution and/or Service Plan relating to that
Class.
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
# Page 34
each year the election of Directors or the appointment of
auditors. However, 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.
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.
PDB/P3030196
# Page 35
# Page 36
PREMIER LIMITED TERM INCOME FUND
PROSPECTUS MARCH 1, 1996
Premier Limited Term Income Fund (the "Fund"), formerly called
the "Laurel Intermediate Income Fund," is a separate, diversified portfolio
of The Dreyfus/ Laurel Funds, Inc., an open-end management investment
company (the "Company"), known as a mutual fund. The Fund seeks to
obtain as high a level of current 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.
By this Prospectus, the Fund is offering four Classes of
shares_Class A, Class B, Class C and Class R.
The Dreyfus Corporation serves as the Fund's investment
manager. The Dreyfus Corporation is referred to as "Dreyfus."
________
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.
The Statement of Additional Information ("SAI") dated March
1, 1996, which may be revised from time to time, provides a further
discussion of certain areas in this Prospectus and other matters which
may be of interest to some investors. It has been filed with the
Securities and Exchange Commission ("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 1-800-554-4611. When
telephoning, ask for Operator 144.
________
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY
OTHER AGENCY. ALL MUTUAL FUND SHARES INVOLVE CERTAIN INVESTMENT 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 AN
AFFILIATE OF MELLON BANK 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.
Page 1
(Continued from page 1)
Class A shares are subject to a sales charge imposed at the
time of purchase. (Class A shares of the Fund were formerly called
Investor Shares.) Class B shares are subject to a maximum 3% contingent
deferred sales charge imposed on redemptions made within five years of
purchase. Class C shares are subject to a .75% contingent deferred sales
charge imposed on redemptions made within the first year of purchase.
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 R shares of the Fund
were formerly called Trust Shares.) Other differences between the
Classes include the services offered to and the expenses borne by each
Class and certain voting rights, as described herein. These alternatives
are offered so an investor may choose the method of purchasing shares
that is most beneficial given the amount of purchase, the length of time
the investor expects to hold the shares and other circumstances.
Each Class of shares may be purchased or redeemed by
telephone using the TELETRANSFER Privilege.
Page 2
TABLE OF CONTENTS
Expense Summary.................................... 4
Financial Highlights............................... 5
Alternative Purchase Methods....................... 9
Description of the Fund............................ 10
Management of the Fund............................. 15
How to Buy Fund Shares............................. 16
Shareholder Services............................... 21
How to Redeem Fund Shares.......................... 24
Distribution Plans (Class A Plan and Class B and C Plan 28
Dividends, Other Distributions and Taxes........... 29
Performance Information............................ 30
General Information................................ 31
# Page 3
<TABLE>
<CAPTION>
EXPENSE SUMMARY
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 Contingent Deferred Sales Charge Imposed
........................... on Redemptions
(as a percentage of the amount subject to charge) none* 3.00% .75% .none
Annual Fund Operating Expenses
(as a percentage of average daily net assets)
Management Fee.......................... .60% .60% .60% .60%
12b-1 Fee1.............................. .25% .75% .75% none
Other Expenses2 ........................ .. .00% .00% .00% .00%
Total Fund Operating Expenses........... .85% 1.35% 1.35% .60%
Example:
You would pay the following expenses on a $1,000 investment,
assuming (1) a 5% annual return and (2) except where noted,
redemption at the end of each time period:
1 YEAR $ 38 $ 44/$14 3 $ 21/$14 3 $ 6
3 YEARS $ 56 $63/$43 3 $ 43 $19
5 YEARS $ 76 $ 84/$74 3 $ 74 $33
10 YEARS $132 $136** $162 $75
</TABLE>
* A contingent deferred sales charge may be imposed on the redemption of
Class A shares that are purchased without an initial sales charge. See "How
to Buy Fund Shares_Class A shares."
**Assumes conversion of Class B shares to Class A shares approximately six
years after the date of purchase and, therefore, reflects Class A expenses
for years seven through ten.
1 See "Distribution Plans (Class A Plan and Class B and C Plan)" for a
description of the Fund's Distribution Plan and Service Plan for Class A, B
and C shares.
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 by 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.")
3 Assuming no redemption of shares.
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 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 below) may charge their clients direct fees for
effecting transactions in Fund shares; such fees are not reflected in the
foregoing table. See "Management of the Fund," "How to Buy Fund Shares"
and "Distribution Plans (Class A Plan and Class B and C Plan)."
The Fund understands that banks, securities dealers and
brokers ("Selected 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.
(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
FINANCIAL HIGHLIGHTS
The tables below are based upon a single Class A, Class B, Class C 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, 1995,
which is incorporated by reference in the SAI. The financial statements
included in the Fund's Annual Report for the year or period ended October
31, 1995 have been audited by ________________, the independent auditors,
whose report appears in the Fund's Annual Report. Further information
about, and management's discussion of, the Fund's performance is
contained in the Fund's Annual Report which may be obtained without
charge by writing to the address or calling the number set forth on the
cover page of this Prospectus.
<TABLE>
<CAPTION>
PREMIER LIMITED TERM INCOME FUND
FOR A CLASS A SHARE OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.
YEAR ENDED PERIOD ENDED
10/31/95 10/31/94*#
Net asset value, beginning of period $10.22 $10.49
------ ------
<S> <C> <C>
Income from investment operations:
Net investment income 0.56 0.28
Net realized and unrealized gain(loss) on investments 0.62 (0.27)
------ ------
Total from investment operations 1.18 0.01
------ ------
Less distributions:
Distributions from net investment income (0.56) (0.28)
Net asset value, end of period $10.84 $10.22
====== =======
Total return 11.83% 0.11%
====== =======
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $1,150 $ 932
Ratio of operating expenses to average net assets 0.85% 0.83%**
Ratio of net investment income to average net assets 5.33% 4.47%**
Portfolio turnover rate 73% .117%
</TABLE>
*The Fund commenced selling Investor Shares on April 7, 1994. Effective
as of 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 served as the Fund's investment
manager. Effective October 17, 1994, Dreyfus began serving as the Fund's
investment manager.
# Page 5
PREMIER LIMITED TERM INCOME FUND
FOR A CLASS B SHARE OUTSTANDING THROUGHOUT THE PERIOD.
YEAR ENDED
10/31/95
Net asset value, beginning of period $10.15
------
Income from investment operations:
Net investment income 0.47
Net realized and unrealized gain on investments 0.69
------
Total from investment operations 1.16
------
Less distributions:
Distributions from net investment income (0.47)
------
Net asset value, end of period $10.84
========
Total return 11.32%
========
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $78
Ratio of operating expenses to average net assets 1.35%**
Ratio of net investment income to average net assets 4.85%**
Portfolio turnover rate 73.00%
*The Fund commenced selling B Shares on April 7, 1994.
** Annualized.
# Page 6
PREMIER LIMITED TERM INCOME FUND
FOR A CLASS C SHARE OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.
YEAR ENDED
10/31/95
Net asset value, beginning of period $10.15
------
Income from investment operations:
Net investment income 0.48
Net realized and unrealized gain on investments (.69)
------
Total from investment operations (1.17)
------
Less distributions:
Distributions from net investment income (0.48)
------
Net asset value, end of period $10.84
========
Total return 11.32%
========
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) ._
Ratio of operating expenses to average net assets ._
Ratio of net investment income to average net assets ._
Portfolio turnover rate 73.00%
*The Fund commenced selling C Shares on December 19, 1994.
# Page 7
<TABLE>
<CAPTION>
PREMIER LIMITED TERM INCOME FUND
FOR A CLASS R SHARE OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.
YEAR YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED
10/31/95 10/31/94*## 10/31/9 10/31/92 *10/31/91*
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $10.22 $11.07 $10.71 $10.41 $10.00
-------- -------- -------- -------- ---------
Income from investment operations:
Net investment income 0.58 0.49# 0.51 0.62 0.19
Net realized and unrealized gain/(loss) on
investments 0.62 (0.75) 0.46 0.30 0.36
-------- -------- -------- -------- ---------
Total from investment operations 1.20 (0.26) 0.97 0.92 0.55
-------- -------- -------- -------- ---------
Less distributions:
Distributions from net
investment income (0.58) (0.53) (0.52) (0.62) (0.14)
Distributions from net realized
capital gains ._ (0.06) (0.09) - -
-------- -------- -------- -------- ---------
---------------
Total Distributions (0.58) (0.59) (0.61) (0.62) (0.14)
-------- -------- -------- -------- ---------
Net asset value, end of period $10.84 $10.22 $11.07 $10.71 $10.41
-============ ======== ======== ======== ========
Total return 12.11% (2.46%) 9.33% 9.11% 5.49%
-============ ======== ======== ======== ========
Ratios to average net assets/
supplemental data:
Net assets, end of year (in 000's) $69,924 $82,406 $59,534 $20,619 $9,608
Ratio of expenses to average
net assets 0.60% 0.60% 0.60% 0.51% 0.02%**
Ratio of net investment income to
average net assets 5.58% 4.70%** 4.81% 5.91% 7.16%**
Portfolio turnover rate 73.83% 117% 112% 67% 23%
</TABLE>
* The Fund commenced operations on July 11, 1991. The Fund commenced
selling Class
A Shares on April 7, 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 as Class R shares.
** Annualized.
Annualized expense ratio before reimbursement of expenses by the investment
adviser was .60% for the year ended October 31, 1994. Total return
represents aggregate total return for the periods indicated. For the year
ended October 31, 1992 and the period ended October 31, 1991, the investment
adviser waived all or 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 investment
adviser was $0.49 for the year ended October 31,
1994.
## Prior to October 17, 1994, Mellon Bank served as the Fund's investment
manager. Effective October 17, 1994, Dreyfus began serving as the Fund's
investment manager.
# Page 8
ALTERNATIVE PURCHASE METHODS
The Fund offers you four methods of purchasing Fund shares; you
may choose the Class of shares that best suits your needs, given the
amount of your purchase, the length of time you expect to hold your
shares and any other relevant circumstances. Each Fund share represents
an identical pro rata interest in the Fund's investment portfolio.
Class A shares are sold at net asset value per share plus a
maximum initial sales charge of 3.0% 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 shares."
Class B shares are sold at net asset value per share with no
initial sales charge at the time of purchase; as a result, the entire
purchase price is immediately invested in the Fund. Class B shares are
subject to a maximum 3% contingent deferred 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 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 (or in the case of Class B shares of the Fund
acquired through exchange of Class B shares of another fund advised by
Dreyfus, the date of purchase of the original Class B shares of the fund
exchanged), Class B shares will automatically convert to Class A shares,
based on the relative net asset values for shares of each such Class, and
will no longer be subject to the distribution fee. (Such conversion is
subject to suspension by the Board of Directors if adverse tax
consequences might result.) Class B shares that have been acquired
through the reinvestment of dividends and other distributions will be
converted on a pro rata basis together with other Class B shares, in the
proportion that a shareholder's Class B shares converting to Class A
shares bears to the total Class B shares not acquired through the
reinvestment of dividends and other distributions.
Class C shares are sold at net asset value per share with no
initial sales charge at the time of purchase; as a result, the entire
purchase price is immediately invested in the Fund. Class C shares are
subject to a .75% CDSC, which is assessed only if you redeem 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. In addition, Class C 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 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.
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 net
asset value per share 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.
Class A, Class B and Class C shares are sold primarily to retail
investors by Agents that have entered into Agreements with the
Distributor.
The decision as to which Class of shares is most beneficial
to you depends on the amount and the intended length of your investment.
You should consider whether, during the anticipated life of your
investment in the Fund, the accumulated distribution fee and CDSC, if
any, on Class B or Class C shares would be less than the initial sales
charge on Class A shares purchased at the same time, and to what extent,
if any, such differential would be offset by the return of Class A
shares.
# Page 9
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, you should consider the effect of the CDSC period and any
conversion rights of the Classes in the context of your own investment
time frame. For example, while Class C shares have a shorter CDSC period
than Class B shares, Class C shares do not have a conversion feature and,
therefore, are subject to an ongoing distribution fee. Thus, Class 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 $100,000
in Fund shares.
DESCRIPTION OF THE FUND
INVESTMENT OBJECTIVE
The Fund seeks to obtain as high a level of current 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. There can be no assurance that the Fund will meet
its stated investment objective.
MANAGEMENT POLICIES
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
objective. Under normal circumstances, at least 65% of the Fund's total
assets will be invested 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 rating services, or, if unrated, determined to be of
comparable quality by the Fund's investment adviser, Dreyfus. 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 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 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 minimum 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 currency controls, interest limitations, seizure of assets,
or the declaration of a moratorium on payment of principal or interest.
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 instrumentalities; (3) mortgage-related securities backed by
U.S. Government agencies or instrumentalities; (4) 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") (5) commercial paper of U.S. and
foreign companies, rated at the time of
# Page 10
purchase at least A-1 by Standard & Poor's, Prime-1 by
Moody's, F-1 by Fitch Investors Service ("Fitch"), Duff 1 by Duff &
Phelps, Inc. or A1 by IBCA, Inc. (6) floating rate securities; (7)
variable amount master demand notes; (8) repurchase agreements; (9)
when-issued transactions; (10) Eurodollar bonds and notes; and (11)
American Depository Receipts ("ADRs").
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.
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.
WHEN-ISSUED 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 Company 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 Company's Board of Directors determine it to be in the
best interest of the Fund and its shareholders. In making that
determination, the Board of 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
Board of 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
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
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.
# Page 11
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 at the time of
purchase at least A-1 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.
EURODOLLAR BONDS AND NOTES. The Fund may invest in Eurodollar
bonds and notes. Eurodollar bonds and notes are obligations that 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.
FIXED-INCOME SECURITIES. The Fund may invest in fixed-income
securities. 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 Fund's yield may tend to be lower than prevailing
interest rates. Also, in periods of falling interest rates, the inflow of
net new money to a fund from the continuous sale of its shares will likely
be invested in portfolio instruments producing lower yields 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 of a 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 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,
adverse 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 (gener
# Page 12
ally with a bank or broker-dealer) to repurchase that
security from the Fund at a specified price and date or upon demand. This
investment 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.
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 Certificates. Reinvestment of prepayments may occur at higher or
lower rates than the original yield of 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 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
# Page 13
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.
MORTGAGE PASS-THROUGH CERTIFICATES. The Fund may invest in
mortgage pass-through certificates that are issued by governmental or
government-related 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 Untied States. The securities are
"pass-through" securities because they provide investors with monthly
payments of principal and interest that, 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 GNMA. 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. 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 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.
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 ("U.S. Government Securities"). In addition to direct obligations
of the U.S. Treasury, U.S. Government Securities 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 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 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 high current income and not for
short-term trading profits, in the past the portfolio turnover rate of
# Page 14
the 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 Fund were replaced once in a period of one year.
In past years the Fund's rate of portfolio turnover exceeded that of
certain other mutual funds with a similar investment objective. A higher
rate of portfolio turnover (100% or greater) 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, security transactions 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.
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 November 30, 1995, Dreyfus managed or
administered approximately $83 billion in assets for more than 1.7 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 one or more third parties to provide,
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 Laurie Carroll. Ms. Carroll has
managed the Fund since its commencement of operations and has been
employed by Dreyfus as a portfolio manager since October 17, 1994. Ms.
Carroll is a Senior Vice President and portfolio manager at Mellon Bank.
Ms. Carroll has been employed by Mellon Bank since 1986.
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 $209 billion in assets as of September
30, 1995, including $80 billion in mutual fund assets. As of
# Page 15
September 30, 1995, Mellon, through various subsidiaries,
provided non-investment services, such as custodial or administration
services, for more than $717 billion in assets, including approximately
$55 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 0.60 of 1% 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. For the period ended
October 31, 1995, the Fund paid Dreyfus 0.60% 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, 1995, for Class A and Class R shares, total operating
expenses (excluding Rule 12b-1 fees) of the Fund were 0.60% of the
average daily net assets for each of the Fund's Class A and Class R
shares. For the period from December 19, 1994 through October 31, 1995
for Class B and Class C shares, total operating expenses (excluding Rule
12b-1 fees) of the Fund were 0.60% (annualized) of the average daily net
assets for each of the Fund's Class B and Class C shares.
In addition, Class A, B and C shares may be subject to
certain distribution and shareholder servicing fees. See "Distribution
Plans (Class A Plan and Class B and C Plan)."
Dreyfus may pay the Fund's distributor for shareholder
services from Dreyfus' 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 service
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 FDI Distribution Services, Inc., a provider of mutual fund
administration services, which in turn is a wholly-owned subsidiary of
FDI Holdings, Inc., the parent company of which is Boston Institutional
Group, Inc.
CUSTODIAN; TRANSFER AND DIVIDEND DISBURSING AGENT; AND
SUB-ADMINISTRATOR--Mellon Bank, (One Mellon Bank Center, Pittsburgh, PA
15258) is the Fund's custodian. The Fund's transfer and dividend
disbursing agent is Dreyfus Transfer, Inc. ("the Transfer Agent"), an
affiliate of Dreyfus. Premier Mutual Fund Services, Inc. serves as 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-- Class A shares, Class B shares and Class C shares
may be purchased only by clients of Agents, except that full-time or
part-time employees or directors of Dreyfus or any of its affili
Page 16
ates or subsidiaries, 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 may purchase Class A shares directly
through the Distributor. Subsequent purchases may be sent directly to the
Transfer Agent or your Agent.
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. 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.
When purchasing Fund shares, you must specify which Class is
being purchased. Stock certificates are issued only upon your written
request. No certificates are issued for fractional shares. The Fund
reserves the right to reject any purchase order.
Agents may receive different levels of compensation for
selling different Classes of shares. Management understands that some
Agents may impose certain conditions on their clients which are different
from those described in this Prospectus, and, to the extent permitted by
applicable regulatory authority, may charge their clients direct fees
which would be in addition to any amounts which might be received under
the Distribution and Service Plans. Each Agent has agreed to transmit to
its clients a schedule of such fees. You should consult your Agent in
this regard.
The minimum initial investment is $1,000. 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. 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
certain qualified or non-qualified employee benefit plans or other
programs, including pension, profit-sharing and other deferred
compensation plans, whether established by corporations, partnerships,
non-profit entities or state and local governments ("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 through the
TELETRANSFER Privilege described below. Checks should be made payable to
"Premier Limited Term Income Fund". Payments to open new accounts which
are mailed should be sent to Premier Limited Term Income Fund, 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 Premier
Limited Term Income Fund, P.O. Box 105, Newark, New Jersey 07101-0105.
Neither initial nor subsequent investments should be made by third party
check.
Wire payments may be made if your bank account is in a
commercial bank that is a member of the Federal Reserve System or any
other bank having a correspondent bank in New York City. Immediately
available funds may be transmitted by wire to Boston Safe Deposit and
Trust
# Page 17
Company, together with the applicable Class' DDA # as shown
below, for purchase of Fund shares in your name:
DDA# 044431 Premier Limited Term Income Fund/Class A shares;
DDA# 044458 Premier Limited Term Income Fund/Class B shares;
DDA# 044474 Premier Limited Term Income Fund/Class C shares;
DDA# 044482 Premier Limited Term Income 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 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 Boston Safe Deposit and Trust Company with
instructions to credit your Fund account. The instructions must specify
your Fund account registration and Fund account number PRECEDED BY THE
DIGITS "4240" for Class A shares, "4250" for Class B shares, "4260" for
Class C shares and "4270" for Class R shares.
The Distributor may pay dealers a fee of up to .5% of the
amount invested through such dealers in Fund shares by employees
participating in qualified or non-qualified employee benefit plans or
other programs where (i) the employers or affiliated employers
maintaining such plans or programs have a minimum of 250 employees
eligible for participation in such plans or programs or (ii) such plan's
or program's aggregate investment in the Dreyfus Family of Funds or
certain other products made available by the Distributor to such plans or
programs exceeds 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 PER SHARE ("NAV") -- An investment
portfolio's NAV refers to the worth of one share. The NAV for shares of
each Class of the Fund 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 number of shares of that Class outstanding. Shares
of each Class of the Fund are offered on a continuous basis. 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
# Page 18
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.
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 such close of business 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
such close of business are effective on, and receive the share price
determined on, the next business day.
Orders for the purchase of Fund shares received by dealers by
the close of trading on the floor of the NYSE on any business day and
transmitted to the Distributor or its designee by the close of its
business day (normally 5:15 p.m., New York time) will be based on the
public offering price per share determined as of the close of trading on
the floor of the NYSE on that day. Otherwise, the orders will be based on
the next determined public offering price. It is the dealer's
responsibility to transmit orders so that they will be received by the
Distributor or its designee before the close of its business day.
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
- ---------------------
As a % of As a % of Dealers' Reallowance
Offering Price Net Asset Value as a % of
Amount of Transaction Per Share Per Share Offering Price
---------------------- ------------- ------------- -------------------
<S> <C> <C> <C>
Less than $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" (other than the amount of the CDSC and its time periods) and
"How to Redeem Fund Shares_Waiver of CDSC" are applicable to the Class A
shares subject to a CDSC. Letter of Intent and Right of Accumulation
apply to such purchases of Class A shares.
Full-time employees of NASD member firms and full-time
employees of other financial institutions which have entered into an
agreement with the Distributor pertaining to the sale of Fund shares (or
which otherwise have a brokerage related or clearing arrangement with an
NASD member firm or financial institution with respect to the sale of
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 the
Distributor with such information as it may request from time to time in
order to verify eligibility for this privilege. This privilege also
applies to full-time employees of financial institutions affiliated with
NASD member firms whose full-time employees are eligible to purchase
Class A shares at NAV. In addition, Class A shares are offered at NAV to
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.
# Page 19
Class A shares will be offered at net asset value without a
sales load to employees participating in Eligible Benefit Plans. Class A
shares also may be purchased (including by exchange) at NAV without a
sales load for Dreyfus-sponsored IRA "Rollover Accounts" with the
distribution proceeds from a qualified retirement plan or a
Dreyfus-sponsored 403(b)(7) plan, provided that, at the time of such
distribution, such qualified retirement plan or Dreyfus-sponsored
403(b)(7) plan (a) met the requirements of an Eligible Benefit Plan and
all or a portion of such plan's assets were invested in funds in the
Dreyfus Family of Funds or certain other products made available by the
Distributor to such plans, or (b) invested all of its assets in certain
funds in the Premier Family of Funds or the Dreyfus Family of Funds or
certain other products made available by the Distributor to such plans.
Holders of Class A accounts of the Fund as of December 19,
1994, may continue to purchase Class A shares of the Fund at NAV.
However, investments by such holders in OTHER funds advised by Dreyfus
will be subject to any applicable front-end sales load.
Class A shares may be purchased at NAV through certain
broker-dealers and other financial institutions which have entered into
an agreement with the Distributor, which includes a requirement that such
shares be sold for the benefit of clients participating in a "wrap
account" or a similar program under which such clients pay a fee to such
broker-dealer or other financial institution.
Class A shares also may be purchased at NAV, subject to
appropriate documentation, through a broker-dealer or other financial
institution with the proceeds from the redemption of shares of a
registered open-end management investment company not managed by Dreyfus
or its affiliates. The purchase of Class A shares of the Fund must be
made within 6y0 days of such redemption and the shareholders must have
either (i) paid an initial sales charge or a CDSC or (ii) been obligated
to pay at any time during the holding period, but did not actually pay on
redemption, a deferred sales charge with respect to such redeemed shares.
Class A shares also may be purchased at NAV, subject to
appropriate documentation, by (i) qualified separate accounts maintained
by an insurance company pursuant to the laws of any State or territory of
the United States, (ii) a State, county or city or instrumentality thereof,
(iii) a charitable organization (as defined in Section 501(c)(3) of the
Code) investing $50,000 or more in Fund shares, and (iv) a charitable
remainder trust (as defined in Section 501(c)(3) of the Code).
The dealer reallowance may be changed from time to time but
will remain the same for all dealers. The Distributor, at its expense,
may provide additional promotional incentives to dealers that sell shares
of funds advised by Dreyfus 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 the
Distributor than they receive for selling most other funds.
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." The Distributor
compensates certain Agents for selling Class B shares at the time of
purchase from the Distributor's own assets. The proceeds of the CDSC and
the distribution fee, in part, are used to defray these expenses.
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 "Class B shares" above and
"How to Redeem Fund Shares."
CLASS R SHARES--The public offering price for Class R shares
is the NAV of that Class.
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 Dreyfus
which are sold with a sales load and shares acquired by a previous
# Page 20
exchange of such shares (hereinafter referred to as "Eligible
Funds"), by you and any related "purchaser" as defined in the SAI, where
the aggregate investment, including such purchase, is $100,000 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 $80,000 and subsequently purchase Class
A shares or shares of an Eligible 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 the Distributor if orders are made by wire,
or the Transfer Agent if orders are made by mail. The reduced sales load
is subject to confirmation of your holdings through a check of
appropriate records.
TELETRANSFER PRIVILEGE -- 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 a filed 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 TELETRANSFER Privilege, you may
request a TELETRANSFER purchase of Fund shares by telephoning
1-800-645-6561 or, if calling from overseas, 516-794-5452.
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, 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 1-800-645-6561 or, if calling from overseas,
516-794-5452. See "How to Redeem Fund Shares_Procedures." Upon an
exchange, the following shareholder services and Privileges, as applicable
# Page 21
and where available, will be automatically carried over to
the fund into which the exchange is made: Telephone Exchange 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 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 other
distributions paid with respect to the foregoing categories of shares. To
qualify, at the time of the exchange 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.
AUTO-EXCHANGE PRIVILEGE
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 other funds in the Premier
Family of Funds or 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 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 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. See "Shareholder
Services" in the SAI. 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 Premier Limited Term Income Fund, P.O. Box 6587,
Providence, Rhode Island 02940-6587. 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 Premier Family of Funds or the Dreyfus
Family of Funds eligi
# Page 22
ble to participate in this Privilege, or to obtain an
Auto-Exchange Authorization Form, please call toll free 1-800-645-6561.
AUTOMATIC ASSET BUILDER
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 an 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 Premier Limited Term Income
Fund, P.O. Box 6587, Providence, Rhode Island 02940-6587, 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.
DIVIDEND OPTIONS
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 another fund in the Premier Family of Funds
or certain of 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 a sales load. If you are investing in a fund
that charges a sales load, you may qualify for share prices which do not
include the sales load or which reflect a reduced sales load. If you are
investing in a fund or class that charges a CDSC, the shares purchased
will be subject on redemption to the CDSC, if any, applicable to the
purchased shares. See "Shareholder Services" in the SAI. 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 Dividend Options Form, please call toll free 1-800-645-6561.
You may cancel these Privileges by mailing written notification to
Premier Limited Term Income Fund, P.O. Box 6587, Providence, Rhode Island
02940-6587. To select a new fund after cancellation, you must submit a
new Dividend Options Form. Enrollment in or cancellation of these
Privileges is effective three business days following receipt. These
privileges are available only for existing accounts and may not be used
to open new accounts. Minimum subsequent investments do not apply for
Dividend Sweep. The Fund may modify or terminate these Privileges at any
time or charge a service fee. No such fee currently is contemplated. Shares
held under Keogh Plans, IRAs or other retirement plans are not eligible
for Dividend Sweep.
GOVERNMENT DIRECT DEPOSIT PRIVILEGE
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 Government Direct Deposit, you must file with the Transfer
Agent a completed Direct Deposit Sign-Up Form for each type of payment
that you desire to include in this Privilege. The appropriate form may be
obtained from the Distributor 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.
# Page 23
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 from 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.
Class B and C shares withdrawn pursuant to the Automatic
Withdrawal Plan will be subject to any applicable CDSC. Purchases of
additional Class A shares where the sales load is imposed concurrently
with withdrawals of Class A shares generally are undesirable.
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.
LETTER OF INTENT--CLASS A SHARES
By signing a Letter of Intent form, available from the
Distributor, 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.
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
# Page 24
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 (other than any applicable CDSC)
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 net asset value.
The Fund ordinarily will make payment for all shares redeemed
within seven days after receipt by the Transfer Agent of a redemption
request in proper form, except as provided by the rules of the SEC.
HOWEVER, IF YOU HAVE PURCHASED FUND SHARES BY CHECK, BY THE TELETRANSFER
PRIVILEGE OR THROUGH 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, TELETRANSFER PURCHASE OR AUTOMATIC ASSET BUILDER ORDER, WHICH MAY
TAKE UP TO EIGHT BUSINESS DAYS OR MORE. IN ADDITION, THE FUND WILL REJECT
REQUESTS TO REDEEM SHARES BY WIRE OR TELEPHONE OR PURSUANT TO THE
TELETRANSFER PRIVILEGE FOR A PERIOD OF EIGHT BUSINESS DAYS AFTER RECEIPT
BY THE TRANSFER AGENT OF THE PURCHASE CHECK, THE TELETRANSFER PURCHASE OR
THE 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.
CONTINGENT DEFERRED SALES CHARGE--CLASS B SHARES--A CDSC
payable to the Distributor is imposed on any redemption of Class B shares
which reduces the current net asset value of your Class B shares to an
amount which is lower than the dollar amount of all payments by you for
the purchase of Class B shares of the Fund held by you at the time of
redemption. No CDSC will be imposed to the extent that the net asset
value of the Class B shares redeemed does not exceed (i) the current net
asset value of Class B shares acquired through reinvestment of dividends
or other distributions, plus (ii) increases in the net asset value of
your Class B shares above the dollar amount of all your payments for the
purchase of Class B shares held by you at the time of redemption.
If the aggregate value of Class B shares redeemed has
declined below their original cost as a result of the Fund's performance,
a CDSC may be applied to the then-current net asset value rather than the
purchase price.
In circumstances where the CDSC is imposed, the amount of the
charge will depend on the number of years 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>
Year Since CDSC as a % of Amount
Purchase Payment Invested or Redemption
Was Made Proceeds
------------------- ------------------------
<S> <C>
First...................................................... 3.00
Second..................................................... 3.00
Third...................................................... 2.00
Fourth..................................................... 2.00
Fifth...................................................... 1.00
Sixth...................................................... .00
</TABLE>
# Page 25
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 other distributions; then of amounts representing the
increase in net asset value of Class B shares above the
total amount of payments for the purchase of Class B shares made during
the preceding 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
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 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 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 3% (the
applicable rate in the second year after purchase) for a total CDSC of
$7.20.
For purposes of determining the applicable CDSC payable with
respect to redemption of Class B shares of the Fund where such shares
were acquired through exchange of Class B shares of another fund advised
by Dreyfus, the year since purchase payment was made is based on the date
of purchase of the original Class B shares of the Fund exchanged.
CONTINGENT DEFERRED SALES CHARGE--CLASS C SHARES--A CDSC of
.75% payable to the Distributor is imposed on any redemption of Class C
shares within one year of the date of purchase. The basis for calculating
the payment of any such CDSC will be the method used in calculating the
CDSC for Class B shares. See "Contingent Deferred Sales Charge_Class B
shares" above.
WAIVER OF CDSC--The CDSC applicable to Class B and Class C
shares (and to certain Class A 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 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 Company's Board of Directors
determines 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 you must notify the Transfer Agent or your Agent must notify
the Distributor. Any such qualification is subject to confirmation of
your entitlement.
PROCEDURES--You may redeem Fund shares by using the regular
redemption procedure through the Transfer Agent, or through the
TELETRANSFER Privilege or, if you are a client of a Selected Dealer, through
the Selected Dealer. If you have given your Agent authority to instruct the
Transfer Agent to redeem shares and to credit the proceeds of such
redemptions to a designated account at your Agent, you may redeem shares
only in this manner and in accordance with the regular redemption
procedure described below. If you wish to use the other redemption
methods described below, you must arrange with your Agent for delivery of
the required application(s) to the Transfer Agent. 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
# Page 26
you select the TELETRANSFER Privilege or telephone exchange
privilege, 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 TELETRANSFER 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 TELETRANSFER 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 Premier Limited
Term Income Fund, P.O. Box 6587, Providence, Rhode Island 02940-6587.
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
1-800-554-4611.
Redemption proceeds of at least $1,000 will be wired to any
member bank of the Federal Reserve System in accordance with a written
signature-guaranteed request.
TELETRANSFER PRIVILEGE. You may 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 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 TELETRANSFER Privilege, you may
request a TELETRANSFER redemption of Fund shares by telephoning
1-800-645-6561 or, if calling from overseas, 516-794-5452. Shares held
under Keogh Plans, IRAs or other retirement plans, and shares issued in
certificate form, are not eligible for this Privilege.
REDEMPTION THROUGH A SELECTED DEALER. If you are a customer
of a Selected Dealer, you may make redemption requests to your Selected
Dealer. If the Selected Dealer transmits the redemption request so that
it is received by the Transfer Agent prior to the close of trading on the
floor of the NYSE (currently 4:00 p.m., New York time), the redemption
request will be effective on that day. If a redemption request is
received by the Transfer Agent after the close of trading on the floor of
the NYSE, the redemption request will be effective on the next business
day. It is the responsibility of the Selected Dealer to transmit a
request so that it is received in a timely manner. The proceeds of
# Page 27
the redemption are credited to your account with the Selected
Dealer. See "How to Buy Fund Shares" for a discussion of additional
conditions or fees that may be imposed upon redemption.
In addition, the Distributor will accept orders from Selected
Dealers with which it has sales agreements for the repurchase of shares
held by shareholders. Repurchase orders received by dealers by the close
of trading on the floor of the NYSE on any business day and transmitted
to the Distributor or its designee prior to the close of its business day
(normally 5:15 p.m., New York time) are effected at the price determined
as of the close of trading on the floor of the NYSE on that day.
Otherwise, the shares will be redeemed at the next determined NAV. It is
the responsibility of the Selected Dealer to transmit orders on a timely
basis. The Selected Dealer may charge the shareholder a fee for executing
the order. This repurchase arrangement is discretionary and may be
withdrawn at any time.
REINVESTMENT PRIVILEGE--CLASS A SHARES. Upon written request,
you may reinvest up to the number of Class A shares you have redeemed,
within 30 days of redemption, at the then-prevailing net asset value
without a sales load, or reinstate your account for the purpose of
exercising Fund Exchanges. The Reinvestment Privilege may be exercised
only once.
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 different compensation with respect to one
class of shares over another.
DISTRIBUTION PLAN--CLASS A SHARES--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 Dreyfus, for
shareholder servicing activities and the Distributor for shareholder
servicing activities and activities or expenses primarily intended to
result in the sale of Class A 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 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 Class A 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.
DISTRIBUTION AND SERVICE PLANS--CLASS B AND C SHARES -- Under
a Distribution Plan adopted pursuant to Rule 12b-1, the Fund pays the
Distributor 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 Service Plan adopted pursuant to Rule
12b-1, the Fund pays Dreyfus Service Corporation or the Distributor 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 maintenance 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 their clients in connection with the
investment of their assets in Class B and C shares. The Distributor may
pay one or more Agents in respect of distribution and other services for
these Classes of shares. The Distributor
# Page 28
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 and Service Plans are
payable without regard to actual expenses incurred.
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
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, 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, to receive dividends in cash and reinvest other
distributions in additional Fund shares, or to reinvest both dividends
and other distributions in additional Fund shares; dividends and other
distributions paid to qualified Retirement Plans are reinvested
automatically in additional Fund shares at net asset value. All expenses
are accrued daily and deducted before declaration of dividends to
investors. 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. 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.
Class B and C shares will receive lower per share dividends than Class A
shares which will receive lower per share dividends than Class R shares,
because of the higher expenses borne by the relevant Class. See "Expense
Summary."
It is expected that the Fund will qualify for treatment 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 (collectively "Dividend Distributions"),
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
capital gain (the excess of net long-term capital gain over net
short-term capital loss) 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.
Dividend Distributions paid by the Fund to a non-resident
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 capital gain paid
by the Fund to a non-resident foreign investor, as well as the proceeds
of any redemptions from a non-resident 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 capital gain, if any, paid during
the year.
The Code provides for the "carryover" of some or all of the
sales load imposed on Class A shares if (1) an investor redeems those
shares or exchanges those shares for shares of another fund advised or
administered by Dreyfus within 91 days of purchase and (2) in the case of
a redemption,
# Page 29
acquires other Fund Class A shares through exercise of the
Reinvestment Privilege or, in the case of an exchange, such other fund
reduces or eliminates its otherwise applicable sales load for the purpose
of the exchange. In this case, the amount of the sales load charged the
investor for the original Class A shares, up to the amount of the
reduction of the sales load pursuant to the Reinvestment Privilege or on
the exchange, as the case may be, is not included in the basis of such
shares for purposes of computing gain or loss on the redemption or the
exchange, and instead is added to the basis of the fund shares received
pursuant to the Reinvestment Privilege or the exchange.
Dividends and other distributions 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 distributions 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. If a
distributee of an "eligible rollover distribution" from a qualified
Retirement Plan does not elect to have the eligible rollover distribution
paid directly from the plan to an eligible retirement plan in a "direct
rollover," the eligible rollover distribution is subject to a 20% income
tax withholding.
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 capital gain 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 that
the TIN furnished in connection with opening an account is correct and
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 distribution and shareholder servicing fees. As a
result, at any given time, the performance of Class B and C should be
expected to be lower than that of Class A and the performance of Class A,
B and C should be expected to be lower than that of Class R. Performance
for each Class will be calculated separately.
# Page 30
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
net asset value (or maximum offering price in the case of Class A 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. Total return also may
be calculated by using the net asset value per share at the beginning of
the period instead of the maximum offering price per share at the
beginning of the period for Class A shares or without giving effect to
any applicable CDSC at the end of the period for Class B or C shares.
Calculations based on the net asset value per share do not reflect the
deduction of the sales load on the Fund's Class A shares, which, if
reflected, would reduce the performance quoted.
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, 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 SEC under the 1940 Act, as an open-end management investment
# Page 31
company. The Company has an authorized capitalization of 25
billion shares of $0.001 par value stock with equal voting rights. The
Company's shares are classified into four classes_Class A, Class B, Class
C and Class R. The 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 Class A, B or C shares, as the
case may be, will be entitled to vote on matters submitted to
shareholders pertaining to the Distribution and Service 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, 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.
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.
PLI/P2030195
#s. Page 32
PREMIER SMALL COMPANY STOCK FUND
PROSPECTUS MARCH 1, 1996
Premier Small Company Stock Fund (the "Fund"), formerly called
the "Laurel Smallcap Stock Fund," is a separate,
diversified portfolio of The Dreyfus/Laurel Funds, Inc., an open-end
management investment company (the "Company"), known as a mutual fund. The
Fund seeks to consistently exceed the total return performance of the
Russell 2500trademark Stock Index while maintaining a similar level of
risk. The Fund is neither sponsored by nor affiliated with Frank Russell
Company.
By this Prospectus, the Fund is offering four Classes of
shares_Class A, Class B, Class C and Class R.
The Dreyfus Corporation serves as the Fund's investment
manager. The Dreyfus Corporation is referred to as "Dreyfus."
________
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.
The Statement of Additional Information ("SAI") dated March
1, 1996, which may be revised from time to time, provides a further
discussion of certain areas in this Prospectus and other matters which
may be of interest to some investors. It has been filed with the
Securities and Exchange Commission ("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 1-800-554-4611. When
telephoning, ask for Operator 144.
________
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS
OF, OR GUARANTEED OR ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD,
OR ANY OTHER AGENCY. ALL MUTUAL FUND SHARES INVOLVE CERTAIN INVESTMENT
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 AN
AFFILIATE OF MELLON BANK, N.A. ("MELLON BANK"), 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.
Page 1
(Continued from page 1)
Class A shares are subject to a sales charge imposed at the
time of purchase. (Class A shares of the Fund were formerly called
Investor shares.) Class B shares are subject to a maximum 4% contingent
deferred sales charge imposed on redemptions made within six years of
purchase. Class C shares are subject to a 1% contingent deferred sales
charge imposed on redemptions made within the first year of purchase.
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 R shares of the Fund were
formerly called Trust shares.) Other differences between the Classes
include the services offered to and the expenses borne by each Class and
certain voting rights, as described herein. These alternatives are
offered so an investor may choose the method of purchasing shares that is
most beneficial given the amount of purchase, the length of time the
investor expects to hold the shares and other circumstances.
Each Class of shares may be purchased or redeemed by
telephone using the TELETRANSFER Privilege.
TABLE OF CONTENTS
Expense Summary.................................... 3
Financial Highlights............................... 4
Alternative Purchase Methods....................... 7
Description of the Fund............................ 8
Management of the Fund............................. 14
How to Buy Fund Shares............................. 15
Shareholder Services............................... 20
How to Redeem Fund Shares.......................... 23
Distribution Plans (Class A Plan and Class B and C Plan) 27
Dividends, Other Distributions and Taxes........... 28
Performance Information............................ 29
General Information................................ 31
Page 2
<TABLE>
<CAPTION>
EXPENSE SUMMARY
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.......................... 1.25% 1.25% 1.25% 1.25%
12b-1 Fee1.............................. .25% 1.00% 1.00% none
Other Expenses.......................... .00% .00% .00% .00%
_____ _____ _____ _____
Total Fund Operating Expenses........... 1.50% 2.25% 2.25% 1.25%
Example
You would pay the following expenses on a $1,000 investment,
assuming (1) a 5% annual return and (2) except where noted,
redemption
at the end of each time period:
1 YEAR $ 60 $ 63/232 $33/232 $ 13
3 YEARS $ 90 $100/703 $70 $ 40
5 YEARS $123 $140/1203 $120 $ 69
10 YEARS $216 $221** $258 $151
* A contingent deferred sales charge may be imposed on the redemption
of Class A shares that are purchased without an initial sales charge. See
"How to Buy Fund Shares_Class A shares."
**Assumes conversion of Class B shares to Class A shares
approximately six years after the date of purchase and, therefore,
reflects Class A expenses for years seven through ten.
1 See "Distribution Plans (Class A Plan and Class B and C Plan)" for
a description of the Fund's Distribution Plan and Service Plan for Class
A, B and C shares.
2 Assuming no redemption of shares.
</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 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 banks
, securities dealers and brokers ("Selected Dealers") or other financial
institutions (including Mellon Bank and its affiliates) (collectively
"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 Plans (Class A Plan and Class B and C Plan)."
The Company understands that 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. (the
"Distributor"). The
# Page 3
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.
FINANCIAL HIGHLIGHTS
The tables below are based upon a single Class A, Class B,
Class C or Class R share outstanding throughout the 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, 1995
which is incorporated by reference in the SAI. The financial statements
included in the Fund's Annual Report for the year ended October 31, 1995
have been audited by _______________, independent auditors, whose report
appears in the Fund's Annual Report. Further information about, and
management's discussion of, the Fund's performance is contained in the
Fund's Annual Report, which may be obtained without charge by writing to
the address or calling the number set forth on the cover page of this
Prospectus.
<TABLE>
<CAPTION>
PREMIER SMALL COMPANY STOCK FUND
FOR A CLASS A SHARE OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.
YEAR ENDED PERIOD ENDED
10/31/95 10/31/94*#
<S> <C> <C>
Net asset value, beginning of period $10.07 $10.00
-------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.02 0.01
Net realized and unrealized gain on investments 3.03 0.06
-------- --------
TOTAL FROM INVESTMENT OPERATIONS 3.05 0.07
-------- --------
Distributions
Dividends from net investment income (.03) ._
Net asset value, end of period $13.09 $10.07
======= ========
TOTAL RETURN 30.31% 0.70%
======= ========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $1,359 $ 60
Ratio of operating expenses to average net assets 1.50% 1.50%
Ratio of net investment income to average net assets 0.10% 0.83%
Portfolio turnover rate 56% .8%
* The Fund commenced selling Investor 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 served as the Fund's investment
manager. Effective October 17, 1994, Dreyfus began serving as the Fund's
investment manager.
</TABLE>
# Page 4
PREMIER SMALL COMPANY STOCK FUND
FOR A CLASS B SHARE OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.
PERIOD ENDED
10/31/95*
Net asset value, beginning of period $9.49
--------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (0.03)
Net realized and unrealized gain on investments 3.59
--------
TOTAL FROM INVESTMENT OPERATIONS 3.56
--------
Net asset value, end of period $13.05
--------
--------
TOTAL RETURN 37.51%
--------
--------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $1,025
Ratio of operating expenses to average net assets 2.25%**
Ratio of net investment income to average net assets (.65%)**
Portfolio turnover rate .56%
* The Fund commenced operations on September 2, 1994. The Fund commenced
selling Class B shares on December 19, 1994.
** Annualized.
# Page 5
PREMIER SMALL COMPANY STOCK FUND
FOR A CLASS C SHARE OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.
PERIOD ENDED
10/31/95*
Net asset value, beginning of period $9.49
--------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (0.01)
Net realized and unrealized gain on investments 3.56
--------
TOTAL FROM INVESTMENT OPERATIONS 3.55
--------
DISTRIBUTIONS:
Dividends from net investment income --
Net asset value, end of period $13.04
========
TOTAL RETURN 37.41%
========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $147
Ratio of operating expenses to average net assets 2.25%**
Ratio of net investment income to average net assets (0.65%)**
Portfolio turnover rate .56%
*The Fund commenced operations on September 2, 1994. The Fund commenced
selling Class C shares on December 19, 1994.
** Annualized.
# Page 6
<TABLE>
<CAPTION>
PREMIER SMALL COMPANY STOCK FUND
FOR A CLASS R SHARE OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.
FISCAL YEAR ENDED PERIOD ENDED
10/31/95 10/31/94*#
<S> <C> <C>
Net asset value, beginning of period $10.07 $10.00
-------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.04 0.02
Net realized and unrealized gain on investments 3.04 0.05
-------- --------
TOTAL FROM INVESTMENT OPERATIONS 3.08 0.07
-------- --------
Net asset value, end of period $13.10 $10.07
======== ========
Distributions
Dividends from net investment income (0.05) ._
TOTAL RETURN 30.70% 0.70%
======== ========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $44,091 $10,747
Ratio of operating expenses to average net assets 1.25% 1.25%
Ratio of net investment income to average net assets 0.35% 1.08%
Portfolio turnover rate 56% .8%
*The Fund 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 served as the Fund's investment
manager. Effective October 17, 1994, Dreyfus began serving as the Fund's
investment manager.
</TABLE>
ALTERNATIVE PURCHASE METHODS
The Fund offers you four methods of purchasing Fund shares;
you may choose the Class of shares that best suits your needs, given the
amount of your purchase, the length of time you expect to hold your
shares and any other relevant circumstances. Each Fund share represents
an identical pro rata interest in the Fund's investment portfolio.
Class A shares are sold at net asset value per share plus a
maximum initial sales charge of 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 shares."
Class B shares are sold at net asset value per share with no
initial sales charge at the time of purchase; as a result, the entire
purchase price is immediately invested in the Fund. Class B shares are
subject to a maximum 4% contingent deferred sales charge ("CDSC"), which
is assessed only if you redeem Class B shares within 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
# Page 7
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 (or in the
case of Class B shares of the Fund acquired through exchange of Class B
shares of another fund advised by Dreyfus, the date of purchase of the
original Class B shares of the fund exchanged), Class B shares will
automatically convert to Class A shares, based on the relative net asset
values for shares of each such Class, and will no longer be subject to
the distribution fee. (Such conversion is subject to suspension by the
Board of Directors if adverse tax consequences might result.) Class B
shares that have been acquired through the reinvestment of dividends and
other distributions will be converted on a pro rata basis together with
other Class B shares, in the proportion that a shareholder's Class B
shares converting to Class A shares bears to the total Class B shares not
acquired through the reinvestment of dividends and other distributions.
Class C shares are sold at net asset value per share with no
initial sales charge at the time of purchase; as a result, the entire
purchase price is immediately invested in the Fund. Class C shares are
subject to a 1% CDSC, which is assessed only if you redeem Class C shares
within one year of 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. In addition, Class C 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 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.
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 net
asset value per share 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.
Class A, Class B and Class C shares are primarily sold to retail
investors by Agents that have entered into Agreements with the
Distributor.
The decision as to which Class of shares is most beneficial
to you depends on the amount and the intended length of your investment.
You should consider whether, during the anticipated life of your
investment in the Fund, the accumulated distribution fee and CDSC, if
any, on Class B or Class C shares would be less than the initial sales
charge on Class A shares 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, you should consider the effect of the CDSC period and any
conversion rights of the Classes in the context of your own investment
time frame. For example, while Class C shares have a shorter CDSC period
than Class B shares, Class C shares do not have a conversion feature and,
therefore, are subject to an ongoing distribution fee. Thus, Class 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.
DESCRIPTION OF THE FUND
INVESTMENT OBJECTIVE
The Fund seeks to consistently exceed the total return
performance of the Russell 2500trademark Stock Index while maintaining a
similar level of risk. There can be no assurance that the Fund will meet
its stated investment objective.
# Page 8
MANAGEMENT POLICIES
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. companies 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 the operating
and investment performance histories of these companies generally are
more limited than those of companies with larger capitalization, and
their securities 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 ("ADRs"), (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.
Individual security selection is the foundation of the Fund's
investment approach. Consistency of returns which exceed the Russell
2500trademark Stock Index and stability of the Fund's asset value
relative to the Russell 2500trademark Stock Index 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 sector or industry
according to relative attractiveness. Dreyfus then applies fundamental
analysis to select the most attractive of the top-rated securities and to
determine 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 the structure of the Fund so that characteristics of the
Fund's portfolio securities such as economic sector, industry exposure,
growth, size, volatility and quality are maintained similar to those of
the Russell 2500trademark Stock Index at all times. In addition, the
Fund's managers do not attempt to time the financial market, or use
sector or industry rotation techniques.
The Russell 2500trademark Stock Index, published by Frank
Russell Company, is comprised of the bottom 500 companies in the Russell
1000trademark Index as ranked by total market capitalization, and all
2,000 stocks in the Russell 2000trademark Index. The Russell 2000 trademark
Index consists of the smallest 2,000 companies in the Russell Index 3000
trademark, representing approximately 10% of the Russell 3000trademarkIndex
total market capitalization. The Russell 3000trademark Index is composed of
3,000 large U.S. companies, as determined by market capitalization. The
Russell 1000trademark Index consists of the 1,000 largest companies in
the Russell 3000trademark Index. Market capitalization of the stocks
contained in the Russell 2500trademark Index typically ranges from $100
million to $1.5 billion.
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 borrow
# Page 9
ers 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.
WHEN-ISSUED 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 at least equal at all times 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 Company's Board of Directors
determines it to be in the best interest of the Fund and its
shareholders. In making that determination, the Board of 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 Board of 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 purchase and sell various financial instruments ("Derivative
Instruments"), such as financial futures contracts (such as interest
rate, index and foreign currency futures contracts), options (such as
options on securities, indices, foreign currencies and futures
contracts), forward currency contracts and interest rate, equity index
and currency swaps, caps, collars and floors. The index Derivative
Instruments the Fund may use may be based on indices of U.S. or foreign
equity or debt securities. These Derivative Instruments may be used, for
example, to preserve a return or spread, to lock in unrealized market
value gains or losses, to facilitate or substitute for the sale or
purchase of securities, to manage the duration of securities, to alter
the exposure of a particular investment or portion of the Fund's
portfolio to fluctuations in interest rates or currency rates, to uncap a
capped security or to convert a fixed rate security into a variable rate
security or a variable rate security into a fixed rate security.
The Fund's ability to use these instruments may be limited by
market conditions, regulatory limits and tax considerations. The Fund
might not use any of these strategies and there can be no assurance that
any strategy that is used will succeed. See the SAI for more information
regarding these instruments and the risks relating thereto.
The Fund may not purchase put or call options that are traded
on a national stock exchange in an amount exceeding 5% of its net assets.
FOREIGN CURRENCY TRANSACTIONS. The Fund may engage in
currency exchange transactions on a spot or forward basis. The Fund may
exchange foreign currency on a spot basis at the spot rate then
prevailing for purchasing or selling foreign currencies in the foreign
exchange market.
The Fund may also enter into forward currency contracts for
the purchase or sale of a specified currency at a specified future date
either with respect to specific transactions or portfolio positions in
order to minimize the risk to the Fund from adverse changes in the
relationship
# Page 10
between the U.S. dollar and foreign currencies. For example,
when the Fund anticipates purchasing or selling a security denominated in
a foreign currency, the Fund may enter into a forward contract in order
to set the exchange rate at which the transaction will be made. The Fund
may also enter into a forward contract to sell an amount of foreign
currency approximating the value of some or all of the Fund's securities
positions denominated in that currency.
Forward currency contracts may substantially change the
Fund's investment exposure to changes in currency exchange rates and
could result in losses if currencies do not perform as Dreyfus
anticipates. There is no assurance that Dreyfus' use of forward currency
contracts will be advantageous to the Fund or that it will hedge at an
appropriate time.
RISKS OF DERIVATIVE INSTRUMENTS. The use of Derivative
Instruments involves special risks, including: (1) possible imperfect or
no correlation between price movements of the portfolio investments (held
or intended to be purchased) involved in the transactions and price
movements of the Derivative Instruments involved in the transaction; (2)
possible lack of a liquid secondary market for any particular Derivative
Instrument at a particular time; (3) the need for additional portfolio
management skills and techniques; (4) losses due to unanticipated market
price movements; (5) the fact that, while such strategies can reduce the
risk of loss, they can also reduce the opportunity for gain, or even
result in losses, by offsetting favorable price movements in portfolio
investments; (6) incorrect forecasts by Dreyfus concerning interest or
currency exchange rates or direction of price fluctuations of the
investment involved in the transaction, which may result in the strategy
being ineffective; (7) loss of premiums paid by the Fund on options it
purchases; and (8) the possible inability of the Fund to purchase or
sell a portfolio security at a time when it would otherwise be favorable
for it to do so, or the need to sell a portfolio security at a
disadvantageous time, due to the need for the Fund to maintain "cover" or
to segregate securities in connection with such transactions and the
possible inability of the Fund to close out or liquidate its positions.
Dreyfus may use Derivative Instruments for hedging purposes
(to adjust the risk characteristics of the Fund's portfolio) and may use
these instruments to adjust the return characteristics of the Fund's
portfolio of investments. This can increase the investment risk. If
Dreyfus judges market conditions incorrectly or employs a strategy that
does not correlate well with the Fund's investments, these techniques
could result in a loss, regardless of whether the intent was to reduce
risk or increase return. These techniques may increase the volatility of
the Fund and may involve a small investment of cash relative to the
magnitude of the risk assumed. In addition, these techniques could result
in a loss if the counterparty to the transaction does not perform as
promised or if there is not a liquid secondary market to close out a
position that the Fund has entered into.
Options and futures transactions may increase portfolio
turnover rates, which results in correspondingly greater commission
expenses and transaction costs, and may result in certain tax
consequences.
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
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
# Page 11
commercial paper of U.S. and foreign companies rated at the
time of purchase at least A-1 by Standard & Poor's, Prime-1 by Moody's
Investors Service, 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,
adverse 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.
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.
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
# Page 12
with a duration of more than seven days are considered
illiquid securities and are subject to the associated limits discussed
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 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.
INITIAL PUBLIC OFFERINGS ("IPOS"). The Fund may invest in an
IPO, 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 operating history 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 (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.
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 ("U.S. Government Securities"). In addition to direct obligations
of the U.S. Treasury, U.S. Government Securities include securities
issued or guaranteed by the Federal Housing Administration, Farmers Home
Administration, Export-Import Bank of the United States, Small Business
Administration, 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, Federal
Home Loan Mortgage Corporation or other instrumentalities.
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 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,
security 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.
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.
# Page 13
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 November 30, 1995, Dreyfus managed or
administered approximately $83 billion in assets for more than 1.7 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 one or more third parties to provide,
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 James Wadsworth. Mr. Wadsworth 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. Wadsworth has been Chief Investment Officer for Laurel Capital
Advisers since October 1990. Mr. Wadsworth also is a First Vice President
of Mellon Bank, where he has been employed since 1977.
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 $207 billion in assets as of September 30,
1995, including $80 billion in mutual fund assets. As of September 30,
1995, Mellon, through various subsidiaries, provided non-investment
services, such as custodial or administration services, for more than
$717 billion in assets, including approximately $55 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 1.25% of the
value of the Fund's average daily net assets. Dreyfus pays all of the
Fund's expenses, except brokerage fees, taxes, interest, Rule 12b-1 fees
(if applicable) and extraordinary 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. For the fiscal year
ended October 31, 1995, the Fund paid Dreyfus 1.25% 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, 1995, total operating
expenses (excluding Rule 12b-1 fees, as applicable) of the Fund for Class
A and Class R shares were 1.25%, of the average daily
# Page 14
net assets for each of the Fund's Class A and Class R shares.
For the period from December 19, 1994 through October 31, 1995 for Class
B and Class C shares, total operating expenses (excluding Rule 12b-1
fees) of the Fund were 1.25% (annualized) of the average daily net assets
for each of the Fund's Class B and Class C shares.
In addition, Class A, B and C shares may be subject to
certain distribution and shareholder servicing fees. See "Distribution
Plans (Class A Plan and Class B and C Plan)."
Dreyfus may pay the Fund's distributor for shareholder
services from Dreyfus' 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 subsidiary
of FDI Distribution Services, Inc., a provider of mutual fund
administration services, which in turn is a wholly-owned subsidiary of
FDI Holdings, Inc., the parent company of which is Boston Institutional
Group, Inc.
CUSTODIAN; TRANSFER AND DIVIDEND DISBURSING AGENT; AND
SUB-ADMINISTRATOR--Mellon Bank, One Mellon Bank Center, Pittsburgh,
Pennsylvania 15258 is the Fund's custodian. The Fund's Transfer and
Dividend Disbursing Agent is Dreyfus Transfer, Inc. (the "Transfer
Agent"), a wholly-owned subsidiary of Dreyfus located at 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-Administration Agreement with Dreyfus, provides various
administrative and corporate secretarial services to the Fund.
HOW TO BUY FUND SHARES
GENERAL--Class A shares, Class B shares and Class C shares
may be purchased only by clients of Agents, except that full-time or
part-time employees or directors of Dreyfus or any of its affiliates or
subsidiaries, 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 may purchase Class A shares directly through the
Distributor. Subsequent purchases may be sent directly to the Transfer
Agent or your Agent.
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. 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.
When purchasing Fund shares, you must specify which Class is
being purchased. Stock certificates are issued only upon your written
request. No certificates are issued for fractional shares. The Fund
reserves the right to reject any purchase order.
Agents may receive different levels of compensation for
selling different Classes of shares. Management understands that some
Agents may impose certain conditions on their clients which are different
from those described in this Prospectus, and, to the extent permitted by
# Page 15
applicable regulatory authority, may charge their clients
direct fees which would be in addition to any amounts which might be
received under the Distribution and Service Plans. Each Agent has agreed
to transmit to its clients a schedule of such fees. You should consult
your Agent in this regard.
The minimum initial investment is $1,000. 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.
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
certain qualified or non-qualified employee benefit plans or other
programs, including pension, profit-sharing and other deferred
compensation plans, whether established by corporations, partnerships,
non-profit entities or state and local governments ("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 through the
TELETRANSFER Privilege described below. Checks should be made payable to
"Premier Small Company Stock Fund." Payments to open new accounts which
are mailed should be sent to Premier Small Company Stock Fund, 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 Premier Small
Company Stock Fund, P.O. Box 105, Newark, New Jersey 07101-0105. Neither
initial nor subsequent investments should be made by third party check.
Wire payments may be made if your bank account is in a
commercial bank that is a member of the Federal Reserve System or any
other bank having a correspondent bank in New York City. Immediately
available funds may be transmitted by wire to Boston Safe Deposit and
Trust Company, together with the applicable Class' DDA # number as shown
below, for purchase of Fund shares in your name:
DDA# 044733 Premier Small Company Stock Fund/Class A shares;
DDA# 044806 Premier Small Company Stock Fund/Class B shares;
DDA# 044903 Premier Small Company Stock Fund/Class C shares;
DDA# 043656 Premier Small Company 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 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 16
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 Boston Safe Deposit and Trust Company with
instructions to credit your Fund account. The instructions must specify
your Fund account registration and Fund account number PRECEDED BY THE
DIGITS "4410" for Class A shares, "4420" for Class B shares, "4430" for
Class C shares and "4960" for Class R shares.
The Distributor may pay dealers a fee of up to 0.5% 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 PER SHARE ("NAV") -- An investment
portfolio's NAV refers to the worth of one share. The NAV for shares of
each Class of the Fund 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 number of shares of that Class outstanding. Shares
of each Class of the Fund are offered on a continuous basis. 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 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.
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 such close of
business 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 such close of business are effective
on, and receive the share price determined on, the next business day.
Orders for the purchase of Fund shares received by dealers by
the close of trading on the floor of the NYSE on any business day and
transmitted to the Distributor or its designee by
# Page 17
the close of its business day (normally 5:15 p.m., New York
time) will be based on the public offering price per share determined as
of the close of trading on the floor of the NYSE on that day. Otherwise,
the orders will be based on the next determined public offering price. It
is the dealer's responsibility to transmit orders so that they will be
received by the Distributor or its designee before the close of its
business day.
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
--------------------------------------
As a % of As a % of Dealers' Reallowance
Offering Price Net Asset Value as a % of
Amount of Transaction Per Share Per Share Offering Price
----------------------- ---------------- ---------------- --------------------------
<S> <C> <C> <C>
Less than $50,000......... 4.50 4.70 4.25
$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 sections of the Fund's Prospectus
entitled "How to Redeem Fund Shares _ Contingent Deferred Sales Charge _
Class B" (other than the amount of the CDSC and its time periods) and
"How to Redeem Fund Shares_Waiver of CDSC" are applicable to the Class A
shares subject to a CDSC. Letter of Intent and Right of Accumulation
apply to such purchases of Class A shares.
Full-time employees of NASD member firms and full-time
employees of other financial institutions which have entered into an
agreement with the Distributor pertaining to the sale of Fund shares (or
which otherwise have a brokerage related or clearing arrangement with an
NASD member firm or financial institution with respect to the sale of
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 the
Distributor with such information as it may request from time to time in
order to verify eligibility for this privilege. This privilege also
applies to full-time employees of financial institutions affiliated with
NASD member firms whose full-time employees are eligible to purchase
Class A shares at NAV. In addition, Class A shares are offered at NAV to
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.
Class A shares will be offered at NAV without a sales load to
employees participating in Eligible Benefit Plans. Class A shares also
may be purchased (including by exchange) at NAV without a sales load for
Dreyfus-sponsored IRA "Rollover Accounts" with the distribution proceeds
from a qualified retirement plan or a Dreyfus-sponsored 403(b)(7) plan,
provided that, at the time of such distribution, such qualified
retirement plan or Dreyfus-sponsored 403(b)(7) plan (a) met the
requirements of an Eligible Benefit Plan and all or a portion of such
plan's assets were invested in funds in the Dreyfus Family of Funds or
certain other products made available by the Distributor to such plans or
(b) invested all of its assets in certain funds in the Premier Family of
Funds or the Dreyfus Family of Funds or certain other products made
available by the Distributor to such plans.
Holders of Class A accounts of the Fund as of December 19,
1994 may continue to purchase Class A shares of the Fund at NAV. However,
investments by such holders in OTHER funds advised by Dreyfus will be
subject to any applicable front-end sales load.
# Page 18
Class A shares may be purchased at NAV through certain
broker-dealers and other financial institutions which have entered into
an agreement with the Distributor, which includes a requirement that such
shares be sold for the benefit of clients participating in a "wrap
account" or a similar program under which such clients pay a fee to such
broker-dealer or other financial institution.
Class A shares also may be purchased at NAV, subject to
appropriate documentation, through a broker-dealer or other financial
institution with the proceeds from the redemption of shares of a
registered open-end management investment company not managed by Dreyfus
or its affiliates. The purchase of Class A shares of the Fund must be
made within 60 days of such redemption and the shareholder must have
either (i) paid an initial sales charge or a CDSC or (ii) been obligated
to pay at any time during the holding period, but did not actually pay on
redemption, a deferred sales charge with respect to such redeemed shares.
Class A shares also may be purchased at NAV, subject to
appropriate documentation, by (i) qualified separate accounts maintained
by an insurance company pursuant to the laws of any State or territory
of the United States, (ii) a State, county or city or instrumentality
thereof, (iii) a charitable organization (as defined in Section 501(c)(3)
of the Code) investing $50,000 or more in Fund shares and (iv) a
charitable remainder trust (as defined in Section 501(c)(3) of the Code).
The dealer reallowance may be changed from time to time but
will remain the same for all dealers. The Distributor, at its expense,
may provide additional promotional incentives to dealers that sell shares
of funds advised by Dreyfus 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 the
Distributor than they receive for selling most other funds.
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." The Distributor
compensates certain Agents for selling Class B shares at the time of
purchase from the Distributor's own assets. The proceeds of the CDSC and
the distribution fee, in part, are used to defray these expenses.
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 is imposed, however, on redemptions of Class C shares
made within the first year of purchase. See "Class B shares" above and
"How to Redeem Fund Shares."
CLASS R SHARES--The public offering price for Class R shares
is the NAV of that Class.
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 Dreyfus
which are sold with a sales load and shares acquired by a previous
exchange of such shares (hereinafter referred to as "Eligible Funds"), by
you and any related "purchaser" as defined in the 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 the Distributor if orders are made by wire,
or the Transfer Agent if orders are made by mail. The reduced sales load
is subject to confirmation of your holdings through a check of
appropriate records.
# Page 19
TELETRANSFER PRIVILEGE -- 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 TELETRANSFER Privilege, you may
request a TeleTransfer purchase of Fund shares by telephoning
1-800-645-6561 or, if calling from overseas, 516-794-5452.
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, 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 1-800-645-6561 or, if calling from overseas,
516-794-5452. 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,
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 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 share
s of the fund from which you are exchanging were:
# Page 20
(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
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.
AUTO-EXCHANGE PRIVILEGE
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 other funds in the Premier
Family of Funds or 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 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 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. See "Shareholder Services" in the
SAI. 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 Premier
Small Company Stock Fund, P.O. Box 6587, Providence, Rhode Island
02940-6587. 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 Premier Family of Funds or the Dreyfus Family of Funds
eligible to participate in this Privilege, or to obtain an Auto-Exchange
Authorization Form, please call toll free 1-800-645-6561.
AUTOMATIC ASSET BUILDER
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 an AUTOMATIC Asset Builder account, you must
file an authorization form with the Transfer Agent. You may obtain the
necessary authorization form
# Page 21
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 Premier Small Company Stock Fund, P.O. Box 6587,
Providence, Rhode Island 02940-6587, 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.
DIVIDEND OPTIONS
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 another fund in the Premier Family of Funds
or certain of 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 a sales load. If you are investing in a fund
that charges a sales load, you may qualify for share prices which do not
include the sales load or which reflect a reduced sales load. If you are
investing in a fund or class that charges a CDSC, the shares purchased
will be subject on redemption to the CDSC, if any, applicable to the
purchased shares. See "Shareholder Services" in the SAI. 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 Dividend Options Form, please call toll free 1-800-645-6561.
You may cancel these Privileges by mailing written notification to
Premier Small Company Stock Fund, P.O. Box 6587, Providence, Rhode Island
02940-6587. To select a new fund after cancellation, you must submit a
new Dividend Options Form. Enrollment in or cancellation of these
Privileges is effective three business days following receipt. These
Privileges are available only for existing accounts and may not be used
to open new accounts. Minimum subsequent investments do not apply for
Dividend Sweep. The Fund may modify or terminate these Privileges at any
time or charge a service fee. No such fee currently is contemplated.
Shares held under Keogh Plans, IRAs or other retirement plans are not
eligible for Dividend Sweep.
GOVERNMENT DIRECT DEPOSIT PRIVILEGE
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 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.
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 from the Automatic Withdrawal Plan. An
application for the
# Page 22
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.
Shares withdrawn pursuant to the Automatic Withdrawal Plan
will be subject to any applicable CDSC. Purchases of additional Class A
shares where the sales load is imposed concurrently with withdrawals of
Class A shares generally are undesirable.
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.
LETTER OF INTENT--CLASS A SHARES
By signing a Letter of Intent form, available from the
Distributor, 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.
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 (other than any applicable CDSC)
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
# Page 23
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. HOWEVE
R, IF YOU HAVE PURCHASED FUND SHARES BY CHECK, BY THE TELETRANSFER PRIVILEGE
OR THROUGH 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,
TELETRANSFER PURCHASE OR AUTOMATIC ASSET BUILDER ORDER, WHICH MAY TAKE UP
TO EIGHT BUSINESS DAYS OR MORE. IN ADDITION, THE FUND WILL REJECT
REQUESTS TO REDEEM SHARES BY WIRE OR TELEPHONE OR PURSUANT TO THE
TELETRANSFER PRIVILEGE FOR A PERIOD OF EIGHT BUSINESS DAYS AFTER RECEIPT
BY THE TRANSFER AGENT OF THE PURCHASE CHECK, THE TELETRANSFER PURCHASE OR
THE 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.
CONTINGENT DEFERRED SALES CHARGE--CLASS B SHARES--A CDSC
payable to the Distributor is imposed on any redemption of Class B shares
which reduces the current 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 other 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:
Year Since CDSC as a % of Amount
Purchase Payment Invested or Redemption
Was Made Proceeds
------------------ ------------------------
First........................... 4.00
Second.......................... 4.00
Third........................... 3.00
Fourth.......................... 3.00
Fifth........................... 2.00
Sixth........................... 1.00
In determining whether a CDSC is applicable to a redemption,
the calculation will be made in a manner that
results in the lowest possible rate. It will be assumed that the
redemption is made first of amounts representing shares acquired pursuant
to the reinvestment of dividends and other distributions; then of amounts
representing the increase in NAV of Class B shares
# Page 24
above the total amount of payments for the purchase of Class
B shares made during the preceding six years; then of amounts
representing the cost of shares purchased six years prior to the
redemption; and finally, of amounts representing the cost of shares held
for the longest period of time within the applicable six-year period.
For example, assume an investor purchased 100 shares at $10
per share for a cost of $1,000. Subsequently, the shareholder acquired
five additional shares through dividend reinvestment. During the second
year after the purchase the investor decided to redeem $500 of his or her
investment. Assuming 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 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.
For purposes of determining the applicable CDSC payable with
respect to redemption of Class B shares of the Fund where such shares
were acquired through exchange of Class B shares of another fund advised
by Dreyfus, the year since purchase payment was made is based on the date
of purchase of the original Class B shares of the fund exchanged.
CONTINGENT DEFERRED SALES CHARGE--CLASS C SHARES--A CDSC of
1% payable to the Distributor is imposed on any redemption of Class C
shares within one year of the date of purchase. The basis for calculating
the payment of any such CDSC will be the method used in calculating the
CDSC for Class B shares. See "Contingent Deferred Sales Charge_Class B
shares" above.
WAIVER OF CDSC--The CDSC applicable to Class B and Class C
shares (and to certain Class A 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 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 Company'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 you must notify the Transfer Agent or your Agent must notify
the Distributor. Any such qualification is subject to confirmation of
your entitlement.
PROCEDURES--You may redeem Fund shares by using the regular
redemption procedure through the Transfer Agent, or through the
TELETRANSFER Privilege or, if you are a client of a Selected Dealer,
through the Selected Dealer. If you have given your Agent authority to
instruct the Transfer Agent to redeem shares and to credit the proceeds
of such redemptions to a designated account at your Agent, you may
redeem shares only in this manner and in accordance with the regular
redemption procedure described below. If you wish to use the other
redemption methods described below, you must arrange with your Agent for
delivery of the required application(s) to the Transfer Agent. 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 TELET
RANSFER Privilege or Telephone Exchange Privilege, which is granted
automatically unless you refuse it, you authorize the Transfer Agent to
act on telephone
# Page 25
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 TELETRANSFER 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 TELETRANSFER 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 Premier Small
Company Stock Fund, P.O. Box 6587, Providence, Rhode Island 02940-6587.
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
1-800-554-4611.
Redemption proceeds of at least $1,000 will be wired to any
member bank of the Federal Reserve System in accordance with a written
signature-guaranteed request.
TELETRANSFER PRIVILEGE. You may 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 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 TELETRANSFER Privilege, you may
request a TELETRANSFER redemption of Fund shares by telephoning
1-800-645-6561 or, if calling from overseas, 1-516-794-5452. Shares held
under Keogh Plans, IRAs or other retirement plans, and shares issued in
certificate form, are not eligible for this Privilege.
REDEMPTION THROUGH A SELECTED DEALER. If you are a customer
of a Selected Dealer, you may make redemption requests to your Selected
Dealer. If the Selected Dealer transmits the redemption request so that
it is received by the Transfer Agent prior to the close of trading on the
floor of the NYSE (currently 4:00 p.m., New York time), the redemption
request will be effective on that day. If a redemption request is
received by the Transfer Agent after the close of trading on the floor of
the NYSE, the redemption request will be effective on the next business
day. It is the responsibility of the Selected Dealer to transmit a
request so that it is
# Page 26
received in a timely manner. The proceeds of the redemption
are credited to your account with the Selected Dealer. See "How to Buy
Fund Shares" for a discussion of additional conditions or fees that may
be imposed upon redemption.
In addition, the Distributor will accept orders from Selected
Dealers with which it has sales agreements for the repurchase of shares
held by shareholders. Repurchase orders received by dealers by the close
of trading on the floor of the NYSE on any business day and transmitted
to the Distributor or its designee prior to the close of its business day
(normally 5:15 p.m., New York time) are effected at the price determined
as of the close of trading on the floor of the NYSE on that day.
Otherwise, the shares will be redeemed at the next determined NAV. It is
the responsibility of the Selected Dealer to transmit orders on a timely
basis. The Selected Dealer may charge the shareholder a fee for executing
the order. This repurchase arrangement is discretionary and may be
withdrawn at any time.
REINVESTMENT PRIVILEGE--CLASS A SHARES. Upon written request,
you may reinvest up to the number of Class A shares you have redeemed,
within 30 days of redemption, at the then-prevailing NAV without a sales
load, or reinstate your account for the purpose of exercising Fund
Exchanges. The Reinvestment Privilege may be exercised only once.
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 different compensation with respect to one
Class of shares over another.
DISTRIBUTION PLAN--CLASS A SHARES--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 Dreyfus, for
shareholder servicing activities and the Distributor for shareholder
servicing activities and expenses primarily intended to result in the
sale of Class A 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 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 Class A 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.
DISTRIBUTION AND SERVICE PLANS--CLASS B AND C SHARES-- Under
a Distribution Plan adopted pursuant to Rule 12b-1, the Fund pays the
Distributor 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 Service Plan adopted pursuant to Rule
12b-1, the Fund pays Dreyfus Service Corporation or the Distributor 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 maintenance 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 their clients in connection with the
investment of their assets in Class B and C shares. The Distributor may
pay one
# Page 27
or more Agents in respect of distribution and other services
for these Classes of shares. The Distributor 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 and Service Plans are payable without regard to actual
expenses incurred.
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
The Fund ordinarily declares and pays (on the first business
day of the following month) dividends four times yearly 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, to receive divdends in cash and reinvest other
distributions 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. Class B
and C shares will receive lower per share dividends than Class A shares
which will receive lower per share dividends than Class R shares, because
of the higher expenses borne by the relevant Class. See "Expense
Summary."
It is expected that the Fund will qualify for treatment 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 (collectively, "Dividend Distributions"),
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
capital gain (the excess of net long-term capital gain over net
short-term capital loss) 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.
Dividend Distributions paid by the Fund to a non-resident
foreign investor generally are subject to U.S. withholding tax at the
rate of 30%, unless the non-resident foreign investor claims the benefit
of a lower rate specified in a tax treaty. Distributions from net capital
gain paid by the Fund to a non-resident foreign investor, as well as the
proceeds of any redemptions from a non-resident 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 capital gain, if any, paid during
the year.
The Code provides for the "carryover" of some or all of the
sales load imposed on Class A shares if (1) an investor redeems those
shares or exchanges those shares for shares of another fund advised or
administered by Dreyfus within 91 days of purchase and (2) in the case of
a
# Page 28
redemption, acquires other Fund Class A shares through
exercise of the Reinvestment Privilege or, in the case of an exchange,
such other fund reduces or eliminates its otherwise applicable sales load
for the purpose of the exchange. In this case, the amount of the sales
load charged the investor for the original Class A shares, up to the
amount of the reduction of the sales load pursuant to the Reinvestment
Privilege or on the exchange, as the case may be, is not included in the
basis of such shares for purposes of computing gain or loss on the
redemption or the exchange, and instead is added to the basis of the fund
shares received pursuant to the Reinvestment Privilege or the exchange.
Dividends and other distributions 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 distributions 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 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. If a
distributee of an "eligible rollover distribution" from a qualified
Retirement Plan does not elect to have the eligible rollover distribution
paid directly from the plan to an eligible retirement plan in a "direct
rollover," the eligible rollover distribution is subject to a 20% income
tax withholding.
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 capital gain 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 that
the TIN furnished in connection with opening an account is correct and
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 distribution and shareholder servicing fees. As a
result, at any given time, the performance of Class B and C should be
expected
# Page 29
to be lower than that of Class A and the performance of Class
A, B and C 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 (or maximum offering price in the case of Class A 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. Total return also may be calculated by
using the NAV 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. Calculations based on the NAV per
share do not reflect the deduction of the sales load on the Fund's Class
A shares, which, if reflected, would reduce the performance quoted.
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 share of such Class 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 Composite Index of 500
Stocks, 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 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.
# Page 30
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 SEC under the 1940 Act, as an open-end 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 four
classes_Class A, Class B, Class C 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 Class are entitled to vote, each
as a separate Class. Only holders of Class A, B or C shares, as the case
may be, will be entitled to vote on matters submitted to shareholders
pertaining to the Distribution and/or Service Plan relating to that
Class.
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, 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.
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 31
[This Page Intentionally Left Blank]
PCS/p3030196
# Page 32
- -------------------------------------------------------------------------------
PROSPECTUS MARCH 1, 1996
DREYFUS INSTITUTIONAL S&P 500 STOCK INDEX FUND
- -------------------------------------------------------------------------------
DREYFUS INSTITUTIONAL S&P 500 STOCK INDEX FUND (the "Fund"),
formerly called the "Dreyfus S&P 500 Stock Index Fund and also formerly
called the "Laurel S&P 500 Stock Index Fund," is a separate, diversified
portfolio of The Dreyfus/Laurel Funds, Inc., an open-end management
investment company (the "Company"), known as a mutual fund. The Fund's
investment objective is to replicate the total return of the Standard &
Poor's 500 Composite Stock Price Index primarily through investments in
equity securities.
Shares of the Fund are sold without a sales load.
You can purchase or redeem 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."
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.
The Statement of Additional Information ("SAI") dated March 1,
1996, which may be revised from time to time, provides a further discussion
of certain areas in this Prospectus and other matters which may be of
interest to some investors. It has been filed with the Securities and
Exchange Commission ("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 1-800-554-4611. When telephoning, ask for Operator
144.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
AGENCY. 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 AN
AFFILIATE OF MELLON BANK, N.A. ("MELLON BANK") 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.
- -------------------------------------------------------------------------------
TABLE OF CONTENTS
PAGE
EXPENSE SUMMARY.................................. 3
FINANCIAL HIGHLIGHTS............................. 4
DESCRIPTION OF THE FUND.......................... 5
MANAGEMENT OF THE FUND........................... 10
HOW TO BUY FUND SHARES........................... 11
SHAREHOLDER SERVICES............................. 13
HOW TO REDEEM FUND SHARES........................ 16
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES......... 19
PERFORMANCE INFORMATION.......................... 20
GENERAL INFORMATION.............................. 21
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.
(Page 2)
[This Page Intentionally Left Blank]
(Page 3)
<TABLE>
EXPENSE SUMMARY
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on Purchases..................... none
Maximum Sales Load Imposed on Reinvestments................. none
Deferred Sales Load......................................... none
Redemption Fee.............................................. none
Exchange Fee................................................ none
ESTIMATED ANNUAL FUND OPERATING EXPENSES:
(as a percentage of net assets)
Management Fees............................................. .20%
Other Expenses(1)........................................... .00%
Total Fund Operating Expenses............................... .20%
</TABLE>
<TABLE>
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:
<S> <C> <C>
1 YEAR $ 2
3 YEARS $ 6
5 YEARS $11
10 YEARS $26
</TABLE>
(1) 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 .01% 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. Effective September 15, 1995, the Fund's "Investor" and
"Class R" designations were eliminated and the Fund became a single class
Fund without any separate class designation. The information in the foregoing
table has been restated to reflect (i) the reduction of the Fund's management
fee from .40 of 1% to .20 of 1% of the Fund's average daily net assets,
effective as of September 15, 1995; and (ii) the termination of the Fund's
Rule 12b-1 Plan, effective as of August 2, 1995, which was applicable only to
its then existing Investor shares. The information in the foregoing table
does not reflect any fee waivers or expense reimbursement arrangements that
may be in effect. Certain banks, securities brokers or dealers and other
financial institutions ("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" and "How to Buy Fund Shares."
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 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 3)
FINANCIAL HIGHLIGHTS
The tables below are based upon a single 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, 1995 which is incorporated by reference in the SAI.
The financial statements included in the Fund's Annual Report for the year
ended October 31, 1995 have been audited by ________________________,
independent auditors, 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 by writing to the address
or calling the number set forth on the cover page of this Prospectus.
<TABLE>
DREYFUS INSTITUTIONAL S&P 500 STOCK INDEX FUND
For a share outstanding throughout each year or period.*
YEAR YEAR PERIOD
ENDED ENDED ENDED
10/31/95 10/31/94 10/31/93
<S> <C> <C> <C>
Net asset value, beginning of period $10.42 $10.23 $10.00
--------- ---------- ----------
Income from investment operations:
Net investment income 0.26 0.21# 0.01
Net realized and unrealized gain on investments 2.37 0.14 0.22
-------- -------- --------
Total from investment operations 2.63 0.35 0.23
-------- -------- --------
Less distributions:
Distributions from net investment income (0.26) (0.16) --_
Distributions from net capital gains (0.04) (0.00)+ --_
-------- -------- --------
Total distributions (0.30) (0.16) --_
-------- -------- --------
Net asset value, end of period $12.75 $ 10.42 $10.23
======== ======== ========
Total return 25.75% 3.50% 2.30%
======== ======== ========
Ratios/supplemental data:
Net assets, end of period (in 000's) $204,278 $123,994 $24,004
Net of operating expenses to average net assets 0.37% 0.40%*** 0.40%**##
Net of net investment income to average net assets 2.36% 2.38% 1.32%**
Portfolio turnover rate 1.03% .13% 22%###
</TABLE>
* 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 October 17,
1994 the Fund's Trust Shares were redesignated Class R shares. Effective
September 15, 1995, the Fund's Investor and Class R designations were
eliminated and the Fund became a single class Fund. The Financial Highlights
are based upon the Fund's Trust (Class R) shares for the period prior to
September 14, 1995, and its single class of shares effective September 15,
1995.
** 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 periods indicated.
Prior to October 17, 1994, Mellon Bank served as the Fund's investment
manager. Effective October 17, 1994, Dreyfus began serving as the Fund's
investment manager.
# 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 calculations does not include in-kind purchases amounting
to $22,472,314.
(Page 4)
DESCRIPTION OF THE FUND
INVESTMENT OBJECTIVE
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.
MANAGEMENT POLICIES
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 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,including Mellon Bank Corporation stock. 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 Fund's investment manager,
Dreyfus, 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.
ADDITIONAL INFORMATION ABOUT THE FUND. "Standard & Poor's
Registration Mark, "S&PRegistration Mark," "S&P 500Registration Mark,"
"Standard & Poor's 500", and "500" are trademarks of McGraw-Hill, Inc. and
have been licensed for
(Page 5)
use by the Company. 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. Standard & Poor's 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. Standard & Poor's only
relationship to the Company is the licensing of certain trademarks and trade
names of Standard & Poor's and of the S&P 500 Index which is determined,
composed and calculated by Standard & Poor's without regard to the Company or
the Fund. Standard & Poor's has no obligation to take the needs of the
Company or the owners of the Fund into consideration in determining,
composing or calculating the S&P 500 Index. Standard & Poor's 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. Standard & Poor's has no obligation or liability in
connection with the administration, marketing or trading of the Fund.
STANDARD & POOR'S DOES NOT GUARANTEE THE ACCURACY AND/OR THE
COMPLETENESS OF THE S&P 500 INDEX OR ANY DATA INCLUDED THEREIN AND STANDARD &
POOR'S SHALL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS
THEREIN. STANDARD & POOR'S 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.
STANDARD & POOR'S MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLA
IMS 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 SHALL STANDARD & POOR'S HAVE ANY
LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES
(INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH
DAMAGES.
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.
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 illiq
(Page 6)
uid 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
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 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
purchase and sell various financial instruments, including financial futures
contracts (such as index futures contracts) and options (such as options on
U.S. or foreign securities or indices of such securities). These instruments
may be used, for example, to preserve a return or spread or to facilitate or
substitute for the sale or purchase of securities. The Fund's ability to use
these instruments may be limited by market conditions, regulatory limits and
tax considerations. The Fund might not use any of these strategies and there
can be no assurance that any strategy that is used will succeed. See the SAI
for more information regarding these instruments and the risks relating
thereto. The Fund may not purchase put or call options that are traded on a
national stock exchange in an amount exceeding 5% of its net assets.
The use of futures and options involves special risks, including:
(1) possible imperfect or no correlation between price movements of the
portfolio investments (held or intended to be purchased) involved in the
transaction and price movements of the instruments involved in the
transaction; (2) possible lack of a liquid secondary market for any
particular instrument at a particular time; (3) the need for additional
portfolio management skills and techniques; (4) losses due to unanticipated
market price movements; (5) the fact that, while such strategies can reduce
the risk of loss, they can also reduce the opportunity for gain, or
(Page 7)
even result in losses, by offsetting favorable price movements in
portfolio investments; (6) incorrect forecasts by Dreyfus concerning
direction of price fluctuations of the investment involved in the
transaction, which may result in the strategy being ineffective; (7) loss of
premiums paid by the Fund on options it purchases; and (8) the possible
inability of the Fund to purchase or sell a portfolio security at a time when
it would otherwise be favorable for it to do so, or the need to sell a
portfolio security at a disadvantageous time, due to the need for the Fund to
maintain "cover" or to segregate securities in connection with such
transactions and the possible inability of the Fund to close out or liquidate
its positions.
Dreyfus may use futures and options for hedging purposes (to
adjust the risk characteristics of the Fund's portfolio) and may use these
instruments to adjust the return characteristics of the Fund's portfolio of
investments. This can increase investment risk. If Dreyfus judges market
conditions incorrectly or employs a strategy that does not correlate well
with the Fund's investments, these techniques could result in a loss,
regardless of whether the intent was to reduce risk or increase return. These
techniques may increase the volatility of the Fund and may involve a small
investment of cash relative to the magnitude of the risk assumed. In
addition, these techniques could result in a loss if the counterparty to the
transaction does not perform as promised or if there is not a liquid
secondary market to close out a position that the Fund has entered into.
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 at the time of purchase at least A-1 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.
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 institu
(Page 8)
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
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 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 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 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.
(Page 9)
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 November 30, 1995, Dreyfus managed or
administered approximately $83 billion in assets for more than 1.7 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 one or more third parties to provide, 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 $209 billion in assets as of
September 30, 1995, including $80 billion in mutual fund assets. As of
September 30, 1995, Mellon, through various subsidiaries, provided
non-investment services, such as custodial or administration services, for
more than $717 billion in assets, including approximately $55 billion in
mutual fund assets.
Effective September 15, 1995, the Investment Management Agreement
between the Company, on behalf of the Fund, and Dreyfus was amended to
reflect a reduction in the annual management fee payable by the Fund to
Dreyfus from 0.40 of 1% to 20 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 by 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. For the period period from November 1,
1994 through September 14, 1995, the Fund paid Dreyfus a monthly management
fee at the effective annual rate of .35 of 1% of the Fund's average daily net
assets, less fees and expenses of the non-interested Directors (including
counsel fees). For the period from September 15, 1995 through October 31,
1995, the Fund paid Dreyfus a monthly management fee at the effective annual
rate of .35 of 1% of the Fund's average daily net assets less such fees and
expenses of non-interested Directors.
(Page 10)
For the fiscal year ended October 31, 1995, total operating
expense (excluding Rule 12b-1 fees) were .35% (annualized) of the Fund's
average daily net assets. Effective September 15, 1995, the Fund's "Investor"
and "Class R" designations were eliminated and the Fund became a single class
fund without any separate class designations. It is anticipated that the
current total operating expenses of the Fund will be approximately .20% of
the Fund's average daily net assets.
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.
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 FDI
Distribution Services, Inc., a provider of mutual fund administration
services, which in turn is a wholly-owned subsidiary of FDI Holdings, Inc.,
the parent company of which is Boston Institutional Group, Inc.
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT, AND
SUB-ADMINISTRATOR--Mellon Bank (One Mellon Bank Center, Pittsburgh,
Pennsylvania 15258) is the Fund's custodian. The Fund's transfer and dividend
disbursing agent is Dreyfus Transfer, Inc. (the "Transfer Agent"), a
subsidiary of Dreyfus, located at 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 -- Fund shares are offered to any investor and may be
purchased through the Distributor or Agents that have entered into Selling
Agreements with the Distributor.
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 $100,000. Subsequent
investments must be at least $1,000 (or at least $100 in the case of persons
who have held Fund shares since September 14, 1995, except that there is no
minimum on subsequent purchases for holders of Fund shares in a
Dreyfus-sponsored Keogh Plan, IRA, SEP-IRA or 403(b)(7) Plan (with only one
participant) account since September 14, 1995.) The initial investment must
be accompanied by the Fund's Account Application. The Fund reserves the right
to offer Fund shares without regard to minimum purchase requirements to
employees participating in certain qualified or non-qualified employee
benefit plans or other programs where contributions or account information
can be transmitted in a manner and form acceptable to the Fund. The Fund
reserves the right to vary further the initial and subsequent investment
minimum requirements at any time.
You may purchase Fund shares by check or wire, or through the
Dreyfus TELETRANSFER Privilege described below. Checks should be made payable
to "The Dreyfus Family of Funds" or, if for Dreyfus retirement plan accounts,
to "The Dreyfus Trust Company, Custodian." Payments to open new accounts
which are mailed should be sent to The Dreyfus Family of Funds, P.O. Box
9387, Providence, Rhode Island 02940-9387, together with your Account
Application. For subsequent investments, your
(Page 11)
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 the telephone number 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 Boston Safe Deposit and Trust Company, DDA# 044288
Dreyfus Institutional S&P500 Stock Index Fund, for purchase of Fund shares in
your name.
The wire must include your Fund account number (for new accounts,
your Taxpayer Identification Number ("TIN") should be included instead),
account registration and dealer number, if applicable. If your initial
purchase of Fund shares is by wire, 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 Boston Safe Deposit and Trust Company with instructions to
credit your Fund account. The instructions must specify your Fund account
registration and Fund account number PRECEDED BY THE DIGITS "4110."
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 PER SHARE ("NAV")--An investment portfolio's NAV
refers to the worth of one share. The NAV for Fund shares is computed by
adding the value of the Fund's investments, cash, and
(Page 12)
other assets, deducting liabilities and dividing the result by
the number of shares 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.
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 such close of business 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 such close of business are
effective on, and receive the share price determined on, the next business
day.
The public offering price of Fund shares, which are offered on a
continuous basis, is the net asset value per share.
DREYFUS TELETRANSFER PRIVILEGE -- 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 Fund shares by telephoning
1-800-645-6561 or, if calling from overseas, 516-794-5452.
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 the Fund, (a) shares
(however the same may be named) of other funds managed or administered by
Dreyfus which you would otherwise be eligible to purchase; (b) shares of
funds managed or administered by Dreyfus which do not have separate share
classes; and (c) shares of other funds specified from time to time, 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.
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 estab
(Page 13)
lishing 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 1-800-645-6561 or, if calling from overseas, 516-794-5452. 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, Dreyfus TELETRANSFER Privilege and the dividends and distributions
payment option (except for Dreyfus 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 into funds sold with a
sales load. If you are exchanging into a fund that charges a sales load, you
may qualify for share prices which do not include the sales load or which
reflect a reduced sales load, if the shares 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 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 (a) shares (however the same may be named) of certain
other funds in the Dreyfus Family of Funds; and (b) shares of other funds
specified from time to time, of which you are currently an investor. The
amount you designate, which can be expressed either in terms of a specific
dollar or share amount ($100 minimum), will be exchanged automatically on the
first and/or fifteenth day of the month according to the schedule you have
selected. Shares will be exchanged at the then-current net asset value;
however a sales load may be charged with respect to exchanges into funds sold
with a sales load. 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 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.
(Page 14)
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 (a) shares (however the same may be named) of certain other funds in
The Dreyfus Family of Funds; and(b) shares of other funds specified from time
to time, of which you are currently 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 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
(Page 15)
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 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. 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.
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 net asset
value.
The Fund ordinarily will make payment for all shares redeemed
within seven days after receipt by the Transfer Agent of a redemption request
in proper form, except as provided by the rules of the 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
(Page 16)
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 $10,000 or less ($500 or less in the case of holders of Fund
shares since prior to September 15, 1995) and remains at or below such amount
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 the Dreyfus TELETRANSFER Priv
ilege. 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 Dreyfus 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 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,
clearing agencies and savings associations, as well as from participants in
the New York Stock Exchange Medallion Signature Program, the Securities
Transfer Agents Medallion
(Page 17)
Program ("STAMP"), and the Stock Exchanges Medallion Program. For
more information with respect to signature-guarantees, please call the
telephone number 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 1-800-645-6561 or,
if calling from overseas, 516-794-5452. 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 any time 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 1-800-645-6561 or, if calling from overseas, 516-794-5452. 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. 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
1-800-645-6561 or, if calling from overseas, 516-794-5452. Shares held under
Keogh Plans, IRAs or other retirement plans, and shares issued in certificate
form, are not eligible for this Privilege.
(Page 18)
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 Internal Revenue
Code of 1986, as amended (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 may choose whether to receive dividends
and other distributions in cash, to receive dividends in cash and reinvest
other distributions in additional Fund shares, or to reinvest both dividends
and other distributions. All expenses are accrued daily and deducted before
declaration of dividends to investors.
It is expected that the Fund will qualify for treatment 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 (collectively, "Dividend Distributions"), paid by the Fund
will be taxable to U.S. shareholders as ordinary income whether received in
cash or reinvested in additional Fund shares. Distributions from the Fund's
net capital gain (the excess of net long-term capital gain over net short-term
capital loss) 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.
Dividend Distributions paid by the Fund to a non-resident 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 gain paid by the Fund to a non-resident
foreign investor, as well as the proceeds of any redemptions from a
non-resident 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 non-resident 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 gain, if any, paid during the year.
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 that the
TIN furnished in connection with opening an account is correct and 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
(Page 19)
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 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 Fund.
Average annual total return is calculated pursuant to a
standardized formula which assumes that an investment was purchased with an
initial payment of $1,000 and that the investment was redeemed at the end of
a stated period of time, after giving effect to the reinvestment of dividends
and 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. Advertise
ments 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 net asset
value per share at the beginning of the period. Advertisements may include
the percentage rate of total return or may include the value of a
hypothetical investment at the end of the period which assumes the
application of the percentage rate of total return.
The Fund may also advertise its yield. The Fund's yield is
calculated by dividing the Fund's annualized net investment income per share
during a recent 30-day (or one month) period by the net asset value of such
share on the last day of that period. Since yields fluctuate, yield data
cannot necessarily be used to compare an investment in Fund 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, 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 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.
(Page 20)
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 SEC under
the 1940 Act, as an open-end 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
Company's Articles of Incorporation permit the Board of Directors to create
an unlimited number of investment portfolios (each a "fund").
Each share has one vote. All shares of all funds (and Classes
thereof, as applicable) 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.
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 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 21)
[This Page Intentionally Left Blank]
(Page 22)
[This Page Intentionally Left Blank]
(Page 23)
Institutional
S&P 500
Stock Index Fund
Prospectus
Copy Rights 1995 Dreyfus Service Corporation
313/713p3000095
Registration Mark
(Page 24)
PROSPECTUS MARCH 1, 1996
DREYFUS DISCIPLINED EQUITY INCOME FUND
DREYFUS DISCIPLINED EQUITY INCOME FUND (THE "FUND"), FORMERLY CALLED
THE "DREYFUS EQUITY INCOME FUND," IS A SEPARATE, DIVERSIFIED PORTFOLIO OF
THE DREYFUS/LAUREL FUNDS, INC., AN OPEN-END DIVERSIFIED MANAGEMENT INVESTMENT
COMPANY (THE "COMPANY"), KNOWN AS A MUTUAL FUND. 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.
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. ("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 SOLD PRIMARILY 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.
SHARES OF THE FUND MAY BE PURCHASED OR REDEEMED 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."
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.
THE STATEMENT OF ADDITIONAL INFORMATION ("SAI") DATED MARCH 1, 1996,
WHICH MAY BE REVISED FROM TIME TO TIME, PROVIDES A FURTHER DISCUSSION OF
CERTAIN AREAS IN THIS PROSPECTUS AND OTHER MATTERS WHICH MAY BE OF INTEREST
TO SOME INVESTORS. IT HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION ("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 144.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
THE NET ASSET VALUE OF FUNDS OF THIS TYPE WILL FLUCTUATE FROM TIME TO TIME.
THE FEES TO WHICH THE FUND IS SUBJECT ARE SUMMARIZED IN THE "EXPENSE
SUMMARY" SECTION OF THE FUND'S PROSPECTUS. THE FUND PAYS AN AFFILIATE OF
MELLON BANK 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 ACC
URACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
# Page 1
TABLE OF CONTENTS
Page
EXPENSE SUMMARY.............................. 4
FINANCIAL HIGHLIGHTS......................... 5
DESCRIPTION OF THE FUND...................... 7
MANAGEMENT OF THE FUND....................... 11
HOW TO BUY FUND SHARES....................... 13
SHAREHOLDER SERVICES......................... 15
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> <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 Fees......................................... .90% .90%
12b-1 Fee1.............................................. .25% none
Other Expenses2......................................... .00% .00%
______ _____
Total Fund Operating Expenses........................... 1.15% .90%
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 $ 12 $ 9
3 Years $ 37 $ 29
5 Years $ 63 $ 50
10 Years $140 $111
(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 .01% 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 Company understands that 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
FINANCIAL HIGHLIGHTS
The tables below are based upon a single Investor Share or Class R
Share outstanding through each 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, 1995 which is incorporated by
reference in the SAI. The financial statements included in the Fund's Annual
Report for the year ended October 31, 1995 have been audited by
_______________________, independent auditors 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 by
writing to the address or calling the number set forth on the cover page of
this Prospectus.
<TABLE>
<CAPTION>
DREYFUS DISCIPLINED EQUITY INCOME FUND
FOR AN INVESTOR SHARE OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.
FISCAL YEAR PERIOD
ENDED ENDED
10/31/95 10/31/94*#
<S> <C> <C>
Net asset value, beginning of period $9.95 $10.00
--------------
Income from investment operations:
Net investment income .22 0.03
Net realized and unrealized gain (loss) on investments 2.05 (0.08)
--------------
Total from investment operations 2.27 (0.05)
Net asset value, end of period $12.00 $9.95
==============
Total return 23.20% (0.50)%
==============
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $1,714 $ 1
Ratio of operating expenses to average net assets 1.15% 1.15%
Ratio of net investment income to average net assets 2.32% 2.65%
Portfolio turnover rate 37.57% 5%
* The Fund 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 served as the Fund's investment
manager. Effective October 17, 1994, Dreyfus began serving as the
Fund's investment manager.
</TABLE>
### Page 5
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
DREYFUS DISCIPLINED EQUITY INCOME FUND
FOR A CLASS R SHARE OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.
FISCAL YEAR PERIOD
ENDED ENDED
10/31/95 10/31/94*#
<S> <C> <C>
Net asset value, beginning of period $9.95 $10.00
--------------
Income from investment operations:
Net investment income 0.28 0.05
Net realized and unrealized gain (loss) on investments 2.02 (0.10)
--------------
Total from investment operations 2.30 (0.05)
--------------
Distributions:
Dividends from net investment income (.25) .__
Net asset value, end of period $12.00 $9.95
==============
Total return 23.48% (0.50)%
==============
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $4,509 $5,005
Ratio of operating expenses to average net assets 0.90% 0.90%
Ratio of net investment income to average net assets 2.57% 2.90%
Portfolio turnover rate 37.57% 5%
* The Fund commenced selling Trust shares on September 2, 1994. Effective
October 17,1994, 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 served as the Fund's investment
manager. Effective October 17, 1994, Dreyfus began serving 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, or to customers who
have received and hold shares of the Fund distributed to them by virtue of
such an amount or relationship. Investor shares are sold primarily to retail
investors by the Fund's Distributor and by Agents that have entered into an
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
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 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.
MANAGEMENT POLICIES
GENERAL -- 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) when-issued transactions and (4) American
Depository Receipts ("ADRs"). The Fund may invest in foreign securities,
which may include investments in developing countries. 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.
Individual security selection is the foundation of the Fund's
investment approach. Consistency of returns which exceed the Standard and
Poor's 500 Composite Stock Price Index ("S&P 500"), maintaining a current
yield greater than that of the S&P500 Index, 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 valua
tion 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 sector or
industry according to relative attractiveness. Dreyfus then applies
fundamental analysis to select the most attractive of the top-rated
securities and to determine those issues that should be sold. The Fund
follows this investment process while normally investing approximately 85% of
its assets in dividend-paying stocks.
This investment process utilizes disciplined control of fund risk and
a process of rigorous security selection. Risk is managed by controlling the
structure of the Fund so that characteristics of the Fund's portfolio
securities such as growth, size, volatility and quality are maintained
similar to those of the S&P500 at all times. The Fund may overweight certain
sectors in attempting to achieve higher yields. In addition, the Fund's
managers do not attempt to time the financial markets, or use sector or
industry rotation techniques.
### 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. 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.
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 at least equal at all times 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 Board of Directors determine it to be in the best interest of the Fund
and its shareholders. In making that determination, the Company's Board of
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.
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 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 at the time of
### Page 8
purchase at least A-1 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.
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 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 of the Fund
investing in fixed-income securities also may change as general levels of
interest rates fluctuate. When interest rates rise, 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 rise.
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, adverse 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.
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 registra-
### Page 9
tion 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.
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 repurcha
se 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.
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
### Page 10
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 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 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 November 30, 1995, Dreyfus managed or administered
approximately $83 billion in assets for more than 1.7 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 one or more third parties to provide, 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
Laurel Capital Advisors since October 1990. Mr. Mullins also is a Vice
President, Portfolio Manager and Senior Security Analyst for Mellon Bank.. He
has been with Mellon Bank since 1966.
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
### Page 11
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 $209 billion in assets as of September 30, 1995,
including $80 billion in mutual fund assets. As of September 30, 1995, Mellon,
through various subsidiaries, provided non-investment services, such as
custodial or administration services, for more than $717 billion in assets,
including approximately $55 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 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 by 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. For the fiscal year ended
October 31, 1995, the Fund paid Dreyfus 0.90% 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, 1995, total operating expenses
(excluding Rule 12b-1 fees) of the Fund were 0.90% of the average daily net
assets of each class for both the Investor and Class R shares.
In addition, Investor shares may be subject to certain distribution
and shareholder servicing fees. See "Distribution Plan (Investors Shares
Only)."
Dreyfus may pay the Fund's Distributor for shareholder services from
Dreyfus' 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 located at One Exchange Place, Boston,
Massachusetts 02109. The Distributor is a wholly-owned subsidiary of
FDIDistribution Services, Inc., a provider of mutual fund administration
services, which in turn is a wholly-owned subsidiary of FDI Holdings, Inc.,
the parent company of which is Boston Institutional Group, Inc.
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT, AND
SUB-ADMINISTRATOR -- Mellon Bank (One Mellon Bank Center, Pittsburgh,
Pennsylvania 15258) is the Fund's custodian. The Fund's transfer and dividend
disbursing agent is Dreyfus Transfer, Inc. (the "Transfer Agent"), a
wholly-owned subsidiary of Dreyfus, located at 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-Administration Agreement,
provides various administrative and corporate secretarial services to the Fund.
### Page 12
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 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. 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.
Stock certificates are issued only upon your written request. The
Fund reserves the right to reject any purchase order. No certificates are
issued for fractional shares.
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 $1,000. 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.
Fund shares are also offered without regard to the minimum initial
investment requirements through Dreyfus-AUTOMATIC Asset Builder, Dreyfus
Government Direct Deposit Privilege or Dreyfus Payroll Savings Plan pursuant
to the Dreyfus Step Program. These services enable you to make regularly
scheduled investments and may provide you with a convenient way to invest for
long-term financial goals. You should be aware, however, that periodic
investment plans do not guarantee a profit and will not protect an investor
against loss in a declining market.
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 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
### Page 13
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 the
telephone number 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 Boston Safe Deposit and Trust Company, together with
the applicable Class DDA# as shown below, for purchase of Fund shares in your
name:
DDA# 044237 Dreyfus Disciplined Equity Income Fund/Investor shares;
DDA# 043591 Dreyfus Disciplined Equity Income 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 Boston Safe Deposit and Trust Company with instructions to
credit your Fund account. The instructions must specify your Fund account
registration and Fund account number PRECEDED BY THE DIGITS "4070" for
Investor shares and "4910" for Class R shares.
The Distributor may pay dealers a fee of up to 0.5% 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
### Page 14
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 PER SHARE ("NAV") -- An investment portfolio's NAV
refers to the worth of one share. The NAV for Investor shares and Class R
shares, both of which are offered on a continuous basis, is computed by
adding, with respect to such Class of shares, the value of the Fund's investme
nts, 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.
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 such close of business 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 such close of business are
effective on, and receive the share price determined on, the next business
day.
The public offering price of Investor shares and Class R shares, both
of which are offered on a continuous basis, is the NAV of that Class.
DREYFUS TELETRANSFER PRIVILEGE -- 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 Transfe
r 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 Fund shares by telephoning
1-800-645-6561 or, if calling from overseas, 516-794-5452.
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 resi
dence. 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
### Page 15
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 1-800-645-6561 or, if calling from
overseas, 516-794-5452. 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, Dreyfus TELETRANSFER Privilege and
the dividends and distributions payment option (except for Dreyfus 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
### Page 16
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 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 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.
### Page 17
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 authorizatio
n form by calling 1-800-645-6561. You may change the amount of purchase or
cancel the authorization only by written notification to your employer. It is
the sole responsibility of your employer, not the Distributor, 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.
DREYFUS STEP PROGRAM -- Dreyfus Step Program enables you to purchase Investor
shares without regard to the Fund's minimum initial investment requirements
through Dreyfus-AUTOMATIC Asset Builder, Dreyfus Government Direct Deposit
Privilege or Dreyfus Payroll Savings Plan. To establish a Dreyfus Step
Program account, you must supply the necessary information on the Fund's
Account Application and file the required authorization form(s) with the
Transfer Agent. For more information concerning this Program, or to request
the necessary authorization form(s), please call toll free 1-800-782-6620.
You may terminate your participation in this Program at any time by
discontinuing your participation in Dreyfus-AUTOMATIC Asset Builder, Dreyfus
Government Direct Deposit Privilege or Dreyfus Payroll Savings Plan, as the
case may be, as provided under the terms of such Privilege(s). The Fund
reserves the right to redeem your account if you have terminated your
participation in the Program and your account's net asset value is $500 or
less. See "How to Redeem Fund Shares." The Fund may modify or terminate this
Program at any time. Investors who wish to purchase Investor shares through
Dreyfus Step Program in conjunction with a Dreyfus-sponsored retirement plan
may do so only for IRAs, SEP-IRAs and IRA "Rollover Accounts."
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 from
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,
### Page 18
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 net asset value.
The Fund ordinarily will make payment for all shares redeemed within
seven days after receipt by the Transfer Agent of a redemption request in
proper form, except as provided by the rules of the 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 PURSUANT TO THE DREYFUS
TELETRANSFER PRIVILEGE FOR A PERIOD OF EIGHT BUSINESS DAYS AFTER RECEIPT BY TH
E 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, 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 19
You may redeem or exchange 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 a telephone
redemption privilege or telephone exchange privilege, which is granted
automatically unless you refuse it, you authorize the Transfer Agent to act
on telephone instructions from any person representing himself or herself to
be you, 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 the telephone number 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-
645-6561 or, if calling from overseas, 516-794-5452. 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 any time 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.
### Page 20
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
1-800-645-6561 or, if calling from overseas, 516-794-5452. 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. 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 TELETR
ANSFER 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
1-800-645-6561 or, if calling from overseas, 516-794-5452. 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 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.
### Page 21
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
The Fund declares and pays (on the first business day of the
following month) dividends four times yearly from its net investment income,
if any, 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, to receive
dividends in cash and reinvest other distributions in additional Fund shares,
or to reinvest both dividends and other distributions in additional Fund
shares at NAV; 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 for treatment 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 (collectively, "Dividend Distributions"), 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 capital gain (the excess of
net long-term capital gain over short-term capital loss) 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.
Dividend Distributions paid by the Fund to a non-resident 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 capital gain paid by the Fund to a
non-resident foreign investor, as well as the proceeds of any redemptions
from a non-resident 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 non-resident 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 capital gain, if any, paid during the year.
Dividends and other distributions 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
### Page 21
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. If a distributee of an "eligible rollover distribution" from a
qualified Retirement Plans does not elect to have the eligible rollover
distribution paid directly from the plan to an eligible retirement plan in a
"direct rollover," the eligible rollover distribution is subject to a 20%
income tax withholding.
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 capital gain 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 that the TIN furnished in
connection with opening an account is correct and 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 and 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 distribution and
shareholder servicing 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. 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 the income
and principal changes for a specified period and dividing by the NAV at the
beginning of the
### Page 23
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 share of such Class 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, the S&P 500 Composite Stock Price Index, Standard & Poor's Midcap
StockIndex, 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 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 SEC under
the 1940 Act, as an open-end 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 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.
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.
### Page 24
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
[This Page Intentionally Left Blank]
### Page 26
[This Page Intentionally Left Blank]
### Page 27
Prospectus
Registration Mark
Copy Rights 1995Dreyfus Service Corporation
000p00000000
PROSPECTUS
PREMIER SMALL
COMPANY STOCK FUND
Managed by
The Dreyfus Corporation
Copy Rights 1995 Dreyfus Service Corporation
BPCSp2030195
Page 28
PROSPECTUS MARCH 1, 1996
DREYFUS INTERNATIONAL EQUITY ALLOCATION FUND
DREYFUS INTERNATIONAL EQUITY ALLOCATION FUND (THE "FUND"), FORMERLY
CALLED THE "LAUREL INTERNATIONAL EQUITY ALLOCATION FUND," IS A SEPARATE,
DIVERSIFIED PORTFOLIO OF THE DREYFUS/LAUREL FUNDS, INC., AN OPEN-END
MANAGEMENT INVESTMENT COMPANY (THE "COMPANY"), KNOWN AS A MUTUAL FUND. THE
FUND'S OBJECTIVE IS TO EXCEED THE TOTAL RETURN OF THE MORGAN STANLEY CAPITAL
INTERNATIONAL -- EUROPE AUSTRALIA FAR EAST (MSCI EAFE) INDEX THROUGH ACTIVE
COUNTRY ALLOCATION, STOCK SELECTION, CURRENCY ALLOCATION, AND PORTFOLIO
CONSTRUCTION AND RISK CONTROL.
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. ("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 SOLD PRIMARILY TO RETAIL INVESTORS BY THE
FUND'S DISTRIBUTOR AND BY BANKS, SECURITIES BROKERS AND DEALERS AND OTHER
FINANCIAL INSTITUTIONS (COLLECTIVELY, "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 FUND 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."
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.
THE STATEMENT OF ADDITIONAL INFORMATION ("SAI") DATED MARCH 1, 1996,
WHICH MAY BE REVISED FROM TIME TO TIME, PROVIDES A FURTHER DISCUSSION OF
CERTAIN AREAS IN THIS PROSPECTUS AND OTHER MATTERS WHICH MAY BE OF INTEREST
TO SOME INVESTORS. IT HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION ("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 144.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
THE NET ASSET VALUE OF FUNDS OF THIS TYPE WILL FLUCTUATE FROM TIME TO TIME.
THE FEES TO WHICH THE FUND IS SUBJECT ARE SUMMARIZED IN THE "EXPENSE
SUMMARY" SECTION OF THE FUND'S PROSPECTUS. THE FUND PAYS AN AFFILIATE OF
MELLON BANK 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.
Page 1
TABLE OF CONTENTS
EXPENSE SUMMARY................................. 4
FINANCIAL HIGHLIGHTS............................ 5
DESCRIPTION OF THE FUND......................... 6
MANAGEMENT OF THE FUND.......................... 12
HOW TO BUY FUND SHARES.......................... 13
SHAREHOLDER SERVICES............................ 16
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
<TABLE>
<CAPTION>
EXPENSE SUMMARY
INVESTOR SHARES CLASS R SHARES
<S> <C> <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 ........................................ 1.50% 1.50%
12b-1 Fee(1)........................................... 0.25% none
Other Expenses(2)...................................... 0.00% 0.00%
------ ------
Total Fund Operating Expenses ......................... 1.75% 1.50%
EXAMPLE:
An investor 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 $18 $15
3 YEARS $55 $47
5 YEARS $95 $82
10 YEARS $206 $179
(1) See "Distribution Plan (Investor Shares Only)" for a description of the
Fund's Distribution Plan for Investor shares.
(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 by an amount equal to the
Fund's allocable portion of such fees and expenses, which are estimated to be
0.01% of the Fund's average 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 Company understands that 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 clients 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 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, 1995, which is incorporated by
reference in the SAI. The financial statements included in the Fund's Annual
Report for the year ended October 31, 1995 have been audited by
_______________________ , independent auditors, whose report appears in the
Fund's Annual Report. Further information about, and management's discussion
of, the Fund's performance is contained in the Fund's Annual Report, which
may be obtained without charge by writing to the address or calling the
number set forth on the cover page of this Prospectus.
<TABLE>
<CAPTION>
DREYFUS INTERNATIONAL EQUITY ALLOCATION FUND
FOR AN INVESTOR SHARE OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.*
Year Period
Ended Ended
10/31/95 10/31/94#
----------- -----------
<S> <C> <C>
Net asset value, beginning of period $10.60 $10.00
----------- -----------
Income from investment operations:
Net investment income 0.01 0.01
Net realized and unrealized gain on investments 0.06 0.05
----------- -----------
Total from investment operations 0.07 0.06
----------- -----------
Distributions
Dividends from net investment income (.02) ._
Net asset value, end of period $10.11 $10.06
-=========== ============
Total Return 0.77% 0.60%
----------- -----------
Ratios to average net assets/Supplemental data:
Net Assets, end of period (in 000's) $4,088 $71
Ratio of expenses to average net assets 1.75% 1.74%
Ratio of net investment income to average net assets .04% 1.98%
Portfolio turnover rate 64.85% 0%
</TABLE>
*The Fund commenced selling Investor shares on August 12, 1994.
Annualized.
Total return represents aggregate total return for the period indicated.
# Prior to October 17, 1994, Mellon Bank served as the Fund's investment
manager. Effective October 17, 1994, Dreyfus began serving as the Fund's
investment manager.
# Page 5
<TABLE>
<CAPTION>
DREYFUS INTERNATIONAL EQUITY ALLOCATION FUND
FOR A CLASS R SHARE OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.*
Year Period
Ended Ended
10/31/95 10/31/94#
----------- -----------
<S> <C> <C>
Net asset value, beginning of period $10.06 $10.00
----------- -----------
Income from investment operations:
Net investment income 0.06 0.02
Net realized and unrealized gain on investments 0.02 0.04
----------- -----------
Total from investment options 0.08 0.0
----------- -----------
Distributions
Dividends from net investment income (0.02) ._
Net asset value, end of period $10.12 $10.06
-=========== ============
Total Return 0.91% 0.60%
----------- -----------
Ratios to average net assets/Supplemental data:
Net Assets, end of period (in 000's) $13,174 $11,844
Ratio of expenses to average net assets 1.56% 1.50%
Ratio of net investment income to average net assets 0.52% 2.22%
Portfolio turnover rate 64.85% 0%
* The Fund commenced selling Trust Shares on August 12, 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 served as the Fund's investment
manager. Effective October 17, 1994, Dreyfus began serving as the Fund's
investment manager.
</TABLE>
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, 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 sold
primarily to retail investors by the Fund's distributor and by Agents that
have entered into an 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 servicing fees paid by Investor shares will
cause Investor shares to have a higher expense ratio and pay lower dividends
than Class R shares.
INVESTMENT OBJECTIVE
The Fund's objective is to exceed the total return of the Morgan
Stanley Capital International--Europe Australia Far East (MSCI EAFE) Index
(the "Benchmark") through active stock selection, country allocation,
currency allocation, and portfolio construction and risk control. The Fund is
not an index fund and its investments are not representative of the
proportions or weightings of the
# Page 6
Benchmark. In addition to investing in securities in countries
representing the Benchmark, the Fund may invest up to 20% of its total assets
in securities of issuers in emerging market countries. There can be no
assurance that the Fund will meet its investment objective. Under normal
circumstances, the Fund will invest at least 65% of its assets in equity
securities of issuers in at least three countries outside of the United
States.
MANAGEMENT POLICIES
The Benchmark is a diversified, capitalization-weighted index of
equity securities of companies located in Australia and 13 countries of
Europe and 5 countries of the Far East. The countries represented in the
Benchmark are: Australia, Austria, Belgium, Denmark, Finland, France,
Germany, Hong Kong, Italy, Japan, the Netherlands, New Zealand, Norway,
Singapore/Malaysia, Spain, Sweden, Switzerland and the United Kingdom. The
Fund may also invest in securities of issuers in other countries added to the
Benchmark from time to time. 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 Dreyfus or the Fund's
sub-adviser, S.A.M. Finance, S.A. ("CCF S.A.M."), in structuring the Fund has
four basic components: (1) country allocation, (2) stock selection, (3)
currency allocation, and (4) portfolio construction and risk control. These
components employ a combination of quantitative research using proprietary
financial models and fundamental research from specialists in Paris, Tokyo
and San Francisco.
Under normal circumstances, the Fund expects to be fully invested
in securities of issuers in countries included in the Benchmark, securities
of emerging market countries, and derivative securities, 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 repurchase agreements and in high quality short-term debt
instruments of the U.S. Government or foreign governments, their agencies or
instrumentalities. No more than 20% of the total assets of the Fund will be
invested in the securities of emerging market countries, including Argentina,
Brazil, Chile, People's Republic of China, Colombia, Czech Republic, Greece,
Korea, Hungary, India, Indonesia, Israel, Jordan, Mexico, Pakistan, Peru,
Philippines, Poland, Portugal, Sri Lanka, Taiwan, Thailand, Turkey and
Venezuela, subject to the satisfaction of regulatory standards for the
custody of assets and securities clearance systems. The Fund may also invest
in securities of other emerging markets added to the Benchmark from time to
time. Each emerging market country is analyzed from a macroeconomic and
financial perspective giving equal consideration to four factors: (1) the
relative and historical market valuation, (2) the currency risk, (3) the
outlook for economic growth and (4) the country political risk.
The Fund may invest in forward foreign currency exchange
contracts, futures contracts, options on securities and on foreign
currencies, currency indices, futures contracts, and securities indices to
adjust its risk exposure relative to the Benchmark and to its investment in
emerging market countries. CCF S.A.M. will manage currency exposure for the
Fund utilizing its proprietary currency allocation model and will determine
the Fund's under- or over-weighting relative to the Benchmark utilizing its
international country allocation model. Dreyfus and CCF S.A.M. will control
and monitor the total risk of the portfolio, including the country and
currency exposure resulting from the implementation of their country and
currency models.
In no event will the Fund purchase securities which would cause
25% or more 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
# Page 7
has a non-fundamental investment limitation which provides that
in no event will it purchase securities 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 government or its agencies and instrumentalities. The
Fund may also invest in commercial paper and may lend its portfolio
securities. 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.
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 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 denominated
or quoted in, or currency convertible into, such currency.
Forward contracts provide for the future sale by one party and
purchase by another party of a specified amount of a specified security or
securities index or currency at a specified future time and at a specified
price. Forward contracts differ from futures contracts as the terms of the
contract are not standardized and forward contracts are not traded on
regulated exchanges. Transactions are executed over the counter. If the
counterparty defaults, the Fund might incur a loss. Dreyfus or CCF S.A.M.
seeks to minimize the risk of loss through forward contracts by analyzing the
creditworthiness of the counterparty under forward contract agreements. The
Fund's use of forward contracts will be restricted to the purchase or sale of
foreign currency. The Fund will selectively employ currency forward contracts
in order to hedge currency risk allocated with investments in foreign equity
securities.
# 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
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 at least equal at all times 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 Company's Board of Directors determines 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
efficiency. 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
purchase and sell various financial instruments ("Derivative Instruments"),
such as financial futures contracts (such as interest rate, index and foreign
currency futures contracts), options (such as options on securities, indices,
foreign currencies and futures contracts), forward currency contracts and
interest rate, equity index and currency swaps, caps, collars and floors. The
index Derivative Instruments the Fund may use may be based on indices of U.S.
or foreign equity or debt securities. These Derivative Instruments may be
used, for example, to preserve a return or spread, to lock in unrealized
market value gains or losses, to facilitate or substitute for the sale or
purchase of securities, to adjust its risk exposure relative to the
Benchmark, or to alter the exposure of a particular investment or portion of
the Fund's portfolio to fluctuations in interest rates or currency rates.
The Fund's ability to use these instruments may be limited by market
conditions, regulatory limits and tax considerations. The Fund might not use
any of these strategies and there can be no assurance that any strategy that
is used will succeed. See the SAI for more information regarding these
instruments and the risks relating thereto.
The Fund may not purchase put or call options that are traded on a
national stock exchange in an amount exceeding 5% of its net assets.
Risks of Derivative Instruments. The use of Derivative Instruments
involves special risks, including: (1) possible imperfect or no correlation
between price movements of the portfolio investments (held or intended to be
purchased) involved in the transaction and price movements of the Derivative
Instruments involved in the transaction; (2) possible lack of a liquid
secondary market for any particular Derivative Instrument at a particular
time; (3) the need for additional portfolio management skills and techniques;
(4) losses due to unanticipated market price movements; (5) the fact that,
while such strategies can reduce the risk of loss, they can also reduce the
opportunity for gain, or even result in losses, by offsetting favorable price
movements in portfolio investments: (6) incorrect forecasts by CCF S.A.M or
Dreyfus concerning interest or currency exchange rates or direction of price
fluctuations of the investment involved in the transaction, which may result
in the strategy being
# Page 9
ineffective; (7) loss of premiums paid by the Fund on options it purchases;
and (8) the possible inability of the Fund to purchase or sell a portfolio
security at a time when it would otherwise be favorable for it to do so, or
the need to sell a portfolio security at a disadvantageous time, due to the
need for the Fund to maintain "cover" or to segregate securities in
connection with such transactions and the possible inability of the Fund to
close out or liquidate its positions.
CCF S.A.M or Dreyfus may use Derivative Instruments for hedging
purposes (to adjust the risk characteristics of the Fund's portfolio) and may
use these instruments to adjust the return characteristics of the Fund's
portfolio of investments. This can increase the investment risk. If CCF S.A.M
or Dreyfus judges market conditions incorrectly or employs a strategy that
does not correlate well with the Fund's investments, these techniques could
result in a loss, regardless of whether the intent was to reduce risk or
increase return. These techniques may increase the volatility of the Fund and
may involve a small investment of cash relative to the magnitude of the risk
assumed. In addition, these techniques could result in a loss if the
counterparty to the transaction does not perform as promised or if there is
not a liquid secondary market to close out a position that the Fund has
entered into.
Options and futures transactions may increase portfolio turnover
rates, which results in correspondingly greater commission expenses and
transaction costs, and may result in certain tax consequences.
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 at the time of purchase at least A-1 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.
FOREIGN SECURITIES. The Fund will 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, adverse 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.
Among the foreign securities in which the Fund may invest are
those issued by companies located in developing countries, which are
countries in the initial stages of their industrialization cycles. Investing
in the equity and debt markets of developing countries involves exposure to
economic structures that are generally less diverse and less mature, and to
political systems that can be expected to have less stability, than those of
developed countries. The markets of developing countries historically have
been more volatile than the markets of the more mature economies of developed
countries, but often have produced higher rates of return to investors.
# Page 10
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 exceeding the total return of the Benchmark 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 (100% or more) 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.
# Page 11
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 November 30, 1995, Dreyfus managed or
administered approximately $83 billion in assets for more than 1.7 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 one or more third parties to provide, 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 $209 billion in assets as of
September 30, 1995, including $80 billion in mutual fund assets. As of
September 30, 1995, Mellon, through various subsidiaries, provided
non-investment services, such as custodial or administration services, for
more than $717 billion in assets, including approximately $55 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 1.50% 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 by
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. For the fiscal year ended
October 31, 1995, the Fund paid Dreyfus 1.50% 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, 1995, total operating
expenses (excluding Rule 12b-1 fees) of the Fund were 1.50% of the average
daily net assets of each Class for both the Investor and Class R shares.
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 Credit
Commercial de France ("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 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
# Page 12
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's portfolio manager is Patrice Conxicouer of CCF S.A.M.
Mr. Conxicouer has managed the Fund since September 26, 1994. Mr. Conxicouer
has been a portfolio manager with CCF S.A.M. since 1992. He specializes in
international equities and fixed income instruments. He joined CCF in 1990 as
a trainee in quantitative fund management.
Pursuant to the sub-advisory agreement among the Company, CCF
S.A.M. and Dreyfus, CCF S.A.M. will receive an advisory fee at the annual
rate of .25% 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, 1995, Dreyfus paid CCF
S.A.M. advisory fees of .25% of the Fund's average daily net assets.
In addition, Investor shares may be subject to certain
distribution and shareholder servicing fees. See "Distribution Plan (Investor
Shares Only)."
Dreyfus may pay the Fund's distributor for distribution services
from Dreyfus' 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 or CCF 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 FDI
Distribution Services, Inc., a provider of mutual fund administration
services, which in turn is a wholly-owned subsidiary of FDI Holdings, Inc.,
the parent company of which is Boston Institutional Group, Inc.
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT, AND
SUB-ADMINISTRATOR--Boston Safe Deposit andTrust Company (One Boston Place,
Boston, Massachusetts 02109), an indirect wholly-owned subsidiary of Mellon,
serves as the Fund's custodian. As custodian, Boston Safe Deposit andTrust
Company maintains possession of the Fund's investment securities and provides
portfolio recordkeeping services. Boston Safe Deposit andTrust Company is
authorized to deposit securities in securities depositories or to use the
services of subcustodians. The Fund's transfer and dividend disbursing agent
is Dreyfus Transfer, Inc. (the "Transfer Agent"), a wholly-owned subsidiary
of Dreyfus, located at 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-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 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
# Page 13
shares of the Fund distributed to them by virtue of such an
account or relationship. A "Retirement Plan" is a 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. 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.
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.
Investor shares are also offered without regard to the minimum
initial investment requirements, through Dreyfus-AUTOMATIC Asset Builder,
Dreyfus Government Direct Deposit Privilege or Dreyfus Payroll Savings Plan
pursuant to the Dreyfus Step Program (described under "Shareholder
Services"). These services enable you to make regularly scheduled investments
and may provide you with a convenient way to invest for long-term financial
goals. You should be aware, however, that periodic investment plans do not
guarantee a profit and will not protect an investor against loss in a
declining market.
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 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
# Page 14
UPON RECEIPT THEREBY. For the location of the nearest Dreyfus
Financial Center, please call the telephone number 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 Boston Safe Deposit and Trust Company, together with
the applicable Class' DDA # as shown below, for purchase of Fund shares in
your name:
DDA# 043702 Dreyfus International Equity Allocation Fund/Investor
shares;
DDA# 043699 Dreyfus International Equity Allocation 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 you
have completed the wire payment in order to obtain your Fund account number.
You should 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 to Boston Safe Deposit and Trust Company with instructions to credit your
Fund account. The instructions must specify your Fund account registration
and Fund account number PRECEDED BY THE DIGITS "4480" for Investor shares and
"4470" for Class R shares.
The Distributor may pay dealers a fee of up to 0.5% 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 PER SHARE ("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 number of
shares of that
# Page15
Class outstanding. Shares of each Class of the Fund are offered
on a continuous basis. 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 NAV, 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 NAV is determined which is likely to materially
change the NAV, 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 various worldwide
exchanges, the calculation of NAV 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 such close of business are effective on, and will receive the price
determined on, that day (except purchase orders made through the Dreyfus
TELETRANSFER Privilege, which are effective one business day after your call).
Investment, exchange and redemption requests received after such close of
business are effective on, and receive the share price determined on, the
next business day.
The public offering price of Investor shares and Class R shares,
which are sold on a continuous basis, is the NAV of that Class.
DREYFUS TELETRANSFER PRIVILEGE -- 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 Transfe
r 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 Fund shares by telephoning
1-800-645-6561 or, if calling from overseas, 516-794-5452.
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 or comparable 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
# Page16
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 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 1-800-645-6561
or, if calling from overseas,
516-794-5452. 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, Dreyfus TELETRANSFER Privilege and
the dividends and distributions payment option (except for Dreyfus 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
# Page17
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 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 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.
# Page 18
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 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.
DREYFUS STEP PROGRAM -- Dreyfus Step Program enables you to purchase Investor
shares without regard to the Fund's minimum initial investment requirements
through Dreyfus-AUTOMATIC Asset Builder, Dreyfus Government Direct Deposit
Privilege or Dreyfus Payroll Savings Plan. To establish a Dreyfus Step
Program account, you must supply the necessary information on the Fund's
Account Application and file the required authorization form(s) with the
Transfer Agent. For more information concerning this Program, or to request
the necessary authorization form(s), please call toll free 1-800-782-6620.
You may terminate your participation in this Program at any time by
discontinuing your participation in Dreyfus-AUTOMATIC Asset Builder, Dreyfus
Government Direct Deposit Privilege or Dreyfus Payroll Savings Plan, as the
case may be, as provided under the terms of such Privilege(s). The Fund
reserves the right to redeem your account if you have terminated your
participation in the Program and your account's net asset value is $500 or
less. See "How to Redeem Fund Shares." The Fund may modify or terminate this
Program at any time. Investors who wish to purchase Investor shares through
Dreyfus Step Program in conjunction with a Dreyfus-sponsored retirement plan
may do so only for IRAs, SEP-IRAs and IRA "Rollover Accounts."
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 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 from the Automatic Withdrawal Plan. An application for the
Automatic Withdrawal Plan can be
# Page 19
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 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 through the Dreyfus TELETRANS
FER 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 Telephone Redemption
Privilege or Telephone Exchange Privilege, which is granted automatically
unless you refuse it, you authorize the Transfer Agent to act on telephone
instructions from any person representing himself or herself to be you, 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 the
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 associatio
ns, 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 the telephone number 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 1-800-645-6561 or,
if calling from overseas, 516-794-5452. 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.
# Page 21
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
1-800-645-6561 or, if calling from overseas, 516-794-5452. 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. 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 a bank 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 TELETR
ANSFER 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
1-800-645-6561 or, if calling from overseas, 516-794-5452. 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"). 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 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.
# Page 22
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
The Fund ordinarily 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 wheth
er to receive dividends and other distributions in cash, to receive dividends
in cash and reinvest other distributions in additional Fund shares, or to
reinvest both dividends and other distributions 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 for treatment 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 that 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 (collectively, "Dividend Distributions"), 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 capital gain (the excess of
net long-term capital gain over net short-term capital loss) 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.
Dividend Distributions paid by the Fund to a non-resident foreign
investor generally will be 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 capital gain paid by the Fund to a
non-resident foreign investor, as well as the proceeds of any redemptions
from a non-resident 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 capital gain, if any, paid during the year.
Dividends and other distributions 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 fol lowing
# Page 23
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. If a distributee of an
eligible rollover distribution from a qualified Retirement Plan does not
elect to have the eligible rollover distribution paid directly from the plan
to an eligible retirement plan a "direct rollover," the eligible rollover
distribution is subject to a 20% income tax withholding.
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 capital gain 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 that the TIN furnished in
connection with opening an account is correct and 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 distribution and
shareholder servicing fees. As a result, at any given time, the performance
of Investor shares should be expected to be lower than that of Class R
shares. 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 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
# Page 24
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 share of such Class 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 Australia Far East
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 SEC under
the 1940 Act, as an open-end 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 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. Only
holders of Investor shares will be entitled to vote on matters submitted to
shareholders pertaining to the Distribution Plan relating to that Class.
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, 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 proper 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
# Page 25
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
International
Equity Allocation
Fund
Prospectus
Copy Rights 1996 Dreyfus Service Corporation
323/723p2030196
Page 28
- -------------------------------------------------------------------------------
PROSPECTUS MARCH 1, 1996
DREYFUS MONEY MARKET RESERVES
DREYFUS MUNICIPAL RESERVES
DREYFUS U.S. TREASURY RESERVES
- -------------------------------------------------------------------------------
THIS PROSPECTUS DESCRIBES THE THREE SEPARATE, DIVERSIFIED INVESTMENT
PORTFOLIOS LISTED BELOW (EACH A "FUND" AND COLLECTIVELY THE "FUNDS") OF THE
DREYFUS/LAUREL FUNDS, INC. (FORMERLY THE LAUREL FUNDS, INC.), AN OPEN-END
MANAGEMENT INVESTMENT COMPANY ALSO KNOWN AS A MUTUAL FUND (THE "COMPANY"),
THAT IS PART OF THE DREYFUS FAMILY OF FUNDS. THIS PROSPECTUS DESCRIBES TWO
CLASSES OF SHARES--INVESTOR SHARES AND CLASS R SHARES OF THE FUNDS.
DREYFUS MONEY MARKET RESERVES (FORMERLY, "DREYFUS/LAUREL MONEY MARKET
RESERVES") SEEKS A HIGH LEVEL OF CURRENT INCOME CONSISTENT WITH STABILITY OF
PRINCIPAL BY INVESTING IN HIGH-GRADE MONEY MARKET INSTRUMENTS.
DREYFUS MUNICIPAL RESERVES (FORMERLY, "DREYFUS/LAUREL MUNICIPAL
RESERVES") SEEKS INCOME EXEMPT FROM FEDERAL INCOME TAX CONSISTENT WITH
STABILITY OF PRINCIPAL BY INVESTING IN TAX-EXEMPT MUNICIPAL OBLIGATIONS.
DREYFUS U.S. TREASURY RESERVES (FORMERLY, "DREYFUS/LAUREL U.S.
TREASURY RESERVES) SEEKS A HIGH LEVEL OF CURRENT INCOME CONSISTENT WITH
STABILITY OF PRINCIPAL BY INVESTING IN DIRECT OBLIGATIONS OF THE U.S.
TREASURY AND REPURCHASE AGREEMENTS SECURED BY SUCH OBLIGATIONS.
EACH FUND SEEKS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER
SHARE. INVESTMENTS IN A FUND ARE NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT AND THERE CAN BE NO ASSURANCE THAT ANY FUND WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
SHARES OF THE FUNDS ARE SOLD WITHOUT A SALES LOAD. INVESTOR SHARES OF
THE FUNDS ARE SUBJECT TO DISTRIBUTION AND SHAREHOLDER SERVICING FEES.
YOU CAN PURCHASE OR REDEEM SHARES BY TELEPHONE USING THE DREYFUS TELET
RANSFER PRIVILEGE.
THE DREYFUS CORPORATION SERVES AS THE FUNDS' INVESTMENT MANAGER. THE
DREYFUS CORPORATION IS REFERRED TO AS "DREYFUS."
THIS PROSPECTUS SETS FORTH CONCISELY INFORMATION ABOUT THE FUNDS THAT
YOU SHOULD KNOW BEFORE INVESTING. IT SHOULD BE READ CAREFULLY BEFORE YOU
INVEST AND RETAINED FOR FUTURE REFERENCE.
THE STATEMENT OF ADDITIONAL INFORMATION ("SAI") DATED MARCH 1, 1996,
WHICH MAY BE REVISED FROM TIME TO TIME, PROVIDES A FURTHER DISCUSSION OF
CERTAIN AREAS IN THIS PROSPECTUS AND OTHER MATTERS WHICH MAY BE OF INTEREST
TO SOME INVESTORS. IT HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION ("SEC") AND IS INCORPORATED HEREIN BY REFERENCE. FOR A FREE COPY,
WRITE TO THE FUNDS AT 144 GLENN CURTISS BOULEVARD, UNIONDALE, NEW YORK
11556-0144, OR CALL 1-800-645-6561. WHEN TELEPHONING, ASK FOR OPERATOR 144.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
ALL MONEY MARKET FUNDS INVOLVE CERTAIN INVESTMENT RISKS, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL.
THE FEES TO WHICH EACH FUND IS SUBJECT ARE SUMMARIZED IN THE "EXPENSE
SUMMARY" SECTION OF THE FUNDS' PROSPECTUS. EACH FUND PAYS ON AFFILIATE OF
MELLON BANK, N.A. ("MELLON BANK") TO BE ITS INVESTMENT MANAGER. 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.
- -------------------------------------------------------------------------------
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 REPRESENT-
ATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- -------------------------------------------------------------------------------
(Continued from page 1)
BY THIS PROSPECTUS, THE FUNDS ARE OFFERING INVESTOR SHARES AND CLASS
R SHARES. (CLASS R SHARES OF THE FUNDS 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 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 A FUND
DISTRIBUTED TO THEM BY VIRTUE OF SUCH AN ACCOUNT OR RELATIONSHIP. INVESTOR
SHARES ARE SOLD PRIMARILY TO RETAIL INVESTORS MAINTAINING RELATED SECURITIES,
BROKERAGE, COMMODITIES TRADING OR SIMILAR ACCOUNTS WITH BANKS, SECURITIES
BROKER/DEALERS ("SELECTED DEALERS") OR OTHER FINANCIAL INSTITUTIONS
(INCLUDING MELLON BANK AND ITS AFFILIATES) (COLLECTIVELY, "AGENTS") THAT HAVE
ENTERED INTO A SELLING AGREEMENT WITH THE FUNDS' DISTRIBUTOR.
Table of Contents
Page
EXPENSE SUMMARY................................... 4
FINANCIAL HIGHLIGHTS.............................. 5
DESCRIPTION OF THE FUNDS.......................... 11
MANAGEMENT OF THE FUNDS........................... 18
HOW TO BUY FUND SHARES............................ 19
SHAREHOLDER SERVICES.............................. 22
HOW TO REDEEM FUND SHARES......................... 25
DISTRIBUTION PLAN (INVESTOR SHARES ONLY).......... 27
PERFORMANCE INFORMATION........................... 28
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES.......... 29
GENERAL INFORMATION............................... 31
(Page 2)
[This PageIntentionally Left Blank]
(Page 3)
<TABLE>
EXPENSE SUMMARY
INVESTOR SHARES CLASS R SHARES
---------------- ----------------
<S> <C> <C>
SHAREHOLDERS 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%
</TABLE>
<TABLE>
EXAMPLES
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 $ 7 $ 5
3 Years $22 $16
5 Years $39 $28
10 Years $87 $63
</TABLE>
* See ""Distribution Plan (Investor shares only)" for a description of
each Fund's Plan of Distribution for Investor 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 by an amount equal to a Fund's allocable portion of
such fees and expenses, which are estimated to be 0.01% of a Fund's net
assets. (See "Management of the Funds.")
THE AMOUNTS LISTED IN THE EXAMPLE SHOULD NOT BE CONSIDERED AS
REPRESENTATIVE OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER
OR LESS THAN THOSE INDICATED. MOREOVER, WHILE THE EXAMPLE ASSUMES A 5% ANNUAL
RETURN, EACH 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. (See "Management of the Funds.") Long-term holders 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.
The Funds understand that Agents may charge fees to their clients who
are owners of a 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 Premier and any other compensation payable by the clients for
various services provided in connection with their accounts.
(Page 4)
FINANCIAL HIGHLIGHTS
The following financial information for Investor and Class R shares has been
derived from the financial statements which have been audited by
__________________________, the independent auditors for the Funds, for the
indicated years or period ended October 31, whose reports accompany such
financial statements that appear in the Fund's Annual Report dated October
31, 1995 and which are incorporated by reference in the SAI.
<TABLE>
DREYFUS MONEY MARKET RESERVES
FOR AN INVESTOR SHARE OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.
YEAR PERIOD
ENDED ENDED
<S> <C> <C>
10/31/95 10/31/94*
Net asset value, beginning of period............................... $1.00 $1.00
--------- ---------
Income from investment operations:
Net investment income...................................... .0516 0.0211
Less distributions:
Dividends from net investment income....................... (.0516) (0.0211)
----------- -----------
Net asset value, end of period..................................... $1.00 $1.00
============== ==============
Total return....................................................... 5.28% 2.14%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's)....................... $161,819 $3,611
Ratio of operating expenses to average net assets.......... 0.70% 0.71%#
Ratio of net investment income to average net assets....... 5.25% 3.31%#
</TABLE>
The Fund commenced selling Investor shares on April 6, 1994. Effective
October 17, 1994, Dreyfus began serving as the Fund's investment manager.
Prior to October 17, 1994, Mellon Bank served as the Fund's investment
manager.
Total return represents aggregate total return for the period indicated.
Annualized.
(Page 5)
<TABLE>
FINANCIAL HIGHLIGHTS (CONTINUED)
DREYFUS MONEY MARKET RESERVES
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
10/31/95 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> <C>
Net asset value, beginning
of year......... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Income from
investment operations:
Net investment
income.......... .0531 0.0344 0.0280 0.0385 0.0621 0.0820 0.0667 0.0601
Less distributions:
Dividends from net
investment income (.0531) (0.0344) (0.0280) (0.0385) (0.0621) (0.0820) (0.0667) (0.0601)
Net asset value,
end of year..... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Total return...... 5.44% 3.52% 2.84% 3.92% 6.39% 8.55% 7.95% 6.18%
Ratios to average net
assets/supplemental data:
Net assets, end of year
(in 000's)...... $139,787 $124,754 $103,760 $91,848 $105,329 $93,366 $92,257 $530
Ratio of operating expenses to
average net assets 0.50% 0.51% 0.50%** 0.50%** 0.50%** 0.16%** 0.00%** 0.60%#**
Ratio of net investment income
to average net assets 5.40% 3.51% 2.80% 3.88% 6.13% 8.21% 8.97% 6.69%#
</TABLE>
* The Fund commenced operations on November 18, 1987. The Fund
commenced selling Investor Shares on April 6, 1994. Those shares out-
standing 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 adviser for the year ended October 31, 1994 was $0.0331.
Total return represents aggregate total return for the periods
indicated.
Annualized operating expense ratio before expenses reimbursed by the
investment adviser for the year ended October 31, 1994 was 0.64%.
#Annualized.
##Effective October 17, 1994, Dreyfus began serving as the
Fund's investment manager. Prior to October 17, 1994, Mellon Bank served
as the Fund's investment manager.
(Page 6)
FINANCIAL HIGHLIGHTS
The following financial information for Investor and Class R shares has been
derived from the financial statements which have been audited by
_________________________, the independent auditors for the Funds, for the
indicated years or period ended October 31, whose reports accompany such
financial statements that appear in the Fund's Annual Report dated October
31, 1995 and which are incorporated by reference in the SAI.
<TABLE>
DREYFUS MUNICIPAL RESERVES
FOR AN INVESTOR SHARE OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.
YEAR PERIOD
ENDED ENDED
10/31/95 10/31/94*
<S> <C> <C>
Net asset value, beginning of period............................... $1.00 $1.00
---------- ----------
Income from investment operations:
Net investment income...................................... 0.0323 0.0113
Less distributions:
Dividends from net investment income....................... (0.0323) (0.0122)
---------- ----------
Net asset value, end of period..................................... $1.00 $1.00
========== =========-
Total return....................................................... 3.28% 1.23%
========== ==========
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's)....................... $17,764 $1,161
Ratio of operating expenses to average net assets.......... 0.70% 0.70%#
Ratio of net investment income to average net assets....... 3.33% 2.11%#
* The Fund commenced selling Investor shares on April 20,
1994.Effective October 17, 1994, Dreyfus began serving as the Fund's
investment manager. Prior to October 17, 1994, Mellon Bank, served as the
Fund's investment manager.
Total return represents aggregate total return for the period
indicated.
# Annualized.
</TABLE>
(Page 7)
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
DREYFUS MUNICIPAL RESERVES
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
10/31/95 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> <C>
Net asset value, beginning
of year................ $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
---------- ------------ ----------- ----------- ---------- ---------- ---------- ----------
Income from
investment operations:
Net investment income.. 0.0343 0.0228 0.0208 0.0291 0.0454 0.0564 0.0592 0.0414
Less distributions:
Dividends from net
investment income...... (0.0343) (0.0228) (0.0208) (0.0291) (0.0454) (0.0564) (0.0592) (0.0414)
---------- ------------ ----------- ----------- ---------- ---------- ---------- ----------
Net asset value, end of year $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
========== ============ =========== =========== ========== ========== ========== ==========
Total return............. 3.48% 2.29% 2.10% 2.94% 4.64% 5.79% 6.08% 4.22%
========== ============ =========== =========== ========== ========== ========= ==========
Ratios to average net
assets/supplemental data:
Net assets, end of year
(in 000's)............. $205,373 $205,105 $187,830 $184,719 $152,260 $88,247 $56,224 $20,472
Ratio of operating expenses
to average net assets.. 0.50% 0.50% 0.50%** 0.50%** 0.50%** 0.55%** 0.70%** 0.70%**#
Ratio of net investment income
to average net assets.. 3.41% 2.27% 2.08% 2.90% 4.49% 5.66% 5.95% 4.61%#
</TABLE>
* 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 adviser for the year ended October 31, 1994 was $0.0218.
Total return represents aggregate total return for the periods
indicated.
Annualized operating expense ratio before expenses reimbursed by the
investment adviser for the year ended October 31, 1994 was 0.60%.
# Annualized.
## Effective October 17, 1994, Dreyfus began serving as the
Fund's investment manager. Prior to October 17, 1994, Mellon Bank, served
as the Fund's investment manager.
(Page 8)
FINANCIAL HIGHLIGHTS
The following financial information for Investor and Class R shares has been
derived from the financial statements which have been audited by
_________________________, the independent auditors for the Funds, for the
indicated years or period ended October 31, whose reports accompany such
financial statements that appear in the Fund's Annual Report dated October
31, 1995 and which are incorporated by reference in the SAI.
<TABLE>
DREYFUS U.S. TREASURY RESERVES
FOR AN INVESTOR SHARE OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.
YEAR PERIOD
ENDED ENDED
10/31/95 10/31/94*
<S> <C> <C>
Net asset value, beginning of period............................... $1.00 $1.00
-------- --------
Income from investment operations:
Net investment income.............................................. 0.0491 0.0185
Less distributions:
Dividends from net investment income............................... (0.0491) (0.0195)
-------- --------
Net asset value, end of period..................................... $1.00 $1.00
======== ========
Total return....................................................... 5.02% 1.96%
======== ========
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's)............................... $21,386 $1,324
Ratio of operating expenses to average net assets.................. 0.70% 0.70%#
Ratio of net investment income to average net assets............... 4.92% 3.42%#
</TABLE>
* The Fund commenced selling Investor Shares on April 18, 1994.
Effective October 17, 1994, Dreyfus began serving as the Fund's
investment manager. Prior to October 17, 1994, Mellon Bank served as the
Fund's investment manager.
Total return represents aggregate total return for the period
indicated.
# Annualized.
(Page 9)
<TABLE>
FINANCIAL HIGHLIGHTS (CONTINUED)
DREYFUS U.S. TREASURY RESERVES
FOR A CLASS R SHARE OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.
YEAR YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED
10/31/95 10/31/94*## 10/31/93 10/31/92 10/31/91*
------------ ------------ ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year............... $1.00 $1.00 $1.00 $1.00 $1.00
------------ ------------ ----------- ----------- -----------
Income from investment operations:
Net investment income.......................... 0.0511 0.0331 0.0274 0.0367 0.0424
Less distributions:
Dividends from net investment income.......... (0.0511) ( 0.0331) (0.0274) (0.0367) (0.0424)
------------ ------------ ----------- ----------- -----------
Net asset value, end of year..................... $1.00 $1.00 $1.00 $1.00 $1.00
============ ============ =========== =========== ===========
Total return..................................... 5.23% 3.37% 2.77% 3.73% 4.32%
============ ============ =========== =========== ===========
Ratios to average net assets/supplemental data:
Net assets, end of year (in 000's)............... $399,873 $228,797 $69,785 $69,187 $45,998
Ratio of operating expenses to average net assets 0.50% 0.50% 0.50%** 0.50%** 0.34%#**
Ratio of net investment income to average net assets 5.14% 3.62% 2.74% 3.63% 5.55%#
</TABLE>
* 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 adviser for the year ended October 31, 1994 was $0.0323.
Total return represents aggregate total return for the periods
indicated.
Annualized expense ratio before expenses reimbursed by the investment
adviser for the year ended October 31, 1994 was 0.59%.
# Annualized.
## Effective October 17, 1994, Dreyfus began serving as the
Fund's investment manager.Prior to October 17, 1994, Mellon Bank served
as the Fund's investment manager.
(Page 10)
DESCRIPTION OF THE FUNDS
GENERAL
By this Prospectus, each Fund is offering Investor shares and Class R
shares. (Class R shares of the Funds 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, or to customers who
have received and hold shares of a Fund distributed to them by virtue of such
an account or relationship. Investor shares are sold primarily to investors
maintaining related securities, brokerage commodities trading or similar
accounts with Agents that have extended into Selling Agreements with the
Funds' distributor. If shares of a 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 each Fund's transfer agent or to the
Distributor. Distribution and shareholder servicing fees paid by Investor
shares will cause Investor shares to have a higher expense ratio and to pay
lower dividends than Class R shares.
DREYFUS MONEY MARKET RESERVES
INVESTMENT OBJECTIVE AND POLICIES
Dreyfus Money Market Reserves seeks a high level of current income
consistent with stability of principal by investing in high-grade money
market instruments. There can be no assurance that Dreyfus Money Market
Reserves 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 Money Market Reserves 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 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; (8)
floating rate notes; and (9) repurchase agreements. Dreyfus Money Market
Reserves also may utilize reverse repurchase agreements. (See "Other
Investment Policies and Risk Factors.")
DREYFUS MUNICIPAL RESERVES
INVESTMENT OBJECTIVE AND POLICIES
Dreyfus Municipal Reserves seeks income exempt from federal income
tax consistent with stability of principal by investing in tax-exempt
municipal obligations. There can be no assurance that Dreyfus Municipal
Reverses 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.
Dreyfus Municipal Reserves intends to invest 100%, and has adopted a
policy requiring that it invest at least at 80%, of its total assets in
municipal obligations.
TYPES OF MUNICIPAL SECURITIES. Municipal securities are obligations
issued 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
feder-
(Page 11)
al income tax. The municipal securities in which Dreyfus Municipal Reserves
may invest include:
(1) municipal notes, including tax anticipation and revenue anticipation
notes, bond anticipation 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) municipal leases.
Dreyfus Municipal Reserves may purchase certain municipal securities,
including certain industrial development bonds and bonds issued after August
7, 1986 to finance "private activities," the interest on which may constitute
a "tax preference item" for purposes of the federal alternative minimum tax,
even though the interest will continue to be fully tax-exempt for federal
income tax purposes. Dreyfus Municipal Reserves may invest without limitation
in such municipal securities as long as such investment is consistent with
the Fund's investment objective.
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 Dreyfus Municipal Reserves' investment
objective is dependent in part on the continuing ability of the issuers of
the municipal securities in which Dreyfus Municipal Reserves 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 Dreyfus Municipal Reserves' municipal securities, including
municipal leases, must at the time of purchase 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. Dreyfus Municipal Reserves 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 guaranteed by the U.S. Government, its agencies or instrumentaliti
es. A participation interest gives Dreyfus Municipal Reserves 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. Dreyfus Municipal Reserves will attempt to
invest 100% of its assets in municipal securities, the interest on which, in
the opinion of bond counsel, is exempt from regular federal income tax.
Dreyfus Municipal Reserves may under certain circumstances, however,invest up
to 20% of the value of its total assets in certain securities the interest
income on which is subject to regular federal income tax.
Dreyfus Municipal Reserves 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 acceptances and time deposits,
and may include ECDs, Yankee CDs and 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.")
(Page 12)
DREYFUS U.S. TREASURY RESERVES
INVESTMENT OBJECTIVE AND POLICIES
Dreyfus U.S. Treasury Reserves seeks a high level of current 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 Dreyfus U.S. Treasury Reserves will meet its
stated 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.
Dreyfus U.S. Treasury Reserves 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 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. Dreyfus Money Market Reserves and Dreyfus Municipal
Reserves 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 at the
time of purchase at least A-1 by Standard & Poor's Ratings Group, Prime-1 by
Moody's Investors Service, Inc. ("Moody's"), F-1 by Fitch's Investors
Service, Inc., Duff 1 by Duff & Phelps, Inc. or A1 by IBCA, Inc.
ECDS, ETDS AND YANKEE CDS. Dreyfus Money Market Reserves and Dreyfus
Municipal Reserves 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. Dreyfus Money Market Reserves 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. Dreyfus Money Market Reserves and Dreyfus
Municipal Reserves 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 securities
generally allows less opportunity for capital appreciation and depreciation
than investing in comparable fixed income securities.
(Page 13)
FOREIGN SECURITIES. Dreyfus Money Market Reserves and Dreyfus
Municipal Reserves 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 govern-
mental laws or restrictions, reduced availability of public information con-
cerning 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 a Fund, including withholding of
dividends. Foreign securities may be subject to foreign government taxes that
would reduce the yield on such securities.
ILLIQUID SECURITIES. No Fund will knowingly invest more than 10% 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 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.
MUNICIPAL LEASES. Dreyfus Municipal Reserves may invest 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 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 these risks, Dreyfus
Municipal Reserves 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.
(Page 14)
Dreyfus Municipal Reserves proposes to purchase municipal lease
obligations principally from banks, equipment vendors or other parties that
have entered into an agreement with Dreyfus Municipal Reserves providing that
such party will remarket the municipal lease obligations on certain conditions
(described below) within seven days after demand by Dreyfus Municipal
Reserves. (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
determined pursuant to the terms of the remarketing agreement as of the
repurchase date (plus accrued interest). The Funds' investment manager,
Dreyfus, anticipates that, in most cases, the remarketing agreement will also
for the seller of the municipal lease obligation or the remarketing party to
service it for a servicing fee. The conditions to Dreyfus Municipal Reserves
right to require the remarketing party to purchase or remarket the obligation
are that Dreyfus Municipal Reserves must certify at the time of remarketing
that (1) payments of principal and interest under the municipal lease
obligation are current and Dreyfus Municipal Reserves 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 Dreyfus Municipal
Reserves to meet the Fund's liquidity needs, and (3) the governmental issuer
has not notified Dreyfus Municipal Reserves 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
Dreyfus Municipal Reserves under certain conditions to provide liquidity if
share redemptions of Dreyfus Municipal Reserves exceed purchases of Dreyfus
Municipal Reserves shares. Dreyfus Municipal Reserves 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 Dreyfus Municipal Reserves.
Dreyfus Municipal Reserves will enter into remarketing agreements covering at
least 75% in the principal amount of the municipal lease obligations in its
Fund. Dreyfus Municipal Reserves will not enter into remarketing agreements
with any one remarketing party in excess of 5% of its total assets.
Remarketing agreements with broker-dealers may require an exemptive order
under the Investment Company Act of 1940, as amended (the "1940 Act").
Dreyfus Municipal Reserves 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 Dreyfus Municipal Reserves municipal lease
obligation within seven days after demand from the Fund; however, the
remarketing party will be obligated to repurchase the municipal lease
obligation for its own account at the end of the seven-day period 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
Dreyfus Municipal Reserves, but remarketing 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 Dreyfus Municipal Reserves
municipal lease obligations may not be covered by remarketing agreements.
Dreyfus Municipal Reserves, however, will not invest in municipal lease
obligations that are not subject to remarketing agreements if, as a result of
such investment, more than 10% of its total assets would be invested in
illiquid securities such as (1) municipal lease obligations not subject to
remarketing agreements and not deemed by Dreyfus at the time of purchase to
be at least of comparable quality to rated municipal debt obligations, or (2)
other illiquid assets such as securities 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, issued by a bank or issuer deemed
(Page 15)
by Dreyfus to be of high quality and minimal 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
equipment 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 general
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 vendor.
A letter of credit or insurance policy would generally provide that the
issuer of the letter of credit or insurance policy would pay the outstanding
principal balance of the municipal lease obligations plus any accrued but
unpaid interest upon non-appropriation or default by the governmental 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 obligation.
OTHER INVESTMENT COMPANIES. Each 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 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 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 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. Dreyfus Money Market Reserves and
Dreyfus Municipal Reserves 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, Dreyfus
Money Market Reserves and Dreyfus Municipal Reserves may lend their 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. Dreyfus Municipal Reserves investments may
include "stand-by commitments," which are rights to resell municipal
securities at specified periods prior to their maturity
(Page 16)
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
inability 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. Dreyfus Money Market Reserves and Dreyfus
Municipal Reserves 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 Federal National Mortgage Association,
the Federal Home Loan Mortgage Corporation, or other instrumentalities.
VARIABLE AMOUNT MASTER DEMAND NOTES. Dreyfus Money Market Reserves
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 agreem
ents 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 invest in
variable amount master demand notes issued only by entities that Dreyfus
considers creditworthy.
VARIABLE RATE OBLIGATIONS. Dreyfus Money Market Reserves and Dreyfus
Municipal Reserves may invest in variable rate obligations whose interest
rates are 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. The adjustments minimize changes in the market value of the obligation
and, accordingly, enhance the ability of the Funds to maintain a stable net
asset value per share ("NAV'). Dreyfus Money Market Reserves and Dreyfus
Municipal Reserves 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
advantageous prices or yields, each 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 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 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. 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 Company 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 a Fund will be given at least 30 days' prior notice of any
such investment. Such invest
(Page 17)
ment 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.
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 with respect to a Fund without the affirmative vote of
the holders of a majority of that Fund's outstanding shares. The SAI
describes all of a Fund's fundamental 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, 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 a Fund's shares in certain states, a
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 that
Fund, it may consider terminating sales of its shares in the states involved.
MANAGEMENT OF THE FUNDS
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 November 30 1995, Dreyfus managed or administered
approximately $83 billion in assets for more than 1.7 million investor
accounts nationwide.
Dreyfus serves as the Funds' investment manager. Dreyfus supervises
and assists in the overall management of the Funds' affairs under an
Investment Management Agreement with the Funds, 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 one or more third parties to provide, investment advisory,
administrative, custody, fund accounting and transfer agency services to the
Funds. As the Funds' investment manager, Dreyfus manages the Funds by making
investment decisions based on the Funds' investment objectives, 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 $209 billion in assets as of
September 30, 1995, including $80 billion in mutual fund assets. As of September
30, 1995, Mellon, through various subsidiaries, provided non-investment
services, such as custodial or administration services, for more than
$717 billion in assets, including approximately $55 billion in mutual fund
assets.
Under the Investment Management Agreement, each Fund pays a fee
computed daily and paid monthly at the annual rate of 0.50% of the 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
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
(Page 18)
investment management fee by an amount equal to a Fund's allocable share of
such fees and 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 applicable
state limitations) additional investment management fees payable by a Fund.
For the fiscal year ended October 31, 1995, each Fund paid Dreyfus 0.50% 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, 1995, total operating expenses
(excluding Rule 12b-1 fees) of each Fund were 0.50% of the average daily net
assets of shares for both the Investor and Class R shares.
In addition, Investor shares may be subject to certain distribution
and shareholder servicing 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 Funds. 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 Funds, 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 Funds may invest in securities of companies with which
Mellon Bank has a lending relationship.
The Funds' 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 FDI
Distribution Services, Inc., a provider of mutual fund administration
services, which in turn is a wholly-owned subsidiary of FDI Holdings, Inc.,
the parent company of which is Boston Institutional Group, Inc.
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT, AND
SUB-ADMINISTRATOR -- Mellon Bank (One Mellon Bank Center, Pittsburgh,
Pennsylvania 15258) is the Funds' custodian. The Funds' transfer and dividend
disbursing agent is Dreyfus Transfer, Inc., a wholly-owned subsidiary of
Dreyfus, located at One American Express Plaza, Providence, Rhode Island
02903. Premier is the Funds' sub-administrator and, pursuant to a
Sub-Administration Agreement with Dreyfus, provides various administrative
and corporate secretarial services to the Funds.
HOW TO BUY FUND SHARES
GENERAL -- Investor shares are sold primarily to investors
maintaining related securities, brokerage commodities trading or similar
accounts with Agents that have entered into Selling Agreements with the
Funds' distributor. Additionally, holders of Investor shares of a Fund who
have held their shares since August 31, 1995, may continue to purchase
Investor shares of the Fund whether or not they otherwise would be eligible
to do so.
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. A
"Retirement Plan" is a 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-pro
fit entities or state and local governments. 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 effect
ing transactions in Class R shares for the accounts of their clients may
charge their clients direct fees in connection with such transactions. It is
not recommended that Dreyfus Municipal Reserves be used as a vehicle for
Keogh, IRA or other qualified plans.
Stock certificates are issued only upon your written request. No
certificates are issued for fractional shares. The Funds reserve the right to
reject any purchase order.
The minimum initial investment is $100,000. Each Fund may waive its
minimum initial investment requirement for new Fund accounts opened through
an Agent whenever Dreyfus Institutional Services Division ("DISD") has
determined for the initial account opened through such Agent which is below
the Fund's minimum initial investment requirement that the existing accounts
in the Fund opened through that Agent have an average account size, or the
Agent has adequate intent and access to funds to result in maintenance of
accounts in the Fund opened through that Agent with an average account size,
in an amount equal to or in excess of $100,000. DISD is required to
periodically review the average size of the accounts opened through each
Agent and, if necessary, reevaluate the Agent's intent and access to funds.
DISD will discontinue the waiver as to new accounts to be opened through an
Agent if DISD determines that the average size of accounts opened through
that Agent is less than $100,000 and the Agent does not have the requisite
intent and access to funds. There is no minimum for subsequent purchases. The
initial investment must be accompanied by the Funds' Account Application.
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 a
Fund by a Retirement Plan. Participants and plan sponsors should consult
their tax advisers for details.
You may purchase shares of a Fund by check or wire, or through the
Dreyfus TELETRANSFER Privilege described below. Checks should be made payable
to "The Dreyfus Family of Funds" or, if for Dreyfus retirement plan accounts,
to "The Dreyfus Trust Company, Custodian." 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 the telephone number 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 Boston Safe Deposit and Trust Company together with
the applicable Class' DDA # as shown below, for purchase of Fund shares in
your name:
DDA# 043427 Dreyfus Money Market Reserves/Investor shares;
DDA# 043435 Dreyfus Money Market Reserves/Class R shares;
DDA# 043516 Dreyfus Municipal Reserves/Investor shares;
DDA# 043508 Dreyfus Municipal Reserves/Class R shares;
DDA# 043567 Dreyfus U.S.Treasury Reserves/Investor shares;
DDA# 043559 Dreyfus U.S. Treasury Reserves/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
(Page 20)
wire payment in order to obtain your Fund account number. Please include your
Fund account number on the Funds' 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 Funds make 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 Boston Safe Deposit and Trust Company with instructions to
credit your Fund account. The instructions must specify your Fund account
registration and Fund account number PRECEDED BY THE DIGITS:
"4790" Dreyfus Money Market Reserves/Investor shares;
"4800" Dreyfus Money Market Reserves/Class R shares;
"4860" Dreyfus Municipal Reserves/Investor shares;
"4850" Dreyfus Municipal Reserves/Class R shares;
"4900" Dreyfus/Laurel U.S. Treasury Investor shares;
"4890" Dreyfus/Laurel U.S. Treasury Class R shares.
The Distributor may pay dealers a fee of up to 1.5% 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 Funds' Account Application for further information concerning
this requirement. Failure to furnish a certified TIN to the Funds could
subject you to a $50 penalty imposed by the Internal Revenue Service (the
"IRS").
NET ASSET VALUE PER SHARE ("NAV") -- The price of a Fund's shares,
which are offered on a continuous basis, is their 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 a
Fund before 4 p.m., Eastern time, are effective on, and will receive the
price next determined on, that business day (except purchase orders made
through the Dreyfus TELETRANSFER Privilege, which are effective one business
day 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, are effective on, and
receive the first share price determined on, the next business day.
An investment portfolio's NAV refers to the worth of one share. The
NAV for Investor and Class R shares of a 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
(Page 21)
premium, regardless of the impact of fluctuating interest rates on the market
value of the instrument. Each Fund intends to maintain a constant NAV of
$1.00, although there is no assurance that this can be done on a continuing
basis.
DREYFUS TELETRANSFER PRIVILEGE -- You may purchase shares of a Fund
(minimum $500 and maximum $150,000 per day) by telephone if you have checked
the appropriate box and supplied the necessary information on the Funds'
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 Funds 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 Fund shares by telephoning
1-800-645-6561 or, if calling from overseas, 516-794-5452.
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 1-800-645-6561
or, if calling from overseas, 516-794-5452. 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
, Check Redemption Privilege, Wire Redemption Privilege, Telephone Redemption
Privilege, Dreyfus TELETRANSFER Privilege and the dividends and distributions
payment option (except for Dreyfus 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 Funds reserve 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. 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
a 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 Funds 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 Funds may charge a service fee for
the use of this Privilege. No such fee currently is contemplated. For more
information concerning this Privilege and the funds in the Dreyfus Family of
Funds eligible to participate in this Privilege, or to obtain a Dreyfus
Auto-Exchange Authorization Form, please call toll free 1-800-645-6561.
DREYFUS-AUTOMATIC ASSET BUILDER
Dreyfus-AUTOMATIC Asset Builder permits you to purchase shares of a
Fund (minimum of $100 and maximum of $150,000 per transaction) at regular
intervals selected by you. Shares of a Fund 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. 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 Funds may modify or terminate this
Privilege at any time or charge a service fee. No such fee currently is
contemplated.
(Page 23)
DREYFUS DIVIDEND OPTIONS
Dreyfus Dividend Sweep enables you to invest automatically dividends
or dividends and capital gain distributions, if any, paid by a 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 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 a 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 Funds 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
shares of a Fund (minimum of $100 and maximum of $50,000 per transaction) by
having Federal salary, Social Security, or certain veterans', military or
other payments from the Federal government automatically deposited into your
Fund account. You may deposit as much of such payments as you elect. To
enroll in Dreyfus Government Direct Deposit, you must file with the Transfer
Agent a completed Direct Deposit Sign-Up Form for each type of payment that
you desire to include in this Privilege. The appropriate form may be obtained
by calling 1-800-645-6561. Death or legal incapacity will terminate your
participation in this Privilege. You may elect at any time to terminate your
participation by notifying in writing the appropriate Federal agency.
Further, the Funds may terminate your participation upon 30 days' notice to
you.
DREYFUS PAYROLL SAVINGS PLAN
Dreyfus Payroll Savings Plan permits you to purchase shares of a Fund
(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 your employer, not the
Distributor, Dreyfus, the Funds, the Transfer Agent or any other person, to
arrange for transactions under the Dreyfus Payroll Savings Plan. The Funds
may modify or terminate this Privilege at any time or charge a service fee.
No such fee currently is contemplated.
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
(Page 24)
from 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, a Fund or the
Transfer Agent. Shares for which certificates have been issued may not be
redeemed through the Automatic Withdrawal Plan.
RETIREMENT PLANS
Dreyfus Money Market Reserves and Dreyfus U.S. Treasury Reserves
offer 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, a 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 Funds impose 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 a Fund's then-current NAV.
The Funds 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 FUNDS WILL NOT
HONOR REDEMPTION CHECKS UNDER THE CHECK REDEMPTION PRIVILEGE AND 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.
Each Fund reserves the right to redeem a shareholder's account at its
option upon not less than 45 days written notice if the net asset value of
such account is $10,000 or less ($500 or less in the case of holders of
shares of a Fund since August 31, 1995) and remains at or below such amount
during the notice period.
PROCEDURES -- You may redeem Shares of a Fund by using the regular redemption
procedure through the Transfer Agent, the Check Redemption Privilege, the
Wire Redemption Privilege, the Telephone Redemption
(Page 25)
Privilege or, the Dreyfus TELETRANSFER Privilege. Other redemption procedures
may be in effect for clients of certain Agents and institutions. The Funds
make available to certain large institutions the ability to issue redemption
instructions through compatible computer facilities.
You may redeem shares of a Fund by telephone if you have checked the
appropriate box on the Funds' Account Application or have filed a Shareholder
Services Form with the Transfer Agent. If you select a telephone redemption
privilege or Telephone Exchange Privilege, which is granted automatically
unless you refuse it, you authorize the Transfer Agent to act on telephone
instructions from any person representing himself or herself to be you, or a
representative of your Agent, and reasonably believed by the Transfer Agent
to be genuine. The Funds 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
Funds or the Transfer Agent may be liable for any losses due to unauthorized
or fraudulent instructions. Neither the Funds 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.
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 the telephone number 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.
CHECK REDEMPTION PRIVILEGE _ You may request on the Account
Application, Shareholder Services Form or by later written request that a
Fund provide Redemption Checks drawn on the Fund's account. Redemption Checks
may be made payable to the order of any person in the amount of $500 or more.
Redemption Checks should not be used to close your account. Redemption Checks
are free, but the Transfer Agent will impose a fee for stopping payment of a
Redemption Check upon your request or if the Transfer Agent cannot honor the
Redemption Check due to insufficient funds or other valid reason. You should
date your Redemption Checks with the current date when you write them. Please
do not postdate your Redemption Checks. If you do, the Transfer Agent will
honor, upon presentment, even if presented before the date of the check, all
postdated Redemption Checks which are dated within six months of presentment
for payment, if they are otherwise in good order. Shares for which
certificates have been issued may not be redeemed by Redemption Check. Shares
held under Keogh Plans, IRAs or other retirement plans are not eligible for
this Privilege. This Privilege may be modified or terminated at any time by
the Funds or the Transfer Agent upon notice to shareholders.
(Page 26)
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 Funds'
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 1-800-645-6561 or, if calling from
overseas, 516-794-5452. The Funds reserve 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 any time by the Transfer Agent or the Funds.
The Funds' 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 shares of a Fund
(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
1-800-645-6561 or, if calling from overseas, 516-794-5452. The Funds reserve
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 Funds. 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. You may redeem shares of a Fund
(minimum $500 per day) by telephone if you have checked the appropriate box
and supplied the necessary information on the Funds' 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 a bank 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 TELETR
ANSFER Privilege for transfer to their bank account only up to $250,000
within any 30-day period. The Funds reserve 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 Funds
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
1-800-645-6561 or, if calling from overseas, 1-516-794-0402. 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)
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 those
shares under the Plan. The Plan allows each Fund to spend annually up to
(Page 27)
0.25% of the 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 a Fund
to compensate Agents that have entered into Selling Agreements with the Distri
butor. 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 the Distributor 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, the Distributor 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
governing Agreements with their Agents. An Agent entitled to receive
compensation for selling and servicing a Fund's shares may receive different
compensation with respect to one Class of shares over another.
PERFORMANCE INFORMATION
From time to time, each Fund may advertise the yield on a class of
shares. Dreyfus Municipal Reserves may advertise tax-equivalent yields. YIELD
AND THE TAX EQUIVALENT YIELD FIGURES ARE BASED ON HISTORICAL EARNINGS AND ARE
NOT INTENDED TO INDICATE FUTURE PERFORMANCE.
The "yield'' of a Class of shares of a Fund refers to the income
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 similarly, but, when
annualized, the income earned by an investment in a Class of shares of a 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. The tax-equivalent yield of Dreyfus Municipal Reserves shows
the level of taxable 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 necessary to reflect the payment of federal income tax (and state
income tax, if applicable) at a stated tax rate. Because 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.
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 R and Investor shares of each Fund, the yield on Class R shares will
generally be higher than the 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 yield. Each
Fund's annual report contains additional performance information and is
available upon request 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
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 the Fund's performance. Furthermore, a Fund may quote its
Investor and Class R shares' yields in advertisements or in
(Page 28)
shareholder reports. A Fund may advertise a quotation of yield or other
similar quotation demonstrating the income earned or distributions made by
the Fund.
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
Each Fund declares daily and pays monthly (on the 20th day of the
month or the next business day if the 20th day falls on a Saturday, Sunday or
national holiday) dividends 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, if any, in cash, your distributions will be automatically
reinvested in additional shares of the distributing Fund at the then current
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. Shares
purchased on a day on which a Fund calculates its NAV will not begin to
accrue dividends until the following day. Except as provided below,
redemption orders effected on any particular day will receive all dividends
declared through the day of redemption. However, if immediately available
funds are received by the Transfer Agent prior to 12:00 noon, Eastern time,
you may receive the dividend declared on the day of purchase. 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)
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.
Each 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. In
addition, Dreyfus Municipal Reserves intends to continue 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 securities.
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 Dreyfus Municipal Reserves that are designated by it as
"exempt-interest dividends'' generally may be excluded by you from your gross
income. Distributions by a Fund (including Dreyfus Municipal Reserves) 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.
The Funds are not expected to realize long-term capital gains.
Interest on indebtedness incurred or continued to purchase or carry
shares of Dreyfus Municipal Reserves will not be deductible for federal
income tax purposes to the extent that Fund's distributions consist of
exempt-interest dividends. Dreyfus Municipal Reserves may invest in "private
activity bonds,'' the interest on which is treated as a tax preference item
for shareholders in determining their liability for the alternative minimum
tax. Proposals have been and may be introduced before Congress that would
restrict or eliminate the federal income tax exemption for interest on
municipal securities. If
(Page 29)
such a proposal were enacted, the availability of such securities for
investment by Dreyfus Municipal Reserves 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 Dreyfus Municipal Reserves) 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 and other distributions paid by a Fund to qualified
Retirement Plans ordinarily will not be subject to taxation until the
proceeds are distributed from the Retirement Plans. A Fund will not report to
the IRS distributions 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 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. If a distributee of an "eligible rollover distributi
on" from a qualified Retirement Plus does not elect to have the eligible
rollover distribution paid directly from the plan to an eligible retirement
plan in a "direct rollover," the eligible rollover distribution is subject to
a 20% income withholding tax.
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 Dreyfus Municipal
Reserves 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 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 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 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; for example, Dreyfus
Municipal Reserves'
(Page 30)
dividends may be wholly or partly taxable under state and/or local laws. You
therefore are urged to consult your own tax adviser.
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 SEC under
the 1940 Act as an open-end management investment company. The Company 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 of
the Funds offered by this Prospectus currently issues two Classes of shares,
designated "Investor'' and "Class R'' shares. At your written request, the
Funds will issue negotiable stock certificates.
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 class 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.
Unless otherwise required by the 1940 Act, ordinarily it will not be
necessary for the Funds 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, 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 proper purpose. Company shareholders may remove a Director by
the affirmative vote of a majority of the Company's 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 Funds 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
FUNDS' OFFICIAL SALES LITERATURE IN CONNECTION WITH THE OFFER OF THE FUNDS'
SHARES, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUNDS. 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 31)
[This Page Intentionally Left Blank]
(Page 32)
[This Page Intentionally Left Blank]
(Page 33)
[This Page Intentionally Left Blank]
(Page 34
[This Page Intentionally Left Blank]
(Page 35
Dreyfus Money Market Reserves
Dreyfus Municipal Reserves
Dreyfus U.S. Treasury Reserves
Prospectus
Registration Mark
Copy Rights 1995 Dreyfus Service Corporation
LMMKTp1041095
Page 36
PROSPECTUS MARCH 1, 1996
DREYFUS DISCIPLINED MIDCAP STOCK FUND
DREYFUS DISCIPLINED MIDCAP STOCK FUND (THE "FUND"), FORMERLY CALLED
THE "LAUREL MIDCAP STOCK FUND," IS A SEPARATE, DIVERSIFIED PORTFOLIO OF THE
DREYFUS/LAUREL FUNDS, INC., AN OPEN-END 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. ("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 SOLD PRIMARILY 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.
SHARES OF THE FUND MAY BE PURCHASED OR REDEEMED 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."
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.
THE STATEMENT OF ADDITIONAL INFORMATION ("SAI") DATED MARCH 1, 1996,
WHICH MAY BE REVISED FROM TIME TO TIME, PROVIDES A FURTHER DISCUSSION OF
CERTAIN AREAS IN THIS PROSPECTUS AND OTHER MATTERS WHICH MAY BE OF INTEREST
TO SOME INVESTORS. IT HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION ("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 144.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
THE NET ASSET VALUE OF FUNDS OF THIS TYPE WILL FLUCTUATE FROM TIME TO TIME.
THE FEES TO WHICH THE FUND IS SUBJECT ARE SUMMARIZED IN THE "EXPENSE
SUMMARY" SECTION OF THE FUND'S PROSPECTUS. THE FUND PAYS AN AFFILIATE OF
MELLON BANK 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.
Page 1
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............................ 16
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
<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.......................................... 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 $ 74 $ 61
10 Years $162 $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 .01% 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 Company understands that 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
FINANCIAL HIGHLIGHTS
The tables below are based upon a single Investor share or Class R
share outstanding throughout each 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, 1995 which is incorporated by
reference in the SAI. The financial statements included in the Fund's Annual
Report for the year ended October 31, 1995 have been audited by
________________________, independent auditors, whose report appears in the
Fund's Annual Report. Further information about, and management's discussion
of, the Fund's performance is contained in the Fund's Annual Report which may
be obtained without charge by writing to the address or calling the number
set forth on the cover page of this Prospectus.
<TABLE>
<CAPTION>
DREYFUS DISCIPLINED MIDCAP STOCK FUND
FOR AN INVESTOR SHARE OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.
<S> <C> <C>
FISCAL YEAR PERIOD
ENDED ENDED
10/31/95 10/31/94*#
Net asset value, beginning of period $9.75 $10.00
--------------
Income from investment operations:
Net investment income .09 0.05
Net realized and unrealized gain (loss) on investments 2.17 (0.26)
--------------
Total from investment operations 2.26 (0.21)
Less distributions:
Distributions from net investment income (.09) (0.04)
Net asset value, end of period $11.92 $9.75
-=============
Total return 23.39% (2.06)%
-=============
Ratios to average net assets/supplemental data:
Net assets, end of period (000's) $1,417 $54
Ratio of operating expenses to average net assets 1.35% 1.40%
Ratio of net investment income to average net assets 0.86% 0.73%
Portfolio turnover rate 71% 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 served as the
Fund's investment manager. Effective October 17, 1994, Dreyfus began
serving as the Fund's investment manager.
</TABLE>
# Page 5
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
DREYFUS DISCIPLINED MIDCAP STOCK FUND
FOR A CLASS R SHARE OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.
<S> <C> <C>
FISCAL YEAR PERIOD
ENDED ENDED
10/31/95 10/31/94*#
Net asset value, beginning of period $9.76 $10.00
--------------
Income from investment operations:
Net investment income** 0.12 0.09
Net realized and unrealized gain (loss) on investments 2.16 (0.27)
--------------
Total from investment operations 2.28 (0.18)
Less distributions:
Distributions from net investment income (0.12) (0.06)
Net asset value, end of period $11.92 $9.76
-=============
Total return 23.57% (1.77)%
-=============
Ratios to average net assets/supplemental data:
Net assets, end of period (000's) $12,129 $18,169
Ratio of operating expenses to average net assets 1.10% 1.16%***
Ratio of net investment income to average net assets 1.11% 0.98%
Portfolio turnover rate 71% 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 served as the
Fund's investment manager. Effective October 17, 1994, Dreyfus began
serving 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, 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 sold primarily to retail
investors by the Fund's Distributor and by Agents that have entered into an
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. In the view of Dreyfus, 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. While it may maintain aggregate investment characteristics
similar to the S&P MidCap, however, 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 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 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) repurchase
agreements; (7) when-issued transactions; and (8) commercial paper. The Fund
may also utilize securities lending and reverse repurchase agreements, and
may enter into options 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 & 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 S&P MidCap candidate populati
on 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. Standard & Poor's 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 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 at least equal
at all times 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 Board of 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
purchase and sell various financial instruments, including financial futures
contracts (such as index futures contracts) and options (such as options on
U.S. or foreign securities or indices of such securities). These instruments
may be used, for example, to preserve a return or spread or to facilitate or
substitute for the sale or purchase of securities. The Fund's ability to use
these instruments may be limited by market conditions, regulatory limits and
tax considerations. The Fund might not use any of these strategies and there
can be no assurance that any strategy that is used will succeed. See the SAI
for more information regarding these instruments and the risks relating
thereto. The Fund may not purchase put or call options that are traded on a
national stock exchange in an amount exceeding 5% of its net assets.
The use of futures and options involves special risks, including: (1)
possible imperfect or no correlation between price movements of the portfolio
investments (held or intended to be purchased) involved in the transaction
and price movements of the instruments involved in the transaction; (2)
possible lack of a liquid secondary market for any particular instrument at a
particular time; (3) the need for additional portfolio management skills and
techniques; (4) losses due to unanticipated market price movements; (5) the
fact that, while such strategies can reduce the risk of loss, they can also
reduce the opportunity for gain, or even result in losses, by offsetting
favorable price movements in portfolio investments; (6) incorrect forecasts
by Dreyfus concerning direction of price fluctuations of the investment
involved in the transaction, which may result in the strategy being
ineffective; (7) loss of premiums paid by the Fund on options it purchases;
and (8) the possible inability of the Fund to purchase or sell a portfolio
security at a time when it would otherwise be favorable for it to do so, or
the need to sell a portfolio security at a disadvantageous time, due to the
need for the Fund to maintain "cover" or to segregate securities in connection
with such transactions and the possible inability of the Fund to close out
or liquidate its positions.
Dreyfus may use futures and options for hedging purposes (to adjust
the risk characteristics of the Fund's portfolio) and may use these
instruments to adjust the return characteristics of the Fund's portfolio of
investments. This can increase investment risk. If Dreyfus judges market
conditions incorrectly or
# Page 9
employs a strategy that does not correlate well with the Fund's investments,
these techniques could result in a loss , regardless of whether the intent
was to reduce risk or increase return. These techniques may increase the
volatility of the Fund and may involve a small investment of cash relative to
the magnitude of the risk assumed. In addition, these techniques could result
in a loss if the counterparty to the transaction does not perform as promised
or if there is not a liquid secondary market to close out a position that the
Fund has entered into.
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 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 at the time of purchase at least A-1 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, adverse 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 repur
# Page 10
chase 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.
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
# Page 11
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 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.
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 November 30, 1995 Dreyfus managed or administered
approximately $83 billion in assets for more than 1.7 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 one or more third parties to provide, 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 John O'Toole. Mr. O'Toole has managed the Fund
since its commencement of operations in November, 1993, and has been employed
by Dreyfus as portfolio manager of the Fund since October 17, 1994. Mr.
O'Toole is a Senior Vice President and a Portfolio Manager for Mellon Equity
Associates. He has been with Mellon Bank since 1979.
# Page 12
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 $209 billion in assets as of September 30, 1995, including $80
billion in mutual fund assets. As of September 30, 1995, Mellon, through
various subsidiaries, provided non-investment services, such as custodial or
administration services, for more than $717 billion in assets, including
approximately $55 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 by 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. For the fiscal year ended
October 31, 1995, the Fund paid Dreyfus 1.10% 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, 1995, total operating expenses
(excluding Rule 12b-1 fees) of the Fund were 1.10% of the average daily net
assets of each class for the Investor Class and Class R shares, respectively.
In addition, Investor shares may be subject to certain distribution
and shareholder servicing fees. See "Distribution Plan (Investor Shares
Only)."
Dreyfus may pay the Fund's Distributor for shareholder services from
Dreyfus' 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 is located at One Exchange Place, Boston, Massachusetts 02109.
The Distributor is a wholly-owned subsidiary of FDI Distribution Services,
Inc., a provider of mutual fund administration services, which in turn is a
wholly-owned subsidiary of FDI Holdings, Inc., the parent company of which is
Boston Institutional Group, Inc.
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT, AND
SUB-ADMINISTRATOR--Mellon Bank (One Mellon Bank Center, Pittsburgh,
Pennsylvania 15258) is the Fund's custodian. The Fund's transfer
# Page 13
and dividend disbursing agent is Dreyfus Transfer, Inc. (the "Transfer
Agent"), a wholly-owned subsidiary of Dreyfus, located at 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 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. 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.
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.
Fund shares are also offered without regard to the minimum initial
investment requirements through Dreyfus-AUTOMATIC Asset Builder, Dreyfus
Government Direct Deposit Privilege or Dreyfus Payroll Savings Plan pursuant
to the Dreyfus Step Program. These services enable you to make regularly
scheduled investments and may provide you with a convenient way to invest for
long-term financial goals. You should be aware, however, that periodic
investment plans do not guarantee a profit and will not protect an investor
against loss in a declining market.
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.
# Page 14
You may purchase Fund shares by check or wire, or through the Dreyfus
TELETRANSFER Privilege described below. Checks
should be made payable to "The Dreyfus Family of Funds" or, if for Dreyfus
retirement plan accounts, to "The Dreyfus Trust Company, Custodian."
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 the
telephone number 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 Boston Safe Deposit and Trust Company, together with
the applicable Class' DDA # as shown below, for purchase of Fund shares in
your name:
DDA# 044199 Dreyfus Disciplined Midcap Stock Fund/Investor shares;
DDA# 044148 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 Boston Safe Deposit and Trust Company with instructions to
credit your Fund account. The instructions must specify your Fund account
registration and Fund account number PRECEDED BY THE DIGITS "4040" for
Investor shares and "4030" for Class R shares.
The Distributor may pay dealers a fee of up to 0.5% 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
# Page 15
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 PER SHARE ("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 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.
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 such close of business 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 such close of business are
effective on, and receive the share price determined on, the next business
day.
The public offering price of Investor shares and Class R shares, both
of which are offered on a continuous basis, is the NAV of that Class.
DREYFUS TELETRANSFER PRIVILEGE -- 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 Transfe
r 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 Fund shares shares by telephoning
1-800-645-6561 or, if calling from overseas, 516-794-5452.
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.
# Page 16
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 1-800-645-6561 or, if calling from
overseas, 516-794-5452. 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, Dreyfus TELETRANSFER Privilege and
the dividends and distributions payment option (except for Dreyfus 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.
# Page 17
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 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.
# Page 18
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.
DREYFUS STEP PROGRAM
Dreyfus Step Program enables you to purchase Investor shares without
regard to the Fund's minimum initial investment requirements through Dreyfus-A
UTOMATIC Asset Builder, Dreyfus Government Direct Deposit Privilege or
Dreyfus Payroll Savings Plan. To establish a Dreyfus Step Program account,
you must supply the necessary information on the Fund's Account Application
and file the required authorization form(s) with the Transfer Agent. For more
information concerning this Program, or to request the necessary
authorization form(s), please call toll free 1-800-782-6620. You may
terminate your participation in this Program at any time by discontinuing
your participation in Dreyfus-AUTOMATIC Asset Builder, Dreyfus Government
Direct Deposit Privilege or Dreyfus Payroll Savings Plan, as the case may be,
as provided under the terms of such Privilege(s). The Fund reserves the right
to redeem your account if you have terminated your participation in the
Program and your account's net asset value is $500 or less. See "How to
Redeem Fund Shares." The Fund may modify or terminate this Program at any
time. Investors who wish to purchase Investors shares through Dreyfus Step
Program in conjunction with a Dreyfus-sponsored retirement plan may do so
only for IRAs, SEP-IRAs and IRA "Rollover Accounts."
#
Page 19
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
from 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 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.
# Page 20
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 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 a telephone redemption
privilege or telephone exchange privilege, which is granted automatically
unless you refuse it, you authorize the Transfer Agent to act on telephone
instructions from any person representing himself or herself to be you, 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 the telephone number 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 joint
# Page 21
ly 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 1-800-645-6561 or, if calling from overseas,
516-794-5452. 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 any time 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
1-800-645-6561 or, if calling from overseas, 516-794-5452. 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. 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 TELETR
ANSFER 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
1-800-645-6561 or, if calling from overseas, 516-794-5452. 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 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.
# Page 22
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 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, to receive dividends in cash and reinvest other distributions in
additional Fund shares, or to reinvest both dividends and other distributions
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 for treatment 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 (collectively, "Dividend Distributions"), 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 capital gain (the excess of
net long-term capital gain over short-term capital loss) 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.
Dividend Distributions paid by the Fund to a non-resident foreign
investor generally are subject to U.S. withholding tax at the rate of 30%,
unless the non-resident foreign investor claims the benefit of a lower rate
specified in a tax treaty. Distributions from net capital gain paid by the
Fund to a non-resident foreign investor, as well as the proceeds of any
redemptions from a non-resident 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 capital gain, if any, paid during the year.
# Page 23
Dividends and other distributions 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 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. If a distributee of an
"eligible rollover distribution" from a qualified Retirement Plan does not
elect to have the eligible rollover distribution paid directly from the plan
to an eligible retirement plan in a "direct rollover," the eligible rollover
distribution is subject to a 20% income tax withholding.
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 capital gain 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 that the TIN furnished in
connection with opening an account is correct and 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 distribution and
shareholder servicing 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
# Page 24
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 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 perce
ntage 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 share of such Class 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, the S&P MidCap, S&P 500, 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 SEC under
the 1940 Act, as an open-end 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
# Page 25
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.
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, 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
Disciplined
Midcap
Stock Fund
Prospectus
Copy Rights 1996 Dreyfus Service Corporation
330/730p3030196
Registration Mark
Page 28
PROSPECTUS March 1, 1996
DREYFUS INSTITUTIONAL PRIME MONEY MARKET FUND
DREYFUS INSTITUTIONAL GOVERNMENT MONEY MARKET FUND
DREYFUS INSTITUTIONAL U.S. TREASURY MONEY MARKET FUND
THIS PROSPECTUS DESCRIBES THE FOLLOWING THREE INVESTMENT PORTFOLIOS
MANAGED BY THE DREYFUS CORPORATION ("DREYFUS"): DREYFUS INSTITUTIONAL PRIME
MONEY MARKET FUND (FORMERLY, "DREYFUS/LAUREL INSTITUTIONAL PRIME MONEY MARKET
FUND"), DREYFUS INSTITUTIONAL GOVERNMENT MONEY MARKET FUND (FORMERLY,
"DREYFUS/LAUREL INSTITUTIONAL GOVERNMENT MONEY MARKET FUND"), AND DREYFUS
INSTITUTIONAL U.S. TREASURY MONEY MARKET FUND (FORMERLY, "DREYFUS/LAUREL
INSTITUTIONAL U.S. TREASURY MONEY MARKET FUND"), (EACH A "FUND," AND
COLLECTIVELY, THE "FUNDS"). THE FUNDS ARE SEPARATE, DIVERSIFIED MONEY MARKET
INVESTMENT PORTFOLIOS OF THE DREYFUS/LAUREL FUNDS, INC. (FORMERLY THE LAUREL
FUNDS, INC.), AN OPEN-END, MANAGEMENT INVESTMENT COMPANY ALSO KNOWN AS A
MUTUAL FUND (THE "COMPANY") THAT IS PART OF THE DREYFUS FAMILY OF FUNDS.
EACH FUND SEEKS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER
SHARE. INVESTMENTS IN A FUND ARE NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT AND THERE CAN BE NO ASSURANCE THAT ANY FUND WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
THIS PROSPECTUS SETS FORTH CONCISELY INFORMATION ABOUT THE FUNDS THAT
YOU SHOULD KNOW BEFORE INVESTING. IT SHOULD BE READ CAREFULLY BEFORE YOU
INVEST AND RETAINED FOR FUTURE REFERENCE.
THE STATEMENT OF ADDITIONAL INFORMATION ("SAI") DATED March 1, 1996,
WHICH MAY BE REVISED FROM TIME TO TIME, PROVIDES A FURTHER DISCUSSION OF
CERTAIN AREAS IN THIS PROSPECTUS AND OTHER MATTERS WHICH MAY BE OF INTEREST
TO SOME INVESTORS. IT HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION ("SEC") AND IS INCORPORATED HEREIN BY REFERENCE. FOR A FREE COPY,
WRITE TO THE FUNDS AT 144 GLENNCURTISS BOULEVARD, UNIONDALE, NEW YORK
11556-0144, OR CALL 1-800-554-4611. WHEN TELEPHONING, ASK FOR OPERATOR 144.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
ALL MONEY MARKET FUNDS INVOLVE CERTAIN INVESTMENT RISKS, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL.
THE FEES TO WHICH EACH FUND IS SUBJECT ARE SUMMARIZED IN THE "EXPENSE
SUMMARY" SECTION OF THE FUNDS' PROSPECTUS. EACH FUND PAYS AN AFFILIATE OF
MELLON BANK, N.A. ("MELLON BANK") TO BE ITS INVESTMENT MANAGER. 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. 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
HOW TO REDEEM FUND SHARES.............. 16
THE SHAREHOLDER SERVICING PLANS........ 19
PERFORMANCE INFORMATION................ 19
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES 20
GENERAL INFORMATION.................... 21
PAGE
EXPENSE SUMMARY........................ 3
FINANCIAL HIGHLIGHTS................... 4
DESCRIPTION OF THE FUNDS............... 7
MANAGEMENT OF THE FUNDS................ 10
HOW TO BUY FUND SHARES................. 12
SHAREHOLDER SERVICES................... 14
Page 1
[This Page Intentionally Left Blank]
# Page 2
<TABLE>
<CAPTION>
<S> <C>
EXPENSE SUMMARY
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on Purchases............................. none
Maximum Sales Load Imposed on Reinvestments......................... none
Deferred Sales Load................................................. none
Redemption Fee...................................................... none
Exchange Fee........................................................ none
ESTIMATED ANNUAL FUND OPERATING EXPENSES:
(as a percentage of net assets)
Management Fee...................................................... 0.15%
Shareholder Servicing Fee*.......................................... 0.15%
Other Expenses**.................................................... 0.00%
______
Total Fund Operating Expenses....................................... 0.30%
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:
1 YEAR $ 3
3 YEARS $10
5 YEARS $17
10 YEARS $38
</TABLE>
* See "The Shareholder Servicing Plans" for a description of the Funds'
shareholder servicing plans.
**Does not include fees and expenses of the non-interested Directors
(including counsel). The investment manager is contractually required to
reduce its Management Fee by 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 of the Funds.")
THE AMOUNTS LISTED IN THE EXAMPLE SHOULD NOT BE CONSIDERED AS
REPRESENTATIVE OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER
OR LESS THAN THOSE INDICATED. MOREOVER, WHILE THE EXAMPLE ASSUMES A 5% ANNUAL
RETURN, EACH 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. (See "Management of the Funds.") Long-term shareholders of the Funds'
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
information in the foregoing table does not reflect any fee waivers or
expense reimbursement arrangements that may be in effect.
# Page 3
FINANCIAL HIGHLIGHTS
The following financial information has been derived from the
financial statements which have been audited by ___________________, 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 dated October 31, 1995 and which are incorporated by
reference in the SAI.
<TABLE>
<CAPTION>
DREYFUS INSTITUTIONAL PRIME MONEY MARKET FUND
FOR FUND SHARES OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.
<S> <C> <C> <C> <C> <C> <C> <C> <C>
YEAR YEAR YEAR YEAR YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
10/31/95 10/31/94# 10/31/93 10/31/92 10/31/91 10/31/90 10/31/89 10/31/88*
Net asset value, beginning
of year.............. $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
------ ------ ------ ------ ----- ----- ----- -----
Income from investment operations:
Net investment income 0.0563 0.0349 0.0300 0.0401 0.0641 0.0810 0.0897 0.0405
------ ------ ------ ------ ----- ----- ----- -----
Less distributions:
Distributions from net
investment income.... (0.0563) (0.0349) (0.0300) (0.0401) (0.0641) (0.0810) (0.0897) (0.0405)
------ ------ ------ ------ ----- ----- ----- -----
Net asset value, end of year $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
------ ------ ------ ------ ----- ----- ----- -----
Total return............. 5.77% 3.67% 3.04% 4.09% 6.60% 8.41% 9.35% 4.12%
====== ====== ====== -====== ====== ====== ====== ======
Ratios to average net assets/
supplemental data:
Net assets, end of year
(in 000's)........... $773,602 $681,781 $824,080 $950,322 $943,636. $360,534 $97,366 $181,525
Ratio of operating expenses to
average net assets... 0.30% 0.29% 0.27% 0.29% 0.30% 0.28% 0.30% 0.30%
Ratio of net investment income
to average net assets 5.61% 3.58% 2.99% 4.04% 6.22% 8.07% 8.74% 7.82%
* The Fund commenced operations on April 15, 1988.
Annualized.
</TABLE>
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, served as the Fund's investment
manager. Effective October 17, 1994, The Dreyfus Corporation began serving as
the Fund's investment manager.
# Page 4
FINANCIAL HIGHLIGHTS
The following financial information has been derived from the
financial statements which have been audited by ________________________, 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 dated October 31, 1995 and which are incorporated by
reference in the SAI.
<TABLE>
<CAPTION>
DREYFUS INSTITUTIONAL GOVERNMENT MONEY MARKET FUND
FOR FUND SHARES OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
10/31/95 10/31/94# 10/31/93 10/31/92 10/31/91 10/31/90 10/31/89 10/31/88 10/31/87*
Net asset value, beginning
of year........... $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000. $1.0000 $1.0000
-------- ------- ------- ------- ------- ------- ------- ------- -------
investment operations:
Net investment
income............ 0.0557 0.0356 0.0293 0.0385 0.0619 0.0796 0.0874... 0.0692 0.0043
-------- ------- ------- ------- ------- ------- ------- ------- -------
Less distributions:
Distributions from net
investment income. (0.0557) (0.0356) (0.0293) (0.0385) (0.0619) (0.0796) (0.0874) (0.0692) (0.0043)
-------- ------- ------- ------- ------- ------- ------- ------- -------
Net asset value, end of year $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
-------- ------- ------- ------- ------- ------- ------- ------- -------
Total return.......... 5.71% 3.63% 2.97% 3.92% 6.36% 8.26% 9.10% 7.15% 0.43%
======= ======== ======== ======= ====== ====== ====== ======= =======
Ratios to average net assets/
supplemental data:
Net assets, end of year
(in 000's)........ $515,812 $470,007 $406,690 $391,364 $308,136 $84,283 $66,077 $147,430 $490,875
Ratio of operating expenses to
average net assets 0.30% 0.30% 0.30% 0.30% 0.30% 0.30% 0.30% 0.30% 0.30%
Ratio of net investment income
to average net assets 5.55% 3.60% 2.93% 3.82% 6.00% 8.03% 8.63% 6.70% 6.53%
* The Fund commenced operations on October 8, 1987.
Annualized.
</TABLE>
Total return represents aggregate total return for the periods
indicated.
For the years ended October 31, 1993, 1992, 1991, 1990 and 1989, 1988
and 1987, the investment adviser reimbursed expenses of $0.0001, $0.0004,
$0.0014, $0.0035, $0.0037 and $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 served as the Fund's investment
manager. Effective October 17, 1994, The Dreyfus Corporation began serving as
the Fund's investment manager.
# Page 5
FINANCIAL HIGHLIGHTS
The following financial information has been derived from the
financial statements which have been audited by ________________________, 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 dated October 31, 1995 and which are incorporated by
reference in the SAI.
<TABLE>
<CAPTION>
DREYFUS INSTITUTIONAL U.S. TREASURY MONEY MARKET FUND
FOR FUND SHARES OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.
<S> <C> <C> <C> <C> <C> <C> <C>
YEAR YEAR YEAR YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED ENDED
10/31/95 10/31/94# 10/31/93 10/31/92 10/31/91 10/31/90 10/31/89*
Net asset value, beginning
of year............. $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
------ -------- -------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.0543 0.0351** 0.0287 0.0381 0.0620 0.0793 0.0761
------ -------- -------- -------- -------- -------- --------
Less distributions:
Distributions from net
investment income... (0.0543) (0.0351) (0.0287) (0.0381) (0.0620) (0.0793) (0.0761)
------ -------- -------- -------- -------- -------- --------
Net asset value, end of year $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
------ -------- -------- -------- -------- -------- --------
Total return............ 5.57% 3.55% 2.91% 3.88% 6.39% 8.23% 7.88%
======= ====== ======== ======= ======= ======= ==========
Ratios to average net assets/
supplemental data:
Net assets, end of year
(in 000's).......... $767,948 $586,778 $500,653 $666,378 $452,333 $270,664 $80,135
Ratio of operating expenses to
average net assets.. 0.30% 0.30%*** 0.30% 0.30% 0.30% 0.30% 0.30%
Ratio of net investment income
to average net assets 5.44% 3.55% 2.87% 3.81% 6.04% 8.08% 8.83%
* 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.
</TABLE>
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 served as the Fund's investment
manager. Effective October 17, 1994, The Dreyfus Corporation began serving as
the Fund's investment manager.
# Page 6
DESCRIPTION OF THE FUNDS
INVESTMENT OBJECTIVE AND POLICES
Described below are the investment objective and policies of each
Fund. There can be no assurance that a Fund will meet its stated investment
objective. See "Other Investment Polices and Risk Factors" on page 8 for a
detailed description of risks and other Fund investment policies.
DREYFUS 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.
DREYFUS 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 Dreyfus 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; (8)
floating rate notes, and (9) repurchase agreements. The Dreyfus Institutional
Prime Money Market Fund also may utilize reverse repurchase agreements. (See
"Other Investment Policies and Risk Factors.")
DREYFUS 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. Dreyfus 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) floating rate
notes; and (3)repurchase agreements.
Each 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,
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.
# Page 7
OTHER INVESTMENT POLICIES AND RISK FACTORS
BANK INSTRUMENTS. Dreyfus Institutional Prime Money Market Fund and
Dreyfus Institutional Government Money Market Fund 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 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 Dreyfus Institutional Prime Money Market Fund and Dreyfus Institutional
Government Money Market Fund in commercial paper will consist of issues rated
in a manner consistent with such Fund's 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. Dreyfus Institutional Prime Money Market Fund and
Dreyfus Institutional Government Money Market Fund 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 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.
ILLIQUID SECURITIES. No Fund will knowingly invest more than 10% 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 Section4(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 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)
# Page 8
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.
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 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. Dreyfus Institutional Prime Money
Market 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.
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 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. Dreyfus Institutional Prime Money Market
Fund and Dreyfus Institutional Government Money Market 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
# Page 9
guaranteed by the U.S. Government; 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. Dreyfus Institutional Prime
Money Market Fund and Dreyfus Institutional Government Money Market 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, a Fund might be unable to dispose o
f 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
invest in variable amount master demand notes issued only 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" 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 Fund's
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 that
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 a 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.
MANAGEMENT OF THE FUNDS
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
# Page 10
of Mellon Bank Corporation ("Mellon"). As of November 30, 1995, Dreyfus
managed or administered approximately $83 billion in assets for more than 1.7
million investor accounts nationwide.
Dreyfus serves as the Funds' investment manager. Dreyfus supervises
and assists in the overall management of the Funds' affairs under an
Investment Management Agreement with the Funds, 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 one or more third parties to provide, investment advisory,
administrative, custody, fund accounting and transfer agency services to the
Funds. As the Fund's investment manager, Dreyfus manages the Funds by making
investment decisions based on the Funds' investment objectives, 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 $209 billion in assets as of
September 30, 1995, including $80 billion in mutual fund assets. As of
September 30, 1995, Mellon, through various subsidiaries, provided
non-investment services, such as custodial or administration services, for
more than $717 billion in assets, including approximately $55 billion in
mutual fund assets.
Under the Investment Management Agreement, each Fund pays a fee
computed daily, and paid monthly, at the annual rate of 0.15% of the 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
and expenses of the non-interested Directors (including counsel fees), Rule
12b-1 fees (shareholder servicing fees in the case of these Funds) 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 by an amount
equal to a Fund's allocable share of such expenses. In order to compensate
Dreyfus for paying virtually all of a 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 a Fund. For the fiscal year ended
October 31, 1995, Dreyfus Institutional Prime Money Market Fund, Dreyfus
Institutional Government Money Market Fund, and Dreyfus Institutional U.S.
Treasury Money Market Fund each paid Dreyfus 0.15% of the Fund's 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, 1995, total operating expenses
(excluding shareholder servicing fees) of Dreyfus Institutional Prime Money
Market Fund, Dreyfus Institutional Government Money Market Fund and Dreyfus
Institutional U.S. Treasury Money Market Fund were 0.15% of each Fund's
average daily net assets. In addition, Fund shares may be subject to certain
shareholder servicing fees. See "The Shareholder Servicing Plans."
Dreyfus may pay the Distributor for shareholder services from
Dreyfus' own assets, including past profits but not including the management
fee paid by the Funds. 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
# Page 11
Dreyfus or Mellon Bank or that have sold shares of the Funds, 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 their investment objectives,
policies and restrictions, the Funds may invest in securities of companies
with which Mellon Bank has a lending relationship.
The Funds' distributor is Premier (the "Distributor"). The
Distributor is located at One Exchange Place, Boston, Massachusetts 02109.
The Distributor is a wholly-owned subsidiary of FDI Distribution Services,
Inc., a provider of mutual fund administration services, which in turn is a
wholly-owned subsidiary of FDI Holdings, Inc., the parent company of which is
Boston Institutional Group, Inc.
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT, AND
SUB-ADMINISTRATOR--Mellon Bank (One Mellon Bank Center, Pittsburgh,
Pennsylvania 15258) is the Funds' custodian. The Funds' transfer and dividend
disbursing agent is Dreyfus Transfer, Inc. (the "Transfer Agent"), a
wholly-owned subsidiary of Dreyfus, located at One American Express Plaza,
Providence, Rhode Island 02903. Premier is the Funds' sub-administrator and,
pursuant to a Sub-Administration Agreement with Dreyfus, provides various
administrative and corporate secretarial services to the Funds.
HOW TO BUY FUND SHARES
You can purchase shares of a Fund without a sales charge directly
from the Distributor; you may be charged a nominal fee if you effect
transactions in shares of a Fund through an Agent. Share certificates are
issued only upon your written request. No certificates are issued for
fractional shares. The Funds reserve the right to reject any purchase order.
The minimum initial investment to establish a new account in each
Fund is $1 million. There is no minimum requirement for subsequent
investments.
You may purchase shares of a Fund by check or wire, or through the
Dreyfus TELETRANSFER Privilege described below. Checks should be made payable
to "The Dreyfus Family of Funds." Payments to open new accounts which are
mailed should be sent to The Dreyfus Family of Funds, P.O. Box 9387,
Providence, Rhode Island 02940-9387, together with your Account Application.
For subsequent investments, your Fund account number should appear on the
check and an investment slip should be enclosed and sent to The Dreyfus
Family of Funds, P.O. Box 105, Newark, New Jersey 07101-0105. 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 the telephone number 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 Boston Safe Deposit and Trust Company, together with
the applicable Fund's DDA# as shown below, for purchase of Fund shares in
your name:
DDA#043974 Dreyfus Institutional Prime Money Market Fund;
DDA#043931 Dreyfus Institutional Government Money Market Fund;
DDA#044075 Dreyfus Institutional U.S. Treasury Money Market Fund.
The wire must include your Fund account number (for new accounts, your
Taxpayer Identification Number ("TIN") should be included instead), account
registration and dealer number, if applicable. If your initial purchase of
Fund shares is by wire, please call 1-800-645-6561 after completing your wire
payment to obtain your Fund account number. Please include your Fund account
number on the Funds' Account Application and promptly mail the Account
Application to the Fund, as no redemption 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
# Page 12
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
Funds make 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 Boston Safe Deposit and Trust Company with instructions to
credit your Fund account. The instructions must specify your Fund account
registration and your Fund account number PRECEDED BY THE DIGITS:
"4640" for Dreyfus Institutional Prime Money Market Fund;
"4610" for Dreyfus Institutional Government Money Market Fund;
"4670" for Dreyfus Institutional U.S. Treasury Money Market Fund.
Federal regulations require that you provide a certified TIN upon
opening or reopening an account. See "Dividends, Distributions and Taxes" and
the Funds' Account Application for further information concerning this
requirement. Failure to furnish a certified TIN to the Fund could subject you
to a $50 penalty imposed by the Internal Revenue Service ("IRS").
NET ASSET VALUE PER SHARE ("NAV") -- The price of Fund shares, which are
offered on a continuous basis, is their 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 Dreyfus
Institutional U.S. Treasury Money Market Fund by 1 p.m., Eastern time, or by
Dreyfus Institutional Prime Money Market Fund or Dreyfus Institutional
Government Money Market Fund by 3 p.m., Eastern time, are effective on, and
will receive the share price next determined on that day. The NAV of the
Funds are calculated as follows: 1 p.m., Eastern time for Dreyfus
Institutional U.S. Treasury Money Market Fund and 3 p.m., Eastern time for
Dreyfus Institutional Prime Money Market Fund and Dreyfus Institutional
Government Money Market Fund. Redemption requests received after 1 p.m.,
Eastern time for Dreyfus Institutional U.S. Treasury Money Market Fund and 3
p.m., Eastern time for Dreyfus Institutional Prime Money Market Fund and
Dreyfus Institutional Government Money Market Fund are effective on, and
receive the first share price determined on, the next business day.
An investment portfolio's NAV refers to the worth of one share. The
NAV for Fund shares 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 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.
PROCEDURES FOR MULTIPLE ACCOUNTS -- Special procedures have been designed for
banks and other institutions that wish to open multiple accounts. The
institution may open a single master account by filing one application with
the Transfer Agent and may open individual sub-accounts at the same time or
at some later date. For further information, please refer to the SAI.
DREYFUS TELETRANSFER PRIVILEGE -- You may purchase shares of a Fund (minimum
$500 and maximum $150,000 per day) by telephone if you have checked the
appropriate box and supplied the necessary information on the Funds' 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 Funds 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 Fund shares by telephoning
1-800-645-6561 or, if calling from overseas, 516-794-5452.
# Page 13
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 Fund, shares 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.
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 1-800-645-6561
or, if calling from overseas, 516-794-5452. 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, Dreyfus
TELETRANSFER Privilege and the dividends and distributions payment option
(except for Dreyfus 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 into funds sold with a sales
load. If you are exchanging into a fund that charges a sales load, you may
qualify for share prices which do not include the sales load or which reflect
a reduced sales load, if the shares 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
Funds reserve 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 Funds reserve 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 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
a Fund, in shares of other funds in the Dreyfus Family of
# Page 14
Funds of which you are currently an investor. 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 into funds sold with a sales load. The right to exercise
this Privilege may be modified or canceled by the Funds 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 Funds 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 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. 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 and the notification will be effective
three business days following receipt. The Funds 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 a Fund in shares
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 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 a 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 Funds may modify or terminate these
Privileges at any time or charge a service fee. No such fee currently is
contemplated. Shares held under Keogh Plans, IRAs or other retirement plans
are not eligible for Dreyfus Dividend Sweep.
# Page 15
DREYFUS GOVERNMENT DIRECT DEPOSIT PRIVILEGE
Dreyfus Government Direct Deposit Privilege enables you to purchase
Fund shares (minimum of $100 and maximum of $50,000 per transaction) by
having Federal salary, Social Security, or certain veterans', military or
other payments from the Federal government automatically deposited into your
Fund account. You may deposit as much of such payments as you elect. To
enroll in Dreyfus Government Direct Deposit, you must file with the Transfer
Agent a completed Direct Deposit Sign-Up Form for each type of payment that
you desire to include in this Privilege. The appropriate form may be obtained
by calling 1-800-645-6561. Death or legal incapacity will terminate your
participation in this Privilege. You may elect at any time to terminate your
participation by notifying in writing the appropriate Federal agency.
Further, the Funds 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 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 Funds
may modify or terminate this Privilege at any time or charge a service fee.
No such fee currently is contemplated.
AUTOMATIC WITHDRAWAL PLAN
The Automatic Withdrawal Plan permits you to request withdrawal of a
specified dollar amount (minimum of $50) on either a monthly or quarterly
basis if you have a $5,000 minimum account. An application for the Automatic
Withdrawal Plan can be obtained by calling 1-800-645-6561. The Automatic
Withdrawal Plan may be ended at any time by the shareholder, a 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, a Fund will redeem the shares at the
next determined NAV.
The Funds impose 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 a Fund's then-current NAV.
# Page 16
The Funds 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 FUNDS 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.
Each Fund reserves the right to redeem a shareholder's account at its
option upon not less than 45 days' written notice if the net asset value of
such account is $10,000 or less ($500 or less in the case of holders of
shares of any of the Funds since September 14, 1995) and remains at or below
such amount 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 the Dreyfus TELETRANSFER
Privilege. Other redemption procedures may be in effect for clients of
certain Agents and institutions. The Funds make 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 Funds' Account Application or have filed a Shareholder
Services Form with the Transfer Agent. If you select a telephone redemption
privilege or Telephone Exchange Privilege, which is granted automatically
unless you refuse it, you authorize the Transfer Agent to act on telephone
instructions from any person representing himself or herself to be you, or a
representative of your Agent, and reasonably believed by the Transfer Agent
to be genuine. The Funds 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
Funds or the Transfer Agent may be liable for any losses due to unauthorized
or fraudulent instructions. Neither the Funds 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.
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. 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
# Page 17
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 the
telephone number 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 Funds'
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 1-800-645-6561 or, if
calling from overseas, 516-794-5452. The Funds reserve 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 Funds. The Funds' 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
Funds' 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
1-800-645-6561 or, if calling from overseas, 516-794-5452. The Funds reserve
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 Funds. 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. 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 Funds' 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 a bank 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 TELETR
ANSFER Privilege for transfer to their bank account only up to $250,000
within any 30-day period. The Funds reserve 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 Funds
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
1-800-645-6561 or, if calling from overseas, 516-794-5452.
# Page 18
Shares held under Keogh Plans, IRAs or other retirement plans, and shares
issued in certificate form, are not eligible for this Privilege.
THE SHAREHOLDER SERVICING PLANS
Each Fund is subject to a shareholder servicing plan. Each Fund's
shareholder servicing plan (each a "Plan," collectively the "Plans") permits
the Fund to compensate Agents that have entered into Selling Agreements
("Agreements") with the Company. Payments under each Fund's 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 Fund's 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
Fund 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 Fund 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 Fund shares;
(v) arranging for bank wires; and (vi) providing general shareholder liaison
services.
The Company may suspend or reduce payments under a Plan at any time,
and payments are subject to the continuation of each Fund's Plan and the
Agreements described above. From time to time, the Agents and the Company 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 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
Company. The Agreement requires each Agent to disclose to their clients any
compensation payable to such Agent by the Company 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.
PERFORMANCE INFORMATION
From time to time, each Fund may advertise the yield and "effective
yield" on its shares. YIELD FIGURES ARE BASED ON HISTORICAL EARNINGS AND ARE
NOT INTENDED TO INDICATE FUTURE PERFORMANCE.
The "yield" of a Fund refers to the income generated by an investment
in such Fund 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 similarly, but, when annualized, the income earned by an
investment in a 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. Since yields fluctuate, yield data cannot necessarily
be used to compare an investment in a Fund 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.
A Fund may compare its performance 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,
# Page 19
and similar publications may also be used in comparing a Fund's performance.
Furthermore, a Fund may quote its shares' yields in advertisements or in
shareholder reports.
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
Each Fund declares daily and pays monthly (on the first business day
of the following month) dividends 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. Capital
gains otherwise distributed may be reduced in whole or in part by virtue 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) 1 p.m.,
Eastern time for the Dreyfus Institutional U.S. Treasury Money Market Fund;
and (ii) 3p.m., Eastern time for the Dreyfus Institutional Prime Money Market
Fund and the Dreyfus Institutional Government Money Market Fund. Dividends
begin accruing on shares on the next business day with regard to purchase
orders effected after the relevant times set forth above.
Unless you choose to receive dividend and/or capital gain
distributions, if any, in cash, your distributions will be automatically
reinvested in additional shares of the distributing Fund at the then-current
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.
You may elect to have distributions on shares held in IRAs and
403(b)accounts paid in cash only if you are at least 591/2 years old or are
permanently and totally disabled. Distribution checks normally are mailed
within seven days after the record date.
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.
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
# Page 20
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 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.
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 SEC under
the 1940 Act as an 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 share has one vote. All shares of a Fund vote together, except
as to any matter for which a separate vote of any Fund is required by the
1940 Act, and except as to any matter which affects the interests of one or
more particular funds,in which case only the shareholders of the affected
Fund are entitled to vote. At your written request, the Company will issue
negotiable stock certificates.
Unless otherwise required by the 1940 Act, ordinarily it will not be
necessary for the Funds 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, 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 proper purpose. Company shareholders may remove a Director by
the affirmative vote of a majority of the Company's 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 Funds 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
FUNDS' OFFICIAL SALES LITERATURE IN CONNECTION WITH THE OFFER OF THE FUNDS'
SHARES, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUNDS. 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 21
[This PageIntentionally Left Blank]
# Page 212
[This PageIntentionally Left Blank]
# Page 213
Dreyfus Institutional Prime Money Market Fund
Dreyfus Institutional Government Money Market Fund
Dreyfus Institutional U.S. Treasury Money Market Fund
Prospectus
Copy Rights 1995 Dreyfus Service Corporation
LFISTp2000095
Registration Mark
Page 24
__________________________________________________________________________
DREYFUS EUROPEAN FUND
INVESTOR SHARES AND CLASS R SHARES
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
MARCH 1, 1996
__________________________________________________________________________
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, 1996, as it may be revised from time to time. The
Fund is a separate diversified portfolio of The Dreyfus/Laurel Funds, Inc.
(formerly The Laurel Funds, Inc.), an open-end 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 one of the following
numbers:
Call Toll Free 1-800-645-6561
In New York City -- Call 1-718-895-1206
On Long Island -- Call 516-794-5452
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-16
Management Arrangements. . . . . . . . . . . . . . . . . . . B-21
Purchase of Fund Shares. . . . . . . . . . . . . . . . . . . B-23
Distribution Plan. . . . . . . . . . . . . . . . . . . . . . B-23
Redemption of Fund Shares. . . . . . . . . . . . . . . . . . B-24
Shareholder Services . . . . . . . . . . . . . . . . . . . . B-26
Determination of Net Asset Value . . . . . . . . . . . . . . B-29
Dividends, Other Distributions and Taxes . . . . . . . . . . B-29
Portfolio Transactions . . . . . . . . . . . . . . . . . . . B-33
Performance Information. . . . . . . . . . . . . . . . . . . B-36
Information About the Fund . . . . . . . . . . . . . . . . . B-37
Custodian, Transfer and Dividend Disbursing
Agent, Counsel and Independent Auditors. . . . . . . . . . B-37
Financial Statements . . . . . . . . . . . . . . . . . . . . B-38
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 certain
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) the 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 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 45 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.
Derivative Instruments. As discussed in the Prospectus, the Fund may
purchase and sell various financial instruments ("Derivative
Instruments"), such as financial futures contracts (such as interest rate,
index and foreign currency futures contracts), options (such as options on
securities, indices, foreign currencies and futures contracts), forward
currency contracts and interest rate, equity index and currency swaps,
caps, collars and floors. The index Derivative Instruments the Fund may
use may be based on indices of U.S. or foreign equity or debt securities.
These Derivative Instruments may be used, for example, to preserve a
return or spread, to lock in unrealized market value gains or losses, to
facilitate or substitute for the sale or purchase of securities, to adjust
its risk expsoure relative to the Benchmark, or to alter the exposure of a
particular investment or portion of the Fund's portfolio to fluctuations
in interest rates or currency rates.
Hedging strategies can be broadly categorized as "short hedges" and
"long hedges." A short hedge is a purchase or sale of a Derivative
Instrument intended partially or fully to offset potential declines in the
value of one or more investments held in the Fund's portfolio. Thus, in a
short hedge the Fund takes a position in a Derivative Instrument whose
price is expected to move in the opposite direction of the price of the
investment being hedged.
Conversely, a long hedge is a purchase or sale of a Derivative
Instrument intended partially or fully to offset potential increases in
the acquisition cost of one or more investments that the Fund intends to
acquire. Thus, in a long hedge the Fund takes a position in a Derivative
Instrument whose price is expected to move in the same direction as the
price of the prospective investment being hedged. A long hedge is
sometimes referred to as an anticipatory hedge. In an anticipatory hedge
transaction, the Fund does not own a corresponding security and,
therefore, the transaction does not relate to a security the Fund owns.
Rather, it relates to a security that the Fund intends to acquire. If the
Fund does not complete the hedge by purchasing the security it anticipated
purchasing, the effect on the Fund's portfolio is the same as if the
transaction were entered into for speculative purposes.
Derivative Instruments on securities generally are used to hedge
against price movements in one or more particular securities positions
that the Fund owns or intends to acquire. Derivative Instruments on
indices, in contrast, generally are used to attempt to hedge against price
movements in market sectors in which the Fund has invested or expects to
invest. Derivative Instruments on debt securities may be used to hedge
either individual securities or broad debt market sectors.
The use of Derivative Instruments is subject to applicable
regulations of the Securities and Exchange Commission ("SEC"), the several
options and futures exchanges upon which they are traded, the Commodity
Futures Trading Commission ("CFTC") and various state regulatory
authorities. In addition, the Fund's ability to use Derivative
Instruments will be limited by tax considerations. See "Dividends, Other
Distributions and Taxes."
In addition to the instruments, strategies and risks described below
and in the Prospectus, CCF S.A.M. and Dreyfus expect to discover
additional opportunities in connection with other Derivative Instruments.
These new opportunities may become available as CCF S.A.M. or Dreyfus
develop new techniques, as regulatory authorities broaden the range of
permitted transactions and as new techniques are developed. CCF S.A.M.
and Dreyfus may utilize these opportunities to the extent that they are
consistent with the Fund's investment objective, and permitted by the
Fund's investment policies and applicable regulatory authorities.
Special Risks. The use of Derivative Instruments involves special
considerations and risks, certain of which are described below. Risks
pertaining to particular Derivative Instruments are described in the
sections that follow.
(1) Successful use of most Derivative Instruments depends upon the
ability of CCF S.A.M. or Dreyfus to predict movements of the overall
securities, currency and other markets, which requires different skills
than predicting changes in the prices of individual securities. There can
be no assurance that any particular strategy will succeed.
(2) There might be imperfect correlation, or even no correlation,
between price movements of a Derivative Instrument and price movements of
the investments being hedged. For example, if the value of a Derivative
Instrument used in a short hedge increased by less than the decline in
value of the hedged investment, the hedge would not be fully successful.
Such a lack of correlation might occur due to factors unrelated to the
value of the investments being hedged, such as speculative or other
pressures on the markets in which Derivative Instruments are traded. The
effectiveness of hedges using Derivative Instruments on indices will
depend on the degree of correlation between price movements in the index
and price movements in the securities being hedged.
Because there are a limited number of types of exchange-traded
options and futures contracts, it is likely that the standardized
contracts available will not match the Fund's current or anticipated
investments exactly. The Fund may invest in options and futures contracts
based on securities with different issuers, maturities, or other
characteristics from the securities in which it typically invests, which
involves a risk that the options or futures position will not track the
performance of the Fund's other investments.
Options and futures prices can also diverge from the prices of their
underlying instruments, even if the underlying instruments match the
Fund's investments well. Options and futures prices are affected by such
factors as current and anticipated short-term interest rates, changes in
volatility of the underlying instrument, and the time remaining until
expiration of the contract, which may not affect security prices the same
way. Imperfect correlation may also result from differing levels of
demand in the options and futures markets and the securities markets, from
structural differences in how options and futures and securities are
traded, or from imposition of daily price fluctuation limits or trading
halts. The Fund may purchase or sell options and futures contracts with a
greater or lesser value than the securities it wishes to hedge or intends
to purchase in order to attempt to compensate for differences in
volatility between the contract and the securities, although this may not
be successful in all cases. If price changes in the Fund's options or
futures positions are poorly correlated with its other investments, the
positions may fail to produce anticipated gains or result in losses that
are not offset by gains in other investments.
(3) If successful, the above-discussed strategies can reduce risk of
loss by wholly or partially offsetting the negative effect of unfavorable
price movements. However, such strategies can also reduce opportunity for
gain by offsetting the positive effect of favorable price movements. For
example, if the Fund entered into a short hedge because CCF S.A.M.
projected a decline in the price of a security in the Fund's portfolio,
and the price of that security increased instead, the gain from that
increase might be wholly or partially offset by a decline in the price of
the Derivative Instrument. Moreover, if the price of the Derivative
Instrument declined by more than the increase in the price of the
security, the Fund could suffer a loss. In either such case, the Fund
would have been in a better position had it not attempted to hedge at all.
(4) As described below, the Fund might be required to maintain
assets as "cover," maintain segregated accounts or make margin payments
when it takes positions in Derivative Instruments involving obligations to
third parties (i.e., Derivative Instruments other than purchased options).
If the Fund were unable to close out its positions in such Derivative
Instruments, it might be required to continue to maintain such assets or
accounts or make such payments until the position expired or matured.
These requirements might impair the Fund's ability to sell a portfolio
security or make an investment at a time when it would otherwise be
favorable to do so, or require that the Fund sell a portfolio security at
a disadvantageous time. The Fund's ability to close out a position in a
Derivative Instrument prior to expiration or maturity depends on the
existence of a liquid secondary market or, in the absence of such a
market, the ability and willingness of the other party to the transaction
("counterparty") to enter into a transaction closing out the position.
Therefore, there is no assurance that any position can be closed out at a
time and price that is favorable to the Fund.
Cover for Derivative Instruments. Transactions using Derivative
Instruments may 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, futures, options,
currencies or forward contracts or (2) cash and short-term liquid debt
securities with a value sufficient at all times to cover its potential
obligations to the extent not covered as provided in (1) above. The Fund
will comply with SEC guidelines regarding cover for Derivative Instruments
and will, 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.
Assets used as cover or held in a segregated account cannot be sold
while the position in the corresponding Derivative Instrument is open,
unless they are replaced with other appropriate assets. As a result, the
commitment of a large portion of the Fund's assets to cover or segregated
accounts could impede portfolio management or the Fund's ability to meet
redemption requests or other current obligations.
Options. A call option gives the purchaser the right to buy, and
obligates the writer to sell, the underlying investment at the agreed upon
exercise price during the option period. A put option gives the purchaser
the right to sell, and obligates the writer to buy, the underlying
investment at the agreed upon exercise price during the option period. A
purchaser of an option pays an amount, known as the premium, to the option
writer in exchange for rights under the option contract.
Options on indices are similar to options on securities or currencies
except that all settlements are in cash and gain or loss depends on
changes in the index in question rather than on price movements in
individual securities or currencies.
The purchase of call options can serve as a long hedge, and the
purchase of put options can serve as a short hedge. Writing put or call
options can enable the Fund to enhance income or yield by reason of the
premiums paid by the purchasers of such options. However, if the market
price of the security or other instrument underlying a put option declines
to less than the exercise price on the option, minus the premium received,
the Fund would expect to suffer a loss.
Writing call options can also serve as a limited short hedge because
declines in the value of the hedged investment would be offset to the
extent of the premium received for writing the option. However, if the
investment appreciates to a price higher than the exercise price of the
call option, it can be expected that the option will be exercised and the
Fund will be obligated to sell the investment at less than its market
value.
Writing put options can serve as a limited long hedge because
increases in the value of the hedged investment would be offset to the
extent of the premium received for writing the option. However, if the
investment depreciates to a price lower than the exercise price of the put
option, it can be expected that the put option will be exercised and the
Fund will be obligated to purchase the investment at more than its market
value.
The value of an option position will reflect, among other things, the
current market value of the underlying investment, the time remaining
until expiration, the relationship of the exercise price to the market
price of the underlying investment, the historical price volatility of the
underlying investment and general market conditions. Options that expire
unexercised have no value.
The Fund may effectively terminate its right or obligation under an
option by entering into a closing transaction. For example, the Fund may
terminate its obligation under a call or put option that it had written by
purchasing an identical call or put option; this is known as a closing
purchase transaction. Conversely, the Fund may terminate a position in a
put or call option it had purchased by writing an identical put or call
option; this is known as a closing sale transaction. Closing transactions
permit the Fund to realize profits or limit losses on an option position
prior to its exercise or expiration.
The Fund may purchase and sell both exchange-traded and over-the-
counter ("OTC") options. Exchange-traded options in the United States are
issued by a clearing organization that, in effect, guarantees completion
of every exchange-traded option transaction. In contrast, OTC options are
contracts between the Fund and its counterparty (usually a securities
dealer or a bank) with no clearing organization guarantee. Thus, when the
Fund purchases an OTC option, it relies on the counterparty from whom it
purchased the option to make or take delivery of the underlying investment
upon exercise of the option. Failure by the counterparty to do so would
result in the loss of any premium paid by the Fund as well as the loss of
any expected benefit of the transaction. The Fund will enter into only
those option contracts that are listed on a national securities or
commodities exchange or traded in the OTC market for which there appears
to be a liquid secondary 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 the current market value of the underlying securities and the
option's strike price). The repurchase price with primary dealers is
typically a formula price that is generally based on a multiple of the
premium received for the option plus the amount by which the option is
"in-the-money."
Generally, the OTC debt and foreign currency options used by the Fund
are European-style options. This means that the option is only
exercisable immediately prior to its expiration. This is in contrast to
American-style options, which are exercisable at any time prior to the
expiration date of the option.
The Fund's ability to establish and close out positions in exchange-
listed options depends on the existence of a liquid market. However,
there can be no assurance that such a market will exist at any particular
time. Closing transactions can be made for OTC options only by
negotiating directly with the counterparty, or by a transaction in the
secondary market if any such market exists. Although the Fund will enter
into OTC options only with major dealers in unlisted options, there is no
assurance that the Fund will in fact be able to close out an OTC option
position at a favorable price prior to expiration. In the event of
insolvency of the counterparty, the Fund might be unable to close out an
OTC option position at any time prior to its expiration.
If the Fund were unable to effect a closing transaction for an option
it had purchased, it would have to exercise the option to realize any
profit. The inability to enter into a closing purchase transaction for a
covered call option written by the Fund could cause material losses
because the Fund would be unable to sell the investment used as cover for
the written option until the option expires or is exercised.
The Fund may write only covered call options on securities. 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.
Futures Contracts and Options on Futures Contracts. When the Fund
purchases a futures contract, it incurs an obligation to take delivery of
a specified amount of the obligation underlying the futures contract at a
specified time in the future for a specified price. When the Fund sells a
futures contract, it incurs an obligation to deliver a specified amount of
the obligation underlying the futures contract at a specified time in the
future for an agreed upon price. With respect to index futures, no
physical transfer of the securities underlying the index is made. Rather,
the parties settle by exchanging in cash an amount based on the difference
between the contract price and the closing value of the index on the
settlement date.
When the Fund writes an option on a futures contract, it becomes
obligated, in return for the premium paid, to assume a position in a
futures contract at a specified exercise price at any time during the term
of the option. If the Fund has written a call, it assumes a short futures
position. If the Fund has written a put, it assumes a long futures
position. When the Fund purchases an option on a futures contract, it
acquires the right, in return for the premium it pays, to assume a
position in a futures contract (a long position if the option is a call
and a short position if the option is a put).
The purchase of futures or call options on futures can serve as a
long hedge, and the sale of futures or the purchase of put options on
futures can serve as a short hedge. Writing call options on futures
contracts can serve as a limited short hedge, using a strategy similar to
that used for writing call options on securities or indices. Similarly,
writing put options on futures contracts can serve as a limited long
hedge.
No price is paid upon entering into a futures contract. Instead, at
the inception of a futures contract the Fund is required to deposit
"initial margin" consisting of cash or U.S. Government securities in an
amount generally equal to 10% or less of the contract value. Margin must
also be deposited when writing a call or put option on a futures contract,
in accordance with applicable exchange rules. Unlike margin in securities
transactions, initial margin on futures contracts does not represent a
borrowing, but rather is in the nature of a performance bond or good-faith
deposit that is returned to the Fund at the termination of the transaction
if all contractual obligations have been satisfied. Under certain
circumstances, such as periods of high volatility, the Fund may be
required by an exchange to increase the level of its initial margin
payment.
Subsequent "variation margin" payments are made to and from the
futures broker daily as the value of the futures position varies, a
process known as "marking-to-market." Variation margin does not involve
borrowing, but rather represents a daily settlement of the Fund's
obligations to or from a futures broker. When the Fund purchases an
option on a future, the premium paid plus transaction costs is all that is
at risk. In contrast, when the Fund purchases or sells a futures contract
or writes a call or put option thereon, it is subject to daily variation
margin calls that could be substantial in the event of adverse price
movements. If the Fund has insufficient cash to meet daily variation
margin requirements, it might need to sell securities at a time when such
sales are disadvantageous.
Purchasers and sellers of futures contracts and options on futures
can enter into offsetting closing transactions, similar to closing
transactions on options, by selling or purchasing, respectively, an
instrument identical to the instrument purchased or sold. Positions in
futures and options on futures may be closed only on an exchange or board
of trade that provides a secondary market. Although the Fund intends to
enter into futures and options on futures only on exchanges or boards of
trade where there appears to be a liquid secondary market, there can be no
assurance that such a market will exist for a particular contract at a
particular time. In such event, it may not be possible to close a futures
contract or options position.
Under certain circumstances, futures exchanges may establish daily
limits on the amount that the price of a futures or an option on a futures
contract can vary from the previous day's settlement price; once that
limit is reached, no trades may be made that day at a price beyond the
limit. Daily price limits do not limit potential losses because prices
could move to the daily limit for several consecutive days with little or
no trading, thereby preventing liquidation of unfavorable positions.
If the Fund were unable to liquidate a futures or options on futures
position due to the absence of a liquid secondary market or the imposition
of price limits, it could incur substantial losses. The Fund would
continue to be subject to market risk with respect to the position. In
addition, except in the case of purchased options, the Fund would continue
to be required to make daily variation margin payments and might be
required to maintain the position being hedged by the future or option or
to maintain cash or securities in a segregated account.
To the extent that the Fund enters into futures contracts, options on
futures contracts, or options on foreign currencies traded on an exchange
regulated by the CFTC, in each case other than for bona fide hedging
purposes (as defined by the CFTC), the aggregate initial margin and
premiums required to establish those positions (excluding the amount by
which options are "in-the-money" at the time of purchase) will not exceed
5% of the liquidation value of the Fund's portfolio, after taking into
account unrealized profits and unrealized losses on any contracts the Fund
has entered into. This policy does not limit to 5% the percentage of the
Fund's assets that are at risk in futures contracts and options on futures
contracts.
Foreign Currency Strategies - Special Considerations. The Fund may
use Derivative Instruments on foreign currencies to hedge against
movements in the values of the foreign currencies in which the Fund's
securities are denominated. Such currency hedges can protect against
price movements in a security that the Fund owns or intends to acquire
that are attributable to changes in the value of the currency in which it
is denominated. Such hedges do not, however, protect against price
movements in the securities that are attributable to other causes.
The Fund might seek to hedge against changes in the value of
particular currency when no Derivative Instruments on that currency are
available or such Derivative Instruments are more expensive than certain
other Derivative Instruments. In such cases, the Fund may hedge against
price movements in that currency by entering into transactions using
Derivative Instruments on another currency or a basket of currencies, the
values of which CCF S.A.M. or Dreyfus believes will have a high degree of
positive correlation to the value of the currency being hedged. The risk
that movements in the price of the Derivative Instrument will not
correlate perfectly with movements in the price of the currency being
hedged is magnified when this strategy is used.
The value of Derivative Instruments on foreign currencies depends on
the value of the underlying currency relative to the U.S. dollar. Because
foreign currency transactions occurring in the interbank market might
involve substantially larger amounts than those involved in the use of
foreign currency Derivative Instruments, the Fund could be disadvantaged
by having to deal in the odd lot market (generally consisting of
transactions of less than $1 million) for the underlying foreign
currencies at prices that are less favorable than for round lots.
There is no systematic reporting of last sale information for foreign
currencies or any regulatory requirement that quotations available through
dealers or other market sources be firm or revised on a timely basis.
Quotation information generally is representative of very large
transactions in the interbank market and thus might not reflect odd-lot
transactions where rates might be less favorable. The interbank market in
foreign currencies is a global, round-the-clock market.
Settlement of transactions involving foreign currencies might be
required to take place within the country issuing the underlying currency.
Thus, the Fund might be required to accept or make delivery of the
underlying foreign currency in accordance with any U.S. or foreign
regulations regarding the maintenance of foreign banking arrangements by
U.S. residents and might be required to pay any fees, taxes and charges
associated with such delivery assessed in the issuing country.
Forward Contracts. A forward foreign currency exchange contract
("forward contract") is a contract to purchase or sell a currency at a
future date. The two parties to the contract set the number of days and
the price. Forward contracts are used as a hedge against future movements
in foreign exchange rates. The Fund may enter into forward contracts to
purchase or sell foreign currencies for a fixed amount of U.S. dollars or
other foreign currency.
Forward contracts may serve as long hedges -- for example, the Fund
may purchase a forward contract to lock in the U.S. dollar price of a
security denominated in a foreign currency that the Fund intends to
acquire. Forward contracts may also serve as short hedges -- for example,
the Fund may sell a forward contract to lock in the U.S. dollar equivalent
of the proceeds from the anticipated sale of a security denominated in a
foreign currency or from anticipated dividend or interest payments
denominated in a foreign currency. CCF S.A.M. may seek to hedge against
changes in the value of a particular currency by using forward contracts
on another foreign currency or basket of currencies, the value of which
CCF S.A.M. believes will bear a positive correlation to the value of the
currency being hedged.
The cost to the Fund of engaging in forward contracts varies with
factors such as the currency involved, the length of the contract period
and the market conditions then prevailing. Because forward contracts are
usually entered into a principal basis, no fees or commissions are
involved. When the Fund enters into a forward contract, it relies on the
counterparty to make or take delivery of the underlying currency at the
maturity of the contract. Failure by the counterparty to do so would
result in the loss of any expected benefit of the transaction.
Buyers and sellers of forward contracts can enter into offsetting
closing transactions by selling or purchasing, respectively, an instrument
identical to the instrument purchased or sold. Secondary markets
generally do not exist for forward contracts, with the result that closing
transactions generally can be made for forward contracts only by
negotiating directly with the counterparty. Thus, there can be no
assurance that the Fund will in fact be able to close out a forward
contract at a favorable price prior to maturity. In addition, in the
event of insolvency of the counterparty, the Fund might be unable to close
out a forward contract at any time prior to maturity. In either event,
the Fund would continue to be subject to market risk with respect to the
position, and would continue to be required to maintain a position in the
securities or currencies that are the subject of the hedge or to maintain
cash or securities in a segregated account.
The precise matching of forward currency contract amounts and the
value of the securities involved generally will not be possible because
the value of such securities measured in the foreign currency will change
after the forward contract has been established. Thus, the Fund might
need to purchase or sell foreign currencies in the spot (cash) market to
the extent such foreign currencies are not covered by forward contracts.
The projection of short-term currency market movements is extremely
difficult, and the successful execution of a short-term hedging strategy
is highly uncertain.
Swaps, Caps, Collars and Floors. Swap agreements, including interest
rate, equity index and currency swaps, caps, collars and floors, may be
individually negotiated and structured to include exposure to a variety of
different types of investments or market factors. Swaps involve two
parties exchanging a series of cash flows at specified intervals. In the
case of an interest rate swap, the parties exchange interest payments
based on an agreed upon principal amount (referred to as the "notional
principal amount"). Under the most basic scenario, Party A would pay a
fixed rate on the notional principal amount to Party B, which would pay a
floating rate on the same notional principal amount to Party A. Depending
on their structure, swap agreements may increase or decrease the Fund's
exposure to long or short-term interest rates (in the U.S. or abroad),
foreign currency values, mortgage securities, corporate borrowing rates,
or other factors. Swap agreements can take many different forms and are
known by a variety of names.
In a typical cap or floor agreement, one party agrees to make
payments only under specified circumstances, usually in return for payment
of a fee by the other party. For example, the buyer of an interest rate
cap obtains the right to receive payments to the extent that a specified
interest rate exceeds an agreed-upon level, while the seller of an
interest rate floor is obligated to make payments to the extent that a
specified interest rate falls below an agreed-upon level. An interest
rate collar combines elements of buying a cap and selling a floor.
The Fund will set aside cash or appropriate liquid assets to cover
its current obligations under swap transactions. If the Fund enters into
a swap agreement on a net basis (that is, the two payment streams are
netted out, with the Fund receiving or paying, as the case may be, only
the net amount of the two payments), the Fund will maintain cash or liquid
assets with a daily value at least equal to the excess, if any, of the
Fund's accrued obligations under the swap agreement over the accrued
amount the Fund is entitled to receive under the agreement. If the Fund
enters into a swap agreement on other than a net basis or writes a cap,
collar or floor, it will maintain cash or liquid assets with a value equal
to the full amount of the Fund's accrued obligations under the agreement.
The most important factor in the performance of swap agreements is
the change in the specific interest rate, currency or other factor(s) that
determine the amounts of payments due to and from the Fund. If a swap
agreement calls for payments by the Fund, the Fund must be prepared to
make such payments when due. In addition, if the counterparty's
creditworthiness declines, the value of a swap agreement would likely
decline, potentially resulting in losses.
The Fund will enter into swaps, caps, collars and floors only with
banks and recognized securities dealers believed by CCF S.A.M. or Dreyfus
to present minimal credit risks in accordance with guidelines established
by the Board. If there is a default by the other party to such a
transaction, the Fund will have to rely on its contractual remedies (which
may be limited by bankruptcy, insolvency or similar laws) pursuant to the
agreement relating to the transaction.
The Fund understands that it is the position of the staff of the SEC
that assets involved in swap transactions are illiquid and, therefore, are
subject to the limitations on illiquid investments.
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 Investment
Company Act of 1940, as amended (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 objective, 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 and options 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 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
PRINCIPAL SHAREHOLDERS
The following shareholder(s) owned 5% or more of the outstanding
Class R shares of the Fund at __________. The following shareholder(s)
owned 5% or more of the outstanding Investor shares of the Fund at
____________.
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, 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 1940 Act) is indicated by an asterisk(*). Each of the
Directors also serves as a Trustee of The Dreyfus/Laurel Funds Trust and
The Dreyfus/Laurel Tax-Free Municipal Funds (collectively, with the
Company, the "Dreyfus/Laurel Funds") and Mr. DiMartino serves as a Board
member of 93 other funds in 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: 80 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. Age: 78 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 of Dreyfus and
Executive Vice President and a director of Dreyfus Service
Corporation, a wholly-owned subsidiary of Dreyfus. From August 1994
to December 31, 1994, he was a director of Mellon Bank Corporation.
He is Chairman of the Board of Noel Group, Inc., a venture capital
company; a trustee of Bucknell University and a director of the
Muscular Dystrophy Association, Health Plan Services Corporation,
Belding Heminway, Inc., Curtis Industry, Inc. and Simmons Outdoor
Corporation and Staffing Resources, Inc. Mr. DiMartino is also a
Board member of 93 other funds in the Dreyfus Family of Funds. Age:
52 years old. Address: 200 Park Avenue, New York, New York 10166.
o + JAMES M. FITZGIBBONS. Director of the 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: 60 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; 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. Since May 1991, Mr. Goeschel has
served as Trustee of Sewickley Valley Hospital. Age: 73 years old.
Address: Way Hollow Road and Woodland Road, Sewickley, Pennsylvania
15143.
o + KENNETH A. HIMMEL. Director of the Company; 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 Managing Partner, Franklin Federal
Partners. Age: 49 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: 48
years old. Address: 401 Edgewater Place, Wakefield, Massachusetts
01880.
o + ROBERT D. McBRIDE. Director of the Company; Director and Chairman,
McLouth Steel; Director, Salem Corporation. Director, SMS/Concast,
Inc. (1983-1991). Age: 67 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: 81 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: 63 years old. Address: 321 Gross
Street, Pittsburgh, Pennsylvania 15224.
o + ROSLYN M. WATSON. Director of the Company; Principal, Watson
Ventures, Inc.; Director, American Express Centurion Bank, Director,
Harvard Community Health Plan, Inc.; Director, Massachusetts Electric
Company; Director, The Hymans Foundation, Inc., prior to February,
1993, Real Estate Development Project Manager and Vice President, The
Gunwyn Company. Age: 45 years old. Address: 25 Braddock Park,
Boston, Massachusetts 02116-5816.
# MARIE E. CONNOLLY. President and Treasurer of the Company, 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). Age: 37 years
old. Address: One Exchange Place, Boston, Massachusetts 02109.
# FREDERICK C. DEY. Vice President of the Company, 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). Age: 33 years old. Address: Premier
Mutual Fund Services, Inc., One Exchange Place, Boston, Massachusetts
02109.
# ERIC B. FISCHMAN. Vice President of the Company, 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). Age: 31 years old. Address: Premier
Mutual Fund Services, Inc., 200 Park Avenue, New York, New York
10166.
RICHARD W. HEALEY. Vice President of the Company, 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). Age: 41 years old. Address: One Exchange Place, Boston,
Massachusetts 02109.
# JOHN E. PELLETIER. Vice President and Secretary of the Company, 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). Age: 31 years old. 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
______________.
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, subsidiary or affiliate thereof)
serves as an officer or Director of the Company. The Dreyfus/Laurel Funds
pay each Director/Trustee who is not an "interested person" of the Company
(as defined in the 1940 Act), $27,000 per annum (and an additional $75,000
for the Chairman of the Board of Directors/Trustees of the Dreyfus/Laurel
Funds). In addition, the Dreyfus/Laurel Funds pay each Director/Trustee
who is not an "interested person" of the Company (as defined in the 1940
Act), $1,000 per joint Dreyfus/Laurel Funds Board meeting attended, plus
$750 per joint Dreyfus/Laurel Funds Audit Committee meeting attended, and
reimburses each Director/Trustee who is not an "interested person" of the
Company (as defined in the 1940 Act), for travel and out-of-pocket
expenses.
For the fiscal year ended October 31, 1995, the aggregate amount of
fees and expenses received by each Director from the Company and all other
funds in the Dreyfus Family of Funds for which such person is a Board
member were as follows:
<TABLE>
Total
Pension or 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 M. Adams $26,662 None None $ 34,500
Francis P. Brennan* 84,914 None None 110,500
Joseph S. DiMartino** None None None $445,000**
James M. Fitzgibbons 25,887 None None 33,500
J. Tomlinson Fort** None None None None
Arthur L. Goeschel 26,835 None None 35,500
Kenneth A. Himmel 24,543 None None 31,750
Arch S. Jeffery** None None None None
Stephen J. Lockwood 25,318 None None 32,750
Robert D. McBride 26,835 None None 35,500
John L. Propst 26,835 None None 35,500
John J. Sciullo 26,662 None None 34,500
Roslyn M. Watson 26,060 None None 34,550
# Amount does not include reimbursed expenses for attending Board meetings,
which amounted to $11,113 for the Company.
</TABLE>
* Compensation of Francis Brennan includes $75,000 paid by the Dreyfus/Laurel
Funds to be Chairman of the Board.
** Joseph S. DiMartino, J. Tomlinson Fort and Arch S. Jeffery are paid directly
by Dreyfus for serving as Board members of the Company and the funds in the
Dreyfus/Laurel Funds. For the fiscal year ended October 31, 1995, the
aggregate amount of fees and expenses received by Joseph DiMartino, J.
Tomlinson Fort and Arch S. Jeffery from Dreyfus for serving as a Board
member of the Company were $18,214, $26,835 and $26,835, respectively, and
for serving as a Board member of all funds in the Dreyfus/Laurel Funds
(including the Company) were $23,500, $35,500 and $35,500, respectively.
In addition, Dreyfus reimbursed Messrs. DiMartino, Fort and Jeffery a
total of $2,664 for expenses attributable to the Company's Board meetings.
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 (the "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 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; Christopher M. Condron, President and
Chief Operating Officer and a director; Stephen E. Canter, Vice Chairman,
Chief Investment Officer and a director; Lawrence S. Kash, Vice Chairman-
Distribution and a director; Philip L. Toia, Vice Chairman-Operations and
Administration; Daniel C. Maclean, Vice President and General Counsel;
Barbara E. Casey, Vice President Dreyfus Retirement Services; Diane M.
Coffey, Vice President-Corporate Communications; Elie M. Genadry, Vice
President-Institutional Sales; Henry D. Gottman, Vice President-Retail
Sales and Service; William F. Glavin, Jr., Vice President-Corporate
Development; Andrew S. Wasser, Vice President-Information Services; Mark
N. Jacobs, Vice President-Fund Legal and Compliance and Secretary; Jeffrey
N. Nachman, Vice President-Mutual Fund Accounting; Katherine C. Wickham,
Vice President-Corporate Human Resources; Maurice Bendrihem, Controller;
Elvira Oslapas, Assistant Secretary; 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
Company or Dreyfus and either a majority of all Directors or a majority of
the shareholders of the Fund approve its continuance. The Company may
terminate the Sub-Advisory 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 Company, 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,
1995 1994 1993
Management fee (gross of waiver) $185,344 $147,137 $77,215
Expense Reimbursement from -- $ 28,625 --
investment manager
Management fees waived -- -- $17,819
For the fiscal year ended October 31, 1995, management fees in the
amount of $185,344 were paid by the Fund to Dreyfus. 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 year ended
October 31, 1993, except for a portion of the management fee in the amount
of $17,819, which was waived, the management fee was paid by Capstone
European to CCIF.
Boston Safe Deposit and Trust Company, One Boston Place, Boston,
Massachusetts 02109 ("Boston Safe") serves as custodian for the Fund
pursuant to a Custodian Agreement with the Fund, dated November 1, 1993.
Prior to effectiveness of the 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. Dreyfus TeleTransfer purchase orders
may be made at any time. Purchase orders received by 4:00 P.M., New York
time, on any business day that Dreyfus Transfer, Inc., the Fund's transfer
and dividend disbursing agent (the "Transfer Agent"), and the New York
Stock Exchange (the "NYSE") are open for business will be credited to the
shareholder's Fund account on the next bank business day following such
purchase order. Purchase orders made after 4:00 P.M., New York time, on
any business day the Transfer Agent and the NYSE are open for business, or
orders made on Saturday, Sunday or any Fund holiday (e.g., when the NYSE
is not open for business), will be credited to the shareholder's Fund
account on the second bank business day following such purchase order.
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 (the "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 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 Investor shares of
the Fund.
For the fiscal year ended October 31, 1995, the Fund paid the
Distributor $786 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 year ended October 31,
1993, Capstone Asset Management Company received $65,577 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 administration 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 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 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. 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."
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 redemptions 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.
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 Simplified Employment Pension
Plans ("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 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 by calling 1-800-645-6561. The Fund reserves the right to reject
any exchange request in whole or in part. The Fund Exchange service
and/or Dreyfus Auto-Exchange Privilege may be modified or terminated at
any time upon notice to shareholders.
Automatic Withdrawal Plan. The Automatic Withdrawal Plan permits an
investor with a $5,000 minimum account to request withdrawal of a
specified dollar amount (minimum of $50) on either a monthly or quarterly
basis. Withdrawal payments are the proceeds from sales of Fund shares,
not the yield on the shares. If withdrawal payments exceed reinvested
dividends and distributions, the investor's shares will be reduced and
eventually may be depleted. An Automatic Withdrawal Plan may be
reestablished 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
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 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 which 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 Day
and Christmas Day.
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 for treatment as a regulated investment company ("RIC")
under the Internal Revenue Code of 1986, as amended (the "Code"), 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)("Distribution Requirement"), (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.
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, 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 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. 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 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 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 certain foreign
currency denominated securities (including debt instrument, and certain
financial forward, futures and options contracts and 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 of the Code. "Conversion transactions" are defined to include
certain forward, futures, option and straddle transactions, transactions
marketed or sold to produce capital gains, and 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 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 would be required to take into
gross income annually a portion of the discount (or deemed discount) at
which the securities were issued and could need to distribute such income
to satisfy the Distribution Requirement and to avoid the 4% excise tax
referred to in the Fund's Prospectus under "Dividends, Other Distributions
and Taxes." 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 it is deemed to be conducting
business, the Fund may be subject to the tax laws thereof. 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 such as a foreign shareholder entitled to claim the benefits of an
applicable tax treaty. 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).
Capital gains realized by foreign shareholders on the sale of Fund
shares and distributions to them of net capital gain (the excess of net
long-term capital gain over net short-term capital loss) 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. 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 a foreign
shareholder's ownership of Fund shares 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.
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 Dreyfus or CCF S.A.M. may be useful to that organization
in carrying out its 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, 1995 totaled $22,304, which
represented .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-Geneva $ _____% _____%
CCF-Frankfurt $ _____% _____%
Elysees Bourse $ _____% _____%
CC Milan $ _____% _____%
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%
The percentage of Capstone European's aggregate dollar amount of
transactions involving the payment of commissions effected through
affiliates for the fiscal year ended October 31, 1993 was 35.9%. During
the fiscal year ended October 31, 1993, Capstone European also executed
trades in the amount of $107,436, 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 Fund for the last two fiscal years were:
Fiscal Year Ended October 31,
1995 1994
41.66% 46%
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.
Average annual total return (expressed as a percentage) for Investor
shares of the Fund for each of the periods noted was:
Annualized Total Return for the
European Fund periods ended October 31, 1995
1 Year Inception
7.16% 8.64%
(4/14/94)
Average annual total return (expressed as a percentage) for Class R
shares of the Fund for each of the periods noted was:
Annualized Total Return for the
Periods Ended October 31, 1995
1 Year 5 Years 10 Years Inception
European Fund 7.29% 6.94% -- 5.33%
(1/5/87)
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, 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
Boston Safe Deposit and Trust Company ("Boston Safe"), an affiliate
of Dreyfus, One Boston Place, Boston, Massachusetts 02108, is the Fund's
custodian. Dreyfus Transfer, Inc., a wholly--owned subsidiary of Dreyfus,
is located at One American Express Plaza, Providence, Rhode Island 02903,
and serves as the Fund's transfer and dividend disbursing agent. Under a
transfer agency agreement with the Fund, the Transfer Agent arranges for
the maintenance of shareholder account records for the Fund, the handling
of certain communications between shareholders and the Fund and the
payment of dividends and distributions payable by the Fund. For these
services, the Transfer Agent receives a monthly fee computed on the baisis
of the number of shareholder accounts it maintains for the Fund during the
month, and is reimbursed for certain out-of-pocket expenses. Dreyfus
Transfer, Inc. and Boston Safe, 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 LLP, 1800 Massachusetts Avenue, N.W. Second
Floor, Washington, D.C. 20036-1800, has passed upon the legality of the
shares offered by the Prospectus and this Statement of Additional
Information.
_________________________, One Mellon Bank Center, Pittsburgh,
Pennsylvania 15218, was appointed by the Directors to serve as the Fund's
independent auditors for the year ending October 31, 1996, 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, 1995,
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.
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, 1996
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, 1996, as they may be
revised from time to time. The Funds are separate, diversified portfolios
of The Dreyfus/Laurel Funds, Inc. (formerly The Laurel Funds, Inc.), an
open-end 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 one
of the following numbers:
Call Toll Free 1-800-645-6561
In New York City -- Call 1-718-895-1206
On Long Island -- Call 1-516-794-5452
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 Objectives and Management Policies. . . . . . . . . . B-2
Management of the Funds. . . . . . . . . . . . . . . . . . . . . . B-14
Management Arrangements. . . . . . . . . . . . . . . . . . . . . . B-19
Purchase of Fund Shares. . . . . . . . . . . . . . . . . . . . . . B-20
Distribution and Service Plans . . . . . . . . . . . . . . . . . . B-22
Redemption of Fund Shares. . . . . . . . . . . . . . . . . . . . . B-24
Shareholder Services . . . . . . . . . . . . . . . . . . . . . . . B-25
Determination of Net Asset Value . . . . . . . . . . . . . . . . . B-28
Dividends, Other Distributions and Taxes . . . . . . . . . . . . . B-28
Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . . B-32
Performance Information. . . . . . . . . . . . . . . . . . . . . . B-34
Information About the Funds. . . . . . . . . . . . . . . . . . . . B-36
Custodian, Transfer and Dividend Disbursing Agent, Counsel
and Independent Auditors . . . . . . . . . . . . . . . . . . . . B-36
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . B-37
Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-38
INVESTMENT OBJECTIVES 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. 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 produce 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. 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 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) the 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 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. 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. 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. 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 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.
Derivative Instruments (Balanced Fund Only). The Fund may purchase
and sell various financial instruments ("Derivative Instruments"), such as
financial futures contracts (including interest rate and index futures
contracts) and options (including options on securities, indices, and
futures contracts). The index Derivative Instruments each Fund may use may
be based on indices of U.S. or foreign equity or debt securities. These
Derivative Instruments may be used, for example, to preserve a return or
spread, to lock in unrealized market value gains or losses, to facilitate
or substitute for the sale or purchase of securities, or to alter the
exposure of a particular investment or portion of a Fund's portfolio to
fluctuations in interest rates.
Hedging strategies can be broadly categorized as "short hedges" and
"long hedges." A short hedge is a purchase or sale of a Derivative
Instrument intended partially or fully to offset potential declines in the
value of one or more investments held in a Fund's portfolio. Thus, in a
short hedge a Fund takes a position in a Derivative Instrument whose price
is expected to move in the opposite direction of the price of the
investment being hedged.
Conversely, a long hedge is a purchase or sale of a Derivative
Instrument intended partially or fully to offset potential increases in the
acquisition cost of one or more investments that a Fund intends to acquire.
Thus, in a long hedge a Fund takes a position in a Derivative Instrument
whose price is expected to move in the same direction as the price of the
prospective investment being hedged. A long hedge is sometimes referred to
as an anticipatory hedge. In an anticipatory hedge transaction, a Fund
does not own a corresponding security and, therefore, the transaction does
not relate to a security the Fund owns. Rather, it relates to a security
that the Fund intends to acquire. If the Fund does not complete the hedge
by purchasing the security it anticipated purchasing, the effect on the
Fund's portfolio is the same as if the transaction were entered into for
speculative purposes.
Derivative Instruments on securities generally are used to hedge
against price movements in one or more particular securities positions that
a Fund owns or intends to acquire. Derivative Instruments on indices, in
contrast, generally are used to attempt to hedge against price movements in
market sectors in which a Fund has invested or expects to invest.
Derivative Instruments on debt securities may be used to hedge either
individual securities or broad debt market sectors.
The use of Derivative Instruments is subject to applicable regulations
of the Securities and Exchange Commission ("SEC"), the several options and
futures exchanges upon which they are traded, the Commodity Futures Trading
Commission ("CFTC") and various state regulatory authorities. In addition,
the ability to use Derivative Instruments will be affected by tax
considerations. See "Dividends, Other Distributions and Taxes."
In addition to the instruments, strategies and risks described below
and in the Prospectus, Dreyfus expects to discover additional opportunities
in connection with other Derivative Instruments. These new opportunities
may become available as Dreyfus develops new techniques, as regulatory
authorities broaden the range of permitted transactions and as new
techniques are developed. Dreyfus may utilize these opportunities to the
extent that they are consistent with the Fund's investment objective, and
permitted by the Fund's investment policies and applicable regulatory
authorities.
Special Risks. The use of Derivative Instruments involves special
considerations and risks, certain of which are described below. Risks
pertaining to particular Derivative Instruments are described in the
sections that follow.
(1) Successful use of most Derivative Instruments depends upon
Dreyfus' ability to predict movements of the overall securities, currency
and interest rate markets, which requires different skills than predicting
changes in the prices of individual securities. There can be no assurance
that any particular strategy will succeed.
(2) There might be imperfect correlation, or even no correlation,
between price movements of a Derivative Instrument and price movements of
the investments being hedged. For example, if the value of a Derivative
Instrument used in a short hedge increased by less than the decline in
value of the hedged investment, the hedge would not be fully successful.
Such a lack of correlation might occur due to factors unrelated to the
value of the investments being hedged, such as speculative or other
pressures on the markets in which Derivative Instruments are traded. The
effectiveness of hedges using Derivative Instruments on indices will depend
on the degree of correlation between price movements in the index and price
movements in the securities being hedged.
Because there are a limited number of types of exchange-traded options
and futures contracts, it is likely that the standardized contracts
available will not match the Fund's current or anticipated investments
exactly. The Fund may invest in options and futures contracts based on
securities with different issuers, maturities, or other characteristics
from the securities in which it typically invests, which involves a risk
that the options or futures position will not track the performance of the
Fund's other investments.
Options and futures prices can also diverge from the prices of their
underlying instruments, even if the underlying instruments match the Fund's
investments well. Options and futures prices are affected by such factors
as current and anticipated short-term interest rates, changes in volatility
of the underlying instrument, and the time remaining until expiration of
the contract, which may not affect security prices the same way. Imperfect
correlation may also result from differing levels of demand in the options
and futures markets and the securities markets, from structural differences
in how options and futures and securities are traded, or from imposition of
daily price fluctuation limits or trading halts. The Fund may purchase or
sell options and futures contracts with a greater or lesser value than the
securities it wishes to hedge or intends to purchase in order to attempt to
compensate for differences in volatility between the contract and the
securities, although this may not be successful in all cases. If price
changes in the Fund's options or futures positions are poorly correlated
with its other investments, the positions may fail to produce anticipated
gains or result in losses that are not offset by gains in other
investments.
(3) If successful, the above-discussed strategies can reduce risk of
loss by wholly or partially offsetting the negative effect of unfavorable
price movements. However, such strategies can also reduce opportunity for
gain by offsetting the positive effect of favorable price movements. For
example, if the Fund entered into a short hedge because Dreyfus projected a
decline in the price of a security in the Fund's portfolio, and the price
of that security increased instead, the gain from that increase might be
wholly or partially offset by a decline in the price of the Derivative
Instrument. Moreover, if the price of the Derivative Instrument declined
by more than the increase in the price of the security, the Fund could
suffer a loss. In either such case, the Fund would have been in a better
position had it not attempted to hedge at all.
(4) As described below, the Fund might be required to maintain assets
as "cover," maintain segregated accounts or make margin payments when it
takes positions in Derivative Instruments involving obligations to third
parties (i.e., Derivative Instruments other than purchased options). If
the Fund were unable to close out its positions in such Derivative
Instruments, it might be required to continue to maintain such assets or
accounts or make such payments until the position expired or matured.
These requirements might impair a Fund's ability to sell a portfolio
security or make an investment at a time when it would otherwise be
favorable to do so, or require that the Fund sell a portfolio security at a
disadvantageous time. The Fund's ability to close out a position in a
Derivative Instrument prior to expiration or maturity depends on the
existence of a liquid secondary market or, in the absence of such a market,
the ability and willingness of the other party to the transaction
("counterparty") to enter into a transaction closing out the position.
Therefore, there is no assurance that any position can be closed out at a
time and price that is favorable to the Fund.
Cover for Derivative Instruments. Transactions using Derivative
Instruments may 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, futures, or options or (2)
cash and short-term liquid debt securities with a value sufficient at all
times to cover its potential obligations to the extent not covered as
provided in (1) above. The Fund will comply with SEC guidelines regarding
cover for Derivative Instruments and will, 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.
Assets used as cover or held in a segregated account cannot be sold
while the position in the corresponding Derivative Instrument is open,
unless they are replaced with other appropriate assets. As a result, the
commitment of a large portion of the Fund's assets to cover or segregated
accounts could impede portfolio management or the Fund's ability to meet
redemption requests or other current obligations.
Options. A call option gives the purchaser the right to buy, and
obligates the writer to sell, the underlying investment at the agreed upon
exercise price during the option period. A put option gives the purchaser
the right to sell, and obligates the writer to buy, the underlying
investment at the agreed upon exercise price during the option period. A
purchaser of an option pays an amount, known as the premium, to the option
writer in exchange for rights under the option contract.
Options on indices are similar to options on securities or currencies
except that all settlements are in cash and gain or loss depends on changes
in the index in question rather than on price movements in individual
securities or currencies.
The purchase of call options can serve as a long hedge, and the
purchase of put options can serve as a short hedge. Writing put or call
options can enable a Fund to enhance income or yield by reason of the
premiums paid by the purchasers of such options. However, if the market
price of the security or other instrument underlying a put option declines
to less than the exercise price on the option, minus the premium received,
the Fund would expect to suffer a loss.
Writing call options can also serve as a limited short hedge because
declines in the value of the hedged investment would be offset to the
extent of the premium received for writing the option. However, if the
investment appreciates to a price higher than the exercise price of the
call option, it can be expected that the option will be exercised and the
Fund will be obligated to sell the investment at less than its market
value.
Writing put options can serve as a limited long hedge because
increases in the value of the hedged investment would be offset to the
extent of the premium received for writing the option. However, if the
investment depreciates to a price lower than the exercise price of the put
option, it can be expected that the put option will be exercised and the
Fund will be obligated to purchase the investment at more than its market
value.
The value of an option position will reflect, among other things, the
current market value of the underlying investment, the time remaining until
expiration, the relationship of the exercise price to the market price of
the underlying investment, the historical price volatility of the
underlying investment and general market conditions. Options that expire
unexercised have no value.
The Fund may effectively terminate its right or obligation under an
option by entering into a closing transaction. For example, the Fund may
terminate its obligation under a call or put option that it had written by
purchasing an identical call or put option; this is known as a closing
purchase transaction. Conversely, the Fund may terminate a position in a
put or call option it had purchased by writing an identical put or call
option; this is known as a closing sale transaction. Closing transactions
permit a Fund to realize profits or limit losses on an option position
prior to its exercise or expiration.
The Fund may purchase and sell both exchange-traded and over-the-
counter ("OTC") options. Exchange-traded options in the United States are
issued by a clearing organization that, in effect, guarantees completion of
every exchange-traded option transaction. In contrast, OTC options are
contracts between a Fund and its counterparty (usually a securities dealer
or a bank) with no clearing organization guarantee. Thus, when the Fund
purchases an OTC option, it relies on the counterparty from whom it
purchased the option to make or take delivery of the underlying investment
upon exercise of the option. Failure by the counterparty to do so would
result in the loss of any premium paid by a Fund as well as the loss of any
expected benefit of the transaction. The Fund will enter into only those
option contracts that are listed on a national securities or commodities
exchange or traded in the OTC market for which there appears to be a liquid
secondary 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 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 the
current market value of the underlying securities and the option's strike
price). The repurchase price with primary dealers is typically a formula
price that 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's ability to establish and close out positions in exchange-
listed options depends on the existence of a liquid market. However, there
can be no assurance that such a market will exist at any particular time.
Closing transactions can be made for OTC options only by negotiating
directly with the counterparty, or by a transaction in the secondary market
if any such market exists. Although the Fund will enter into OTC options
only with major dealers in unlisted options, there is no assurance that the
Fund will in fact be able to close out an OTC option position at a
favorable price prior to expiration. In the event of insolvency of the
counterparty, the Fund might be unable to close out an OTC option position
at any time prior to its expiration.
If the Fund were unable to effect a closing transaction for an option
it had purchased, it would have to exercise the option to realize any
profit. The inability to enter into a closing purchase transaction for a
covered call option written by the Fund could cause material losses because
the Fund would be unable to sell the investment used as cover for the
written option until the option expires or is exercised.
The Fund may write only covered call options on securities. A call
option is covered if a Fund owns the underlying security or a call option
on the same security with a lower strike price.
Futures Contracts and Options on Futures Contracts. When the Fund
purchases a futures contract, it incurs an obligation to take delivery of a
specified amount of the obligation underlying the futures contract at a
specified time in the future for a specified price. When the Fund sells a
futures contract, it incurs an obligation to deliver a specified amount of
the obligation underlying the futures contract at a specified time in the
future for an agreed upon price. With respect to index futures, no
physical transfer of the securities underlying the index is made. Rather,
the parties settle by exchanging in cash an amount based on the difference
between the contract price and the closing value of the index on the
settlement date.
When the Fund writes an option on a futures contract, it becomes
obligated, in return for the premium paid, to assume a position in a
futures contract at a specified exercise price at any time during the term
of the option. If the Fund has written a call, it assumes a short futures
position. If the Fund has written a put, it assumes a long futures
position. When the Fund purchases an option on a futures contract, it
acquires the right, in return for the premium it pays, to assume a position
in a futures contract (a long position if the option is a call and a short
position if the option is a put).
The purchase of futures or call options on futures can serve as a long
hedge, and the sale of futures or the purchase of put options on futures
can serve as a short hedge. Writing call options on futures contracts can
serve as a limited short hedge, using a strategy similar to that used for
writing call options on securities or indices. Similarly, writing put
options on futures contracts can serve as a limited long hedge.
Futures strategies also can be used to manage the average duration of
the Fund's fixed-income portfolio. If Dreyfus wishes to shorten the
average duration of a Fund's fixed-income portfolio, the Fund may sell an
interest rate futures contract or a call option thereon, or purchase a put
option on that futures contract. If Dreyfus wishes to lengthen the average
duration of the Fund's fixed-income portfolio, the Fund may buy an interest
rate futures contract or a call option thereon, or sell a put option
thereon.
No price is paid upon entering into a futures contract. Instead, at
the inception of a futures contract a Fund is required to deposit "initial
margin" consisting of cash or U.S. Government securities in an amount
generally equal to 10% or less of the contract value. Margin must also be
deposited when writing a call or put option on a futures contract, in
accordance with applicable exchange rules. Unlike margin in securities
transactions, initial margin on futures contracts does not represent a
borrowing, but rather is in the nature of a performance bond or good-faith
deposit that is returned to the Fund at the termination of the transaction
if all contractual obligations have been satisfied. Under certain
circumstances, such as periods of high volatility, the Fund may be required
by an exchange to increase the level of its initial margin payment.
Subsequent "variation margin" payments are made to and from the
futures broker daily as the value of the futures position varies, a process
known as "marking-to-market." Variation margin does not involve borrowing,
but rather represents a daily settlement of a Fund's obligations to or from
a futures broker. When the Fund purchases an option on a future, the
premium paid plus transaction costs is all that is at risk. In contrast,
when the Fund purchases or sells a futures contract or writes a call or put
option thereon, it is subject to daily variation margin calls that could be
substantial in the event of adverse price movements. If the Fund has
insufficient cash to meet daily variation margin requirements, it might
need to sell securities at a time when such sales are disadvantageous.
Purchasers and sellers of futures contracts and options on futures can
enter into offsetting closing transactions, similar to closing transactions
on options, by selling or purchasing, respectively, an instrument identical
to the instrument purchased or sold. Positions in futures and options on
futures may be closed only on an exchange or board of trade that provides a
secondary market. Although each Fund intends to enter into futures and
options on futures only on exchanges or boards of trade where there appears
to be a liquid secondary market, there can be no assurance that such a
market will exist for a particular contract at a particular time. In such
event, it may not be possible to close a futures contract or options
position.
Under certain circumstances, futures exchanges may establish daily
limits on the amount that the price of a futures or an option on a futures
contract can vary from the previous day's settlement price; once that limit
is reached, no trades may be made that day at a price beyond the limit.
Daily price limits do not limit potential losses because prices could move
to the daily limit for several consecutive days with little or no trading,
thereby preventing liquidation of unfavorable positions.
If the Fund were unable to liquidate a futures or options on futures
position due to the absence of a liquid secondary market or the imposition
of price limits, it could incur substantial losses. The Fund would
continue to be subject to market risk with respect to the position. In
addition, except in the case of purchased options, the Fund would continue
to be required to make daily variation margin payments and might be
required to maintain the position being hedged by the future or option or
to maintain cash or securities in a segregated account.
To the extent that the Fund enters into futures contracts or options
on futures contracts on an exchange regulated by the CFTC, in each case
other than for bona fide hedging purposes (as defined by the CFTC), the
aggregate initial margin and premiums required to establish those positions
(excluding the amount by which options are "in-the-money" at the time of
purchase) will not exceed 5% of the liquidation value of the Fund's
portfolio, after taking into account unrealized profits and unrealized
losses on any contracts the Fund has entered into. This policy does not
limit to 5% the percentage of the Fund's assets that are at risk in futures
contracts and options on futures contracts.
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
Investment Company Act of 1940, as amended (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 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 and options
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 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 FUNDS
PRINCIPAL SHAREHOLDERS
The following shareholder(s) owned 5% or more of the outstanding
voting shares of a Fund at _____________:
Limited Term Income Fund:
Balanced 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 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, 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 1940 Act is indicated by an asterisk. Each of the Directors
also serves as a Trustee of The Dreyfus/Laurel Funds Trust and The
Dreyfus/Laurel Tax-Free Municipal Funds (collectively, with the Company,
the "Dreyfus/Laurel Funds") and Mr. DiMartino serves as a Board member for
93 other funds advised by Dreyfus.
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: 80 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: 78 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 of Dreyfus and
Executive Vice President and a director of Dreyfus Service
Corporation, a wholly-owned subsidiary of Dreyfus. From August 1994
to December 31, 1994, he was a director of Mellon Bank Corporation.
He is Chairman of the Board of Noel Group, Inc., a venture capital
company, a trustee of Bucknell University; and a director of the
Muscular Dystrophy Association, HealthPlan Services Corporation,
Belding Heminway, Inc., Curtis Industries, Inc., Simmons Outdoor
Corporation and Staffing Resources, Inc. Age: 52 years old. His
address is 200 Park Avenue, New York, New York 10166.
o + JAMES M. FITZGIBBONS. Director of the 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: 60 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. Since May 1991, Mr. Goeschel has
served as Trustee of Sewickley Valley Hospital. Age: 73 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. Age: 49
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: 48
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: 67 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: 81 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: 63 years old. Address: 321 Gross
Street, Pittsburgh, Pennsylvania 15224.
o + ROSLYN M. WATSON. Director of the Company; Principal, Watson Ventures,
Inc.; Director, American Express Centurion Bank; Director, Harvard
Community Health Plan, Inc.; Director, Massachusetts Electric Company;
Director, The Hymans Foundation, Inc.; prior to February, 1993; Real
Estate Development Project Manager and Vice President, The Gunwyn
Company. Age: 45 years old. Address: 25 Braddock Park, Boston,
Massachusetts 02116-5816.
# MARIE E. CONNOLLY. President and Treasurer of the Company, 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). Age: 37 years old.
Address: One Exchange Place, Boston, Massachusetts 02109.
# FREDERICK C. DEY. Vice President of the Company, 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). Age: 33 years old. Address: Premier Mutual Fund
Services, Inc., One Exchange Place, Boston, Massachusetts 02109.
# ERIC B. FISCHMAN. Vice President of the Company, 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). Age: 31 years old. Address: Premier Mutual Fund
Services, Inc., 200 Park Avenue, New York, New York 10166.
RICHARD W. HEALEY. Vice President of the Company, 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). Age: 41 years old.
Address: One Exchange Place, Boston, Massachusetts 02109.
# JOHN E. PELLETIER. Vice President and Secretary of the Company, 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). Age: 31 years old. 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 each Fund's total shares outstanding as of
_________________.
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, subsidiary or affiliate thereof)
serves as an officer or Director of the Company. The Dreyfus/Laurel Funds
pay each Director/Trustee who is not an "interested person" of the Company
(as defined in the 1940 Act), $27,000 per annum (and an additional $75,000
for the Chairman of the Board of Directors/Trustees of the Dreyfus/Laurel
Funds). In addition, the Dreyfus/Laurel Funds pay each Director/Trustee
who is not an "interested person" of the Company (as defined in the 1940
Act), $1,000 per joint Dreyfus/Laurel Funds Board meeting attended, plus
$750 per joint Dreyfus/Laurel Funds Audit Committee meeting attended, and
reimburses each Director/Trustee who is not an "interested person" of the
Company (as defined in the 1940 Act), for travel and out-of-pocket
expenses.
For the fiscal year ended October 31, 1995, the aggregate amount of
fees and expenses received by each Director from the Company and all other
funds in the Dreyfus Family of Funds for which such person is a Board
member were as follows:
<TABLE>
<CAPTION>
Total
Pension or 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 M. Adams $26,662 None None $ 34,500
Francis P. Brennan* 84,914 None None 110,500
Joseph S. DiMartino** None None None $445,000**
James M. Fitzgibbons 25,887 None None 33,500
J. Tomlinson Fort** None None None None
Arthur L. Goeschel 26,835 None None 35,500
Kenneth A. Himmel 24,543 None None 31,750
Arch S. Jeffery** None None None None
Stephen J. Lockwood 25,318 None None 32,750
Robert D. McBride 26,835 None None 35,500
John L. Propst 26,835 None None 35,500
John J. Sciullo 26,662 None None 34,500
Roslyn M. Watson 26,060 None None 34,550
# Amount does not include reimbursed expenses for attending Board meetings, which
amounted to $11,113 for the Company.
* Compensation of Francis Brennan includes $75,000 paid by the Dreyfus/Laurel Funds
to be Chairman of the Board.
** Joseph S. DiMartino, J. Tomlinson Fort and Arch S. Jeffery are paid directly by
Dreyfus for serving as Board members of the Company and the funds in the
Dreyfus/Laurel Funds. For the fiscal year ended October 31, 1995, the aggregate
amount of fees and expenses received by Joseph DiMartino, J. Tomlinson Fort and
Arch S. Jeffery from Dreyfus for serving as a Board member of the Company were
$18,214, $26,835 and $26,835, respectively, and for serving as a Board member of
all funds in the Dreyfus/Laurel Funds (including the Company) were $23,500,
$35,500 and $35,500, respectively. In addition, Dreyfus reimbursed Messrs.
DiMartino, Fort and Jeffery a total of $2,664 for expenses attributable to the
Company's Board meetings.
</TABLE>
MANAGEMENT ARRANGEMENTS
The following information supplements and should be read in
conjunction with the section in each Fund's Prospectus entitled "Management
of the Fund."
Management Agreement. Dreyfus serves as the investment manager for
the Funds pursuant to an Investment Management Agreement with the Company
dated April 4, 1994 (the "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 objective,
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 and
extraordinary expenses (which are expected to be minimal), and (iii) the
Rule 12b-1 fees described in this SAI. 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.
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; Christopher M. Condron, President, Chief
Operating Officer and a director, Stephen E. Canter, Vice Chairman, Chief
Investment Officer and a director; Lawrence S. Kash, Vice Chairman-
Distribution and a director; Philip L. Toia, Vice Chairman-Operations and
Administration; Daniel C. Maclean, Vice President and General Counsel;
Barbara E. Casey, Vice President-Dreyfus President-Dreyfus Retirement
Services; Diane M. Coffey, Vice President-Corporate Communications; Elie M.
Genadry, Vice President-Institutional Sales; Henry D. Gottman, Vice
President-Retail Sales and Service; William F. Glavin, Jr., Vice President-
Corporate Development; Andrew S. Wasser, Vice President-Information
Services; Mark N. Jacobs, Vice President-Fund Legal and Compliance and
Secretary; Jeffrey N. Nachman, Vice President-Mutual Fund Accounting;
Katherine C. Wickham, Vice President-Corporate Human Resources; Maurice
Bendrihem, Controller; Elvira Oslapas; Assistant Secretary; 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:
<TABLE>
<CAPTION>
For the Fiscal Years Ended October 31,
--------------------------------------------------
1995 1994 1993
____ ____ ____
<S> <C> <C> <C>
Limited Term Income Fund
- -----------------------------------
Advisory fees (gross of waiver) $446,781 $455,919 $118,161
Expense reimbursement from Adviser -- 8,622 142,319
Advisory fees waived -- -- --
Balanced Fund
- -------------------
Advisory fees (gross of waiver) $874,166 $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.
</TABLE>
PURCHASE OF FUND SHARES
The following information supplements and should be read in
conjunction with the section in each 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 (the "Code")), although more than
one beneficiary is involved; or a group of accounts established by or on
behalf of the employees of an employer or affiliated employers pursuant to
an employee benefit plan or other program (including accounts established
pursuant to Sections 403(b), 408(k), and 457 of the Code); or an organized
group which has been in existence for more than six months, provided that
it is not organized for the purpose of buying redeemable securities of a
registered investment company and provided that the purchases are made
through a central administration or a single dealer, or by other means
which result in economy of sales effort or expense.
Set forth below is an example of the method of computing the offering
price of the 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 $11.91
Per Share Sales Charge - 4.5%
of offering price (4.7% of
net asset value per share) $ 0.56
Per Share Offering Price to
the Public $12.47
For Premier Limited Term Income Fund:
Net Asset Value per Share $10.84
Per Share Sales Charge - 3.0%
of offering price (3.1% of
net asset value per share) $0.34
Per Share Offering Price to
the Public $11.18
TeleTransfer Privilege. TeleTransfer purchase orders may be made at
any time. Purchase orders received by 4:00 P.M., New York time, on any
business day that Dreyfus Transfer, Inc., each Fund's transfer and dividend
disbursing agent (the "Transfer Agent"), and the New York Stock Exchange
("NYSE") are open for business will be credited to the shareholder's Fund
account on the next bank business day following such purchase order.
Purchase orders made after 4:00 P.M., New York time, on any business day
the Transfer Agent and the NYSE are open for business, or orders made on
Saturday, Sunday or any Fund holiday (e.g., when the NYSE is not open for
business), will be credited to the shareholder's Fund account on the second
bank business day following such purchase order.
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 Class A Plan and Class B and C Plan 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 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.
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 each 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 Company's Board of Directors believes that there
is a reasonable likelihood that the Distribution and Service Plans (the
"Plans") will benefit the Funds 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 Funds 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. Each 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 October 25, 1995. 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.
For the year ended October 31, 1995, the distribution and service fees
paid by the Funds were as follows:
<TABLE>
<CAPTION>
Class A Class B Class C
------- ------- -------
<S> <C> <C> <C>
Premier Balanced Fund(1) $5,584 $11,718 $29
Premier Limited Term
Income Fund(2) $2,638 $256 -
(1) Premier Balanced Fund commenced selling Class B and Class C shares on December 20,
1994, respectively.
(2) Premier Limited Term Income Fund commenced selling Class B and Class C shares on
December 19, 1994 and April 30, 1995, respectively.
</TABLE>
Class R shares bear no distribution fee.
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. 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."
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 redemptions 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 each 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 Simplified Employee Pension
Plans ("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 SEP-IRA 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 Dreyfus 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 Dreyfus Auto-Exchange Privilege are available to
shareholders resident in any state in which shares of the fund being
acquired may legally be sold. Shares may be exchanged only between
accounts having identical names and other identifying designations.
Shareholder Services Forms and prospectuses of the other funds may be
obtained by calling 1-800-645-6561. The Funds reserve 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 Plan. The Automatic Withdrawal Plan permits an
investor with a $5,000 minimum account to request withdrawal of a specified
dollar amount (minimum of $50) on either a monthly or quarterly basis.
Withdrawal payments are the proceeds from sales of Fund shares, not the
yield on the shares. If withdrawal payments exceed reinvested dividends
and distributions, the investor's shares will be reduced and eventually may
be depleted. An Automatic Withdrawal Plan may be established by completing
the appropriate application available from the Distributor. 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 each 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 which 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 each 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 for treatment as a regulated investment company ("RIC")
under the Internal Revenue Code of 1986, as amended (the "Code"), 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) ("Distribution Requirement"), (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.
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, 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 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 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 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 certain foreign
currency denominated securities (including debt instruments and certain
financial forward, futures and option contracts and 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 of the Code. "Conversion transactions" are defined to include certain
forward, futures, option and straddle transactions, transactions marketed
or sold to produce capital gains, and 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 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 could need to distribute such income to satisfy the Distribution
Requirement and to avoid the 4% excise tax referred to in each Fund's
Prospectus under "Dividends, Other Distributions and Taxes." 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 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 it is deemed to be conducting
business, the Fund may be subject to the tax laws thereof. 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, such as
a foreign shareholder entitled to claim the benefits of an applicable tax
treaty. 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).
Capital gains realized by foreign shareholders on the sale of Fund
shares and distributions to them of net capital gain (the excess of net
long-term capital gain over net short-term capital loss) 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. 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 a foreign
shareholder's ownership of a Fund's shares 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.
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, 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
obligation 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, 1995, 1994 and 1993, Premier
Limited Term Income Fund paid $5,763, $9,550 and $4,885, respectively, in
brokerage commissions. 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 for the fiscal years ended October 31, 1995 and 1994,
the Premier Balanced Fund paid brokerage commissions amounting to $89,957
and $24,670, 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,
__________________________
1995* 1994
____ ____
Premier Limited Income Fund 73% 117%
Premier Balanced Fund 53.20% 83%
PERFORMANCE INFORMATION
The following information supplements and should be read in conjunction
with the section in each Fund's Prospectus entitled "Performance
Information."
The Premier Balanced Fund's average annual total return for the 1 and
1.551 year periods ended October 31, 1995 for Class A was 15.77% and
13.15%, respectively. The Premier Balanced Fund's average annual total
return for Class R for the 1 and 2.129 year periods ended October 31, 1995
was 21.46% and 10.83%, respectively. The Premier Balanced Fund's average
annual total return for Class B and Class C for the period December 19,
1994 (inception date of Class B and Class C) through October 31, 1995 was
22.41% and 26.09%, respectively.
The Premier Limited Term Income Fund's average annual total return for
the 1 and 1.570 year periods ended October 31, 1995 for Class A was 8.44%
and 5.42%, respectively. The Premier Limited Term Income Fund's average
annual total return for class R for the 1 and 4.310 year periods ended
October 31, 1995 was 12.11% and 7.6%, respectively. The Premier Limited
Term Income Fund's average annual total return for Class B and Class C for
the period December 19, 1994 (inception date of Class B and Class C)
through October 31, 1995 was 9.64% and 12.27%, respectively.
Average annual total return is calculated by determining the ending
redeemable value of an investment purchased at net asset value (maximum
offering price in the case of Class A) per share with a hypothetical $1,000
payment made at the beginning of the period (assuming the reinvestment of
dividends and 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 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 Class C the maximum applicable CDSC has been paid upon
redemption at the end of the period.
The Premier Balanced Fund's total return for the period September 15,
1993 (commencement of operations) to October 31, 1995 for Class R was
24.49%. The Premier Balanced Fund's total return for Class A for the
period April 14, 1994 (inception date of Class A) to October 31, 1995 was
21.11%. Based on net asset value per share, the total return for Class A
was 26.84% for this period. The Premier Balanced Fund's total return for
Class B and Class C for the period from December 19, 1994 (inception date
of Class B and Class C) through October 31, 1995 was 19.19% and 22.29%,
respectively. Without giving effect to the applicable CDSC, total return
for Class B and Class C was 23.19% and 23.29%, respectively. The Premier
Limited Term Income Fund's total return for the period July 11, 1991
(commencement of operations) to October 31, 1995 for Class R was 37.61%.
The Premier Limited Term Income Fund's total return for Class A for the
period April 7, 1994 (inception date of Class A) to October 31, 1995 was
8.64%. Based on net asset value per share, the total return for Class A
was 11.95% for this period. The Premier Limited Term Income Fund's total
return for Class B and Class C for the period from December 19, 1994
(inception date of Class B and Class C) through October 31, 1995 was 8.32%
and 10.57%, respectively. Without giving effect to the applicable CDSC,
total return for Class B and Class C was 11.32% and 11.32%, respectively.
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.
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Performance
Information."
The Premier Limited Term Income Fund's current yield for the 30-day
period ended October 31, 1995 was 5.17%, 4.85%, 4.85% and 5.59% for its
Class A, Class B, Class C and Class R shares, respectively. Current yield
is computed pursuant to a formula which operates, with respect to each
Class, as follows: the amount of the Fund's expenses with respect to such
Class accrued for the 30-day period (net of reimbursements) is subtracted
from the amount of the dividends and interest earned (computed in
accordance with regulatory requirements) by the Fund with respect to such
Class during the period. That result is then divided by the product of:
(a) the average daily number of shares outstanding during the period that
were entitled to receive dividends, and (b) the maximum offering price per
share in the case of Class A or the net asset value per share in the case
of Class B, Class C and Class R on the last day of the period less any
undistributed earned income per share reasonably expected to be declared as
a dividend shortly thereafter. The quotient is then added to 1, and that
sum is raised to the 6th power, after which 1 is subtracted. The current
yield is then arrived at by multiplying the result by 2.
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 each Fund's Prospectus entitled "General Information."
Each Fund share has one vote and, when issued and paid for in accordance
with the terms of the offering, is fully paid and non-assessable. Fund
shares 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. Dreyfus Transfer, Inc., a wholly-owned subsidiary of Dreyfus,
is located at One American Express Plaza, Providence, Rhode Island 02903,
and is each Fund's transfer and dividend disbursing agent. Under a
transfer agency agreement with each Fund, the Transfer Agent arranges for
the maintenance of shareholder account records for the Fund, the handling
of certain communication between shareholders and the Fund and the payment
of dividends and distributions payable by each Fund. For these services,
the Transfer Agent receives a monthly fee computed on the basis of the
number of shareholder accounts it maintains for each Fund during the month,
and is reimbursed for certain out-of-pocket expenses. Dreyfus Transfer,
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.
Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue, N.W., Second
Floor, Washington, D.C. 20036, has passed upon the legality of the shares
offered by the Prospectuses and this Statement of Additional Information.
, One Mellon Bank Center, Pittsburgh, Pennsylvania
15218 was appointed by the Directors to serve as the Funds' independent
auditors for the year ending October 31, 1996, 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 filed on behalf of each
Fund.
FINANCIAL STATEMENTS
The financial statements for the fiscal year ended October 31, 1995,
including notes to the financial statements and supplementary information
and the Report of Independent Auditors, are included in each Fund's Annual
Report to shareholders. A copy of each Fund's Annual Report accompanies
this SAI. The financial statements included in each Fund's Annual Report
are incorporated herein by reference.
APPENDIX
DESCRIPTION OF SECURITIES RATINGS
Debt Instruments Ratings
Moody's Investors Service, Inc. (Moody's):
Aaa - 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 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 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.
PREMIER SMALL COMPANY STOCK FUND
CLASS A, CLASS B, CLASS C AND CLASS R SHARES
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
March 1, 1996
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, 1996, as it may be revised
from time to time. The Fund is a separate, diversified portfolio of The
Dreyfus/Laurel Funds, Inc. (formerly The Laurel Funds, Inc.), an open-end
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 one of the
following numbers:
Call Toll Free 1-800-645-6561
In New York City -- Call 1-718-895-1206
On Long Island -- Call 516-794-5452
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-17
Management Arrangements . . . . . . . . . . . . . . . . . . . . . . B-23
Purchase of Fund Shares . . . . . . . . . . . . . . . . . . . . . . B-24
Distribution and Service Plans. . . . . . . . . . . . . . . . . . . B-25
Redemption of Fund Shares . . . . . . . . . . . . . . . . . . . . . B-27
Shareholder Services. . . . . . . . . . . . . . . . . . . . . . . . B-28
Determination of Net Asset Value. . . . . . . . . . . . . . . . . . B-32
Dividends, Other Distributions and Taxes. . . . . . . . . . . . . . B-32
Portfolio Transactions. . . . . . . . . . . . . . . . . . . . . . . B-36
Performance Information . . . . . . . . . . . . . . . . . . . . . . B-38
Information About the Fund. . . . . . . . . . . . . . . . . . . . . B-39
Custodian, Transfer and Dividend Disbursing Agent, Counsel
and Independent Auditors. . . . . . . . . . . . . . . . . . . . . B-39
Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . B-40
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) the 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.
Derivative Instruments. The Fund may purchase and sell various
financial instruments ("Derivative Instruments"), such as financial futures
contracts (such as interest rate, index and foreign currency futures
contracts), options (such as options on securities, indices, foreign
currencies and futures contracts), forward currency contracts and interest
rate, equity index and currency swaps, caps, collars and floors. The index
Derivative Instruments the Fund may use may be based on indices of U.S. or
foreign equity or debt securities. These Derivative Instruments may be
used, for example, to preserve a return or spread, to lock in unrealized
market value gains or losses, to facilitate or substitute for the sale or
purchase of securities, to manage the duration of securities, to alter the
exposure of a particular investment or portion of the Fund's portfolio to
fluctuations in interest rates or currency rates, to uncap a capped security
or to convert a fixed rate security into a variable rate security or a
variable rate security into a fixed rate security.
Hedging strategies can be broadly categorized as "short hedges" and
"long hedges." A short hedge is a purchase or sale of a Derivative
Instrument intended partially or fully to offset potential declines in the
value of one or more investments held in the Fund's portfolio. Thus, in a
short hedge the Fund takes a position in a Derivative Instrument whose price
is expected to move in the opposite direction of the price of the investment
being hedged.
Conversely, a long hedge is a purchase or sale of a Derivative
Instrument intended partially or fully to offset potential increases in the
acquisition cost of one or more investments that the Fund intends to
acquire. Thus, in a long hedge the Fund takes a position in a Derivative
Instrument whose price is expected to move in the same direction as the
price of the prospective investment being hedged. A long hedge is sometimes
referred to as an anticipatory hedge. In an anticipatory hedge transaction,
the Fund does not own a corresponding security and, therefore, the
transaction does not relate to a security the Fund owns. Rather, it relates
to a security that the Fund intends to acquire. If the Fund does not
complete the hedge by purchasing the security it anticipated purchasing, the
effect on the Fund's portfolio is the same as if the transaction were
entered into for speculative purposes.
Derivative Instruments on securities generally are used to hedge
against price movements in one or more particular securities positions that
the Fund owns or intends to acquire. Derivative Instruments on indices, in
contrast, generally are used to attempt to hedge against price movements in
market sectors in which the Fund has invested or expects to invest.
Derivative Instruments on debt securities may be used to hedge either
individual securities or broad debt market sectors.
The use of Derivative Instruments is subject to applicable regulations
of the Securities and Exchange Commission ("SEC"), the several options and
futures exchanges upon which they are traded, the Commodity Futures Trading
Commission ("CFTC") and various state regulatory authorities. In addition,
the Fund's ability to use Derivative Instruments will be limited by tax
considerations. See "Dividends, Other Distributions and Taxes."
In addition to the instruments, strategies and risks described below
and in the Prospectus, Dreyfus expects to discover additional opportunities
in connection with other Derivative Instruments. These new opportunities
may become available as Dreyfus develops new techniques, as regulatory
authorities broaden the range of permitted transactions and as new
techniques are developed. Dreyfus may utilize these opportunities to the
extent that they are consistent with the Fund's investment objective, and
permitted by the Fund's investment policies and applicable regulatory
authorities.
Special Risks. The use of Derivative Instruments involves special
considerations and risks, certain of which are described below. Risks
pertaining to particular Derivative Instruments are described in the
sections that follow.
(1) Successful use of most Derivative Instruments depends upon
Dreyfus' ability to predict movements of the overall securities, currency
and interest rate markets, which requires different skills than predicting
changes in the prices of individual securities. There can be no assurance
that any particular strategy will succeed.
(2) There might be imperfect correlation, or even no correlation,
between price movements of a Derivative Instrument and price movements of
the investments being hedged. For example, if the value of a Derivative
Instrument used in a short hedge increased by less than the decline in value
of the hedged investment, the hedge would not be fully successful. Such a
lack of correlation might occur due to factors unrelated to the value of the
investments being hedged, such as speculative or other pressures on the
markets in which Derivative Instruments are traded. The effectiveness of
hedges using Derivative Instruments on indices will depend on the degree of
correlation between price movements in the index and price movements in the
securities being hedged.
Because there are a limited number of types of exchange-traded options
and futures contracts, it is likely that the standardized contracts
available will not match the Fund's current or anticipated investments
exactly. The Fund may invest in options and futures contracts based on
securities with different issuers, maturities, or other characteristics from
the securities in which it typically invests, which involves a risk that the
options or futures position will not track the performance of the Fund's
other investments.
Options and futures prices can also diverge from the prices of their
underlying instruments, even if the underlying instruments match the Fund's
investments well. Options and futures prices are affected by such factors
as current and anticipated short-term interest rates, changes in volatility
of the underlying instrument, and the time remaining until expiration of the
contract, which may not affect security prices the same way. Imperfect
correlation may also result from differing levels of demand in the options
and futures markets and the securities markets, from structural differences
in how options and futures and securities are traded, or from imposition of
daily price fluctuation limits or trading halts. The Fund may purchase or
sell options and futures contracts with a greater or lesser value than the
securities it wishes to hedge or intends to purchase in order to attempt to
compensate for differences in volatility between the contract and the
securities, although this may not be successful in all cases. If price
changes in the Fund's options or futures positions are poorly correlated
with its other investments, the positions may fail to produce anticipated
gains or result in losses that are not offset by gains in other investments.
(3) If successful, the above-discussed strategies can reduce risk of
loss by wholly or partially offsetting the negative effect of unfavorable
price movements. However, such strategies can also reduce opportunity for
gain by offsetting the positive effect of favorable price movements. For
example, if the Fund entered into a short hedge because Dreyfus projected a
decline in the price of a security in the Fund's portfolio, and the price of
that security increased instead, the gain from that increase might be wholly
or partially offset by a decline in the price of the Derivative Instrument.
Moreover, if the price of the Derivative Instrument declined by more than
the increase in the price of the security, the Fund could suffer a loss. In
either such case, the Fund would have been in a better position had it not
attempted to hedge at all.
(4) As described below, the Fund might be required to maintain assets
as "cover," maintain segregated accounts or make margin payments when it
takes positions in Derivative Instruments involving obligations to third
parties (i.e., Derivative Instruments other than purchased options). If the
Fund were unable to close out its positions in such Derivative Instruments,
it might be required to continue to maintain such assets or accounts or make
such payments until the position expired or matured. These requirements
might impair the Fund's ability to sell a portfolio security or make an
investment at a time when it would otherwise be favorable to do so, or
require that the Fund sell a portfolio security at a disadvantageous time.
The Fund's ability to close out a position in a Derivative Instrument prior
to expiration or maturity depends on the existence of a liquid secondary
market or, in the absence of such a market, the ability and willingness of
the other party to the transaction ("counterparty") to enter into a
transaction closing out the position. Therefore, there is no assurance that
any position can be closed out at a time and price that is favorable to the
Fund.
Cover for Derivative Instruments. Transactions using Derivative
Instruments may 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, futures, options, currencies
or forward contracts or (2) cash and short-term liquid debt securities with
a value sufficient at all times to cover its potential obligations to the
extent not covered as provided in (1) above. The Fund will comply with SEC
guidelines regarding cover for Derivative Instruments and will, 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.
Assets used as cover or held in a segregated account cannot be sold
while the position in the corresponding Derivative Instrument is open,
unless they are replaced with other appropriate assets. As a result, the
commitment of a large portion of the Fund's assets to cover or segregated
accounts could impede portfolio management or the Fund's ability to meet
redemption requests or other current obligations.
Options. A call option gives the purchaser the right to buy, and
obligates the writer to sell, the underlying investment at the agreed upon
exercise price during the option period. A put option gives the purchaser
the right to sell, and obligates the writer to buy, the underlying
investment at the agreed upon exercise price during the option period. A
purchaser of an option pays an amount, known as the premium, to the option
writer in exchange for rights under the option contract.
Options on indices are similar to options on securities or currencies
except that all settlements are in cash and gain or loss depends on changes
in the index in question rather than on price movements in individual
securities or currencies.
The purchase of call options can serve as a long hedge, and the
purchase of put options can serve as a short hedge. Writing put or call
options can enable the Fund to enhance income or yield by reason of the
premiums paid by the purchasers of such options. However, if the market
price of the security or other instrument underlying a put option declines
to less than the exercise price on the option, minus the premium received,
the Fund would expect to suffer a loss.
Writing call options can also serve as a limited short hedge because
declines in the value of the hedged investment would be offset to the extent
of the premium received for writing the option. However, if the investment
appreciates to a price higher than the exercise price of the call option, it
can be expected that the option will be exercised and the Fund will be
obligated to sell the investment at less than its market value.
Writing put options can serve as a limited long hedge because increases
in the value of the hedged investment would be offset to the extent of the
premium received for writing the option. However, if the investment
depreciates to a price lower than the exercise price of the put option, it
can be expected that the put option will be exercised and the Fund will be
obligated to purchase the investment at more than its market value.
The value of an option position will reflect, among other things, the
current market value of the underlying investment, the time remaining until
expiration, the relationship of the exercise price to the market price of
the underlying investment, the historical price volatility of the underlying
investment and general market conditions. Options that expire unexercised
have no value.
The Fund may effectively terminate its right or obligation under an
option by entering into a closing transaction. For example, the Fund may
terminate its obligation under a call or put option that it had written by
purchasing an identical call or put option; this is known as a closing
purchase transaction. Conversely, the Fund may terminate a position in a
put or call option it had purchased by writing an identical put or call
option; this is known as a closing sale transaction. Closing transactions
permit the Fund to realize profits or limit losses on an option position
prior to its exercise or expiration.
The Fund may purchase and sell both exchange-traded and over-the-
counter ("OTC") options. Exchange-traded options in the United States are
issued by a clearing organization that, in effect, guarantees completion of
every exchange-traded option transaction. In contrast, OTC options are
contracts between the Fund and its counterparty (usually a securities dealer
or a bank) with no clearing organization guarantee. Thus, when the Fund
purchases an OTC option, it relies on the counterparty from whom it
purchased the option to make or take delivery of the underlying investment
upon exercise of the option. Failure by the counterparty to do so would
result in the loss of any premium paid by the Fund as well as the loss of
any expected benefit of the transaction. The Fund will enter into only
those option contracts that are listed on a national securities or
commodities exchange or traded in the OTC market for which there appears to
be a liquid secondary 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 the current market value of
the underlying securities and the option's strike price). The repurchase
price with primary dealers is typically a formula price that is generally
based on a multiple of the premium received for the option plus the amount
by which the option is "in-the-money."
Generally, the OTC debt and foreign currency options used by the Fund
are European-style options. This means that the option is only exercisable
immediately prior to its expiration. This is in contrast to American-style
options, which are exercisable at any time prior to the expiration date of
the option.
The Fund's ability to establish and close out positions in exchange-
listed options depends on the existence of a liquid market. However, there
can be no assurance that such a market will exist at any particular time.
Closing transactions can be made for OTC options only by negotiating
directly with the counterparty, or by a transaction in the secondary market
if any such market exists. Although the Fund will enter into OTC options
only with major dealers in unlisted options, there is no assurance that the
Fund will in fact be able to close out an OTC option position at a favorable
price prior to expiration. In the event of insolvency of the counterparty,
the Fund might be unable to close out an OTC option position at any time
prior to its expiration.
If the Fund were unable to effect a closing transaction for an option
it had purchased, it would have to exercise the option to realize any
profit. The inability to enter into a closing purchase transaction for a
covered call option written by the Fund could cause material losses because
the Fund would be unable to sell the investment used as cover for the
written option until the option expires or is exercised.
The Fund may write only covered call options on securities. 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.
Futures Contracts and Options on Futures Contracts. When the Fund
purchases a futures contract, it incurs an obligation to take delivery of a
specified amount of the obligation underlying the futures contract at a
specified time in the future for a specified price. When the Fund sells a
futures contract, it incurs an obligation to deliver a specified amount of
the obligation underlying the futures contract at a specified time in the
future for an agreed upon price. With respect to index futures, no physical
transfer of the securities underlying the index is made. Rather, the
parties settle by exchanging in cash an amount based on the difference
between the contract price and the closing value of the index on the
settlement date.
When the Fund writes an option on a futures contract, it becomes
obligated, in return for the premium paid, to assume a position in a futures
contract at a specified exercise price at any time during the term of the
option. If the Fund has written a call, it assumes a short futures
position. If the Fund has written a put, it assumes a long futures
position. When the Fund purchases an option on a futures contract, it
acquires the right, in return for the premium it pays, to assume a position
in a futures contract (a long position if the option is a call and a short
position if the option is a put).
The purchase of futures or call options on futures can serve as a long
hedge, and the sale of futures or the purchase of put options on futures can
serve as a short hedge. Writing call options on futures contracts can serve
as a limited short hedge, using a strategy similar to that used for writing
call options on securities or indices. Similarly, writing put options on
futures contracts can serve as a limited long hedge.
Futures strategies also can be used to manage the average duration of
the Fund's fixed-income portfolio. If Dreyfus wishes to shorten the average
duration of the Fund's fixed-income portfolio, the Fund may sell an interest
rate futures contract or a call option thereon, or purchase a put option on
that futures contract. If Dreyfus wishes to lengthen the average duration
of the Fund's fixed-income portfolio, the Fund may buy an interest rate
futures contract or a call option thereon, or sell a put option thereon.
No price is paid upon entering into a futures contract. Instead, at
the inception of a futures contract the Fund is required to deposit "initial
margin" consisting of cash or U.S. Government securities in an amount
generally equal to 10% or less of the contract value. Margin must also be
deposited when writing a call or put option on a futures contract, in
accordance with applicable exchange rules. Unlike margin in securities
transactions, initial margin on futures contracts does not represent a
borrowing, but rather is in the nature of a performance bond or good-faith
deposit that is returned to the Fund at the termination of the transaction
if all contractual obligations have been satisfied. Under certain
circumstances, such as periods of high volatility, the Fund may be required
by an exchange to increase the level of its initial margin payment.
Subsequent "variation margin" payments are made to and from the futures
broker daily as the value of the futures position varies, a process known as
"marking-to-market." Variation margin does not involve borrowing, but
rather represents a daily settlement of the Fund's obligations to or from a
futures broker. When the Fund purchases an option on a future, the premium
paid plus transaction costs is all that is at risk. In contrast, when the
Fund purchases or sells a futures contract or writes a call or put option
thereon, it is subject to daily variation margin calls that could be
substantial in the event of adverse price movements. If the Fund has
insufficient cash to meet daily variation margin requirements, it might need
to sell securities at a time when such sales are disadvantageous.
Purchasers and sellers of futures contracts and options on futures can
enter into offsetting closing transactions, similar to closing transactions
on options, by selling or purchasing, respectively, an instrument identical
to the instrument purchased or sold. Positions in futures and options on
futures may be closed only on an exchange or board of trade that provides a
secondary market. Although the Fund intends to enter into futures and
options on futures only on exchanges or boards of trade where there appears
to be a liquid secondary market, there can be no assurance that such a
market will exist for a particular contract at a particular time. In such
event, it may not be possible to close a futures contract or options
position.
Under certain circumstances, futures exchanges may establish daily
limits on the amount that the price of a futures or an option on a futures
contract can vary from the previous day's settlement price; once that limit
is reached, no trades may be made that day at a price beyond the limit.
Daily price limits do not limit potential losses because prices could move
to the daily limit for several consecutive days with little or no trading,
thereby preventing liquidation of unfavorable positions.
If the Fund were unable to liquidate a futures or options on futures
position due to the absence of a liquid secondary market or the imposition
of price limits, it could incur substantial losses. The Fund would continue
to be subject to market risk with respect to the position. In addition,
except in the case of purchased options, the Fund would continue to be
required to make daily variation margin payments and might be required to
maintain the position being hedged by the future or option or to maintain
cash or securities in a segregated account.
To the extent that the Fund enters into futures contracts, options on
futures contracts, or options on foreign currencies traded on an exchange
regulated by the CFTC, in each case other than for bona fide hedging
purposes (as defined by the CFTC), the aggregate initial margin and premiums
required to establish those positions (excluding the amount by which options
are "in-the-money" at the time of purchase) will not exceed 5% of the
liquidation value of the Fund's portfolio, after taking into account
unrealized profits and unrealized losses on any contracts the Fund has
entered into. This policy does not limit to 5% the percentage of the Fund's
assets that are at risk in futures contracts and options on futures
contracts.
Foreign Currency Strategies - Special Considerations. The Fund may use
Derivative Instruments on foreign currencies to hedge against movements in
the values of the foreign currencies in which the Fund's securities are
denominated. Such currency hedges can protect against price movements in a
security that the Fund owns or intends to acquire that are attributable to
changes in the value of the currency in which it is denominated. Such
hedges do not, however, protect against price movements in the securities
that are attributable to other causes.
The Fund might seek to hedge against changes in the value of particular
currency when no Derivative Instruments on that currency are available or
such Derivative Instruments are more expensive than certain other Derivative
Instruments. In such cases, the Fund may hedge against price movements in
that currency by entering into transactions using Derivative Instruments on
another currency or a basket of currencies, the values of which Dreyfus
believes will have a high degree of positive correlation to the value of the
currency being hedged. The risk that movements in the price of the
Derivative Instrument will not correlate perfectly with movements in the
price of the currency being hedged is magnified when this strategy is used.
The value of Derivative Instruments on foreign currencies depends on
the value of the underlying currency relative to the U.S. dollar. Because
foreign currency transactions occurring in the interbank market might
involve substantially larger amounts than those involved in the use of
foreign currency Derivative Instruments, the Fund could be disadvantaged by
having to deal in the odd lot market (generally consisting of transactions
of less than $1 million) for the underlying foreign currencies at prices
that are less favorable than for round lots.
There is no systematic reporting of last sale information for foreign
currencies or any regulatory requirement that quotations available through
dealers or other market sources be firm or revised on a timely basis.
Quotation information generally is representative of very large transactions
in the interbank market and thus might not reflect odd-lot transactions
where rates might be less favorable. The interbank market in foreign
currencies is a global, round-the-clock market.
Settlement of transactions involving foreign currencies might be
required to take place within the country issuing the underlying currency.
Thus, the Fund might be required to accept or make delivery of the
underlying foreign currency in accordance with any U.S. or foreign
regulations regarding the maintenance of foreign banking arrangements by
U.S. residents and might be required to pay any fees, taxes and charges
associated with such delivery assessed in the issuing country.
Forward Contracts. A forward foreign currency exchange contract
("forward contract") is a contract to purchase or sell a currency at a
future date. The two parties to the contract set the number of days and the
price. Forward contracts are used as a hedge against future movements in
foreign exchange rates. The Fund may enter into forward contracts to
purchase or sell foreign currencies for a fixed amount of U.S. dollars or
other foreign currency.
Forward contracts may serve as long hedges -- for example, the Fund may
purchase a forward contract to lock in the U.S. dollar price of a security
denominated in a foreign currency that the Fund intends to acquire. Forward
contracts may also serve as short hedges -- for example, the Fund may sell a
forward contract to lock in the U.S. dollar equivalent of the proceeds from
the anticipated sale of a security denominated in a foreign currency or from
anticipated dividend or interest payments denominated in a foreign currency.
Dreyfus may seek to hedge against changes in the value of a particular
currency by using forward contracts on another foreign currency or basket of
currencies, the value of which Dreyfus believes will bear a positive
correlation to the value of the currency being hedged.
The cost to the Fund of engaging in forward contracts varies with
factors such as the currency involved, the length of the contract period and
the market conditions then prevailing. Because forward contracts are
usually entered into a principal basis, no fees or commissions are involved.
When the Fund enters into a forward contract, it relies on the counterparty
to make or take delivery of the underlying currency at the maturity of the
contract. Failure by the counterparty to do so would result in the loss of
any expected benefit of the transaction.
Buyers and sellers of forward contracts can enter into offsetting
closing transactions by selling or purchasing, respectively, an instrument
identical to the instrument purchased or sold. Secondary markets generally
do not exist for forward contracts, with the result that closing
transactions generally can be made for forward contracts only by negotiating
directly with the counterparty. Thus, there can be no assurance that the
Fund will in fact be able to close out a forward contract at a favorable
price prior to maturity. In addition, in the event of insolvency of the
counterparty, the Fund might be unable to close out a forward contract at
any time prior to maturity. In either event, the Fund would continue to be
subject to market risk with respect to the position, and would continue to
be required to maintain a position in the securities or currencies that are
the subject of the hedge or to maintain cash or securities in a segregated
account.
The precise matching of forward currency contract amounts and the value
of the securities involved generally will not be possible because the value
of such securities measured in the foreign currency will change after the
forward contract has been established. Thus, the Fund might need to
purchase or sell foreign currencies in the spot (cash) market to the extent
such foreign currencies are not covered by forward contracts. The
projection of short-term currency market movements is extremely difficult,
and the successful execution of a short-term hedging strategy is highly
uncertain.
Swaps, Caps, Collars and Floors. Swap agreements, including interest
rate, equity index and currency swaps, caps, collars and floors, may be
individually negotiated and structured to include exposure to a variety of
different types of investments or market factors. Swaps involve two parties
exchanging a series of cash flows at specified intervals. In the case of an
interest rate swap, the parties exchange interest payments based on an
agreed upon principal amount (referred to as the "notional principal
amount"). Under the most basic scenario, Party A would pay a fixed rate on
the notional principal amount to Party B, which would pay a floating rate on
the same notional principal amount to Party A. Depending on their
structure, swap agreements may increase or decrease the Fund's exposure to
long or short-term interest rates (in the U.S. or abroad), foreign currency
values, mortgage securities, corporate borrowing rates, or other factors.
Swap agreements can take many different forms and are known by a variety of
names.
In a typical cap or floor agreement, one party agrees to make payments
only under specified circumstances, usually in return for payment of a fee
by the other party. For example, the buyer of an interest rate cap obtains
the right to receive payments to the extent that a specified interest rate
exceeds an agreed-upon level, while the seller of an interest rate floor is
obligated to make payments to the extent that a specified interest rate
falls below an agreed-upon level. An interest rate collar combines elements
of buying a cap and selling a floor.
The Fund will set aside cash or appropriate liquid assets to cover its
current obligations under swap transactions. If the Fund enters into a swap
agreement on a net basis (that is, the two payment streams are netted out,
with the Fund receiving or paying, as the case may be, only the net amount
of the two payments), the Fund will maintain cash or liquid assets with a
daily value at least equal to the excess, if any, of the Fund's accrued
obligations under the swap agreement over the accrued amount the Fund is
entitled to receive under the agreement. If the Fund enters into a swap
agreement on other than a net basis or writes a cap, collar or floor, it
will maintain cash or liquid assets with a value equal to the full amount of
the Fund's accrued obligations under the agreement.
The most important factor in the performance of swap agreements is the
change in the specific interest rate, currency or other factor(s) that
determine the amounts of payments due to and from the Fund. If a swap
agreement calls for payments by the Fund, the Fund must be prepared to make
such payments when due. In addition, if the counterparty's creditworthiness
declines, the value of a swap agreement would likely decline, potentially
resulting in losses.
The Fund will enter into swaps, caps, collars and floors only with
banks and recognized securities dealers believed by Dreyfus to present
minimal credit risks in accordance with guidelines established by the Board.
If there is a default by the other party to such a transaction, the Fund
will have to rely on its contractual remedies (which may be limited by
bankruptcy, insolvency or similar laws) pursuant to the agreement relating
to the transaction.
The Fund understands that it is the position of the staff of the SEC
that assets involved in swap transactions are illiquid and, therefore, are
subject to the limitations on illiquid investments.
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 Investment
Company Act of 1940, as amended (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 objective, 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 and options 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 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
PRINCIPAL SHAREHOLDERS
The following shareholder(s) owned 5% or more of the outstanding
Investor shares of the Fund at _______________________:
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, 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 1940 Act) is
indicated by an asterisk. Each of the Directors also serves as a Trustee of
The Dreyfus/Laurel Funds Trust and The Dreyfus/Laurel Tax-Free Municipal
Funds (collectively, with the Company, the "Dreyfus/Laurel Funds") and Mr.
DiMartino serves as a Board member of 93 other funds in 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: 80
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: 78 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 of Dreyfus and
Executive Vice President and a director of Dreyfus Service Corporation,
a wholly-owned subsidiary of Dreyfus. From August 1994 to December 31,
1994, he was a director of Mellon Bank Corporation. He is Chairman of
the Board of Noel Group, Inc., a venture capital company, a trustee of
Bucknell University; and a director of the Muscular Dystrophy
Association, HealthPlan Services Corporation, Belding Heminway, Inc.,
Simmons Outdoor Corporation and Staffing Resources, Inc. Age: 52 years
old. Address: 200 Park Avenue, New York, New York 10166.
o + JAMES M. FITZGIBBONS. Director of the 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: 60 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. Since May 1991, Mr. Goeschel has served as
Trustee of Sewickley Valley Hospital. Age: 73 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,
Franklin Federal Partners. Age: 49 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: 48
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: 67 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: 81 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: 63 years old. Address: 321 Gross
Street, Pittsburgh, Pennsylvania 15224.
o + ROSLYN M. WATSON. Director of the Company; Principal, Watson Ventures,
Inc.; Director, American Express Centurion Bank; Director, Harvard
Community Health Plan, Inc.; Director, Massachusetts Electric Company;
Director, The Hymans Foundation, Inc., prior to February, 1993; Real
Estate Development Project Manager and Vice President, The Gunwyn
Company. Age: 45 years old. Address: 25 Braddock Park, Boston,
Massachusetts 02116-5816.
# MARIE E. CONNOLLY. President and Treasurer of the Company, 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). Age: 37 years old.
Address: One Exchange Place, Boston, Massachusetts 02109.
# FREDERICK C. DEY. Vice President of the Company, 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). Age: 33 years old. Address: Premier Mutual Fund Services, Inc.,
One Exchange Place, Boston, Massachusetts 02109.
# ERIC B. FISCHMAN. Vice President of the Company, 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).
Age: 31 years old. Address: Premier Mutual Fund Services, Inc., 200
Park Avenue, New York, New York 10166.
RICHARD W. HEALEY. Vice President of the Company, 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). Age: 41 years old. Address: One Exchange Place, Boston,
Massachusetts 02109.
# JOHN E. PELLETIER. Vice President and Secretary of the Company, 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).
Age: 31 years old. 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 ____________.
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, subsidiary or affiliate thereof) serves as an
officer or Director of the Company. The Dreyfus/Laurel Funds pay each
Director/Trustee who is not an "interested person" of the Company (as
defined in the 1940 Act), $27,000 per annum (and an additional $75,000 for
the Chairman of the Board of Directors/Trustees of the Dreyfus/Laurel
Funds). In addition, the Dreyfus/Laurel Funds pay each Director/Trustee who
is not an "interested person" of the Company (as defined in the 1940 Act),
$1,000 per joint Dreyfus/Laurel Funds Board meeting attended, plus $750 per
joint Dreyfus/Laurel Funds Audit Committee meeting attended, and reimburses
each Director/Trustee who is not an "interested person" of the Company (as
defined in the 1940 Act), for travel and out-of-pocket expenses.
<TABLE>
<CAPTION>
For the fiscal year ended October 31, 1995, the aggregate amount of
fees and expenses received by each Director from the Company and all other
funds in the Dreyfus Family of Funds for which such person is a Board member
were as follows:
Total
Compensation
Pension or From the
Retirement Estimated Company
Aggregate Benetis 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 M. Adams $26,662 None None $ 34,500
Francis P. Brennan* 84,914 None None 110,500
Joseph S. DiMartino** None None None $445,000**
James M. Fitzgibbons 25,887 None None 33,500
J. Tomlinson Fort** None None None None
Arthur L. Goeschel 26,835 None None 35,500
Kenneth A. Himmel 24,543 None None 31,750
Arch S. Jeffery** None None None None
Stephen J. Lockwood 25,318 None None 32,750
Robert D. McBride 26,835 None None 35,500
John L. Propst 26,835 None None 35,500
John J. Sciullo 26,662 None None 34,500
Roslyn M. Watson 26,060 None None 34,550
</TABLE>
# Amount does not include reimbursed expenses for attending Board
meetings, which amounted to $11,113 for the Company.
* Compensation of Francis Brennan includes $75,000 paid by the
Dreyfus/Laurel Funds to be Chairman of the Board.
** Joseph S. DiMartino, J. Tomlinson Fort and Arch S. Jeffery are paid
directly by Dreyfus for serving as Board members of the Company and the
funds in the Dreyfus/Laurel Funds. For the fiscal year ended October
31, 1995, the aggregate amount of fees and expenses received by Joseph
DiMartino, J. Tomlinson Fort and Arch S. Jeffery from Dreyfus for
serving as a Board member of the Company were $18,214, $26,835 and
$26,835, respectively, and for serving as a Board member of all funds in
the Dreyfus/Laurel Funds (including the Company) were $23,500, $35,500
and $35,500, respectively. In addition, Dreyfus reimbursed Messrs.
DiMartino, Fort and Jeffery a total of $2,664 for expenses attributable
to the Company's Board meetings.
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 (the "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 objective, 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 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. 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 and $278,575 during the period
from September 1, 1994 (commencement of operations) to October 31, 1994 and
for the fiscal year ended October 31, 1995, respectively.
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; Christopher M. Condron, President, Chief
Operating Officer and a director, Stephen E. Canter, Vice Chairman, Chief
Investment Officer and a director; Lawrence S. Kash, Vice Chairman-
Distribution and a director; Philip L. Toia, Vice Chairman-Operations and
Administration; Daniel C. Maclean, Vice President and General Counsel;
Barbara E. Casey, Vice President-Dreyfus President-Dreyfus Retirement
Services; Diane M. Coffey, Vice President-Corporate Communications; Elie M.
Genadry, Vice President-Institutional Sales; Henry D. Gottman, Vice
President-Retail Sales and Service; William F. Glavin, Jr., Vice President-
Corporate Development; Andrew S. Wasser, Vice President-Information
Services; Mark N. Jacobs, Vice President-Fund Legal and Compliance and
Secretary; Jeffrey N. Nachman, Vice President-Mutual Fund Accounting;
Katherine C. Wickham, Vice President-Corporate Human Resources; Maurice
Bendrihem, Controller; Elvira Oslapas; Assistant Secretary; 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 the ("the Code") although more than one
beneficiary is involved; or a group of accounts established by or on behalf
of the employees of an employer or affiliated employers pursuant to an
employee benefit plan or other program (including accounts established
pursuant to Sections 403(b), 408(k), and 457 of the Code); or an organized
group which has been in existence for more than six months, provided that it
is not organized for the purpose of buying redeemable securities of a
registered investment company and provided that the purchases are made
through a central administration or a single dealer, or by other means which
result in economy of sales effort or expense.
Set forth below is an example of the method of computing the offering
price of the 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, 1995.
Net Asset Value per Share $13.09
Per Share Sales Charge - 4.5%
of offering price (4.7% of
net asset value per share) $ 0.62
Per Share Offering Price to
the Public $13.71
TeleTransfer Privilege. TeleTransfer purchase orders may be made at
any time. Purchase orders received by 4:00 P.M., New York time, on any
business day that Dreyfus Transfer, Inc., the Fund's transfer and dividend
disbursing agent (the "Transfer Agent"), and the New York Stock Exchange
("NYSE") are open for business will be credited to the shareholder's Fund
account on the next bank business day following such purchase order.
Purchase orders made after 4:00 P.M., New York time, on any business day the
Transfer Agent and the NYSE are open for business, or orders made on
Saturday, Sunday or any Fund holiday (e.g., when the NYSE is not open for
business), will be credited to the shareholder's Fund account on the second
bank business day following such purchase order.
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 Plans
(Class A Plan and Class B and C Plan)."
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 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 the 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.
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.
For the year ended October 31, 1995, the distribution and service fees
paid by the Fund were as follows:
Class A Class B Class C
------- ------- -------
Premier Small Company
Stock Fund (1) $1,521 $3,239 $112
(1) The Fund commenced selling Class B and Class C shares on December 19,
1994 and April 30, 1995, respectively.
Class R shares bear no distribution fee.
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. Each 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 October 25, 1995. 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.
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.
Dreyfus TeleTransfer Privilege. Investors should be aware that if they
have selected the Dreyfus TeleTransfer Privilege, any request for a wire
redemption will be effected as a Dreyfus TeleTransfer transaction through
the Automated Clearing House 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."
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 redemptions 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.
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 Simplified Employee Pension Plans ("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 SEP-IRA 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.
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 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 Dreyfus Auto-Exchange Privilege are available to
shareholders resident in any state in which shares of the fund being
acquired may legally be sold. Shares may be exchanged only between accounts
having identical names and other identifying designations.
Shareholder Services Forms and prospectuses of the other funds may be
obtained by calling 1-800-645-6561. The 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 Plan. The Automatic Withdrawal Plan permits an
investor with a $5,000 minimum account to request withdrawal of a specified
dollar amount (minimum of $50) on either a monthly or quarterly basis.
Withdrawal payments are the proceeds from sales of Fund shares, not the
yield on the shares. If withdrawal payments exceed reinvested dividends and
distributions, the investor's shares will be reduced and eventually may be
depleted. An Automatic Withdrawal Plan may be established by completing the
appropriate application available from the Distributor. 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 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
$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 which 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 Day and
Christmas Day.
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 for treatment as a regulated investment company ("RIC")
under the Internal Revenue Code of 1986, as amended (the "Code"), 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) ("Distribution Requirement"), (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.
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, 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 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 certain foreign currency
denominated securities (including debt instruments and certain financial
forward, futures and option contracts and 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 of the Code.
"Conversion transactions" are defined to include certain forward, futures,
option and straddle transactions, transactions marketed or sold to produce
capital gains, and 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 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 could need to distribute such income in order to satisfy the
Distribution Requirement and to avoid the 4% excise tax referred to in the
Fund's Prospectus under "Dividends, Other Distributions and Taxes." 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 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 it is deemed to be conducting
business, the Fund may be subject to the tax laws thereof. 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,
such as a foreign shareholder entitled to claim the benefits of an
applicable tax treaty. 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).
Capital gains realized by foreign shareholders on the sale of Fund
shares and distributions to them of net capital gain (the excess of net
long-term capital gain over net short-term capital loss) 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. 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 a foreign
shareholder's ownership of the Fund's shares 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.
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
obligation 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 Dreyfus as investment
manager to the Fund outweighs any disadvantages that may be said to exist
from exposure to simultaneous transactions.
For the period from September 1, 1994 (commencement of operations) to
October 31, 1994 and for the fiscal year ended October 31, 1995, the Fund
paid brokerage fees of $13,899 and $65,341, 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 period from September 1, 1994
(commencement of operations) to October 31, 1994 and for the fiscal year
ended October 31, 1995 were 8% and 56%, respectively.
PERFORMANCE INFORMATION
The following information supplements and should be read in conjunction
with the section in each Fund's Prospectus entitled "Performance
Information."
The Fund's average annual total return for the 1 and 1.164 year periods
ended October 31, 1995 for Class A was 24.50% and 21.49%, respectively. The
Fund's average annual total return for Class R for the 1 and 1.164 year
periods ended October 31, 1995 was 30.70% and 26.72%, respectively. The
Fund's average annual total return for Class B and Class C for the period
December 19, 1994 (inception date of Class B and Class C) through October
31, 1995 was 39.51% and 43.01%, respectively.
Average annual total return is calculated by determining the ending
redeemable value of an investment purchased at net asset value (maximum
offering price in the case of Class A) per share with a hypothetical $1,000
payment made at the beginning of the period (assuming the reinvestment of
dividends and 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 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 Class C the maximum applicable CDSC has been paid upon
redemption at the end of the period.
The Fund's total return for the period September 11, 1994 to October
31, 1995 for Class R was 31.62%. The Fund's total return for Class A for
the period April 14, 1994 to October 31, 1995 was 25.33%. Based on net
asset value per share, the total return for Class A was 31.22% for this
period. The Fund's total return for Class B and Class C for the period from
December 19, 1994 (inception date of Class B and Class C) through October
31, 1995 was 33.51% and 36.41%, respectively. Without giving effect to the
applicable CDSC, total return for Class B and Class C was 37.51% and 37.41%,
respectively.
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.
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. Dreyfus Transfer, Inc., a wholly-owned subsidiary of
Dreyfus, is located at One American Express Plaza, Providence, Rhode Island
02903, and serves as the Fund's transfer and dividend disbursing agent.
Under a transfer agency agreement with the Company, the Transfer Agent
arranges for the maintenance of shareholder account records for the Fund,
the handling of certain communications between shareholders and the Fund and
the payment of dividends and distributions payable by the Fund. For these
services, the Transfer Agent receives a monthly fee computed on the basis of
the number of shareholder accounts it maintains for the Fund during the
month, and is reimbursed for certain out-of-pocket expenses. Dreyfus
Transfer, 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 LLP, 1800 Massachusetts Avenue, N.W., Second
Floor, Washington, D.C. 20036, has passed upon the legality of the shares
offered by the Prospectus and this Statement of Additional Information.
__________________, One Mellon Bank Center, Pittsburgh, PA 15218,
was appointed by the Directors to serve as the Fund's independent auditors
for the year ending October 31, 1996, 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 filed on behalf of the Fund.
FINANCIAL STATEMENTS
The financial statements for the fiscal year ended October 31, 1995,
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.
DREYFUS INSTITUTIONAL S&P 500 STOCK INDEX FUND
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
MARCH 1, 1996
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus
of the Dreyfus Institutional S&P 500 Stock Index Fund (formerly the Dreyfus
S&P 500 Stock Index Fund) (the "Fund"), dated March 1, 1996, as it may be
revised from time to time. The Fund is a separate diversified portfolio of
The Dreyfus/Laurel Funds, Inc. (formerly, The Laurel Funds, Inc.), an open-
end 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 one of
the following numbers:
Call Toll Free 1-800-645-6561
In New York City -- Call 1-718-895-1206
Outside the U.S. and Canada -- Call 516-794-5452
The Dreyfus Corporation ("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-13
Management Arrangements . . . . . . . . . . . . . . . . . . B-18
Purchase of Fund Shares . . . . . . . . . . . . . . . . . . B-20
Redemption of Fund Shares . . . . . . . . . . . . . . . . . B-20
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-30
Information About the Fund. . . . . . . . . . . . . . . . . B-31
Custodian, Transfer and Dividend Disbursing
Agent, Counsel and Independent Auditors . . . . . . . . . B-32
Financial Statements. . . . . . . . . . . . . . . . . . . . B-32
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) the 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.
Derivative Instruments. The Fund may purchase and sell various
financial instruments ("Derivative Instruments"), such as financial futures
contracts (such as index futures contracts), options (such as options on
U.S. and foreign securities or indices of such securities). The index
Derivative Instruments the Fund may use may be based on indices of U.S. or
foreign equity securities. These Derivative Instruments may be used, for
example, to preserve a return or spread or to facilitate or substitute for
the sale or purchase of securities.
Hedging strategies can be broadly categorized as "short hedges" and
"long hedges." A short hedge is a purchase or sale of a Derivative
Instrument intended partially or fully to offset potential declines in the
value of one or more investments held in the Fund's portfolio. Thus, in a
short hedge the Fund takes a position in a Derivative Instrument whose
price is expected to move in the opposite direction of the price of the
investment being hedged.
Conversely, a long hedge is a purchase or sale of a Derivative
Instrument intended partially or fully to offset potential increases in the
acquisition cost of one or more investments that the Fund intends to
acquire. Thus, in a long hedge the Fund takes a position in a Derivative
Instrument whose price is expected to move in the same direction as the
price of the prospective investment being hedged. A long hedge is
sometimes referred to as an anticipatory hedge. In an anticipatory hedge
transaction, the Fund does not own a corresponding security and, therefore,
the transaction does not relate to a security the Fund owns. Rather, it
relates to a security that the Fund intends to acquire. If the Fund does
not complete the hedge by purchasing the security it anticipated
purchasing, the effect on the Fund's portfolio is the same as if the
transaction were entered into for speculative purposes.
Derivative Instruments on securities generally are used to hedge
against price movements in one or more particular securities positions that
the Fund owns or intends to acquire. Derivative Instruments on indices, in
contrast, generally are used to attempt to hedge against price movements in
market sectors in which the Fund has invested or expects to invest.
The use of Derivative Instruments is subject to applicable regulations
of the Securities and Exchange Commission ("SEC"), the several options and
futures exchanges upon which they are traded, the Commodity Futures Trading
Commission ("CFTC") and various state regulatory authorities. In addition,
the Fund's ability to use Derivative Instruments will be limited by tax
considerations. See "Dividends, Other Distributions and Taxes."
In addition to the instruments, strategies and risks described below
and in the Prospectus, Dreyfus expects to discover additional opportunities
in connection with other Derivative Instruments. These new opportunities
may become available as Dreyfus develops new techniques, as regulatory
authorities broaden the range of permitted transactions and as new
techniques are developed. Dreyfus may utilize these opportunities to the
extent that they are consistent with the Fund's investment objective, and
permitted by the Fund's investment policies and applicable regulatory
authorities.
Special Risks. The use of Derivative Instruments involves special
considerations and risks, certain of which are described below. Risks
pertaining to particular Derivative Instruments are described in the
sections that follow.
(1) Successful use of most Derivative Instruments depends upon
Dreyfus' ability to predict movements of the overall securities and
interest rate markets, which requires different skills than predicting
changes in the prices of individual securities. There can be no assurance
that any particular strategy will succeed.
(2) There might be imperfect correlation, or even no correlation,
between price movements of a Derivative Instrument and price movements of
the investments being hedged. For example, if the value of a Derivative
Instrument used in a short hedge increased by less than the decline in
value of the hedged investment, the hedge would not be fully successful.
Such a lack of correlation might occur due to factors unrelated to the
value of the investments being hedged, such as speculative or other
pressures on the markets in which Derivative Instruments are traded. The
effectiveness of hedges using Derivative Instruments on indices will depend
on the degree of correlation between price movements in the index and price
movements in the securities being hedged.
Because there are a limited number of types of exchange-traded options
and futures contracts, it is likely that the standardized contracts
available will not match the Fund's current or anticipated investments
exactly. The Fund may invest in options and futures contracts based on
securities with different issuers, maturities, or other characteristics
from the securities in which it typically invests, which involves a risk
that the options or futures position will not track the performance of the
Fund's other investments.
Options and futures prices can also diverge from the prices of their
underlying instruments, even if the underlying instruments match the Fund's
investments well. Options and futures prices are affected by such factors
as current and anticipated short-term interest rates, changes in volatility
of the underlying instrument, and the time remaining until expiration of
the contract, which may not affect security prices the same way. Imperfect
correlation may also result from differing levels of demand in the options
and futures markets and the securities markets, from structural differences
in how options and futures and securities are traded, or from imposition of
daily price fluctuation limits or trading halts. The Fund may purchase or
sell options and futures contracts with a greater or lesser value than the
securities it wishes to hedge or intends to purchase in order to attempt to
compensate for differences in volatility between the contract and the
securities, although this may not be successful in all cases. If price
changes in the Fund's options or futures positions are poorly correlated
with its other investments, the positions may fail to produce anticipated
gains or result in losses that are not offset by gains in other
investments.
(3) If successful, the above-discussed strategies can reduce risk of
loss by wholly or partially offsetting the negative effect of unfavorable
price movements. However, such strategies can also reduce opportunity for
gain by offsetting the positive effect of favorable price movements. For
example, if the Fund entered into a short hedge because Dreyfus projected a
decline in the price of a security in the Fund's portfolio, and the price
of that security increased instead, the gain from that increase might be
wholly or partially offset by a decline in the price of the Derivative
Instrument. Moreover, if the price of the Derivative Instrument declined
by more than the increase in the price of the security, the Fund could
suffer a loss. In either such case, the Fund would have been in a better
position had it not attempted to hedge at all.
(4) As described below, the Fund might be required to maintain assets
as "cover," maintain segregated accounts or make margin payments when it
takes positions in Derivative Instruments involving obligations to third
parties (i.e., Derivative Instruments other than purchased options). If
the Fund were unable to close out its positions in such Derivative
Instruments, it might be required to continue to maintain such assets or
accounts or make such payments until the position expired or matured.
These requirements might impair the Fund's ability to sell a portfolio
security or make an investment at a time when it would otherwise be
favorable to do so, or require that the Fund sell a portfolio security at a
disadvantageous time. The Fund's ability to close out a position in a
Derivative Instrument prior to expiration or maturity depends on the
existence of a liquid secondary market or, in the absence of such a market,
the ability and willingness of the other party to the transaction
("counterparty") to enter into a transaction closing out the position.
Therefore, there is no assurance that any position can be closed out at a
time and price that is favorable to the Fund.
Cover for Derivative Instruments. Transactions using Derivative
Instruments may 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, futures or options, or (2)
cash and short-term liquid debt securities with a value sufficient at all
times to cover its potential obligations to the extent not covered as
provided in (1) above. The Fund will comply with SEC guidelines regarding
cover for Derivative Instruments and will, 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.
Assets used as cover or held in a segregated account cannot be sold
while the position in the corresponding Derivative Instrument is open,
unless they are replaced with other appropriate assets. As a result, the
commitment of a large portion of the Fund's assets to cover or segregated
accounts could impede portfolio management or the Fund's ability to meet
redemption requests or other current obligations.
Options. A call option gives the purchaser the right to buy, and
obligates the writer to sell, the underlying investment at the agreed upon
exercise price during the option period. A put option gives the purchaser
the right to sell, and obligates the writer to buy, the underlying
investment at the agreed upon exercise price during the option period. A
purchaser of an option pays an amount, known as the premium, to the option
writer in exchange for rights under the option contract.
Options on indices are similar to options on securities except that
all settlements are in cash and gain or loss depends on changes in the
index in question rather than on price movements in individual securities.
The purchase of call options can serve as a long hedge, and the
purchase of put options can serve as a short hedge. Writing put or call
options can enable the Fund to enhance income or yield by reason of the
premiums paid by the purchasers of such options. However, if the market
price of the security or other instrument underlying a put option declines
to less than the exercise price on the option, minus the premium received,
the Fund would expect to suffer a loss.
Writing call options can also serve as a limited short hedge because
declines in the value of the hedged investment would be offset to the
extent of the premium received for writing the option. However, if the
investment appreciates to a price higher than the exercise price of the
call option, it can be expected that the option will be exercised and the
Fund will be obligated to sell the investment at less than its market
value.
Writing put options can serve as a limited long hedge because
increases in the value of the hedged investment would be offset to the
extent of the premium received for writing the option. However, if the
investment depreciates to a price lower than the exercise price of the put
option, it can be expected that the put option will be exercised and the
Fund will be obligated to purchase the investment at more than its market
value.
The value of an option position will reflect, among other things, the
current market value of the underlying investment, the time remaining until
expiration, the relationship of the exercise price to the market price of
the underlying investment, the historical price volatility of the
underlying investment and general market conditions. Options that expire
unexercised have no value.
The Fund may effectively terminate its right or obligation under an
option by entering into a closing transaction. For example, the Fund may
terminate its obligation under a call or put option that it had written by
purchasing an identical call or put option; this is known as a closing
purchase transaction. Conversely, the Fund may terminate a position in a
put or call option it had purchased by writing an identical put or call
option; this is known as a closing sale transaction. Closing transactions
permit the Fund to realize profits or limit losses on an option position
prior to its exercise or expiration.
The Fund may purchase and sell both exchange-traded and over-the-
counter ("OTC") options. Exchange-traded options in the United States are
issued by a clearing organization that, in effect, guarantees completion of
every exchange-traded option transaction. In contrast, OTC options are
contracts between the Fund and its counterparty (usually a securities
dealer or a bank) with no clearing organization guarantee. Thus, when the
Fund purchases an OTC option, it relies on the counterparty from whom it
purchased the option to make or take delivery of the underlying investment
upon exercise of the option. Failure by the counterparty to do so would
result in the loss of any premium paid by the Fund as well as the loss of
any expected benefit of the transaction. The Fund will enter into only
those option contracts that are listed on a national securities or
commodities exchange or traded in the OTC market for which there appears to
be a liquid secondary 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 the
current market value of the underlying securities and the option's strike
price). The repurchase price with primary dealers is typically a formula
price that 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's ability to establish and close out positions in exchange-
listed options depends on the existence of a liquid market. However, there
can be no assurance that such a market will exist at any particular time.
Closing transactions can be made for OTC options only by negotiating
directly with the counterparty, or by a transaction in the secondary market
if any such market exists. Although the Fund will enter into OTC options
only with major dealers in unlisted options, there is no assurance that the
Fund will in fact be able to close out an OTC option position at a
favorable price prior to expiration. In the event of insolvency of the
counterparty, the Fund might be unable to close out an OTC option position
at any time prior to its expiration.
If the Fund were unable to effect a closing transaction for an option
it had purchased, it would have to exercise the option to realize any
profit. The inability to enter into a closing purchase transaction for a
covered call option written by the Fund could cause material losses because
the Fund would be unable to sell the investment used as cover for the
written option until the option expires or is exercised.
The Fund may write only covered call options on securities. 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.
Futures Contracts and Options on Futures Contracts. When the Fund
purchases a futures contract, it incurs an obligation to take delivery of a
specified amount of the obligation underlying the futures contract at a
specified time in the future for a specified price. When the Fund sells a
futures contract, it incurs an obligation to deliver a specified amount of
the obligation underlying the futures contract at a specified time in the
future for an agreed upon price. With respect to index futures, no
physical transfer of the securities underlying the index is made. Rather,
the parties settle by exchanging in cash an amount based on the difference
between the contract price and the closing value of the index on the
settlement date.
When the Fund writes an option on a futures contract, it becomes
obligated, in return for the premium paid, to assume a position in a
futures contract at a specified exercise price at any time during the term
of the option. If the Fund has written a call, it assumes a short futures
position. If the Fund has written a put, it assumes a long futures
position. When the Fund purchases an option on a futures contract, it
acquires the right, in return for the premium it pays, to assume a position
in a futures contract (a long position if the option is a call and a short
position if the option is a put).
The purchase of futures or call options on futures can serve as a long
hedge, and the sale of futures or the purchase of put options on futures
can serve as a short hedge. Writing call options on futures contracts can
serve as a limited short hedge, using a strategy similar to that used for
writing call options on securities or indices. Similarly, writing put
options on futures contracts can serve as a limited long hedge.
No price is paid upon entering into a futures contract. Instead, at
the inception of a futures contract the Fund is required to deposit
"initial margin" consisting of cash or U.S. Government securities in an
amount generally equal to 10% or less of the contract value. Margin must
also be deposited when writing a call or put option on a futures contract,
in accordance with applicable exchange rules. Unlike margin in securities
transactions, initial margin on futures contracts does not represent a
borrowing, but rather is in the nature of a performance bond or good-faith
deposit that is returned to the Fund at the termination of the transaction
if all contractual obligations have been satisfied. Under certain
circumstances, such as periods of high volatility, the Fund may be required
by an exchange to increase the level of its initial margin payment.
Subsequent "variation margin" payments are made to and from the
futures broker daily as the value of the futures position varies, a process
known as "marking-to-market." Variation margin does not involve borrowing,
but rather represents a daily settlement of the Fund's obligations to or
from a futures broker. When the Fund purchases an option on a future, the
premium paid plus transaction costs is all that is at risk. In contrast,
when the Fund purchases or sells a futures contract or writes a call or put
option thereon, it is subject to daily variation margin calls that could be
substantial in the event of adverse price movements. If the Fund has
insufficient cash to meet daily variation margin requirements, it might
need to sell securities at a time when such sales are disadvantageous.
Purchasers and sellers of futures contracts and options on futures can
enter into offsetting closing transactions, similar to closing transactions
on options, by selling or purchasing, respectively, an instrument identical
to the instrument purchased or sold. Positions in futures and options on
futures may be closed only on an exchange or board of trade that provides a
secondary market. Although the Fund intends to enter into futures and
options on futures only on exchanges or boards of trade where there appears
to be a liquid secondary market, there can be no assurance that such a
market will exist for a particular contract at a particular time. In such
event, it may not be possible to close a futures contract or options
position.
Under certain circumstances, futures exchanges may establish daily
limits on the amount that the price of a futures or an option on a futures
contract can vary from the previous day's settlement price; once that limit
is reached, no trades may be made that day at a price beyond the limit.
Daily price limits do not limit potential losses because prices could move
to the daily limit for several consecutive days with little or no trading,
thereby preventing liquidation of unfavorable positions.
If the Fund were unable to liquidate a futures or options on futures
position due to the absence of a liquid secondary market or the imposition
of price limits, it could incur substantial losses. The Fund would
continue to be subject to market risk with respect to the position. In
addition, except in the case of purchased options, the Fund would continue
to be required to make daily variation margin payments and might be
required to maintain the position being hedged by the future or option or
to maintain cash or securities in a segregated account.
To the extent that the Fund enters into futures contracts, options on
futures contracts, or options on foreign currencies traded on an exchange
regulated by the CFTC, in each case other than for bona fide hedging
purposes (as defined by the CFTC), the aggregate initial margin and
premiums required to establish those positions (excluding the amount by
which options are "in-the-money" at the time of purchase) will not exceed
5% of the liquidation value of the Fund's portfolio, after taking into
account unrealized profits and unrealized losses on any contracts the Fund
has entered into. This policy does not limit to 5% the percentage of the
Fund's assets that are at risk in futures contracts and options on futures
contracts.
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.
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
and options 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 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
PRINCIPAL SHAREHOLDERS
The following shareholder(s) owned 5% or more of the outstanding
voting shares of the Fund at ______________, 1996:
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. ("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, 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
0
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 and The Dreyfus/Laurel Tax-Free
Municipal Funds (collectively, with the Company, the "Dreyfus/Laurel
Funds") and Mr. DiMartino serves as a Board member of 93 other funds in 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: 80 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: 78 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 of Dreyfus and
Executive Vice President and a director of Dreyfus Service
Corporation, a wholly-owned subsidiary of Dreyfus. From August 1994
to December 31, 1994, he was a director of Mellon Bank Corporation.
He is Chairman of the Board of Noel Group, Inc., a venture capital
company; a trustee of Bucknell University; and a director of the
Muscular Dystrophy Association, Health- Plan Services Corporation,
Belding Heminway, Inc., Curtis Industries, Inc., Simmons Outdoor
Corporation, and Staffing Resources, Inc. Age: 52 years old.
Address: 200 Park Avenue, New York, New York 10166.
o+ JAMES M. FITZGIBBONS. Director of the 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: 60 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: 73 years old. Since May 1991,
Mr. Goeschel has served as Trustee of Sewickley Valley Hospital.
Address: Way Hollow Road and Woodland Road, Sewickley, Pennsylvania
15143.
o+ KENNETH 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: 49 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: 48
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: 67 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: 81 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: 63 years old. Address: 321 Gross
Street, Pittsburgh, Pennsylvania 15224.
o+ ROSLYN M. WATSON. Director of the Company; Principal, Watson Ventures,
Inc.; Director, American Express Centurion Bank; Director, Harvard
Community Health Plan, Inc.; Director, Massachusetts Electric Company;
Director, The Hymans Foundation, Inc.; prior to February, 1993; Real
Estate Development Project Manager and Vice President, The Gunwyn
Company. Age: 45 years old. Address: 25 Braddock Park, Boston,
Massachusetts 02116-5816.
# MARIE E. CONNOLLY. President and Treasurer of the Company, 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). Age: 37 years old.
Address: One Exchange Place, Boston, Massachusetts 02109.
# FREDERICK C. DEY. Vice President of the Company, 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). Age: 33 years old. Address: Premier Mutual Fund
Services, Inc., One Exchange Place, Boston, Massachusetts, 02109.
# ERIC B. FISCHMAN. Vice President of the Company, 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). Age: 31 years old. Address: Premier Mutual Fund
Services, Inc., 200 Park Avenue, New York, New York 10166.
RICHARD W. HEALEY. Vice President of the Company, 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). Age: 41 years old. Address: One Exchange Place, Boston,
Massachusetts 02109.
# JOHN E. PELLETIER. Vice President and Secretary of the Company, 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). Age: 31 years old. 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
___________________.
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, subsidiary or affiliate thereof)
serves as an officer or Director of the Company. The Dreyfus/Laurel Funds
pay each Director/Trustee who is not an "interested person" of the Company
(as defined in the 1940 Act), $27,000 per annum (and an additional $75,000
for the Chairman of the Board of Directors/Trustees of the Dreyfus/Laurel
Funds). In addition, the Dreyfus/Laurel Funds pay each Director/Trustee
who is not an "interested person" of the Company (as defined in the 1940
Act), $1,000 per joint Dreyfus/Laurel Funds Board meeting attended, plus
$750 per joint Dreyfus/Laurel Funds Audit Committee meeting attended, and
reimburses each Director/Trustee who is not an "interested person" of the
Company (as defined in the 1940 Act), for travel and out-of-pocket
expenses.
<TABLE>
<CAPTION>
For the fiscal year ended October 31, 1995, the aggregate amount of
fees and expenses received by each Director from the Company and all other
funds in the Dreyfus Family of Funds for which such person is a Board
member were as follows:
Total
Pension or 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 M. Adams $26,662 None None $ 34,500
Francis P. Brennan* 84,914 None None 110,500
Joseph S. DiMartino** None None None $445,000**
James M. Fitzgibbons 25,887 None None 33,500
J. Tomlinson Fort** None None None None
Arthur L. Goeschel 26,835 None None 35,500
Kenneth Himmel 24,543 None None 31,750
Arch S. Jeffery** None None None None
Stephen J. Lockwood 25,318 None None 32,750
Robert D. McBride 26,835 None None 35,500
John L. Propst 26,835 None None 35,500
John J. Sciullo 26,662 None None 34,500
Roslyn M. Watson 26,060 None None 34,550
# Amount does not include reimbursed expenses for attending Board meetings, which
amounted to $11,113 for the Company.
* Compensation of Francis Brennan includes $75,000 paid by the Dreyfus/Laurel Funds to be
Chairman of the Board.
** Joseph S. DiMartino, J. Tomlinson Fort and Arch S. Jeffery are paid directly by Dreyfus
for serving as Board members of the Company and the funds in the Dreyfus/Laurel Funds.
For the fiscal year ended October 31, 1995, the aggregate amount of fees and expenses
received by Joseph DiMartino, J. Tomlinson Fort and Arch S. Jeffery from Dreyfus for
serving as a Board member of the Company were $18,214, $26,835 and $26,835,
respectively, and for serving as a Board member of all funds in the Dreyfus/Laurel
Funds (including the Company) were $23,500, $35,500 and $35,500, respectively. In
addition, Dreyfus reimbursed Messrs. DiMartino, Fort and Jeffery a total of $2,664 for
expenses attributable to the Company's Board meetings.
</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 (the "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 the Manager:
Howard Stein, Chairman of the Board and Chief Executive Officer; W. Keith
Smith, Vice Chairman of the Board; Christopher M. Condron, President, Chief
Operating Officer and a director; Stephen E. Canter, Vice Chairman, Chief
Investment Officer and a director; Lawrence S. Kash, Vice Chairman--
Distribution and a director; Philip L. Toia, Vice Chairman--Operations and
Administration and a director; Barbara E. Casey, Vice President--Dreyfus
Retirement Services; Diane M. Coffey, Vice President--Corporate
Communications; Elie M. Genadry, Vice President--Institutional Sales;
William F. Glavin, Jr., Vice President--Corporate Development; Henry D.
Gottmann, Vice President--Retail Sales and Service; Mark N. Jacobs, Vice
President--Legal and Secretary; Daniel C. Maclean, Vice President and
General Counsel; Jeffrey N. Nachman, Vice President--Mutual Fund
Accounting; Andrew S. Wasser, Vice President--Information Services;
Katherine C. Wickham, Vice President--Human Resources; Maurice Bendrihem,
Controller; Elvira Oslapas, Assistant Secretary; and Mandell L. Berman,
Frank V. Cahouet, Alvin E. Friedman, Lawrence M. Greene, Julian M. Smerling
and David B. Truman, directors.
Effective September 15, 1995, the management fee payable by the Fund
to Dreyfus under the Management Agreement was reduced from .40 of 1% to .20
of 1% of the Fund's average daily net assets. For the last three fiscal
years, the Fund has had the following expenses:
For the Fiscal Year Ended October 31,
1995 1994 1993
Management fees (gross
of waiver) $551,025 $371,508 $ 5,476
Expense Reimbursement from -- $ 52,201 $30,614
investment manager
In addition, under a Distribution Plan (the "Plan") adopted pursuant
to Rule 12b-1 under the 1940 Act, and terminated effective August 2, 1995,
the Fund was permitted to spend annually up to 0.25% of its average daily
net assets attributable to the Fund's Investor shares to compensate Dreyfus
Service Corporation, an affiliate of Dreyfus, for shareholder servicing
activities and the Distributor for shareholder servicing activities and
expenses primarily intended to result in the sale of Investor shares of the
Fund. The Plan allowed the Distributor to make payments from the Rule 12b-
1 fees it collected from the Fund to compensate Agents that had entered
into Selling Agreements with the Distributor. Effective September 15,
1995, the Fund's "Investor" and "Class R" designations were eliminated and
the Fund became a single class fund without any separate class designation.
For the period from November 1, 1994 to August 2, 1995, the Fund was
charged $6,832 by the Distributor pursuant to the Plan.
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. Dreyfus TeleTransfer purchase orders
may be made at any time. Purchase orders received by 4:00 P.M., New York
time, on any business day that Dreyfus Transfer, Inc., the Fund's transfer
and dividend disbursing agent (the "Transfer Agent"), and the New York
Stock Exchange are open for business will be credited to the shareholder's
Fund account on the next bank business day following such purchase order.
Purchase orders made after 4:00 P.M., New York time, on any business day
the Transfer Agent and the New York Stock Exchange are open for business,
or orders made on Saturday, Sunday or any Fund holiday (e.g., when the New
York Stock Exchange is not open for business), will be credited to the
shareholder's Fund account on the second bank business day following such
purchase order.
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.
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. 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."
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 other funds purchased by exchange will be
purchased on the basis of relative net asset value per share as follows:
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.
To accomplish an exchange under item D above, shareholders must notify
the Transfer Agent of their prior ownership of fund shares and their
account number.
To 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 Simplified Employee Pension
Plans ("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 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, (a)
shares (however the same may be named) of certain other funds in the
Dreyfus Family of Funds; and (b) shares of other funds specified from time
to time, of which you are currently a shareholder. This Privilege is
available only for existing accounts. Shares will be exchanged on the
basis of relative net asset value as described above under "Fund
Exchanges." Enrollment in or modification or cancellation of this
Privilege is effective three business days following notification by the
investor. 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 by calling 1-800-645-6561. 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 (a) shares (however the same may be
named) of certain other funds in the Dreyfus Family of Funds; and (b)
shares of other funds specified from time to time, of which you are
currently a shareholder. Shares of other funds purchased pursuant to this
Privilege will be purchased on the basis of relative net asset value per
share as follows:
A. Dividends and distributions paid by a fund may be invested
without imposition of a sales load in shares of other funds that
are offered without a sales load.
B. Dividends and distributions paid by a fund which does not charge
a sales load may be invested in shares of other funds sold with a
sales load, and the applicable sales load will be deducted.
C. Dividends and distributions paid by a fund which charges a sales
load may be invested in shares of other funds sold with a sales
load (referred to herein as "Offered Shares"), provided that, if
the sales load applicable to the Offered Shares exceeds the
maximum sales load charged by the fund from which dividends or
distributions are being swept, without giving effect to any
reduced loads, the difference will be deducted.
D. Dividends and distributions paid by a fund may be invested in
shares of other funds that impose a contingent deferred sales
charge ("CDSC") and the applicable CDSC, if any, will be imposed
upon redemption of such shares.
Corporate Pension/Profit-Sharing and Retirement Plans. The 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 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 which 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 Day and
Christmas Day.
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 for treatment as a regulated investment company ("RIC")
under the Internal Revenue Code of 1986, as amended (the "Code"), 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) secu-
rities, (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, 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 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 certain foreign
currency denominated securities (including debt instruments and certain
financial forward, futures and option contracts and 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 of the Code. "Conversion transactions" are defined to include certain
forward, futures, option and straddle transactions, transactions marketed
or sold to produce capital gains, or transactions described in Treasury
regulations to be issued in the future.
Under Section 1256 of the Code, any gain or loss realized by 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 could need to distribute such income to satisfy the Distribution
Requirement and avoid the imposition of the 4% excise tax referred to in
the Fund's Prospectus under "Dividends, Other Distributions and Taxes." 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 it is deemed to be conducting
business, the Fund may be subject to the tax laws thereof. 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, such as a foreign shareholder entitled to claim the benefits of an
applicable tax treaty. 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).
Capital gains realized by foreign shareholders on the sale of Fund
shares and distributions to them of net capital gain, (the excess of net
long-term gain over net short-term capital loss) 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. 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 a foreign
shareholder's ownership of Fund shares 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.
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 years ended October 31, 1994 and 1995,
the Fund paid brokerage commissions of $1,194, $29,595 and $50,384,
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 fiscal years ended October 31, 1994 and
1995 were 13% and 1.03%, respectively.
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.
The Fund's total return for the period September 30, 1993 to October
31, 1995 was 33.14%. 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.
Effective September 15, 1995, the Fund's "Investor" and "Class R"
designations were eliminated and the Fund became a single class fund
without any separate class designation. The foregoing performance data is
reflective of the Fund's Class R share performance through September 14,
1995 and of the Fund's single class of shares from September 15, 1995
through October 31, 1995.
Average annual total return (expressed as a percentage) for Fund
shares for the periods noted were:
Average Annual Total Return for the
Periods Ended October 31, 1995
Fund: 1 Year 5 Years 10 Years Inception
S&P 500 Fund 25.75% -- -- 14.68%
(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. Dreyfus Transfer, Inc., a wholly-owned subsidiary of the
Manager, is located at One American Express Plaza, Providence, Rhode Island
02903, and serves as the Fund's transfer and dividend disbursing agent.
Under a transfer agency agreement with the Fund, the Transfer Agent
arranges for the maintenance of shareholder account records for the Fund,
the handling of certain communications between shareholders and the Fund
and the payment of dividends and distributions payable by the Fund. For
these services, the Transfer Agent receives a monthly fee computed on the
basis of the number of shareholder accounts it maintains for the Fund
during the month, and is reimbursed for certain out-of-pocket expenses.
Dreyfus Transfer, 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 LLP, 1800 Massachusetts Avenue N.W. Second
Floor, Washington, D.C. 20036-1800, has passed upon the legality of the
shares offered by the Prospectus and this Statement of Additional
Information.
____________________ was appointed by the Directors to serve as the
Fund's independent auditors for the year ending October 31, 1996, 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 filed on behalf
of the Fund.
FINANCIAL STATEMENTS
The financial statements for the fiscal year ended October 31, 1995,
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 included in the Annual
Report are incorporated herein by reference.
DREYFUS DISCIPLINED EQUITY INCOME FUND
INVESTOR AND CLASS R SHARES
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
MARCH 1, 1996
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 Equity Income Fund (formerly the Dreyfus Equity
Income Fund and prior to that the Laurel Equity Income Fund) (the "Fund"),
dated March 1, 1996, as it may be revised from time to time. The Fund is a
separate diversified portfolio of The Dreyfus/Laurel Funds, Inc., an open-
end 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 one of
the following numbers:
Call Toll Free 1-800-645-6561
In New York City -- Call 1-718-895-1206
On Long Island -- Call 1-516-794-5452
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-7
Management Arrangements . . . . . . . . . . . . . . . . . . . . B-13
Purchase of Fund Shares . . . . . . . . . . . . . . . . . . . . B-14
Distribution Plan . . . . . . . . . . . . . . . . . . . . . . . B-15
Redemption of Fund Shares . . . . . . . . . . . . . . . . . . . B-16
Shareholder Services. . . . . . . . . . . . . . . . . . . . . . B-18
Determination of Net Asset Value. . . . . . . . . . . . . . . . B-21
Dividends, Other Distributions and Taxes. . . . . . . . . . . . B-21
Portfolio Transactions. . . . . . . . . . . . . . . . . . . . . B-25
Performance Information . . . . . . . . . . . . . . . . . . . . B-27
Information About the Fund. . . . . . . . . . . . . . . . . . . B-29
Custodian, Transfer and Dividend Disbursing Agent, Counsel
and Independent Auditors. . . . . . . . . . . . . . . . . . . B-29
Financial Statements. . . . . . . . . . . . . . . . . . . . . . B-30
Appendix. . . . . . . . . . . . . . . . . . . . . . . . . . . . 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) the 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.
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
Investment Company Act of 1940, as amended (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
and options 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 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
PRINCIPAL SHAREHOLDERS
The following shareholder owned 5% or more of the outstanding Class R
shares of the Fund at ____________________:
The following shareholder(s) owned 5% or more of the outstanding
Investor shares of the Fund at ____________________:
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, 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 1940 Act) is indicated by an asterisk. Each of the
Directors also serves as a Trustee of The Dreyfus/Laurel Funds Trust and
The Dreyfus/Laurel Tax-Free Municipal Funds (collectively, with the
Company, the "Dreyfus/Laurel Funds") and Mr. DiMartino serves as a Board
member for 93 other funds advised by Dreyfus.
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: 80 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: 78 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 of Dreyfus and
Executive Vice President and a director of Dreyfus Service
Corporation, a wholly-owned subsidiary of Dreyfus. From August 1994
to December 31, 1994, he was a director of Mellon Bank Corporation.
He is Chairman of the Board of Noel Group, Inc., a venture capital
company, a trustee of Bucknell University; and a director of the
Muscular Dystrophy Association, HealthPlan Services Corporation,
Belding Heminway, Inc., Simmons Outdoor Corporation and Staffing
Resources, Inc. Age: 52 years old. Address: 200 Park Avenue, New
York, New York 10166.
o + JAMES M. FITZGIBBONS. Director of the 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: 60 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. Since May 1991, Mr. Goeschel has
served as Trustee of Sewickley Valley Hospital. Age: 73 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, Franklin Federal Partners. Age: 49 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: 48
years old. Address: 401 Edgewater Place, Wakefield, Massachusetts
01880.
o + ROBERT D. MCBRIDE. Director of the Company; Director and Chairman,
McLouth Steel; Director, Salem Corporation. Director, SMS/Concast,
Inc. (1983-1991). Age: 67 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: 81 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: 63 years old. Address: 321 Gross
Street, Pittsburgh, Pennsylvania 15224.
o + ROSLYN M. WATSON. Director of the Company; Principal, Watson Ventures,
Inc.; Director, American Express Centurion Bank; Director, Harvard
Community Health Plan, Inc.; Director, Massachusetts Electric Company;
Director, The Hymans Foundation, Inc., prior to February, 1993; Real
Estate Development Project Manager and Vice President, The Gunwyn
Company. Age: 45 years old. Address: 25 Braddock Park, Boston,
Massachusetts 02116-5816.
# MARIE E. CONNOLLY. President and Treasurer of the Company, 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). Age: 37 years old.
Address: One Exchange Place, Boston, Massachusetts 02109.
# FREDERICK C. DEY. Vice President of the Company, 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). Age: 33 years old. Address: Premier Mutual Fund
Services, Inc., One Exchange Place, Boston, Massachusetts 02109.
# ERIC B. FISCHMAN. Vice President of the Company, 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). Age: 31 years old. Address: Premier Mutual Fund
Services, Inc., 200 Park Avenue, New York, New York 10166.
RICHARD W. HEALEY. Vice President of the Company, 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). Age: 41 years old. Address: One Exchange Place, Boston,
Massachusetts 02109.
# JOHN E. PELLETIER. Vice President and Secretary of the Company, 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). Age: 31 years old. 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
________________.
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, subsidiary or affiliate thereof)
serves as an officer or Director of the Company. The Dreyfus/Laurel Funds
pay each Director/Trustee who is not an "interested person" of the Company
(as defined in the 1940 Act), $27,000 per annum (and an additional $75,000
for the Chairman of the Board of Directors/Trustees of the Dreyfus/Laurel
Funds). In addition, the Dreyfus/Laurel Funds pay each Director/Trustee
who is not an "interested person" of the Company (as defined in the 1940
Act), $1,000 per joint Dreyfus/Laurel Funds Board meeting attended, plus
$750 per joint Dreyfus/Laurel Funds Audit Committee meeting attended, and
reimburses each Director/Trustee who is not an "interested person" of the
Company (as defined in the 1940 Act), for travel and out-of-pocket
expenses.
For the fiscal year ended October 31, 1995, the aggregate amount of
fees and expenses received by each Director from the Company and all other
funds in the Dreyfus Family of Funds for which such person is a Board
member were as follows:
<TABLE>
<CAPTION>
Total
Pension or 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 M. Adams $26,662 None None $ 34,500
Francis P. Brennan* 84,914 None None 110,500
Joseph S. DiMartino** None None None $445,000**
James M. Fitzgibbons 25,887 None None 33,500
J. Tomlinson Fort** None None None None
Arthur L. Goeschel 26,835 None None 35,500
Kenneth A. Himmel 24,543 None None 31,750
Arch S. Jeffery** None None None None
Stephen J. Lockwood 25,318 None None 32,750
Robert D. McBride 26,835 None None 35,500
John L. Propst 26,835 None None 35,500
John J. Sciullo 26,662 None None 34,500
Roslyn M. Watson 26,060 None None 34,550
# Amount does not include reimbursed expenses for attending Board meetings, which
amounted to $11,113 for the Company.
* Compensation of Francis Brennan includes $75,000 paid by the Dreyfus/Laurel Funds to be
Chairman of the Board.
** Joseph S. DiMartino, J. Tomlinson Fort and Arch S. Jeffery are paid directly by
Dreyfus for serving as Board members of the Company and the funds in the Dreyfus/Laurel
Funds. For the fiscal year ended October 31, 1995, the aggregate amount of fees and
expenses received by Joseph DiMartino, J. Tomlinson Fort and Arch S. Jeffery from Dreyfus
for serving as a Board member of the Company were $18,214, $26,835 and $26,835,
respectively, and for serving as a Board member of all funds in the Dreyfus/Laurel Funds
(including the Company) were $23,500, $35,500 and $35,500, respectively. In addition,
Dreyfus reimbursed Messrs. DiMartino, Fort and Jeffery a total of $2,664 for expenses
attributable to the Company's Board meetings.
</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 (the "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 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; Christopher M. Condron, President, Chief
Operating Officer and a director, Stephen E. Canter, Vice Chairman, Chief
Investment Officer and a director; Lawrence S. Kash, Vice Chairman-
Distribution and a director; Philip L. Toia, Vice Chairman-Operations and
Administration; Daniel C. Maclean, Vice President and General Counsel;
Barbara E. Casey, Vice President-Dreyfus President-Dreyfus Retirement
Services; Diane M. Coffey, Vice President-Corporate Communications; Elie M.
Genadry, Vice President-Institutional Sales; Henry D. Gottman, Vice
President-Retail Sales and Service; William F. Glavin, Jr., Vice President-
Corporate Development; Andrew S. Wasser, Vice President-Information
Services; Mark N. Jacobs, Vice President-Fund Legal and Compliance and
Secretary; Jeffrey N. Nachman, Vice President-Mutual Fund Accounting;
Katherine C. Wickham, Vice President-Corporate Human Resources; Maurice
Bendrihem, Controller; Elvira Oslapas; Assistant Secretary; Mandell L.
Berman, Frank V. Cahouet, Alvin E. Friedman, Lawrence M. Greene, Julian M.
Smerling and David B. Truman, directors.
For the last two years, the Fund had the following expenses:
For the Fiscal Year or Period Ended October 31,
1995 1994(1)
Management fees (gross of waiver) $47,974 $7,144
Expense Reimbursement from
investment manager -- --
Management fees waived -- --
(1) The Fund commenced operations on September 2, 1994.
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. Dreyfus TeleTransfer purchase orders
may be made at any time. Purchase orders received by 4:00 P.M., New York
time, on any business day that Dreyfus Transfer, Inc., the Fund's transfer
and dividend disbursing agent (the "Transfer Agent"), and the New York
Stock Exchange ("NYSE") are open for business will be credited to the
shareholder's Fund account on the next bank business day following such
purchase order. Purchase orders made after 4:00 P.M., New York time, on
any business day the Transfer Agent and the NYSE are open for business, or
orders made on Saturday, Sunday or any Fund holiday (e.g., when the NYSE is
not open for business), will be credited to the shareholder's Fund account
on the second bank business day following such purchase order.
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 Only)."
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 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 fiscal year ended October 31, 1995, the Fund paid the
Distributor $49,974 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 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. 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."
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 redemptions 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.
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 Simplified Employee Pension
Plans ("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 SEP-IRA 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 by calling 1-800-645-6561. 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 Plan. The Automatic Withdrawal Plan permits an
investor with a $5,000 minimum account to request withdrawal of a specified
dollar amount (minimum of $50) on either a monthly or quarterly basis.
Withdrawal payments are the proceeds from sales of Fund shares, not the
yield on the shares. If withdrawal payments exceed reinvested dividends
and distributions, the investor's shares will be reduced and eventually may
be depleted. An Automatic Withdrawal Plan may be established by completing
the appropriate application available from the Distributor. 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 which 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 Day and
Christmas Day.
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 for treatment as a regulated investment company ("RIC")
under the Internal Revenue Code of 1986, as amended (the "Code"), 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) ("Distribution Requirement"), (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.
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, 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 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 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 certain foreign
currency denominated securities (including debt instruments and certain
financial forward, futures and option contracts and 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 of the Code. "Conversion transactions" are defined to include certain
forward, futures, option and straddle transactions, transactions marketed
or sold to produce capital gains, or transactions described in Treasury
regulations to be issued in the future.
Under Section 1256 of the Code, any gain or loss realized by 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 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 could need to distribute such income to satisfy the Distribution
Requirement and to avoid the 4% excise tax referred to in the Fund's
Prospectus under "Dividends, Other Distributions and Taxes." 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 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 it is deemed to be conducting
business, the Fund may be subject to the tax laws thereof. 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, such as a foreign shareholder entitled to claim the benefits of an
applicable tax treaty. 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).
Capital gains realized by foreign shareholders on the sale of Fund
shares and distributions to them of net capital gain (the excess of long-
term capital gain over short-term capital loss) 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. 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 a foreign
shareholder's ownership of the Fund's shares 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.
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
obligation 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 fiscal year ended October 31, 1995, the Fund paid brokerage
commissions amounting to $4,730.
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 2, 1994 (commencement
of operations) to October 31, 1994 and for the fiscal year ended October
31, 1995 were 5% and 37.57%, respectively.
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.
The Fund's total return for Investor and Class R shares for the
periods September 14, 1994 and September 2, 1994 to October 31, 1995 were
24.32% and 22.86%, respectively. 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.
Average annual total returns (expressed as a percentage) for Investor
shares of the Fund for the periods noted were:
Average Annual Total Return for the
Periods Ended October 31, 1995
1 Year 5 Years 10 Years Inception
Investor Shares 23.20 -- -- 21.25%
(9/14/94)
Inception date appears in parentheses following the average annual total
return since inception.
Average annual total returns (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, 1995
1 Year 5 Years 10 Years Inception
Class R Shares 23.48 -- -- (19.42%)
(9/02/94)
Inception date appears in parentheses following the Average 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, 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. Dreyfus Transfer, Inc., a wholly-owned subsidiary of
Dreyfus, is located at One American Express Plaza, Providence, Rhode Island
02703, and is the Fund's transfer and dividend disbursing agent. Under a
transfer agency agreement with the Fund, the Transfer Agent arranges for
the maintenance of shareholder account records for the Fund, the handling
of certain communication between shareholders and the Fund and the payment
of dividends and distributions payable by the Fund. For these services,
the Transfer Agent receives a monthly fee computed on the basis of the
number of shareholder accounts it maintains for the Fund during the month,
and is reimbursed for certain out-of-pocket expenses. Dreyfus Transfer,
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 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 LLP, 1800 Massachusetts Avenue, N.W., Second
Floor, Washington, D.C. 20036, has passed upon the legality of the shares
offered by the Prospectus and this Statement of Additional Information.
_________________, One Mellon Bank Center, Pittsburgh, PA 15218,
was appointed by the Directors to serve as the Fund's independent auditors
for the year ending October 31, 1996, 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 filed on behalf of the Fund.
FINANCIAL STATEMENTS
The financial statements for the fiscal year ended October 31, 1995,
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 SAI. The
financial statements for the 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 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 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.
DREYFUS INTERNATIONAL EQUITY ALLOCATION FUND
INVESTOR AND CLASS R SHARES
PART B
STATEMENT OF ADDITIONAL INFORMATION
MARCH 1, 1996
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus
of the Dreyfus International Equity Allocation Fund (formerly, the Laurel
International Equity Allocation Fund) (the "Fund"), dated March 1, 1996, as
it may be revised from time to time. The Fund is a separate, diversified
portfolio of The Dreyfus/Laurel Funds, Inc., an open-end 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 one of the
following numbers:
Call Toll Free 1-800-645-6561
In New York City -- Call 1-718-895-1206
On Long Island -- Call 516-794-5452
The Dreyfus Corporation ("Dreyfus" or the "Manager") serves as the
Fund's investment manager.
Premier Mutual Fund Services, Inc. ("Premier") is the distributor of
the Fund's shares.
TABLE OF CONTENTS
Page
Investment Objective and Management Policies. . . . . . . . . . . B-2
Management of the Fund. . . . . . . . . . . . . . . . . . . . . . B-17
Management Arrangements . . . . . . . . . . . . . . . . . . . . . B-23
Purchase of Fund Shares . . . . . . . . . . . . . . . . . . . . . B-24
Distribution Plan . . . . . . . . . . . . . . . . . . . . . . . . B-25
Redemption of Fund Shares . . . . . . . . . . . . . . . . . . . . B-26
Shareholder Services. . . . . . . . . . . . . . . . . . . . . . . B-28
Determination of Net Asset Value. . . . . . . . . . . . . . . . . B-31
Dividends, Other Distributions and Taxes. . . . . . . . . . . . . B-31
Portfolio Transactions. . . . . . . . . . . . . . . . . . . . . . B-36
Performance Information . . . . . . . . . . . . . . . . . . . . . B-38
Information about the Fund. . . . . . . . . . . . . . . . . . . . B-40
Custodian, Transfer and Dividend Disbursing Agent, Counsel
and Independent Auditors. . . . . . . . . . . . . . . . . . . . B-40
Financial Statements. . . . . . . . . . . . . . . . . . . . . . . B-41
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."
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) the 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.
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 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. 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 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 45 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 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
obligation from then-available cash flow, the sale of segregated
securities, the sale of other securities, and/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, the Manager or
the sub-adviser 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 Manager and the sub-adviser
consider all relevant factors and circumstances including the
creditworthiness of the borrower.
Derivative Instruments. As discussed in the Prospectus, the Fund may
purchase and sell various financial instruments ("Derivative Instruments"),
such as financial futures contracts (such as interest rate, index and
foreign currency futures contracts), options (such as options on
securities, indices, foreign currencies and futures contracts), forward
currency contracts and interest rate, equity index and currency swaps,
caps, collars and floors. The index Derivative Instruments the Fund may
use may be based on indices of U.S. or foreign equity or debt securities.
These Derivative Instruments may be used, for example, to preserve a return
or spread, to lock in unrealized market value gains or losses, to
facilitate or substitute for the sale or purchase of securities, to adjust
its risk exposure relative to the Benchmark, or to alter the exposure of a
particular investment or portion of the Fund's portfolio to fluctuations in
interest rates or currency rates.
Hedging strategies can be broadly categorized as "short hedges" and
"long hedges." A short hedge is a purchase or sale of a Derivative
Instrument intended partially or fully to offset potential declines in the
value of one or more investments held in the Fund's portfolio. Thus, in a
short hedge the Fund takes a position in a Derivative Instrument whose
price is expected to move in the opposite direction of the price of the
investment being hedged.
Conversely, a long hedge is a purchase or sale of a Derivative
Instrument intended partially or fully to offset potential increases in the
acquisition cost of one or more investments that the Fund intends to
acquire. Thus, in a long hedge the Fund takes a position in a Derivative
Instrument whose price is expected to move in the same direction as the
price of the prospective investment being hedged. A long hedge is
sometimes referred to as an anticipatory hedge. In an anticipatory hedge
transaction, the Fund does not own a corresponding security and, therefore,
the transaction does not relate to a security the Fund owns. Rather, it
relates to a security that the Fund intends to acquire. If the Fund does
not complete the hedge by purchasing the security it anticipated
purchasing, the effect on the Fund's portfolio is the same as if the
transaction were entered into for speculative purposes.
Derivative Instruments on securities generally are used to hedge
against price movements in one or more particular securities positions that
the Fund owns or intends to acquire. Derivative Instruments on indices, in
contrast, generally are used to attempt to hedge against price movements in
market sectors in which the Fund has invested or expects to invest.
Derivative Instruments on debt securities may be used to hedge either
individual securities or broad debt market sectors.
The use of Derivative Instruments is subject to applicable regulations
of the Securities and Exchange Commission ("SEC"), the several options and
futures exchanges upon which they are traded, the Commodity Futures Trading
Commission ("CFTC") and various state regulatory authorities. In addition,
the Fund's ability to use Derivative Instruments will be limited by tax
considerations. See "Dividends, Other Distributions and Taxes."
In addition to the instruments, strategies and risks described below
and in the Prospectus, CCF S.A.M. and Dreyfus expect to discover additional
opportunities in connection with other Derivative Instruments. These new
opportunities may become available as CCF S.A.M. or Dreyfus develop new
techniques, as regulatory authorities broaden the range of permitted
transactions and as new techniques are developed. CCF S.A.M. and Dreyfus
may utilize these opportunities to the extent that they are consistent with
the Fund's investment objective, and permitted by the Fund's investment
policies and applicable regulatory authorities.
Special Risks. The use of Derivative Instruments involves special
considerations and risks, certain of which are described below. Risks
pertaining to particular Derivative Instruments are described in the
sections that follow.
(1). Successful use of most Derivative Instruments depends upon the
ability of CCF S.A.M. or Dreyfus to predict movements of the overall
securities, currency and other markets, which requires different skills
than predicting changes in the prices of individual securities. There can
be no assurance that any particular strategy will succeed.
(2). There might be imperfect correlation, or even no correlation,
between price movements of a Derivative Instrument and price movements of
the investments being hedged. For example, if the value of a Derivative
Instrument used in a short hedge increased by less than the decline in
value of the hedged investment, the hedge would not be fully successful.
Such a lack of correlation might occur due to factors unrelated to the
value of the investments being hedged, such as speculative or other
pressures on the markets in which Derivative Instruments are traded. The
effectiveness of hedges using Derivative Instruments on indices will depend
on the degree of correlation between price movements in the index and price
movements in the securities being hedged.
Because there are a limited number of types of exchange-traded options
and futures contracts, it is likely that the standardized contracts
available will not match the Fund's current or anticipated investments
exactly. The Fund may invest in options and futures contracts based on
securities with different issuers, maturities, or other characteristics
from the securities in which it typically invests, which involves a risk
that the options or futures position will not track the performance of the
Fund's other investments.
Options and futures prices can also diverge from the prices of their
underlying instruments, even if the underlying instruments match the Fund's
investments well. Options and futures prices are affected by such factors
as current and anticipated short-term interest rates, changes in volatility
of the underlying instrument, and the time remaining until expiration of
the contract, which may not affect security prices the same way. Imperfect
correlation may also result from differing levels of demand in the options
and futures markets and the securities markets, from structural differences
in how options and futures and securities are traded, or from imposition of
daily price fluctuation limits or trading halts. The Fund may purchase or
sell options and futures contracts with a greater or lesser value than the
securities it wishes to hedge or intends to purchase in order to attempt to
compensate for differences in volatility between the contract and the
securities, although this may not be successful in all cases. If price
changes in the Fund's options or futures positions are poorly correlated
with its other investments, the positions may fail to produce anticipated
gains or result in losses that are not offset by gains in other
investments.
(3). If successful, the above-discussed strategies can reduce risk of
loss by wholly or partially offsetting the negative effect of unfavorable
price movements. However, such strategies can also reduce opportunity for
gain by offsetting the positive effect of favorable price movements. For
example, if the Fund entered into a short hedge because CCF S.A.M.
projected a decline in the price of a security in the Fund's portfolio, and
the price of that security increased instead, the gain from that increase
might be wholly or partially offset by a decline in the price of the
Derivative Instrument. Moreover, if the price of the Derivative Instrument
declined by more than the increase in the price of the security, the Fund
could suffer a loss. In either such case, the Fund would have been in a
better position had it not attempted to hedge at all.
(4). As described below, the Fund might be required to maintain assets
as "cover," maintain segregated accounts or make margin payments when it
takes positions in Derivative Instruments involving obligations to third
parties (i.e., Derivative Instruments other than purchased options). If
the Fund were unable to close out its positions in such Derivative
Instruments, it might be required to continue to maintain such assets or
accounts or make such payments until the position expired or matured.
These requirements might impair the Fund's ability to sell a portfolio
security or make an investment at a time when it would otherwise be
favorable to do so, or require that the Fund sell a portfolio security at a
disadvantageous time. The Fund's ability to close out a position in a
Derivative Instrument prior to expiration or maturity depends on the
existence of a liquid secondary market or, in the absence of such a market,
the ability and willingness of the other party to the transaction
("counterparty") to enter into a transaction closing out the position.
Therefore, there is no assurance that any position can be closed out at a
time and price that is favorable to the Fund.
Cover for Derivative Instruments. Transactions using Derivative
Instruments may 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, futures, options, currencies
or forward contracts or (2) cash and short-term liquid debt securities with
a value sufficient at all times to cover its potential obligations to the
extent not covered as provided in (1) above. The Fund will comply with SEC
guidelines regarding cover for Derivative Instruments and will, 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.
Assets used as cover or held in a segregated account cannot be sold
while the position in the corresponding Derivative Instrument is open,
unless they are replaced with other appropriate assets. As a result, the
commitment of a large portion of the Fund's assets to cover or segregated
accounts could impede portfolio management or the Fund's ability to meet
redemption requests or other current obligations.
Options. A call option gives the purchaser the right to buy, and
obligates the writer to sell, the underlying investment at the agreed upon
exercise price during the option period. A put option gives the purchaser
the right to sell, and obligates the writer to buy, the underlying
investment at the agreed upon exercise price during the option period. A
purchaser of an option pays an amount, known as the premium, to the option
writer in exchange for rights under the option contract.
Options on indices are similar to options on securities or currencies
except that all settlements are in cash and gain or loss depends on changes
in the index in question rather than on price movements in individual
securities or currencies.
The purchase of call options can serve as a long hedge, and the
purchase of put options can serve as a short hedge. Writing put or call
options can enable the Fund to enhance income or yield by reason of the
premiums paid by the purchasers of such options. However, if the market
price of the security or other instrument underlying a put option declines
to less than the exercise price on the option, minus the premium received,
the Fund would expect to suffer a loss.
Writing call options can also serve as a limited short hedge because
declines in the value of the hedged investment would be offset to the
extent of the premium received for writing the option. However, if the
investment appreciates to a price higher than the exercise price of the
call option, it can be expected that the option will be exercised and the
Fund will be obligated to sell the investment at less than its market
value.
Writing put options can serve as a limited long hedge because
increases in the value of the hedged investment would be offset to the
extent of the premium received for writing the option. However, if the
investment depreciates to a price lower than the exercise price of the put
option, it can be expected that the put option will be exercised and the
Fund will be obligated to purchase the investment at more than its market
value.
The value of an option position will reflect, among other things, the
current market value of the underlying investment, the time remaining until
expiration, the relationship of the exercise price to the market price of
the underlying investment, the historical price volatility of the
underlying investment and general market conditions. Options that expire
unexercised have no value.
The Fund may effectively terminate its right or obligation under an
option by entering into a closing transaction. For example, the Fund may
terminate its obligation under a call or put option that it had written by
purchasing an identical call or put option; this is known as a closing
purchase transaction. Conversely, the Fund may terminate a position in a
put or call option it had purchased by writing an identical put or call
option; this is known as a closing sale transaction. Closing transactions
permit the Fund to realize profits or limit losses on an option position
prior to its exercise or expiration.
The Fund may purchase and sell both exchange-traded and over-the-
counter ("OTC") options. Exchange-traded options in the United States are
issued by a clearing organization that, in effect, guarantees completion of
every exchange-traded option transaction. In contrast, OTC options are
contracts between the Fund and its counterparty (usually a securities
dealer or a bank) with no clearing organization guarantee. Thus, when the
Fund purchases an OTC option, it relies on the counterparty from whom it
purchased the option to make or take delivery of the underlying investment
upon exercise of the option. Failure by the counterparty to do so would
result in the loss of any premium paid by the Fund as well as the loss of
any expected benefit of the transaction. The Fund will enter into only
those option contracts that are listed on a national securities or
commodities exchange or traded in the OTC market for which there appears to
be a liquid secondary 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 the
current market value of the underlying securities and the option's strike
price). The repurchase price with primary dealers is typically a formula
price that is generally based on a multiple of the premium received for the
option plus the amount by which the option is "in-the-money."
Generally, the OTC debt and foreign currency options used by the Fund
are European-style options. This means that the option is only exercisable
immediately prior to its expiration. This is in contrast to American-style
options, which are exercisable at any time prior to the expiration date of
the option.
The Fund's ability to establish and close out positions in exchange-
listed options depends on the existence of a liquid market. However, there
can be no assurance that such a market will exist at any particular time.
Closing transactions can be made for OTC options only by negotiating
directly with the counterparty, or by a transaction in the secondary market
if any such market exists. Although the Fund will enter into OTC options
only with major dealers in unlisted options, there is no assurance that the
Fund will in fact be able to close out an OTC option position at a
favorable price prior to expiration. In the event of insolvency of the
counterparty, the Fund might be unable to close out an OTC option position
at any time prior to its expiration.
If the Fund were unable to effect a closing transaction for an option
it had purchased, it would have to exercise the option to realize any
profit. The inability to enter into a closing purchase transaction for a
covered call option written by the Fund could cause material losses because
the Fund would be unable to sell the investment used as cover for the
written option until the option expires or is exercised.
The Fund may write only covered call options on securities. 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.
Futures Contracts and Options on Futures Contracts. When the Fund
purchases a futures contract, it incurs an obligation to take delivery of a
specified amount of the obligation underlying the futures contract at a
specified time in the future for a specified price. When the Fund sells a
futures contract, it incurs an obligation to deliver a specified amount of
the obligation underlying the futures contract at a specified time in the
future for an agreed upon price. With respect to index futures, no
physical transfer of the securities underlying the index is made. Rather,
the parties settle by exchanging in cash an amount based on the difference
between the contract price and the closing value of the index on the
settlement date.
When the Fund writes an option on a futures contract, it becomes
obligated, in return for the premium paid, to assume a position in a
futures contract at a specified exercise price at any time during the term
of the option. If the Fund has written a call, it assumes a short futures
position. If the Fund has written a put, it assumes a long futures
position. When the Fund purchases an option on a futures contract, it
acquires the right, in return for the premium it pays, to assume a position
in a futures contract (a long position if the option is a call and a short
position if the option is a put).
The purchase of futures or call options on futures can serve as a long
hedge, and the sale of futures or the purchase of put options on futures
can serve as a short hedge. Writing call options on futures contracts can
serve as a limited short hedge, using a strategy similar to that used for
writing call options on securities or indices. Similarly, writing put
options on futures contracts can serve as a limited long hedge.
No price is paid upon entering into a futures contract. Instead, at
the inception of a futures contract the Fund is required to deposit
"initial margin" consisting of cash or U.S. Government securities in an
amount generally equal to 10% or less of the contract value. Margin must
also be deposited when writing a call or put option on a futures contract,
in accordance with applicable exchange rules. Unlike margin in securities
transactions, initial margin on futures contracts does not represent a
borrowing, but rather is in the nature of a performance bond or good-faith
deposit that is returned to the Fund at the termination of the transaction
if all contractual obligations have been satisfied. Under certain
circumstances, such as periods of high volatility, the Fund may be required
by an exchange to increase the level of its initial margin payment.
Subsequent "variation margin" payments are made to and from the
futures broker daily as the value of the futures position varies, a process
known as "marking-to-market." Variation margin does not involve borrowing,
but rather represents a daily settlement of the Fund's obligations to or
from a futures broker. When the Fund purchases an option on a future, the
premium paid plus transaction costs is all that is at risk. In contrast,
when the Fund purchases or sells a futures contract or writes a call or put
option thereon, it is subject to daily variation margin calls that could be
substantial in the event of adverse price movements. If the Fund has
insufficient cash to meet daily variation margin requirements, it might
need to sell securities at a time when such sales are disadvantageous.
Purchasers and sellers of futures contracts and options on futures can
enter into offsetting closing transactions, similar to closing transactions
on options, by selling or purchasing, respectively, an instrument identical
to the instrument purchased or sold. Positions in futures and options on
futures may be closed only on an exchange or board of trade that provides a
secondary market. Although the Fund intends to enter into futures and
options on futures only on exchanges or boards of trade where there appears
to be a liquid secondary market, there can be no assurance that such a
market will exist for a particular contract at a particular time. In such
event, it may not be possible to close a futures contract or options
position.
Under certain circumstances, futures exchanges may establish daily
limits on the amount that the price of a futures or an option on a futures
contract can vary from the previous day's settlement price; once that limit
is reached, no trades may be made that day at a price beyond the limit.
Daily price limits do not limit potential losses because prices could move
to the daily limit for several consecutive days with little or no trading,
thereby preventing liquidation of unfavorable positions.
If the Fund were unable to liquidate a futures or options on futures
position due to the absence of a liquid secondary market or the imposition
of price limits, it could incur substantial losses. The Fund would
continue to be subject to market risk with respect to the position. In
addition, except in the case of purchased options, the Fund would continue
to be required to make daily variation margin payments and might be
required to maintain the position being hedged by the future or option or
to maintain cash or securities in a segregated account.
To the extent that the Fund enters into futures contracts, options on
futures contracts, or options on foreign currencies traded on an exchange
regulated by the CFTC, in each case other than for bona fide hedging
purposes (as defined by the CFTC), the aggregate initial margin and
premiums required to establish those positions (excluding the amount by
which options are "in-the-money" at the time of purchase) will not exceed
5% of the liquidation value of the Fund's portfolio, after taking into
account unrealized profits and unrealized losses on any contracts the Fund
has entered into. This policy does not limit to 5% the percentage of the
Fund's assets that are at risk in futures contracts and options on futures
contracts.
Foreign Currency Strategies - Special Considerations. The Fund may
use Derivative Instruments on foreign currencies to hedge against movements
in the values of the foreign currencies in which the Fund's securities are
denominated. Such currency hedges can protect against price movements in a
security that the Fund owns or intends to acquire that are attributable to
changes in the value of the currency in which it is denominated. Such
hedges do not, however, protect against price movements in the securities
that are attributable to other causes.
The Fund might seek to hedge against changes in the value of
particular currency when no Derivative Instruments on that currency are
available or such Derivative Instruments are more expensive than certain
other Derivative Instruments. In such cases, the Fund may hedge against
price movements in that currency by entering into transactions using
Derivative Instruments on another currency or a basket of currencies, the
values of which CCF S.A.M. or Dreyfus believes will have a high degree of
positive correlation to the value of the currency being hedged. The risk
that movements in the price of the Derivative Instrument will not correlate
perfectly with movements in the price of the currency being hedged is
magnified when this strategy is used.
The value of Derivative Instruments on foreign currencies depends on
the value of the underlying currency relative to the U.S. dollar. Because
foreign currency transactions occurring in the interbank market might
involve substantially larger amounts than those involved in the use of
foreign currency Derivative Instruments, the Fund could be disadvantaged by
having to deal in the odd lot market (generally consisting of transactions
of less than $1 million) for the underlying foreign currencies at prices
that are less favorable than for round lots.
There is no systematic reporting of last sale information for foreign
currencies or any regulatory requirement that quotations available through
dealers or other market sources be firm or revised on a timely basis.
Quotation information generally is representative of very large
transactions in the interbank market and thus might not reflect odd-lot
transactions where rates might be less favorable. The interbank market in
foreign currencies is a global, round-the-clock market.
Settlement of transactions involving foreign currencies might be
required to take place within the country issuing the underlying currency.
Thus, the Fund might be required to accept or make delivery of the
underlying foreign currency in accordance with any U.S. or foreign
regulations regarding the maintenance of foreign banking arrangements by
U.S. residents and might be required to pay any fees, taxes and charges
associated with such delivery assessed in the issuing country.
Forward Contracts. A forward foreign currency exchange contract
("forward contract") is a contract to purchase or sell a currency at a
future date. The two parties to the contract set the number of days and
the price. Forward contracts are used as a hedge against future movements
in foreign exchange rates. The Fund may enter into forward contracts to
purchase or sell foreign currencies for a fixed amount of U.S. dollars or
other foreign currency.
Forward contracts may serve as long hedges -- for example, the Fund
may purchase a forward contract to lock in the U.S. dollar price of a
security denominated in a foreign currency that the Fund intends to
acquire. Forward contracts may also serve as short hedges -- for example,
the Fund may sell a forward contract to lock in the U.S. dollar equivalent
of the proceeds from the anticipated sale of a security denominated in a
foreign currency or from anticipated dividend or interest payments
denominated in a foreign currency. CCF S.A.M. may seek to hedge against
changes in the value of a particular currency by using forward contracts on
another foreign currency or basket of currencies, the value of which CCF
S.A.M. believes will bear a positive correlation to the value of the
currency being hedged.
The cost to the Fund of engaging in forward contracts varies with
factors such as the currency involved, the length of the contract period
and the market conditions then prevailing. Because forward contracts are
usually entered into a principal basis, no fees or commissions are
involved. When the Fund enters into a forward contract, it relies on the
counterparty to make or take delivery of the underlying currency at the
maturity of the contract. Failure by the counterparty to do so would
result in the loss of any expected benefit of the transaction.
Buyers and sellers of forward contracts can enter into offsetting
closing transactions by selling or purchasing, respectively, an instrument
identical to the instrument purchased or sold. Secondary markets generally
do not exist for forward contracts, with the result that closing
transactions generally can be made for forward contracts only by
negotiating directly with the counterparty. Thus, there can be no
assurance that the Fund will in fact be able to close out a forward
contract at a favorable price prior to maturity. In addition, in the event
of insolvency of the counterparty, the Fund might be unable to close out a
forward contract at any time prior to maturity. In either event, the Fund
would continue to be subject to market risk with respect to the position,
and would continue to be required to maintain a position in the securities
or currencies that are the subject of the hedge or to maintain cash or
securities in a segregated account.
The precise matching of forward currency contract amounts and the
value of the securities involved generally will not be possible because the
value of such securities measured in the foreign currency will change after
the forward contract has been established. Thus, the Fund might need to
purchase or sell foreign currencies in the spot (cash) market to the extent
such foreign currencies are not covered by forward contracts. The
projection of short-term currency market movements is extremely difficult,
and the successful execution of a short-term hedging strategy is highly
uncertain.
Swaps, Caps, Collars and Floors. Swap agreements, including interest
rate, equity index and currency swaps, caps, collars and floors, may be
individually negotiated and structured to include exposure to a variety of
different types of investments or market factors. Swaps involve two
parties exchanging a series of cash flows at specified intervals. In the
case of an interest rate swap, the parties exchange interest payments based
on an agreed upon principal amount (referred to as the "notional principal
amount"). Under the most basic scenario, Party A would pay a fixed rate on
the notional principal amount to Party B, which would pay a floating rate
on the same notional principal amount to Party A. Depending on their
structure, swap agreements may increase or decrease the Fund's exposure to
long or short-term interest rates (in the U.S. or abroad), foreign currency
values, mortgage securities, corporate borrowing rates, or other factors.
Swap agreements can take many different forms and are known by a variety of
names.
In a typical cap or floor agreement, one party agrees to make payments
only under specified circumstances, usually in return for payment of a fee
by the other party. For example, the buyer of an interest rate cap obtains
the right to receive payments to the extent that a specified interest rate
exceeds an agreed-upon level, while the seller of an interest rate floor is
obligated to make payments to the extent that a specified interest rate
falls below an agreed-upon level. An interest rate collar combines
elements of buying a cap and selling a floor.
The Fund will set aside cash or appropriate liquid assets to cover its
current obligations under swap transactions. If the Fund enters into a
swap agreement on a net basis (that is, the two payment streams are netted
out, with the Fund receiving or paying, as the case may be, only the net
amount of the two payments), the Fund will maintain cash or liquid assets
with a daily value at least equal to the excess, if any, of the Fund's
accrued obligations under the swap agreement over the accrued amount the
Fund is entitled to receive under the agreement. If the Fund enters into a
swap agreement on other than a net basis or writes a cap, collar or floor,
it will maintain cash or liquid assets with a value equal to the full
amount of the Fund's accrued obligations under the agreement.
The most important factor in the performance of swap agreements is the
change in the specific interest rate, currency or other factor(s) that
determine the amounts of payments due to and from the Fund. If a swap
agreement calls for payments by the Fund, the Fund must be prepared to make
such payments when due. In addition, if the counterparty's
creditworthiness declines, the value of a swap agreement would likely
decline, potentially resulting in losses.
The Fund will enter into swaps, caps, collars and floors only with
banks and recognized securities dealers believed by CCF S.A.M. or Dreyfus
to present minimal credit risks in accordance with guidelines established
by the Board. If there is a default by the other party to such a
transaction, the Fund will have to rely on its contractual remedies (which
may be limited by bankruptcy, insolvency or similar laws) pursuant to the
agreement relating to the transaction.
The Fund understands that it is the position of the staff of the SEC
that assets involved in swap transactions are illiquid and, therefore, are
subject to the limitations on illiquid investments.
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 Investment
Company Act of 1940, as amended (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 objective, 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 and options 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 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, 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 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 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 be extent otherwise permitted by
the 1940 Act.
8. The Fund shall not purchase any security while borrowings representing
more than 5% of 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
Stock Exchange ("NYSE") 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 future contracts and related options.
11. The 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, the Fund will not invest more the 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.
MANAGEMENT OF THE FUND
PRINCIPAL SHAREHOLDERS
The following shareholder(s) owned 5% or more of the outstanding Class
R shares of the Fund at ________________:
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, as well as the Manager's 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 the Manager 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 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 1940 Act, is indicated by an asterisk (*). Each of the
Directors also serves as a Trustee of The Dreyfus/Laurel Funds Trust and
The Dreyfus/Laurel Tax-Free Municipal Funds (collectively, with the
Company, the "Dreyfus/Laurel Funds" and Mr. DiMartino serves as a Board
member for 93 other funds advised by Dreyfus).
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: 80 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.
Age: 78 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 and a director of Dreyfus and
Executive Vice President of Dreyfus Service Corporation, a wholly
owned subsidiary of Dreyfus. From August 1994 to December 31, 1994,
he was a director of Mellon Bank Corporation. He is Chairman of the
Board of Noel Group Inc., a venture capital company; a trustee of
Bucknell University and a director of the Muscular Dystrophy
Association, Staffing Resources, Inc., Health Plans Services
Corporation, Belding Heminway, Inc., Curtis Industries, Inc., Simmons
Outdoor Corporation. Age: 52 years old. Address: 200 Park Avenue,
New York, New York 10166.
o + JAMES M. FITZGIBBONS. Director of the 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: 60 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; 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. Since May 1991, Mr. Goeschel has served as
Trustee of Sewickley Valley Hospital. Age: 73 years old. Address:
Way Hallow Road and Woodland Road, Sewickley, Pennsylvania 15143.
o + KENNETH A. HIMMEL. Director of the Company; 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,
Franklin Federal Partners. Age: 49 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: 48
years old. Address: 401 Edgewater Place, Wakefield, Massachusetts
01880.
o + ROBERT D. MCBRIDE. Director of the Company; Director and Chairman,
McLouth Steel; Director, Salem Corporation. Director, SMS/Concast,
Inc. (1983-1991). Age: 67 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: 81 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: 63 years old. Address: 321 Gross
Street, Pittsburgh, Pennsylvania 15224.
+ ROSLYN M. WATSON. Director of the Company; Principal, Watson Ventures,
Inc. Director, American Express Centurion Bank; Director, Harvard
Community Health Plan, Inc., Director, Massachusetts Electric company;
Director, The Hyman Foundation, Inc., prior to February, 1993, Real
Estate Development Project Manager and Vice President, The Gunwyn
Company. Age: 45 years old. Address: 25 Braddock Park, Boston,
Massachusetts 02116-5816.
# MARIE E. CONNOLLY. President and Treasurer of the Company; 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). Age: 37 years old.
Address: One Exchange Place, Boston, Massachusetts 02109.
# FREDERICK C. DEY. Vice President of the Company, 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); Fund raising Manager, Swim Across America
(October 1993 to August 1994); General Manager, Spring Industries
(August 1988 to October 1993). Age: 33 years old. Address: Premier
Mutual Fund Services, Inc. One Exchange Place, Boston Massachusetts,
02109.
# ERIC B. FISCHMAN. Vice President of the Company, 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). Age: 31 years old. Address: Premier Mutual Fund
Services, Inc., 200 Park Avenue, New York, New York 10166.
RICHARD W. HEALEY. Vice President of the Company, 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). Age: 41 years old. Address: One Exchange Place, Boston,
Massachusetts 02109.
# JOHN E. PELLETIER. Vice President and Secretary of the Company, 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). Age: 31 years old. 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 The Dreyfus Corporation.
The officers and Directors of the Company as a group owned
beneficially less than 1% of the Fund's total shares outstanding as of
________________.
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, subsidiary or affiliate thereof)
serves as an officer or Director of the Company. The Dreyfus/Laurel Funds
pay each Director/Trustee who is not an "interested person" of the Company
(as defined in the 1940 Act), $27,000 per annum (and an additional $75,000
for the Chairman of the Board of Directors/Trustees of the Dreyfus/Laurel
Funds). In addition, the Dreyfus/Laurel Funds pay each Director/Trustee
who is not an "interested person" of the Company (as defined in the 1940
Act), $1,000 per joint Dreyfus/Laurel Funds Board meeting attended, plus
$750 per joint Dreyfus/Laurel Funds Audit Committee meeting attended, and
reimburses each Director/Trustee who is not an "interested person" of the
Company (as defined in the 1940 Act), for travel and out-of-pocket
expenses.
<TABLE>
<CAPTION>
For the fiscal year ended October 31, 1995, the aggregate amount of
fees and expenses received by each Director from the Company and all other
funds in the Dreyfus Family of Funds for which such person is a Board
member were as follows:
Total
Pension or 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 M. Adams $26,662 None None $ 34,500
Francis P. Brennan* 84,914 None None 110,500
Joseph S. DiMartino** None None None $445,000**
James M. Fitzgibbons 25,887 None None 33,500
J. Tomlinson Fort** None None None None
Arthur L. Goeschel 26,835 None None 35,500
Kenneth A. Himmel 24,543 None None 31,750
Arch S. Jeffery** None None None None
Stephen J. Lockwood 25,318 None None 32,750
Robert D. McBride 26,835 None None 35,500
John L. Propst 26,835 None None 35,500
John J. Sciullo 26,662 None None 34,500
Roslyn M. Watson 26,060 None None 34,550
# Amount does not include reimbursed expenses for attending Board meetings, which
amounted to $11,113 for the Company.
* Compensation of Francis Brennan includes $75,000 paid by the Dreyfus/Laurel Funds to be
Chairman of the Board.
** Joseph S. DiMartino, J. Tomlinson Fort and Arch S. Jeffery are paid directly by Dreyfus
for serving as Board members of the Company and the funds in the Dreyfus/Laurel Funds.
For the fiscal year ended October 31, 1995, the aggregate amount of fees and expenses
received by Joseph DiMartino, J. Tomlinson Fort and Arch S. Jeffery from Dreyfus for
serving as a Board member of the Company were $18,214, $26,835 and $26,835,
respectively, and for serving as a Board member of all funds in the Dreyfus/Laurel
Funds (including the Company) were $23,500, $35,500 and $35,500, respectively. In
addition, Dreyfus reimbursed Messrs. DiMartino, Fort and Jeffery a total of $2,664 for
expenses attributable to the Company's Board meetings.
</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 (the "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 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.
S.A.M. Finance, S.A. ("CCF SAM"), 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 SAM and Mellon Bank
dated July 18, 1994 (the "Sub-Advisory Agreement"), transferred to the
Manager effective as of October 17, 1994. 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 Fund's assets in accordance with its investment
objective, policies and limitations. The Manager has overall
responsibility for general management of the Fund, and for compliance with
applicable law and the Fund's investment objective, policies and
limitations. The Manager also directs investments of all assets not
assigned to CCF SAM. For these services, the 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 Company and either a majority of all Directors or a majority
of the shareholders of the Fund approve the continuance. The Company 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 the Fund on 60 days'
written notice to the Manager or CCF SAM. The Manager may terminate the
Management Agreement upon written notice to the Company; 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.
The following persons are officers and/or directors of the Manager:
Howard Stein, Chairman of the Board and Chief Executive Officer; W. Keith
Smith, Vice Chairman of the Board; Christopher M. Condron, President, Chief
Operating Officer and a director; Stephen E. Canter, Vice Chairman, Chief
Investment Officer and a director; Lawrence S. Kash, Vice Chairman-
Distribution and a director; Philip L. Toia, Vice Chairman-Operations and
Administration; Daniel C. Maclean, Vice President and General Counsel;
Barbara E. Casey, Vice President-Retirement Services; Diane M. Coffey, Vice
President-Corporate Communications; Elie M. Genadry, Vice President-
Institutional Sales; Henry D. Gottman, Vice President-Retail Sales and
Service; William F. Glavin, Jr., Vice President-Corporate Development;
Andrew S. Wasser, Vice President-Information Services; Mark N. Jacobs, Vice
President-Fund Legal and Compliance and Secretary; Jeffrey N. Nachman, Vice
President-Mutual Fund Accounting; Katherine C. Wickham, Vice President-
Corporate Human Resources; Maurice Bendrihem, Controller; Elvira Oslapas,
Assistant Secretary; Mandell L. Berman, Frank V. Cahouet, Alvin E.
Friedman, Lawrence M. Greene, Julian M. Smerling and David B. Truman,
directors.
For the period from August 12, 1994 (commencement of operations)
through October 31, 1994, and for the fiscal year ended October 31, 1995,
the Fund has had the following expenses:
For the Fiscal Year Ended October 31,
1995 1994
Management fees (gross of waiver) $249,080 $29,370
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. Dreyfus TeleTransfer purchase orders
may be made at any time. Purchase orders received by 4:00 P.M., New York
time, on any business day that Dreyfus Transfer, Inc., the Fund's transfer
and dividend disbursing agent (the "Transfer Agent"), and the NYSE are open
for business will be credited to the shareholder's Fund Account on the next
bank business day following such purchase order. Purchase orders made
after 4:00 P.M., New York time, on any business day the Transfer Agent and
the NYSE are open for business, or orders made on Saturday, Sunday or any
Fund holiday (e.g., when the NYSE is not open for business), will be
credited to the shareholder's Fund account on the second bank business day
following such purchase order.
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 Only)."
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-l 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 Agents pursuant to the Plan.
Under the Plan, the Fund may spend annually up to 0.25% of the 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 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 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
the such class of the Fund.
For the fiscal year ended October 31, 1995, the Fund paid $5,612
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 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 contracting a TRT Cables operator at 1-800-
654-7171, toll free. Investors should advise the operator that the above
transmittal code must be used and should also inform the operator of the
Transfer Agent's answer back sign.
To change the commercial bank or account designated to receive
redemption proceeds, a written request must be sent to the Transfer Agent.
This request must be signed by each shareholder, with each signature
guaranteed as described below under "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. 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."
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 the Manager. 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.
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 Simplified Employee Pension
Plans ("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 SEP-IRA 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 by calling 1-800-645-6551. 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 Plan. The Automatic Withdrawal Plan permits an
investor with a $5,000 minimum account to request withdrawal of a specified
dollar amount (minimum of $50) on either a monthly or quarterly basis.
Withdrawal payments are the proceeds from sales of Fund shares, not the
yield on the shares. If withdrawal payments exceed reinvested dividends
and distributions, the investor's shares will be reduced and eventually may
be depleted. An Automatic Withdrawal Plan may be established by completing
the appropriate application available from the Distributor. 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 which 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 Day and
Christmas Day.
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.
General. To qualify for treatment as a regulated investment company
("RIC") under the Internal Revenue Code of 1986, as amended ("Code"), the
Fund -- 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
net investment income, net short-term capital gain and net gains from
certain foreign currency transactions) ("Distribution Requirement") and
must meet several additional requirements. 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 those 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, or any of the following, that were held
for less than three months - options or futures (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 the 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 the 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 dividend or other distribution, the shareholder
will pay full price for the shares and receive some portion of the price
back as a taxable distribution.
If the Fund retains net capital gain (the excess of net long-term
capital gain over net short-term capital loss) for reinvestment, although
it has no plans to do so, it may elect to treat such amounts as having been
distributed to its shareholders. As a result, the 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. The Fund 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 the 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 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 thereto) 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, when it engages in
hedging strategies, whether it should seek to qualify for this treatment.
To the extent the 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 qualify as a RIC.
Certain futures contracts in which the Fund may invest are "section
1256 contracts." Section 1256 contracts held by the 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. Section 1256 contracts also
may be marked-to-market for purposes of the 4% excise tax described in the
Prospectus ("Excise Tax").
Certain futures contracts entered into by the Fund may result in
"straddles" for federal income tax purposes. The straddle rules may affect
the character of gains (or losses) realized by the Fund on straddle
positions. In addition, losses realized by the Fund on straddle positions
may be deferred under the straddle rules. If the 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.
Passive Foreign Investment Companies. 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. If the Fund holds stock of a PFIC, an "excess distribution"
received with respect to the stock and gain from the disposition of the
stock (collectively "PFIC income") will be treated as having been realized
ratably over the entire period during which the Fund held the stock. The
Fund itself will be subject to tax on the portion, if any, of the PFIC
income that is allocated to the part 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 PFIC income
is taxable as ordinary income.
The Fund may elect alternative tax treatment with respect to any PFIC
stock that it holds. Under such an election, the Fund generally would be
required to include in its gross income each year its share of the PFIC's
earnings and capital gains 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 its 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 such a 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. 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 the foreign currency between the date of
acquisition of the security, option or contract and the date of disposition
also are treated as ordinary income 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.
Foreign Taxes. 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
investors. If more than 50% of the value of the Fund's total assets at the
close of its taxable year consists of securities of foreign corporations,
it will be eligible to, and may, file an election ("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, 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 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 the 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 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, such as
a foreign shareholder entitled to claim the benefits of an applicable tax
treaty. 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 a foreign
shareholder's income from the Fund is not effectively connected with a U.S.
trade or business carried on by the foreign shareholder, distributions of
the Fund's 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 deemed income resulting from any Election
made by the Fund regarding 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 (the excess of net
long-term capital gain over net short-term capital loss) 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. In the case of
certain foreign shareholders, the Fund may be required to withhold federal
income tax at a rate of 31% from capital gain distributions and 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 a foreign
shareholder's income from the Fund is effectively connected with a U.S.
trade or business carried on by the foreign shareholder, then all
distributions to that shareholder and any gains realized by that
shareholder on the disposition of Fund shares will be subject to federal
income tax at the graduated rates applicable to U.S. citizens or 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 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.
State and Local Taxes. Depending on the Fund's activities in states
and localities in which it is deemed to be conducting business, the Fund
may be subject to the tax laws thereof. Shareholders are advised to
consult their tax advisers concerning the application of state and local
taxes.
PORTFOLIO TRANSACTIONS
All portfolio transactions of the Fund are placed on behalf of the
Fund by the Manager or CCF SAM. 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. The Manager or CCF SAM 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. The Manager or 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 the 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 CCF SAM each 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 the Manager
or 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 CCF SAM 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 the Manager or CCF SAM 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 the Manager's
and CCF SAM's performance of their 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 the Manager and CCF SAM 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 the Manager or
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 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 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 Manager or CCF SAM as investment advisers to the Fund
outweighs any disadvantages that may be said to exist from exposure to
simultaneous transactions.
During the period from August 12, 1994 (commencement of operations) to
October 31, 1994, the Fund paid no brokerage commissions. During the
fiscal year ended October 31, 1995 the Fund paid brokerage commissions of
$31,984.
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 Fund
commenced operations August 12, 1994, and its portfolio turnover rates for
the period ended October 31, 1994 and for the fiscal year ended October 31,
1995, were 0% and 64.85%, respectively.
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.
The Fund's total return for the period September 15, 1995 to October
31, 1995 for Investor and Class R was 1.28% and 1.42%, respectively. 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.
Average annual total return (expressed as a percentage) for Investor
shares of the Fund for each of the periods noted was:
Average Annual Total Return for the
Periods Ended October 31, 1995
1 Year 5 Years 10 Years Inception
Investor Shares 0.77% __ __ 1.13%
(9/15/95)
Inception date appears in parentheses following the average annual total
return since inception.
Average annual total return (expressed as a percentage) for Class R
shares of the Fund for each of the periods noted was:
Average Total Return for the
Periods Ended October 31, 1995
1 Year 5 Years 10 Years Inception
Class R Shares 0.91% __ __ 1.26%
(9/15/94)
Inception date appears in parentheses following the average 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 Capital International-Europe Australia Far East 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, 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
Boston Safe Deposit and Trust Company, One Boston Place, Boston, MA
02109, is the Fund's custodian. Dreyfus Transfer, Inc., Dreyfus Transfer,
Inc., a wholly-owned subsidiary of the Manager, is located at One American
Express Plaza, Providence, Rhode Island 02903, and serves as the Fund's
transfer and dividend disbursing agent. Under a transfer agency agreement
with the Fund, the Transfer Agent arranges for the maintenance of
shareholder account records for the Fund, the handling of certain
communications between shareholders and the Fund and the payment of
dividends and distributions payable by the Fund. For these services, the
Transfer Agent receives a monthly fee computed on the basis of the number
of shareholder accounts it maintains for the Fund during the month, and is
reimbursed for certain out-of-pocket expenses. Dreyfus Transfer, Inc. and
Boston Safe Deposit and Trust Company, 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 Massachusetts Avenue, N.W., Second Floor,
Washington, D.C. 20036, has passed upon the legality of the shares offered
by the Prospectus and this Statement of Additional Information.
was appointed by the Directors to serve as the
Fund's independent auditors for the year ending October 31, 1996, 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 filed on behalf
of the Fund.
FINANCIAL STATEMENTS
The financial statements for the fiscal year ended October 31, 1995,
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, 1996
THE DREYFUS/LAUREL FUNDS, INC.
200 Park Avenue
New York, NY 10166
For information call 1-800-645-6561
This Statement of Additional Information, which is not a prospectus,
supplements and should be read only in conjunction with each Fund's current
prospectus, dated March 1, 1996, as it may be revised from time to time.
The Funds listed below are separate, diversified portfolios of The
Dreyfus/Laurel Funds, Inc. (formerly, "The Laurel Funds, Inc.") (the
"Company"), an open-end management investment company that offers shares of
common stock of these Funds. Shares of the Funds are offered without sales
commissions.
Dreyfus Money Market Reserves ("Money Market Reserves") (formerly, the
"Dreyfus/Laurel Money Market Reserves")
Dreyfus U.S. Treasury Reserves ("U.S. Treasury Reserves") (formerly, the
"Dreyfus/Laurel U.S. Treasury Reserves")
Dreyfus Municipal Reserves ("Municipal Reserves") (formerly, the
"Dreyfus/Laurel Municipal Reserves")
Dreyfus Institutional Prime Money Market Fund ("Institutional Prime
Fund") (formerly, the "Dreyfus/Laurel Institutional Prime Money Market
Fund")
Dreyfus Institutional Government Money Market Fund ("Institutional
Government Fund") (formerly, the "Dreyfus/Laurel Institutional Government
Money Market Fund")
Dreyfus Institutional U.S. Treasury Money Market Fund ("Institutional
U.S. Treasury Fund") (formerly, the "Dreyfus/Laurel Institutional U.S.
Treasury Money Market Fund")
The Dreyfus Corporation ("Dreyfus") serves as the Funds' investment
manager.
Premier Mutual Fund Services, Inc. ("Premier") is the distributor of
the Funds' shares.
To obtain a copy of these Prospectuses, please write to the Funds 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 1-516-794-5452
TABLE OF CONTENTS
Page
General Information. . . . . . . . . . . . . . . . . . . . . . . . .3
Investment Information and Risk Factors. . . . . . . . . . . . . . .4
Investment Limitations . . . . . . . . . . . . . . . . . . . . . . .9
Principal Shareholders . . . . . . . . . . . . . . . . . . . . . . .12
Directors and Officers . . . . . . . . . . . . . . . . . . . . . . .12
Investment Management and Other Services . . . . . . . . . . . . . .17
Federal Law Affecting Mellon Bank. . . . . . . . . . . . . . . . . .20
Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . . .21
Net Asset Value. . . . . . . . . . . . . . . . . . . . . . . . . . .23
Performance Calculations . . . . . . . . . . . . . . . . . . . . . .24
Dividends, Other Distributions and Taxes . . . . . . . . . . . . . .25
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . .28
Other Information. . . . . . . . . . . . . . . . . . . . . . . . . .29
Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30
GENERAL INFORMATION
Municipal Reserves. The Municipal Reserves 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 Municipal Reserves 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 Municipal Reserves' 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 Municipal
Reserves or a bank issues a letter of credit in support of a security
purchased by the Municipal Reserves, 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 Municipal Reserves' investment objective 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 (Municipal Reserves). The municipal securities
in which the Municipal Reserves 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 Municipal Reserves 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 (Municipal Reserves). The interest rates
payable on certain municipal securities, including municipal leases, in
which the Municipal Reserves 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 Municipal Reserves 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 Municipal Reserves 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 Municipal Reserves 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 Municipal Reserves' investment
quality requirements.
Variable rate obligations purchased by the Municipal Reserves may
include participation interests purchased by the Municipal Reserves 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 Municipal Reserves 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 Municipal Reserves'
participation interest in the instrument, plus accrued interest, but will
do so only (i) as required to provide liquidity to the Municipal Reserves,
(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 Municipal Reserves' 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 Municipal Reserves on the basis of published
financial information, rating agency reports and other research services to
which the Municipal Reserves may subscribe.
Stand-by Commitments (Municipal Reserves). The Municipal Reserves 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 Municipal Reserves 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 Municipal Reserves 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 Municipal Reserves 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 Municipal Reserves 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 Municipal Reserves 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 Municipal Reserves' 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 Municipal Reserves are valued at zero in determining net
asset value. When the Municipal Reserves 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 (Money Market Reserves, Municipal Reserves,
Institutional Prime Fund and Institutional Government Fund). 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 (Money Market Reserves, Municipal Reserves
and Institutional Prime Fund). 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 Money Market Reserves
and Municipal Reserves, Institutional Prime and Institutional Government
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.
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 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 (Money Market Reserves, Municipal
Reserves and Institutional Prime 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 (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 except U.S. Treasury Reserves).
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.
Commercial Paper (Money Market Reserves, Municipal Reserves and
Institutional Prime 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.
INVESTMENT LIMITATIONS
The following limitations have been adopted by each Fund. 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.
None of the Funds intends to engage in futures contracts, related
options or forward currency contracts.
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 amounts to the securities sold
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.
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, 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 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.
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 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 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.
PRINCIPAL SHAREHOLDERS
The following shareholder(s) owned 5% or more of the outstanding
voting shares of the Company, the Funds or any others of the Funds at
____________, 1996:
MONEY MARKET RESERVES:
U.S. TREASURY RESERVES:
MUNICIPAL RESERVES:
INSTITUTIONAL PRIME FUND:
INSTITUTIONAL GOVERNMENT FUND:
INSTITUTIONAL TREASURY FUND:
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 1940 Act) is indicated by an asterisk. Each of the
Directors also serves as a Trustee of The Dreyfus/Laurel Funds Trust and
The Dreyfus/Laurel Tax-Free Municipal Funds (collectively with the Company,
the "Dreyfus/Laurel Funds") and Mr. DiMartino serves as a Board member for
93 other funds advised by Dreyfus.
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: 80 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: 78 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 of
Dreyfus and Executive Vice President and a director of Dreyfus
Service Corporation, a wholly-owned subsidiary of Dreyfus and
until August 24, 1994, the Funds' distributor. From August 1994
to December 31, 1994, he was a director of Mellon Bank
Corporation. He is Chairman of the Board of Noel Group, Inc., a
venture capital company; a trustee of Bucknell University; a
trustee of the Muscular Dystrophy Association, HealthPlan
Services Corporation, Belding Heminway Company, Inc., Curtis
Industries, Inc., Simmons Outdoor Corporation and Staffing
Resources, Inc. Age: 52 years old. Address: 200 Park Avenue,
New York, New York 10166.
o +JAMES M. FITZGIBBONS. Director of the 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: 60 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; From 1988-1989
Director, Rexene Corporation. Since May 1991, Mr. Goeschel has
served as Trustee of Sewickley Valley Hospital. Age: 73 years
old. Address: Way Hollow Road and Woodland Road, Sewickley,
Pennsylvania 15143.
o +KENNETH A. HIMMEL. Director of the Company; 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 Managing Partner,
Franklin Federal Partners. Age: 49 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:
48 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: 67 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: 81 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: 63 years old.
Address: 321 Gross Street, Pittsburgh, Pennsylvania 15224.
o +ROSLYN M. WATSON. Director of the Company; Principal, Watson
Ventures, Inc.; Director, American Express Centurion Bank;
Director, Harvard Community Health Plan, Inc.; Director,
Massachusetts Electric Company; Director, The Hymans Foundation,
Inc., prior to February, 1993; Real Estate Development Project
Manager and Vice President, The Gunwyn Company. Age: 45 years
old. Address: 25 Braddock Park, Boston, Massachusetts 02116-
5816.
#MARIE E. CONNOLLY. President and Treasurer of the Company, 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). Age: 37 years old. Address: One
Exchange Place, Boston, Massachusetts 02109.
#FREDERICK C. DEY. Vice President of the Company, 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). Age: 33 years
old. Address: Premier Mutual Fund Services, Inc., One Exchange
Place, Boston, Massachusetts 02109.
#ERIC B. FISCHMAN. Vice President of the Company, 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). Age: 31
years old. Address: Premier Mutual Fund Services, Inc., 200 Park
Avenue, New York, New York 10166.
RICHARD W. HEALEY. Vice President of the Company, 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).
Age: 41 years old. Address: One Exchange Place, Boston,
Massachusetts 02109.
#JOHN E. PELLETIER. Vice President and Secretary of the Company, 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).
Age: 31 years old. Address: One Exchange Place, Boston,
Massachusetts 02109.
_____________________________
* "Interested person" of the Company, as defined in the 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 ______________.
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,
subsidiary or affiliate thereof) serves as an officer or Director
of the Company. The Dreyfus/Laurel Funds pay each
Director/Trustee who is not an "interested person" of the Company
(as defined in the 1940 Act), $27,000 per annum (and an
additional $75,000 for the Chairman of the Board of
Directors/Trustees of the Dreyfus/Laurel Funds). In addition,
the Dreyfus/Laurel Funds pay each Director/Trustee who is not an
"interested person" of the Company (as defined in the 1940 Act),
$1,000 per joint Dreyfus/Laurel Funds Board meeting attended,
plus $750 per joint Dreyfus/Laurel Funds Audit Committee meeting
attended, and reimburses each Director/Trustee who is not an
"interested person" of the Company (as defined in the 1940 Act),
for travel and out-of-pocket expenses.
For the fiscal year ended October 31, 1995, the aggregate
amount of fees and expenses received by each Director from the
Company and all other funds in the Dreyfus Family of Funds for
which such person is a Board member were as follows:
<TABLE>
<CAPTION>
Total
Pension or 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 M. Adams $26,662 None None $ 34,500
Francis P. Brennan* 84,914 None None 110,500
Joseph S. DiMartino** None None None $445,000**
James M. Fitzgibbons 25,887 None None 33,500
J. Tomlinson Fort** None None None None
Arthur L. Goeschel 26,835 None None 35,500
Kenneth A. Himmel 24,543 None None 31,750
Arch S. Jeffery** None None None None
Stephen J. Lockwood 25,318 None None 32,750
Robert D. McBride 26,835 None None 35,500
John L. Propst 26,835 None None 35,500
John J. Sciullo 26,662 None None 34,500
Roslyn M. Watson 26,060 None None 34,550
# Amount does not include reimbursed expenses for attending Board meetings, which
amounted to $11,113 for the Company.
* Compensation of Francis Brennan includes $75,000 paid by the Dreyfus/Laurel Funds
to be Chairman of the Board.
** Joseph S. DiMartino, J. Tomlinson Fort and Arch S. Jeffery are paid directly by
Dreyfus for serving as Board members of the Company and the funds in the
Dreyfus/Laurel Funds. For the fiscal year ended October 31, 1995, the aggregate
amount of fees and expenses received by Joseph DiMartino, J. Tomlinson Fort and
Arch S. Jeffery from Dreyfus for serving as a Board member of the Company were
$18,214, $26,835 and $26,835, respectively, and for serving as a Board member of
all funds in the Dreyfus/Laurel Funds (including the Company) were $23,500,
$35,500 and $35,500, respectively. In addition, Dreyfus reimbursed Messrs.
DiMartino, Fort and Jeffery a total of $2,664 for expenses attributable to the
Company's Board meetings.
</TABLE>
INVESTMENT MANAGEMENT AND OTHER SERVICES
Advisory Services. Dreyfus (200 Park Avenue, New York, New York
10166) serves as each Fund's investment manager. Dreyfus is a wholly-owned
subsidiary of Mellon Bank, N.A. ("Mellon Bank") (One Mellon Bank Center,
Pittsburgh, PA 15258), 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 objective, policies and
restrictions, and is paid a fee as described in the Fund's Prospectus.
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. The
Company 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 the Company. The Investment Management Agreement
will terminate immediately and automatically upon its assignment.
<TABLE>
<CAPTION>
For the last three fiscal years, each Fund had the following expenses:
For the Fiscal Years Ended October 31,
1995 1994 1993
<S> <C> <C> <C>
Money Market Reserves
Advisory fees (gross of waiver) $1,479,772 $241,885 $481,181
Expense reimbursement from Adviser -- 147,972 343,319
Advisory fees waived -- -- --
U.S. Treasury Reserves
Advisory fees (gross of waiver) $1,588,710 $152,242 $ 333,417
Expense reimbursement from Adviser -- 111,352 267,656
Advisory fees waived -- -- --
Municipal Reserves
Advisory fees (gross of waiver) $1,074,708 $563,317 $1,156,577
Expense reimbursement from Adviser -- 206,817 468,941
Advisory fees waived -- -- --
Institutional Prime Fund
Advisory fees (gross of waiver) $1,294,365 $719,248 $2,085,334
Expense reimbursement from Adviser -- -- 55,366
Advisory fees waived -- -- --
Institutional Government Fund
Advisory fees (gross of waiver) $590,518 $380,929 $ 837,576
Expense reimbursement from Adviser -- -- 53,054
Advisory fees waived -- -- --
Institutional U.S. Treasury Fund
Advisory fees (gross of waiver) $967,664 $404,422 $1,252,103
Expense reimbursement from Adviser -- 21,564 25,387
Advisory fees waived -- -- --
</TABLE>
Distribution and Shareholder Services Plan. The SEC has adopted Rule
12b-1 under the 1940 Act (the "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 Class of Money Market Reserves, U.S. Treasury Reserves and
Municipal Reserves, the Company has adopted a Distribution Plan (the
"Plan") pursuant to the Rule, under which Premier may enter into Selling
Agreements with Agents (as defined below). Under the Plan, each of the
Money Market Reserves, U.S. Treasury Reserves and Municipal Reserves, may
spend annually up to 0.25% (currently limited by the Board to 0.20%) of its
average daily net assets attributable to Investor shares for costs and
expenses incurred in connection with the sale of such shares and for
shareholder servicing.
With respect to the Institutional Prime, Institutional Government and
Institutional U.S. Treasury Funds, the Company has adopted a Shareholder
Servicing Plan (the "Institutional Plan") which is not subject to the Rule,
and may enter into Shareholder Servicing Agreements with Agents (as defined
below).
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 with the Company. 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 0.15% of the average daily net asset value of Fund shares. Payments
under the Institutional Plan may be increased without shareholder approval.
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 Fund 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 Fund 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 Fund 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 the Company and who do
not have any direct or indirect financial interest in the operation of the
Plan or in the related Selling Agreements or Shareholder Servicing
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 Selling Agreements or
Shareholder Servicing 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 Selling
Agreements or Shareholder Servicing Agreements or by vote of the holders of
a majority of the outstanding shares of such class of a Fund.
For the fiscal year ended October 31, 1995 the amounts paid by the
Funds for the Distribution Plan were:
Dreyfus Money Market Reserves $346,318
Dreyfus Municipal Reserves $ 40,029
Dreyfus U.S. Treasury Reserves $ 62,079
For the fiscal year ended October 31, 1995, the amounts paid by the
Funds for the Shareholder Services Plan were:
Dreyfus Institutional Prime Money Market Fund $1,280,430
Dreyfus Institutional Government Money Market Fund $ 632,698
Dreyfus Institutional U.S. Treasury Money Market Fund $1,036,783
Prior to September 23, 1994, Frank Russell Investment Management
Company acted as the Funds' Administrator and was paid the following
amounts in fees by the Funds:
For Year Ended October 31
Fund 1994 1993
Money Market Reserves $ 13,821 $ 28,296
U.S. Treasury Reserves 8,699 19,612
Municipal Reserves 26,808 56,584
Institutional Prime Fund 102,687 303,285
Institutional Government Fund 54,384 122,940
Institutional U.S. Treasury Fund 57,738 182,602
The Distributor; Sub-Administrator. Premier serves as the Funds'
distributor pursuant to an agreement which is renewable annually. Premier
also acts as distributor for the other 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 and Transfer and Dividend Disbursing Agent (All Funds).
Mellon Bank serves as custodian with respect to each Fund. 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 the Company's net
assets and .01% of net assets over $500 million, plus a specified
transaction fee for each transaction.
Dreyfus Transfer, Inc., a wholly-owned subsidiary of the Manager, is
located at One American Express Plaza, Providence, Rhode Island 02903, and
serves as the Fund's transfer and dividend disbursing agent. Under a
transfer agency agreement with the Fund, the Transfer Agent arranges for
the maintenance of shareholder account records for the Fund, the handling
of certain communications between shareholders and the Fund and the payment
of dividends and distributions payable by the Fund. For these services,
the Transfer Agent receives a monthly fee computed on the baisis of the
number of shareholder accounts it maintains for the Fund during the month,
and is reimbursed for certain out-of-pocket expenses. The Transfer Agent
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 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, 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 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 the
Company's procedures adopted in accordance with Rule 17e-1 of the 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 during the three
fiscal years ended October 31, 1995.
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. Money Market Reserves, U.S. Treasury Reserves and
Municipal Reserves determine net asset value twice daily, as of 12:00 p.m.
and 4:00 p.m., Eastern time. Institutional U.S. Treasury Fund determines
net asset value as of 1:00 p.m. and Institutional Prime and Institutional
Government Funds determine net asset value as of 3:00 p.m., Eastern time,
daily.
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.
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 Day and
Christmas Day.
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, 1995:
<TABLE>
<CAPTION>
Current Yield Effective Yield
Investor Class R Investor Class R
<S> <C> <C> <C> <C>
Money Market Reserves 5.21% 5.41% 5.35% 5.56%
U.S. Treasury Reserves 4.93% 5.13% 5.05% 5.26%
Municipal Reserves 3.19% 3.39% 3.24% 3.45%
Current Yield Effective Yield
Institutional Prime Fund 5.55% 5.70%
Institutional Government Fund 5.48% 5.63%
Institutional U.S. Treasury Fund 5.42% 5.57%
</TABLE>
The Municipal Reserves 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 Municipal Reserves for the seven-day period ended
October 31, 1995:
Investor Class R
Current Tax-Equivalent Yield 5.28% 5.61%
Effective Tax-Equivalent Yield 5.42% 5.77%
The Municipal Reserves 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:
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%
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 Municipal Reserves, 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.
Municipal Reserves. Dividends paid by the Municipal Reserves 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 Municipal Reserves 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 Municipal
Reserves' 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 Municipal Reserves 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 Municipal Reserves)
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 Municipal Reserves 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 Municipal Reserves 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 Municipal Reserves.
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.
FINANCIAL STATEMENTS
The financial statements for the fiscal year ended October 31, 1995,
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. was appointed by the Directors to serve as
the Funds' independent auditors for the year ending October 31, 1996,
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 filed on behalf of the
Company.
Legal Counsel. Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue,
N.W., Second 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.
DREYFUS DISCIPLINED MIDCAP STOCK FUND
INVESTOR AND CLASS R SHARES
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
MARCH 1, 1996
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, 1996, as it may be revised from
time to time. The Fund is a separate, diversified portfolio of The
Dreyfus/Laurel Funds, Inc. (formerly The Laurel Funds, Inc.), an open-end
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 one of
the following numbers:
Call Toll Free 1-800-645-6561
In New York City -- Call 1-718-895-1206
On Long Island -- Call 516-794-5452
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-13
Management Arrangements . . . . . . . . . . . . . . . . B-18
Purchase of Fund Shares . . . . . . . . . . . . . . . . B-19
Distribution Plan . . . . . . . . . . . . . . . . . . . B-20
Redemption of Fund Shares . . . . . . . . . . . . . . . B-21
Shareholder Services. . . . . . . . . . . . . . . . . . B-22
Determination of Net Asset Value. . . . . . . . . . . . B-25
Dividends, Other Distributions and Taxes. . . . . . . . B-26
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
Appendix. . . . . . . . . . . . . . . . . . . . . . . . B-35
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) the 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.
Derivative Instruments. The Fund may purchase and sell various
financial instruments ("Derivative Instruments"), including financial
futures contracts (such as index futures contracts) and options (such as
options on U.S. and foreign securities or indices of such securities). The
index Derivative Instruments the Fund may use may be based on indices of
U.S. or foreign equity or debt securities. These Derivative Instruments
may be used, for example, to preserve a return or spread or to facilitate
or substitute for the sale or purchase of securities.
Hedging strategies can be broadly categorized as "short hedges" and
"long hedges." A short hedge is a purchase or sale of a Derivative
Instrument intended partially or fully to offset potential declines in the
value of one or more investments held in the Fund's portfolio. Thus, in a
short hedge the Fund takes a position in a Derivative Instrument whose
price is expected to move in the opposite direction of the price of the
investment being hedged.
Conversely, a long hedge is a purchase or sale of a Derivative
Instrument intended partially or fully to offset potential increases in the
acquisition cost of one or more investments that the Fund intends to
acquire. Thus, in a long hedge the Fund takes a position in a Derivative
Instrument whose price is expected to move in the same direction as the
price of the prospective investment being hedged. A long hedge is
sometimes referred to as an anticipatory hedge. In an anticipatory hedge
transaction, the Fund does not own a corresponding security and, therefore,
the transaction does not relate to a security the Fund owns. Rather, it
relates to a security that the Fund intends to acquire. If the Fund does
not complete the hedge by purchasing the security it anticipated
purchasing, the effect on the Fund's portfolio is the same as if the
transaction were entered into for speculative purposes.
Derivative Instruments on securities generally are used to hedge
against price movements in one or more particular securities positions that
the Fund owns or intends to acquire. Derivative Instruments on indices, in
contrast, generally are used to attempt to hedge against price movements in
market sectors in which the Fund has invested or expects to invest.
Derivative Instruments on debt securities may be used to hedge either
individual securities or broad debt market sectors.
The use of Derivative Instruments is subject to applicable regulations
of the Securities and Exchange Commission ("SEC"), the several options and
futures exchanges upon which they are traded, the Commodity Futures Trading
Commission ("CFTC") and various state regulatory authorities. In addition,
the Fund's ability to use Derivative Instruments will be limited by tax
considerations. See "Dividends, Other Distributions and Taxes."
In addition to the instruments, strategies and risks described below
and in the Prospectus, Dreyfus expects to discover additional opportunities
in connection with other Derivative Instruments. These new opportunities
may become available as Dreyfus develops new techniques, as regulatory
authorities broaden the range of permitted transactions and as new
techniques are developed. Dreyfus may utilize these opportunities to the
extent that they are consistent with the Fund's investment objective, and
permitted by the Fund's investment policies and applicable regulatory
authorities.
Special Risks. The use of Derivative Instruments involves special
considerations and risks, certain of which are described below. Risks
pertaining to particular Derivative Instruments are described in the
sections that follow.
(1) Successful use of most Derivative Instruments depends upon
Dreyfus' ability to predict movements of the overall securities and
interest rate markets, which requires different skills than predicting
changes in the prices of individual securities. There can be no assurance
that any particular strategy will succeed.
(2) There might be imperfect correlation, or even no correlation,
between price movements of a Derivative Instrument and price movements of
the investments being hedged. For example, if the value of a Derivative
Instrument used in a short hedge increased by less than the decline in
value of the hedged investment, the hedge would not be fully successful.
Such a lack of correlation might occur due to factors unrelated to the
value of the investments being hedged, such as speculative or other
pressures on the markets in which Derivative Instruments are traded. The
effectiveness of hedges using Derivative Instruments on indices will depend
on the degree of correlation between price movements in the index and price
movements in the securities being hedged.
Because there are a limited number of types of exchange-traded options
and futures contracts, it is likely that the standardized contracts
available will not match the Fund's current or anticipated investments
exactly. The Fund may invest in options and futures contracts based on
securities with different issuers, maturities, or other characteristics
from the securities in which it typically invests, which involves a risk
that the options or futures position will not track the performance of the
Fund's other investments.
Options and futures prices can also diverge from the prices of their
underlying instruments, even if the underlying instruments match the Fund's
investments well. Options and futures prices are affected by such factors
as current and anticipated short-term interest rates, changes in volatility
of the underlying instrument, and the time remaining until expiration of
the contract, which may not affect security prices the same way. Imperfect
correlation may also result from differing levels of demand in the options
and futures markets and the securities markets, from structural differences
in how options and futures and securities are traded, or from imposition of
daily price fluctuation limits or trading halts. The Fund may purchase or
sell options and futures contracts with a greater or lesser value than the
securities it wishes to hedge or intends to purchase in order to attempt to
compensate for differences in volatility between the contract and the
securities, although this may not be successful in all cases. If price
changes in the Fund's options or futures positions are poorly correlated
with its other investments, the positions may fail to produce anticipated
gains or result in losses that are not offset by gains in other
investments.
(3) If successful, the above-discussed strategies can reduce risk of
loss by wholly or partially offsetting the negative effect of unfavorable
price movements. However, such strategies can also reduce opportunity for
gain by offsetting the positive effect of favorable price movements. For
example, if the Fund entered into a short hedge because Dreyfus projected a
decline in the price of a security in the Fund's portfolio, and the price
of that security increased instead, the gain from that increase might be
wholly or partially offset by a decline in the price of the Derivative
Instrument. Moreover, if the price of the Derivative Instrument declined
by more than the increase in the price of the security, the Fund could
suffer a loss. In either such case, the Fund would have been in a better
position had it not attempted to hedge at all.
(4) As described below, the Fund might be required to maintain assets
as "cover," maintain segregated accounts or make margin payments when it
takes positions in Derivative Instruments involving obligations to third
parties (i.e., Derivative Instruments other than purchased options). If
the Fund were unable to close out its positions in such Derivative
Instruments, it might be required to continue to maintain such assets or
accounts or make such payments until the position expired or matured.
These requirements might impair the Fund's ability to sell a portfolio
security or make an investment at a time when it would otherwise be
favorable to do so, or require that the Fund sell a portfolio security at a
disadvantageous time. The Fund's ability to close out a position in a
Derivative Instrument prior to expiration or maturity depends on the
existence of a liquid secondary market or, in the absence of such a market,
the ability and willingness of the other party to the transaction
("counterparty") to enter into a transaction closing out the position.
Therefore, there is no assurance that any position can be closed out at a
time and price that is favorable to the Fund.
Cover for Derivative Instruments. Transactions using Derivative
Instruments may 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, futures or options, or (2)
cash and short-term liquid debt securities with a value sufficient at all
times to cover its potential obligations to the extent not covered as
provided in (1) above. The Fund will comply with SEC guidelines regarding
cover for Derivative Instruments and will, 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.
Assets used as cover or held in a segregated account cannot be sold
while the position in the corresponding Derivative Instrument is open,
unless they are replaced with other appropriate assets. As a result, the
commitment of a large portion of the Fund's assets to cover or segregated
accounts could impede portfolio management or the Fund's ability to meet
redemption requests or other current obligations.
Options. A call option gives the purchaser the right to buy, and
obligates the writer to sell, the underlying investment at the agreed upon
exercise price during the option period. A put option gives the purchaser
the right to sell, and obligates the writer to buy, the underlying
investment at the agreed upon exercise price during the option period. A
purchaser of an option pays an amount, known as the premium, to the option
writer in exchange for rights under the option contract.
Options on indices are similar to options on securities except that
all settlements are in cash and gain or loss depends on changes in the
index in question rather than on price movements in individual securities.
The purchase of call options can serve as a long hedge, and the
purchase of put options can serve as a short hedge. Writing put or call
options can enable the Fund to enhance income or yield by reason of the
premiums paid by the purchasers of such options. However, if the market
price of the security or other instrument underlying a put option declines
to less than the exercise price on the option, minus the premium received,
the Fund would expect to suffer a loss.
Writing call options can also serve as a limited short hedge because
declines in the value of the hedged investment would be offset to the
extent of the premium received for writing the option. However, if the
investment appreciates to a price higher than the exercise price of the
call option, it can be expected that the option will be exercised and the
Fund will be obligated to sell the investment at less than its market
value.
Writing put options can serve as a limited long hedge because
increases in the value of the hedged investment would be offset to the
extent of the premium received for writing the option. However, if the
investment depreciates to a price lower than the exercise price of the put
option, it can be expected that the put option will be exercised and the
Fund will be obligated to purchase the investment at more than its market
value.
The value of an option position will reflect, among other things, the
current market value of the underlying investment, the time remaining until
expiration, the relationship of the exercise price to the market price of
the underlying investment, the historical price volatility of the
underlying investment and general market conditions. Options that expire
unexercised have no value.
The Fund may effectively terminate its right or obligation under an
option by entering into a closing transaction. For example, the Fund may
terminate its obligation under a call or put option that it had written by
purchasing an identical call or put option; this is known as a closing
purchase transaction. Conversely, the Fund may terminate a position in a
put or call option it had purchased by writing an identical put or call
option; this is known as a closing sale transaction. Closing transactions
permit the Fund to realize profits or limit losses on an option position
prior to its exercise or expiration.
The Fund may purchase and sell both exchange-traded and over-the-
counter ("OTC") options. Exchange-traded options in the United States are
issued by a clearing organization that, in effect, guarantees completion of
every exchange-traded option transaction. In contrast, OTC options are
contracts between the Fund and its counterparty (usually a securities
dealer or a bank) with no clearing organization guarantee. Thus, when the
Fund purchases an OTC option, it relies on the counterparty from whom it
purchased the option to make or take delivery of the underlying investment
upon exercise of the option. Failure by the counterparty to do so would
result in the loss of any premium paid by the Fund as well as the loss of
any expected benefit of the transaction. The Fund will enter into only
those option contracts that are listed on a national securities or
commodities exchange or traded in the OTC market for which there appears to
be a liquid secondary 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 the
current market value of the underlying securities and the option's strike
price). The repurchase price with primary dealers is typically a formula
price that 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's ability to establish and close out positions in exchange-
listed options depends on the existence of a liquid market. However, there
can be no assurance that such a market will exist at any particular time.
Closing transactions can be made for OTC options only by negotiating
directly with the counterparty, or by a transaction in the secondary market
if any such market exists. Although the Fund will enter into OTC options
only with major dealers in unlisted options, there is no assurance that the
Fund will in fact be able to close out an OTC option position at a
favorable price prior to expiration. In the event of insolvency of the
counterparty, the Fund might be unable to close out an OTC option position
at any time prior to its expiration.
If the Fund were unable to effect a closing transaction for an option
it had purchased, it would have to exercise the option to realize any
profit. The inability to enter into a closing purchase transaction for a
covered call option written by the Fund could cause material losses because
the Fund would be unable to sell the investment used as cover for the
written option until the option expires or is exercised.
The Fund may write only covered call options on securities. 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.
Futures Contracts and Options on Futures Contracts. When the Fund
purchases a futures contract, it incurs an obligation to take delivery of a
specified amount of the obligation underlying the futures contract at a
specified time in the future for a specified price. When the Fund sells a
futures contract, it incurs an obligation to deliver a specified amount of
the obligation underlying the futures contract at a specified time in the
future for an agreed upon price. With respect to index futures, no
physical transfer of the securities underlying the index is made. Rather,
the parties settle by exchanging in cash an amount based on the difference
between the contract price and the closing value of the index on the
settlement date.
When the Fund writes an option on a futures contract, it becomes
obligated, in return for the premium paid, to assume a position in a
futures contract at a specified exercise price at any time during the term
of the option. If the Fund has written a call, it assumes a short futures
position. If the Fund has written a put, it assumes a long futures
position. When the Fund purchases an option on a futures contract, it
acquires the right, in return for the premium it pays, to assume a position
in a futures contract (a long position if the option is a call and a short
position if the option is a put).
The purchase of futures or call options on futures can serve as a long
hedge, and the sale of futures or the purchase of put options on futures
can serve as a short hedge. Writing call options on futures contracts can
serve as a limited short hedge, using a strategy similar to that used for
writing call options on securities or indices. Similarly, writing put
options on futures contracts can serve as a limited long hedge.
No price is paid upon entering into a futures contract. Instead, at
the inception of a futures contract the Fund is required to deposit
"initial margin" consisting of cash or U.S. Government securities in an
amount generally equal to 10% or less of the contract value. Margin must
also be deposited when writing a call or put option on a futures contract,
in accordance with applicable exchange rules. Unlike margin in securities
transactions, initial margin on futures contracts does not represent a
borrowing, but rather is in the nature of a performance bond or good-faith
deposit that is returned to the Fund at the termination of the transaction
if all contractual obligations have been satisfied. Under certain
circumstances, such as periods of high volatility, the Fund may be required
by an exchange to increase the level of its initial margin payment.
Subsequent "variation margin" payments are made to and from the
futures broker daily as the value of the futures position varies, a process
known as "marking-to-market." Variation margin does not involve borrowing,
but rather represents a daily settlement of the Fund's obligations to or
from a futures broker. When the Fund purchases an option on a future, the
premium paid plus transaction costs is all that is at risk. In contrast,
when the Fund purchases or sells a futures contract or writes a call or put
option thereon, it is subject to daily variation margin calls that could be
substantial in the event of adverse price movements. If the Fund has
insufficient cash to meet daily variation margin requirements, it might
need to sell securities at a time when such sales are disadvantageous.
Purchasers and sellers of futures contracts and options on futures can
enter into offsetting closing transactions, similar to closing transactions
on options, by selling or purchasing, respectively, an instrument identical
to the instrument purchased or sold. Positions in futures and options on
futures may be closed only on an exchange or board of trade that provides a
secondary market. Although the Fund intends to enter into futures and
options on futures only on exchanges or boards of trade where there appears
to be a liquid secondary market, there can be no assurance that such a
market will exist for a particular contract at a particular time. In such
event, it may not be possible to close a futures contract or options
position.
Under certain circumstances, futures exchanges may establish daily
limits on the amount that the price of a futures or an option on a futures
contract can vary from the previous day's settlement price; once that limit
is reached, no trades may be made that day at a price beyond the limit.
Daily price limits do not limit potential losses because prices could move
to the daily limit for several consecutive days with little or no trading,
thereby preventing liquidation of unfavorable positions.
If the Fund were unable to liquidate a futures or options on futures
position due to the absence of a liquid secondary market or the imposition
of price limits, it could incur substantial losses. The Fund would
continue to be subject to market risk with respect to the position. In
addition, except in the case of purchased options, the Fund would continue
to be required to make daily variation margin payments and might be
required to maintain the position being hedged by the future or option or
to maintain cash or securities in a segregated account.
To the extent that the Fund enters into futures contracts, options on
futures contracts, or options on foreign currencies traded on an exchange
regulated by the CFTC, in each case other than for bona fide hedging
purposes (as defined by the CFTC), the aggregate initial margin and
premiums required to establish those positions (excluding the amount by
which options are "in-the-money" at the time of purchase) will not exceed
5% of the liquidation value of the Fund's portfolio, after taking into
account unrealized profits and unrealized losses on any contracts the Fund
has entered into. This policy does not limit to 5% the percentage of the
Fund's assets that are at risk in futures contracts and options on futures
contracts.
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.
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
Investment Company Act of 1940, as amended (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
and options 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
PRINCIPAL SHAREHOLDERS
The following shareholder(s) owned 5% or more of the Class R shares of
the Fund at __________________:
The following shareholder(s) owed 5% or more of the outstanding
Investor shares of the Fund at __________________:
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, 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.
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 1940 Act) is indicated by an asterisk. Each of the
Directors also serves as a Trustee of The Dreyfus/Laurel Funds Trust and
The Dreyfus/Laurel Tax-Free Municipal Funds (collectively, with the
Company, the "Dreyfus/Laurel Funds") and Mr. DiMartino serves as a Board
member for 93 other funds advised by Dreyfus.
DIRECTORS AND OFFICERS
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: 80 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: 78 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 of Dreyfus and
Executive Vice President and a director of Dreyfus Service
Corporation, a wholly-owned subsidiary of Dreyfus. From August 1994
to December 31, 1994, he was a director of Mellon Bank Corporation.
He is Chairman of the Board of Noel Group, Inc., a venture capital
company, a trustee of Bucknell University; and a director of the
Muscular Dystrophy Association, HealthPlan Services Corporation,
Belding Heminway, Inc., Simmons Outdoor Corporation and Staffing
Resources, Inc. Age: 52 years old. Address: 200 Park Avenue, New
York, New York 10166.
o + JAMES M. FITZGIBBONS. Director of the 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: 60 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. Since May 1991, Mr. Goeschel has
served as Trustee of Sewickley Valley Hospital. Age: 73 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, Franklin Federal Partners. Age: 49 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: 48
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: 67 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: 81 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: 63 years old. Address: 321 Gross
Street, Pittsburgh, Pennsylvania 15224.
o + ROSLYN M. WATSON. Director of the Company; Principal, Watson Ventures,
Inc., Director, American Express Centurion Bank; Director, Harvard
Community Health Plan, Inc.; Director, Massachusetts Electric Company;
Director, The Hymans Foundation, Inc., prior to February, 1993; Real
Estate Development Project Manager and Vice President, The Gunwyn
Company. Age: 45 years old. Address: 25 Braddock Park, Boston,
Massachusetts 02116-5816.
# MARIE E. CONNOLLY. President and Treasurer of the Company, 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). Age: 37 years old.
Address: One Exchange Place, Boston, Massachusetts 02109.
# FREDERICK C. DEY. Vice President of the Company, 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). Age: 33 years old. Address: Premier Mutual Fund
Services, Inc., One Exchange Place, Boston, Massachusetts 02109.
# ERIC B. FISCHMAN. Vice President of the Company, 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). Age: 31 years old. Address: Premier Mutual Fund
Services, Inc., 200 Park Avenue, New York, New York 10166.
RICHARD W. HEALEY. Vice President of the Company, 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). Age: 41 years old. Address: One Exchange Place, Boston,
Massachusetts 02109.
# JOHN E. PELLETIER. Vice President and Secretary of the Company, 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). Age: 31 years old. 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
_______________.
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, subsidiary or affiliate thereof)
serves as an officer or Director of the Company. The Dreyfus/Laurel Funds
pay each Director/Trustee who is not an "interested person" of the Company
(as defined in the 1940 Act), $27,000 per annum (and an additional $75,000
for the Chairman of the Board of Directors/Trustees of the Dreyfus/Laurel
Funds). In addition, the Dreyfus/Laurel Funds pay each Director/Trustee
who is not an "interested person" of the Company (as defined in the 1940
Act), $1,000 per joint Dreyfus/Laurel Funds Board meeting attended, plus
$750 per joint Dreyfus/Laurel Funds Audit Committee meeting attended, and
reimburses each Director/Trustee who is not an "interested person" of the
Company (as defined in the 1940 Act), for travel and out-of-pocket
expenses.
For the fiscal year ended October 31, 1995, the aggregate amount of
fees and expenses received by each Director from the Company and all other
funds in the Dreyfus Family of Funds for which such person is a Board
member were as follows:
Total
Pension or 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
Ruth M. Adams $26,662 None None $ 34,500
Francis P. Brennan* 84,914 None None 110,500
Joseph S. DiMartino** None None None $445,000**
James M. Fitzgibbons 25,887 None None 33,500
J. Tomlinson Fort** None None None None
Arthur L. Goeschel 26,835 None None 35,500
Kenneth A. Himmel 24,543 None None 31,750
Arch S. Jeffery** None None None None
Stephen J. Lockwood 25,318 None None 32,750
Robert D. McBride 26,835 None None 35,500
John L. Propst 26,835 None None 35,500
John J. Sciullo 26,662 None None 34,500
Roslyn M. Watson 26,060 None None 34,550
# Amount does not include reimbursed expenses for attending Board meetings,
which amounted to $11,113 for the Company.
* Compensation of Francis Brennan includes $75,000 paid by the Dreyfus/Laurel
Funds to be Chairman of the Board.
** Joseph S. DiMartino, J. Tomlinson Fort and Arch S. Jeffery are paid directly
by Dreyfus for serving as Board members of the Company and the funds in the
Dreyfus/Laurel Funds. For the fiscal year ended October 31, 1995, the
aggregate amount of fees and expenses received by Joseph DiMartino, J.
Tomlinson Fort and Arch S. Jeffery from Dreyfus for serving as a Board member
of the Company were $18,214, $26,835 and $26,835, respectively, and for
serving as a Board member of all funds in the Dreyfus/Laurel Funds
(including the Company) were $23,500, $35,500 and $35,500, respectively.
In addition, Dreyfus reimbursed Messrs. DiMartino, Fort and Jeffery a total
of $2,664 for expenses attributable to the Company's Board meetings.
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 (the "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 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; Christopher M. Condron, President, Chief
Operating Officer and a director, Stephen E. Canter, Vice Chairman, Chief
Investment Officer and a director; Lawrence S. Kash, Vice Chairman-
Distribution and a director; Philip L. Toia, Vice Chairman-Operations and
Administration; Daniel C. Maclean, Vice President and General Counsel;
Barbara E. Casey, Vice President-Dreyfus President-Dreyfus Retirement
Services; Diane M. Coffey, Vice President-Corporate Communications; Elie M.
Genadry, Vice President-Institutional Sales; Henry D. Gottman, Vice
President-Retail Sales and Service; William F. Glavin, Jr., Vice President-
Corporate Development; Andrew S. Wasser, Vice President-Information
Services; Mark N. Jacobs, Vice President-Fund Legal and Compliance and
Secretary; Jeffrey N. Nachman, Vice President-Mutual Fund Accounting;
Katherine C. Wickham, Vice President-Corporate Human Resources; Maurice
Bendrihem, Controller; Elvira Oslapas; Assistant Secretary; Mandell L.
Berman, Frank V. Cahouet, Alvin E. Friedman, Lawrence M. Greene, Julian M.
Smerling and David B. Truman, directors.
For the last two years, the Fund had the following expenses:
For the Fiscal Year or Period Ended October 31,
1995 1994(1)
Management fees (gross
of waiver) $175,864 $170,453
Expense Reimbursement from
investment manager -- $ 61,475
Management fees waived -- --
(1) The Fund commenced operations on November 12, 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 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. Dreyfus TeleTransfer purchase orders
may be made at any time. Purchase orders received by 4:00 P.M., New York
time, on any business day that Dreyfus Transfer, Inc., the Fund's transfer
and dividend disbursing agent (the "Transfer Agent"), and the New York
Stock Exchange are open for business will be credited to the shareholder's
Fund account on the next bank business day following such purchase order.
Purchase orders made after 4:00 P.M., New York time, on any business day
the Transfer Agent and the New York Stock Exchange are open for business,
or orders made on Saturday, Sunday or any Fund holiday (e.g., when the New
York Stock exchange is not open for business), will be credited to the
shareholder's Fund account on the second bank business day following such
purchase order.
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 Only)."
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 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 fiscal year ended October 31, 1995, the Fund paid the
Distributor $1,422 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 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. 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."
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 redemptions 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.
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 Simplified Employee Pension
Plans ("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 SEP-IRA 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 by calling 1-800-645-6561. 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 Plan. The Automatic Withdrawal Plan permits an
investor with a $5,000 minimum account to request withdrawal of a specified
dollar amount (minimum of $50) on either a monthly or quarterly basis.
Withdrawal payments are the proceeds from sales of Fund shares, not the
yield on the shares. If withdrawal payments exceed reinvested dividends
and distributions, the investor's shares will be reduced and eventually may
be depleted. An Automatic Withdrawal Plan may be established by completing
the appropriate application available from the Distributor. 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, which 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 for treatment as a regulated investment company ("RIC")
under the Internal Revenue Code of 1986, as amended (the "Code"), 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 ("Distribution Requirement"), 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.
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, 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 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 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 certain foreign
currency denominated securities (including debt instruments and certain
financial forward, futures and option contracts and 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 of the Code. "Conversion transactions" are defined to include certain
forward, futures, option and straddle transactions, transactions marketed
or sold to produce capital gains, or transactions described in Treasury
regulations to be issued in the future.
Under Section 1256 of the Code, any gain or loss realized by 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 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 could need to distribute such income to satisfy the Distribution
Requirement and to avoid the 4% excise tax referred to in the Fund's
Prospectus under "Dividends, Other Distributions and Taxes." 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 it is deemed to be conducting
business, the Fund may be subject to the tax laws thereof. 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, such as a foreign shareholder entitled to claim the benefits of an
applicable tax treaty. 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).
Capital gains realized by foreign shareholders on the sale of Fund
shares and distributions to them of net capital gain (the excess of long-
term capital gain over short-term capital loss) 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. 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 a foreign
shareholder's ownership of the Fund's shares 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.
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
obligation 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.
For the fiscal year ended October 31, 1995, the Fund paid brokerage
commissions amounting to $0.
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 last two years of the Fund was:
Year Ended October 31, 1995
1995 1994(1)
71% 83%
(1) The Fund commenced operations on November 12, 1993.
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.
The Fund's total return for Investor and Class R shares for the
periods April 6, 1994 and November 12, 1993 to October 31, 1995 were 21.87%
and 22.4%, respectively. 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.
Average annual total returns (expressed as a percentage) for Investor
shares of the Fund for the periods noted were:
Average Annual Total Return for the
Periods Ended October 31, 1995
Fund: 1 Year 5 Years 10 Years Inception
Investor shares 24.43% -- -- (13.42%)
(4/6/94)
Inception date appears in parentheses following the average annual total
return since inception.
Average annual total returns (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, 1995
Fund: 1 Year 5 Years 10 Years Inception
Class R shares 24.61% -- -- (10.81%)
(11/12/93)
Inception date appears in parentheses following the average 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, 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. Dreyfus Transfer, Inc., a wholly-owned subsidiary of
Dreyfus, is located at One American Express Plaza, Providence, Rhode Island
02703, and is the Fund's transfer and dividend disbursing agent. Under a
transfer agency agreement with the Fund, the Transfer Agent arranges for
the maintenance of shareholder account records for the Fund, the handling
of certain communication between shareholders and the Fund and the payment
of dividends and distributions payable by the Fund. For these services,
the Transfer Agent receives a monthly fee computed on the basis of the
number of shareholder accounts it maintains for the Fund during the month,
and is reimbursed for certain out-of-pocket expenses. Dreyfus Transfer,
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 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 0.02% of the first $500 million of the
Company's assets and 0.01% 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 LLP, 1800 Massachusetts Avenue, N.W., Second
Floor, Washington, D.C. 20036, has passed upon the legality of the shares
offered by the Prospectus and this Statement of Additional Information.
___________________ was appointed by the Directors to serve as the
Fund's independent auditors for the year ending October 31, 1996, 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 filed on behalf
of the Fund.
FINANCIAL STATEMENTS
The financial statements for the period ended October 31, 1995,
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.
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 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 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.
THE DREYFUS/LAUREL FUNDS, INC.
(formerly, The Laurel Funds, Inc.)
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.
Included in Part B:
The following are incorporated by reference to the Registrant's
Annual Reports to Shareholders for the period ended October 31,
1995 filed on ___________.
- Report 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 dated July 31, 1987. Filed
herewith.
1(b) Articles Supplementary dated October 15, 1993 increasing
authorized capital stock. Incorporated by reference to
Post-Effective Amendment No. 39 to the Registrant's
Registration Statement on Form N-1A ("Post-Effective
Amendment No. 39") filed on September 22, 1995.
1(c) Articles of Amendment dated March 31, 1994. Filed
herewith.
1(d) Articles Supplementary dated March 31, 1994 reclassifying
shares. Filed herewith.
1(e) Articles Supplementary dated May 24, 1994 designating and
classifying shares. Incorporated by reference to Post-
Effective Amendment No. 39.
1(f) Articles of Amendment dated October 17, 1994. Incorporated
by reference to Post-Effective Amendment No. 31 filed on
December 13, 1994.
1(g) Articles Supplementary dated December 19, 1994 designating
classes. Incorporated by reference to Post-Effective
Amendment No. 32 filed on December 19, 1994.
1(h) Articles of Amendment dated June 9, 1995. Incorporated by
reference to Post-Effective Amendment No. 39.
1(i) Articles of Amendment dated August 30, 1995. Incorporated
by reference to Post-Effective Amendment No. 39.
1(j) Articles Supplementary dated August 31, 1995 reclassifying
shares. Incorporated by reference to Post-Effective
Amendment No. 39.
1(k) Articles of Amendment dated October 31, 1995 designating and
classifying shares. Filed herewith.
1(1) Articles of Amendment dated November 22, 1995 designating
and reclassifying shares filed herewith.
2 Bylaws. Incorporated by reference to Pre-Effective
Amendment No. 1 to the Registrant's Registration Statement
on Form N-1A filed on August 6, 1987 -- Registration No.
33-16338 ("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 on September 3, 1993.
5(b) Investment Management Agreement between Mellon Bank, N.A.
and the Registrant. Filed herewith.
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. Incorporated by
reference to Post-Effective Amendment No. 23 filed on
December 30, 1993.
8(b) Custody Agreement between the Registrant and Mellon Bank,
N.A. Filed herewith.
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
filed on May 19, 1994.
8(d) Custody Agreement with Boston Safe Deposit and Trust Company
with respect to the International Equity Allocation Fund.
To be filed by amendment.
8(e) Sub-Custodian Agreement between Mellon Bank, N.A. and Boston
Safe Deposit and Trust Company. Filed herewith.
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 Not Applicable.
12 Not Applicable.
13 Letter of Investment Intent. Incorporated by reference to
the Registration Statement.
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 on March 1, 1994.
18 Rule 18f-3 Plans dated April 26, 1995. Incorporated by
reference to Post-Effective Amendment No. 36 filed on May
16, 1995.
25 Powers of Attorney of the Directors and Officers dated April
5, 1995. Incorporated by reference to Post-Effective
Amendment No. 35 filed on April 7, 1995.
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 the
Registrant as of ____________, 1995:
Number of Record Holders
Investor
Title of Class Class Class R
- -------------- -------- -------
Dreyfus Bond Market Index Fund
Dreyfus International Equity Allocation Fund
Dreyfus Disciplined Intermediate Bond Fund
Dreyfus Disciplined Stock Fund
Dreyfus Disciplined Midcap Stock Fund
Dreyfus Institutional S&P 500 Stock Index Fund
Dreyfus Disciplined Equity Income Fund
Dreyfus European Fund
Dreyfus Money Market Reserves
Dreyfus U.S. Treasury Reserves
Dreyfus Municipal Reserves
Dreyfus Institutional Prime Money Market Fund
Dreyfus Institutional U.S. Treasury Money Market Fund
Dreyfus Institutional Government Money Market Fund
Title of Class Class A Class B Class C Class R
- -------------- ------- ------- ------- -------
Premier Balanced Fund
Premier Small Company Stock Fund
Premier Limited Term Income Fund
Item 27. Indemnification
Incorporated by reference to Registration Statement.
Item 28. Business and Other Connections of Investment Adviser
The Dreyfus Corporation ("Dreyfus") and subsidiary companies comprise
a financial service organization whose business consists primarily of
providing investment management services as the investment adviser, manager
and distributor for sponsored investment companies registered under the
Investment Company Act of 1940, as amended, 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
Director Chief Executive Officer:
Mellon Bank Corporation****
Mellon Bank, N.A.****
Director:
Avery Dennison Corporation
150 North Orange Grove Boulevard
Pasadena, California 91103;
Saint-Gobain Corporation
750 East Swedesford Road
Valley Forge, Pennsylvania 19482;
Teledyne, Inc.
1901 Avenue of the Stars
Los Angeles, California 90067
ALVIN E. FRIEDMAN Senior Adviser to Dillon, Read & Co. Inc.
Director 535 Madison Avenue
New York, New York 10022;
Director and member of the Executive
Committee of Avnet, Inc.**
LAWRENCE M. GREENE Director:
Director Dreyfus America Fund
JULIAN M. SMERLING None
Director
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 Dreyfus Acquisition Corporation*;
Chief Executive Officer The Dreyfus Consumer Credit
Corporation*;
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 Service Organization, Inc.***;
Seven Six Seven Agency, Inc.*;
Trustee:
Corporate Property Investors
New York, New York
W. KEITH SMITH Chairman and Chief Executive Officer:
Vice Chairman of the Board The Boston Company*****
Vice Chairman of the Board:
Mellon Bank Corporation****
Mellon Bank, N.A.****
Director:
Dentsply International, Inc.
570 West College Avenue
York, Pennsylvania 17405
CHRISTOPHER M. CONDRON Vice Chairman:
President, Chief Mellon Bank Corporation****
Operating Officer The Boston Company*****
Deputy Director:
Mellon Trust****
Chief Executive Officer:
The Boston Company Asset
Management, Inc.*****
President:
Boston Safe Deposit and
Trust Company*****
STEPHEN E. CANTER Former Chairman and Chief Executive Officer:
Vice Chairman and Chief Kleinwort Benson Investment Management
Investment Officer, and Americas, Inc.*
a Director Director:
The Dreyfus Trust Company++
LAWRENCE S. KASH Chairman, President and Chief
Vice Chairman-Distribution Executive Officer:
and a Director The Boston Company Advisors, Inc.
53 State Street
Exchange Place
Boston, Massachusetts 02109;
Executive Vice President and Director:
Dreyfus Service Organization, Inc.***;
Director:
The Dreyfus Consumer Credit
Corporation*;
The Dreyfus Trust Company++;
Dreyfus Service Corporation*;
President:
The Boston Company*****
Laurel Capital Advisors****
Boston Group Holdings, Inc.
Executive Vice President:
Mellon Bank, N.A.****
Boston Safe Deposit & Trust Co.*****
PHILIP L. TOIA Chairman of the Board and Trust Investment
Vice Chairman-Operations Officer:
and Administration The Dreyfus Trust Company++;
and a Director Chairman of the Board and Chief Operating
Officer:
Major Trading Corporation*;
Director:
Dreyfus Precious Metals, Inc.*;
Dreyfus Service Corporation*;
Seven Six Seven Agency, Inc.*;
President and Director:
Dreyfus Acquisition Corporation*;
The Dreyfus Consumer Credit
Corporation*;
Dreyfus-Lincoln, Inc.*;
Dreyfus Management, Inc.*;
Dreyfus Personal Management, Inc.*;
Dreyfus Partnership Management, Inc.+;
Dreyfus Service Organization, Inc.***;
The Truepenny Corporation*;
Formerly, Senior Vice President:
The Chase Manhattan Bank, N.A. and
The Chase Manhattan Capital Markets
Corporation
One Chase Manhattan Plaza
New York, New York 10081
BARBARA E. CASEY President:
Vice President- Dreyfus Retirement Services Division;
Services Executive Vice President:
Boston Safe Deposit and Trust
Company*****
Dreyfus Service Corporation*
DIANE M. COFFEY None
Vice President-
Corporate Communications
ELIE M. GENADRY President:
Vice President- Institutional Services Division of
Institutional Sales Dreyfus Service Corporation*;
Broker-Dealer Division of Dreyfus
Service Corporation*;
Group Retirement Plans Division of
Dreyfus Service Corporation;
Executive Vice President:
Dreyfus Service Corporation*;
Dreyfus Service Organization, Inc.***;
Vice President:
The Dreyfus Trust Company++
HENRY D. GOTTMANN Executive Vice President:
Vice President-Retail Dreyfus Service Corporation*;
Sales and Service Vice President:
Dreyfus Precious Metals, Inc.*
DANIEL C. MACLEAN Director, Vice President and Secretary:
Vice President and General Dreyfus Precious Metals, Inc.*;
Counsel Director and Vice President:
The Dreyfus Consumer Credit
Corporation*;
Director and Secretary:
Dreyfus Acquisition Corporation*;
Dreyfus Partnership Management, Inc.*;
Major Trading Corporation*;
The Truepenny Corporation+;
Director, Vice President and Treasurer:
Lion Management, Inc.*;
Director:
The Dreyfus Trust Company++;
Secretary:
Dreyfus Service Corporation*;
Dreyfus Service Organization, Inc.***;
Seven Six Seven Agency, Inc.*
JEFFREY N. NACHMAN None
Vice President-Mutual Fund
Accounting
WILLIAM F. GLAVIN, JR. Executive Vice President:
Vice President-Corporate Dreyfus Service Corporation*;
Development Senior Vice President:
The Boston Company Advisors, Inc.
53 State Street
Exchange Place
Boston, Massachusetts 02109
KATHERINE C. WICKHAM Formerly, Assistant Commissioner:
Vice President- Department of Parks and Recreation of
Human Resources the City of New York
830 Fifth Avenue
New York, New York 10022
MARK N. JACOBS Vice President, Secretary and Director:
Vice President-Fund Lion Management, Inc.*;
Legal and Secretary Secretary:
The Dreyfus Consumer Credit
Corporation*;
Dreyfus Management, Inc.*;
Assistant Secretary:
Dreyfus Service Organization, Inc.***;
Major Trading Corporation*;
The Truepenny Corporation*
ANDREW S. WASSER Vice President:
Vice President-Information Mellon Bank Corporation
Services One Mellon Bank Center
Pittsburgh, Pennsylvania 15258
MAURICE BENDRIHEM Treasurer:
Controller Dreyfus Partnership Management, Inc.*;
Dreyfus Precious Metals, Inc.*;
Dreyfus Service Organization, Inc.***;
Seven Six Seven Agency, Inc.*;
The Truepenny Corporation*;
Controller:
Dreyfus Acquisition Corporation*;
Dreyfus Service Corporation*;
The Dreyfus Trust Company++;
The Dreyfus Consumer Credit
Corporation*;
Formerly, Vice President-Financial Planning,
Administration and Tax:
Showtime/The Movie Channel, Inc.
1633 Broadway
New York, New York 10019
ELVIRA OSLAPAS Assistant Secretary:
Assistant Secretary Dreyfus Service Corporation*;
Dreyfus Management, Inc.*;
Dreyfus Acquisition Corporation, Inc.*;
The Truepenny Corporation+
________________________
* The address of the business so indicated is 200 Park Avenue, New
York, New York 10166.
** The address of the business so indicated is 80 Cutter Mill Road,
Great Neck, New York 11021.
*** The address of the business so indicated is 131 Second Street,
Lewes, Delaware 19958.
**** The address of the business so indicated is One Mellon Bank Center,
Pittsburgh, Pennsylvania 15258.
***** The address of the business so indicated is One Boston Place,
Boston, Massachusetts 02108.
+ The address of the business so indicated is Atrium Building, 80
Route 4 East, Paramus, New Jersey 07652.
++ The address of the business so indicated is 144 Glenn Curtiss
Boulevard, Uniondale, New York 11556-0144.
+++ The address of the business so indicated is One Rockefeller Plaza,
New York, New York 10020.
++++ The address of the business so indicated is 2 Boulevard Royal,
Luxembourg.
+++++ The address of the business so indicated is Nassau, Bahama Islands.
Item 29. Principal 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.
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) Dreyfus Edison Electric Index Fund, Inc.
18) Dreyfus Florida Intermediate Municipal Bond Fund
19) Dreyfus Florida Municipal Money Market Fund
20) Dreyfus Growth and Value Funds, Inc.
21) The Dreyfus Fund Incorporated
22) Dreyfus Global Bond Fund, Inc.
23) Dreyfus Global Growth, L.P. (A Strategic Fund)
24) Dreyfus GNMA Fund, Inc.
25) Dreyfus Government Cash Management
26) Dreyfus Growth and Income Fund, Inc.
27) Dreyfus Growth Opportunity Fund, Inc.
28) Dreyfus Institutional Money Market Fund
29) Dreyfus Institutional Short Term Treasury Fund
30) Dreyfus Insured Municipal Bond Fund, Inc.
31) Dreyfus Intermediate Municipal Bond Fund, Inc.
32) Dreyfus International Equity Fund, Inc.
33) Dreyfus Investors GNMA Fund
34) The Dreyfus/Laurel Funds Trust
35) The Dreyfus/Laurel Tax-Free Municipal Funds
36) Dreyfus Life and Annuity Index Fund, Inc.
37) Dreyfus LifeTime Portfolios, 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.
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 Pennsylvania Municipal Money Market Fund
63) Dreyfus Short-Intermediate Government Fund
64) Dreyfus Short-Intermediate Municipal Bond Fund
65) Dreyfus Short-Term Income Fund, Inc.
66) The Dreyfus Socially Responsible Growth Fund, Inc.
67) Dreyfus Strategic Growth, L.P.
68) Dreyfus Strategic Income
69) Dreyfus Strategic Investing
70) Dreyfus Tax Exempt Cash Management
71) The Dreyfus Third Century Fund, Inc.
72) Dreyfus Treasury Cash Management
73) Dreyfus Treasury Prime Cash Management
74) Dreyfus Variable Investment Fund
75) Dreyfus-Wilshire Target Funds, Inc.
76) Dreyfus Worldwide Dollar Money Market Fund, Inc
77) General California Municipal Bond Fund, Inc.
78) General California Municipal Money Market Fund
79) General Government Securities Money Market Fund, Inc.
80) General Money Market Fund, Inc.
81) General Municipal Bond Fund, Inc.
82) General Municipal Money Market Fund, Inc.
83) General New York Municipal Bond Fund, Inc.
84) General New York Municipal Money Market Fund
85) Pacifica Funds Trust -
Pacifica Prime Money Market Fund
Pacifica Treasury Money Market Fund
86) Peoples Index Fund, Inc.
87) Peoples S&P Midcap Index Fund, Inc.
88) Premier Insured Municipal Bond Fund
89) Premier California Municipal Bond Fund
90) Premier Capital Growth Fund, Inc.
91) Premier Global Investing, Inc.
92) Premier GNMA Fund
93) Premier Growth Fund, Inc.
94) Premier Municipal Bond Fund
95) Premier New York Municipal Bond Fund
96) Premier State Municipal Bond Fund
(b)
Positions and
Name and principal Positions and offices with offices with
business address the Distributor Registrant
__________________ ___________________________ _____________
Marie E. Connolly+ Director, President, Chief President and
Operating Officer and Compliance Treasurer
Officer
Joseph F. Tower, III+ Senior Vice President, Treasurer Assistant
and Chief Financial Officer Treasurer
John E. Pelletier+ Senior Vice President, General Vice President
Counsel, Secretary and Clerk and Secretary
Frederick C. Dey++ Senior Vice President Vice President
and Assistant
Treasurer
Eric B. Fischman++ Vice President and Associate Vice President
General Counsel and Assistant
Secretary
Elizabeth Bachman++ Attorney Vice President
and Assistant
Secretary
Lynn H. Johnson+ Vice President None
Margaret Pardo++ Legal Assistant Assistant
Secretary
Paul Prescott+ Assistant Vice President None
Mary Nelson+ Assistant Treasurer None
John J. Pyburn++ Assistant Treasurer Assistant
Treasurer
Jean M. O'Leary+ Assistant Secretary and None
Assistant Clerk
John W. Gomez+ Director None
William J. Nutt+ Director None
________________________________
+ Principal business address is One Exchange Place, Boston,
Massachusetts 02109.
++ Principal business address is 200 Park Avenue, New York,
New York 10166.
Item 30. Location of Accounts and Records
________________________________
1. First Data Investor Services Group, Inc.,
a subsidiary of First Data Corporation
P.O. Box 9671
Providence, Rhode Island 02940-9671
2. The Bank of New York
90 Washington Street
New York, New York 10286
3. The Dreyfus Corporation
200 Park Avenue
New York, New York 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.
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.), 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 New York, State of New York on the 29th day of December, 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 12/29/95
Marie E. Connolly
/s/Francis P. Brennan*
_______________________ Director,
Francis P. Brennan Chairman of the Board 12/29/95
/s/Ruth Marie Adams*
_______________________ Director 12/29/95
Ruth Marie Adams
/s/Joseph S. DiMartino*
_______________________ Director 12/29/95
Joseph S. DiMartino
/s/James M. Fitzgibbons*
________________________ Director 12/29/95
James M. Fitzgibbons
/s/Kenneth A. Himmel*
________________________ Director 12/29/95
Kenneth A. Himmel
/s/Stephen J. Lockwood*
________________________ Director 12/29/95
Stephen J. Lockwood
/s/Roslyn M. Watson*
________________________ Director 12/29/95
Roslyn M. Watson
/s/J. Tomlinson Fort*
________________________ Director 12/29/95
J. Tomlinson Fort
/s/Arthur L. Goeschel*
________________________ Director 12/29/95
Arthur L. Goeschel
/s/Arch S. Jeffery*
________________________ Director 12/29/95
Arch S. Jeffery
/s/Robert D. McBride*
________________________ Director 12/29/95
Robert D. McBride
/s/John L. Propst*
________________________ Director 12/29/95
John L. Propst
/s/John J. Sciullo*
________________________ Director 12/29/95
John J. Sciullo
*By: /s/Eric B. Fischman
______________________
Eric B. Fischman,
Attorney-in-Fact
ARTICLES OF INCORPORATION
OF
THE LAUREL FUNDS, INC.
FIRST: The undersigned, CLIFFORD J. ALEXANDER, whose post office
address is South Lobby, Ninth Floor, 1800 M Street, N.W., Washington, D.C.
20036, being at least eighteen years of age, under and by virtue of the
General Laws of the State of Maryland authorizing the formation of
corporations, is acting as sole incorporator with the intention of forming
a corporation.
SECOND: The name of the corporation is THE LAUREL FUNDS, INC. (the
"Corporation").
THIRD: The purposes for which the Corporation is formed are to act as
an open-end management investment company under the Investment Company Act
of 1940, as amended ("1940 Act"), and to exercise and enjoy all of the
powers, rights and privileges granted to, or conferred upon, corporations
of a similar character by the General Laws of the State of Maryland now or
hereafter in force, including, but not limited to, the following:
(a) To hold, invest and reinvest its funds, and in connection
therewith to hold part or all of its funds in cash, and to
purchase, subscribe for or otherwise acquire, hold for investment
or otherwise, to trade and deal in, write, sell, assign,
negotiate, transfer, exchange, lend, pledge or otherwise dispose
of or turn to account or realize upon, securities (which term
"securities" shall, for the purposes of these Articles of
Incorporation, without limiting the generality thereof, be deemed
to include any stocks, shares, bonds, debentures, bills, notes,
mortgages or other obligations or evidences of indebtedness, and
any options, certificates, receipts, warrants or other
instruments representing rights to receive, purchase or subscribe
for the same, or evidencing or representing any other rights or
interest therein, or in any property or assets; and any
negotiable or non-negotiable instruments and money market
instruments, including bank certificates of deposit, finance
paper, commercial paper, bankers' acceptances and all kinds of
repurchase or reverse repurchase agreements) created or issued by
any United States or foreign issuer (which term "issuer" shall,
for the purpose of these Articles of Incorporation, without
limiting the generality thereof, be deemed to include any
persons, firms, associations, partnerships, corporations,
syndicates, combinations, organizations, governments or
subdivisions, agencies or instrumentalities of any government);
and to exercise, as owner or holder of any securities, all
rights, powers and privileges in respect thereof including the
right to vote thereon; to aid by further investment any issuer,
any obligation of or interest in which is held by the Corporation
or in the affairs of which the Corporation has any direct or
indirect interest; to guarantee or become surety on any or all of
the contracts, stocks, bonds, notes, debentures and other
obligations of any corporation, company, trust, association or
firm; and to do any and all acts and things for the preservation,
protection, improvement and enhancement in value of any and all
such securities.
(b) To acquire all or any part of the goodwill, rights, property and
business of any person, firm, association or corporation
heretofore or hereafter engaged in any business similar to any
business which the Corporation has the power to conduct, and to
hold, utilize, enjoy and in any manner dispose of the whole or
any part of the rights, property and business so acquired, and to
assume in connection therewith any liabilities of any such
person, firm, association or corporation.
(c) To apply for, obtain, purchase or otherwise acquire, any patents,
copyrights, licenses, trademarks, trade names and the like, which
may be capable of being used for any of the purposes of the
Corporation; and to use, exercise, develop, grant licenses in
respect of, sell and otherwise turn to account, the same.
(d) To issue and sell shares of its own capital stock and securities
convertible into such capital stock in such amounts and on
such terms and conditions, for such purposes and for such amount
or kind of consideration (including without limitation thereto,
securities) now or hereafter permitted by the laws of the State
of Maryland, by the 1940 Act and by these Articles of
Incorporation, as its Board of Directors may determine.
(e) To purchase or otherwise acquire, hold, dispose of, resell,
transfer, reissue or cancel (all without the vote or consent of
the stockholders of the Corporation) shares of its capital stock
in any manner and to the extent now or hereafter permitted by the
laws of the State of Maryland, by the 1940 Act and by these
Articles of Incorporation.
(f) To conduct its business in all its branches at one or more
offices in Maryland and elsewhere in any part of the world,
without restriction or limit as to extent.
(g) To exercise and enjoy, in Maryland and in any other states,
territories, districts and United States dependencies and in
foreign countries, all of the powers, rights and privileges
granted to, or conferred upon, corporations by the General Laws
of the State of Maryland now or hereafter in force.
(h) In general to carry on any other business in connection with or
incidental to its corporate purposes, to do everything necessary,
suitable or proper for the accomplishment of such purposes or for
the attainment of any object or the furtherance of any power
hereinbefore set forth, either alone or in association with
others, to do every other act or thing incidental or appurtenant
to or growing out of or connected with its business or purposes,
objects or powers, and, subject to the foregoing, to have and
exercise all the powers, rights and privileges conferred upon
corporations by the laws of the State of Maryland as in force
from time to time.
The foregoing objects and purposes shall, except as otherwise expressly
provided, be in no way limited or restricted by reference to, or inference
from, the terms of any other clause of this or any other Article of these
Articles of Incorporation, and shall each be regarded as independent and
construed as a power as well as an object and a purpose, and the
enumeration of specific purposes, objects and powers shall not be construed
to limit or restrict in any manner the meaning of general terms or the
general powers of the Corporation now or hereafter conferred by the laws of
Maryland, nor shall the expression of one thing be deemed to exclude
another though it be of like nature, not expressed; provided however, that
the Corporation shall not have power to carry on within the State of
Maryland any business whatsoever the carrying on of which would preclude it
from being classified as an ordinary business corporation under the laws of
said State; nor shall it carry on any business, or exercise any powers, in
any other state, territory, district or country except to the extent that
the same lawfully may be carried on or exercised under the laws thereof.
Incident to meeting the purposes specified above, the Corporation also
shall have the power:
(1) To acquire (by purchase, lease or otherwise) and to hold, use,
maintain, develop and dispose of (by sale or otherwise) any
property, real or personal, and any interest therein.
(2) To borrow money and, in this connection, issue notes or other
evidence of indebtedness.
(3) Subject to any applicable provisions of law, to buy, hold, sell,
and otherwise deal in and with foreign exchange.
FOURTH: The post office address of the principal office of the
Corporation in the State of Maryland is The Corporation Trust, Inc., 32
South Street, Baltimore, Maryland 21202. The name of the resident agent of
the Corporation in the State of Maryland is The Corporation Trust, Inc.,
whose post address is 32 South State Street, Baltimore, Maryland 21202.
Said resident is a citizen of the State of Maryland and actually resides
therein.
FIFTH: Section 5.1. Capital Stock. The total number of shares of
capital stock which the Corporation shall have authority to issue is five
billion (5,000,000,000) shares, of the par value of one-tenth of one cent
($.001) (the "Shares"), and of the aggregate par value of five million
dollars ($5,000,000). The Shares may be issued by the Board of Directors
in such separate and distinct series ("Series") as the Board of Directors
shall from time to time create and establish. The Board of Directors shall
have full power and authority, in its sole discretion, to create and
establish Shares having such preferences, rights, voting powers,
restrictions, limitations as to dividends, qualifications, and terms and
conditions of redemption as shall be fixed and determined from time to time
by resolution or resolutions providing for the issuance of such Shares
adopted by the Board of Directors. In addition, the Board of Directors is
hereby expressly granted authority to increase or decrease the number of
Shares of any class, but the number of Shares of any class shall not be
decreased by the Board of Directors below the number of Shares thereof then
outstanding.
The Board of Directors of the Corporation is authorized, from time to
time, to classify or to reclassify, as the case may be, any unissued Shares
of the Corporation in separate series. The shares of said series of stock
shall have such preferences, rights, voting powers, restrictions,
limitations as to dividends, qualifications, and terms and conditions of
redemption as shall be fixed and determined from time to time by the Board
of Directors. The Corporation may hold as treasury Shares, reissue for
such consideration and on such terms as the Board of Directors may
determine, or cancel, at their discretion from time to time, any Shares
reacquired by the Corporation. No holder of any of the Shares shall be
entitled as of right to subscribe for, purchase, or otherwise acquire any
Shares of the Corporation which the Corporation proposes to issue or
reissue.
Without limiting the authority of the Board of Directors set forth
herein to establish and designate any further Series, and to classify and
reclassify any unissued Shares, there is hereby established and classified,
ten Series of stock comprised as follows: Laurel Prime Money Market I
Portfolio, Laurel Government Money Market I Portfolio, Laurel Tax-Exempt
Money Market I Portfolio, Laurel Quantitative Performance Portfolio, Laurel
Prime Money Market II Portfolio, Laurel Government Money Market II
Portfolio, Laurel Tax-Exempt Money Market II Portfolio, Laurel Short-Term
Bond Portfolio, Laurel Tactical Asset Allocation Portfolio and Laurel Prime
Money Market III Portfolio.
The Corporation shall have authority to issue any additional shares
hereafter authorized and any shares redeemed or repurchased by the
Corporation. All Shares of any class when properly issued in accordance
with these Articles of Incorporation shall be fully paid and nonassessable.
Section 5.2. Establishment of Series. The establishment of any
Series in addition to those established in Section 5.1 hereof shall be
effective upon the adoption of a resolution by a majority of the then
Directors setting forth such establishment and designation and the relative
rights and preferences of the Shares of such Series. At any time that
there are no Shares outstanding of any particular Series previously
established and designated, the Directors may by a majority vote abolish
that Series and the establishment and designation thereof.
Section 5.3. Dividends. Dividends and distributions on Shares may be
declared and paid with such frequency, in such form and in such amount as
the Board of Directors may from time to time determine. Dividends may be
declared daily or otherwise pursuant to a standing resolution or
resolutions adopted only once or with such frequency as the Board of
Directors may determine.
The Board of Directors shall have the power, in it sole discretion, to
distribute in any fiscal year as dividends (including dividends designated
in whole or in part as capital gain distributions) amounts sufficient, in
the opinion of the Board of Directors, to enable each Series of the
Corporation to qualify as a regulated investment company under the Internal
Revenue Code of 1986, as amended, or any successor or comparable statute
thereto, and regulations promulgated thereunder, and to avoid liability of
each Series of the Corporation for Federal income tax in respect of that
year. However, nothing in the foregoing shall limit the authority of the
Board of Directors to make distributions greater than or less the amount
necessary to qualify as a regulated investment company and to avoid
liability of any Series of the Corporation for such tax.
Dividends and distributions may be paid in cash, property or Shares,
or a combination thereof, as determined by the Board of Directors or
pursuant to any program that the Board of Directors may have in effect at
the time. Any such dividend or distribution paid in Shares will be paid at
the current net asset value thereof as defined in Section 5.7.
Section 5.4. Assets and Liabilities of Series. All consideration
received by the Corporation for the issue or sale of Shares of a particular
Series, together with all assets in which such consideration is invested or
reinvested, all income, earnings, profits, and proceeds thereof, including
any proceeds derived from the sale, exchange or liquidation of such assets,
and any funds or payments derived from any reinvestment of such proceeds in
whatever form the same may be, shall be referred to as "assets belonging
to" that Series. In addition, any assets, income, earnings, profits, and
proceeds thereof, funds, or payments which are not readily identifiable as
belonging to any particular Series shall be allocated by the Board of
Directors between and among one or more of the Series in such manner as the
Board of Directors, in its sole discretion, deems fair and equitable. Each
such allocation shall be conclusive and binding upon the Stockholders of
all Series for all purposes, and shall be referred to as assets belonging
to that Series. The assets belonging to a particular Series shall be so
recorded upon the books of the Corporation. The assets belonging to each
particular Series shall be charged with the liabilities of that Series and
all expenses, costs, charges and reserves attributable to that Series. Any
general liabilities, expenses, costs, charges or reserves of the
Corporation which are not readily identifiable as belonging to any
particular Series shall be allocated and charged by the Board of Directors
between or among any one or more of the Series in such a manner as the
Board of Directors in its sole discretion deems fair and equitable. Each
such allocation shall be conclusive and binding upon the Stockholders of
all Series for all purposes.
Section 5.5. Voting. On each matter submitted to a vote of the
Stockholders, each holder of a Share shall be entitled to one vote for each
Share and fractional votes for fractional Shares standing in his name on
the books of the Corporation; provided, however, that when required by the
1940 Act or rules thereunder or when the Board of Directors has determined
that the matter affects only the interests of one Series, matters may be
submitted to a vote of the Stockholders of a particular Series, and each
holder of Shares thereof shall be entitled to votes equal to the full and
fractional Shares of the Series standing in his name on the books of the
Corporation. The presence in person or by proxy of the holders of one-
third of the shares of capital stock of the Corporation outstanding and
entitled to vote thereat shall constitute a quorum for the transaction of
business at a Stockholders' meeting, except that where any provision of law
or of these Articles of Incorporation permit or require that holders of any
Series shall vote as a Series, then one-third of the aggregate number of
shares of capital stock of that Series outstanding and entitled to vote
shall constitute a quorum for the transaction of business by that Series.
Section 5.6. Redemption by Stockholders. Each holder of Shares shall
have the right at such times as may be permitted by the Corporation to
require the Corporation to redeem all or any part of his Shares at a
redemption price per Share equal to the net asset value per Share as of
such time as the Board of Directors shall have prescribed by resolution.
In the absence of such resolution, the redemption price per Share shall be
the net asset value next determined (in accordance with Section 5.7) after
receipt by the Corporation of a request for redemption in proper form less
such charges as are determined by the Board of Directors and described in
the Corporation's registration statement under the Securities Act of 1933.
The Board of Directors may specify conditions, prices, and places of
redemption, and may specify binding requirements for the proper form or
forms of requests for redemption. Payment of the redemption price may be
wholly or partly in securities or other assets at the value of such
securities or assets used in such determination of net asset value, or may
be in cash. Notwithstanding the foregoing, the Board of Directors may
postpone payment of the redemption price and may suspend the right of the
holders of Shares to require the Corporation to redeem Shares during any
period or at any time when and to the extent permissible under the 1940
Act.
Section 5.7. Net Asset Value per Share. The net asset value of each
Share of each Series shall be the quotient obtained by dividing the value
of the net assets of the Series (being the value of the assets of the
Series less its actual and accrued liabilities exclusive of Capital Stock
and Surplus) by the total number of Shares of the Series outstanding. The
Board of Directors shall have the power and duty to determine from time to
time the net asset value per Share at such times and by such methods as it
shall determine subject to any restrictions or requirements under the 1940
Act and the rules, regulations and interpretations thereof promulgated or
issued by the Securities and Exchange Commission or insofar as permitted by
any order of the Securities and Exchange Commission applicable to the
Corporation. The Board of Directors may delegate such power and duty to
any one or more of the directors and officers of the Corporation, to the
Corporation's manager or investment adviser, to the custodian or depository
of the Corporation's assets, or to another agent of the Corporation.
Section 5.8. Redemption by the Corporation. The Board of Directors
may cause the Corporation to redeem at current net asset value all Shares
owned or held by any one Stockholder having an aggregate current net asset
value of less than five hundred ($500). No such redemption shall be
effected unless the Corporation has given the Stockholder at least sixty
(60) days' notice of its intention to redeem the Shares and an opportunity
to purchase a sufficient number of additional Shares to bring the aggregate
current net asset value of his Shares to five hundred ($500). Upon
redemption of Shares pursuant to this Section, the Corporation shall
promptly cause payment of the full redemption price to be made to the
holder of Shares so redeemed.
SIXTH: Section 6.1. Issuance of New Stock. The Board of Directors
is authorized to issue and sell or cause to be issued and sold from time to
time (without the necessity of offering the same or any part thereof to
existing stockholders) all or any portion or portions of the entire
authorized but unissued Shares of the Corporation, and all or any portion
or portions of the Shares of the Corporation from time to time in its
treasury, for cash or for any other lawful consideration or considerations
and on or for any terms, conditions, or prices consistent with the
provisions of law and of the Articles of Incorporation at the time in
force; provided, however, that in no event shall Shares of the Corporation
having a par value be issued or sold for a consideration or considerations
less in amount or value than the par value of the Shares so issued or sold,
and provided further that in no event shall any Shares of the Corporation
be issued or sold, except as a stock dividend distributed to stockholders,
for a consideration (which shall be net to the Corporation after
underwriting discounts or commissions) less in amount or value than the net
asset value of the Shares so issued or sold determined as of such time as
the Board of Directors shall have by resolution prescribed. In the absence
of such a resolution, such net asset value shall be that next determined
after an unconditional order in proper form to purchase such Shares is
accepted, except that Shares may be sold to an underwriter at (a) the net
asset value next determined after such orders are received by a dealer with
whom such underwriter has a sales agreement or (b) the net asset value
determined at a later time.
Section 6.2. Fractional Shares. The Corporation may issue and sell
fractions of Shares having pro rata all the rights of full Shares,
including, without limitation, the right to vote and to receive dividends,
and wherever the words "Share" or "Shares" are used in these Articles or in
the By-Laws they shall be deemed to include fractions of Shares, where the
context does not clearly indicate that only full Shares are intended.
SEVENTH: Notwithstanding any provision of law requiring a greater
proportion than a majority of the votes of all classes (or of any class
entitled to vote thereon as a separate class) to take or authorize any
action, in accordance with the authority granted by Section 2-104(b)(5) of
the Maryland General Corporation Law, the Corporation is hereby authorized
to take such action upon the concurrence of a majority of the aggregate
number of Shares entitled to vote thereon (or of a majority of the
aggregate number of Shares of a class or Series entitled to vote thereon as
a separate class or Series). The right to cumulate votes in the election
of directors is expressly prohibited.
EIGHTH: Section 8.1. Board of Directors. All corporate powers and
authority of the Corporation (except as otherwise provided by statute, by
these Articles of Incorporation, or by the By-Laws of the Corporation)
shall be vested in and exercised by the Board of Directors. The number of
directors constituting the Board of Directors shall be such number as may
from time to time be fixed in or in accordance with the By-Laws of the
Corporation, provided that after stock is issued to more than one
stockholder, such number shall not be less than three. Except as provided
in the By-Laws, the election of directors may be conducted in any way
approved at the meeting (whether of stockholders or directors) at which the
election is held, provided that such election shall be by ballot whenever
requested by any person entitled to vote. The name of the person who shall
act as initial director until stock is issued to more than one stockholder
or the first meeting of stockholders, whichever shall occur earlier, and
until his successor(s) has been duly chosen and qualified is Philip J.
Fina.
Section 8.2. By-Laws. Except as may otherwise be provided in the By-
Laws, the Board of Directors of the Corporation is expressly authorized to
make, alter, amend and repeal By-Laws or to adopt new By-Laws of the
Corporation, without any action on the part of the Stockholders; but the
By-Laws made by the Board of Directors and the power so conferred may be
altered or repealed by the Stockholders.
NINTH: Section 9.1. Contracts. The Board of Directors may in its
discretion from time to time enter into an exclusive or nonexclusive
distribution contract or contracts providing for the sale of Shares whereby
the Corporation may either agree to sell Shares to the other party to the
contract or appoint such other party its sales agent for such shares (such
other party being herein sometimes called the "distributor"), and in either
case on such terms and conditions as may be prescribed in the By-Laws, if
any, and such further terms and conditions as the Board of Directors may in
its discretion determine not inconsistent with the provisions of these
Articles of Incorporation and such contract may also provide for the
repurchase of Shares of the Corporation by such other party as agent of the
Corporation. The Board of Directors may also in its discretion from time
to time enter into an investment advisory or management contract or
contracts whereby the other party to such contract shall undertake to
furnish to the Board of Directors such management, investment advisory,
statistical and research facilities and services and such other facilities
and services, if any, and all upon such terms and conditions, as the Board
of Directors may in its discretion determine.
Section 9.2. Any contract of the character described in Section 9.1
or for services as administrator, custodian, transfer agent or disbursing
agent or related services may be entered into with any corporation, firm,
trust or association, although any one or more of the directors or officers
of the Corporation may be an officer, director, trustee, stockholder or
member of such other party to the contract, and no such contract shall be
invalidated or rendered voidable by reason of the existence of any such
relationship, nor shall any person holding such relationship be liable
merely by reason of such relationship for any loss or expense to the
Corporation under or by reason of said contract or accountable for any
profit realized directly or indirectly therefrom, provided that the
contract when entered into was reasonable and fair and not inconsistent
with the provisions of this Article NINTH. The same person (including a
firm, corporation, trust, or association) may be the other party to
contracts entered into pursuant to Section 9.1 above, and any individual
may be financially interested or otherwise affiliated with persons who are
parties to any or all of the contracts mentioned in this Section 9.2.
TENTH: Indemnification. The Corporation shall indemnify its present
and past directors, officers, employees, and agents, and persons who are
serving or have served at the request of the Corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or enterprise, to the maximum extent permitted by applicable
law, in such manner as may be provided in the By-Laws; provided, that no
director, officer, investment adviser or principal underwriter of the
Corporation shall be indemnified in violation of Section 17(h) or (i) of
the 1940 Act. The Corporation may purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent
of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in any such capacity or arising
out of his status as such, whether or not the Corporation would have the
power to indemnify him against such liability.
ELEVENTH: Amendments. The Corporation reserves the right from time
to time to make any amendment of these Articles of Incorporation, now or
hereafter authorized by law, including any amendment which alters contract
rights, as expressly set forth in these Articles of Incorporation, of any
outstanding Shares. Any amendment to these Articles of Incorporation may
be adopted at a meeting of the stockholders upon receiving an affirmative
vote of a majority of all votes entitled to be cast thereon.
IN WITNESS WHEREOF, the undersigned incorporator of THE LAUREL FUNDS,
INC., has executed the foregoing Articles of Incorporation and hereby
acknowledges the same to be his act and further acknowledges that, to the
best of his knowledge, information, and belief, the matters and facts set
forth therein are true in all material respects under the penalties of
perjury.
On the 31st day of July, 1987.
/s/ Clifford J. Alexander
______________________________
Clifford J. Alexander
ARTICLES OF AMENDMENT
TO ARTICLES OF INCORPORATION
OF
THE LAUREL FUNDS, INC.
Pursuant to Section 2-607 of the Maryland General Corporation Law, The
Laurel Funds, Inc. ("Corporation") adopts the following Articles of
Amendment to the Corporation's Articles of Incorporation effective as of
the date of filing hereof with the State Department of Assessments and
Taxation.
ONE: The following sentence is added at the end of Article SECOND
from and as of the effective date of this Amendment:
Notwithstanding any other provisions of these Articles in effect prior
to March 31, 1994, but subject to the Authority of the Board of
Directors set forth in Section 5.1 of Article FIFTH as in effect from
and as of March 31, 1994, the designation of each Series of stock of
the Corporation is amended by changing the word "Portfolio" to "Fund".
TWO: The second, third and fourth sentences of the first paragraph of
Section 5.1 of Article FIFTH are amended from and as of the effective date
of this Amendment to read in their entirety as follows:
The Shares may be issued by the Board of Directors in such separate
and distinct series ("Series") and classes of series ("Classes") as
the Board of Directors shall from time to time create and establish.
The Board of Directors shall have full power and authority, in its
sole discretion, to create and establish Shares of said Series and
Classes having such preferences, rights, voting powers, restrictions,
limitations as to dividends, qualifications, and terms and conditions
of redemption as shall be fixed and determined from time to time by
resolution or resolutions providing for the issuance of such Shares
adopted by the Board of Directors. In addition, the Board of
Directors is hereby expressly granted authority to increase or
decrease the number of Shares of any Series or Class, but the number
of Shares of any Series or Class shall not be decreased by the Board
of Directors below the number of Shares thereof then outstanding.
THREE: The second, third and fourth paragraphs of Section 5.1 of
Article FIFTH are hereby amended from and as of the effective date of this
Amendment in their entirety to read as follows:
The Board of Directors of the Corporation is authorized, from
time to time, to classify or to reclassify, as the case may be, any
unissued Shares of the Corporation in separate Series or Classes. The
shares of said Series and Classes of stock shall have such
preferences, rights, voting powers, restrictions, limitations as to
dividends, qualifications, and terms and conditions of redemption as
shall be fixed and determined from time to time by the Board of
Directors. The Corporation may hold as treasury Shares, reissue for
such consideration and on such terms as the Board of Directors may
determine, or cancel, at their discretion from time to time, any
Shares reacquired by the Corporation. No holder of any of the Shares
shall be entitled as of right to subscribe for, purchase, or otherwise
acquire any Shares of the Corporation which the Corporation proposes
to issue or reissue.
The Board of Directors shall have the authority to establish and
designate any further Series and Classes, and to classify and reclassify
any unissued Shares, and to redesignate or change the name of any
outstanding Series or Class, including those established and classified
upon the original filing of these Articles.
The Corporation shall have authority to issue any additional shares
hereafter authorized and any shares redeemed or repurchased by the
Corporation. All Shares of any Series or Class when properly issued in
accordance with these Articles of Incorporation shall be fully paid and
nonassessable.
FOUR: Section 5.2, Section 5.3, Section 5.4, Section 5.5, Section
5.6, Section 5.7 and Section 5.8 of Article FIFTH are hereby amended from
and as of the effective date of this Amendment in their entirety to read as
follows:
Section 5.2. Establishment of Series or Class. The establishment of
any Series or Class in addition to those established in Section 5.1 hereof
shall be effective upon the adoption of a resolution by a majority of the
then Directors setting forth such establishment and designation and the
relative rights and preferences of the Shares of such Series or Class. At
any time that there are no Shares outstanding of any particular Series or
Class previously established and designated, the Directors may by a
majority vote abolish that Series or Class and the establishment and
designation thereof.
Section 5.3. Dividends. Dividends and distributions on Shares may be
declared and paid with such frequency, in such form and in such amount as
the Board of Directors may from time to time determine. Dividends may be
declared daily or otherwise pursuant to a standing resolution or
resolutions adopted only once or with such frequency as the Board of
Directors may determine.
The Board of Directors shall have the power, in its sole discretion,
to distribute in any fiscal year as dividends (including dividends
designated in whole or in part as capital gain distributions) amounts
sufficient, in the opinion of the Board of Directors, to enable such Series
of the Corporation to qualify as a regulated investment company under the
Internal Revenue Code of 1986, as amended, or any successor or comparable
statute thereto, and regulations promulgated thereunder, and to avoid
liability of each Series of the Corporation for Federal income tax in
respect of that year. However, nothing in the foregoing shall limit the
authority of the Board of Directors to make distributions greater than or
less than the amount necessary to qualify as a regulated investment company
and to avoid liability of any Series of the Corporation for such tax.
Dividends and distributions may be paid in cash, property or Shares,
or a combination thereof, as determined by the Board of Directors or
pursuant to any program that the Board of Directors may be in effect at the
time. Any such dividend or distribution paid in Shares will be paid at the
current net asset value thereof as defined in Section 5.7.
Section 5.4. Assets and Liabilities of Series or Class. All
consideration received by the Corporation for the issue or sale of Shares
of a particular Series or Class, together with all assets in which such
consideration is invested or reinvested, all income, earnings, profits, and
proceeds thereof, including any proceeds derived from the sale, exchange or
liquidation of such assets, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, shall be
referred to as "assets belonging to" that Series or Class. In addition,
any assets, income, earnings, profits, and proceeds thereof, funds, or
payments which are not readily identifiable as belonging to any particular
Series or Class shall be allocated by the Board of Directors between and
among one or more of the Series or Classes in such manner as the Board of
Directors, in its sole discretion, deems fair and equitable. Each such
allocation shall be conclusive and binding upon the Stockholders of all
Series and Classes for all purposes, and shall be referred to as assets
belonging to that Series or Class. The assets belonging to a particular
Series or Class shall be so recorded upon the books of the Corporation.
The assets belonging to each particular Series or Class shall be charged
with the liabilities of that Series or Class and all expenses, costs,
charges and reserves attributable to that Series or Class. Any general
liabilities, expenses, costs, charges or reserves of the Corporation which
are not readily identifiable as belonging to any particular Series or Class
shall be allocated and charged by the Board of Directors between or among
any one or more of the Series or Classes in such a manner as the Board of
Directors in its sole discretion deems fair and equitable. Each such
allocation shall be conclusive and binding upon the Stockholders of all
Series and Classes for all purposes.
Section 5.5. Voting. On each matter submitted to a vote of the
Stockholders, each holder of a Share shall be entitled to one vote for each
Share and fractional votes for fractional Shares standing in his name on
the books of the Corporation; provided, however, that when required by the
1940 Act or rules thereunder or when the Board of Directors has determined
that the matter affects only the interests of one Series or Class, matters
may be submitted to a vote of the Stockholders of a particular Series or
Class, and each holder of Shares thereof shall be entitled to votes equal
to the full and fractional Shares of the Series or Class standing in his
name on the books of the Corporation. The presence in person or by proxy
of the holders of one-third of the shares of capital stock of the
Corporation outstanding and entitled to vote thereat shall constitute a
quorum for the transaction of business at a Stockholders' meeting, except
that where any provision of law or of these Articles of Incorporation
permit or require that holders of any Series or Class shall vote as a
Series or Class, then one-third of the aggregate number of shares of
capital stock of that Series or Class outstanding and entitled to vote
shall constitute a quorum for the transaction of business by that Series or
Class.
Section 5.6. Redemption by Stockholders. Each holder of Shares shall
have the right at such times as may be permitted by the Corporation to
require the Corporation to redeem all or any part of his Shares at a
redemption price per Share equal to the net asset value per Share as of
such time as the Board of Directors shall have prescribed by resolution.
In the absence of such resolution, the redemption price per Share shall be
the net asset value next determined (in accordance with Section 5.7) after
receipt by the Corporation of a request for redemption in proper form less
such charges as are determined by the Board of Directors and described in
the Corporation's registration statement under the Securities Act of 1933.
The Board of Directors may specify conditions, prices, and places of
redemption, and may specify binding requirements for the proper form or
forms of requests for redemption. Payment of the redemption price may be
wholly or partly in securities or other assets at the value of such
securities or assets used in such determination of net asset value, or may
be in cash. Notwithstanding the foregoing, the Board of Directors may
postpone payment of the redemption price and may suspend the right of the
holders of Shares to require the Corporation to redeem Shares during any
period or at any time when and to the extent permissible under the 1940
Act.
Section 5.7. Net Asset Value per Share. The net asset value of each
Share of each Series or Class shall be the quotient obtained by dividing
the value of the net assets of the Series or Class (being the value of the
assets of the Series or Class less its actual and accrued liabilities
exclusive of Capital Stock and surplus) by the total number of Shares of
the Series or Class outstanding. The Board of Directors shall have the
power and duty to determine from time to time the net asset value per Share
at such times and by such methods as its shall determine subject to any
restrictions or requirements under the 1940 Act and the rules, regulations
and interpretations thereof promulgated or issued by the Securities and
Exchange Commission or insofar as permitted by any order of the Securities
and Exchange Commission applicable to the Corporation. The Board of
Directors may delegate such power and duty to any one or more of the
directors and officers of the Corporation, to the Corporation's manager or
investment adviser, to the custodian or depository of the Corporation's
assets, or to another agent of the Corporation.
Section 5.8. Redemption by the Corporation. The Board of Directors
may cause the Corporation to redeem at current net asset value all Shares
owned or held by any one Stockholder having an aggregate current net asset
value of any amount. Such redemptions shall be effected in accordance with
such procedures as the Board of Directors may adopt. Upon redemption of
Shares pursuant to this Section, the Corporation shall promptly cause
payment of the full redemption price to be made to the holder of the Shares
so redeemed.
FIVE: The Amendments herein contained were advised by a majority of
the entire Board of Directors of the Corporation and approved by the
affirmative vote of the holders of a majority of all votes of shares of the
Corporation entitled to be cast thereon pursuant to Article ELEVENTH of the
Articles of Incorporation and Section 2-607 of the Maryland General
Corporation Law.
IN WITNESS WHEREOF, the undersigned hereby executes these Articles of
Amendment on behalf of the Corporation, acknowledging it to be the act of
the Corporation, and further states under the penalties of perjury that, to
the best of his knowledge, information and belief, the matters and facts
set forth herein are true in all material respects.
Dated: March 31, 1994 THE LAUREL FUNDS, INC.
By: /s/ Lynn L. Anderson
_____________________
Name: Lynn L. Anderson
Title: President
Attest: /s/ Deedra A. Smith
______________________
Name: Deedra A. Smith
Title: Assistant Secretary
ARTICLES SUPPLEMENTARY
TO
ARTICLES OF INCORPORATION
OF
THE LAUREL FUNDS, INC.
The Laurel Funds, Inc. ("Corporation"), a Maryland corporation,
incorporated on August 6, 1987, having its principal office in Maryland in
Baltimore, Maryland, hereby certifies to the State Department of
Assessments and Taxation of Maryland that:
FIRST: Pursuant to authority expressly vested in the Board of
Directors of the Corporation by Article FIFTH of the Articles of
Incorporation of the Corporation, the Board of Directors has heretofore
duly designated, in accordance with Maryland Corporations and Associations
Code Annotated S 2-105(c) (Supp. 1993), the aggregate number of shares of
capital stock which the Corporation is authorized to issue at twenty-five
billion (25,000,000,000) shares of capital stock (par value $.001 per
share), amounting in the aggregate to a par value of twenty-five million
dollars ($25,000,000). Such shares of capital stock have heretofore been
classified by the Board of Directors among the series of the Corporation as
follows:
Laurel Prime Money Market I Portfolio (125 million shares)
Laurel U.S. Treasury Money Market I Portfolio (75 million shares)
Laurel Tax-Exempt Money Market I Portfolio (240 million shares)
Laurel Stock Portfolio (15 million shares)
Laurel Intermediate Income Portfolio (10 million shares)
Laurel S&P 500 Portfolio (13 million shares)
Laurel Balanced Portfolio (8 million shares)
Laurel Midcap Stock Portfolio (3 million shares)
Laurel European Portfolio (2 million shares)
Laurel Bond Market Index Portfolio (2 million shares)
Laurel Ginnie Mae Portfolio (1 thousand shares)
Laurel Tactical Asset Allocation Portfolio (1 thousand shares)
Laurel Short-Term Government Securities Portfolio (1 thousand shares)
Laurel Smallcap Stock Portfolio (1 thousand shares)
Laurel Equity Income Portfolio (1 thousand shares)
Laurel Wilshire 4500 Stock Index Portfolio (1 thousand shares)
Laurel Prime Money Market II Portfolio (1,400 million shares)
Laurel Government Money Market II Portfolio (500 million shares)
Laurel U.S. Treasury Money Market II Portfolio (800 million shares)
Laurel U.S. Treasury Only Money Market Portfolio (90 million shares)
Laurel Short-Term Bond Portfolio (3 million shares)
All authorized shares that have not been designated or classified remain
available for future designation or classification.
SECOND: Pursuant to authority expressly vested in the Board of
Directors of the Corporation by Article FIFTH of the Articles of
Incorporation of the Corporation, the Board of Directors, in accordance
with Maryland Corporations and Associations Code Annotated S 2-105(c)
(Supp. 1993), now duly redesignates and reclassifies the capital stock of
the Corporation among the series of the Corporation and classes thereof as
follows:
Laurel Prime Money Market I Fund, Trust Class (2 billion shares)
Laurel Prime Money Market I Fund, Investor Class (2 billion shares)
Laurel U.S. Treasury Money Market I Fund, Trust Class (1 billion shares)
Laurel U.S. Treasury Money Market I Fund, Investor Class (1 billion shares)
Laurel Tax-Exempt Money Market I Fund, Trust Class (1 billion shares)
Laurel Tax-Exempt Money Market I Fund, Investor Class (1 billion shares)
Laurel Stock Fund, Trust Class (165 million shares)
Laurel Stock Fund, Investor Class (80 million shares)
Laurel Intermediate Income Fund, Trust Class (100 million shares)
Laurel Intermediate Income Fund, Investor Class (50 million shares)
Laurel S&P 500 Stock Index Fund, Trust Class (63 million shares)
Laurel S&P 500 Stock Index Fund, Investor Class (7 million shares)
Laurel Balanced Fund, Trust Class (50 million shares)
Laurel Balanced Fund, Investor Class (50 million shares)
Laurel Midcap Stock Fund, Trust Class (66 million shares)
Laurel Midcap Stock Fund, Investor Class (22 million shares)
Laurel European Fund, Trust Class (12 million shares)
Laurel European Fund, Investor Class (8 million shares)
Laurel Bond Market Index Fund, Trust Class (100 million shares)
Laurel Bond Market Index Fund, Investor Class (50 million shares)
Laurel Ginnie Mae Fund, Trust Class (15 million shares)
Laurel Ginnie Mae Fund, Investor Class (35 million shares)
Laurel Tactical Asset Allocation Fund, Trust Class (40 million shares)
Laurel Tactical Asset Allocation Fund, Investor Class (10 million shares)
Laurel Short-Term Government Securities Fund, Trust Class (75 million
shares)
Laurel Short-Term Government Securities Fund, Investor Class (75 million
shares)
Laurel Smallcap Stock Fund, Trust Class (41 million shares)
Laurel Smallcap Stock Fund, Investor Class (27 million shares)
Laurel Equity Income Fund, Trust Class (30 million shares)
Laurel Equity Income Fund, Investor Class (20 million shares)
Laurel Wilshire 4500 Stock Index Fund, Trust Class (27 million shares)
Laurel Wilshire 4500 Stock Index Fund, Investor Class (3 million shares)
Laurel Prime Money Market II Fund, Class I (2 billion shares)
Laurel Prime Money Market II Fund, Class II (1 billion shares)
Laurel Prime Money Market II Fund, Class III (1 billion shares)
Laurel Government Money Market II Fund, Class I (1 billion shares)
Laurel Government Money Market II Fund, Class II (500 million shares)
Laurel Government Money Market II Fund, Class III (500 million shares)
Laurel U.S. Treasury Money Market II Fund, Class I (1 billion shares)
Laurel U.S. Treasury Money Market II Fund, Class II (500 million shares)
Laurel U.S. Treasury Money Market II Fund, Class III (500 million shares)
Laurel U.S. Treasury Only Money Market Fund, Class I (200 million shares)
Laurel U.S. Treasury Only Money Market Fund, Class II (200 million shares)
Laurel U.S. Treasury Only Money Market Fund, Class III (200 million shares)
Laurel Short-Term Bond Fund, Class I (1 billion shares)
Laurel Short-Term Bond Fund, Class II (500 million shares)
Laurel Short-Term Bond Fund, Class III (500 million shares)
The aggregate number of shares of all classes and series remains twenty-
five billion (25,000,000,000), the par value per share remains $.001, and
the aggregate par value of all authorized stock remains twenty-five million
dollars ($25,000,000). All authorized shares not designated or classified
above remain available for future designation and classification by the
Board of Directors.
THIRD: The Corporation is registered with the Securities and Exchange
Commission as an open-end investment company under the Investment Company
Act of 1940, as amended.
IN WITNESS WHEREOF, the undersigned hereby executes these Articles
Supplementary on behalf of the Corporation, acknowledging it to be the act
of the Corporation, and further states under the penalties of perjury that,
to the best of his knowledge, information and belief, the matters and facts
set forth herein are true in all material respects.
Dated: March 31, 1994 THE LAUREL FUNDS, INC.
By: /s/ Margaret Barclay
_________________________
Name: Margaret Barclay
Title: Director of Operations,
Vice President and Treasurer
Attest: /s/ Deedra A. Smith
_________________________
Title: Assistant Secretary
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
THE DREYFUS/LAUREL FUNDS, INC.
Pursuant to Sections 2-605(a)(4) and 2-607 of the Maryland General
Corporation Law, The Dreyfus/Laurel Funds, Inc. (the "Corporation") adopts
the following Articles of Amendment to the Corporation's Articles of
Incorporation:
FIRST: The Board of Directors of the Corporation (the "Board")
establishes and designates the following Series and Classes of such Series:
Dreyfus Disciplined Intermediate Bond Fund, Class R
(100 million shares)
Dreyfus Disciplined Intermediate Bond Fund, Investor Class
(100 million shares)
Such Series and Classes are in addition to Series and Classes previously
established and designated.
SECOND: The names of each of the following Series of the Corporation
are changed as follows : "Dreyfus/Laurel U.S. Treasury Only Money Market
Fund" to "Dreyfus/Laurel Institutional U.S. Treasury Only Money Market
Fund" and "Dreyfus/Laurel Institutional Prime Money Market Fund" to
"Dreyfus Institutional Prime Money Market Fund."
THIRD: Whereas there are no shares of the following Classes or Series
of the Corporation issued or outstanding, all authorized shares of each
listed Class or Series are redesignated as authorized capital stock of the
Corporation, without designation of Class or Series, available for future
designation and classification by the Board:
Dreyfus Institutional Prime Money Market Fund (formerly "Dreyfus/Laurel
Institutional Prime Money Market Fund"), Class II
Dreyfus Institutional Prime Money Market Fund (formerly "Dreyfus/Laurel
Institutional Prime Money Market Fund"), Class III
Dreyfus/Laurel Institutional Short-Term Bond Fund, Class I
Dreyfus/Laurel Institutional Short-Term Bond Fund, Class II
Dreyfus/Laurel Institutional Short-Term Bond Fund, Class III
Dreyfus/Laurel Short-Term Government Securities Fund, Class R
Dreyfus/Laurel Short-Term Government Securities Fund, Investor Class
Dreyfus/Laurel Institutional U.S. Treasury Only Money Market Fund (formerly
"Dreyfus/Laurel U.S. Treasury Only Fund"), Class I
Dreyfus/Laurel Institutional U.S. Treasury Only Money Market Fund (formerly
"Dreyfus/Laurel U.S. Treasury Only Fund"), Class II
Dreyfus/Laurel Institutional U.S. Treasury Only Money Market Fund (formerly
"Dreyfus/Laurel U.S. Treasury Only Fund"), Class III
Laurel Ginnie Mae Fund, Class R
Laurel Ginnie Mae Fund, Investor Class
Laurel Tactical Asset Allocation Fund, Class R
Laurel Tactical Asset Allocation Fund, Investor Class
Laurel Wilshire 4500 Stock Index Fund, Class R
Laurel Wilshire 4500 Stock Index Fund, Investor Class
FOURTH: The "Class I" shares of the following Series are redesignated
as a single class of shares of such Series:
Dreyfus Institutional Prime Money Market Fund (formerly "Dreyfus/Laurel
Institutional
Prime Money Market Fund")
Dreyfus Institutional Government Money Market Fund
Dreyfus Institutional U.S. Treasury Money Market Fund
FIFTH: The aggregate number of shares of all Classes and Series of
the Corporation remains twenty-five billion (25,000,000,000), the par value
per share remains $.001, and the aggregate par value of all authorized
stock remains twenty-five million dollars ($25,000,000).
SIXTH: The Amendments contained herein were approved by a majority of
the entire Board and are limited to changes expressly permitted by Section
2-605(a)(4) of the Maryland General Corporation Law to be made without
action by the stockholders of the Corporation.
SEVENTH: The Corporation is registered with the Securities and
Exchange Commission as an open-end management investment company under the
Investment Company Act of 1940, as amended.
IN WITNESS WHEREOF, the undersigned hereby executes these Articles of
Amendment to the Corporation's Articles of Incorporation on behalf of the
Corporation, acknowledging it to be the act of the Corporation, and further
states under the penalties of perjury that, to the best of his or her
knowledge, information and belief, the matters and facts set forth herein
are true in all material respects.
Dated: October 31, 1995
THE DREYFUS/LAUREL FUNDS, INC.
Attest: /s/ Eric B. Fischman By: /s/ John E. Pelleher
____________________ ________________________
Name: Eric B. Fischman Name: John E. Pelleher
Title: Vice President and Title: Vice President and
Assistant Secretary Secretary
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
THE DREYFUS/LAUREL FUNDS, INC.
The Dreyfus/Laurel Funds, Inc. (the "Corporation"), a Maryland
Corporation, incorporated on August 6, 1987, having its principal office i
Maryland in Baltimore, Maryland, hereby certifies to the State Department of
Assessments and Taxation of Maryland that the amendment made hereby was
approved by a majority of the Corporation's entire Board of Directors (the
"Board") and is limited to changes permitted by Section 2-605 of the Maryland
General Corporation Law to be made without action by stockholders, and that:
FIRST: Pursuant to authority expressly vested in the Board by Article
FIFTH of the Articles of Incorporation of the Corporation, the Board has
heretofore duly designated, in accordance with Section 2-105(c) of the
Maryland General Corporation Law, the aggregate number of shares of capital
stock which the Corporation is authorized to issue at twenty-five billio
(25,000,000,000) shares of capital stock, par value $.001 per share, amounting
in the aggregate to a par value of twenty-five million dollars ($25,000,000).
Such shares of capital stock have heretofore been classified by the Board
among the series of the Corporation as follows:
Dreyfus Money Market Reserves, Class R
(2 billion shares)
Dreyfus Money Market Reserves, Investor Class
(2 billion shares)
Dreyfus U.S. Treasury Reserves, Class R
(1 billion shares)
Dreyfus U.S. Treasury Reserves, Investor Class
(1 billion shares)
Dreyfus Municipal Reserves, Class R
(1 billion shares)
Dreyfus Municipal Reserves, Investor Class
(1 billion shares)
Dreyfus Institutional Government Money Market Fund
(2 billion shares)
Dreyfus Institutional Prime Money Market Fund
(2 billion shares)
Dreyfus Institutional U.S. Treasury Money Market Fund
(2 billion shares)
Premier Balanced Fund, Class R
(50 million shares)
Premier Balanced Fund, Class A
(50 million shares)
Premier Balanced Fund, Class B
(50 million shares)
Premier Balanced Fund, Class C
(50 million shares)
Dreyfus Bond Market Index Fund, Class R
(100 million shares)
Dreyfus Bond Market Index Fund, Investor Class
(50 million shares)
Dreyfus Disciplined Intermediate Bond Fund, Class R
(100 million shares)
Dreyfus Disciplined Intermediate Bond Fund, Investor Class
(100 million shares)
Premier Limited Term Income Fund, Class R
(100 million shares)
Premier Limited Term Income Fund, Class A
(50 million shares)
Premier Limited Term Income Fund, Class B
(50 million shares)
Premier Limited Term Income Fund, Class C
(50 million shares)
Dreyfus Equity Income Fund, Class R
(30 million shares)
Dreyfus Equity Income Fund, Investor Class
(20 million shares)
Dreyfus Disciplined Midcap Stock Fund, Class R
(66 million shares)
Dreyfus Disciplined Midcap Stock Fund, Investor Class
(22 million shares)
Premier Small Company Stock Fund, Class R
(41 million shares)
Premier Small Company Stock Fund, Class A
(27 million shares)
Premier Small Company Stock Fund, Class B
(50 million shares)
Premier Small Company Stock Fund, Class C
(50 million shares)
Dreyfus Disciplined Stock Fund, Class R
(165 million shares)
Dreyfus Disciplined Stock Fund, Investor Class
(80 million shares)
Dreyfus Institutional S&P 500 Stock Index Fund
(70 million shares)
Dreyfus European Fund, Class R
(12 million shares)
Dreyfus European Fund, Investor Class
(8 million shares)
Dreyfus International Equity Allocation Fund, Class R
(36 million shares)
Dreyfus International Equity Allocation Fund, Investor Class
(24 million shares)
Laurel Global Income Fund, Class R
(36 million shares)
Laurel Global Income Fund, Investor Class
(24 million shares)
Laurel International Stock Fund, Class R
(36 million shares)
Laurel International Stock Fund, Investor Class
(24 million shares)
SECOND: Pursuant to authority expressly vested in the Board by Article
FIFTH of the Articles of Incorporation of the Corporation, the Board has, i
accordance with Sections 2-605(a)(4) and 2-607 of the Maryland General
Corporation Law, determined to change the name of "Dreyfus Equity Income Fund"
to "Dreyfus Disciplined Equity Income Fund."
THIRD: The aggregate number of shares of all classes and series of the
Corporation remains twenty-five billion (25,000,000,000), the par value per
share remains $.001, and the aggregate par value of all authorized stock
remains twenty-five million dollars ($25,000,000). Except as provided in the
foregoing Article SECOND of these Articles of Amendment, the designation and
aggregate number of shares of capital stock of each series and class that the
Corporation is authorized to issue remain unchanged from those set forth i
Article FIRST. All authorized shares not designated or classified above
remain available for future designation and classification by the Board.
FOURTH: The Corporation is registered with the Securities and Exchange
Commission as an open-end investment company under the Investment Company Act
of 1940, as amended.
IN WITNESS WHEREOF, the undersigned hereby executes these Articles of
Amendment on behalf of the Corporation, acknowledging it to be the act of the
Corporation, and further states under the penalties of perjury that, to the
best of his or her knowledge, information and belief, the matters and facts
set forth herein are true in all material respects.
Dated: November 22, 1995 THE DREYFUS/LAUREL FUNDS, INC.
By: /s/ Eric B. Fischman
__________________________
Name: Eric B. Fishman
Title: Vice President
Attest: /s/ John E. Pelletier
_______________________
Name: John E. Pelletier
Title: Vice President and
Secretary
APPENDIX A
FORM OF
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made this 4th day of April, 1994 between The Laurel Funds,
Inc., a Maryland corporation (hereinafter referred to as the "Investment
Company"), on behalf of the investment portfolios (individually a "Fund",
collectively the "Funds") listed hereto as Exhibit A, and Mellon Bank, N.A., a
national banking corporation (hereinafter referred to as the "Adviser").
WHEREAS, the Investment Company is engaged in business as an open-end
management company and is so registered under the Investment Company Act of
1940 (the "1940 Act"); and
WHEREAS, the Investment Company is authorized to issue shares of
common stock ("Shares") in separate funds with each such fund representing the
interests in a separate portfolio of securities and other assets; and
WHEREAS, the Investment Company currently offers shares of common
stock in the Funds, listed in Exhibit A, established by the Investment Company
with respect to which the Investment Company desires to retain the Adviser to
render investment advisory services hereunder and the Adviser is willing so to
do; and
WHEREAS, the Investment Company desires for the Adviser to provide or
otherwise arrange for the provision of other services for the Funds, including
custody, transfer agency, administrative, accounting, legal, audit and similar
services.
NOW, THEREFORE, WITNESSETH: That it is hereby agreed between the
parties hereto as follows:
1. NAME OF INVESTMENT COMPANY.
The Adviser consents to the use by the Investment Company of the name
"The Laurel Funds, Inc." so long as this Agreement or an extension, renewal or
amendment thereof remains in effect, including any such agreements with any
organization which shall have succeeded to the business of the Adviser. The
Trust agrees that if and when no such agreement is in effect it will cease to
use that name or any name indicating that it is advised by or otherwise
associated with the Adviser.
2. APPOINTMENT OF ADVISER.
(a) The Investment Company hereby appoints the Adviser to act
as investment adviser to each of the Funds for the period and on the terms
herein set forth. The Adviser accepts such appointment and agrees to render
the services herein set forth, for the compensation herein provided.
(b) In the event that the Investment Company establishes one
or more Funds other than the Funds with respect to which it desires to retain
the Adviser to render investment advisory services hereunder, it shall notify
the Adviser in writing. If the Adviser is willing to render such services it
shall notify the Investment Company in writing whereupon each of such funds
shall become a Fund hereunder and the compensation payable by such Funds to
the Adviser will be as agreed in writing at the time.
3. DUTIES OF THE ADVISER.
(a) The Adviser shall supervise the investments of the Funds,
maintain a continuous investment program for each Fund, determine what
securities shall be purchased or sold by each Fund, secure and evaluate such
information as it deems proper and take whatever action is necessary or
convenient to perform its functions, including the placing of purchase and
sale orders.
(b) The Adviser shall also provide or arrange for and
supervise the provision of by third parties. Fund's custody, transfer agency,
administrative, accounting, legal, audit and similar services.
(c) The Adviser, at its own expense, shall place all orders
for the purchase and sale of portfolio securities for the account of each Fund
with brokers or dealers selected by the Adviser. In executing portfolio
transactions and selecting brokers or dealers, the Adviser will use its best
efforts to seek on behalf of the Investment Company or any Fund thereof the
best overall terms available. In assessing the best overall terms available
for any transaction, the Adviser shall consider all factors it deems relevant,
including the breadth of
Page A-1
the market in the security, the price of the security, the financial condition
and execution capability of the broker or dealer, and the reasonableness of
the commission, if any (for the specific transaction and on a continuing
basis). In evaluating the best overall terms available and in selecting
the broker or dealer to execute a particular transaction, the Adviser may
also consider the brokerage and research services (as those terms are defined
in Section 28(e) of the Securities Exchange Act of 1934) provided to any Fund
and/or other accounts over which the Adviser or any affiliate of the Adviser
exercises investment discretion. The Adviser is authorized to pay to a broker
or dealer who provides such brokerage and research services a commission for
executing a portfolio transaction for any Fund which is in excess of the
amount of commission another broker or dealer would have charged for effecting
that transaction if, but only if, the Adviser determines in good faith that
such commission was reasonable in relation to the value of the brokerage and
research services provided by such broker or dealer _ viewed in terms of that
particular transaction or in terms of all of accounts over which investment
discretion is so exercised.
(d) All of the functions undertaken by the Adviser hereunder
shall at all times be subject to any directions of the Board of Directors
of the Investment Company, its committees or officers of the Investment
Company acting under the authority of the Board of Directors.
(e) The Adviser may enter into sub-advisory agreements, as
approved by the Board of Directors. Any sub-adviser appointed pursuant to a
sub-advisory agreement shall have full investment discretion and shall make
all determinations with respect to the investment of a Fund's assets assigned
to the sub-adviser and the purchase and sale of portfolio securities with
those assets, and such steps as may be necessary to implement its decision.
The Adviser shall not be responsible or liable for the investment merits of
any decision by a sub-adviser to purchase, hold or sell a security for a Fund.
The Adviser shall research and evaluate sub-advisers and shall advise the
Board of Directors of sub-advisers which the Adviser believes are best-suited
to invest the assets of each Fund; shall monitor and evaluate the investment
performance of each Sub-Adviser employed by the Investment Company; and shall
compensate the sub-adviser.
4. COMPENSATION OF THE ADVISER.
(a) The Investment Company agrees to pay to the Adviser, and
the Adviser agrees to accept as full compensation for the services and
facilities provided by the Adviser hereunder with respect to each of the
Funds of the Investment Company, a fee computed daily and payable monthly at
the annual rates applied to the average daily net assets of the applicable
Funds as set forth in Exhibit A attached hereto and incorporated herein, less,
in the case of each Fund, its allocable portion of the accrued fees and
expenses (including counsel fees) of the non-interested Directors of the
Investment Company.
In case of termination of this Agreement with respect to any Funds
during any month, the fee with respect to such Funds for that month shall be
reduced proportionately based upon the number of calendar days during which
it is in effect, and the fee shall be computed upon the average net assets of
such Funds for the business days during which it is so in effect.
The fees payable under this Agreement shall be calculated by
applying 1/365ths of the annual rate to the net assets of each Fund each day,
such net assets to be determined as of the close of business on
that day or that last previous business day, and shall be accrued daily.
(b) The Adviser will pay all of the Investment Company's
expenses, including the fees and other charges of third-party service
providers engaged pursuant to paragraph 3(a) or (b) above, except interest,
taxes, brokerage commissions, Rule 12b-1 distribution fees and expenses, fees
and expenses of the non-interested directors (including counsel fees), and
extraordinary expenses. The Adviser will provide the Investment Company with
all physical facilities and personnel required to carry on the business of the
Investment Company, including but not limited to office space, office
furniture, fixtures and equipment, office supplies, computer hardware and
software, and salaried and hourly paid personnel. The Adviser may at its own
expense employ others to provide all or any part of such facilities and
personnel.
5. LIMITATION OF LIABILITY OF ADVISER.
The Adviser shall not be liable for any error of judgment or mistake
of law or for any loss suffered by the Investment Company or any Funds in
connection with the performance of its obligations under this Agreement; but
nothing herein contained shall be construed to protect the Adviser against any
liability to the Investment Company by reason of willful misfeasance, bad
faith or gross negligence in the performance of its duties or by reason of
reckless disregard of its obligations and duties under the Agreement.
6. COVENANTS OF THE ADVISER.
All functions undertaken by the Adviser shall at all times conform
to, and be in accordance with, any requirements imposed by: (i) the Investment
Company Act of 1940, and any rules and regulations promulgated thereunder;
(ii) any other applicable provisions of law; (iii) the Articles of
Incorporation as amended from time to time, (iv) the By-Laws of the Investment
Company as amended from time to time; and (v) the registration statement of
the Investment Company, as amended from time to time, filed under the
Securities Act of 1933 and the Investment Company Act of 1940.
Page A-2
7. DURATION AND TERMINATION OF THIS AGREEMENT.
(a) This Agreement shall become effective with respect to the
Funds on the date hereof and, with respect to any additional Fund, on the date
of receipt by the Investment Company of notice from the Adviser in accordance
with paragraph 2(b) hereof that the Adviser is willing to serve as Adviser
with respect to such Fund. Unless terminated as herein provided, this
Agreement shall remain in full force and effect for two years from the date
hereof with respect to each Fund added to the Investment Company pursuant to
paragraph 2(b), for two years from the date on which such Fund becomes a Fund
hereunder, and shall continue in full force and effect for periods of one year
thereafter with respect to each Fund so long as such continuance with respect
to any such Fund is approved at least annually, (a) by either the Directors of
the Investment Company or by vote of a majority of the outstanding voting
Shares (as defined in the 1940 Act) of such Fund, and (b) in either event by
the vote of a majority of the Directors of the Investment Company who are not
parties to this Agreement or interested persons (as defined in the 1940 Act)
of any such party, cast in person at a meeting called for the purpose of
voting on such approval.
Any approval of this Agreement by the holders of a majority of the
outstanding Shares (as defined in the 1940 Act) of any Funds shall be
effective to continue this Agreement with respect to any such Funds
notwithstanding (a) that this Agreement has not been approved by the holders
of a majority of the outstanding Shares of any other Funds affected thereby,
and (b) that this Agreement has not been approved by the vote of a majority
of the outstanding Shares of the Investment Company, unless such approval
shall be required by any other applicable law or otherwise.
(b) This Agreement may be terminated at any time, without
payment of any penalty, by vote of the Directors of the Investment Company or
by vote of a majority of the outstanding Shares (as defined in the 1940 Act),
or by the Adviser on sixty (60) days' written notice to the other party.
(c) This Agreement shall automatically and immediately
terminate in the event of its assignment.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed the day and year above written.
THE LAUREL FUNDS, INC.
By:_____________________________
Name: Lynn C. Anderson
Title: Chairman of the Board,
and President
MELLON BANK, N.A.
By:_____________________________
Name: David Mossman
Title: F.V.P.
AMENDED
EXHIBIT A
Investment Portfolio Investment Management Fee
- -------------------- -------------------------
Dreyfus Money Market Reserves 0.50%
Dreyfus U.S. Treasury Reserves 0.50%
Dreyfus Municipal Reserves 0.50%
Dreyfus Disciplined Stock Fund 0.90%
Premier Limited Term Income Fund 0.60%
Dreyfus Institutional Prime Money Market Fund 0.15%
Dreyfus Institutional Government Money Market Fund 0.15%
Dreyfus Institutional U.S. Treasury Money Market Fund 0.15%
Dreyfus Institutional U.S. Treasury Only Money Market Fund 0.15%
Dreyfus Institutional Short-Term Bond Fund 0.20%
Ginnie Mae Portfolio 0.60%
Tactical Asset Allocation Portfolio 0.65%
Dreyfus Institutional S&P 500 Stock Index Fund 0.20%
Dreyfus Disciplined Midcap Stock Fund 1.10%
Premier Balanced Fund 1.00%
Dreyfus Bond Market Index Fund 0.40%
Dreyfus European Fund 1.75%
Dreyfus Equity Income Fund 0.90%
Dreyfus Short Term Government Securities Fund 0.55%
Premier Small Company Stock Fund 1.25%
Wilshire 4500 Stock Index Fund 0.50%
Dreyfus International Equity Allocation Fund 1.50%
Dreyfus Disciplined Intermediate Bond Fund 0.55%
THE DREYFUS/LAUREL FUNDS, INC.
(formerly, The Laurel Funds, Inc. and prior thereto The
Boston Company Funds, Inc.)
CUSTODY AGREEMENT
AGREEMENT dated as of April 4, 1994, as amended, November 1, 1995,
between The Dreyfus/Laurel Funds, Inc., a Maryland corporation having its
principal office and place of business at 200 Park Avenue, New York, NY
10166 (the "Fund"), and MELLON BANK, N.A., a national banking association
with its principal place of business at One Mellon Bank Center, Pittsburgh,
Pennsylvania 15258 (the "Custodian").
W I T N E S S E T H:
That for and in consideration of the mutual promises hereinafter set
forth, the Fund and the Custodian agree as follows:
1. Definitions.
Whenever used in this Agreement or in any Schedules or Appendices to
this Agreement, the following words and phrases, unless the context
otherwise requires, shall have the following meanings:
(a) "Authorized Person" shall be deemed to include the Chairman of
the Board of Directors, the President, and any Vice President,
the Secretary, the Treasurer or any other person, whether or not
any such person is an officer or employee of the Fund, duly
authorized by the Board of Directors of the Fund to give Oral
Instructions and Written Instructions on behalf of the Fund and
listed in the certification annexed hereto as Appendix A or such
other certification as may be received by the Custodian from time
to time.
(b) "Book-Entry System" shall mean the Federal Reserve/Treasury
book-entry system for United States and federal agency
Securities, its successor or successors and its nominee or
nominees.
(c) "Certificate" shall mean any notice, instruction or other
instrument in writing, authorized or required by this Agreement
to be given to the Custodian, which is actually received by the
Custodian and signed on behalf of the Fund by any two Authorized
Persons or any two officers thereof.
(d) "Articles of Incorporation" shall mean the Articles of
Incorporation of the Fund dated July 31, 1987, as the same may be
amended from time to time.
(e) "Depository" shall mean The Depository Trust Company ("DTC"), a
clearing agency registered with the Securities and Exchange
Commission under Section 17(a) of the Securities Exchange Act of
1934, as amended, its successor or successors and its nominee or
nominees, in which the Custodian is hereby specifically
authorized to make deposits. The term "Depository" shall further
mean and include any other person to be named in a Certificate
authorized to act as a depository under the 1940 Act, its
successor or successors and its nominee or nominees.
(f) "Money Market Security" shall be deemed to include, without
limitation, debt obligations issued or guaranteed as to interest
and principal by the Government of the United States or agencies
or instrumentalities thereof, commercial paper, bank certificates
of deposit, bankers' acceptances and short-term corporate
obligations, where the purchase or sale of such securities
normally requires settlement in federal funds on the same day as
such purchase or sale, and repurchase and reverse repurchase
agreements with respect to any of the foregoing types of
securities.
(g) "Oral Instructions" shall mean verbal instructions actually
received by the Custodian from a person reasonably believed by
the Custodian to be an Authorized Person.
(h) "Prospectus" shall mean the Fund's current prospectus(es) and
statement of additional information relating to the registration
of the Fund's Shares under the Securities Act of 1933, as
amended.
(i) "Shares" refers to shares of common stock, $.001 par value per
share, of the Fund.
(j) "Security" or "Securities" shall be deemed to include bonds,
debentures, notes, stocks, shares, evidences of indebtedness, and
other securities, commodities interests and investments from time
to time owned by the Fund.
(k) "Transfer Agent" shall mean the person which performs as the
transfer agent, dividend disbursing agent and shareholder
servicing agent functions for the Fund.
(l) "Written Instructions" shall mean a written communication
actually received by the Custodian from a person reasonably
believed by the Custodian to be an Authorized Person by any
system whereby the receiver of such communication is able to
verify through codes or otherwise with a reasonable degree of
certainty the authenticity of the sender of such communication.
(m) The "1940 Act" refers to the Investment Company Act of 1940, and
the Rules and Regulations thereunder, all as amended from time to
time.
2. Appointment of Custodian.
(a) The Fund hereby constitutes and appoints the Custodian as
custodian of all the Securities and monies at the time owned by or in
the possession of the Fund during the period of this Agreement.
(b) The Custodian hereby accepts appointment as such custodian and
agrees to perform the duties thereof as hereinafter set forth.
3. Compensation.
The Custodian will be deemed to be compensated for the
performance of its obligations hereunder by the payment by the Fund of
investment management fees to The Dreyfus Corporation, as investment
manager, pursuant to an Investment Management Agreement between the
Fund and Mellon Bank, N.A., dated April 4, 1994 as transferred to The
Dreyfus Corporation pursuant to the Assignment and Assumption of
Investment Management Agreement, dated October 17, 1994.
4. Custody of Cash and Securities.
(a) Receipt and Holding of Assets.
The Fund will deliver or cause to be delivered to the Custodian all
Securities and monies owned by the Fund at any time during the period
of this Agreement. The Custodian will not be responsible for such
Securities and monies until actually received by it. The Fund shall
instruct the Custodian from time to time in its sole discretion, by
means of Written Instructions, or, in connection with the purchase or
sale of Money Market Securities, by means of Oral Instructions or
Written Instructions, as to the manner in which and in what amounts
Securities and monies are to be deposited on behalf of the Fund in the
Book-Entry System or the Depository; provided, however, that prior to
the deposit of Securities of the Fund in the Book-Entry System or the
Depository, including a deposit in connection with the settlement of a
purchase or sale, the Custodian shall have received a Certificate
specifically approving such deposits by the Custodian in the
Book-Entry System or the Depository. Securities and monies of the Fund
deposited in the Book-Entry System or the Depository will be
represented in accounts which include only assets held by the
Custodian for customers, including but not limited to accounts which
the Custodian acts in a fiduciary or representative capacity.
(b) Accounts and Disbursements. The Custodian shall establish and
maintain a separate account for the Fund and shall credit to the
separate account all monies received by it for the account of the Fund
and shall disburse the same only:
1. In payment for Securities purchased for the Fund, as provided in
Section 5 hereof;
2. In payment of dividends or distributions with respect to the
Shares of the Fund, as provided in Section 7 hereof;
3. In payment of original issue or other taxes with respect to the
Shares of the Fund, as provided in Section 8 hereof;
4. In payment for Shares which have been redeemed by the Fund, as
provided in Section 8 hereof;
5. Pursuant to Written Instructions, or with respect to Money
Market Securities, Oral Instructions or Written Instructions,
setting forth the name and address of the person to whom the payment
is to be made, the amount to be paid and the purpose for which
payment is to be made; or
6. In payment of fees and in reimbursement of the expenses and
liabilities of the Custodian attributable to the Fund, as provided
in Section 3 and Section 12(h) hereof.
(c) Confirmation and Statements. Promptly after the close of
business on each day, the Custodian shall furnish the Fund with
confirmations and a summary of all transfers to or from the account
of the Fund during said day. Where securities purchased by the Fund
are in a fungible bulk of securities registered in the name of the
Custodian (or its nominee) or shown on the Custodian's account on
the books of the Depository or the Book-Entry System, the Custodian
shall by book entry or otherwise identify the quantity of those
securities belonging to the Fund. At least monthly, the Custodian
shall furnish the Fund with a detailed statement of the Securities
and monies held for the Fund under this Agreement.
(d) Registration of Securities and Physical Separation. All
Securities held for the Fund which are issued or issuable only in
bearer form, except such Securities as are held in the Book-Entry
System, shall be held by the Custodian in that form; all other
Securities held for the Fund may be registered in the name of the
Fund, in the name of any duly appointed registered nominee of the
Custodian as the Custodian may from time to time determine, or in
the name of the Book-Entry System or the Depository or their
successor or successors, or their nominee or nominees. The Fund
reserves the right to instruct the Custodian as to the method of
registration and safekeeping of the Securities. The Fund agrees to
furnish to the Custodian appropriate instruments to enable the
Custodian to hold or deliver in proper form for transfer, or to
register in the name of its registered nominee or in the name of the
Book-Entry System or the Depository, any Securities which it may
hold for the account of the Fund and which may from time to time be
registered in the name of the Fund. The Custodian shall hold all
such Securities specifically allocated to the Fund which are not
held in the Book-Entry System or the Depository in a separate
account for the Fund in the name of the Fund physically segregated
at all times from those of any other person or persons.
(e) Segregated Accounts. Upon receipt of a Written Instruction the
Custodian will establish segregated accounts on behalf of the Fund
to hold liquid or other assets as it shall be directed by a Written
Instruction and shall increase or decrease the assets in such
Segregated Accounts only as it shall be directed by subsequent
Written Instruction.
(f) Collection of Income and Other Matters Affecting Securities.
Unless otherwise instructed to the contrary by a Written
Instruction, the Custodian by itself, or through the use of the
Book-Entry System or the Depository with respect to Securities
therein deposited, shall with respect to all Securities held for the
Fund in accordance with this Agreement:
1. Collect all income due or payable;
2. Present for payment and collect the amount payable upon
all Securities which may mature or be called, redeemed or
retired, or otherwise become payable. Notwithstanding the
foregoing, the Custodian shall have no responsibility to
the Fund for monitoring or ascertaining any call,
redemption or retirement dates with respect to put bonds
which are owned by the Fund and held by the Custodian or
its nominees. Nor shall the Custodian have any
responsibility or liability to the Fund for any loss
by the Fund for any missed payments or other defaults
resulting therefrom; unless the Custodian received timely
notification from the Fund specifying the time, place and
manner for the presentment of any such put bond owned by
the Fund and held by the Custodian or its nominee. The
Custodian shall not be responsible and assumes no
liability to the Fund for the accuracy or completeness of
any notification the Custodian may furnish to the Fund
with respect to put bonds;
3. Surrender Securities in temporary form for definitive
Securities;
4. Execute any necessary declarations or certificates of
ownership under the Federal income tax laws or the laws or
regulations of any other taxing authority now or hereafter in
effect; and
5. Hold directly, or through the Book-Entry System or the
Depository with respect to Securities therein deposited, for
the account of the Fund all rights and similar Securities
issued with respect to any Securities held by the Custodian
hereunder for the Fund.
(g) Delivery of Securities and Evidence of Authority. Upon receipt of
a Written Instruction and not otherwise, except for subparagraphs 5,
6, 7 and 8 of this section 4(g) which may be effected by Oral or
Written Instructions, the Custodian, directly or through the use of
the Book-Entry System or the Depository, shall:
1. Execute and deliver or cause to be executed and delivered to
such persons as may be designated in such Written Instructions,
proxies, consents, authorizations, and any other instruments whereby
the authority of the Fund as owner of any Securities may be
exercised;
2. Deliver or cause to be delivered any Securities held for the
Fund in exchange for other Securities or cash issued or paid in
connection with the liquidation, reorganization, refinancing,
merger, consolidation or recapitalization of any corporation, or the
exercise of any conversion privilege;
3. Deliver or cause to be delivered any Securities held for the
Fund to any protective committee, reorganization committee or other
person in connection with the reorganization, refinancing, merger,
consolidation or recapitalization or sale of assets of any
corporation, and receive and hold under the terms of this Agreement
in the separate account for the Fund such certificates of deposit,
interim receipts or other instruments or documents as may be issued
to it to evidence such delivery;
4. Make or cause to be made such transfers or exchanges of the
assets specifically allocated to the separate account of the Fund
and take such other steps as shall be stated in Written Instructions
to be for the purpose of effectuating any duly authorized plan of
liquidation, reorganization, merger, consolidation or
recapitalization of the Fund;
5. Deliver Securities upon sale of such Securities for the account
of the Fund pursuant to Section 5;
6. Deliver Securities upon the receipt of payment in connection
with any repurchase agreement related to such Securities entered
into by the Fund;
7. Deliver Securities owned by the Fund to the issuer thereof or
its agent when such Securities are called, redeemed, retired or
otherwise become payable; provided, however, that in any such case
the cash or other consideration is to be delivered to the Custodian.
Notwithstanding the foregoing, the Custodian shall have no
responsibility to the Fund for monitoring or ascertaining any call,
redemption or retirement dates with respect to the put bonds which
are owned by the Fund and held by the Custodian or its nominee. Nor
shall the Custodian have any responsibility or liability to the Fund
for any loss by the Fund for any missed payment or other default
resulting therefrom; unless the Custodian received timely
notification from the Fund specifying the time, place and manner for
the presentment of any such put bond owned by the Fund and held by
the Custodian or its nominee. The Custodian shall not be responsible
and assumes no liability to the Fund for the accuracy or
completeness of any notification the Custodian may furnish to the
Fund with respect to put bonds;
8. Deliver Securities for delivery in connection with any loans of
securities made by the Fund but only against receipt of adequate
collateral as agreed upon from time to time by the Custodian and the
Fund which may be in the form of cash or obligations issued by the
United States government, its agencies or instrumentalities;
9. Deliver Securities for delivery as security in connection with
any borrowings by the Fund requiring a pledge of Fund assets, but
only against receipt of amounts borrowed;
10. Deliver Securities upon receipt of Written Instructions from
the Fund for delivery to the Transfer Agent or to the holders of
Shares in connection with distributions in kind, as may be described
from time to time in the Fund's Prospectus, in satisfaction of
requests by holders of Shares for repurchase or redemption;
11. Deliver Securities as collateral in connection with short sales
by the Fund of common stock for which the Fund owns the stock or
owns preferred stocks or debt securities convertible or
exchangeable, without payment or further consideration, into shares
of the common stock sold short;
12. Deliver Securities for any purpose expressly permitted by and
in accordance with procedures described in the Fund's Prospectus;
and
13. Deliver Securities for any other proper business purpose, but
only upon receipt of, in addition to Written Instructions, a
certified copy of a resolution of the Board of Directors signed by
an Authorized Person and certified by the Secretary of the Fund,
specifying the Securities to be delivered, setting forth the purpose
for which such delivery is to be made, declaring such purpose to be
a proper business purpose, and naming the person or persons to whom
delivery of such Securities shall be made.
(h) Endorsement and Collection of Checks, Etc. The Custodian is
hereby authorized to endorse and collect all checks, drafts or other
orders for the payment of money received by the Custodian for the
account of the Fund.
5. Purchase and Sale of Investments of the Fund.
(a) Promptly after each purchase of Securities for the Fund, the Fund
shall deliver to the Custodian (i) with respect to each purchase of
Securities which are not Money Market Securities, a Written
Instruction, and (ii) with respect to each purchase of Money Market
Securities, either a Written Instruction or Oral Instruction, in
either case specifying with respect to each purchase: (1) the name of
the issuer and the title of the Securities; (2) the number of shares
or the principal amount purchased and accrued interest, if any; (3)
the date of purchase and settlement; (4) the purchase price per unit;
(5) the total amount payable upon such purchase; (6) the name of the
person from whom or the broker through whom the purchase was made, if
any; (7) whether or not such purchase is to be settled through the
Book-Entry System or the Depository; and (8) whether the Securities
purchased are to be deposited in the Book-Entry System or the
Depository. The Custodian shall receive the Securities purchased by or
for the Fund and upon receipt of Securities shall pay out of the
monies held for the account of the Fund the total amount payable upon
such purchase, provided that the same conforms to the total amount
payable as set forth in such Written or Oral Instruction.
(b) Promptly after each sale of Securities of the Fund, the Fund
shall deliver to the Custodian (i) with respect to each sale of
Securities which are not Money Market Securities, a Written
Instruction, and (ii) with respect to each sale of Money Market
Securities, either Written Instruction or Oral Instructions, in either
case specifying with respect to such sale: (1) the name of the issuer
and the title of the Securities; (2) the number of shares or principal
amount sold, and accrued interest, if any; (3) the date of sale; (4)
the sale price per unit; (5) the total amount payable to the Fund upon
such sale; (6) the name of the broker through whom or the person to
whom the sale was made; and (7) whether or not such sale is to be
settled through the Book-Entry System or the Depository. The Custodian
shall deliver or cause to be delivered the Securities to the broker or
other person designated by the Fund upon receipt of the total amount
payable to the Fund upon such sale, provided that the same conforms to
the total amount payable to the Fund as set forth in such Written or
Oral Instruction. Subject to the foregoing, the Custodian may accept
payment in such form as shall be satisfactory to it, and may deliver
Securities and arrange for payment in accordance with the customs
prevailing among dealers in Securities.
6. Lending of Securities.
If the Fund is permitted by the terms of the Articles of
Incorporation and as disclosed in its Prospectus to lend Securities,
within 24 hours after each loan of Securities, the Fund shall deliver
to the Custodian a Written Instruction specifying with respect to each
such loan: (a) the name of the issuer and the title of the Securities;
(b) the number of shares or the principal amount loaned; (c) the date
of loan and delivery; (d) the total amount to be delivered to the
Custodian, and specifically allocated against the loan of the
Securities, including the amount of cash collateral and the premium,
if any, separately identified; (e) the name of the broker, dealer or
financial institution to which the loan was made; and (f) whether the
Securities loaned are to be delivered through the Book-Entry System or
the Depository.
Promptly after each termination of a loan of Securities,
the Fund shall deliver to the Custodian a Written Instruction
specifying with respect to each such loan termination and return of
Securities: (a) the name of the issuer and the title of the Securities
to be returned; (b) the number of shares or the principal amount to be
returned; (c) the date of termination; (d) the total amount to be
delivered by the Custodian (including the cash collateral for such
Securities minus any offsetting credits as described in said Written
Instruction); (e) the name of the broker, dealer or financial
institution from which the Securities will be returned; and (f)
whether such return is to be effected through the Book-Entry System or
the Depository. The Custodian shall receive all Securities returned
from the broker, dealer or financial institution to which such
Securities were loaned and upon receipt thereof shall pay the total
amount payable upon such return of Securities as set forth in the
Written Instruction. Securities returned to the Custodian shall be
held as they were prior to such loan.
7. Payment of Dividends or Distributions.
(a) The Fund shall furnish to the Custodian the vote of the Board of
Directors of the Fund certified by the Secretary (i) authorizing the
declaration of distributions on a specified periodic basis and
authorizing the Custodian to rely on Oral or Written Instructions
specifying the date of the declaration of such distribution, the date
of payment thereof, the record date as of which shareholders entitled
to payment shall be determined, the amount payable per Share to the
shareholders of record as of the record date and the total amount
payable to the Transfer Agent on the payment date, or (ii) setting
forth the date of declaration of any distribution by the Fund, the
date of payment thereof, the record date as of which shareholders
entitled to payment shall be determined, the amount payable per share
to the shareholders of record as of the record date and the total
amount payable to the Transfer Agent on the payment date.
(b) Upon the payment date specified in such vote, Oral Instructions,
or Written Instructions, as the case may be, the Custodian shall pay
out the total amount payable to the Transfer Agent of the Fund.
8. Sale and Redemption of Shares of the Fund.
(a) Whenever the Fund shall sell any Shares, the Fund shall deliver
or cause to be delivered to the Custodian a Written Instruction duly
specifying:
1. The number of Shares sold, trade date, and price; and
2. The amount of money to be received by the Custodian for the sale
of such Shares.
The Custodian understands and agrees that Written Instructions
may be furnished subsequent to the purchase of Shares and that the
information contained therein will be derived from the sales of Shares
as reported to the Fund by the Transfer Agent.
(b) Upon receipt of such money from the Transfer Agent, the Custodian
shall credit such money to the separate account of the Fund.
(c) Upon issuance of any Shares in accordance with the foregoing
provisions of this Section 8, the Custodian shall pay all original
issue or other taxes required to be paid in connection with such
issuance upon the receipt of a Written Instruction specifying the
amount to be paid.
(d) Except as provided hereafter, whenever any Shares are redeemed,
the Fund shall cause the Transfer Agent to promptly furnish to the
Custodian Written Instructions, specifying:
1. The number of Shares redeemed; and
2. The amount to be paid for the Shares redeemed.
The Custodian further understands that the information
contained in such Written Instructions will be derived from the
redemption of Shares as reported to the Fund by the Transfer Agent.
(e) Upon receipt from the Transfer Agent of advice setting forth the
number of Shares received by the Transfer Agent for redemption and
that such Shares are valid and in good form for redemption, the
Custodian shall make payment to the Transfer Agent of the total amount
specified in a Written Instruction issued pursuant to paragraph (d) of
this Section 8.
(f) Notwithstanding the above provisions regarding the redemption of
Shares, whenever such Shares are redeemed pursuant to any check
redemption privilege which may from time to time be offered by the
Fund, the Custodian, unless otherwise instructed by a Written
Instruction shall, upon receipt of advice from the Fund or its agent
stating that the redemption is in good form for redemption
in accordance with the check redemption procedure, honor the check
presented as part of such check redemption privilege out of the monies
specifically allocated to the Fund in such advice for such purpose.
9. Indebtedness.
(a) The Fund will cause to be delivered to the Custodian by any bank
(excluding the Custodian) from which the Fund borrows money for
temporary administrative or emergency purposes using Securities as
collateral for such borrowings, a notice or undertaking in the form
currently employed by any such bank setting forth the amount which
such bank will loan to the Fund against delivery of a stated amount of
collateral. The Fund shall promptly deliver to the Custodian Written
Instructions stating with respect to each such borrowing: (1) the name
of the bank; (2) the amount and terms of the borrowing, which may be
set forth by incorporating by reference an attached promissory note,
duly endorsed by the Fund, or other loan agreement; (3) the time and
date, if known, on which the loan is to be entered into (the
"borrowing date"); (4) the date on which the loan becomes due and
payable; (5) the total amount payable to the Fund on the borrowing
date; (6) the market value of Securities to be delivered as collateral
for such loan, including the name of the issuer, the title and the
number of shares or the principal amount of any particular Securities;
(7) whether the Custodian is to deliver such collateral through the
Book-Entry System or the Depository; and (8) a statement that such
loan is in conformance with the 1940 Act and the Fund's Prospectus.
(b) Upon receipt of the Written Instruction referred to in
subparagraph (a) above, the Custodian shall deliver on the borrowing
date the specified collateral and the executed promissory note, if
any, against delivery by the lending bank of the total amount of the
loan payable, provided that the same conforms to the total amount
payable as set forth in the Written Instruction. The Custodian may, at
the option of the lending bank, keep such collateral in its
possession, but such collateral shall be subject to all rights therein
given the lending bank by virtue of any promissory note or loan
agreement. The Custodian shall deliver as additional collateral in the
manner directed by the Fund from time to time such Securities as may
be specified in Written Instruction to collateralize further any
transaction described in this Section 9. The Fund shall cause all
Securities released from collateral status to be returned directly to
the Custodian, and the Custodian shall receive from time to time such
return of collateral as may be tendered to it. In the event that the
Fund fails to specify in Written Instruction all of the information
required by this Section 9, the Custodian shall not be under any
obligation to deliver any Securities. Collateral returned to the
Custodian shall be held hereunder as it was prior to being used as
collateral.
10. Persons Having Access to Assets of the Fund.
(a) No director or agent of the Fund, and no officer, director,
employee or agent of the Fund's investment adviser, of any
sub-investment adviser of the Fund, or of the Fund's administrator,
shall have physical access to the assets of the Fund held by the
Custodian or be authorized or permitted to withdraw any investments of
the Fund, nor shall the Custodian deliver any assets of the Fund to
any such person. No officer, director, employee or agent of the
Custodian who holds any similar position with the Fund's investment
adviser, with any sub-investment adviser of the Fund or with the
Fund's administrator shall have access to the assets of the Fund.
(b) Nothing in this Section 10 shall prohibit any officer, employee
or agent of the Fund, or any officer, director, employee or agent of
the investment adviser, of any sub-investment adviser of the Fund or
of the Fund's administrator, from giving Oral Instructions or Written
Instructions to the Custodian or executing a Certificate so long as it
does not result in delivery of or access to assets of the Fund
prohibited by paragraph (a) of this Section 10.
11. Overdraft Facility and Security for Payment.
In the event that the Custodian is directed by Written
Instruction (or Oral Instructions confirmed in writing) to make any
payment or transfer of funds on behalf of the Fund for which there
would be, at the close of business on the date of such payment or
transfer, insufficient funds held by the Custodian on behalf of the
Fund, the Custodian may, in its sole discretion, provide an overdraft
(an "Overdraft") to the Fund in an amount sufficient to allow the
completion of such payment or transfer. Any Overdraft provided
hereunder: (a) shall be payable on the next Business Day, unless
otherwise agreed by the Fund and the Custodian; and (b) shall accrue
interest from the date of the Overdraft to the date of payment in full
by the Fund at a rate agreed upon in writing, from time to time, by
the Custodian and the Fund. The Custodian and the Fund acknowledge
that the purpose of such Overdraft is to temporarily finance the
purchase of securities for prompt delivery in accordance with the
terms hereof, to meet unanticipated or unusual redemptions, or to meet
other emergency expenses not reasonably foreseeable by the Fund. The
Custodian shall promptly notify the Fund in writing (an "Overdraft
Notice") of any Overdraft by facsimile transmission or in such other
manner as the Fund and the Custodian may agree in writing. To secure
payment of any Overdraft, the Fund hereby grants to the Custodian a
continuing security interest in and right of setoff against the
Securities in the Fund's account from time to time in the full amount
of such Overdraft. Shall the Fund fail to pay promptly any amounts
owed hereunder, the Custodian shall be entitled to use available cash
in the Fund's account and to liquidate Securities in the account as is
necessary to meet the Fund's obligations under the Overdraft. In any
such case, and without limiting the foregoing, the Custodian shall be
entitled to take such other action(s) or exercise such other options,
powers and rights as the Custodian now or hereafter has as a secured
creditor under the Maryland Uniform Commercial Code or any other
applicable law.
12. Concerning the Custodian.
(a) Standard of Conduct. Except as otherwise provided herein, neither
the Custodian nor its nominee shall be liable for any loss or damage,
including counsel fees, resulting from its action or omission to act
or otherwise, except for any such loss or damage arising out of its
own negligence or willful misconduct. The Custodian may, with respect
to questions of law, apply for and obtain the advice and opinion of
counsel to the Fund or of its own counsel, at the expense of the Fund,
and shall be fully protected with respect to anything done or omitted
by it in good faith in conformity with such advice or opinion. The
Custodian shall be liable to the Fund for any loss or damage resulting
from the use of the Book-Entry System or the Depository arising by
reason of any negligence, misfeasance or misconduct on the part of the
Custodian or any of its employees or agents.
(b) Limit of Duties. Without limiting the generality of the
foregoing, the Custodian shall be under no duty or obligation to
inquire into, and shall not be liable for:
l. The validity of the issue of any Securities purchased by the
Fund, the legality of the purchase thereof, or the propriety of the
amount paid therefor;
2. The legality of the sale of any Securities by the Fund or
the propriety of the amount for which the same are sold;
3. The legality of the issue or sale of any Shares, or the
sufficiency of the amount to be received therefore;
4. The legality of the redemption of any Shares, or the propriety
of the amount to be paid therefor;
5. The legality of the declaration or payment of any distribution
of the Fund; or
6. The legality of any borrowing for temporary or emergency
administrative purposes.
(c) No Liability Until Receipt. The Custodian shall not be liable
for, or considered to be the Custodian of, any money, whether or not
represented by any check, draft, or other instrument for the payment
of money, received by it on behalf of the Fund until the Custodian
actually receives and collects such money directly or by the final
crediting of the account representing the Fund's interest in the
Book-Entry System or the Depository.
(d) Amounts Due from Transfer Agent. The Custodian shall not be under
any duty or obligation to take action to effect collection of any
amount due to the Fund from the Transfer Agent nor to take any action
to effect payment or distribution by the Transfer Agent of any amount
paid by the Custodian to the Transfer Agent in accordance with this
Agreement.
(e) Collection Where Payment Refused. The Custodian shall not be
under any duty or obligation to take action to effect collection of
any amount, if the Securities upon which such amount is payable are in
default, or if payment is refused after due demand or presentation,
unless and until (a) it shall be directed to take such action by a
Certificate and (b) it shall be assured to its satisfaction of
reimbursement of its costs and expenses in connection with any such
action.
(f) Appointment of Agents and Sub-Custodians. The Custodian may
appoint one or more banking institutions, including but not limited to
banking institutions located in foreign countries, to act as
Depository or Depositories or as SubCustodian or as SubCustodians of
Securities and monies at any time owned by the Fund, upon terms and
conditions specified in a Certificate. The Custodian shall use
reasonable care in selecting a Depository and/or Sub-Custodian located
in a country other than the United States ("Foreign Sub-Custodian"),
and shall oversee the maintenance of any Securities or monies of the
Fund by any Foreign SubCustodian. In addition, the Custodian shall
hold the Fund harmless from, and indemnify the Fund against, any loss
that occurs as a result of the failure of any Foreign Sub-Custodian to
exercise reasonable care with respect to the safekeeping of Securities
and monies of the Fund.
(g) No Duty to Ascertain Authority. The Custodian shall not be under
any duty or obligation to ascertain whether any Securities at any time
delivered to or held by it for the Fund are such as may properly be
held by the Fund under the provisions of the Articles of Incorporation
and the Fund's Prospectus.
(h) Reliance on Certificates and Instructions. The Custodian shall be
entitled to rely upon any Certificate, notice or other instrument in
writing received by the Custodian and reasonably believed by the
Custodian to be genuine and to be signed by two officers of the Fund.
The Custodian shall be entitled to rely upon any Written Instructions
or Oral Instructions actually received by the Custodian pursuant to
the applicable Sections of this Agreement and reasonably believed by
the Custodian to be genuine and to be given by an Authorized Person.
The Fund agrees to forward to the Custodian Written Instructions from
an Authorized Person confirming such Oral Instructions in such manner
so that such Written Instructions are received by the Custodian,
whether by hand delivery, telex or otherwise, by the close of business
on the same day that such Oral Instructions are given to the
Custodian. The Fund agrees that the fact that such confirming
instructions are not received by the Custodian shall in no way affect
the validity of the transactions or enforceability of the transactions
hereby authorized by the Fund. The Fund agrees that the Custodian
shall incur no liability to the Fund in acting upon Oral Instructions
given to the Custodian hereunder concerning such transactions provided
such instructions reasonably appear to have been received from a duly
Authorized Person.
(i) Inspection of Books and Records. The books and records of the
Custodian shall be open to inspection and audit at reasonable times by
officers and auditors employed by the Fund and by the appropriate
employees of the Securities and Exchange Commission.
The Custodian shall provide the Fund with any report obtained
by the Custodian on the system of internal accounting control of the
Book-Entry System or the Depository and with such reports on its own
systems of internal accounting control as the Fund may reasonably
request from time to time.
13. Term and Termination.
(a) This Agreement shall become effective on the date first set forth
above (the "Effective Date") and shall continue in effect thereafter
as the parties may mutually agree.
(b) Either of the parties hereto may terminate this Agreement by
giving to the other party a notice in writing specifying the date of
such termination, which shall be not less than 60 days after the date
of receipt of such notice. In the event such notice is given by the
Fund, it shall be accompanied by a certified vote of the Board of
Directors of the Fund, electing to terminate this Agreement and
designating a successor custodian or custodians, which shall be a
person qualified to so act under the 1940 Act.
In the event such notice is given by the Custodian, the Fund
shall, on or before the termination date, deliver to the Custodian a
certified vote of the Board of Directors of the Fund, designating a
successor custodian or custodians. In the absence of such designation
by the Fund, the Custodian may designate a successor custodian, which
shall be a person qualified to so act under the 1940 Act. If the Fund
fails to designate a successor custodian, the Fund shall upon the date
specified in the notice of termination of this Agreement and upon the
delivery by the Custodian of all Securities (other than Securities
held in the Book-Entry System which cannot be delivered to the Fund)
and monies then owned by the Fund, be deemed to be its own custodian,
and the Custodian shall thereby be relieved of all duties and
responsibilities pursuant to this Agreement, other than the duty with
respect to Securities held in the Book-Entry System which cannot be
delivered to the Fund.
(c) Upon the date set forth in such notice under paragraph (b) of
this Section 13, this Agreement shall terminate to the extent
specified in such notice, and the Custodian shall upon receipt of a
notice of acceptance by the successor custodian on that date deliver
directly to the successor custodian all Securities and monies then
held by the Custodian on behalf of the Fund, after deducting all fees,
expenses and other amounts for the payment or reimbursement of which
it shall then be entitled.
14. Miscellaneous.
(a) Annexed hereto as Appendix A is a certification signed by the
Secretary of the Fund setting forth the names and the signatures of
the present Authorized Persons. The Fund agrees to furnish to the
Custodian a new certification in similar form in the event that any
such present Authorized Person ceases to be such an Authorized Person
or in the event that other or additional Authorized Persons are
elected or appointed. Until such new certification shall be received,
the Custodian shall be fully protected in acting under the provisions
of this Agreement upon Oral Instructions or signatures of the present
Authorized Persons as set forth in the last delivered certification.
(b) Annexed hereto as Appendix B is a certification signed by the
Secretary of the Fund setting forth the names and the signatures of
certain officers of the Fund. The Fund agrees to furnish to the
Custodian a new certification in similar form in the event any such
present officer ceases to be an officer of the Fund or in the event
that other or additional officers are elected or appointed. Until such
new certification shall be received, the Custodian shall be fully
protected in acting under the provisions of this Agreement upon the
signature of the officers as set forth in the last delivered
certification.
(c) Any notice or other instrument in writing, authorized or required
by this Agreement to be given to the Custodian, shall be sufficiently
given if addressed to the Custodian and mailed or delivered to it at
its offices at One Mellon Bank Center, Pittsburgh, Pennsylvania 15258
or at such other place as the Custodian may from time to time
designate in writing.
(d) Any notice or other instrument in writings authorized or required
by this Agreement to be given to the Fund shall be sufficiently given
if addressed to the Fund or the Fund and mailed or delivered to it at
its offices at One Mellon Bank Center, Pittsburgh, Pennsylvania 15258
or at such other place as the Fund may from time to time designate in
writing.
(e) This Agreement may not be amended or modified in any manner
except by a written agreement executed by both parties with the same
formality as this Agreement, (i) authorized and approved by a vote of
the Board of Directors of the Fund, including a majority of the
members of the Board of Directors of the Fund who are not "interested
persons" of the Fund (as defined in the 1940 Act), or (ii) authorized
and approved by such other procedures as may be permitted or required
by the 1940 Act.
(f) This Agreement shall extend to and shall be binding upon the
parties hereto, and their respective successors and assigns; provided,
however, that this Agreement shall not be assignable by the Fund
without the written consent of the Custodian, or by the Custodian
without the written consent of the Fund authorized or approved by a
vote of the Board of Directors of the Fund, and any attempted
assignment without such written consent shall be null and void.
(g) The Fund represents that a copy of the Articles of Incorporation
are on file with the State of Maryland.
(h) This Agreement shall be construed in accordance with the laws of
the State of Pennsylvania.
(i) The captions of the Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions
hereof or otherwise affect their construction or effect.
(j) This agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original, but such counterparts
shall, together, constitute only one instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective representatives duly authorized as of the
day and year first above written.
THE DREYFUS/LAUREL FUNDS, INC.
By: __________________________
Name: Marie E. Connolly
Title: President
MELLON BANK, N.A.
By: ___________________________
Name: David K. Mossman
Title: F.V.P.
FORM OF
APPENDIX A
I, John E. Pelletier, Secretary of The Dreyfus/Laurel Funds, Inc., a
corporation organized under the laws of The State of Maryland (the
"Fund"), do hereby certify that:
The following individuals have been duly authorized as Authorized
Persons to give Oral Instructions and Written Instructions on behalf of the
Fund and the signatures set forth opposite their respective names are their
true and correct signatures:
Name Signature
Marie E. Connolly _________________________
John E. Pelletier _________________________
Frederick C. Dey _________________________
Eric B. Fischman _________________________
Richard W. Healy _________________________
______________________________________
Secretary
Dated:
FORM OF
APPENDIX B
I, John E. Pelletier, Secretary of The Dreyfus/Laurel Funds, Inc., a
corporation organized under the laws of The State of Maryland (the "Fund"),
do hereby certify that:
The following individuals serve in the following positions with the
Fund and each individual has been duly elected or appointed to each such
position and qualified therefor in conformity with the Fund's Articles of
Incorporation and the signatures set forth opposite their respective names
are their true and correct signatures:
Name Position Signature
Marie E. Connolly President and Treasurer ________________________
John E. Pelletier Vice President and Secretary ________________________
Frederick C. Dey Vice President ________________________
Eric B. Fischman Vice President ________________________
Richard W. Healey Vice President ________________________
_______________________________________
Secretary
Dated:
