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. 43 /X/
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /_/
Amendment No. 43 /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):
/X/ immediately upon filing pursuant to paragraph (b)
/ / on (date) pursuant to paragraph (b)
/ / 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 28, 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 International Equity Allocation 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 Government Money Market Fund
Dreyfus Institutional U.S. Treasury Money Market Fund
Premier Balanced Fund
Premier Small Company Stock Fund
Premier Limited Term Income Fund
Part B - Statement of Additional Information
Dreyfus International Equity Allocation 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 Government Money Market Fund
Dreyfus Institutional U.S. Treasury Money Market Fund
Premier Balanced Fund
Premier Small Company Stock Fund
Premier Limited Term Income Fund
Part C - Other Information
Dreyfus International Equity Allocation 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 Government Money Market Fund
Dreyfus Institutional U.S. Treasury Money Market Fund
Premier Balanced Fund
Premier Small Company Stock Fund
Premier Limited Term Income Fund
Signatures
______________________________________________________________________________
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.
______________________________________________________________________________
TABLE OF CONTENTS
PAGE
Expense Summary........................ 4
Financial Highlights................... 5
Description of the Fund................ 7
Management of the Fund................. 12
How to Buy Fund Shares................. 14
Shareholder Services................... 17
How to Redeem Fund Shares.............. 20
Distribution Plan (Investor Shares Only) 22
Dividends, Other Distributions and Taxes 23
Performance Information................ 24
General Information.................... 25
Page 2
[This Page Intentionally Left Blank]
Page 3
<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.......................................... 1.10% 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
<TABLE>
<CAPTION>
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 KPMG Peat
Marwick LLP, 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.
DREYFUS DISCIPLINED MIDCAP STOCK 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 $9.75 $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
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS (CONTINUED)
DISCIPLINED MIDCAP STOCK 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 $9.76 $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 out-
standing 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. As a fundamental policy, the Fund
may not (i) borrow money in an amount exceeding 331/3% of the Fund's total
assets at the time of borrowing; (ii) make loans or lend securities in excess
of 331/3% of the Fund's total assets; (iii) purchase, with respect to 75% of
the Fund's total assets, securities of any one issuer representing more than
5% of the Fund's total assets (other than securities issued or guaranteed by
the U.S. Government, its agencies and instrumentalities) or more than 10% of
that issuer's outstanding voting securities; and (iv) invest more than 25% of
the value of the Fund's total assets in the securities of one or more issuers
conducting their principal activities in the same industry; provided that
there shall be no such limitation on investments, in obligations of the U.S.
Government, state and municipal governments and their political subdivisions
or investments in domestic banks, including U.S. branches of foreign banks
and foreign branches of U.S. banks. The SAI describes all of the Fund's
fundamental and non-fundamental restrictions.
The investment objective, policies, restrictions, practices and
procedures of the Fund, unless otherwise specified, may be changed without
shareholder approval. If the Fund's investment objective, policies,
restrictions, practices or procedures change, shareholders should consider
whether the Fund remains an appropriate investment in light of the
shareholder's then-current position and needs.
In order to permit the sale of the Fund's shares in certain states,
the Fund may make commitments more restrictive than the investment policies
and restrictions described in this Prospectus and the SAI. Should the Fund
determine that any such commitment is no longer in the best interest of the
Fund, it may consider terminating sales of its shares in the states involved.
MANAGEMENT OF THE FUND
INVESTMENT MANAGER -- Dreyfus, located at 200 Park Avenue, New York,
New York 10166, was formed in 1947. Dreyfus is a wholly-owned subsidiary of
Mellon Bank, which is a wholly-owned subsidiary of Mellon Bank Corporation
("Mellon"). As of January 31, 1996 Dreyfus managed or administered
approximately $82 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
Page 12
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.
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 $233 billion in assets as of
December 31, 1995, including $81 billion in mutual fund assets. As of
December 31, 1995, Mellon, through various subsidiaries, provided
non-investment services, such as custodial or administration services, for
more than $786 billion in assets, including approximately $60 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. 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)."
In allocating brokerage transactions for the Fund, Dreyfus seeks to
obtain the best execution of orders at the most favorable net price. Subject
to this determination, Dreyfus may consider, among other things, the receipt
of research services and/or the sale of shares of the Fund or other funds
managed, advised or administrated by Dreyfus as factors in the selection of
broker-dealers to execute portfolio transactions for the Fund. See "Portfolio
Transactions" in the SAI.
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
Page 13
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.
DISTRIBUTOR -- 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 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
Page 14
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 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
Page 15
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 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
Page 16
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 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
Page 17
check of appropriate records. See "Shareholder Services" in the SAI. No fees
currently are charged shareholders directly in connection with exchanges,
although the Fund reserves the right, upon not less than 60 days' written
notice, to charge shareholders a nominal fee in accordance with rules
promulgated by the SEC. The Fund reserves the right to reject any exchange
request in whole or in part. The availability of Fund Exchanges may be
modified or terminated at any time upon notice to shareholders.
The exchange of shares of one fund for shares of another is treated
for Federal income tax purposes as a sale of the shares given in exchange by
the shareholder and, therefore, an exchanging shareholder may realize, or an
exchange on behalf of a Retirement Plan which is not tax exempt may result
in, a taxable gain or loss.
DREYFUS AUTO-EXCHANGE PRIVILEGE
Dreyfus Auto-Exchange Privilege enables you to invest regularly (on a
semi-monthly, monthly, quarterly or annual basis), in exchange for shares of
the Fund, in shares of the same class of certain other funds in the Dreyfus
Family of Funds of which you are currently an investor. WITH RESPECT TO CLASS
R SHARES HELD BY RETIREMENT PLANS, EXCHANGES PURSUANT TO THE DREYFUS
AUTO-EXCHANGE PRIVILEGE MAY BE MADE ONLY BETWEEN A SHAREHOLDER'S RETIREMENT
PLAN ACCOUNT IN ONE FUND AND SUCH SHAREHOLDER'S RETIREMENT PLAN ACCOUNT IN
ANOTHER FUND. The amount you designate, which can be expressed either in
terms of a specific dollar or share amount ($100 minimum), will be exchanged
automatically on the first and/or fifteenth day of the month according to the
schedule you have selected. Shares will be exchanged at the then-current net
asset value; however a sales load may be charged with respect to exchanges of
Investor shares into funds sold with a sales load. The right to exercise this
Privilege may be modified or canceled by the Fund or the Transfer Agent. You
may modify or cancel your exercise of this Privilege at any time by mailing
written notification to The Dreyfus Family of Funds, P.O. Box 9671,
Providence, Rhode Island 02940-9671. The Fund may charge a service fee for
the use of this Privilege. No such fee currently is contemplated. The
exchange of shares of one fund for shares of another is treated for Federal
income tax purposes as a sale of the shares given in exchange by the
shareholder and, therefore, an exchanging shareholder may realize, or an
exchange on behalf of a Retirement Plan which is not tax exempt may result
in, a taxable gain or loss. For more information concerning this Privilege
and the funds in the Dreyfus Family of Funds eligible to participate in this
Privilege, or to obtain a Dreyfus Auto-Exchange Authorization Form, please
call toll free 1-800-645-6561.
DREYFUS-AUTOMATIC ASSET BUILDERRegistration Mark
Dreyfus-AUTOMATIC Asset Builder permits you to purchase Fund shares
(minimum of $100 and maximum of $150,000 per transaction) at regular
intervals selected by you. Fund shares are purchased by transferring funds
from the bank account designated by you. 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
Page 18
do not include the sales load or which reflect a reduced sales load. See
"Shareholder Services" in the SAI. Dreyfus Dividend ACH permits you
to transfer electronically on the payment date dividends or dividends and
capital gain distributions, if any, from the Fund to a designated bank
account. Only an account maintained at a domestic financial institution which
is an ACH member may be so designated. Banks may charge a fee for this
service.
For more information concerning these Privileges, or to request a
Dreyfus Dividend Options Form, please call toll free 1-800-645-6561. You may
cancel these Privileges by mailing written notification to The Dreyfus Family
of Funds, P.O. Box 9671, Providence, Rhode Island 02940-9671. Enrollment in
or cancellation of these Privileges is effective three business days
following receipt. These Privileges are available only for existing accounts
and may not be used to open new accounts. Minimum subsequent investments do
not apply for Dreyfus Dividend Sweep. The Fund may modify or terminate these
Privileges at any time or charge a service fee. No such fee currently is
contemplated. Shares held under Keogh Plans, IRAs or other retirement plans
are not eligible for Dreyfus Dividend Sweep.
DREYFUS GOVERNMENT DIRECT DEPOSIT PRIVILEGE
Dreyfus Government Direct Deposit Privilege enables you to purchase
Fund shares (minimum of $100 and maximum of $50,000 per transaction) by
having Federal salary, Social Security, or certain veterans', military or
other payments from the Federal government automatically deposited into your
Fund account. You may deposit as much of such payments as you elect. You
should consider whether Direct Deposit of your entire payment into a fund
with fluctuating NAV, such as the Fund, may be appropriate for you. To enroll
in Dreyfus Government Direct Deposit, you must file with the Transfer Agent a
completed Direct Deposit Sign-Up Form for each type of payment that you
desire to include in this Privilege. The appropriate form may be obtained by
calling 1-800-645-6561. Death or legal incapacity will terminate your
participation in this Privilege. You may elect at any time to terminate your
participation by notifying in writing the appropriate Federal agency.
Further, the Fund may terminate your participation upon 30 days' notice to
you.
DREYFUS PAYROLL SAVINGS PLAN
Dreyfus Payroll Savings Plan permits you to purchase Fund shares
(minimum of $100 per transaction) automatically on a regular basis. Depending
upon the direct deposit program of your employer, you may have part or all of
your paycheck transferred to your existing Dreyfus account electronically
through the ACH system at each pay period. To establish a Dreyfus Payroll
Savings Plan account, you must file an authorization form with your
employer's payroll department. Your employer must complete the reverse side
of the form and return it to The Dreyfus Family of Funds, P.O. Box 9671,
Providence, Rhode Island 02940-9671. You may obtain the necessary
authorization form by calling 1-800-645-6561. You may change the amount of
purchase or cancel the authorization only by written notification to your
employer. It is the sole responsibility of the your employer, not the
Distributor, Dreyfus, the Fund, the Transfer Agent or any other person, to
arrange for transactions under the Dreyfus Payroll Savings Plan. The Fund may
modify or terminate this Privilege at any time or charge a service fee. No
such fee currently is contemplated.
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
Page 19
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."
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 call1-800-
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
Page 20
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.
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
Page 21
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 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 TELE-
TRANSFER 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
Page 22
to provide distribution related services with regard to the Fund and/or share-
holder services to the Agent's clients that own Investor shares of the Fund.
The Fund and the Distributor may suspend or reduce payments under the
Plan at any time, and payments are subject to the continuation of the Fund's
Plan and the Agreements described above. From time to time, the Agents, the
Distributor and the Fund may agree to voluntarily reduce the maximum fees
payable under the Plan. See the SAI for more details on the Plan.
Potential investors should read this Prospectus in light of the terms
governing Agreements with their Agents. An Agent entitled to receive
compensation for selling and servicing the Fund's shares may receive
different compensation with respect to one class of shares over another.
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
The Fund 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.
Page 23
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 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 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
Page 24
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 per
share at the beginning of the period. Advertisements may include the
percentage rate of total return or may include the value of a hypothetical
investment at the end of the period which assumes the application of the
percentage rate of total return.
The Fund may also advertise the yield on a Class of shares. The
Fund's yield is calculated by dividing a Class of shares' annualized net
investment income per share during a recent 30-day (or one month) period by
the maximum public offering price per 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").
Page 25
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, the holders of at least 10% of the shares
outstanding and entitled to vote may require the Company to hold a special
meeting of shareholders for purposes of removing a Director from office and
for any other purpose. Company shareholders may remove a Director by the
affirmative vote of a majority of the Company's outstanding voting shares. In
addition, the Board of Directors will call a meeting of shareholders for the
purpose of electing Directors if, at any time, less than a majority of the
Directors then holding office have been elected by shareholders.
The Transfer Agent maintains a record of your ownership and will send
you confirmations and statements of account.
Shareholder inquiries may be made by writing to the Fund at 144 Glenn
Curtiss Boulevard, Uniondale, New York 11556-0144, or by calling toll free
1-800-645-6561.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND IN THE
FUND'S OFFICIAL SALES LITERATURE IN CONNECTION WITH THE OFFER OF THE FUND'S
SHARES, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER IN ANY STATE IN WHICH, OR TO ANY PERSON TO WHOM,
SUCH OFFERING MAY NOT LAWFULLY BE MADE.
Page 26
[This Page Intentionally Left Blank]
Page 27
DREYFUS
DISCIPLINED
MIDCAP
STOCK FUND
PROSPECTUS
(LION LOGO)
Copy Rights 1996 Dreyfus Service Corporation
330/730p030196
Registration Mark
- ------------------------------------------------------------------------------
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
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS ACRIMINAL OFFENSE.
- ------------------------------------------------------------------------------
TABLE OF CONTENTS
PAGE
EXPENSE SUMMARY.............................. 3
FINANCIAL HIGHLIGHTS......................... 4
DESCRIPTION OF THE FUND...................... 6
MANAGEMENT OF THE FUND....................... 10
HOW TO BUY FUND SHARES....................... 12
SHAREHOLDER SERVICES......................... 14
HOW TO REDEEM FUND SHARES.................... 18
DISTRIBUTION PLAN (INVESTOR SHARES ONLY)..... 20
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES..... 20
PERFORMANCE INFORMATION...................... 22
GENERAL INFORMATION.......................... 23
Page 2
<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 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 3
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 KPMG Peat
Marwick LLP, 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)
Distributions:
Dividends from investment income-net (0.22) --
----------- -----------
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 4
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 operations 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 5
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 shares.
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 val-
uation 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. The Fund may also invest in futures
contracts and options to a limited extent but does not intend to invest more
than 5% of its assets in such instruments.
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 6
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
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 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 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.
Page 7
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 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
Page 8
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
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.
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 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
Page 9
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. As a fundamental policy, the Fund
may not (i) borrow money in an amount exceeding 331/3% of the Fund's total
assets at the time of borrowing; (ii) make loans or lend securities in excess
of 331/3% of the Fund's total assets; (iii) purchase, with respect to 75% of
the Fund's total assets, securities of any one issuer representing more than
5% of the Fund's total assets (other than securities issued or guaranteed by
the U.S. Government, its agencies and instrumentalities) or more than 10% of
that issuer's outstanding voting securities; and (iv) invest more than 25% of
the value of the Fund's total assets in the securities of one or more issuers
conducting their principal activities in the same industry; provided that
there shall be no such limitation on investments, in obligations of the U.S.
Government, state and municipal governments and their political subdivisions
or investments in domestic banks, including U.S. branches of foreign banks
and foreign branches of U.S. banks. The SAI describes all of the Fund's
fundamental and non-fundamental restrictions.
The investment objective, policies, restrictions, practices and
procedures of the Fund, unless otherwise specified, may be changed without
shareholder approval. If the Fund's investment objective, policies,
restrictions, practices or procedures change, shareholders should consider
whether the Fund remains an appropriate investment in light of the
shareholder's then-current position and needs.
In order to permit the sale of the Fund's shares in certain states,
the Fund may make commitments more restrictive than the investment policies
and restrictions described in this Prospectus and the SAI. Should the Fund
determine that any such commitment is no longer in the best interest of the
Fund, it may consider terminating sales of its shares in the states involved.
MANAGEMENT OF THE FUND
INVESTMENT MANAGER. Dreyfus, located at 200 Park Avenue, New York,
New York 10166, was formed in 1947. Dreyfus is a wholly-owned subsidiary of
Mellon Bank, which is a wholly-owned subsidiary of Mellon Bank Corporation
("Mellon"). As of January 31, 1996, Dreyfus managed or administered
approximately $82 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
Page 10
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 0.90 of 1% of the value of the
Fund's average daily net assets. Dreyfus pays all of the Fund's expenses,
except brokerage fees, taxes, interest, fees and expenses of the
non-interested Directors (including counsel fees), Rule 12b-1 fees (if
applicable) and extraordinary expenses. Although Dreyfus does not pay for the
fees and expenses of the non-interested Directors (including counsel fees),
Dreyfus is contractually required to reduce its investment management fee 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)."
In allocating brokerage transactions for the Fund, Dreyfus seeks to
obtain the best execution of orders at the most favorable net price. Subject
to this determination, Dreyfus may consider, among other things, the receipt
of research services and/or the sale of shares of the Fund or other funds
managed, advised or administered by Dreyfus as factors in the selection of
broker-dealers to execute portfolio transactions for the Fund. See "Portfolio
Transactions" in the Statement of Additional Information.
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.
DISTRIBUTOR -- The Fund's 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
Page 11
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.
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.
Page 12
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 invest
ment 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.
Page 13
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
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 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
Page 14
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 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
Page 15
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 BUILDERRegistration Mark
Dreyfus-AUTOMATIC Asset Builder permits you to purchase Fund shares
(minimum of $100 and maximum of $150,000 per transaction) at regular
intervals selected by you. Fund shares are purchased by transferring funds
from the bank account designated by you. 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
quality 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
Page 16
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-A
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, 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
Page 17
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 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.
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
Page 18
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.
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.
Page 19
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 TELE-
TRANSFER 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.
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; dividends and other distributions paid to qualified Retirement Plans
are reinvested automatically in additional
Page 20
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 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.
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 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
Page 21
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
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. 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 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-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.
Page 22
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, Standard & Poor's Midcap Stock Index, CDA Technologies
indexes, indexes created by Lehman Brothers, the Consumer Price Index, and
the Dow Jones Industrial Average. Performance rankings as reported in CHANGING
TIMES, BUSINESS WEEK, INSTITUTIONAL INVESTOR, THE WALL STREET JOURNAL,
MUTUAL FUND FORECASTER, NO LOAD INVESTOR, MONEY MAGAZINE, MORNINGSTAR MUTUAL
FUND VALUES, U.S. NEWS AND WORLD REPORT, FORBES, FORTUNE, BARRON'S and
similar publications may also be used in comparing the Fund's performance.
Furthermore, the Fund may quote its 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. 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 23
DREYFUS
Disciplined
Equity
Income Fund
Prospectus
(LION LOGO)
Copy Rights 1996 Dreyfus Service Corporation
318/718p030196
Registration Mark
______________________________________________________________________________
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............................... 14
SHAREHOLDER SERVICES................................. 17
HOW TO REDEEM FUND SHARES............................ 20
DISTRIBUTION PLAN (INVESTOR SHARES ONLY).............. 23
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES.............. 23
PERFORMANCE INFORMATION............................... 25
GENERAL INFORMATION................................... 26
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 1.75% 1.75%
12b-1 Fee(1) 0.25% none
Other Expenses(2) 0.00% 0.00%
______ ______
Total Fund Operating Expenses 2.00% 1.75%
EXAMPLE:
You would pay the following expenses
on a $1,000 investment, assuming (1) a 5% annual
return and (2) redemption at the end of each
time period: INVESTOR SHARES CLASS R SHARES
________________ ______________
1 Year $20 $ 18
3 Years $63 $ 55
5 Years $108 $ 95
10 Years $233 $206
(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.")
</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 under-
standing 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
<TABLE>
<CAPTION>
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 KPMG Peat
Marwick LLP, 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.
DREYFUS EUROPEAN 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 $12.50 $11.78
------- -------
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%
______________________________________________________________________________
* The Fund commenced selling Investor shares on April 14, 1994.
** Annualized.
+ Total return represents aggregate total return for the period indicated.
++ Based on average shares outstanding.
# 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
<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%
_________________________________________________________________________________________________________________________________
* 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 Tait, Weller and Baker, Certified Public Accountants.
++ Net investment income before expenses reimbursed by the investment
adviser was $0.09 for the year ended October 31, 1994.
+++ Total return represents aggregate total 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 Inter-
national 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 investment
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.
</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 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
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 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 even result in losses, by offsetting favorable price
movements in portfolio investments: (6) incorrect
Page 9
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 trans-
actions 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. As a fundamental policy, the Fund
may not (i) borrow money in an amount exceeding 331/3% of the Fund's total
assets at the time of borrowing; (ii) make loans or lend securities in excess
of 331/3% of the Fund's total assets; (iii) purchase, with respect to 75% of
the Fund's total assets, securities of any one issuer representing more than
5% of the Fund's total assets (other than securities issued or guaranteed by
the U.S. Government, its agencies and instrumentalities) or more than 10% of
that issuer's outstanding voting securities; and (iv) invest more than 25% of
the value of the Fund's total assets in the securities of one or more issuers
conducting their principal activities in the same industry; provided that
there shall be no such limita-
Page 11
tion on investments in obligations of the U.S. Government, state and municipal
governments and their political subdivisions or investments in domestic banks,
including U.S. branches of foreign banks and foreign branches of U.S. banks.
The SAI describes all of the Fund's fundamental and non-fundamental
restrictions.
The investment objective, policies, restrictions, practices and
procedures of the Fund, unless otherwise specified, may be changed without
shareholder approval. If the Fund's investment objective, policies,
restrictions, practices or procedures change, shareholders should consider
whether the Fund remains an appropriate investment in light of the
shareholder's then-current position and needs.
In order to permit the sale of the Fund's shares in certain
states, the Fund may make commitments more restrictive than the investment
policies and restrictions described in this Prospectus and the SAI. Should
the Fund determine that any such commitment is no longer in the best interest
of the Fund, it may consider terminating sales of its shares in the states
involved.
MANAGEMENT OF THE FUND
INVESTMENT MANAGER -- Dreyfus, located at 200 Park Avenue, New
York, New York 10166, was formed in 1947. Dreyfus is a wholly-owned
subsidiary of Mellon Bank, which is a wholly-owned subsidiary of Mellon Bank
Corporation ("Mellon"). As of January 31, 1996, Dreyfus managed or
administered approximately $82 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 $233 billion in assets as of
December 31, 1995, including $81 billion in mutual fund assets. As of
December 31, 1995, Mellon, through various subsidiaries, provided
non-investment services, such as custodial or administration services, for
more than $786 billion in assets, including approximately $60 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. 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).
Page 12
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 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)."
In allocating brokerage transactions for the Fund, Dreyfus seeks to
obtain the best execution of orders at the most favorable net price. Subject
to this determination, Dreyfus may consider, among other things, the receipt
of research services and/or the sale of shares of the Fund or other funds
managed, advised or administered by Dreyfus as factors in the selection of
broker-dealers to execute portfolio transactions for the Fund. See "Portfolio
Transactions" in the SAI.
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.
DISTRIBUTOR -- 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 record-
Page 13
keeping 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, 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 (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.
Page 14
The Internal Revenue Code of 1986, as amended (the "Code"),
imposes various limitations on the amount that may be contributed to
Retirement Plans. These limitations apply with respect to participants at the
plan level and, therefore, do not directly affect the amount that may be
invested in the Fund by a Retirement Plan. Participants and plan sponsors
should consult their tax advisers for details.
You may purchase Fund shares by check or wire, or 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# 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 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
Page 15
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 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,
both of 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
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.
Page 16
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, 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.
Page 17
The exchange of shares of one fund for shares of another is
treated for Federal income tax purposes as a sale of the shares given in
exchange by the shareholder and, therefore, an exchanging shareholder may
realize, or an exchange on behalf of a Retirement Plan which is not tax
exempt may result in, a taxable gain or loss.
DREYFUS AUTO-EXCHANGE PRIVILEGE
Dreyfus Auto-Exchange Privilege enables you to invest regularly
(on a semi-monthly, monthly, quarterly or annual basis), in exchange for
shares of the Fund, in shares of the same class of certain other funds in the
Dreyfus Family of Funds of which you are currently an investor. WITH RESPECT
TO CLASS R SHARES HELD BY RETIREMENT PLANS, EXCHANGES PURSUANT TO THE DREYFUS
AUTO-EXCHANGE PRIVILEGE MAY BE MADE ONLY BETWEEN A SHAREHOLDER'S RETIREMENT
PLAN ACCOUNT IN ONE FUND AND SUCH SHAREHOLDER'S RETIREMENT PLAN ACCOUNT IN
ANOTHER FUND. The amount you designate, which can be expressed either in
terms of a specific dollar or share amount ($100 minimum), will be exchanged
automatically on the first and/or fifteenth day of the month according to the
schedule you have selected. Shares will be exchanged at the then-current NAV;
however a sales load may be charged with respect to exchanges of Investor
shares into funds sold with a sales load. The right to exercise this
Privilege may be modified or canceled by the Fund or the Transfer Agent. You
may modify or cancel your exercise of this Privilege at any time by mailing
written notification to The Dreyfus Family of Funds, P.O. Box 9671,
Providence, Rhode Island 02940-9671. The Fund may charge a service fee for
the use of this Privilege. No such fee currently is contemplated. The
exchange of shares of one fund for shares of another is treated for Federal
income tax purposes as a sale of the shares given in exchange by the
shareholder and, therefore, an exchanging shareholder may realize, or an
exchange on behalf of a Retirement Plan which is not tax exempt may result
in, a taxable gain or loss. For more information concerning this Privilege
and the funds in the Dreyfus Family of Funds eligible to participate in this
Privilege, or to obtain a Dreyfus Auto-Exchange Authorization Form, please
call toll free 1-800-645-6561.
DREYFUS-AUTOMATIC ASSET BUILDERRegistration Mark
Dreyfus-AUTOMATIC Asset Builder permits you to purchase Fund
shares (minimum of $100 and maximum of $150,000 per transaction) at regular
intervals selected by you. Fund shares are purchased by transferring funds
from the bank account designated by you. 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
Page 18
"Shareholder Services" in the SAI. Dreyfus Dividend ACH permits you
to transfer electronically on the payment date dividends or dividends and
capital gain distributions, if any, from the Fund to a designated bank
account. Only an account maintained at a domestic financial institution which
is an ACH member may be so designated. Banks may charge a fee for this
service.
For more information concerning these Privileges, or to request a
Dreyfus Dividend Options Form, please call toll free 1-800-645-6561. You may
cancel these Privileges by mailing written notification to The Dreyfus Family
of Funds, P.O. Box 9671, Providence, Rhode Island 02940-9671. Enrollment in
or cancellation of these Privileges is effective three business days
following receipt. These Privileges are available only for existing accounts
and may not be used to open new accounts. Minimum subsequent investments do
not apply for Dreyfus Dividend Sweep. The Fund may modify or terminate these
Privileges at any time or charge a service fee. No such fee currently is
contemplated. Shares held under Keogh Plans, IRAs or other retirement plans
are not eligible for Dreyfus Dividend Sweep.
DREYFUS GOVERNMENT DIRECT DEPOSIT PRIVILEGE
Dreyfus Government Direct Deposit Privilege enables you to
purchase Fund shares (minimum of $100 and maximum of $50,000 per transaction)
by having Federal salary, Social Security, or certain veterans', military or
other payments from the Federal government automatically deposited into your
Fund account. You may deposit as much of such payments as you elect. You
should consider whether Direct Deposit of your entire payment into a fund
with fluctuating NAV, such as the Fund, may be appropriate for you. To enroll
in Dreyfus Government Direct Deposit, you must file with the Transfer Agent a
completed Direct Deposit Sign-Up Form for each type of payment that you
desire to include in this Privilege. The appropriate form may be obtained by
calling 1-800-645-6561. Death or legal incapacity will terminate your
participation in this Privilege. You may elect at any time to terminate your
participation by notifying in writing the appropriate Federal agency.
Further, the Fund may terminate your participation upon 30 days' notice to
you.
DREYFUS PAYROLL SAVINGS PLAN
Dreyfus Payroll Savings Plan permits you to purchase Fund shares
(minimum of $100 per transaction) automatically on a regular basis. Depending
upon the direct deposit program of your employer, you may have part or all of
your paycheck transferred to your existing Dreyfus account electronically
through the ACH system at each pay period. To establish a Dreyfus Payroll
Savings Plan account, you must file an authorization form with your
employer's payroll department. Your employer must complete the reverse side
of the form and return it to The Dreyfus Family of Funds, P.O. Box 9671,
Providence, Rhode Island 02940-9671. You may obtain the necessary
authorization form by calling 1-800-645-6561. You may change the amount of
purchase or cancel the authorization only by written notification to your
employer. It is the sole responsibility of 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 par-
PAGE 19
ticipation 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 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
Page 20
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.
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.
Page 21
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.
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
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 22
DISTRIBUTION PLAN
(INVESTOR SHARES ONLY)
Investor shares are subject to a Distribution Plan (the "Plan")
adopted pursuant to Rule 12b-1 under the 1940 Act ("Rule 12b-1"). The
Investor shares of the Fund bear some of the cost of selling those shares
under the Plan. The Plan allows the Fund to spend annually up to 0.25% of its
average daily net assets attributable to Investor shares to compensate
Dreyfus Service Corporation, an affiliate of Dreyfus, for shareholder
servicing activities and the Distributor for shareholder servicing activities
and for activities or expenses primarily intended to result in the sale of
Investor shares of the Fund. The Plan allows the Distributor to make payments
from the Rule 12b-1 fees it collects from the Fund to compensate Agents that
have entered into Agreements with the Distributor. Under the Agreements, the
Agents are obligated to provide distribution related services with regard to
the Fund and/or shareholder services to the Agent's clients that own Investor
shares of the Fund.
The Fund and the Distributor may suspend or reduce payments under
the Plan at any time, and payments are subject to the continuation of the
Fund's Plan and the Agreements described above. From time to time, the
Agents, the Distributor and the Fund may agree to voluntarily reduce the
maximum fees payable under the Plan. See the SAI for more details on the
Plan.
Potential investors should read this Prospectus in light of the
terms governing Agreements with their Agents. An Agent entitled to receive
compensation for selling and servicing the Fund's shares may receive
different compensation with respect to one Class of shares over another.
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
The Fund ordinarily declares and pays dividends from its net
investment income and distributes net realized gains, if any, once a year,
but it may make distributions on a more frequent basis to comply with the
distribution requirements of the Code, in all events in a manner consistent
with the provisions of the 1940 Act. The Fund will not make distributions
from net realized gains unless capital loss carryovers, if any, have been
utilized or have expired. Investors other than qualified Retirement Plans may
choose whether to receive dividends and other distributions in cash, 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 capi-
Page 23
tal 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 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.
Page 24
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. 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 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.
Page 25
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, 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 Direc
tor 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
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Page 27
DREYFUS
EUROPEAN FUND
PROSPECTUS
Copy Rights 1996 Dreyfus Service Corporation
308/708p030196
Registration Mark
- ------------------------------------------------------------------------------
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.
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE PAGE
<S> <C> <S> <C>
EXPENSE SUMMARY........................ 3 HOW TO REDEEM FUND SHARES.............. 17
FINANCIAL HIGHLIGHTS................... 4 THE SHAREHOLDER SERVICING PLANS........ 19
DESCRIPTION OF THE FUNDS............... 7 PERFORMANCE INFORMATION................ 19
MANAGEMENT OF THE FUNDS................ 11 DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES.... 20
HOW TO BUY FUND SHARES................. 12 GENERAL INFORMATION.................... 21
SHAREHOLDER SERVICES................... 14
</TABLE>
- ------------------------------------------------------------------------------
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.
- ------------------------------------------------------------------------------
THIS PAGE INTENTIONALLY LEFT BLANK
Page 2
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
* 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 KPMG Peat Marwick LLP, the
independent auditors for the Fund for the indicated years or period ended
October 31, whose reports accompanies 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.*
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.............. $1.0000 $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)........... $773,60 $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%+
- ---------------------
* Prior to October 31, 1995, shares of the Fund were designated Class I shares.
**The Fund commenced operations on April 15, 1988.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated.
+++ For the years ended October 31, 1993, 1992, 1991, 1989 and 1988, the
investment adviser reimbursed expenses of $0.00005, $0.0001, $0.0007,
$0.0022, $0.0044 and $0.0018 per share, respectively. For the period ended
October 31, 1988, the investment adviser waived a portion of its advisory fee
amounting to $0.0006 per share.
# Prior to October 17, 1994, Mellon Bank, served as the Fund's investment
manager. Effective October 17, 1994, The Dreyfus Corporation began serving as
the Fund's investment manager.
</TABLE>
Page 4
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
The following financial information has been derived from the
financial statements which have been audited by KPMGPeat Marwick LLP, the
independent auditors for the Fund for the indicated years or period ended
October 31, whose reports accompany such financial statements that appear in
the Fund's Annual Report dated October 31, 1995 and which are incorporated by
reference in the SAI.
DREYFUS INSTITUTIONAL GOVERNMENT MONEY MARKET FUND
FOR FUND SHARES 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# 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........... $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
-------- -------- -------- ------- ------- ------- -------- -------- -------
Income from
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%+
- -------------
* Prior to October 31, 1995, shares of the Fund were designated Class Ishares.
** The Fund commenced operations on October 8, 1987.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated.
+++ For the years ended October 31, 1993, 1992, 1991, 1990 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.
</TABLE>
Page 5
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
The following financial information has been derived from the
financial statements which have been audited by KPMG Peat Marwick LLP, the
independent auditors for the Fund for the indicated years or period ended
October 31, whose reports accompany such financial statements that appear in
the Fund's Annual Report dated October 31, 1995 and which are incorporated by
reference in the SAI.
DREYFUS INSTITUTIONAL U.S. TREASURY MONEY MARKET FUND
FOR FUND SHARES OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.*
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**
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
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%+
- ---------------
* Prior to October 31, 1995, shares of the Fund were designated Class Ishares.
** The Fund commenced operations on December 22, 1988.
*** Net investment income before reimbursement of expenses by the investment
manager for the year ended October 31, 1994 was $0.0350 per share.
****Annualized expense ratio before reimbursement of expenses by investment
manager for the year ended October 31, 1994 was 0.31%.
+ Annualized.
++ Total return represents aggregate total return for the periods
indicated.
+++ For the years ended October 31, 1993, 1992, 1991, 1990 and 1989 the
investment adviser reimbursed expenses of $0.0004, $0.0003, $0.0008, $0.0023
and $0.0028 per share, respectively. For the period ended October 31, 1989,
the investment adviser waived a portion of its advisory fee amounting to
$0.0005 per share.
# Prior to October 17, 1994, Mellon Bank served as the Fund's investment
manager. Effective October 17, 1994, The Dreyfus Corporation began serving as
the Fund's investment manager.
</TABLE>
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 guar-
Page 9
anteed 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
of the note because of the absence of a secondary market and might, for this
or other reasons, suffer a loss to the extent of the default. A Fund will
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. As a fundamental policy, the Funds
may not (i) borrow money in an amount exceeding 331/3% of the Funds' total
assets at the time of borrowing; (ii) make loans or lend securities in excess
of 331/3% of the Funds' total assets; (iii) purchase, with respect to 75% of
the Funds' total assets, securities of any one issuer representing more than
5% of the Funds' total assets (other than securities issued or guaranteed by
the U.S. Government, its agencies and instrumentalities) or more than 10% of
that issuer's outstanding voting securities; and (iv) invest more than 25% of
the value of the Funds' total assets in the securities of one or more issuers
conducting their principal activities in the same industry; provided that
there shall be no such limitation on investments, in obligations of the U.S.
Government, state and municipal governments and their political subdivisions
or investments in domestic banks, including U.S. branches of foreign banks
and foreign branches of U.S. banks. 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.
Page 10
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 of Mellon Bank Corporation
("Mellon"). As of January 31, 1996, Dreyfus managed or administered
approximately $82 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 $233 billion in assets as of
December 31, 1995, including $81 billion in mutual fund assets. As of
December 31, 1995, Mellon, through various subsidiaries, provided
non-investment services, such as custodial or administration services, for
more than $786 billion in assets, including approximately $60 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. 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. 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
Page 11
average daily net assets. In addition, Fund shares may be subject to certain
shareholder servicing fees. See "The Shareholder Servicing Plans."
In allocating brokerage transactions for the Fund, Dreyfus seeks to
obtain the best execution of orders at the most favorable net price. Subject
to this determination, Dreyfus may consider, among other things, the receipt
of research services and/or the sale of shares of the Fund or other funds
managed, advised or administered by Dreyfus as factors in the selection of
broker-dealers to execute portfolio transactions for the Fund. See "Portfolio
Transactions" in the SAI.
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 their investment objectives, polic
ies and restrictions, the Funds may invest in securities of companies with
which Mellon Bank has a lending relationship.
DISTRIBUTOR -- 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
Page 12
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 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
Page 13
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.
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
Page 14
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 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 BUILDERRegistration Mark
Dreyfus-AUTOMATIC Asset Builder permits you to purchase Fund shares
(minimum of $100 and maximum of $150,000 per transaction) at regular
intervals selected by you. Fund shares are purchased by transferring funds
from the bank account designated by you. 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
Page 15
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
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.
Page 16
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.
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,
Page 17
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 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
Page 18
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 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. 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 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 Company 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
Page 19
"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, 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.
Page 20
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 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 all funds 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.
Page 21
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 22
[This PageIntentionally Left Blank]
Page 23
DREYFUS
Dreyfus Institutional Prime Money Market Fund
Dreyfus Institutional Government Money Market Fund
Dreyfus Institutional U.S. Treasury Money Market Fund
Prospectus
(LION LOGO)
Copy Rights 1996 Dreyfus Service Corporation
LFISTp030196
Registration Mark
- ----------------------------------------------------------------------------
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 T
ELETRANSFER 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.
- ----------------------------------------------------------------------------
[This Page Intentionally Left Blank]
Page 2
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 Fees.......................................... .20%
Other Expenses(1)........................................ .00%
Total Fund Operating Expenses............................ .20%
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 $ 2
3 YEARS $ 6
5 YEARS $11
10 YEARS $26
(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."
TheFund 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 KPMG Peat Marwick LLP,
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.
DREYFUS INSTITUTIONAL S&P 500 STOCK INDEX FUND
For a share outstanding throughout each year or period.*
<TABLE>
<CAPTION>
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%###
- -----------------------
* 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.
</TABLE>
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. As a fundamental policy, the Fund
may not (i) borrow money in an amount exceeding 331/3% of the Fund's total
assets at the time of borrowing; (ii) make loans or lend securities in excess
of 331/3% of the Fund's total assets; (iii) purchase, with respect to 75% of
the Fund's total assets, securities of any one issuer representing more than
5% of the Fund's total assets (other than securities issued or guaranteed by
the U.S. Government, its agencies and instrumentalities) or more than 10% of
that issuer's outstanding voting securities; and (iv) invest more than 25% of
the value of the Fund's
Page 9
total assets in the securities of one or more issuers
conducting their principal activities in the same industry; provided that
there shall be no such limitation on investments in obligations of the U.S.
Government, state and municipal governments and their political subdivisions
or investments in domestic banks, including U.S. branches of foreign banks
and foreign branches of U.S. banks. The SAI describes all of the Fund's
fundamental and non-fundamental restrictions.
The investment objective, policies, restrictions, practices and
procedures of the Fund, unless otherwise specified, may be changed without
shareholder approval. If the Fund's investment objective, policies,
restrictions, practices or procedures change, shareholders should consider
whether the Fund remains an appropriate investment in light of the
shareholder's then-current position and needs.
In order to permit the sale of the Fund's shares in certain
states, the Fund may make commitments more restrictive than the investment
policies and restrictions described in this Prospectus and the SAI. Should
the Fund determine that any such commitment is no longer in the best interest
of the Fund, it may consider terminating sales of its shares in the states
involved.
MANAGEMENT OF THE FUND
INVESTMENT MANAGER -- Dreyfus, located at 200 Park Avenue, New
York, New York 10166, was formed in 1947. Dreyfus is a wholly-owned
subsidiary of Mellon Bank, which is a wholly-owned subsidiary of Mellon Bank
Corporation ("Mellon"). As of January 31, 1996, Dreyfus managed or
administered approximately $82 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 $233 billion in assets as of
December 31, 1995, including $81 billion in mutual fund assets. As of
December 31, 1995, Mellon, through various subsidiaries, provided
non-investment services, such as custodial or administration services, for
more than $786 billion in assets, including approximately $60 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. 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
Page 10
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 fiscal year ended October 31, 1995, total operating
expenses (excluding Rule 12b-1 fees) were .37% (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.
In allocating brokerage transactions for the Fund, Dreyfus seeks to
obtain the best execution of orders at the most favorable net price. Subject
to this determination, Dreyfus may consider, among other things, the receipt
of research services and/or the sale of shares of the Fund or other funds
managed, advised or administered by Dreyfus as factors in the selection of
broker-dealers to execute portfolio transactions for the Fund. See "Portfolio
Transactions" in the SAI.
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.
DISTRIBUTOR -- 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--Mell
on 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.
Page 11
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 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 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 12
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 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.
Page 13
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 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
Page 14
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 BUILDERRegistration Mark
Dreyfus-AUTOMATIC Asset Builder permits you to purchase Fund
shares (minimum of $100 and maximum of $150,000 per transaction) at regular
intervals selected by you. Fund shares are purchased by transferring funds
from the bank account designated by you. 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
Page 15
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.
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 NAV 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.
Page 16
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 $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 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.
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
Page 17
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 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, includ-
Page 18
ing 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.
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 in additional Fund shares. 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. withholdin
g 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 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
Page 19
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 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. 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 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, S&P 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,
Page 20
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
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.
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DREYFUS
Institutional
S&P 500
Stock Index Fund
Prospectus
(LION LOGO)
Copy Rights 1996 Dreyfus Service Corporation
313/713p030196
Registration Mark
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PROSPECTUS MARCH 1, 1996
DREYFUS INTERNATIONAL EQUITY ALLOCATION FUND
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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.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
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TABLE OF CONTENTS
EXPENSE SUMMARY................................. 4
FINANCIAL HIGHLIGHTS............................ 5
DESCRIPTION OF THE FUND......................... 6
MANAGEMENT OF THE FUND.......................... 12
HOW TO BUY FUND SHARES.......................... 14
SHAREHOLDER SERVICES............................ 17
HOW TO REDEEM FUND SHARES....................... 20
DISTRIBUTION PLAN (INVESTOR SHARES ONLY)........ 22
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES........ 23
PERFORMANCE INFORMATION......................... 24
GENERAL INFORMATION............................. 25
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<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 ........................................ 1.50% 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:
</TABLE>
<TABLE>
<CAPTION>
INVESTOR SHARES CLASS R SHARES
<S> <C> <C>
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>
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THE AMOUNTS LISTED IN THE EXAMPLE SHOULD NOT BE CONSIDERED AS
REPRESENTATIVE OF FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS
THAN THOSE INDICATED. MOREOVER, WHILE THE EXAMPLE ASSUMES A 5% ANNUAL RETURN,
THE FUND'S ACTUAL PERFORMANCE WILL VARY AND MAY RESULT IN AN ACTUAL RETURN
GREATER OR LESS THAN 5%.
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The purpose of the foregoing table is to assist you in
understanding the 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 KPMG Peat
Marwick LLP, 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#
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<S> <C> <C>
Net asset value, beginning of period $10.06 $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++ 0.67% 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%
- ------------------
* The Fund commenced operations 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.
</TABLE>
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 0.06
---- -----
Distributions
Dividends from net investment income (0.02) --
Net asset value, end of period $10.12 $10.06
======= ======
Total Return++ 0.81% 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 1.50% 1.50%
Ratio of net investment income to average net assets 0.52% 2.22%
Portfolio turnover rate 64.85% 0%
- -------------------
* The Fund commenced operations 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. As a fundamental policy, the Fund
may not (i) borrow money in an amount exceeding 331/3% of the Fund's total
assets at the time of borrowing; (ii) make loans or lend securities in excess
of 331/3% of the Fund's total assets; (iii) purchase, with respect to 75% of
the Fund's total assets, securities of any one issuer representing more than
5% of the Fund's total assets (other than securities issued or guaranteed by
the U.S. Government, its agencies and instrumentalities) or more than 10% of
that issuer's outstanding voting securities; and (iv) invest more than 25% of
the value of the Fund's total assets in the securities of one or more issuers
conducting their principal activities in the same industry; provided that
there shall be no such limitation on investments in obligations of the U.S.
Government, state and municipal governments and their political subdivisions
or investments in domestic banks, including U.S. branches of foreign banks
and foreign branches of U.S. banks. The SAI describes all of the Fund's
fundamental and non-fundamental restrictions.
Page 11
The investment objective, policies, restrictions, practices and
procedures of the Fund, unless otherwise specified, may be changed without
shareholder approval. If the Fund's investment objective, policies,
restrictions, practices or procedures change, shareholders should consider
whether the Fund remains an appropriate investment in light of the
shareholder's then-current position and needs.
In order to permit the sale of the Fund's shares in certain
states, the Fund may make commitments more restrictive than the investment
policies and restrictions described in this Prospectus and the SAI. Should
the Fund determine that any such commitment is no longer in the best interest
of the Fund, it may consider terminating sales of its shares in the states
involved.
MANAGEMENT OF THE FUND
INVESTMENT MANAGER. Dreyfus, located at 200 Park Avenue, New
York, New York 10166, was formed in 1947. Dreyfus is a wholly-owned
subsidiary of Mellon Bank, which is a wholly-owned subsidiary of Mellon Bank
Corporation ("Mellon"). As of January 31, 1996, Dreyfus managed or
administered approximately $82 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 $233 billion in assets as of
December 31, 1995, including $81 billion in mutual fund assets. As of
December 31, 1995, Mellon, through various subsidiaries, provided
non-investment services, such as custodial or administration services, for
more than $786 billion in assets, including approximately $60 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. 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 investmen
t 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-
Page 12
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 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)."
In allocating brokerage transactions for the Fund, Dreyfus seeks to
obtain the best execution of orders at the most favorable net price. Subject
to this determination, Dreyfus may consider, among other things, the receipt
of research services and/or the sale of shares of the Fund or other funds
managed, advised or administered by Dreyfus as factors in the selection of
broker-dealers to execute portfolio transactions for the Fund. See "Portfolio
Transactions" in the SAI.
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.
DISTRIBUTOR. 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 and Trust 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
Page 13
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 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
Page 14
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# 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.
Page 15
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 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,
both of 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
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.
Page 16
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 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 share-
Page 17
holder may realize, or an exchange on behalf of a Retirement Plan which is
not tax exempt may result in, a taxable gain or loss.
DREYFUS AUTO-EXCHANGE PRIVILEGE
Dreyfus Auto-Exchange Privilege enables you to invest regularly
(on a semi-monthly, monthly, quarterly or annual basis), in exchange for
shares of the Fund, in shares of the same class of certain other funds in the
Dreyfus Family of Funds of which you are currently an investor. WITH RESPECT
TO CLASS R SHARES HELD BY RETIREMENT PLANS, EXCHANGES PURSUANT TO THE DREYFUS
AUTO-EXCHANGE PRIVILEGE MAY BE MADE ONLY BETWEEN A SHAREHOLDER'S RETIREMENT
PLAN ACCOUNT IN ONE FUND AND SUCH SHAREHOLDER'S RETIREMENT PLAN ACCOUNT IN
ANOTHER FUND. The amount you designate, which can be expressed either in
terms of a specific dollar or share amount ($100 minimum), will be exchanged
automatically on the first and/or fifteenth day of the month according to the
schedule you have selected. Shares will be exchanged at the then-current NAV;
however, a sales load may be charged with respect to exchanges of Investor
shares into funds sold with a sales load. The right to exercise this
Privilege may be modified or canceled by the Fund or the Transfer Agent. You
may modify or cancel your exercise of this Privilege at any time by mailing
written notification to The Dreyfus Family of Funds, P.O. Box 9671,
Providence, Rhode Island 02940-9671. The Fund may charge a service fee for
the use of this Privilege. No such fee currently is contemplated. The
exchange of shares of one fund for shares of another is treated for Federal
income tax purposes as a sale of the shares given in exchange by the
shareholder and, therefore, an exchanging shareholder may realize, or an
exchange on behalf of a Retirement Plan which is not tax exempt may result
in, a taxable gain or loss. For more information concerning this Privilege
and the funds in the Dreyfus Family of Funds eligible to participate in this
Privilege, or to obtain a Dreyfus Auto-Exchange Authorization Form, please
call toll free 1-800-645-6561.
DREYFUS-AUTOMATIC ASSET BUILDERRegistration Mark
Dreyfus-AUTOMATIC Asset Builder permits you to purchase Fund
shares (minimum of $100 and maximum of $150,000 per transaction) at regular
intervals selected by you. Fund shares are purchased by transferring funds
from the bank account designated by you. 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 des-
Page 18
ignated bank account. Only an account maintained at a domestic financial
institution which is an ACH member may be so designated. Banks may charge a
fee for this service.
For more information concerning these privileges, or to request a
Dreyfus Dividend Options Form, please call toll free 1-800-645-6561. You may
cancel these privileges by mailing written notification to The Dreyfus Family
of Funds, P.O. Box 9671, Providence, Rhode Island 02940-9671. Enrollment in
or cancellation of these privileges is effective three business days
following receipt. These privileges are available only for existing accounts
and may not be used to open new accounts. Minimum subsequent investments do
not apply for Dreyfus Dividend Sweep. The Fund may modify or terminate these
privileges at any time or charge a service fee. No such fee currently is
contemplated. Shares held under Keogh Plans, IRAs or other retirement plans
are not eligible for Dreyfus Dividend Sweep.
DREYFUS GOVERNMENT DIRECT DEPOSIT PRIVILEGE
Dreyfus Government Direct Deposit Privilege enables you to
purchase Fund shares (minimum of $100 and maximum of $50,000 per transaction)
by having Federal salary, Social Security, or certain veterans', military or
other payments from the Federal government automatically deposited into your
Fund account. You may deposit as much of such payments as you elect. You
should consider whether Direct Deposit of your entire payment into a fund
with fluctuating NAV, such as the Fund, may be appropriate for you. To enroll
in Dreyfus Government Direct Deposit, you must file with the Transfer Agent a
completed Direct Deposit Sign-Up Form for each type of payment that you
desire to include in this Privilege. The appropriate form may be obtained by
calling 1-800-645-6561. Death or legal incapacity will terminate your
participation in this Privilege. You may elect at any time to terminate your
participation by notifying in writing the appropriate Federal agency.
Further, the Fund may terminate your participation upon 30 days notice to
you.
DREYFUS PAYROLL SAVINGS PLAN
Dreyfus Payroll Savings Plan permits you to purchase Fund shares
(minimum of $100 per transaction) automatically on a regular basis. Depending
upon the direct deposit program of your employer, you may have part or all of
your paycheck transferred to your existing Dreyfus account electronically
through the ACH system at each pay period. To establish a Dreyfus Payroll
Savings Plan account, you must file an authorization form with your
employer's payroll department. Your employer must complete the reverse side
of the form and return it to The Dreyfus Family of Funds, P.O. Box 9671,
Providence, Rhode Island 02940-9671. You may obtain the necessary
authorization form by calling 1-800-645-6561. You may change the amount of
purchase or cancel the authorization only by written notification to your
employer. It is the sole responsibility of 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
Page 19
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 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
Page 20
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
TELETRANSFER Privilege. Other redemption procedures may be in effect for
clients of certain Agents and institutions. The Fund makes available to
certain large institutions the ability to issue redemption instructions
through compatible computer facilities.
You may redeem Fund shares by telephone if you have checked the
appropriate box on the Fund's Account Application or have filed a Shareholder
Services Form with the Transfer Agent. If you select the 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
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
Page 21
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.
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
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.
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
Page 22
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.
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
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 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.
Page 23
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 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 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
Page 24
at the end of a stated period of time, after giving effect to the
reinvestment of dividends and other distributions during the period. The
return is expressed as a percentage rate which, if applied on a compounded
annual basis, would result in the redeemable value of the investment at the
end of the period. Advertisements of the Fund's performance will include the
Fund's average annual total return for one, five and ten year periods, or for
shorter periods depending upon the length of time during which the Fund has
operated. Computations of average annual total return for periods of less
than one year represent an annualization of the Fund's actual total return for
the applicable period.
Total return is computed on a per share basis and assumes the
reinvestment of dividends and other distributions. Total return generally is
expressed as a percentage rate which is calculated by combining the income
and principal changes for a specified period and dividing by the NAV at the
beginning of the period. Advertisements may include the percentage rate of
total return or may include the value of a hypothetical investment at the end
of the period which assumes the application of the percentage rate of total
return.
The Fund may also advertise the yield on a Class of shares. The
Fund's yield is calculated by dividing a Class of shares' annualized net
investment income per share during a recent 30-day (or one month) period by
the maximum public offering price per 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
Page 25
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 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
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Page 27
DREYFUS
International
Equity Allocation
Fund
Prospectus
(LION LOGO)
Registration Mark
Copy Rights 1996 Dreyfus Service Corporation
323/723p030196
- ----------------------------------------------------------------------------
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......................... 24
DISTRIBUTION PLAN (INVESTOR SHARES ONLY).......... 27
PERFORMANCE INFORMATION........................... 27
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES.......... 28
GENERAL INFORMATION............................... 30
PAGE 2
This Page Intentionally Left Blank
Page 3
<TABLE>
<CAPTION>
EXPENSE SUMMARY
INVESTOR SHARES CLASS R SHARES
---------------- ----------------
<S> <C> <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%
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
----------------- -----------------
1 Year $ 7 $ 5
3 Years $22 $16
5 Years $39 $28
10 Years $87 $63
- -------------------
* 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.")
</TABLE>
- ----------------------------------------------------------------------------
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
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
The following financial information for Investor and Class R shares has been
derived from the financial statements which have been audited by KPMG Peat
Marwick LLP, the independent auditors for the 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.
DREYFUS MONEY MARKET 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...................................... .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%#
* The Fund commenced selling Investor shares on April 6, 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.
+ Total return represents aggregate total return for the period indicated.
# Annualized.
</TABLE>
Page 5
<TABLE>
<CAPTION>
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%#
- -------------------------
* The Fund commenced operations on November 18, 1987. The Fund commenced
selling Investor Shares on April 6, 1994.Those shares outstanding prior to
April 4, 1994 were designated Trust Shares. Effective as of October 17,
1994, the Fund's Trust Shares were redesignated Class R Shares.
** For the years or period ended October 31, 1992, 1991, 1990, 1989 and
1988, the investment adviser waived all or a portion of its advisory fee
amounting to $0.0007, $0.0010, $0.0038, $0.0043 and $0.0045 per share,
respectively. For the years or period ended October 31, 1993, 1992, 1991,
1990, 1989 and 1988, the investment adviser reimbursed expenses of the
Fund amounting to $0.0036, $0.0027, $0.0018, $0.0026, $0.0062 and $0.3952
per share, respectively.
+ Net investment income before expenses reimbursed by the investment
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.
## 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
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
The following financial information for Investor and Class R shares has been
derived from the financial statements which have been audited by KPMG Peat
Marwick LLP, the independent auditors for the 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.
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.
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.
+ Total return represents aggregate total return for the period
indicated.
# Annualized.
</TABLE>
Page 7
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS (CONTINUED)
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% 0.51%+++ 0.50%** 0.50%** 0.50%** 0.55%** 0.70%** 0.70%**#
Ratio of net investment income
to average net assets.. 3.41% 2.30% 2.08% 2.90% 4.49% 5.66% 5.95% 4.61%#
- --------------------
* 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.
## 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
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
The following financial information for Investor and Class R shares has been
derived from the financial statements which have been audited by KPMG Peat
Marwick LLP, the independent auditors for the 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.
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%#
- -----------------
* The Fund commenced selling Investor Shares on April 18, 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.
+ Total return represents aggregate total return for the period
indicated.
# Annualized.
</TABLE>
Page 9
<TABLE>
<CAPTION>
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%#
- --------------
* 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.
## 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 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
federal 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
Page 11
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.")
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.
Page 12
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.
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
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 a Fund, including withholding of
dividends. Foreign securities may be subject to foreign government taxes that
would reduce the yield on such securities.
page 13
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.
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 provide for the seller of the municipal lease obligation or the rema
rketing 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
knowl-
Page 14
edge 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 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.
Page 15
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 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, 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
Page 16
(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 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.
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. As a fundamental
policy, each Fund may not (i) borrow money in an amount exceeding 331/3% of
the Fund's total assets at the time of borrowing; (ii) make loans or lend
securities in excess of 331/3% of the Fund's total assets; (iii) purchase,
with respect to 75% of the Fund's total assets, securities of any one issuer
representing more than 5% of the Fund's total assets (other than securities
issued or guaranteed by the U.S. Government, its agencies and
instrumentalities) or more than 10% of that issuer's outstanding voting
securities; and (iv) invest more than 25% of the value of the Fund's total
assets in the securities of one or more issuers conducting their principal
activities in the same industry; provided that there shall be no such
limitation on investments, in obligations of the U.S. Government, state and
municipal governments and their political subdivisions or investments in
domestic banks, including U.S. branches of foreign banks and foreign branches
of U.S. banks. The SAI describes each of the 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,
Page 17
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 January 31, 1996, Dreyfus managed or administered
approximately $82 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 $233 billion in assets as of
December 31, 1995, including $81 billion in mutual fund assets. As of
December 31, 1995, Mellon, through various subsidiaries, provided
non-investment services, such as custodial or administration services, for
more than $786 billion in assets, including approximately $60 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. 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. 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)."
In allocating brokerage transactions for the Fund, Dreyfus seeks to
obtain the best execution of orders at the most favorable net price. Subject
to this determination, Dreyfus may consider, among other things, the
Page 18
receipt of research services and/or the sale of shares of the Fund or other
funds managed, advised or administered by Dreyfus as factors in the selection
of broker-dealers to execute portfolio transactions for the Fund. See
"Portfolio Transactions" in the Statement of Additional Information.
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.
DISTRIBUTOR -- 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 effecting
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
Page 19
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
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:
Page 20
"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, both of which are offered on a
continuous basis, 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
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.
Page 21
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 you
r 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
Page 22
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 BUILDERRegistration Mark
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.
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
Page 23
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
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
Page 24
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 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
Page 25
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.
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,
Page 26 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
TELETRANSFER 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 eligib le 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
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 Distributor. 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
Page 27
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 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.
Page 28
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 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
distribution" from a qualified Retirement Plus does not elect to have
Page 29
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' 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.
Page 30
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
DREYFUS
Dreyfus Money Market Reserves
Dreyfus Municipal Reserves
Dreyfus U.S. Treasury Reserves
Prospectus
(LION LOGO)
Copy Rights 1996 Dreyfus Service Corporation
LMMKTp030196
Registration Mark
- -----------------------------------------------------------------------------
PREMIER BALANCED FUND
(LION LOGO)
PROSPECTUS MARCH 1, 1996
Registration Mark
- -----------------------------------------------------------------------------
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
Government/Corporate 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.
- -----------------------------------------------------------------------------
(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............................... 24
How to Redeem Fund Shares.......................... 27
Distribution Plans (Class A Plan and Class B and C Plan).. 31
Dividends, Other Distributions and Taxes........... 32
Performance Information............................ 33
General Information................................ 35
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)...... 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/$202 $30/$202 $ 10
3 YEARS $ 83 $93/$632 $63 $ 32
5 YEARS $111 $128/$1082 $108 $ 55
10 YEARS $189 $196** $233 $122
- -----------------
* 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.
</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. 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 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 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 KPMG Peat Marwick LLP, 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% 83.00%
- ---------------
* 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.
# 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
PREMIER BALANCED FUND
FOR A CLASS B SHARE OUTSTANDING THROUGHOUT THE PERIOD.
PERIOD ENDED
10/31/95*
-----------
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.
Page 6
PREMIER BALANCED FUND
FOR A CLASS C SHARE OUTSTANDING THROUGHOUT THE PERIOD.
PERIOD ENDED
10/31/95*
-----------
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.
** Annualized.
Pagee 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
<S> <C> <C> <C>
Net asset value, beginning or period $10.09 $10.18 $10.00
------ ------- ------
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. The
amount shown in this caption for each share outstanding throughout the
period may not accord with the change in the aggregate gains and loses
in the portfolio securities for the period because of the timing of
purchases and withdrawal of shares in relation to the fluctuations in
market values of the portfolio.
*** 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 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. As a fundamental policy,
the Fund may not (i) borrow money in an amount exceeding 331/3% of the
Fund's total assets at the time of borrowing; (ii) make loans or lend
securities in excess of 331/3% of the Fund's total assets; (iii)
purchase, with respect to 75% of the Fund's total assets, securities of
any one issuer representing more than 5% of the Fund's total assets
(other than securities issued or guaranteed by the U.S. Government, its
agencies and instrumentalities) or more than 10% of that issuer's
outstanding voting securities; and (iv) invest more than 25% of the value
of the Fund's total assets in the securities of one or more issuers
conducting their principal activities in the same industry; provided that
there shall be no such limitation on investments in obligations of the
U.S. Government, state and municipal governments and their political
subdivisions or investments in domestic banks, including U.S. branches of
foreign banks and foreign branches of U.S. banks. The SAI describes all
of the Fund's fundamental and non-fundamental restrictions.
The investment objective, policies, restrictions, practices
and procedures of the Fund, unless otherwise specified, may be changed
without shareholder approval. If the Fund's investment objective,
policies, restrictions, practices or procedures change, shareholders
should consider whether the Fund remains an appropriate investment in
light of the shareholder's then-current position and needs.
In order to permit the sale of the Fund's shares in certain
states, the Fund may make commitments more restrictive than the
investment policies and restrictions described in this Prospectus and the
SAI. Should the Fund determine that any such commitment is no longer in
the best interest of the Fund, it may consider terminating sales of its
shares in the states involved.
MANAGEMENT OF THE FUND
INVESTMENT MANAGER -- Dreyfus, located at 200 Park Avenue,
New York, New York 10166, was formed in 1947. Dreyfus is a wholly-owned
subsidiary of Mellon Bank, which is a wholly-owned subsidiary of Mellon
Bank Corporation ("Mellon"). As of January 31, 1996, Dreyfus managed or
administered approximately $82 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
Page 17
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 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 $ 233 billion in assets as of
December 31, 1995, including $ 81 billion in mutual fund assets. As of
December 31, 1995, Mellon, through various subsidiaries, provided
non-investment services, such as custodial or administration services,
for more than $786 billion in assets, including approximately $60 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 20, 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)."
In allocating brokerage transactions for the Fund, Dreyfus
seeks to obtain the best execution of orders at the most favorable net
price. Subject to this determination, Dreyfus may consider, among other
things, the receipt of research services and/or the sale of shares of the
Fund or other funds managed, advised or administered by Dreyfus as
factors in the selection
Page 18
of broker-dealers to execute portfolio transactions for the Fund. See
"Portfolio Transactions" in the SAI.
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.
DISTRIBUTOR -- 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"), 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
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.
Page 19
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 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
Page 20
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.
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
Page 21
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 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
Page 22
"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.
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 nec-
Page 23
essary 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 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
Page 24
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
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.
DREYFUS-AUTOMATIC ASSET BUILDERRegistration Mark
Dreyfus-AUTOMATIC Asset Builder permits you to purchase Fund
shares (minimum of $100 and maximum of $150,000 per transaction) at
regular intervals selected by you. Fund shares are purchased by
transferring funds from the bank account designated by you. 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
Page 25
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. 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
Page 26
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 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.
Page 27
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:
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 net asset value of Class B shares above the
total amount of payments for the purchase of Class B shares made during
the
Page 28
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.
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
Page 29
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 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 the
redemption are credited to your
Page 30
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 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
Page 31
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 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 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
Page 32
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 33
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 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.
Page 34
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.
PDB/P030196
Page 35
- ------------------------------------------------------------------------------
PREMIER LIMITED TERM INCOME FUND
PROSPECTUS MARCH 1, 1996
Registration Mark
- ------------------------------------------------------------------------------
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, 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.
- -----------------------------------------------------------------------------
(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.
TABLE OF CONTENTS
Expense Summary.............................. 3
Financial Highlights......................... 4
Alternative Purchase Methods................. 8
Description of the Fund...................... 9
Management of the Fund....................... 14
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 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).............. 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 Expenses ......................... .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/$142 $ 21/$143 $ 6
3 YEARS $ 56 $63/$432 $ 43 $19
5 YEARS $ 76 $ 84/$742 $ 74 $33
10 YEARS $132 $136** $162 $75
* 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 Fund 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 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 3
FINANCIAL HIGHLIGHTS
The tables below are based upon a single Class A, Class B, Class C
and 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 KPMG Peat Marwick LLP, 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*#
<S> <C> <C>
Net asset value, beginning of period $10.22 $10.49
----------- --------------
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%
*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.
</TABLE>
Page 4
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 December 19, 1994.
**Annualized.
Page 5
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 6
<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*## 10/31/93 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% 117% 112% 67% 23%
- ------------------
* 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 a portion of
its advisory fee amounting to $0.0064 and $0.0107 per share,
respectively. For the years ended October 31, 1993 and 1992 and the
period ended October 31, 1991, the investment adviser reimbursed
expenses of the Fund amounting to $.0509, $.1147, and $.0732 per
share, respectively.
# Net investment income before reimbursement of expenses by the
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.
</TABLE>
Page 7
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
Page 8
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
$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
Page 9
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
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 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
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.
Page 10
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.
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
Page 11
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 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 securi-
Page 12
ties 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 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 pur-
Page 13
suant 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
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.As a fundamental policy,
the Fund may not (i) borrow money in an amount exceeding 331/3% of the
Fund's total assets at the time of borrowing; (ii) make loans or lend
securities in excess of 331/3% of the Fund's total assets; (iii) purchase,
with respect to 75% of the Fund's total assets, securities of any one
issuer representing more than 5% of the Fund's total assets (other than
securities issued or guaranteed by the U.S. Government, its agencies and
instrumentalities) or more than 10% of that issuer's outstanding voting
securities; and (iv) invest more than 25% of the value of the Fund's
total assets in the securities of one or more issuers conducting their
principal activities in the same industry; provided that there shall be
no such limitation on investments, in obligations of the U.S. Government,
state and municipal governments and their political subdivisions or
investments in domestic banks, including U.S. branches of foreign banks
and foreign branches of U.S. banks. The SAI describes all of the Fund's
fundamental and non-fundamental restrictions.
The investment objective, policies, restrictions, practices
and procedures of the Fund, unless otherwise specified, may be changed
without shareholder approval. If the Fund's investment objective,
policies, restrictions, practices or procedures change, shareholders
should consider whether the Fund remains an appropriate investment in
light of the shareholder's then-current position and needs.
In order to permit the sale of the Fund's Shares in certain
states, the Fund may make commitments more restrictive than the
investment policies and restrictions described in this Prospectus and the
SAI. Should the Fund determine that any such commitment is no longer in
the best interest of the Fund, it may consider terminating sales of its
shares in the states involved.
MANAGEMENT OF THE FUND
INVESTMENT MANAGER -- Dreyfus, located at 200 Park Avenue,
New York, New York 10166, was formed in 1947. Dreyfus is a wholly-owned
subsidiary of Mellon Bank, which is a wholly-owned subsidiary of Mellon
Bank Corporation ("Mellon"). As of January 31, 1996, Dreyfus
Page 14
managed or administered approximately $82 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 $233 billion in assets as of December 31,
1995, including $81 billion in mutual fund assets. As of December 31,
1995, Mellon, through various subsidiaries, provided non-investment
services, such as custodial or administration services, for more than
$786 billion in assets, including approximately $60 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. 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)."
In allocating brokerage transactions for the Fund, Dreyfus
seeks to obtain the best execution of orders at the most favorable net
price. Subject to this determination, Dreyfus may consider, among other
things, the receipt of research services and/or the sale of shares of the
Fund or other funds managed, advised or administered by Dreyfus as
factors in the selection of broker-dealers to execute portfolio
transactions for the Fund. See "Portfolio Transactions" in the SAI.
Page 15
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.
DISTRIBUTOR -- 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"), a
wholly-owned subsidiary of Dreyfus, located at One American 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-
Page 16
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 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.
Page 17
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 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.
Page 18
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.
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 redemp-
Page 19
tion 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
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
Page 20
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
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
Page 21
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 eligible to participate in this Privilege, or to obtain
an Auto-Exchange Authorization Form, please call toll free
1-800-645-6561.
DREYFUS-AUTOMATIC ASSET BUILDERRegistration Mark
Dreyfus-AUTOMATIC Asset Builder permits you to purchase Fund
shares (minimum of $100 and maximum of $150,000 per transaction) at
regular intervals selected by you. Fund shares are purchased by
transferring funds from the bank account designated by you. 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.
Page 22
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.
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.
Page 23
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 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
Page 24
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:
Year Since CDSC as a % of Amount
Purchase Payment Invested or Redemption
Was Made Proceeds
------------------- -------------------------
First................................... 3.00
Second.................................. 3.00
Third................................... 2.00
Fourth.................................. 2.00
Fifth................................... 1.00
Sixth................................... .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 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,
Page 25
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 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.
Page 26
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 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.,
Page 27
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 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.
Page 28
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 NAV. 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, 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
Page 29
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.
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/P030195
- -----------------------------------------------------------------------------
PREMIER SMALL COMPANY STOCK FUND
PROSPECTUS MARCH 1, 1996
(LION LOGO
Registration Mark
- -----------------------------------------------------------------------------
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.
- -----------------------------------------------------------------------------
(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.......................... 24
Distribution Plans (Class A Plan and Class B and C Plan). 27
Dividends, Other Distributions and Taxes........... 28
Performance Information............................ 30
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 $100/702 $70 $ 40
5 YEARS $123 $140/1202 $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 4
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 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 ended October 31, 1995
have been audited by KPMG Peat Marwick LLP, 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 THE 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.
+ Total represents aggregate total return for the period indicated.
** Annualized.
Page 5
PREMIER SMALL COMPANY STOCK FUND
FOR A CLASS C SHARE OUTSTANDING THROUGHOUT THE 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
offering Class C shares on December 19, 1994.
+ Total represents aggregate total return for the period indicated.
** 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
------- ---------
Distributions
Dividends from net investment income (0.05) --
Net asset value, end of period $13.10 $10.07
======= ========
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 2000trademark
Index consists of the smallest 2,000 companies in the Russell Index
3000trademark, representing approximately 10% of the Russell 3000
trademarkIndex 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 between the U.S. dollar and foreign currencies. For example,
when the Fund anticipates pur-
Page 10
chasing 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 commercial paper of U.S. and foreign companies rated
at the time of purchase at least A-1 by
Page 11
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 with a duration of more than seven days are considered
illiquid securities and are subject to the associated limits discussed
above.
Page 12
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. As a fundamental policy, t
he Fund may not (i) borrow money in an amount exceeding 331/3% of the Fund's
total assets at the time of borrowing; (ii) make loans or lend securities
in excess of 331/3% of the Fund's total assets; (iii) purchase, with
respect to 75% of the Fund's total assets, securities of any one issuer
representing more than 5% of the Fund's total assets (other than
securities issued or guaranteed by the U.S. Government, its agencies and
instrumentalities) or more than 10% of that issuer's outstanding voting
securities; and (iv) invest more than 25% of the value of the Fund's
total assets in the securities of one or more issuers conducting their
principal activities in the same industry; provided that there shall be
no such limitation on invest-
Page 13
ments in obligations of the U.S. Government, state and municipal
governments and their political subdivisions or investments in domestic
banks, including U.S. branches of foreign banks
and foreign branches of U.S. banks. The SAI describes all of the Fund's
fundamental and non-fundamental restrictions.
The investment objective, policies, restrictions, practices
and procedures of the Fund, unless otherwise specified, may be changed
without shareholder approval. If the Fund's investment objective,
policies, restrictions, practices or procedures change, shareholders
should consider whether the Fund remains an appropriate investment in
light of the shareholder's then-current position and needs.
In order to permit the sale of the Fund's shares in certain
states, the Fund may make commitments more restrictive than the
investment policies and restrictions described in this Prospectus and the
SAI. Should the Fund determine that any such commitment is no longer in
the best interest of the Fund, it may consider terminating sales of its
shares in the states involved.
MANAGEMENT OF THE FUND
INVESTMENT MANAGER -- Dreyfus, located at 200 Park Avenue,
New York, New York 10166, was formed in 1947. Dreyfus is a wholly-owned
subsidiary of Mellon Bank, which is a wholly-owned subsidiary of Mellon
Bank Corporation ("Mellon"). As of January 31, 1996, Dreyfus managed or
administered approximately $82 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 $233 billion in assets as of December 31,
1995, including $81 billion in mutual fund assets. As of December 31,
1995, Mellon, through various subsidiaries, provided non-investment
services, such as custodial or administration services, for more than
$786 billion in assets, including approximately $60 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 invest-
Page 14
ment 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 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, total operating expenses (excluding
Rule 12b-1 fees) of the Fund for Class B and Class C shares were 1.25%
(annualized) of the average daily net assets for 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)."
In allocating brokerage transactions for the Fund, Dreyfus
seeks to obtain the best execution of orders at the most favorable net
price. Subject to this determination, Dreyfus may consider, among other
things, the receipt of research services and/or the sale of shares of the
Fund or other fundsmanaged, advised or administered by Dreyfus as factors
in the selection of broker-dealers to execute portfolio transactions for
the Fund. See "Portfolio Transactions" in the SAI.
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.
DISTRIBUTOR -- 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.
Page 15
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 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:
Page 16
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.
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
Page 17
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 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-
Page 18
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 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.
Page 19
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 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
Page 20
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 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
Page 21
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.
DREYFUS-AUTOMATIC ASSET BUILDERRegistration Mark
Dreyfus-AUTOMATIC Asset Builder permits you to purchase Fund
shares (minimum of $100 and maximum of $150,000 per transaction) at
regular intervals selected by you. Fund shares are purchased by
transferring funds from the bank account designated by you. 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 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.
Page 22
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.
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
Page 23
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 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 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
Page 24
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 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 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
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.
Page 25
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 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,
Page 26
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 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
Page 27
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 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.
Page 28
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 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, 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.
Page 29
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
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
Page 30
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.
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
PCSp030196
Page 31
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-19
Purchase of Fund Shares . . . . . . . . . . . . . . . . B-20
Distribution Plan . . . . . . . . . . . . . . . . . . . B-21
Redemption of Fund Shares . . . . . . . . . . . . . . . B-22
Shareholder Services. . . . . . . . . . . . . . . . . . B-23
Determination of Net Asset Value. . . . . . . . . . . . B-26
Dividends, Other Distributions and Taxes. . . . . . . . B-27
Portfolio Transactions. . . . . . . . . . . . . . . . . B-30
Performance Information . . . . . . . . . . . . . . . . B-32
Information About the Fund. . . . . . . . . . . . . . . B-34
Custodian, Transfer and Dividend Disbursing
Agent, Counsel and Independent Auditors . . . . . . . B-34
Financial Statements. . . . . . . . . . . . . . . . . . B-34
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 January 31, 1996: Mac & Co., 862-711, P.O. Box 3198,
Pittsburgh, PA 15230-3198, 8% record and Mac & Co., c/o Mellon Bank, N.A.,
P.O. Box 3198, Pittsburgh, PA 15230-3198, 31% record.
FEDERAL LAW AFFECTING MELLON BANK
The Glass-Steagall Act of 1933 prohibits national banks from engaging
in the business of underwriting, selling or distributing securities and
prohibits a member bank of the Federal Reserve System from having certain
affiliations with an entity engaged principally in that business. The
activities of Mellon Bank, N.A. ("Mellon Bank") in informing its customers
of, and performing, investment and redemption services in connection with
the Fund, and in providing services to the Fund as custodian, 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 twelve 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 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.
# ELIZABETH BACHMAN. Vice President and Assistant Secretary of the
Company, The Dreyfus/Laurel Funds Trust and The Dreyfus/Laurel Tax
Free Municipal Funds (since January 1996); Counsel, Premier Mutual
Fund Services, Inc. Prior to September 1995, she was enrolled at the
Fordham University School of Law and received her J.D. in May 1995.
Prior to September 1992, she was an Assistant at the National
Association for Public Interest Law. Age: 26 years old. Address: 200
Park Avenue, New York, New York 10166.
# 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: One Exchange Place,
Boston, Massachusetts 02109.
# ERIC B. FISCHMAN. Vice President and Assisant Secretary (since January
1996) of the Company, The Dreyfus/Laurel Funds Trust and The
Dreyfus/Laurel Tax-Free Municipal Funds; 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: 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.
# MARGARET PARDO. Assistant Secretary of the Company, The Dreyfus/Laurel
Funds Trust and The Dreyfus/Laurel Tax-Free Municipal Funds (since
January 1996); Paralegal, Premier Mutual Fund Services, Inc. Prior
to April 1995, she was a Medical Coordination Officer at ORBIS
International. Prior to June 1992, she worked as a Program
Coordinator at Physicians World Communications Group. Age: 27 years
old. Address: 200 Park Avenue, New York, New York 10166.
# 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.
# JOHN J. PYBURN. Assistant Treasurer of the Company, The Dreyfus/Laurel
Funds Trust and The Dreyfus/Laurel Tax-Free Municipal Funds (since
January 1996); Vice President of Premier Mutual Fund Services, Inc.
and an officer of other investment companies advised or administered
by Dreyfus. From 1984 to July 1994, he was Assistant Vice President
in the Mutual Fund Accounting Department of Dreyfus. Age: 61 years
old. Address: 200 Park Avenue, New York, New York 10166.
JOSEPH F. TOWER, III. Assistant Treasurer of the Company, The
Dreyfus/Laurel Funds Trust and The Dreyfus/Laurel Tax-Free Municipal
Funds (since January 1996); Senior Vice President, Treasurer and Chief
Financial Officer of Premier Mutual Fund Services, Inc. and an officer
of other investment companies advised or administered by Dreyfus.
From July 1988 to August 1994, he was employed by The Boston Company,
Inc. where he held various management positions in the Corporate
Finance and Treasury areas. Age: 33 years old. Address: 200 Park
Avenue, New York, New York 10166.
______________________________
* "Interested person" of the Company, as defined in the 1940 Act.
o Member of the Audit Committee.
+ Member of the Nominating Committee.
# Officer also serves as an officer for other investment companies
advised by Dreyfus.
The officers and Directors of the Company as a group owned
beneficially less than 1% of the Fund's total shares outstanding as of
January 31, 1996.
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 current 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 $27,800 None None $ 34,500
Francis P. Brennan* 86,683 None None 110,500
Joseph S. DiMartino** None None None $448,618***
James M. Fitzgibbons 27,795 None None 34,500
J. Tomlinson Fort** None None None None
Arthur L. Goeschel 27,604 None None 35,500
Kenneth A. Himmel 26,381 None None 32,750
Arch S. Jeffery** None None None None
Stephen J. Lockwood 26,387 None None 32,750
Robert D. McBride 27,800 None None 35,500
John J. Sciullo 27,800 None None 34,500
Roslyn M. Watson 27,795 None None 34,550
# Amounts required to be paid by the Company directly to the non-interested Directors,
that would be applied to offset a portion of the management fee payable to Dreyfus, are in
fact paid directly by Dreyfus to the non-interested Directors. Amount does not include
reimbursed expenses for attending Board meetings, which amounted to $12,342 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 $17,563, $28,604 and $27,800,
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 $3,186 for expenses
attributable to the Company's Board meetings ($3,186 is not included in the $12,342
above).
*** Estimated amounts for the fiscal year ending October 31, 1995.
</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 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 and a director; Barbara E. Casey, Vice President-Dreyfus
President-Dreyfus Retirement Services; Diane M. Coffey, Vice President-
Corporate Communications; Elie M. Genadry, Vice President-Institutional
Sales; William T. Sandalls, Jr., Senior Vice President, Chief Financial
Officer and a director; 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; Maurice Bendrihem,
Controller; Elvira Oslapas; Assistant Secretary; Mandell L. Berman, Frank
V. Cahouet, Alvin E. Friedman, Lawrence M. Greene and Julian M. Smerling
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.
In-Kind Purchases. If the following conditions are satisfied, the
Fund may at its discretion, permit the purchase of shares through an "in-
kind" exchange of securities. Any securities exchanged must meet the
investment objective, policies and limitations of the Fund, must have a
readily ascertainable market value, must be liquid and must not be subject
to restrictions on resale. The market value of any securities exchanged,
plus any cash, must be at least equal to $25,000. Shares purchased in
exchange for securities generally cannot be redeemed for fifteen days
following the exchange in order to allow time for the transfer to settle.
The basis of the exchange will depend upon the relative NAV of the
Shares purchased and securities exchanged. Securities accepted by the Fund
will be valued in the same manner as the Fund values its assets. Any
interest earned on the securities following their delivery to the Fund and
prior to the exchange will be considered in valuing the securities. All
interest, dividends, subscription or other rights attached to the
securities become the property of the Fund, along with the securities. For
further information about "in-kind" purchases, call 1-800-645-6561.
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 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 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 ("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.
From time to time, advertising material for the Fund may include
biographical information relating to its portfolio manager and may refer
to, or include commentary by the portfolio manager relating to investment
strategy, asset growth, current or past business, political, economic or
financial conditions and other matters of general interest to investors.
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 15219, 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.
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.
KPMG Peat Marwick 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.
<PAGE>
Dreyfus Disciplined Midcap Stock Fund October 31, 1995
- ----------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN DREYFUS DISCIPLINED
MIDCAP STOCK FUND CLASS R SHARES AND THE STANDARD & POOR'S
MIDCAP 400 INDEX
Disciplined Midcap
Stock Fund Standard & Poor's
(Class R Shares) Midcap 400 Index *
11/12/93 10,000 10,000
1/31/94 10,282 10,471
4/30/94 9,992 9,917
7/31/94 9,628 9,806
10/31/94 9,823 10,237
1/31/95 9,434 9,968
4/30/95 10,264 10,887
7/31/95 11,746 12,207
10/31/95 12,139 12,410
*Source: Lipper Analytical Services, Inc.
Average Annual Total Returns
- ----------------------------------------------------------------------------
Investor Class Shares Class R Shares
- ---------------------------------- -----------------------------------
Period ended 10/31/95 Period ended 10/31/95
- ---------------------------------- -----------------------------------
1 Year 23.39% 1 Year 23.57%
From Inception (4/6/94) 12.79 From Inception (11/12/93 10.34
Past performance is not predictive of future performance.
The above graph compares a $10,000 investment made in Class R shares of
Dreyfus Disciplined Midcap Stock Fund on 11/12/93 (Inception Date) to a
$10,000 investment made in the Standard & Poor's MidCap 400 Index on that
date. For comparative purposes, the value of the Index on 10/31/93 is used as
the beginning value on 11/12/93. All dividends and capital gain distributions
are reinvested. Performance for Investor Class shares will vary from the
performance of Class R shares shown above due to differences in charges and
expenses.
The Dreyfus Disciplined Midcap Stock Fund seeks investment returns (including
capital appreciation and income) consistently superior to the Standard &
Poor's MidCap 400 Index. While the midcap market is the Fund's main focus,
the Fund can also invest in other areas, such as stocks of smaller and larger
corporations. The Fund's performance shown in the line graph takes into
account all applicable fees and expenses. The Standard & Poor's MidCap 400
Index is a broad-based Index of 400 companies with market capitalizations
generally ranging from $50 million to $10 billion and is a widely accepted,
unmanaged index of overall midcap stock market performance which does not
take into account charges, fees and other expenses. Further information
relating to Fund performance, including expense reimbursements, if
applicable, is contained in the Financial Highlights section of the
Prospectus and elsewhere in this report.
<PAGE>
Dreyfus Disciplined Midcap Stock Fund
- -----------------------------------------------------------------------------
Statement of Investments October 31, 1995
Shares Common Stocks--94.8% Value
---------- ------------
Basic Industries--8.5%
900 Alumax, Inc.+ ................... $00,026,550
3,400 Arco Chemical Company ........... 166,600
900 Cleveland-Cliffs, Inc. .......... 33,638
1,400 Cyprus Minerals ................. 36,575
2,000 Eastman Chemical ................ 119,000
1,500 Fleetwood Enterpirses, Inc. ..... 30,750
2,700 First Mississippi Corporation.... 55,350
1,912 Firstmiss Gold Inc. + ........... 34,416
2,500 Greenfield Industries, Inc. ..... 75,000
1,600 Rayonier, Inc. .................. 60,000
4,900 Smith International, Inc.+....... 78,400
1,500 Temple Inland, Inc. ............. 68,250
2,200 Varian Associates ............... 113,025
2,100 Vigoro Corporation .............. 91,087
2,000 Viking Office Products, Inc.+.... 89,000
3,500 Wellman, Inc. ................... 82,250
-----------
1,159,891
-----------
Business Machines--.8%
2,400 3 Com Corp. + ................... 112,800
-----------
Capital Spending--2.1%
2,700 Case Corporation ................ 102,937
1,500 DSC Communications +............. 55,500
1,600 Danaher Corp. ................... 49,600
4,100 INDRESCO Inc. +.................. 70,213
-----------
278,250
-----------
Communications--3.8%
9,200 Frontier Corp. .................. 248,400
2,200 Scripps (E.W.) Company, Cl. A.... 83,050
2,500 Tellabs, Inc.+................... 85,000
2,700 United States Cellular
Corporation+................... 93,150
-----------
509,600
-----------
Construction--.2%
1,800 Centex Construction
Product Inc. +................. 22,725
-----------
Consumer Basics--1.4%
1,700 Alberto-Culver Company, Cl. B.... 53,338
1,600 Nine West Group Inc. +........... 71,200
2,900 Whitman Corporation ............. 61,625
-----------
186,163
-----------
Consumer Durables--3.4%
3,900 Brunswick Corporation ........... 76,050
2,400 Cummins Engine
Company, Inc................... 84,300
2,100 First Brands Corp. .............. 96,075
Consumer Durables (continued)
2,400 Harley Davidson, Inc. ........... $ 64,200
5,800 Leggett & Platt, Inc. ........... 139,200
-----------
459,825
-----------
Consumer Non-Durables--.5%
1,400 V. F. Corporation ............... 67,025
-----------
Consumer Services--12.2%
2,300 Applebees International Inc. .... 64,688
2,200 BMC Software Inc + .............. 78,375
3,700 Carson Pirie Scott & Company+ ... 62,437
4,900 Circuit City Stores, Inc. ....... 163,538
3,000 Dole Food, Inc. ................. 112,875
4,500 Gartner Group Inc. + ............ 196,312
4,300 Hannaford Brothers .............. 112,338
2,700 Heritage Media Corporation +..... 74,925
3,600 Hormel Foods .................... 82,800
1,400 IBP ............................. 83,825
2,700 IHOP Corp. +..................... 58,050
2,200 Lin Television +................. 62,975
3,100 Manpower, Inc. .................. 84,087
4,100 Morrison Restaurants, Inc. ...... 64,063
2,600 Pittston Services Group ......... 71,500
3,800 Players International, Inc.+..... 40,850
800 Ralston Purina Company .......... 47,500
2,700 Scientific Games Holdings
Corporation+................... 88,425
2,100 Smuckers (J.M.), Cl. A........... 41,212
1,200 Tandy Corporation ............... 59,250
-----------
1,650,025
-----------
Energy--5.3%
1,300 Ashland Coal, Inc. .............. 30,875
5,100 Brooklyn Union Gas Company ...... 128,137
2,200 Chesapeake Energy
Corporation +.................. 64,350
2,300 Diamond Shamrock Inc. ........... 59,225
5,900 Peco Energy Company.............. 172,575
5,100 Union Texas Petroleum
Holdings, Inc. ................ 91,800
4,300 Williams Companies Inc. ......... 166,088
-----------
713,050
-----------
Financial Services--16.1%
1,200 Advanta Corporation ............. 46,500
2,400 Allied Group, Inc. .............. 78,000
1,800 American Bankers Insurance
Group Inc...................... 64,575
<PAGE>
Dreyfus Disciplined Midcap Stock Fund
- -----------------------------------------------------------------------------
Statement of Investments (continued) October 31, 1995
Shares Common Stocks (continued) Value
---------- ------------
Financial Services (continued)
1,300 American General Corporation .... $ 42,737
1,989 American National Insurance
Company ....................... 113,373
4,100 Bank of New York
Company, Inc................... 172,200
1,800 BayBanks, Inc. .................. 145,800
2,300 Bear Stearns Company, Inc. ...... 45,713
2,500 Bergen Brunswig Corporation ..... 51,875
2,900 Commercial Federal .............. 95,337
2,000 Crestar Financial Corporation ... 114,000
4,400 Cullen Frost Bankers ............ 224,400
2,400 Dean Witter, Discover
& Company ..................... 119,400
3,300 Equifax, Inc. ................... 128,700
3,300 First Bank System, Inc. ......... 164,175
1,400 First Chicago Corporation ....... 95,025
800 First Interstate Bancorp ........ 103,200
2,400 Old Republic Intl Corp........... 68,700
1,600 Price T Rowe .................... 79,600
2,300 RCSB Financial .................. 51,175
2,600 Standard Financial +............. 35,750
3,600 Vesta Insurance Group ........... 145,350
-----------
2,185,585
-----------
Forest Products--.3%
1,000 Bowater Inc. .................... 44,250
-----------
General Business--3.6%
3,300 Central Newspapers, Inc.,
Cl. A.......................... 97,350
3,800 Chesapeake Corporation .......... 116,375
2,200 HFS Inc. +..................... 134,750
1,900 King World Productions, Inc.+.... 66,263
1,500 Royal Caribbean Cruises ......... 34,500
1,900 Sport Authority (The) +.......... 41,325
-----------
490,563
-----------
Health Care/Pharmaceuticals--7.8%
1,500 Becton, Dickinson & Company ..... 97,500
2,500 Cardinal Health, Inc. ........... 128,437
2,400 Columbia/HCA Healthcare
Corporation.................... 117,900
1,400 Elan Corp. PLC ADS + ............ 56,175
3,700 HealthCare COMPARE
Corporation+ .................. 136,900
3,700 MediSense + ..................... 79,088
2,000 Medtronic, Inc. ................. 115,500
2,300 Mylan Labs, Inc. ................ 43,700
2,700 OrNda Healthcorp + .............. 47,587
Health Care/Pharmaceuticals
(continued)
2,600 Rite Aid Corp. .................. $ 70,200
1,028 Vencor Inc. + ................... 28,527
2,900 Watson Pharmeceutical + ......... 129,775
-----------
1,051,289
-----------
Technology--17.8%
2,800 Applied Material, Inc.+.......... 140,350
2,300 Autodesk, Inc. .................. 78,200
2,000 Cabletron Systems Inc.+ ......... 157,250
6,600 Cadence Design Systems, Inc.+.... 212,850
3,200 Cypress Semiconductor
Corporation+ .................. 112,800
3,600 Dell Computer+................... 167,850
3,600 Informix Corporation+ ........... 104,850
2,000 Komag, Inc.+ .................... 114,000
4,600 Loral Corporation ............... 136,275
1,700 Micron Technology, Inc. ......... 120,063
3,700 Millipore Corporation ........... 130,887
3,200 NetManage Inc.+ ................. 65,200
1,500 Novellus Systems, Inc.+ ......... 103,313
3,100 Seagate Technology+ ............. 138,725
1,600 Smith (A.O) Corp................. 33,200
2,400 StrataCom, Inc.+ ................ 147,600
2,300 Sun Microsystems, Inc.+.......... 179,400
3,300 Teradyne, Inc. +................. 110,137
4,800 Worldcom Inc. + ................. 156,600
-----------
2,409,550
-----------
Transportation--1.6%
1,000 Conrail, Inc. ................... 68,750
2,600 Illinois Central Corporation .... 99,450
1,800 Landstar System, Inc.+ .......... 47,250
-----------
215,450
-----------
Utilities--9.5%
8,200 Baltimore Gas & Electric
Company ....................... 219,350
5,900 Boston Edison Company ........... 161,513
5,500 Commonwealth Energy
Systems ....................... 233,062
7,100 DQE, Inc. ....................... 195,250
6,200 General Public Utilities
Corporation.................... 193,750
3,300 MCN Corporation ................. 71,775
7,900 Portland General Corporation .... 214,288
-----------
1,288,988
-----------
TOTAL COMMON STOCKS
(cost $10,535,774)............. 12,845,029
-----------
<PAGE>
Dreyfus Disciplined Midcap Stock Fund
- -----------------------------------------------------------------------------
Statement of Investments (continued) October 31, 1995
Principal REPURCHASE
Amount AGREEMENT--4.6% Value
---------- ------------
$619,806 Goldman Sachs & Company
Tri-Party Repo Agreement with
Goldman Sachs, 5.88% dated
10/31/95, to be repurchased
at $619,907 on 11/1/95,
collateralized by $620,142
U.S. Treasury Notes, 5.875%
due 7/31/97 (cost $619,806)..... $ 619,806
-----------
TOTAL INVESTMENTS
(cost $11,155,580).......................... 99.4% $13,464,835
CASH AND RECVEIVABLES
(NET)....................................... .6% $ 81,040
------ -----------
NET ASSETS ................................... 100.0% $13,545,875
------ -----------
------ -----------
Note to Statement of Investments;
- ----------------------------------------------------------------------------
+ Non-income producing security.
See notes to financial statements.
<PAGE>
Dreyfus Disciplined Midcap Stock Fund
- ----------------------------------------------------------------------------
Statement of Assets and Liabilities October 31, 1995
<TABLE>
<S> <C> <C>
ASSETS:
Investments in securities, at value (cost $11,155,580)--see Statement of
Investments (including repurchase agreement of $619,806).............. $13,464,835
Cash.................................................................... 667
Receivable for investment securities sold............................... 94,764
Dividends and interest receivable....................................... 17,792
-----------
13,578,058
LIABILITIES:
Due to The Dreyfus Corporation-Note 2(a)................................ $ 4,477
Due to Distributor-Note 2(b)............................................ 266
Payable for investment securities purchased............................. 23,610
Directors' fees payable-Note 2(c)....................................... 3,830 32,183
-------- -----------
NET ASSETS.................................................................. $13,545,875
-----------
-----------
REPRESENTED BY:
Paid-in capital......................................................... $10,613,155
Accumulated undistributed investment income--net........................ 29,477
Accumulated undistributed net realized gain on investments.............. 593,988
Accumulated net unrealized appreciation on investments--Note 3.......... 2,309,255
-----------
NET ASSETS at value......................................................... $13,545,875
-----------
-----------
NET ASSET VALUE, offering and redemption price per share:
Investor Shares
(22 million shares of $.001 par value Capital Stock authorized)
($1,416,688 / 118,891 shares of Capital Stock outstanding)............ $11.92
------
------
Class R Shares
(60 million shares of $.001 par value Capital Stock authorized)
($12,129,187 / 1,017,827 shares of Capital Stock outstanding)......... $11.92
------
------
</TABLE>
See notes to financial statements.
<PAGE>
Dreyfus Disciplined Midcap Stock Fund
- -----------------------------------------------------------------------------
Statement of Operations Year ended October 31, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Income:
Cash dividends........................................................ $ 314,515
Interest.............................................................. 44,045
-----------
Total Income...................................................... $ 358,560
Expenses:
Management fee--Note 2(a)............................................. 175,864
Directors' fees and expenses-Note 2(c)................................ 2,907
Distribution fee (Investor shares)-Note 2(b).......................... 1,422
-----------
Total Expenses.................................................... 180,193
----------
INVESTMENT INCOME--NET............................................ 178,367
----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS-Note 3:
Net realized gain on investments........................................ $1,347,713
Net realized gain on financial futures.................................. 10,196
-----------
Net Realized Gain..................................................... 1,357,909
Net unrealized appreciation on investments.............................. 1,977,353
----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS................... 3,335,262
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $3,513,629
----------
----------
</TABLE>
See notes to financial statements.
<PAGE>
Dreyfus Disciplined Midcap Stock Fund
- -----------------------------------------------------------------------------
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended October 31,
------------ ------------
1995 1994(1)
------------ ------------
<S> <C> <C>
OPERATIONS:
Investment income--net............................................... $ 178,367 $ 159,637
Net realized gain (loss) on investments.............................. 1,357,909 (763,921)
Net unrealized appreciation on investments for the year.............. 1,977,353 331,902
------------ ------------
Net Increase (Decrease) In Net Assets Resulting From Operations.... 3,513,629 (272,382)
------------ ------------
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income--net:
Investor Shares.................................................... (4,227) (94)
Class R Shares..................................................... (194,302) (109,904)
------------ ------------
Total Dividends.................................................. (198,529) (109,998)
------------ ------------
CAPITAL STOCK TRANSACTIONS:
Net proceeds from shares sold:
Investor Shares.................................................... 1,469,329 59,087
Class R Shares..................................................... 7,089,344 21,172,051
Dividends reinvested:
Investor Shares.................................................... 3,676 66
Class R Shares..................................................... 187,481 109,104
Cost of shares redeemed:
Investor Shares.................................................... (252,161) (5,216)
Class R Shares..................................................... (16,489,889) (2,729,717)
------------ ------------
Increase (Decrease) In Net Assets From Capital Stock Transactions (7,992,220) 18,605,375
------------ ------------
Total Increase (Decrease) In Net Assets........................ (4,677,120) 18,222,995
NET ASSETS:
Beginning of year.................................................... 18,222,995 --
------------ ------------
End of year (including undistributed investment income--net:
$29,477 in 1995 and $49,639 in 1994)............................... $ 13,545,875 $ 18,222,995
------------ ------------
------------ ------------
</TABLE>
<TABLE>
<CAPTION>
Shares
--------------------------------------------------------------
Investor Shares Class R Shares
--------------------------- ----------------------------
Year Ended October 31, Year Ended October 31,
--------------------------- ----------------------------
1995 1994(1)(2) 1995 1994(1)(2)
-------- --------- ---------- ----------
<S> <C> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Shares sold......................... 137,173 6,048 692,632 2,122,927
Shares issued for dividends reinvested 343 7 18,799 11,107
Shares redeemed..................... (24,144) (536) (1,554,326) (273,312)
-------- ------- ---------- ---------
Net Increase (Decrease) In Shares
Outstanding..................... 113,372 5,519 (842,895) 1,860,722
-------- ------- ---------- ---------
-------- ------- ---------- ---------
<FN>
- ----------------
(1) The Fund commenced operations on November 12, 1993.
(2) The Fund commenced selling Investor shares on April 6, 1994. Any 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.
</TABLE>
See notes to financial statements.
<PAGE>
Dreyfus Disciplined Midcap Stock Fund
- -----------------------------------------------------------------------------
Financial Highlights
Reference is made to pages 5 and 6 of the Fund's Prospectus
dated March 1, 1996.
See notes to financial statements.
<PAGE>
Dreyfus Disciplined Midcap Stock Fund
- -----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 1--Significant Accounting Policies:
The Dreyfus/Laurel Funds, Inc. (the "Company") is registered under the
Investment Company Act of 1940 ("Act") as a diversified open-end management
investment company and operates as a series company currently offering
sixteen Series including the Dreyfus Disciplined Midcap Stock Fund (the
"Fund"). The Dreyfus Corporation ("Manager") serves as the Fund's investment
adviser. The Manager is a direct subsidiary of Mellon Bank, N.A. ("Mellon
Bank").
Premier Mutual Fund Services, Inc. (the "Distributor") acts as the
distributor of the Fund's shares. The Distributor, located at One Exchange
Place, Boston, Massachusetts 02109, 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.
The Fund is currently authorized to issue two classes of shares: Investor
shares and Class R shares. Investor shares are sold primarily to retail
investors and bear a distribution fee. Class R shares are sold primarily to
bank trust departments and other financial service providers (including
Mellon Bank and its affiliates) acting on behalf of customers having a
qualified trust or investment account or relationship at such institution,
and bear no distribution fee. Each class of shares has identical rights and
privileges, except with respect to the distribution fee and voting rights on
matters affecting a single class. The Company has the authority to issue 25
billion shares of capital stock with a par value of $.001.
Investment income, net of expenses (other than class specific expenses)
and realized and unrealized gains and losses are allocated daily to each
class of shares based upon the relative proportion of net assets of each
class.
(a) Portfolio Valuation: Investments in securities are valued at the last
sales price on the securities exchange on which such securities are primarily
traded or at the last sales price on the national securities market.
Securities not listed on an exchange or the national securities market, or
securities for which there were no transactions, are valued at the average of
the most recent bid and asked prices. Bid price is used when no asked price
is available. Securities for which there are no such valuations are valued at
fair value as determined in good faith under the direction of the Board of
Directors.
(b) Securities Transactions and Investment Income: Securities
transactions are recorded on a trade date basis. Realized gain and loss from
securities transactions are recorded on the identified cost basis. Dividend
income is recognized on the ex-dividend date and interest income, including,
where applicable, amortization of discount on investments, is recognized on
the accrual basis.
(c) Repurchase Agreements: The Fund may engage in repurchase agreement
transactions. Under the terms of a typical repurchase agreement, the Fund,
through its custodian, and sub-custodian takes possession of an underlying
debt obligation subject to an obligation of the seller to repurchase, and the
Fund to resell, the obligation at an agreed-upon price and time, thereby
determining the yield during the Fund's holding period. This arrangement
results in a fixed rate of return that is not subject to market fluctuations
during the Fund's holding period. The value of the collateral is at least
equal, at all times, to the total amount of the repurchase obligations,
including interest. In the event of a counterparty default, the Fund has the
right to use the collateral to offset losses incurred. There is potential
loss to the Fund in the
<PAGE>
Dreyfus Disciplined Midcap Stock Fund
- ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
event the Fund is delayed or prevented from exercising its rights to
dispose of the collateral securities, including the risk of a possible
decline in the value of the underlying securities during the period while the
Fund seeks to assert its rights. The Fund's manager, acting under the
supervision of the Board of Directors, reviews the value of the collateral
and the creditworthiness of those banks and dealers with which the Fund
enters into repurchase agreements to evaluate potential risks.
(d) Financial Futures: The Fund may invest in trading financial futures
contracts in order to gain exposure to or protect against changes in the
market. The Fund is exposed to market risk as a result of changes in the
value of the underlying financial instruments. Investments in financial
futures require the Fund to "mark to market" on a daily basis, which reflects
the change in the market value of the contract at the close of each day's
trading. Accordingly, variation margin payments are made or received to
reflect daily unrealized gains or losses. When the contracts are closed, the
Fund recognizes a realized gain or loss. These investments require initial
margin deposits with a custodian, which consist of cash or cash equivalents,
up to approximately 10% of the contract amount. The amount of these deposits
is determined by the exchange or Board of Trade on which the contract is
traded and is subject to change. At October 31, 1995, there were no financial
futures contracts outstanding.
(e) Distributions to Shareholders: Dividends are recorded on the
ex-dividend date. Dividends from investment income-net are declared and paid
on a quarterly basis. Dividends from net realized capital gain are normally
declared and paid annually, but the Fund may make distributions on a more
frequent basis to comply with the distribution requirements of the Internal
Revenue Code. To the extent that net realized capital gain can be offset by
capital loss carryovers, if any, it is the policy of the Fund not to
distribute such gain.
On November 2, 1995, the Board of Directors declared dividends from net
investment income for the Investor shares and ClassR shares in the amount of
$0.0189 per share and $0.0263 per share, respectively, payable on November 3,
1995 to shareholders of record onNovember 2, 1995.
(f) Federal Income Taxes: It is the policy of the Fund to continue to
qualify as a regulated investment company, if such qualification is in the
best interests of its shareholders, by complying with the applicable
provisions of the Internal Revenue Code, and to make distributions of taxable
income sufficient to relieve it from substantially all Federal income and
excise taxes.
NOTE 2--Investment Management Fee and other Transactions with Affiliates:
(a) Investment Management Fee: Pursuant to an Investment Management
agreement with the Manager, the Manager provides or arranges for one or more
third parties and or affiliates to provide investment advisory,
administrative, custody, fund accounting and transfer agency services to the
Fund. The Manager also directs the investments of the Fund in accordance with
its investment objective, policies and limitations. For these services, the
Fund is contractually obligated to pay the Manager a fee, calculated daily
and paid monthly, at the annual rate of 1.10% of the value of the Fund's
average daily net assets. Out of its fee, the Manager pays all of the
expenses of the Fund except brokerage fees, taxes, interest, Rule 12b-1
distribution fees and expenses, fees and expenses of non-interested Directors
(including counsel fees) and
<PAGE>
Dreyfus Disciplined Midcap Stock Fund
- -----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
extraordinary expenses. In addition, the Manager is required to reduce
its fee in an amount equal to the Fund's allocable portion of fees and
expenses of the non-interested Directors (including counsel).
(b) Distribution Plan: The Fund has adopted a distribution plan (the
"Plan") pursuant to Rule 12b-1 under the 1940 Act relating to its Investor
shares. Under the Plan, the Fund may pay annually up to .25% of the value of
the average daily net assets attributable to its Investor shares to
compensate the Distributor and Dreyfus Service Corporation, an affiliate of
the Manager, for shareholder servicing activities and the Distributor for
activities primarily intended to result in the sale of Investor shares. The
Class R shares bear no distribution fee. For the year ended October 31, 1995,
the distribution fee for the Investor shares was $1,422.
Under its terms, the Plan shall remain in effect from year to year,
provided such continuance is approved annually by a vote of majority of those
Directors who are not "interested persons" of the Investment Company and who
have no direct or indirect financial interest in the operation of the Plan or
in any agreement related to the Plan.
(c) Directors' Fees: Each director who is not an "interested person" as
defined in the Act receives $27,000 per year, $1,000 for each Board meeting
attended and $750 for each Audit Committee attended and is reimbursed for
travel and out-of-pocket expenses. These expenses are paid in total by the
following funds: the Dreyfus/Laurel Funds, Inc., the Dreyfus/Laurel Tax-Free
Municipal Funds, and the Dreyfus/Laurel Funds Trust. In addition the Chairman
of the Board receives an annual fee of $75,000 per year. These fees and
expenses are charged and allocated to each series based on net assets.
NOTE 3--Securities Transactions:
The aggregate amount of purchase and sales of investment securities,
other than short-term securities, during the year ended October 31, 1995,
amounted to $10,996,070 and $18,527,076, respectively.
At October 31, 1995, accumulated net unrealized appreciation on
investments was $2,309,255, consisting of $2,628,442 gross unrealized
appreciation and $319,187 gross unrealized depreciation.
At October 31, 1995, the cost of investments for Federal income tax
purposes was substantially the same as the cost for financial reporting
purposes (see the Statement of Investments).
<PAGE>
Dreyfus Disciplined Midcap Stock Fund
- -----------------------------------------------------------------------------
Independent Auditors' Report
The Board of Directors and Shareholders
The Dreyfus/Laurel Funds, Inc.:
We have audited the accompanying statement of assets and liabilities of
the Dreyfus Disciplined Midcap Stock Fund of The Dreyfus/Laurel Funds, Inc.,
including the statement of investments, as of October 31, 1995, and the
related statement of operations for the year then ended, and the statement of
changes in net assets and the financial highlights for each of the periods
indicated herein. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of October 31, 1995, by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used
and significant estimates made by management, as we as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects the financial
position of the Dreyfus Disciplined Midcap Stock Fund of The Dreyfus/Laurel
Funds, Inc., as of October 31, 1995, and the results of its operations for
the year then ended, and the changes in its net assets and the financial
highlights for each of the periods indicated herein, in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
Pittsburgh, Pennsylvania
December 15, 1995
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 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-19
Purchase of Fund Shares . . . . . . . . . . . . . . . . . . B-20
Distribution Plan . . . . . . . . . . . . . . . . . . . . . B-21
Redemption of Fund Shares . . . . . . . . . . . . . . . . . B-22
Shareholder Services. . . . . . . . . . . . . . . . . . . . B-23
Determination of Net Asset Value. . . . . . . . . . . . . . B-26
Dividends, Other Distributions and Taxes. . . . . . . . . . B-27
Portfolio Transactions. . . . . . . . . . . . . . . . . . . B-30
Performance Information . . . . . . . . . . . . . . . . . . B-32
Information About the Fund. . . . . . . . . . . . . . . . . B-34
Custodian, Transfer and Dividend Disbursing Agent, Counsel
and Independent Auditors. . . . . . . . . . . . . . . . . B-34
Financial Statements. . . . . . . . . . . . . . . . . . . . B-35
Appendix. . . . . . . . . . . . . . . . . . . . . . . . . . B-36
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 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.
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 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.
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(s) owned 5% or more of the outstanding
Investor shares of the Fund at January 31, 1996: Nathan M. Pusey, 200 East
66th Street, New York, NY 10021-6728, 5.5% record.
FEDERAL LAW AFFECTING MELLON BANK
The Glass-Steagall Act of 1933 prohibits national banks from engaging
in the business of underwriting, selling or distributing securities and
prohibits a member bank of the Federal Reserve System from having certain
affiliations with an entity engaged principally in that business. The
activities of Mellon Bank, N.A. ("Mellon Bank") in informing its customers
of, and performing, investment and redemption services in connection with
the Fund, and in providing services to the Fund as custodian, 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 twelve 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 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.
# ELIZABETH BACHMAN. Vice President and Assistant Secretary of the
Company, The Dreyfus/Laurel Funds Trust and The Dreyfus/Laurel Tax
Free Municipal Funds (since January 1996); Counsel, Premier Mutual
Fund Services, Inc. Prior to September 1995, she was enrolled at the
Fordham University School of Law and received her J.D. in May 1995.
Prior to September 1992, she was an Assistant at the National
Association for Public Interest Law. Age: 26 years old. Address: 200
Park Avenue, New York, New York 10166.
# 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 and Assistant Secretary (since January
1996) of the Company, The Dreyfus/Laurel Funds Trust and The
Dreyfus/Laurel Tax-Free Municipal Funds; 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.
# MARGARET PARDO. Assistant Secretary of the Company, The Dreyfus/Laurel
Funds Trust and The Dreyfus/Laurel Tax-Free Municipal Funds (since
January 1996); Paralegal, Premier Mutual Fund Services, Inc. Prior
to April 1995, she was a Medical Coordination Officer at ORBIS
International. Prior to June 1992, she worked as a Program
Coordinator at Physicians World Communications Group. Age: 27 years
old. Address: 200 Park Avenue, New York, New York 10166.
# 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.
# JOHN J. PYBURN. Assistant Treasurer of the Company, The Dreyfus/Laurel
Funds Trust and The Dreyfus/Laurel Tax-Free Municipal Funds (since
January 1996); Vice President of Premier Mutual Fund Services, Inc.
and an officer of other investment companies advised or administered
by Dreyfus. From 1984 to July 1994, he was Assistant Vice President
in the Mutual Fund Accounting Department of Dreyfus. Age: 61 years
old. Address: 200 Park Avenue, New York, New York 10166.
JOSEPH F. TOWER, III. Assistant Treasurer of the Company, The
Dreyfus/Laurel Funds Trust and The Dreyfus/Laurel Tax-Free Municipal
Funds (since January 1996); Senior Vice President, Treasurer and Chief
Financial Officer of Premier Mutual Fund Services, Inc. and an officer
of other investment companies advised or administered by Dreyfus.
From July 1988 to August 1994, he was employed by The Boston Company,
Inc. where he held various management positions in the Corporate
Finance and Treasury areas. Age: 33 years old. Address: 200 Park
Avenue, New York, New York 10166.
_______________________
* "Interested person" of the Company, as defined in the 1940 Act.
o Member of the Audit Committee.
+ Member of the Nominating Committee.
# Officer also serves as an officer for other investment companies
advised by Dreyfus.
The officers and Directors of the Company as a group owned
beneficially less than 1% of the Fund's total shares outstanding as of
January 31, 1996.
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 current 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 $27,800 None None $ 34,500
Francis P. Brennan* 86,683 None None 110,500
Joseph S. DiMartino** None None None
$448,618***
James M. Fitzgibbons 27,795 None None 34,500
J. Tomlinson Fort** None None None None
Arthur L. Goeschel 27,604 None None 35,500
Kenneth A. Himmel 26,381 None None 32,750
Arch S. Jeffery** None None None None
Stephen J. Lockwood 26,387 None None 32,750
Robert D. McBride 27,800 None None 35,500
John J. Sciullo 27,800 None None 34,500
Roslyn M. Watson 27,795 None None 34,550
# Amounts required to be paid by the Company directly to the non-interested Directors,
that would be applied to offset a portion of the management fee payable to Dreyfus, are in
fact paid directly by Dreyfus to the non-interested Directors. Amount does not include
reimbursed expenses for attending Board meetings, which amounted to $12,342 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 $17,563,
$28,604 and $27,800, 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 $3,186 for expenses attributable to the Company's Board meetings ($3,186 is
not included in the $12,342 above).
*** Estimated amounts for the fiscal year ending October 31, 1995.
</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 and a director; Barbara E. Casey, Vice President-Dreyfus
President-Dreyfus Retirement Services; Diane M. Coffey, Vice President-
Corporate Communications; Elie M. Genadry, Vice President-Institutional
Sales; William T. Sandalls, Jr., Senior Vice President, Chief Financial
Officer and a director; 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; Maurice Bendrihem,
Controller; Elvira Oslapas; Assistant Secretary; Mandell L. Berman, Frank
V. Cahouet, Alvin E. Friedman, Lawrence M. Greene and Julian M. Smerling
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.
In-Kind Purchases. If the following conditions are satisfied, the
Fund may at its discretion, permit the purchase of shares through an "in-
kind" exchange of securities. Any securities exchanged must meet the
investment objective, policies and limitations of the Fund, must have a
readily ascertainable market value, must be liquid and must not be subject
to restrictions on resale. The market value of any securities exchanged,
plus any cash, must be at least equal to $25,000. Shares purchased in
exchange for securities generally cannot be redeemed for fifteen days
following the exchange in order to allow time for the transfer to settle.
The basis of the exchange will depend upon the relative NAV of the
shares purchased and securities exchanged. Securities accepted by the Fund
will be valued in the same manner as the Fund values its assets. Any
interest earned on the securities following their delivery to the Fund and
prior to the exchange will be considered in valuing the securities. All
interest, dividends, subscription or other rights attached to the
securities become the property of the Fund, along with the securities. For
further information about "in-kind" purchases, call 1-800-645-6561.
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 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 period
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%
(9/02/94)
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.
From time to time, Fund advertisements may include statistical data or
general discussions about the growth and development of Dreyfus Retirement
Services (in terms of new customers, assets under management, market share,
etc.) and its presence in the defined contribution plan market.
From time to time, advertising material for the Fund may include
biographical information relating to its portfolio manager and may refer
to, or include commentary by the portfolio manager relating to investment
strategy, asset growth, current or past business, political, economic or
financial conditions and other matters of general interest to investors.
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 15219, 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.
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.
KPMG Peat Marwick LLP, One Mellon Bank Center, Pittsburgh, PA 15219,
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 Independent Auditors' Report 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.
<PAGE>
Dreyfus Equity Income Fund October 31, 1995
- ---------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN DREYFUS EQUITY
INCOME FUND CLASS R SHARES WITH THE STANDARD AND POOR'S 500 COMPOSITE
STOCK PRICE INDEX AND THE LIPPER EQUITY INCOME FUND INDEX
Dreyfus Equity Standard & Poor's
Income Fund 500 Composite Lipper Equity
Period (Class R Shares) Price Index * Income Fund Index *
- ---------- ---------------- -------------- -------------------
9/2/94 10,000 10,000 10,000
10/31/94 9,950 9,975 9,864
1/31/95 9,856 10,007 9,741
4/30/95 10,856 11,018 10,537
7/31/95 11,736 12,112 11,305
10/31/95 12,286 12,609 11,631
*Source: Lipper Analytical Services, Inc.
Average Annual Total Returns
- --------------------------------------------------------------------------
Investor Class Shares Class R Shares
- ---------------------------------- -------------------------------
Period ended 10/31/95 Period ended 10/31/95
- ---------------------------------- -------------------------------
1 Year 23.20% 1 Year 23.48%
From Inception (9/14/94) 21.25 From Inception (9/2/94) 19.42
Past performance is not predictive of future performance.
The above graph compares a $10,000 investment made in Class R shares of
Dreyfus Equity Income Fund on 9/2/94 (Inception Date) to a $10,000 investment
made in the Standard & Poor's 500 Composite Stock Price Index on that date as
well as to the Lipper Equity Income Fund Index which is described below. For
comparative purposes, the value of each Index on 8/31/94 is used as the
beginning value on 9/2/94. All dividends and capital gain distributions are
reinvested. Performance for Investor Class shares will vary from the
performance of Class R shares shown above due to differences in charges and
expenses.
The Dreyfus Equity Income Fund seeks to provide above-average income along
with moderate long-term growth of principal and income by investing primarily
in a diversified portfolio of dividend-paying stocks. The Fund's performance
shown in the line graph takes into account all applicable fees and expenses.
The Standard & Poor's 500 Composite Stock Price Index is a widely accepted,
unmanaged index of overall stock market performance which does not take into
account charges, fees and other expenses. The Lipper Equity Income Fund
Index is a non-weighted index of the 30 largest equity income mutual funds.
It is calculated daily with adjustments for income dividends and capital gain
distributions as of the ex-dividend dates. Further information relating to
Fund performance, including expense reimbursements, if applicable, is
contained in the Financial Highlights section of the Prospectus and elsewhere
in this report.
<PAGE>
Dreyfus Equity Income Fund
- ---------------------------------------------------------------------------
Statement of Investments October 31, 1995
Shares COMMON STOCKS--91.3% Value
----------- ------------
Basic Industries--5.5%
750 Dow Chemical....................... $ 51,469
1,300 du Pont (EI) De Nemours............ 81,087
350 Eastman Chemical................... 20,825
450 Georgia Pacific Corporation........ 37,125
400 International Paper Company........ 14,800
300 Monsanto Company................... 31,425
700 PPG Industries Inc................. 29,750
200 Temple-Inland...................... 9,100
550 Westvco............................ 15,263
1,200 Weyerhaeuser Company............... 52,950
----------
343,794
----------
Consumer Cyclical--9.1%
900 Albertsons Inc..................... 29,925
350 Chrysler Corporation............... 18,069
750 Circuit City Stores Inc............ 25,031
550 Echlin Inc......................... 19,662
2,100 Ford Motor......................... 60,375
750 General Motors..................... 32,813
350 Goodyear Tire & Rubber............. 13,300
1,000 J C Penney Company Inc............. 42,125
1,750 Limited Inc........................ 32,156
1,300 Lowes Company...................... 35,100
500. Marriott International............. 18,438
1,450 May Department Stores
Company.......................... 56,913
1,000 McDonald's Corp.................... 41,000
350 McGraw-Hill Inc.................... 28,656
750 Reynolds & Reynolds Company........ 26,719
525 Sbarro Inc......................... 10,959
1,550 Sears Roebuck & Company............ 52,700
400 Walt Disney Productions............ 23,050
----------
566,991
----------
Consumer Services--16.0%
350 Avnet Inc.......................... 17,631
400 Deere & Company.................... 35,750
400 Eaton Corporation.................. 20,500
200 Emerson Electric................... 14,250
3,000 General Electric Company........... 189,750
1,000 General Motors Corporation,
Class H.......................... 42,000
1,200 H & R Block, Inc................... 49,500
450 Harsco Corp........................ 23,738
850 Hewlett Packard Company............ 78,731
300 Illinois Tool Works................ 17,438
850 International Business ............
Machines......................... 82,663
946 Lockheed Martin.................... 64,446
300 McDonnell Douglas
Corporation...................... 24,525
Consumer Services (continued)
700 Motorola Inc....................... $ 45,938
200 Omnicom Group...................... 12,775
600 Pitney Bowes Inc................... 26,175
950 Raytheon Company................... 41,444
650 Texas Instruments.................. 44,362
650 Textron Inc........................ 44,687
500 United Technologies................ 44,375
550 Xerox Corporation.................. 71,362
----------
992,040
----------
Consumer Staples--11.9%
300 Anheuser-Busch Companies........... 19,800
500 Avon Products Inc.................. 35,562
650 CPC International Inc............. 43,144
1,700 Coca-Cola Company.................. 122,187
750 Conagra Inc........................ 28,969
850 Eastman Kodak Company.............. 53,231
1100 Gillette Company................... 53,212
300 IBP Inc............................ 17,963
400 Kellogg............................ 28,900
1,000 Pepsico Inc........................ 52,750
1,450 Philip Morris Companies Inc........ 122,525
300 Pioneer Hi-Bred International...... 14,888
1,250 Procter & Gamble Company........... 101,250
1000 Sara Lee Corp...................... 29,375
500 Seagram Co Ltd..................... 18,000
-----------
741,756
-----------
Energy--10.2%
1,050 Amoco Corporation.................. 67,069
500 Atlantic Richfield................. 53,375
550 British Petroleum, PLC, ADR........ 48,537
2,350 Exxon Corporation.................. 179,481
300 Mobil Corporation.................. 30,225
950 Pacific Enterprises................ 23,513
800 Phillips Petroleum Company......... 25,800
950 Royal Dutch Petroleum.............. 116,731
500 Sonat Inc.......................... 14,375
800 Texaco Inc......................... 54,500
1,250 USX-Marathon Group................. 22,188
----------
635,794
----------
Health Care--9.4%
1,350 Abbott Labs........................ 53,662
650 American Home Products Inc......... 57,606
350 Baxter International Inc........... 13,519
650 Bristol-Myers Squibb Company....... 49,562
750 Eli Lilly Company.................. 72,469
1,050 Johnson & Johnson.................. 85,575
1,800 Merck & Company Inc................ 103,500
1,700 Pfizer Inc......................... 97,538
<PAGE>
Dreyfus Equity Income Fund
- ------------------------------------------------------------------------
Statement of Investments October 31, 1995
Shares COMMON STOCKS (continued) Value
----------- ------------
Health Care (continued)
400 Schering-Plough Corporation........ $ 21,450
550 Smithkline Beecham................. 28,531
----------
583,412
----------
Interest Sensitive--12.5%
1,301 Allstate........................... 47,812
1,100 American General
Corporation...................... 36,162
750 American National
Insurance Company................ 42,750
1,100 BCE Inc............................ 36,988
1,800 Bank Of New York
Company Inc...................... 75,600
1,150 BankAmerica Corporation............ 66,125
600 CIGNA Corporation.................. 59,475
900 Chase Manhattan Corporation........ 51,300
329 Citicorp........................... 21,344
1,450 Corestates Financial
Corporation...................... 52,744
250 Dean Witter Discover &
Company.......................... 12,437
400 Federal National Mortgage
Association...................... 41,950
200 First Bank System Inc.............. 9,950
700 First Chicago...................... 47,512
100 First Interstate Bancorp........... 12,900
250 First Union Corporation............ 12,406
1,050 MBNA Corporation................... 38,719
400 National City Corporation.......... 12,350
550 PNC Financial Corporation.......... 14,438
500.. Providian Corporation.............. 19,625
500 Safeco Corporation................. 32,094
600 St. Paul Companies................. 30,450
----------
775,131
----------
Mining and Metals--1.5%
900 Aluminum Company
Of America 45,900..............
350 Phelps Dodge Corporation......... 22,181
350 Potash Corporation............... 24,369
----------
92,450
----------
Transportation--1.4%
700 Conrail Inc...................... 48,125
150 Delta Air Lines Inc.............. 9,844
800 Illinios Central................. 30,600
----------
88,569
----------
Utilities--13.4%
1,350 A T & T Corporation.............. $ 86,400
1,350 Ameritech Inc.................... 72,900
1,150 Bell Atlantic Corporation........ 73,169
550 Bellsouth Corporation............ 42,075
700 Boston Edison.................... 19,162
1,750 CINergy Corporation.............. 49,656
1,500 Consolidated Edison
Company Inc.................... 45,562
1,050 DQE, Inc......................... 28,875
900 Entergy Corporation.............. 25,650
200 FPL Group Inc.................... 8,375
1,650 GTE Corporation.................. 68,062
1,250 Nynex Corporation................ 58,750
2,450 Pacific Telesis Group............ 74,419
1,150 SBC Communication................ 64,256
1,900 Southern Company................. 45,363
500 U S West Inc..................... 23,813
1,500 Unicom Corporation............... 49,125
----------
835,612
----------
Utilities-Electric Power--.4%
750 Texas Utilities 27,562
----------
TOTAL COMMON STOCKS
(cost $4,794,386)................. $5,683,111
----------
----------
CONVERTIBLE PREFERRED
STOCKS--2.2%
300 Ashland Oil Inc.,
6.25%........................... $ 16,425
200 Barnett Banks Inc.,
$4.50, Series A................. 21,000
358 Citicorp, Depositary Shares
representing 1/12 share,
Series 15....................... 6,489
400 First U.S.A. Inc.,
6.25%, Series A................. 16,600
350 General Motors Corporation,
Depositary Shares representing
1/10 share Series C............. 23,450
2,300 RJR Nabisco Holdings,
Depositary Shares
representing 1/10 share,
Series C, 9.25%................. 14,375
500 Travelers Inc.,
5.50%, Series B................. 35,250
----------
TOTAL CONVERTIBLE
PREFERRED STOCKS
(cost $109,101)................. $ 133,589
----------
----------
<PAGE>
Dreyfus Equity Income Fund
- ------------------------------------------------------------------------
Statement of Investments October 31, 1995
Principal CONVERTIBLE BONDS
Amount AND NOTES--1.1% Value
---------------- -------------------------- -----------
$18,000 General Instrument,
Subordinate Notes,
5%, 6/15/00.................. $ 18,090
20,000 Magna International,
Subordinate Debentures,
5%, 10/15/02................. 20,375
11,000 Pogo Producing Company,
Subordinate Notes,
5.50%, 3/15/04............... 11,990
10,000 Wendy's International Inc.,
Subordinate Debentures,
7%, 4/1/06................... 16,288
----------
TOTAL CONVERTIBLE BONDS
AND NOTES
(cost $68,335)............... $ 66,743
----------
----------
Principal REPURCHASE
Amount AGREEMENT--5.3% Value
- ------------ ----------
$331,291 Agreement with Goldman
Sachs & Company Tri-Party
Repurchase Agreement,
5.88% dated 10/31/95,
to be repurchased at
$331,345 on 11/1/95,
collateralized by $333,349
U.S Treasury Notes,
5.875% due 7/31/97
(cost $331,291)....... $ 331,291
----------
----------
TOTAL INVESTMENTS
(cost $5,303,113)......... 99.9% $6,214,734
------ ----------
------ ----------
CASH AND RECEIVABLES
(NET)..................... .1% $ 8,216
------ ----------
------ ----------
NET ASSETS.................. 100.0% $6,222,950
------ ----------
------ ----------
See notes to financial statements.
<PAGE>
Dreyfus Equity Income Fund
- ---------------------------------------------------------------------------
Statement of Assets and Liabilities October 31, 1995
<TABLE>
<S> <C> <C>
ASSETS:
Investments in securities, at value (cost $5,303,113)--See statement of
investments (including repurchase agreement of $331,291).............. $6,214,734
Receivable for investment securities sold............................... 80,799
Dividends and interest receivable....................................... 14,457
Receivable for Capital Stock sold....................................... 10,872
----------
6,320,862
LIABILITIES:
Due to The Dreyfus Corporation.......................................... $ 9,150
Due to the Distributor.................................................. 322
Payable for investment securities purchased............................. 87,363
Directors' fees payable................................................. 1,077 97,912
------- ----------
NET ASSETS ................................................................ $6,222,950
----------
----------
REPRESENTED BY:
Paid-in capital......................................................... $5,212,663
Accumulated undistributed investment income--net........................ 35,559
Accumulated undistributed net realized gain on investments.............. 63,107
Accumulated net unrealized appreciation on investments--Note 3.......... 911,621
----------
NET ASSETS at value......................................................... $6,222,950
----------
----------
NET ASSET VALUE, offering and redemption price per share:
Investor Shares
(20 million shares of $.001 par value Capital Stock authorized)
($1,714,331 / 142,842 shares of capital stock outstanding)............ $12.00
------
------
Class R Shares
(30 million shares of $.001 par value Capital Stock authorized)
($4,508,619 / 375,605 shares of capital stock outstanding)............ $12.00
------
------
</TABLE>
See notes to financial statements.
<PAGE>
Dreyfus Equity Income Fund
- ---------------------------------------------------------------------------
Statement of Operations Year ended October 31, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Income:
Cash dividends........................................................ $170,062
Interest.............................................................. 18,863
--------
Total Income...................................................... $ 188,925
Expenses:
Investment management fee--Note 2(a).................................. 47,974
Distribution fee (Investor shares)--Note 2(b)......................... 1,608
Directors' fees and expenses--Note 2(c)............................... 938
--------
Total Expenses.................................................... 50,520
----------
INVESTMENT INCOME--NET............................................ 138,405
REALIZED AND UNREALIZED GAIN ON INVESTMENTS (Note 3):
Net realized gain on investments........................................ $ 72,706
Net unrealized appreciation on investments.............................. 948,493
--------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS....................... 1,021,199
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $1,159,604
----------
----------
</TABLE>
See notes to financial statements.
<PAGE>
Dreyfus Equity Income Fund
- ---------------------------------------------------------------------------
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended October 31,
----------------------------
1995 1994(1)
---------- ----------
<S> <C> <C>
OPERATIONS:
Investment income--net............................................... $ 138,405 $ 23,451
Net realized gain (loss) on investments.............................. 72,706 (9,599)
Net unrealized appreciation (depreciation) on investments for the year 948,493 (36,872)
---------- ----------
Net Increase (Decrease) In Net Assets Resulting From Operations.... 1,159,604 (23,020)
---------- ----------
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income--net:
Investor shares.................................................... (10,411) --
Class R shares..................................................... (115,886) --
---------- ----------
Total Dividends.................................................. (126,297) --
---------- ----------
CAPITAL STOCK TRANSACTIONS:
Net proceeds from shares sold:
Investor shares.................................................... 1,710,225 1,300
Class R shares..................................................... 690,542 5,027,800
Dividends reinvested:
Investor shares.................................................... 9,143 --
Class R shares..................................................... 26,865 --
Cost of shares redeemed:
Investor shares.................................................... (150,971) (299)
Class R shares..................................................... (2,101,842) (100)
---------- ----------
Increase In Net Assets From Capital Stock Transactions........... 183,962 5,028,701
---------- ----------
Total Increase In Net Assets................................... 1,217,269 5,005,681
NET ASSETS:
Beginning of year.................................................... 5,005,681 --
---------- ----------
End of year (including undistributed investment income--net
of $35,559 in 1995 and $23,451 in 1994]............................ $6,222,950 $5,005,681
---------- ----------
---------- ----------
</TABLE>
<TABLE>
<CAPTION>
Shares
-------------------------------------------------------------
Investor Class Class R
--------------------------- ---------------------------
Year Ended October 31, Year Ended October 31,
--------------------------- ---------------------------
1995 1994(1) 1995 1994(1)(2)
-------- ------ --------- ----------
<S> <C> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Shares sold......................... 155,201 132 61,234 502,825
Shares issued for dividends reinvested 832 -- 2,697 --
Shares redeemed..................... (13,293) (30) (191,141) (10)
-------- ------ --------- --------
Net Increase (Decrease) In Shares
Outstanding..................... 142,740 102 (127,210) 502,815
-------- ------ --------- --------
-------- ------ --------- --------
<FN>
- -----------
(1) The Fund commenced operations on September 2, 1994.
(2) Effective October 17, 1994, the Fund's Trust shares were redesignated as
Class R shares.
</TABLE>
See notes to financial statements.
<PAGE>
Dreyfus Equity Income Fund
- ---------------------------------------------------------------------------
Financial Highlights
Reference is made to pages 4 and 5 of the Fund's Prospectus
dated March 1, 1996.
See notes to financial statements.
<PAGE>
Dreyfus Equity Income Fund
- ---------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 1--Significant Accounting Policies:
The Dreyfus/Laurel Funds, Inc. (the "Company") is registered under the
Investment Company Act of 1940 ("Act") as a diversified open-end management
investment company and operates as a series company currently offering
sixteen Series including the Dreyfus Equity Income Fund (the "Fund"). The
Dreyfus Corporation ("Manager") serves as the Fund's investment adviser. The
Manager is a direct subsidiary of Mellon Bank, N.A. ("Mellon Bank").
Premier Mutual Fund Services, Inc. (the "Distributor") acts as the
distributor of the Fund's shares. The Distributor, located at One Exchange
Place, Boston, Massachusetts 02109, 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.
On November 15, 1995, the Fund changed its name to the Dreyfus
Disciplined Equity Income Fund.
The Fund is currently authorized to issue two classes of shares:
Investor shares and Class R shares. Investor shares are sold primarily to
retail investors and bear a distribution fee. Class R shares are sold
primarily to bank trust departments and other financial service providers
(including Mellon Bank and its affiliates) acting on behalf of customers
having a qualified trust or investment account or relationship at such
institution, and bear no distribution fee. Each class of shares has identical
rights and privileges, except with respect to the distribution fee and voting
rights on matters affecting a single class. The Company has the authority to
issue 25 billion shares of capital stock with a par value of $.001.
Investment income, net of expenses (other than class specific
expenses) and realized and unrealized gains and losses are allocated daily to
each class of shares based upon the relative proportion of net assets of each
class.
(a) Portfolio Valuation: Investments in securities are valued at the last
sales price on the securities exchange on which such securities are primarily
traded or at the last sales price on the national securities market.
Securities not listed on an exchange or the national securities market, or
securities for which there were no transactions, are valued at the average of
the most recent bid and asked prices. Bid price is used when no asked price
is available. Securities for which there are no such valuations are valued at
fair value as determined in good faith under the direction of the Board of
Directors.
(b) Securities Transactions and Investment Income: Securities
transactions are recorded on a trade date basis. Realized gain and loss from
securities transactions are recorded on the identified cost basis. Dividend
income is recognized on the ex-dividend date and interest income, including,
where applicable, amortization of discount on investments, is recognized on
the accrual basis.
(c) Repurchase Agreements: The Fund may engage in repurchase agreement
transactions. Under the terms of a typical repurchase agreement, the Fund,
through its custodian and sub-custodian, takes possession of an underlying
debt obligation subject to an obligation of the seller to repurchase, and the
Fund to resell, the obligation at an agreed-upon price and time, thereby
determining the yield during the Fund's holding period. This arrangement
results in a fixed rate of return that is not subject to market fluctuations
during the Fund's holding period. The value of the collateral is at least
equal, at all times, to the total amount of the repurchase obligations,
including interest. In the event of a counterparty default, the
<PAGE>
Dreyfus Equity Income Fund
- ---------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
Fund has the right to use the collateral to offset losses incurred. There
is potential loss to the Fund in the event the Fund is delayed or prevented
from exercising its rights to dispose of the collateral securities, including
the risk of a possible decline in the value of the underlying securities
during the period while the Fund seeks to assert its rights. The Fund's
manager, acting under the supervision of the Board of Directors, reviews the
value of the collateral and the creditworthiness of those banks and dealers
with which the Fund enters into repurchase agreements to evaluate potential
risks.
(d) Distributions to Shareholders: Dividends are recorded on the
ex-dividend date. Dividends from investment income-net are declared and paid
on a quarterly basis. Dividends from net realized capital gain are normally
declared and paid annually, but the Fund may make distributions on a more
frequent basis to comply with the distribution requirements of the Internal
Revenue Code. To the extent that net realized capital gain can be offset by
capital loss carryovers, if any, it is the policy of the Fund not to
distribute such gain.
On November 2, 1995, the Board of Directors declared dividends from net
investment income for the Investor shares and Class R shares in the amount of
$0.0622 per share and $0.0697 per share, respectively, payable on November 3,
1995 to shareholders of record on November 2, 1995.
(e) Federal Income Taxes: It is the policy of the Fund to continue to
qualify as a regulated investment company, if such qualification is in the
best interests of its shareholders, by complying with the applicable
provisions of the Internal Revenue Code, and to make distributions of taxable
income sufficient to relieve it from substantially all Federal income and
excise taxes.
NOTE 2--Investment Management Fee and Other Transactions With Affiliates:
(a) Investment Management Fee: Pursuant to an Investment Management
agreement with the Manager, the Manager provides or arranges for one or more
third parties and or affiliates to provide investment advisory,
administrative, custody, fund accounting and transfer agency services to the
Fund. The Manager also directs the investments of the Fund in accordance with
its investment objective, policies and limitations. For these services, the
Fund is contractually obligated to pay the Manager a fee, calculated daily
and paid monthly, at the annual rate of .90% of the value of the Fund's
average daily net assets. Out of its fee, the Manager pays all of the
expenses of the Fund except brokerage fees, taxes, interest, Rule 12b-1
distribution fees and expenses, fees and expenses of non-interested Directors
(including counsel fees) and extraordinary expenses. In addition, the Manager
is required to reduce its fee in an amount equal to the Fund's allocable
portion of fees and expenses of the non-interested Directors (including
counsel).
(b) Distribution Plan: The Fund has adopted a distribution plan (the
"Plan") pursuant to Rule 12b-1 under the 1940 Act relating to its Investor
shares. Under the Plan, the Fund may pay annually up to .25% of the value of
the average daily net assets attributable to its Investor shares to
compensate the Distributor and Dreyfus Service Corporation, an affiliate of
the Manager, for shareholder servicing activities and the Distributor for
activities primarily intended to result in the sale of Investor shares. The
Class R shares bear no distribution fee. For the year ended October 31, 1995,
the distribution fee for the Investor shares was $1,608.
<PAGE>
Dreyfus Equity Income Fund
- ---------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
Under its terms, the Plan shall remain in effect from year to year,
provided such continuance is approved annually by a vote of majority of those
Directors who are not "interested persons" of the Investment Company and who
have no direct or indirect financial interest in the operation of the Plan or
in any agreement related to the Plan.
(c) Directors' Fees: Each director who is not an "interested
person" as defined in the Act receives $27,000 per year, $1,000 for each
Board meeting attended and $750 for each Audit Committee attended and is
reimbursed for travel and out-of-pocket expenses. These expenses are paid in
total by the following funds: the Dreyfus/Laurel Funds, Inc., the
Dreyfus/Laurel Tax-Free Municipal Funds, and the Dreyfus/Laurel Funds Trust.
In addition the Chairman of the Board receives an annual fee of $75,000 per
year. These fees and expenses are charged and allocated to each series based
on net assets.
NOTE 3--Securities Transactions:
The aggregate amount of purchase and sales of investment securities,
other than short-term securities, during the year ended October 31, 1995,
amounted to $2,002,934 and $1,939,020, respectively.
At October 31, 1995, accumulated net unrealized appreciation on
investments was $911,621, consisting of $993,139 gross unrealized
appreciation and $81,518 gross unrealized depreciation.
At October 31, 1995, the cost of investments for Federal income tax
purposes was substantially the same as the cost for financial reporting
purposes (see the Statement of Investments).
<PAGE>
Dreyfus Equity Income Fund
- ---------------------------------------------------------------------------
Independent Auditors' Report
The Board of Directors and Shareholders
The Dreyfus/Laurel Funds, Inc.:
We have audited the accompanying statement of assets and liabilities of
the Dreyfus Equity Income Fund of The Dreyfus/Laurel Funds, Inc., including
the statement of investments, as of October 31, 1995, and the related
statement of operations for the year then ended, and the statement of changes
in net assets and the financial highlights for each of the periods indicated
herein. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of October 31, 1995, by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of the Dreyfus Equity Income Fund of The Dreyfus/Laurel Funds, Inc.,
as of October 31, 1995, and the results of its operations for the year then
ended, and the changes in its net assets and the financial highlights for
each of the periods indicated herein, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Pittsburgh, Pennsylvania
December 15, 1995
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-22
Purchase of Fund Shares . . . . . . . . . . . . . . . . . . . B-24
Distribution Plan . . . . . . . . . . . . . . . . . . . . . . B-25
Redemption of Fund Shares . . . . . . . . . . . . . . . . . . B-26
Shareholder Services. . . . . . . . . . . . . . . . . . . . . B-27
Determination of Net Asset Value. . . . . . . . . . . . . . . B-30
Dividends, Other Distributions and Taxes. . . . . . . . . . . B-31
Portfolio Transactions. . . . . . . . . . . . . . . . . . . . B-35
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."
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 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. 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 January 31, 1996: Vernet Gestion, 103 Avenue des
Champs Elysees, Paris, France 75008, 20% record; Mutavie, 115-117 Avenue
des Champs Elysees, Paris, France 75008, 19% recored; Europe Index Plus,
c/o CCF Sam, 115-117 Avenue des Champs Elysees, Paris, France 75008, 10%
record; Selection Europe c/o CCF Sam, 115-117 Avenue des Champs, Elysees,
Paris, France 75008, 10% recored; Selection Diversifee, 115-117 Avenue des
Champs Elysees, Paris, France, 10% recored; Selection Mondiale, 115-117
Avenue des Champs Elysees, 10% record; Elysees Ecrins, 115-117 Avenue des
Champs Elysee, Paris, France 75018, 9% record. The following
shareholder(s) owned 5% or more of the outstanding Investor shares of the
Fund at January 31, 1996: Jeffrey Heinz, 42 Blueberry Circle, Ellinton, CT,
06029-2503, 2% record.
FEDERAL LAW AFFECTING MELLON BANK
The Glass-Steagall Act of 1933 prohibits national banks from engaging
in the business of underwriting, selling or distributing securities and
prohibits a member bank of the Federal Reserve System from having certain
affiliations with an entity engaged principally in that business. The
activities of Mellon Bank, N.A. ("Mellon Bank") in informing its customers
of, and performing, investment and redemption services in connection with
the Fund, 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 twelve 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 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.
# ELIZABETH BACHMAN. Vice President and Assistant Secretary of the
Company, The Dreyfus/Laurel Funds Trust and The Dreyfus/Laurel Tax
Free Municipal Funds (since January 1996); Counsel, Premier Mutual
Fund Services, Inc. Prior to September 1995, she was enrolled at the
Fordham University School of Law and received her J.D. in May 1995.
Prior to September 1992, she was an Assistant at the National
Association for Public Interest Law. Age: 26 years old. Address: 200
Park Avenue, New York, New York 10166.
# 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 and Assistant Secretary (since January
1996) of the Company, The Dreyfus/Laurel Funds Trust and The
Dreyfus/Laurel Tax-Free Municipal Funds; 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.
# MARGARET PARDO. Assistant Secretary of the Company, The Dreyfus/Laurel
Funds Trust and The Dreyfus/Laurel Tax-Free Municipal Funds (since
January 1996); Paralegal, Premier Mutual Fund Services, Inc. Prior
to April 1995, she was a Medical Coordination Officer at ORBIS
International. Prior to June 1992, she worked as a Program
Coordinator at Physicians World Communications Group. Age: 27 years
old. Address: 200 Park Avenue, New York, New York 10166.
# 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.
# JOHN J. PYBURN. Assistant Treasurer of the Company, The Dreyfus/Laurel
Funds Trust and The Dreyfus/Laurel Tax-Free Municipal Funds (since
January 1996); Vice President of Premier Mutual Fund Services, Inc.
and an officer of other investment companies advised or administered
by Dreyfus. From 1984 to July 1994, he was Assistant Vice President
in the Mutual Fund Accounting Department of Dreyfus. Age: 61 years
old. Address: 200 Park Avenue, New York, New York 10166.
JOSEPH F. TOWER, III. Assistant Treasurer of the Company, The
Dreyfus/Laurel Funds Trust and The Dreyfus/Laurel Tax-Free Municipal
Funds (since January 1996); Senior Vice President, Treasurer and Chief
Financial Officer of Premier Mutual Fund Services, Inc. and an officer
of other investment companies advised or administered by Dreyfus.
From July 1988 to August 1994, he was employed by The Boston Company,
Inc. where he held various management positions in the Corporate
Finance and Treasury areas. Age: 33 years old. Address: 200 Park
Avenue, New York, New York 10166.
________________________________
* "Interested person" of the Company as defined in the 1940 Act.
o Member of the Audit Committee.
+ Member of the Nominating Committee.
# Officer also serves as an officer for other investment companies
advised by Dreyfus.
The officers and Directors of the Company as a group owned
beneficially less than 1% of the Fund's total shares outstanding as of
January 31, 1996.
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 current 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 $27,800 None None $ 34,500
Francis P. Brennan* 86,683 None None 110,500
Joseph S. DiMartino** None None None $448,618***
James M. Fitzgibbons 27,795 None None 34,500
J. Tomlinson Fort** None None None None
Arthur L. Goeschel 27,604 None None 35,500
Kenneth A. Himmel 26,381 None None 32,750
Arch S. Jeffery** None None None None
Stephen J. Lockwood 26,387 None None 32,750
Robert D. McBride 27,800 None None 35,500
John J. Sciullo 27,800 None None 34,500
Roslyn M. Watson 27,795 None None 34,550
# Amounts required to be paid by the Company directly to the non-interested Directors,
that would be applied to offset a portion of the management fee payable to Dreyfus, are in
fact paid directly by Dreyfus to the non-interested Directors. Amount does not include
reimbursed expenses for attending Board meetings, which amounted to $12,342 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 $17,563, $28,604 and $27,800,
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 $3,186 for expenses
attributable to the Company's Board meetings ($3,186 is not included in the $12,342
above).
*** Estimated amounts for the fiscal year ending October 31, 1995.
</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 and a director; Barbara E. Casey, Vice President-Dreyfus
President-Dreyfus Retirement Services; Diane M. Coffey, Vice President-
Corporate Communications; Elie M. Genadry, Vice President-Institutional
Sales; William T. Sandalls, Jr., Senior Vice President, Chief Financial
Officer and a director; 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; Maurice Bendrihem,
Controller; Elvira Oslapas; Assistant Secretary; Mandell L. Berman, Frank
V. Cahouet, Alvin E. Friedman, Lawrence M. Greene and Julian M. Smerling
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.
In-Kind Purchases. If the following conditions are satisfied, the
Fund may at its discretion, permit the purchase of shares through an "in-
kind" exchange of securities. Any securities exchanged must meet the
investment objective, policies and limitations of the Fund, must have a
readily ascertainable market value, must be liquid and must not be subject
to restrictions on resale. The market value of any securities exchanged,
plus any cash, must be at least equal to $25,000. Shares purchased in
exchange for securities generally cannot be redeemed for fifteen days
following the exchange in order to allow time for the transfer to settle.
The basis of the exchange will depend upon the relative NAV of the
Shares purchased and securities exchanged. Securities accepted by the Fund
will be valued in the same manner as the Fund values its assets. Any
interest earned on the securities following their delivery to the Fund and
prior to the exchange will be considered in valuing the securities. All
interest, dividends, subscription or other rights attached to the
securities become the property of the Fund, along with the securities. For
further information about "in-kind" purchases, call 1-800-645-6561.
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 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 investors. If
more than 50% of the value of the Fund's total assets at the close of its
taxable year consist of securities of foreign corporations, it will be
eligible to, and may, file an election with the Internal Revenue Service
that will enable its shareholders, in effect, to receive the benefit of the
foreign tax credit with respect to any foreign or U.S. possessions' income
taxes paid by it. Pursuant to the election, the Fund would treat those
taxes as dividends paid to its shareholders and each shareholder would be
required to (1) include in gross income, as treat as paid by him or her,
his or her proportionate share of those taxes, (2) treat his or her share
of those taxes and of any dividend paid by the Fund that represents income
from foreign or U.S. possession sources as his or her own income from those
sources and (3) either deduct the taxes deemed paid by him or her in
computing his or her taxable income or, alternatively, use the foregoing
information in calculating the foreign tax credit against his or her
federal income tax. No deductions for foreign taxes may be claimed by a
shareholder who does not itemize deductions. Generally, a credit for
foreign taxes may not exceed the shareholder's federal income tax
attributable to his total foreign source taxable income. The Fund will
report to its shareholders shortly after each taxable year their respective
shares of the income from sources within, and paid to, foreign countries
and U.S. possessions if it makes this election.
The Fund may invest in the stock of foreign corporations that are
classified as "passive foreign investment companies" ("PFICs"). In
general, a foreign corporation is classified as a PFIC if at least one-half
of its assets constitute investment-type assets or 75% or more of its gross
income is passive income. An "excess distribution" received with respect
to a PFIC's stock and gain from the disposition of such stock will be
treated as having been realized ratably over the entire period during which
the Fund held the PFIC stock. The Fund itself will be subject to tax on
that portion, if any, of the excess distribution and gain that is allocated
to the portion of that holding period in prior taxable years (and an
interest factor will be added to the tax, as if the tax had actually been
payable in those prior taxable years), even if the Fund distributes the
corresponding income to its shareholders. All excess distributions and
such gains are taxable as ordinary income.
The Fund may elect alternative tax treatment with respect to any PFIC
stock it holds. Under the election, the Fund generally would be required
to include in its gross income each year its share of the PFIC earnings and
capital gains of a PFIC for the year regardless of whether any
distributions are received from the PFIC, and the special rules in the
preceding paragraph would not apply; the amount so included in the Fund's
income would have to be distributed to the Fund's shareholders to satisfy
the Distribution Requirement and to avoid imposition of the Excise Tax. In
most instances it will be very difficult, if not impossible, to make this
election because of certain requirements thereof.
Pursuant to proposed regulations, open-end RICs such as the Fund would
be entitled to elect to "mark to market" their stock in certain PFICs.
"Marking to Market," in this context, means recognizing as gain for each
taxable year the excess, as of the end of that year, of the fair market
value of the PFIC's stock over the adjusted basis in that stock (including
mark-to-market gain for each prior year for which an election was in
effect.)
In addition, gain realized from the sale or other disposition of PFIC
securities may be treated as ordinary income under Section 1291 of the
Code.
Income from foreign currencies (except certain gains therefrom that
may be excluded by future regulations), and income from transactions in
options, futures and forward contracts derived by the Fund with respect to
its business of investing in securities or foreign currencies, will qualify
as permissible income under the Income Requirement. However, income from
the disposition of options and futures contracts (other than those on
foreign currencies) will be subject to the Short-Short Limitation if they
are held for less than three months. Income from the disposition of
foreign currencies and options, futures and forward contracts thereon, that
are not directly related to the Fund's principal business of investing in
securities (or options and futures with respect to securities) also will be
subject to the Short-Short Limitation if they are held for less than three
months.
Gains and losses attributable to fluctuations in foreign currency
exchange rates that occur between the time the Fund accrues dividends,
interest or other receivables, or expenses or other liabilities,
denominated in a foreign currency and the time 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.
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.
From time to time, advertising material for the Fund may include
biographical information relating to its portfolio manager and may refer
to, or include commentary by the portfolio manager relating to investment
strategy, asset growth, current or past business, political, economic or
financial conditions and other matters of general interest to investors.
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 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, 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.
KPMG Peat Marwick LLP, One Mellon Bank Center, Pittsburgh,
Pennsylvania 15219, 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 Independent Auditors' Report 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.
<PAGE>
Dreyfus European Fund October 31, 1995
- ----------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN DREYFUS EUROPEAN FUND
CLASS R SHARES AND THE MORGAN STANLEY CAPITAL INTERNATIONAL EUROPE INDEX
Dreyfus European Fund Morgan Stanley Capital International
Period (Class R Shares) Europe 14 Index *
- -------- --------------------- ------------------------------------
1/5/87 $10,000 $10,000
10/31/87 8,950 10,247
10/31/88 9,441 11,795
10/31/89 9,523 13,195
10/31/90 11,307 14,902
10/31/91 11,886 15,937
10/31/92 11,906 15,638
10/31/93 13,915 19,652
10/31/94 14,746 21,861
10/31/95 15,821 24,749
*Source: Lipper Analytical Services, Inc.
Average Annual Total Returns
- ------------------------------------------------------------------------------
Investor Class Shares Class R Shares
- -------------------------------- -------------------------------
Period ended 10/31/95 Period ended 10/31/95
- -------------------------------- -------------------------------
1 Year 7.16% 1 Year 7.29%
From Inception (4/14/94) 8.64 5 Years 6.94
From Inception (1/5/87) 5.33
Past performance is not predictive of future performance.
The above graph compares a $10,000 investment made in Class R shares of
Dreyfus European Fund on 1/5/87 (Inception Date) to a $10,000 investment made
in the Morgan Stanley Capital International Europe Index on that date. For
comparative purposes, the value of the Index on 12/31/86 is used as the
beginning value on 1/5/87. All dividends and capital gain distributions are
reinvested. Performance for Investor Class shares will vary from the
performance of Class R shares shown above due to differences in charges and
expenses.
The Fund seeks to outperform the Morgan Stanley Capital International Europe
Index in the medium to long term by allocating the Fund's assets among the
Western European countries and industry sectors represented in the Index.
The Fund's performance shown in the line graph takes into account all
applicable fees and expenses. The Index, which is the property of Morgan
Stanley & Co. Incorporated, is an unmanaged index of equity performance in
Western Europe and encompasses securities of all major industry sectors in 14
countries and includes net dividends reinvested. The Index does not take into
account charges, fees and other expenses. Further information relating to
Fund performance, including expense reimbursements, if applicable, is
contained in the Financial Highlights section of the Prospectus and
elsewhere in this report.
<PAGE>
Dreyfus European Fund
- ---------------------------------------------------------------------------
Statement of Investments October 31, 1995
<TABLE>
<CAPTION>
Common Stocks--96.6% Shares Value
------------ --------------
<S> <C> <C> <C>
Belgium--1.3% Generale de Banque.................... 210 $ 67,873
Glaverbal NPV VVPR.................... 13 1,475
Glaverbal Strip NPV VVPR.............. 13 2
Petrofina............................. 80 24,807
Solvay, Class A, NPV.................. 50 25,207
Tractabel............................. 80 29,282
-----------
148,646
-----------
Denmark--3.4% Carlsberg, Class B.................... 2,200 113,988
International Service Systems AS,
Class B............................. 1,700 34,859
Novo Nordisk AS, Class B.............. 400 50,897
Sophus Berenden, Class B 1,230 134,890
Superfos AS........................... 500 44,398
-----------
379,032
-----------
Finland--1.5% Kansallis-Osake-Pankki................ 15,000 12,021
Outokumpu, Class A.................... 3,200 50,914
Pohjola, Class B, Free................ 3,800 55,533
Repola................................ 1,100 21,313
Stockmann AB, Class B, Free........... 600 30,831
-----------
170,612
-----------
France--17.2% AXA................................... 2,035 113,201
Air Liquide (L')...................... 45 7,558
Cap Gemini Sogeti..................... 4,500 124,424
Carrefour............................. 120 70,587
Cerus (Cie Europenne Reunis).......... 700 9,133
Cie Generale Des Eaux................. 1,162 108,168
Clarins............................... 1,500 140,246
Clarins (Rights)...................... 1,500 (a) 20,092
Club Mediterranee..................... 1,600 125,673
Club Mediterranee (Rights)............ 1,600 (a) 1,580
Compagnie de St. Gobain............... 1,050 125,376
Compagnie Financiere De Paribas S.A.. 1,140 62,808
Compagnie Financiere de Suez......... 375 14,178
DMC (Dollfus-Mieg & Cie)............. 500 21,393
Damart............................... 15 13,333
Danone (EX BSN)...................... 660 105,573
Dassault Electronique................ 1,500 54,685
Esso Francaise....................... 200 21,956
Eurafrance........................... 50 16,743
Finextel............................. 1,000 12,739
Fromageries Bel...................... 30 28,025
GTM-Entrepose........................ 1,477 95,895
Groupe Andre......................... 300 23,871
LVMH Moet Hennessey.................. 539 107,414
Lyonnaise des Eaux Dumez............. 763 74,542
Salomon.............................. 60 34,679
Sat sa de Telecom.................... 200 74,019
</TABLE>
<PAGE>
Dreyfus European Fund
- ---------------------------------------------------------------------------
Statement of Investments (continued) October 31, 1995
<TABLE>
<CAPTION>
Common Stocks (continued) Shares Value
- ---------------------------------------------------------------- ------------ -------------
<S> <C> <C> <C>
France (continued) Skis Rossignol....................... 36 $ 9,615
Societe Generale..................... 962 110,140
Societe National Elf Aquitaine....... 2,927 199,630
-----------
1,927,276
-----------
Germany--12.6% Agiv AG.............................. 1,300 27,330
Allianz Holdings AG.................. 160 296,023
Bayer AG............................. 30 7,977
Bayerische Motoren Werke AG.......... 218 116,896
Commerzbank AG....................... 300 69,418
Daimler Benz Group AG................ 70 33,732
Deutsche Bank AG..................... 1,250 56,525
Didier-Werke AG...................... 150 11,836
Dresdner Bank........................ 450 12,017
Gerresheimer Glas AG................. 460 84,290
Heidelberg (Portland-Zementwerke).... 110 68,750
Linde AG............................. 200 122,869
M.A.N. AG............................ 100 28,977
Preussag AG.......................... 250 71,023
Schering Group AG.................... 1,000 69,744
Siemens AG........................... 380 199,176
Strabag Bau AG....................... 50 8,345
VEBA AG.............................. 3,100 127,237
-----------
1,412,165
-----------
Ireland--3.2% Allied Irish Banks................... 12,000 60,725
Bank of Ireland PLC.................. 17,100 113,619
Clondalkin........................... 13,000 73,009
Kerry Group PLC...................... 7,680 59,777
Waterford Glass (Units).............. 25,000 22,741
Woodchester Investment (Units)....... 10,000 25,984
-----------
355,855
-----------
Italy--5.4% Assicurazioni Generali SPA........... 4,361 101,830
Banco Ambrosiano Veneto.............. 22,000 57,385
Banca Commerciale Italiana........... 15,600 30,445
Banco Commerciale Italiana SPA
(Warrants)......................... 2,600 (a) 261
Benetton............................. 3,400 35,250
Cementir SPA......................... 8,000 6,673
Cir-Compagnie Industriale............ 4,000 2,522
Credito Italiano SPA................. 7,000 7,968
Fiat SPA............................. 10,500 34,252
Fidis................................ 8,000 14,582
Franco Tosi SPA...................... 2,000 17,033
Italgas.............................. 10,100 26,916
Magneti Marelli...................... 9,500 18,212
Olivetti Group SPA................... 10,000 7,480
Pirelli SPA.......................... 22,000 28,485
</TABLE>
<PAGE>
Dreyfus European Fund
- -------------------------------------------------------------------------------
Statement of Investments (continued) October 31, 1995
<TABLE>
<CAPTION>
Common Stocks (continued) Shares Value
------------ -------------
<S> <C> <C> <C>
Italy (continued) Premafin Financeria................... 9,000 $ 3,847
RAS................................... 1,120 11,263
RAS (Warrants)........................ 160 553
SME (Meridionale Finanziaria)......... 1,212 2,670
Sirti SPA............................. 1,700 10,375
Snia BPD.............................. 28,000 27,402
Telecom Italia Mobile................. 46,460 78,115
Telecom Italia Mobile di Risp......... 6,000 6,675
Telecom Italia SPA.................... 46,460 70,668
Telecom Italia SPA di Risp............ 6,000 7,090
-----------
607,952
-----------
Netherlands--5.1% ABN Amro Holdings..................... 1,234 51,814
Akzo Nobel N.V........................ 300 34,142
Elsevier N.V.......................... 2,500 32,299
Internationale Nederlanden Groep...... 717 42,729
Koninklijke Ahold N.V................. 824 31,207
Koninklijke PTT NED................... 1,400 49,208
Nutricia Verenigde Bedrijven.......... 500 38,790
Philips Electronics N.V............... 1,200 46,359
Royal Dutch Petroleum................. 1,700 210,912
Van Ommerren.......................... 350 10,440
Wolters Kluwer CVA.................... 200 18,189
-----------
566,089
-----------
Norway--6.8% Dyno Industrier....................... 3,300 66,817
Hafslund Nycomed, Class B............. 4,359 121,881
Kvaerner, Class A..................... 1,100 46,312
Norske Hydro AS....................... 3,800 151,438
Orkla AS.............................. 1,500 77,615
Saga Petroleum........................ 20,000 250,683
Skogsindustries, Class A.............. 1,700 49,309
-----------
764,055
-----------
Spain--7.1% Argentaria............................ 1,600 56,525
Autopista Cesa........................ 1,230 11,493
Banco Bilbao Vizcaya.................. 1,494 45,677
Centros Commersiales Pryca............ 500 10,656
Empresa Nacional de Elec (Endesa)..... 2,800 139,312
Fomento de Construcciones y Contratas SA 100 7,066
Gas Natural S.D.G. SA................. 600 82,328
Iberdrola S.A......................... 6,500 49,016
Portland Valderrivas SA............... 200 13,131
Prosegur Compania Securi SA........... 500 12,254
Repsol SA............................. 4,000 119,508
Telefonica de Espana.................. 11,300 142,639
Zardoya-Otis.......................... 1,100 107,475
-----------
797,080
-----------
</TABLE>
<PAGE>
Dreyfus European Fund
- --------------------------------------------------------------------------------
Statement of Investments (continued) October 31, 1995
<TABLE>
<CAPTION>
Common Stocks (continued) Shares Value
------------ -------------
<S> <C> <C> <C>
Switzerland--6.5% Ciba-Geigy AG......................... 70 $ 60,414
Credit Suisse Holding................. 700 71,510
Nestle SA............................. 100 104,799
Roche Holdings AG..................... 5 63,959
SMH AG Nuenberg....................... 200 26,860
Sandoz AG............................. 225 185,667
Schweiz-Ruckvericherundgs............. 8 8,736
Schweizerischer Bankverein............ 170 69,767
Union Bank of Switzerland............. 60 64,993
Zurich Verischerung................... 250 71,554
-----------
728,259
-----------
United Kingdom--26.5% Argyll Group PLC....................... 401 2,040
Associated British Foods PLC........... 9,000 100,164
B.A.T. Industies PLC................... 12,156 99,808
BBA Group.............................. 6,000 25,533
BTR PLC................................ 7,498 39,856
Barclays Bank PLC...................... 13,745 161,454
Beazer Homes PLC....................... 9,000 21,844
Boots Company PLC...................... 13,871 122,776
British Gas PLC........................ 5,000 19,063
British Petroleum Company PLC.......... 10,579 77,906
British Telecommunications PLC......... 34,970 208,289
CRH.................................... 11,000 73,088
General Electric PLC................... 18,393 91,367
Glaxo Holdings PLC..................... 18,691 252,373
Great Universal Stores PLC............. 7,820 70,578
Guinness PLC........................... 15,600 125,124
Hanson PLC............................. 48,981 150,133
Hillsdown Holdings PLC................. 6,000 15,899
Imperial Chemical Industries PLC....... 6,200 75,868
Irish Life PLC......................... 28,327 104,415
Laing (John) PLC....................... 4,000 14,238
Lasmo PLC.............................. 17,357 42,286
Lloyds Bank PLC........................ 6,234 76,777
Meggitt................................ 25,000 34,409
Meyer International.................... 5,000 27,685
National Power PLC..................... 9,500 74,093
Norcros................................ 1,600 2,050
Pearson PLC............................ 5,918 58,842
Pilkington PLC......................... 18,000 53,820
Reuters PLC............................ 12,400 115,347
Royal Bank of Scotland Group PLC ...... 19,344 156,836
Sainsbury PLC.......................... 5,919 39,656
Sedgwick Group PLC..................... 11,000 18,446
Signet Group........................... 7,000 1,440
Simon Engineering...................... 16,000 21,009
Smithkline Beecham PLC................. 177 1,814
Smurfit Group.......................... 16,000 43,283
Southern Water PLC..................... 17,000 183,014
Thames Water PLC....................... 2,766 23,039
</TABLE>
<PAGE>
Dreyfus European Fund
- -----------------------------------------------------------------------
Statement of Investments (continued) October 31, 1995
<TABLE>
<CAPTION>
Common Stocks (continued) Shares Value
------------ -------------
<S> <C> <C> <C>
United Kingdom (continued) Thorn-EMI PLC.......................... 35 $ 816
Vickers PLC............................ 3,000 11,912
Williams Holdings PLC.................. 3,714 18,420
Willis Corroon PLC..................... 8,000 15,947
Wilson Holdings PLC.................... 4,000 8,986
Wimpey (George) PLC.................... 8,000 12,909
Zeneca Group PLC....................... 4,200 78,304
-----------
2,972,956
-----------
TOTAL COMMON STOCKS
(cost $9,283,117).................... $10,829,977
-----------
<CAPTION>
Preferred Stock--.2%
- -----------------------------------------------------------------------
<S> <C> <C> <C>
Germany; Krones AG
(cost $27,304)........................ 50 $ 17,898
-----------
<CAPTION>
Principal
Convertible Corporate Bond--.0% Amount
- ---------------------------------------------------------------------- ---------
<S> <C> <C> <C>
France; AXA, 4.50%, 1/1/1999
(cost $7,640) .....................$ 13,600 $ 8,738
-----------
<CAPTION>
Short-Term Investments--2.9%
- ----------------------------------------------------------------------
<S> <C> <C> <C>
Commercial Paper; Ford Motor Credit Co.
5.90%, 11/1/1995
(cost $322,000) ................. $ 322,000 $ 322,000
-----------
TOTAL INVESTMENTS (cost $9,640,061)....................................... 99.7% $11,178,613
CASH AND RECEIVABLES (NET)................................................ .3% $ 35,350
------- -----------
NET ASSETS................................................................ 100.0% $11,213,963
------- -----------
------- -----------
<FN>
Note to Statement of Investments;
(a) Non-income producing.
</TABLE>
See notes to financial statements.
<PAGE>
Dreyfus European Fund
- ----------------------------------------------------------------------
Statement of Assets and Liabilities October 31, 1995
<TABLE>
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $9,640,061)--see Statement of Investments..................... $11,178,613
Cash and foreign currency (Cost $47,374)................................ 37,048
Dividends and interest receivable....................................... 32,375
------------
11,248,036
LIABILITIES:
Due to The Dreyfus Corporation-Note 2(a)................................ $ 32,933
Due to the Distributor-Note 2(c)........................................ 133
Net unrealized depreciation on forward currency
exchange contracts.................................................. 370
Directors' fees payable-Note 2(d)....................................... 637 34,073
--------- ------------
NET ASSETS.................................................................. $11,213,963
------------
------------
REPRESENTED BY:
Paid-in capital......................................................... $8,955,730
Accumulated undistributed investment income--net........................ 107,229
Accumulated undistributed net realized gain on investments ............. 622,750
Accumulated net unrealized appreciation on investments and foreign currency
transactions-Note 3 ................................................ 1,528,254
------------
NET ASSETS at value........................................................ $11,213,963
------------
------------
NET ASSET VALUE offering and redemption price per share:
Investor Shares
(8 million shares of $.001 par value Capital Stock authorized)
($591,495 / 50,999 shares of capital stock outstanding)............. $11.60
-------
-------
Class R Shares
(12 million shares of $.001 par value Capital Stock authorized)
($10,622,468 / 917,079 shares of capital stock outstanding)......... $11.58
-------
-------
See notes to financial statements.
</TABLE>
<PAGE>
Dreyfus European Fund
- --------------------------------------------------------------------------
Statement of Operations Year ended October 31, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Income:
Cash dividends (net of $47,170 foreign taxes withheld at source)...... $ 294,961
Expenses:
Investment management fee--Note 2(a,b)................................ $185,344
Distribution fees (Investor Shares)--Note 2(c)........................ 786
Directors' fees and expenses--Note 2(d)............................... 1,575
---------
Total Expenses.................................................... 187,705
----------
INVESTMENT INCOME--NET............................................ 107,256
----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS-Note 3:
Net realized gain on investments and foreign currency transactions...... $623,476
Net realized (loss) on forward currency exchange contracts.............. (751)
---------
Net Realized Gain..................................................... 622,725
Net unrealized appreciation on investments and foreign currency transactions 33,050
----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS................... 655,775
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $ 763,031
----------
----------
See notes to financial statements.
</TABLE>
<PAGE>
Dreyfus European Fund
- ------------------------------------------------------------------------
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended October 31,
------------------------------
1995 1994
------------------------------
<S> <C> <C>
OPERATIONS:
Investment income--net............................................... $ 107,256 $ 101,261
Net realized gain on investments..................................... 622,725 1,315,398
Net unrealized appreciation (depreciation) on investments for the year 33,050 (834,355)
----------- -----------
Net Increase In Net Assets Resulting From Operations............. 763,031 582,304
----------- -----------
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income--net:
Investor shares.................................................... (86,136) --
Class R shares..................................................... (373) (95,131)
Net realized gain on investments:
Investor shares.................................................... (1,268,308) --
Class R shares..................................................... (7,780) (670,815)
----------- -----------
Total Dividends.................................................. (1,362,597) (765,946)
----------- -----------
CAPITAL STOCK TRANSACTIONS:
Net proceeds from shares sold:
Investor shares.................................................... 9,095,386 73,438
Class R shares..................................................... 3,495,761 811,065
Dividends reinvested:
Investor shares.................................................... 7,800 --
Class R shares..................................................... 1,326,541 752,008
Cost of shares redeemed:
Investor shares.................................................... (8,608,735) (26,349)
Class R shares..................................................... (4,348,365) (1,062,219)
----------- -----------
Increase In Net Assets From Capital Stock Transactions........... 968,388 547,943
----------- -----------
Total Increase In Net Assets................................... 368,822 364,301
NET ASSETS:
Beginning of year.................................................... 10,845,141 10,480,840
----------- -----------
End of year (including undistributed investment income--net of:
$107,229 in 1995 and $86,482 in 1994).............................. $11,213,963 $10,845,141
----------- -----------
----------- -----------
<CAPTION>
Shares
----------------------------------------------------------------
Investor Shares Class R Shares
------------------------------ ------------------------------
Year Ended October 31, Year Ended October 31,
------------------------------ ------------------------------
1995 1994* 1995 1994
--------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Shares sold......................... 835,473 6,054 301,352 65,212
Shares issued for dividends reinvested 762 -- 129,926 60,719
Shares redeemed..................... (789,079) (2,211) (378,020) (87,074)
-------- ------- -------- -------
Net Increase In
Shares Outstanding.................... 47,156 3,843 53,258 38,857
-------- ------- -------- -------
-------- ------- -------- -------
<FN>
- -------------------
* The Fund commenced selling Investor shares on April 14, 1994.
</TABLE>
See notes to financial statements.
<PAGE>
Dreyfus European Fund
- --------------------------------------------------------------------------
Financial Highlights
Reference is made to pages 5 and 6 of the Fund's Prospectus
dated March 1, 1996.
See notes to financial statements.
<PAGE>
Dreyfus European Fund
- -------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 1--Significant Accounting Policies:
The Dreyfus/Laurel Funds, Inc. (the "Company") is registered
under the Investment Company Act of 1940 ("Act") as a
diversified open-end management investment company and operates as a series
company currently offering sixteen Series including the Dreyfus European Fund
(the "Fund"). The Dreyfus Corporation ("Manager") serves as the Fund's
investment adviser. The Manager is a direct subsidiary of Mellon Bank, N.A.
("Mellon Bank").
Premier Mutual Fund Services, Inc. (the "Distributor") acts as the
distributor of the Fund's shares. The Distributor, located at One Exchange
Place, Boston, Massachusetts 02109, 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.
The Fund is currently authorized to issue two classes of shares: Investor
shares and Class R shares. Investor shares are sold primarily to retail
investors and bear a distribution fee. Class R shares are sold primarily to
bank trust departments and other financial service providers (including
Mellon Bank and its affiliates) acting on behalf of customers having a
qualified trust or investment account or relationship at such institution,
and bear no distribution fee. Each class of shares has identical rights and
privileges, except with respect to the distribution fee and voting rights on
matters affecting a single class. The Company has the authority to issue 25
billion shares of capital stock with a par value of $.001.
Investment income, net of expenses (other than class specific
expenses) and realized and unrealized gains and losses are allocated daily to
each class of shares based upon the relative proportion of net assets of each
class.
(a) Portfolio Valuation: Investments in securities are valued at the last
sales price on the securities exchange on which such securities are primarily
traded or at the last sales price on the national securities market.
Securities not listed on an exchange or the national securities market, or
securities for which there were no transactions, are valued at the average of
the most recent bid and asked prices. Bid price is used when no asked price
is available. Securities for which there are no such valuations are valued at
fair value as determined in good faith under the direction of the Board of
Directors. Investments denominated in foreign currencies are translated to
U.S. dollars at the prevailing rates of exchange. Forward currency exchange
contracts are valued at the offsetting rate.
(b) Securities Transactions and Investment Income: Securities
transactions are recorded on a trade date basis. Realized gain and loss from
securities transactions are recorded on the identified cost basis. Dividend
income is recognized on the ex-dividend date and interest income, including,
where applicable, amortization of discount on investments, is recognized on
the accrual basis.
(c) Foreign Currency Transactions: The Fund does not isolate that portion
of the results of the operations resulting from changes in foreign exchange
rates on investment from the fluctuations arising from changes in the market
prices of securities held. Such fluctuations are included with the net
realized and unrealized gain or loss from investments.
Net realized foreign exchange gains or losses arise from sales and
maturities of short-term securities, sales of foreign currencies, currency
gains or losses realized on securities transactions, the difference
<PAGE>
Dreyfus European Fund
- -------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
between the amount of dividends, interest, and foreign withholding taxes
recorded on the Fund's books, and the U.S. dollar equivalent of the amounts
actually received or paid. Net unrealized foreign exchange gains and losses
arise from changes in the value of assets and liabilities other than
investments in securities, resulting from changes in exchange rates. Such
gains and losses are included with net realized and unrealized gain or loss
on investments.
(d) Forward Currency Exchange Contracts: The Fund enters into forward
currency exchange contracts in order to hedge its exposure to changes in
foreign currency exchange rates on its foreign portfolio holdings. When
executing forward currency exchange contracts, the Fund is obligated to buy
or sell a foreign currency at a specified rate on a certain date in the
future. With respect to sales of forward currency exchange contracts, the
Fund would incur a loss if the value of the contract increases between the
date the forward contract is opened and the date the forward contract is
closed. The Fund realizes a gain if the value of the contract decreases
between those dates. With respect to purchases of forward currency exchange
contracts, the Fund would incur a loss if the value of the contract decreases
between the date the forward contract is opened and the date the forward
contract is closed. The Fund realizes a gain if the value of the contract
increases between those dates. The Fund is also exposed to credit risk
associated with counter party nonperformance on these forward currency
exchange contracts which is typically limited to the unrealized gains on such
contracts that are recognized in the statement of assets and liabilities. At
October 31, 1995, the following summarizes open currency exchange contracts.
<TABLE>
<CAPTION>
Foreign U.S. Dollar
Currency Value Unrealized
Forward Currency Sale Contracts Amount Proceeds 10/31/95 (Depreciation)
- -------------------------------- --------- --------- ----------- -------------
<S> <C> <C> <C> <C>
German Deutsche Marks, expiring 3/5/96........ 14,514 $10,000 $10,370 $ (370)
</TABLE>
(e) Distributions to Shareholders: Dividends are recorded on the
ex-dividend date. Dividends from investment income-net and dividends from net
realized capital gain are normally declared and paid annually, but the Fund
may make distributions on a more frequent basis to comply with the distributio
n requirements of the Internal Revenue Code. To the extent that net realized
capital gain can be offset by capital loss carryovers, if any, it is the
policy of the Fund not to distribute such gain.
(f) Federal Income Taxes: It is the policy of the Fund to continue to
qualify as a regulated investment company, if such qualification is in the
best interests of its shareholders, by complying with the applicable
provisions of the Internal Revenue Code, and to make distributions of taxable
income sufficient to relieve it from substantially all Federal income and
excise taxes.
NOTE 2--Investment Management Fee and Other Transactions with Affiliates:
(a) Investment Management Fee: Pursuant to an Investment Management
agreement with the Manager, the Manager provides or arranges for one or more
third parties and or affiliates to provide investment advisory,
administrative, custody, fund accounting and transfer agency services to the
Fund. The Manager also directs the investments of the Fund in accordance with
its investment objective, policies and limitations. For these services, the
Fund is contractually obligated to pay the Manager a fee, calculated daily
and paid monthly, at the annual rate of 1.75% of the value of the Fund's
average daily net assets. Out of its fee, the Manager pays all of the
expenses of the Fund except brokerage fees, taxes,
<PAGE>
Dreyfus European Fund
- --------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
interest, Rule 12b-1 distribution fees and expenses, fees and expenses of
non-interested Directors (including counsel fees) and extraordinary expenses.
In addition, the Manager is required to reduce its fee in an amount equal to
the Fund's allocable portion of fees and expenses of the non-interested
Directors (including counsel).
(b) Sub-Advisory Agreement: S.A.M. Finance, S.A. (the "Sub-Advisor"), a
wholly-owned subsidiary of Credit Commercial de France, serves as the Fund's
Sub-Advisor pursuant to a sub-advisory agreement among the Fund, the
Sub-Advisor and the Manager. For its services, the Sub-Advisor is paid an
annual fee of .25% of the value of the Fund's average daily net assets and is
paid by the Manager out of its fee.
(c) Distribution Plan: The Fund has adopted a distribution plan (the
"Plan") pursuant to Rule 12b-1 under the 1940 Act relating to its Investor
shares. Under the Plan, the Fund may pay annually up to .25% of the value of
the average daily net assets attributable to its Investor shares to
compensate the Distributor and Dreyfus Service Corporation, an affiliate of
the Manager, for shareholder servicing activities and the Distributor for
activities primarily intended to result in the sale of Investor shares. The
Class R shares bear no distribution fee. For the year ended October 31, 1995,
the distribution fee for the Investor shares was $786.
Under its terms, the Plan shall remain in effect from year to year,
provided such continuance is approved annually by a vote of majority of those
Directors who are not "interested persons" of the Investment Company and who
have no direct or indirect financial interest in the operation of the Plan or
in any agreement related to the Plan.
(d) Directors' Fees: Each director who is not an "interested
person" as defined in the Act receives $27,000 per year, $1,000 for each
Board meeting attended and $750 for each Audit Committee attended and is
reimbursed for travel and out-of-pocket expenses. These expenses are paid in
total by the following funds: the Dreyfus/Laurel Funds, Inc., the
Dreyfus/Laurel Tax-Free Municipal Funds, and the Dreyfus/Laurel Funds Trust.
In addition the Chairman of the Board receives an annual fee of $75,000 per
year. These fees and expenses are charged and allocated to each series based
on net assets.
NOTE 3--Securities Transactions:
The aggregate amount of purchases and sales of investment securities,
excluding short-term securities and forward currency exchange contracts,
during the year ended October 31, 1995 amounted to $4,334,094 and $4,650,276,
respectively.
At October 31, 1995, accumulated net unrealized appreciation on
investments and forward foreign currency contracts was $1,538,182, consisting
of $2,063,258 gross unrealized appreciation and $525,076 gross unrealized
depreciation, excluding foreign currency transactions.
At October 31, 1995, the cost of investments for Federal income tax
purposes was substantially the same as the cost for financial reporting
purposes (see the Statement of Investments).
<PAGE>
Dreyfus European Fund
- --------------------------------------------------------------------------
Independent Auditors Report
The Board of Directors and Shareholders
The Dreyfus/Laurel Funds, Inc.:
We have audited the accompanying statement of assets and liabilities of
the Dreyfus European Fund of The Dreyfus/Laurel Funds, Inc., including the
statement of investments, as of October 31, 1995, and the related statement
of operations for the year then ended, the statement of changes in net assets
and the financial highlights for each of the years in the two year period
then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits. The financial highlights for the three year period ended October 31,
1993 were audited by other auditors whose report thereon, dated November 30,
1993 expressed an unqualified opinion on those financial highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of October 31, 1995, by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of the Dreyfus European Fund of The Dreyfus/Laurel Funds, Inc., as
of October 31, 1995, and the results of its operations for the year then
ended, and the changes in its net assets and the financial highlights for
each of the years in the two year period then ended, in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
Pittsburgh, Pennsylvania
December 15, 1995
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-19
Purchase of Fund Shares . . . . . . . . . . . . . . . . . . B-20
Redemption of Fund Shares . . . . . . . . . . . . . . . . . B-21
Shareholder Services. . . . . . . . . . . . . . . . . . . . B-23
Determination of Net Asset Value. . . . . . . . . . . . . . B-25
Dividends, Other Distributions and Taxes. . . . . . . . . . B-26
Portfolio Transactions. . . . . . . . . . . . . . . . . . . B-30
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-33
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 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.
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 January 31, 1996: Mac & Co., c/o Mellon Bank,
P.O. Box 3198, Pittsburgh, PA 15230-3198, 26% record; Mac & Co., 194-803,
P.O. Box 3198, Pittsburgh, PA 15230-3198, 25% record; Mac & Co., 853-922,
P.O. Box 3198, Pittsburgh, PA 15230-3198, 15% record; Mac & Co., 178-827,
P.O. Box 3198, Pittsburgh, PA 15230-3198, 7% record.
FEDERAL LAW AFFECTING MELLON BANK
The Glass-Steagall Act of 1933 prohibits national banks from engaging
in the business of underwriting, selling or distributing securities and
prohibits a member bank of the Federal Reserve System from having certain
affiliations with an entity engaged principally in that business. The
activities of Mellon Bank, N.A. ("Mellon Bank") in informing its customers
of, and performing, investment and redemption services in connection with
the Fund, and in providing services to the Fund as custodian, 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 twelve 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 A. HIMMEL. Director of the Company; Former Director, The Boston
Company, Inc. and Boston Safe Deposit and Trust Company; President and
Chief Executive Officer, Himmel & Co., Inc.; Vice Chairman, Sutton
Place Gourmet, Inc. and Florida Hospitality Group; Managing Partner,
Himmel/MKDG, Franklin Federal Partners, Reston Town Center Associates
and Grill 23 & Bar. Age: 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 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.
# ELIZABETH BACHMAN. Vice President and Assistant Secretary of the
Company, The Dreyfus/Laurel Funds Trust and The Dreyfus/Laurel Tax
Free Municipal Funds (since January 1996); Counsel, Premier Mutual
Fund Services, Inc. Prior to September 1995, she was enrolled at the
Fordham University School of Law and received her J.D. in May 1995.
Prior to September 1992, she was an Assistant at the National
Association for Public Interest Law. Age: 26 years old. Address: 200
Park Avenue, New York, New York 10166.
# 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 and Assistant Secretary (since January
1996) 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.
# MARGARET PARDO. Assistant Secretary of the Company, The Dreyfus/Laurel
Funds Trust and The Dreyfus/Laurel Tax-Free Municipal Funds (since
January 1996); Paralegal, Premier Mutual Fund Services, Inc. Prior
to April 1995, she was a Medical Coordination Officer at ORBIS
International. Prior to June 1992, she worked as a Program
Coordinator at Physicians World Communications Group. Age: 27 years
old. Address: 200 Park Avenue, New York, New York 10166.
# 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.
# JOHN J. PYBURN. Assistant Treasurer of the Company, The Dreyfus/Laurel
Funds Trust and The Dreyfus/Laurel Tax-Free Municipal Funds (since
January 1996); Vice President of Premier Mutual Fund Services, Inc.
and an officer of other investment companies advised or administered
by Dreyfus. From 1984 to July 1994, he was Assistant Vice President
in the Mutual Fund Accounting Department of Dreyfus. Age: 61 years
old. Address: 200 Park Avenue, New York, New York 10166.
JOSEPH F. TOWER, III. Assistant Treasurer of the Company, The
Dreyfus/Laurel Funds Trust and The Dreyfus/Laurel Tax-Free Municipal
Funds (since January 1996); Senior Vice President, Treasurer and Chief
Financial Officer of Premier Mutual Fund Services, Inc. and an officer
of other investment companies advised or administered by Dreyfus.
From July 1988 to August 1994, he was employed by The Boston Company,
Inc. where he held various management positions in the Corporate
Finance and Treasury areas. Age: 33 years old. Address: 200 Park
Avenue, New York, New York 10166.
_________________________________
* "Interested person" of the Company, as defined in the 1940 Act.
o Member of the Audit Committee.
+ Member of the Nominating Committee.
# Officer also serves as an officer for other investment companies
advised by Dreyfus.
The officers and Directors of the Company as a group owned
beneficially less than 1% of the Fund's total shares outstanding as of
January 31, 1996.
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 current 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 $27,800 None None $ 34,500
Francis P. Brennan* 86,683 None None 110,500
Joseph S. DiMartino** None None None $448,618***
James M. Fitzgibbons 27,795 None None 34,500
J. Tomlinson Fort** None None None None
Arthur L. Goeschel 27,604 None None 35,500
Kenneth A. Himmel 26,381 None None 32,750
Arch S. Jeffery** None None None None
Stephen J. Lockwood 26,387 None None 32,750
Robert D. McBride 27,800 None None 35,500
John J. Sciullo 27,800 None None 34,500
Roslyn M. Watson 27,795 None None 34,550
# Amounts required to be paid by the Company directly to the non-interested Directors,
that would be applied to offset a portion of the management fee payable to Dreyfus, are in
fact paid directly by Dreyfus to the non-interested Directors. Amount does not include
reimbursed expenses for attending Board meetings, which amounted to $12,342 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 $17,563, $28,604 and $27,800,
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 $3,186 for expenses
attributable to the Company's Board meetings ($3,186 is not included in the $12,342
above).
*** Estimated amounts for the fiscal year ending October 31, 1995.
</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 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 and a director; Barbara E. Casey, Vice President-Dreyfus
President-Dreyfus Retirement Services; Diane M. Coffey, Vice President-
Corporate Communications; Elie M. Genadry, Vice President-Institutional
Sales; William T. Sandalls, Jr., Senior Vice President, Chief Financial
Officer and a director; 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; Maurice Bendrihem,
Controller; Elvira Oslapas; Assistant Secretary; Mandell L. Berman, Frank
V. Cahouet, Alvin E. Friedman, Lawrence M. Greene and Julian M. Smerling
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.
In-Kind Purchases. If the following conditions are satisfied, the
Fund may at its discretion, permit the purchase of shares through an "in-
kind" exchange of securities. Any securities exchanged must meet the
investment objective, policies and limitations of the Fund, must have a
readily ascertainable market value, must be liquid and must not be subject
to restrictions on resale. The market value of any securities exchanged,
plus any cash, must be at least equal to $25,000. Shares purchased in
exchange for securities generally cannot be redeemed for fifteen days
following the exchange in order to allow time for the transfer to settle.
The basis of the exchange will depend upon the relative NAV of the
Shares purchased and securities exchanged. Securities accepted by the Fund
will be valued in the same manner as the Fund values its assets. Any
interest earned on the securities following their delivery to the Fund and
prior to the exchange will be considered in valuing the securities. All
interest, dividends, subscription or other rights attached to the
securities become the property of the Fund, along with the securities. For
further information about "in-kind" purchases, call 1-800-645-6561.
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:
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.
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.
From time to time, Fund advertisements may include statistical data or
general discussions about the growth and development of Dreyfus Retirement
Services (in terms of new customers, assets under management, market share,
etc.) and its presence in the defined contribution plan market.
From time to time, advertising material for the Fund may include
biographical information relating to its portfolio manager and may refer
to, or include commentary by the portfolio manager relating to investment
strategy, asset growth, current or past business, political, economic or
financial conditions and other matters of general interest to investors.
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 15219, 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.
KPMG Peat Marwick LLP 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 Independent Auditors' Report, 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.
<PAGE>
Dreyfus Institutional S&P 500 Stock Index Fund October 31, 1995
- -----------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF $100,000 INVESTMENT IN DREYFUS INSTITUTIONAL
S&P 500 STOCK INDEX FUND AND THE STANDARD & POOR'S 500 COMPOSITE STOCK
PRICE INDEX
Standard & Poor's
Institutional S&P 500 Composite Stock
Period Stock Index Fund Price Index*
- ------------- --------------------- -----------------
9/30/93 100,000 100,000
10/31/93 102,300 102,070
10/31/94 105,877 106,010
10/31/95 133,145 134,000
*Source: Lipper Analytical Services, Inc.
Average Annual Total Returns
- -----------------------------------------------------------------------------
One Year Ended From Inception (9/30/93)
October 31, 1995 to October 31, 1995
---------------- ------------------------
25.75% 14.68%
Past performance is not predictive of future performance. All performance
information reflects the performance of the Fund's previously existing Class
R shares through September 14, 1995 and the Fund's single class of shares
from September 15, 1995 through October 31, 1995.
The above graph compares a $100,000 investment made in Dreyfus Institutional
S&P 500 Stock Index Fund on 9/30/93 (Inception Date) to a $100,000 investment
made in the Standard & Poor's 500 Composite Stock Price Index on that date.
All dividends and capital gain distributions are reinvested.
The Fund seeks to replicate the total return performance of the Standard &
Poor's 500 Composite Stock Price Index. The Fund's performance shown in the
line graph takes into account all applicable fees and expenses. The Standard
& Poor's 500 Composite Stock Price Index is a widely accepted, unmanaged
index of overall stock market performance which does not take into account
charges, fees and other expenses. Further information relating to Fund
performance, including expense reimbursements, if applicable, is contained in
the Financial Highlights section of the Prospectus and elsewhere in this
report.
<PAGE>
Dreyfus Institutional S&P 500 Stock Index Fund
- -----------------------------------------------------------------------------
Statement of Investments October 31, 1995
Shares Common Stocks--97.3% Value
- ---------- -------------
Basic Industry--5.4%
5,185 Air Products & Chemicals, Inc. ...... $ 267,676
2,610 Alco Standard Corporation ........... 230,985
1,698 Armstrong World
Industries, Inc ................... 100,819
2,424 Avery Dennison Corporation .......... 108,474
1,400 Ball Corporation .................... 38,675
2,370 Bemis, Inc. ......................... 61,620
2,203 Boise Cascade Corporation ........... 79,859
1,291 Centex Corporation .................. 42,280
4,370 Champion International
Corporation ....................... 233,795
4,239 Crown Cork & Seal
Company, Inc. +.................... 147,835
359 Crown Vantage, Inc. +................ 7,135
12,467 Dow Chemical Company ................ 855,548
25,711 du Pont (E.I.) de Nemours
& Company ......................... 1,603,724
3,816 Eastman Chemical .................... 227,052
6,714 Engelhard Corporation ............... 167,011
2,021 Federal Paper Board
Company, Inc....................... 84,882
3,898 Fluor Corporation ................... 220,237
1,591 FMC Corporation +.................... 113,955
4,254 Georgia Pacific Corporation ......... 350,955
1,235 Goodrich (B.F.) Company ............. 81,356
4,515 Grace (W.R.) & Company .............. 251,711
2,942 Great Lakes Chemical
Corporation........................ 197,482
5,220 Hercules, Inc. ...................... 278,617
11,838 International Paper Company ......... 438,006
3,795 James River Corporation ............. 121,914
7,400 Kimberly-Clark Corporation .......... 537,425
5,045 Louisiana-Pacific Corporation ....... 120,449
2,490 Mead Corporation .................... 143,486
5,207 Monsanto Company .................... 545,433
1,513 Morrison Knudsen
Corporation........................ 9,834
6,844 Morton International, Inc. .......... 208,742
3,093 Nalco Chemical Company .............. 92,790
14,785 Occidental Petroleum
Corporation........................ 317,877
1,349 Potlatch Corporation ................ 56,827
9,392 PPG Industries, Inc. ................ 399,160
6,441 Praxair, Inc. ....................... 173,907
3,088 Rohm & Haas Company ................. 170,612
7,086 Scott Paper Company ................. 377,329
3,944 Sherwin Williams Company ............ 148,393
2,300 Sigma-Aldrich Corporation ........... 109,250
4,315 Stone Container
Corporation........................ 71,197
Basic Industry (continued)
2,606 Temple Inland, Inc. ................. $ 118,573
3,209 Union Camp Corporation .............. 163,258
6,411 Union Carbide Corporation ........... 242,817
4,755 Westvaco Corporation ................ 131,951
9,476 Weyerhaeuser Company ................ 418,128
2,500 Willamette Inds Inc.................. 145,000
431 Zurn Industries, Inc. ............... 10,775
------------
11,024,816
------------
Capital Spending--20.9%
4,863 Advanced Micro Devices, Inc. ........ 116,104
13,096 Allied Signal, Inc. ................. 556,580
1,999 Alexander & Alexander
Services, Inc...................... 44,728
5,522 Amdahl Corporation +................. 51,078
10,147 AMP, Inc. ........................... 398,270
1,719 Andrew Corporation +................. 72,628
5,736 Apple Computer, Inc. ................ 208,288
8,300 Applied Materials, Inc. +............ 416,037
2,138 Autodesk, Inc. ...................... 72,692
6,684 Automatic Data Processing, Inc. ..... 477,906
4,882 Block (H&R), Inc. ................... 201,382
15,883 Boeing Corporation .................. 1,042,322
1,356 Briggs & Stratton Corporation ....... 54,748
9,907 Browning- Ferris Industries ......... 288,541
3,300 Cabletron Systems +.................. 259,462
9,186 Caterpillar, Inc. ................... 515,564
2,007 Ceridian Corporation +............... 87,304
1,524 Cincinnati Milacron, Inc. ........... 39,243
12,600 Cisco Systems, Inc.+................. 976,500
12,307 Compaq Computer
Corporation+....................... 686,115
11,237 Computer Associates
International, Inc................. 618,035
2,534 Computer Sciences
Corporation +...................... 169,461
5,000 Cooper Industries, Inc. ............. 168,750
1,436 Crane Company ....................... 50,798
1,128 Cray Research, Inc. +................ 23,406
8,250 CUC International, Inc.+............. 285,656
1,798 Cummins Engine
Company, Inc. ..................... 63,155
5,294 D.S.C. Communications
Corporation +...................... 195,878
1,702 Data General Corporation +........... 19,573
4,033 Deere & Company ..................... 360,449
3,829 Deluxe Corporation .................. 102,904
6,857 Digital Equipment Corporation +...... 371,135
5,254 Dover Corporation ................... 207,533
4,512 Dow Jones & Company, Inc. ........... 159,048
<PAGE>
Dreyfus Institutional S&P 500 Stock Index Fund
- -----------------------------------------------------------------------------
Statement of Investments (continued) October 31, 1995
Shares Common Stocks (continued) Value
- ---------- -------------
Capital Spending (continued)
8,446 Dresser Industrues, Inc. ............ $ 175,254
7,900 Dun & Bradstreet Corporation ........ 472,025
3,661 Eaton Corporation ................... 187,626
2,367 EG&G, Inc. .......................... 44,085
10,379 Emerson Electric Company ............ 739,504
5,500 First Data Corporation .............. 363,687
1,586 Foster Wheeler Corporation .......... 59,475
2,816 General Dynamics Corporation ........ 155,936
78,078 General Electric Company ............ 4,938,433
2,216 General Signal Corporation .......... 70,635
5,682 Genuine Parts Company ............... 225,149
1,572 Giddings & Lewis, Inc. .............. 25,348
2,393 Grainger (W.W.), Inc. ............... 149,562
2,255 Harnischfeger Indutries, Inc. ....... 71,033
1,781 Harris Corporation .................. 103,521
23,770 Hewlett Packard Company ............. 2,201,696
5,889 Honeywell, Inc. ..................... 247,338
5,424 Illinois Tool Works ................. 315,270
4,922 Ingersoll Rand Company .............. 174,116
38,188 Intel Corporation ................... 2,668,386
2,188 Intergraph Corporation +............. 26,529
26,369 International Business
Machines .......................... 2,564,385
3,502 Interpublic Group Companies ......... 135,702
1,883 Johnson Controls, Inc. .............. 109,685
517 JWP, Inc. +.......................... 10
12,900 Laidlaw, Inc., Class B .............. 116,100
9,428 Lockheed Martin ..................... 642,283
7,904 Loral Corporation ................... 234,156
3,566 Mallinckrodt, Inc. .................. 123,919
3,287 Marsh & McLennan Company ............ 269,123
2,382 McDermott International, Inc. ....... 37,814
5,255 McDonnell Douglas
Corporation........................ 429,596
27,400 Microsoft Corporation +.............. 2,740,000
9,600 Micron Technology, Inc. ............. 678,000
19,534 Minnesota Mining &
Manufacturing Company ............. 1,110,996
27,390 Motorola, Inc. ...................... 1,797,469
5,735 National Semiconductor
Corporation +...................... 139,791
2,267 National Service Industries ......... 67,443
11,765 Northern Telecom, Ltd. .............. 423,540
2,305 Northrop Corporation ................ 131,961
17,148 Novell, Inc. +....................... 282,942
2,190 Ogden Corporation ................... 49,823
20,190 Oracle Systems Corporation +......... 880,789
2,382 Owens Corning Fiberglass
Corporation +...................... 100,937
5,338 Pall Corporation .................... 130,114
Capital Spending (continued)
3,478 Parker-Hannifin Corporation ......... $ 117,383
1,847 Perkin Elmer Corporation ............ 64,876
7,080 Pitney Bowes, Inc. .................. 308,865
1,800 Pittston Services Group ............. 49,500
2,752 Premark International, Inc. ......... 127,280
2,006 Raychem Corporation ................. 93,028
10,862 Raytheon Company .................... 473,855
10,067 Rockwell International
Corporation........................ 447,982
3,708 Ryder System ........................ 89,456
2,599 Safety Kleen Corporation ............ 39,960
3,580 Scientific Atlanta, Inc. ............ 44,303
4,827 Service Corporation
International ..................... 193,683
951 Shared Medical Systems
Corporation........................ 36,732
7,400 Silicon Graphics, Inc. +............. 246,050
1,796 Snap-On Tools Corporation ........... 76,106
2,098 Stanley Works Company ............... 100,180
4,463 Sun Microsystems, Inc. +............. 348,114
5,454 Tandem Computers, Inc. +............. 61,358
1,473 Tektronix, Inc. ..................... 87,275
2,498 Teledyne, Inc. ...................... 62,138
4,000 Tellabs, Inc......................... 136,000
8,720 Texas Instruments, Inc. ............. 595,140
3,943 Textron, Inc. ....................... 271,081
889 Thomas & Betts Corporation .......... 57,452
1,451 Timken Company ...................... 58,403
1,351 Trinova Corporation ................. 37,997
3,023 TRW, Inc. ........................... 198,762
3,536 Tyco Laboratories, Inc. ............. 214,812
7,983 Unisys Corporation +................. 44,904
5,711 United Technologies
Corporation........................ 506,851
1,907 Varity Corporation +................. 69,129
18,245 Westinghouse Electric
Corporation........................ 257,711
22,507 WMX Technologies, Inc. .............. 633,009
5,018 Xerox Corporation ................... 651,086
------------
42,772,920
------------
Consumer Discretionary--12.1%
11,720 Albertsons, Inc. .................... 389,690
3,426 American Greetings
Corporation, Class A............... 107,919
6,832 American Stores Company ............. 204,106
2,200 Bally Entertainment
Corporation +...................... 24,200
3,997 Black & Decker Corporation .......... 135,398
734 Brown Group, Inc. ................... 10,093
<PAGE>
Dreyfus Institutional S&P 500 Stock Index Fund
- -----------------------------------------------------------------------------
Statement of Investments (continued) October 31, 1995
Shares Common Stocks (continued) Value
- ---------- ------------
Consumer Discretionary (continued)
4,400 Brunswick Corporation ............... $ 85,800
7,110 Capital Cities/ABC. Inc. ............ 843,424
2,920 CBS, Inc. ........................... 235,790
4,824 Charming Shoppes, Inc. .............. 13,869
17,757 Chrysler Corporation ................ 916,705
4,466 Circuit City Stores, Inc. ........... 149,053
11,100 Comcast Corporation, Class K ........ 198,413
3,912 Cooper Tire & Rubber
Company ........................... 90,465
4,730 Dana Corporation .................... 121,206
7,299 Darden Restaurants .................. 83,026
3,216 Dayton-Hudson Corporation ........... 221,100
5,214 Dillard Department Stores,
Class A ........................... 141,430
24,284 Disney (Walt) Productions ........... 1,399,366
7,134 Donnelley (R.R.) & Sons
Company ........................... 260,391
2,813 Echlin, Inc. ........................ 100,565
2,044 Fleetwood Enterprises, Inc. ......... 41,902
1,677 Fleming Companies, Inc. ............. 37,942
49,878 Ford Motor Company .................. 1,433,993
3,500 Fruit of The Loom ................... 60,813
6,476 Gannett Company, Inc. ............... 352,133
6,673 Gap, Inc. ........................... 262,749
34,683 General Motors Corporation .......... 1,517,381
2,732 Giant Food, Inc., Class A ........... 87,766
7,098 Goodyear Tire & Rubber
Company ........................... 269,724
1,706 Great Atlantic & Pacific Tea
Company, Inc. ..................... 34,547
1,497 Handleman Company ................... 11,602
3,336 Harcourt General, Inc. .............. 132,189
1,405 Harland (John H.) Company ........... 29,154
4,639 Harrah's Entertainment +............. 114,815
4,089 Hasbro, Inc. ........................ 124,715
2,244 Hilton Hotels Corporation ........... 150,348
22,124 Home Depot, Inc. .................... 824,119
1,933 Jostens, Inc. ....................... 43,734
21,281 K Mart Corporation .................. 172,908
1,690 King World Productions, Inc. +....... 58,939
2,153 Knight Ridder, Inc. ................. 119,492
5,714 Kroger Company +..................... 190,705
6,890 Liberty Media Group +................ 169,666
16,638 Limited, Inc. ....................... 305,723
3,524 Liz Claiborne, Inc. ................. 99,994
851 Longs Drug Stores
Corporation........................ 34,040
7,476 Lowes Companies, Inc. ............... 201,852
1,000 Luby's Cafeterias, Inc. ............. 20,750
Consumer Discretionary (continued)
5,813 Marriott International
Corporation........................ $ 214,354
7,488 Masco Corporation ................... 210,600
10,287 Mattel, Inc. ........................ 295,751
11,559 May Department Stores
Compamy ........................... 453,691
5,018 Maytag Corporation .................. 95,342
32,158 McDonald's Corporation .............. 1,318,478
2,356 Mcgraw-Hill, Inc. ................... 192,898
4,867 Melville Corporation ................ 155,744
1,698 Mercantile Stores
Company, Inc. ..................... 76,198
1,136 Meredith Corporation ................ 40,612
4,631 Moore Corporation, Ltd. ............. 88,568
320 Nacco Industries, Inc., Class A ..... 18,320
3,533 Navistar International
Corporation +...................... 36,213
4,381 New York Times Company .............. 121,573
6,454 Nike, Inc., Class B ................. 366,265
3,802 Nordstrom, Inc. ..................... 140,912
847 Outboard Marine
Corporation........................ 17,575
1,835 PACCAR, Inc. ........................ 76,611
10,472 Penney (J.C.) Company, Inc. ......... 441,133
2,737 Pep Boys - Manny Moe & Jack ......... 59,872
9,079 Price/Costco, Inc. +................. 154,343
3,637 Reebok International, Ltd. .......... 123,658
3,737 Rite Aid Corporation ................ 100,899
1,805 Russell Corporation ................. 44,674
2,513 Ryans Family Steak
Houses, Inc. +..................... 19,476
18,115 Sears Roebuck & Company ............. 615,910
1,800 Shoney's, Inc. +..................... 20,025
803 Springs Industries, Inc. ............ 34,429
2,201 Stride Rite Corporation ............. 24,761
3,214 Super Value, Inc. ................... 98,831
8,443 Sysco Corporation ................... 256,456
3,165 Tandy Corporation ................... 156,272
30,262 Tele-Communications,
Class A + ......................... 514,454
17,886 Time Warner, Inc. ................... 652,839
5,241 Times Mirror Companies .............. 151,989
3,234 TJX Companies, Inc. ................. 43,659
12,635 Toys "R" Us. Inc. +.................. 276,391
2,982 Tribune Company ..................... 188,239
2,862 V.F. Corporation .................... 137,018
16,800 Viacom, Inc., Class B +.............. 840,000
106,569 Wal-Mart Stores, Inc. ............... 2,304,555
11,408 Walgreen Company .................... 325,128
<PAGE>
Dreyfus Institutional S&P 500 Stock Index Fund
- -----------------------------------------------------------------------------
Statement of Investments (continued) October 31, 1995
Shares Common Stocks (continued) Value
- ---------- -------------
Consumer Discretionary (continued)
4,794 Wendy's International, Inc. ......... $ 95,281
3,305 Whirlpool Corporation ............... 175,165
3,512 Winn Dixie Stores, Inc. ............. 228,280
6,170 Woolworth Corporation ............... 90,236
2,050 Zenith Electronics
Corporation +...................... 17,169
------------
24,746,551
------------
Consumer Staples--13.3%
1,678 Adolph Coors Company,
Class B ........................... 29,994
1,167 Alberto-Culver Company,
Class B ........................... 36,615
8,631 American Brands, Inc. ............... 370,054
11,844 Anheuser-Busch Companies ............ 781,704
24,721 Archer Daniels Midland .............. 398,626
3,129 Avon Products, Inc. ................. 222,550
3,106 Brown Forman Corporation,
Class B ........................... 118,416
11,611 Campbell Soup Company ............... 608,126
2,303 Clorox Company ...................... 165,240
58,500 Coca-Cola Company ................... 4,204,688
6,717 Colgate Palmolive Company ........... 465,152
11,042 Conagra, Inc. ....................... 426,497
10,681 Corning, Inc. ....................... 279,041
6,818 CPC International, Inc. ............. 452,545
4,278 Dial Corporation .................... 104,276
15,867 Eastman Kodak Company ............... 993,671
2,862 Ecolab, Inc. ........................ 82,998
7,399 General Mills, Inc. ................. 424,518
20,588 Gillette Company .................... 995,945
11,476 Heinz (H.J.) Company ................ 533,634
3,663 Hershey Foods Corporation ........... 218,864
5,030 International Flavors &
Fragrance, Inc. ................... 242,698
30,046 Johnson & Johnson ................... 2,448,749
10,203 Kellogg Company ..................... 737,167
7,328 Newell Company ...................... 176,788
36,552 Pepsico, Inc. ....................... 1,928,118
38,977 Philip Morris Companies, Inc. ....... 3,293,557
3,800 Pioneer Hi-Bred
International, Inc................. 188,575
1,967 Polaroid Corporation ................ 84,089
31,888 Procter & Gamble Company ............ 2,582,928
6,198 Quaker Oats Company ................. 211,507
4,963 Ralston Purina Group ................ 294,678
7,378 Rubbermaid, Inc. .................... 192,750
22,510 Sara Lee Corporation ................ 661,231
17,286 Seagram Company, Ltd. ............... 622,296
Consumer Staples (continued)
7,476 Unilever N.V. ....................... $ 979,356
9,095 UST, Inc. ........................... 272,850
4,891 Whitman Corporation ................. 103,934
5,410 Wrigley (W.M.) Jr. Company .......... 251,565
------------
27,185,990
------------
Energy & Related--9.3%
4,277 Amerada Hess Corporation ............ 193,000
22,798 Amoco Corporation ................... 1,456,222
2,940 Ashland Oil, Inc. ................... 92,977
7,498 Atlantic Richfield .................. 800,411
6,520 Baker Hughes, Inc. .................. 127,955
5,900 Burlington Resources, Inc. .......... 212,400
30,226 Chevron Corporation ................. 1,413,065
4,849 Coastal Corporation ................. 156,986
2,272 Columbia Gas Systems, Inc. +......... 87,472
4,342 Consolidated Natural
Gas Company........................ 164,996
964 Eastern Enterprises ................. 28,799
11,659 Enron Corporation ................... 400,778
3,101 Enserch Corporation ................. 44,964
57,676 EXXON Corporation ................... 4,405,004
5,317 Halliburton Company ................. 220,655
1,042 Helmerich & Payne, Inc. ............. 26,962
2,347 Kerr-McGee Corporation .............. 129,378
1,505 Louisiana Land &
Exploration Company................ 53,239
18,401 Mobil Corporation ................... 1,853,901
2,209 Nicor, Inc. ......................... 59,367
5,759 Noram Energy ........................ 44,632
1,277 Oneok, Inc. ......................... 31,127
4,811 Oryx Energy Company +................ 55,326
3,786 Pacific Enterprises ................. 93,703
6,985 Panhandle Eastern
Corporation........................ 176,371
2,035 Pennzoil Company .................... 76,821
1,585 Peoples Energy Corporation .......... 45,569
12,165 Phillips Petroleum Company .......... 392,321
3,937 Rowan Companies, Inc. +.............. 26,083
24,836 Royal Dutch Petroleum ............... 3,051,723
4,144 Santa Fe Energy
Resources, Inc.+................... 36,778
11,235 Schlumberger, Ltd. .................. 699,379
3,884 Sonat, Inc. ......................... 111,665
4,474 Sun Company, Inc. ................... 128,068
8,300 Tenneco, Inc. ....................... 364,162
12,044 Texaco, Inc. ........................ 820,497
11,470 Unocal Corporation .................. 301,087
13,302 USX-Marathon Group .................. 236,110
<PAGE>
Dreyfus Institutional S&P 500 Stock Index Fund
- -----------------------------------------------------------------------------
Statement of Investments (continued) October 31, 1995
Shares Common Stocks (continued) Value
- ---------- -------------
Energy & Related (continued)
2,500 Western Atlas +...................... $ 109,687
4,600 Williams Companies, Inc. ............ 177,675
------------
18,907,315
------------
Finance--12.4%
5,297 Aetna Life & Casualty
Company ........................... 372,776
5,455 Ahmanson (H.F.) & Company ........... 136,375
20,853 Allstate Corporation ................ 766,348
22,594 American Express Company ............ 917,881
9,494 American General
Corporation........................ 312,115
21,981 American International
Group, Inc......................... 1,854,689
18,190 Banc One Corporation ................ 613,913
5,043 Bank of Boston Corporation .......... 224,414
8,900 Bank of New York
Corporation........................ 373,800
17,317 BankAmerica Corporation ............. 995,728
3,488 Bankers Trust, New York
Corporation........................ 222,360
4,513 Barnett Banks, Inc. ................. 249,343
2,480 Beneficial Corporation .............. 121,520
5,986 Boatmen's Bancshares, Inc. .......... 227,468
8,050 Chase Manhattan
Corporation........................ 458,850
11,736 Chemical Banking
Corporation........................ 667,485
3,993 Chubb Corporation (The) .............. 358,871
3,249 Cigna Corporation .................... 322,057
19,240 Citicorp ............................. 1,248,195
6,462 CoreStates Financial
Corporation......................... 235,055
7,818 Dean Witter, Discover
& Company .......................... 388,946
8,417 Federal Home Loan
Mortgage Corporation................ 582,877
12,654 Federal National Mortgage
Association......................... 1,327,088
6,300 First Bank Systems, Inc. ............. 313,425
4,133 First Chicago Corporation ............ 280,527
3,697 First Fidelity Bancorp ............... 241,691
3,423 First Interstate Bancorp ............. 441,567
7,962 First Union Corporation .............. 395,114
6,549 Fleet Financial Group, Inc. .......... 253,774
3,816 General Reinsurance
Corporation......................... 552,843
2,667 Golden West Financial
Corporation........................ 133,683
Finance (continued)
6,276 Great Western Financial
Corporation........................ $ 141,995
4,542 Household International
Corporation........................ 255,488
5,382 ITT Corporation ..................... 659,295
2,111 Jefferson Pilot Corporation ......... 139,326
1,449 Kaufman & Broad
Corporation........................ 16,845
11,053 Keycorp ............................. 373,039
4,783 Lincoln National Corporation ........ 213,441
2,600 Loews Corporation ................... 381,225
6,940 MBNA Corporation .................... 255,913
8,134 Merrill Lynch & Company, Inc. ....... 451,437
8,687 Morgan (J.P.) & Company, Inc. ....... 669,985
3,600 Morgan Stanley ...................... 313,200
6,800 National City Corporation ........... 209,950
12,566 NationsBank Corporation ............. 826,215
7,416 NBD Bancorp, Inc. ................... 281,808
15,136 Norwest Corporation ................. 446,512
10,723 PNC Financial Corporation ........... 281,479
4,396 Providian Corporation ............... 172,543
1,240 Pulte Corporation ................... 39,215
2,500 Republic NY Corp .................... 146,563
2,859 Safeco Corporation .................. 183,512
4,983 Salomon, Inc. ....................... 180,011
5,833 Shawmut National
Corporation........................ 197,593
3,800 St Paul's Companies, Inc. ........... 192,850
5,256 SunTrust Banks, Inc. ................ 339,012
3,341 Torchmark Corporation ............... 138,652
3,228 Transamerica Corporation ............ 218,697
70 Transport Hldgs +.................... 2,773
14,771 Travelers, Inc. ..................... 745,936
4,601 U.S. Bancorp ........................ 136,305
3,400 UNUM Corporation .................... 178,925
5,175 USF&G Corporation ................... 86,681
1,519 USLIFE Corporation .................. 43,292
7,900 Wachovia Corporation ................ 348,588
2,213 Wells Fargo & Company ............... 465,007
------------
25,324,086
------------
Health Care--8.6%
36,819 Abbott Laboratories ................. 1,463,555
2,993 Allergan, Inc. ...................... 87,919
3,814 Alza Corporation +................... 83,908
14,372 American Home Products ..............
Corporation........................ 1,273,719
12,218 Amgen, Inc. +........................ 586,464
2,589 Bard (C.R.), Inc. ................... 73,139
<PAGE>
Dreyfus Institutional S&P 500 Stock Index Fund
- -----------------------------------------------------------------------------
Statement of Investments (continued) October 31, 1995
Shares Common Stocks (continued) Value
- ---------- ------------
Health Care (continued)
2,536 Bausch & Lomb, Inc. ................. $ 87,809
12,844 Baxter International, Inc. .......... 496,100
3,070 Becton Dickinson & Company .......... 199,550
4,559 Beverly Enterprises, Inc. +.......... 53,568
5,371 Biomet, Inc. +....................... 89,293
7,000 Boston Scientific
Corporation +...................... 294,875
23,559 Bristol Myers Squibb Company ........ 1,796,374
20,612 Columbia/HCA Healthcare
Corporation........................ 1,012,565
1,976 Community Psychiatric
Centers ........................... 21,489
13,108 Lilly (Eli) & Company ............... 1,266,561
2,896 Manor Care, Inc. .................... 94,844
10,728 Medtronic, Inc. ..................... 619,542
57,340 Merck & Company, Inc. ............... 3,297,050
1,990 Millipore Corporation ............... 70,396
29,424 Pfizer, Inc. ........................ 1,688,202
17,240 Schering-Plough Corporation ......... 924,495
2,022 St. Jude Medical, Inc. +............. 107,672
9,318 Tenet Healthcare Corp +.............. 166,559
7,000 U.S. Healthcare ..................... 269,500
2,609 U.S. Surgical Corporation ........... 63,921
8,100 United Healthcare
Corporation........................ 430,313
7,899 Upjohn Company ...................... 400,874
6,291 Warner Lambert Company .............. 535,521
------------
17,555,777
------------
Metal & Mining--1.5%
10,437 Alcan Aluminum, Ltd. ................ 330,070
8,256 Aluminum Company of
America............................ 421,056
4,955 Armco, Inc. +........................ 30,349
1,827 ASARCO, Inc. ........................ 58,921
16,400 Barrick Gold ........................ 379,250
5,123 Bethlehem Steel
Corporation +...................... 67,239
4,194 Cyprus Minerals ..................... 109,568
5,216 Echo Bay Mines, Ltd. ................ 46,944
9,400 Freeport-McMoran Copper ............. 213,850
6,401 Homestake Mining Company ............ 98,415
5,508 Inco, Ltd. .......................... 189,337
2,238 Inland Steel Industries, Inc. ....... 52,313
4,017 Newmont Mining Corporation .......... 151,642
4,072 Nucor Corporation ................... 195,965
3,119 Phelps Dodge Corporation ............ 197,667
Metal & Mining (continued)
11,072 Placer Dome, Inc. ................... $ 242,200
2,929 Reynolds Metal Company .............. 147,548
6,065 Santa Fe Pacific Gold
Corporation........................ 59,892
3,750 USX-US Steel Group .................. 112,031
4,257 Worthington Industries, Inc. ........ 70,773
------------
3,175,030
------------
Transportation--1.6%
3,432 AMR Corporation +.................... 226,512
6,818 Burlington Northern, Inc. ........... 571,860
3,728 Conrail, Inc. ....................... 256,300
1,879 Consolidated Freightways, Inc. ...... 43,687
4,746 CSX Corporation ..................... 397,478
2,366 Delta Air Lines, Inc. ............... 155,269
2,601 Federal Express Corporation +........ 213,607
6,037 Norfolk Southern Corporation ........ 466,358
1,844 Roadway Services, Inc. .............. 82,519
6,700 Southwest Airlines Company .......... 134,000
9,495 Union Pacific Corporation ........... 620,736
2,947 U S Air Group, Inc. ................. 40,153
1,282 Yellow Corporation .................. 16,826
------------
3,225,305
------------
Utilities--12.2%
22,946 Airtouch Communications +............ 653,961
8,800 Alltel Corporation .................. 269,500
8,655 American Electric Power, Inc. ....... 329,972
25,686 Ameritech Corporation ............... 1,387,044
73,600 AT&T Corporation .................... 4,710,400
6,829 Baltimore Gas & Electric ............ 182,676
20,274 Bell Atlantic Corporation ........... 1,289,933
23,053 BellSouth Corporation ............... 1,763,555
7,180 Carolina Power & Light
Company ........................... 235,145
8,881 Central & Southwest
Corporation........................ 237,567
7,253 Cinergy Corporation ................. 205,804
10,913 Consolidated Edison
Company, Inc. ..................... 331,482
6,779 Detroit Edison Company .............. 228,791
8,007 Dominion Resources, Inc. ............ 318,278
9,504 Duke Power Company .................. 425,304
10,586 Entergy Corporation ................. 301,701
8,552 FPL Group, Inc. ..................... 358,115
5,400 General Public Utility
Corporation........................ 168,750
<PAGE>
Dreyfus Institutional S&P 500 Stock Index Fund
- -----------------------------------------------------------------------------
Statement of Investments (continued) October 31, 1995
Shares Common Stocks (continued) Value
- ---------- -------------
Utilities (continued)
45,081 GTE Corporation ..................... $ 1,859,591
6,093 Houston Industries, Inc. ............ 282,563
31,452 MCI Communications
Corporation........................ 784,334
6,721 Niagara Mohawk Power
Corporation........................ 72,251
3,000 Northern States Power of
Minnesota Company.................. 141,750
19,877 NYNEX Corporation ................... 934,219
7,120 Ohio Edison Company ................. 162,870
19,690 Pacific Gas & Electric
Company ........................... 578,394
19,846 Pacific Telesis Group ............... 602,822
13,242 PacifiCorp .......................... 249,943
10,269 PECO Energy Company ................. 300,368
11,365 Public Service Enterprise
Group, Inc. ....................... 333,847
28,305 SBC Communications .................. 1,581,542
20,687 SCE Corporation ..................... 351,679
30,894 Southern Company .................... 737,594
16,131 Sprint Corporation .................. 621,044
10,440 Texas Utilities Company ............. 383,670
21,812 U S West, Inc. ...................... 1,038,797
9,970 Unicom Corporation .................. 326,518
4,745 Union Electric Company .............. 185,055
------------
24,926,829
------------
TOTAL COMMON STOCKS
(cost $136,716,778) ............... $198,844,619
------------
Shares PREFERRED STOCKS--.0% Value
- ---------- -------------
Electronic Technology
60 Teledyne, Inc., Series E
(cost $000)........................ $ 863
------------
Principal
Amount SHORT-TERM INVESTMENTS--2.8%
- ----------
380,000 U.S. Treasury Bill--.2%
5.26% due 1/18/96*................. 375,605
Repurchase Agreement--2.6%
5,413,779 Agreement with Goldman Sachs
and Company, 5.88% dated
10/31/95, to be repurchased at
$5,414,663 on 11/1/95,
collateralized by $5,414,509 U.S.
Treasury Notes, 5.875% due
7/31/97 ............................. $ 5,413,779
------------
TOTAL SHORT-TERM
INVESTMENTS
(cost $5,789,384) ................. $ 5,789,384
------------
TOTAL INVESTMENTS
(cost $171,076,005)...................... 100.2% $204,634,866
LIABILITIES, LESS CASH
AND RECEIVABLES ......................... (0.2%) $ (356,768)
------ ------------
NET ASSETS ................................ 100.0% $204,278,098
------ ------------
------ ------------
Note To Statement Of Investments;
- ---------------------------------------------------------------------------
+ Non-income producing.
* Partially held by the custodian in a segregated account as collateral for
open financial futures positions.
Statement of Financial Futures October 31, 1995
<TABLE>
<CAPTION>
FINANCIAL FUTURES LONG
- ----------------------
Market Value Unrealized
Number of Covered (Depreciation)
Issuer Contracts by Contracts Expiration at 10/31/95
- ------ ------------ ------------ -------------- --------------
<S> <C> <C> <C> <C>
Standard & Poor's 500........................ 20 $5,838,500 December '95 $(52,025)
=========
</TABLE>
See notes to financial statements.
<PAGE>
Dreyfus Institutional S&P 500 Stock Index Fund
- ---------------------------------------------------------------------------
Statement of Assets and Liabilities October 31, 1995
<TABLE>
<S> <C> <C>
ASSETS:
Investments in securities, at value (cost $171,076,005)--see Statement of
Investments (including repurchase agreement of $5,413,779)............ $204,634,866
Cash.................................................................... 17,190
Receivable Capital Stock sold........................................... 945,809
Dividends and interest receivable....................................... 281,253
Receivable for investment securities sold............................... 4,540
------------
205,883,658
LIABILITIES:
Due to The Dreyfus Corporation.......................................... $ 39,616
Payable for Capital Stock redeemed...................................... 1,500,526
Directors' fee payable--Note 2(c)....................................... 33,239
Payable for futures variation margin.................................... 32,100
Accrued expenses........................................................ 79 1,605,560
----------- ------------
NET ASSETS.................................................................. $204,278,098
------------
REPRESENTED BY:
Paid-in capital......................................................... $168,578,232
Accumulated undistributed investment income--net........................ 1,104,437
Accumulated undistributed net realized gain on investments.............. 1,088,593
Accumulated net unrealized appreciation on investments [including ($52,025)
net unrealized (depreciation) on financial futures]--Note 3............. 33,506,836
------------
NET ASSETS at value applicable to 16,022,681 shares outstanding
(70 million shares of $.001 par value Capital Stock authorized)......... $204,278,098
============
NET ASSET VALUE, offering and redemption price per share
($204,278,098 / 16,022,681 shares of Capital Stock outstanding)......... $12.75
======
</TABLE>
See notes to financial statements.
<PAGE>
Dreyfus Institutional S&P 500 Stock Index Fund
- ---------------------------------------------------------------------------
Statement of Operations Year ended October 31, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Income:
Cash dividends........................................................ $3,916,951
Interest.............................................................. 380,457
----------
Total Income.................................................... $ 4,297,408
Expenses:
Management fee--Note 2(c).............................................. 551,025
Directors' fees and expenses--Note 2(c)................................ 26,706
Distribution fee--Note 2(b)............................................ 6,832
----------
Total Expenses.................................................. 584,563
-----------
INVESTMENT INCOME--NET........................................... 3,712,845
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS--Note 3:
Net realized gain on investments...................................... $ 160,593
Net realized gain on financial futures;
Long transactions..................................................... 959,674
----------
Net Realized Gain..................................................... 1,120,267
Net unrealized appreciation on investments [including ($52,025)
net unrealized (depreciation) on financial futures]................... 32,124,097
-----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS................. 33,244,364
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $36,957,209
===========
</TABLE>
See notes to financial statements.
<PAGE>
Dreyfus Institutional S&P 500 Stock Index Fund
- ---------------------------------------------------------------------------
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended October 31,
--------------------------------
1995 1994
------------ ------------
<S> <C> <C>
OPERATIONS:
Investment income--net............................................ $ 3,712,845 $ 2,524,633
Net realized gain on investments.................................. 1,120,267 479,171
Net unrealized appreciation on investments for the year........... 32,124,097 876,438
------------ ------------
Net Increase In Net Assets Resulting From Operations............ 36,957,209 3,880,242
------------ ------------
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income--net:
Investor shares................................................. (86,823) (1,186)
Class R shares.................................................. (3,296,842) (1,772,327)
Net realized gain on investments:
Investor shares................................................. (2,114) --
Class R shares.................................................. (508,850) (13,841)
------------ ------------
Total Dividends................................................. (3,894,629) (1,787,354)
------------ ------------
CAPITAL STOCK TRANSACTIONS:
Net proceeds from shares sold:
Investor shares................................................. 18,014,652 775,958
Class R shares.................................................. 78,667,021 123,501,816
Dividends reinvested:
Investor shares................................................. 85,429 1,172
Class R shares.................................................. 3,790,189 1,784,732
Cost of shares redeemed:
Investor shares................................................. (19,863,189) (396,829)
Class R shares.................................................. (33,853,613) (27,388,901)
------------ ------------
Increase In Net Assets From Capital Stock Transactions.......... 46,840,489 98,277,948
------------ ------------
Total Increase In Net Assets.................................. 79,903,069 100,370,836
NET ASSETS:
Beginning of period............................................... 124,375,029 24,004,193
------------ ------------
End of year (including undistributed investmement income-net:
$1,104,437 in 1995 and $775,257 in 1994)........................ $204,278,098 $124,375,029
------------ ------------
------------ ------------
</TABLE>
<TABLE>
<CAPTION>
Shares
------------------------------------------------------------------
Investor Shares Class R Shares
------------------------------ ----------------------------
Year Ended October 31, Year Ended October 31,
------------------------------ ----------------------------
1995 1994* 1995 1994*
---------- -------- ---------- ----------
<S> <C> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Shares sold........................... 1,538,481 77,042 6,713,863 12,100,667
Shares issued for dividends reinvested 7,306 117 349,258 177,979
Shares redeemed....................... (1,582,364) (40,582) (2,943,826) (2,720,889)
---------- -------- ---------- ----------
Net Increase (Decrease) In
Shares Outstanding................ (36,577) 36,577 4,119,295 9,557,757
---------- -------- ---------- ----------
---------- -------- ---------- ----------
<FN>
- ----------------
* The Fund commenced selling Investor shares on April 18, 1994. Any 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.
</TABLE>
See notes to financial statements.
<PAGE>
Dreyfus Institutional S&P 500 Stock Index Fund
- ---------------------------------------------------------------------------
Financial Highlights
Reference is made to page 4 of the Fund's Prospectus
dated March 1, 1996.
See notes to financial statements.
<PAGE>
Dreyfus Institutional S&P 500 Stock Index Fund
- ---------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 1--Significant Accounting Policies:
The Dreyfus/Laurel Funds, Inc. (the "Company") is registered under the
Investment Company Act of 1940 ("Act") as a diversified open-end management
investment company and operates as a series company currently offering
sixteen Series including the Dreyfus Institutional S&P 500 Stock Index Fund
(the "Fund"). The Dreyfus Corporation ("Manager") serves as the Fund's
investment adviser. The Manager is a direct subsidiary of Mellon Bank, N.A.
("Mellon Bank").
Premier Mutual Fund Services, Inc. (the "Distributor") acts as the
distributor of the Fund's shares. The Distributor, located at One Exchange
Place, Boston, Massachusetts 02109, 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.
On July 26, 1995, the Fund's Directors approved a change to the Fund's
name, effective September 15, 1995, from "Dreyfus S&P 500 Stock Index Fund"
to "Dreyfus Institutional S&P 500 Stock Index Fund."
Prior to September 17, 1995, the Fund was authorized to issue two classes
of shares: Investor shares and Class R shares. Investor shares are sold
primarily to retail investors and bear a distribution fee. Class R shares are
sold primarily to bank trust departments and other financial service
providers (including Mellon Bank and its affiliates) acting on behalf of
customers having a qualified trust or investment account or relationship at
such institution, and bear no distribution fee. Each class of shares had
identical rights and privileges, except with respect to the distribution fee
and voting rights on matters affecting a single class. The Company has the
authority to issue 25 billion shares of capital stock with a par value of
$.001. The Fund currently offers Class R shares only. Effective September
17, 1995, the Fund converted to a single Class Fund, with the existing
Investor class shares converted into Class R shares.
Investment income, net of expenses (other than class specific expenses)
and realized and unrealized gains and losses are allocated daily to each
class of shares based upon the relative proportion of net assets of each
class.
(a) Portfolio Valuation: Investments in securities are valued at the last
sales price on the securities exchange on which such securities are primarily
traded or at the last sales price on the national securities market.
Securities not listed on an exchange or the national securities market, or
securities for which there were no transactions, are valued to the average of
the most recent bid and asked prices. Bid price is used when no asked price
is available. Securities for which there are no such valuations are valued at
fair value as determined in good faith under the direction of the Board of
Directors.
(b) Securities Transactions and Investment Income: Securities
transactions are recorded on a trade date basis. Realized gain and loss from
securities transactions are recorded on the identified cost basis. Dividend
income is recognized on the ex-dividend date and interest income, including,
where applicable, amortization of discount on investments, is recognized on
the accrual basis.
(c) Repurchase Agreements: The Fund may engage in repurchase agreement
transactions. Under the terms of a typical repurchase agreement, the Fund,
through its custodian and sub-custodian, takes possession of an underlying
debt obligation subject to an obligation of the seller to repurchase, and the
Fund to resell, the obligation at an agreed-upon price and time, thereby
determining the yield during the
<PAGE>
Dreyfus Institutional S&P 500 Stock Index Fund
- ---------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
Fund's holding period. This arrangement results in a fixed rate of return
that is not subject to market fluctuations during the Fund's holding period.
The value of the collateral is at least equal, at all times, to the total
amount of the repurchase obligations, including interest. In the event of a
counterparty default, the Fund has the right to use the collateral to offset
losses incurred. There is potential loss to the Fund in the event the Fund is
delayed or prevented from exercising its rights to dispose of the collateral
securities, including the risk of a possible decline in the value of the
underlying securities during the period while the Fund seeks to assert its
rights. The Fund's manager, acting under the supervision of the Board of
Directors, reviews the value of the collateral and the creditworthiness of
those banks and dealers with which the Fund enters into repurchase agreements
to evaluate potential risks.
(d) Financial Futures: The Fund may invest in trading financial futures
contracts in order to gain exposure to or protect against changes in the
market. The Fund is exposed to market risk as a result of changes in the
value of the underlying financial instruments (see Statement of Financial
Futures). Investments in financial futures require the Fund to "mark to
market" on a daily basis, which reflects the change in the market value of
the contract at the close of each day's trading. Accordingly, variation
margin payments are made or received to reflect daily unrealized gains or
losses. When the contracts are closed, the Fund recognizes a realized gain or
loss. These investments require initial margin deposits with a custodian,
which consist of cash or cash equivalents, up to approximately 10% of the
contract amount. The amount of these deposits is determined by the exchange
or Board of Trade on which the contract is traded and is subject to change.
Contracts open at October 31, 1995, and their related unrealized depreciation
are set forth in the Statement of Financial Futures.
(e) Distributions to Shareholders: Dividends are recorded on the
ex-dividend date. Dividends from investment income-net are declared and paid
on a quarterly basis. Dividends from net realized capital gain are normally
declared and paid annually, but the Fund may make distributions on a more
frequent basis to comply with the distribution requirements of the Internal
Revenue Code. This may result in distributions that are in excess of the net
realized gains on the fiscal year basis. To the extent that net realized
capital gain can be offset by capital loss carryovers, if any, it is the
policy of the Fund not to distribute such gain.
On November 2, 1995, the Board of Directors declared dividends from net
investment income for the Class R shares in the amount of $0.0650 per share
payable on November 3, 1995 to shareholders of record on November 2, 1995.
(f) Federal Income Taxes: It is the policy of the Fund to continue to
qualify as a regulated investment company, if such qualification is in the
best interests of its shareholders, by complying with the applicable
provisions of the Internal Revenue Code, and to make distributions of taxable
income sufficient to relieve it from substantially all Federal income and
excise taxes.
NOTE 2--Investment Management Fee and Other Transactions with Affiliates:
(a) Investment Management Fee: Pursuant to an Investment Management
agreement with the Manager, the Manager provides or arranges for one or more
third parties and or affiliaties to provide investment advisory,
administrative, custody, fund accounting and transfer agency services to the
Fund. The Manager also directs the investments of the Fund in accordance with
its investment objective, policies and
<PAGE>
Dreyfus Institutional S&P 500 Stock Index Fund
- ---------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
limitations. For these services, the Fund is contractually obligated to
pay the Manager a fee, calculated daily and paid monthly, at the annual rate
of .20 of 1% of the value of the Fund's average daily net assets. Prior to
September 15, 1995, the Fund was contractually obligated to pay the Manager a
fee, calculated daily and paid monthly, at the annual rate of .40 of 1% of
the value of the Fund's average daily net assets. Out of its fee, the Manager
pays all of the expenses of the Fund except brokerage fees, taxes, interest,
Rule 12b-1 distribution fees and expenses, fees and expenses of
non-interested Directors (including counsel fees) and extraordinary expenses.
In addition, the Manager is required to reduce its fee in an amount equal to
the Fund's allocable portion of fees and expenses of the non-interested
Directors (including counsel).
(b) Distribution Plan: Prior to August 3, 1995, the Fund had a
distribution plan (the "Plan") pursuant to Rule 12b-1 under the 1940 Act
relating to its Investor shares. Under the Plan, the Fund may pay annually up
to .25% of the value of the average daily net assets attributable to its
Investor shares to compensate the Distributor and Dreyfus Service
Corporation, an affiliate of the Manager, for shareholder servicing
activities and the Distributor for activities primarily intended to result in
the sale of Investor shares. The Class R shares bear no distribution fee.
During the period November 1, 1994 through August 2, 1995, the Investor
shares were charged $6,832 pursuant to the Plan. Effective August 3, 1995
the Plan was terminated.
(c) Directors' Fees: Each director who is not an "interested
person" as defined in the Act receives $27,000 per year, $1,000 for each
Board meeting attended and $750 for each Audit Committee attended and is
reimbursed for travel and out-of-pocket expenses. These expenses are paid in
total by the following funds: the Dreyfus/Laurel Funds, Inc., the
Dreyfus/Laurel Tax-Free Municipal Funds, and the Dreyfus/Laurel Funds Trust.
In addition the Chairman of the Board receives an annual fee of $75,000 per
year. These fees and expenses are charged and allocated to each series based
on net assets.
NOTE 3--Securities Transactions:
The aggregate amount of purchase and sales of investment securities,
other than short-term securities, during the year ended October 31, 1995,
amounted to $48,292,263 and $1,567,151, respectively.
At October 31, 1995, accumulated net unrealized appreciation on
investments was $33,506,836, consisting of $38,830,665 gross unrealized
appreciation and $5,323,829 gross unrealized depreciation.
At October 31, 1995, the cost of investments for Federal income tax
purposes was substantially the same as the cost for financial reporting
purposes (see the Statement of Investments).
<PAGE>
Dreyfus Institutional S&P 500 Stock Index Fund
- ---------------------------------------------------------------------------
Independent Auditors' Report
The Board of Directors and Shareholders
The Dreyfus/Laurel Funds, Inc.:
We have audited the accompanying statement of assets and liabilities of
the Dreyfus Institutional S&P 500 Stock Index Fund of The Dreyfus/Laurel
Funds, Inc., including the statement of investments and statement of
financial futures, as of October 31, 1995, and the related statement of
operations for the year then ended, the statement of changes in net assets
for each of the two years in the period then ended, and the financial
highlights for each of the periods indicated herein. These financial statemen
ts and financial highlights are the responsibility of the Fund's management.
Our responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of October 31, 1995, by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of the Dreyfus Institutional S&P 500 Stock Index Fund of The
Dreyfus/Laurel Funds, Inc., as of October 31, 1995, and the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each
of the periods indicated herein, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Pittsburgh, Pennsylvania
December 15, 1995
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-16
Management Arrangements . . . . . . . . . . . . . . . . . . . . . B-21
Purchase of Fund Shares . . . . . . . . . . . . . . . . . . . . . B-23
Distribution Plan . . . . . . . . . . . . . . . . . . . . . . . . B-24
Redemption of Fund Shares . . . . . . . . . . . . . . . . . . . . B-25
Shareholder Services. . . . . . . . . . . . . . . . . . . . . . . B-26
Determination of Net Asset Value. . . . . . . . . . . . . . . . . B-29
Dividends, Other Distributions and Taxes. . . . . . . . . . . . . B-30
Portfolio Transactions. . . . . . . . . . . . . . . . . . . . . . B-34
Performance Information . . . . . . . . . . . . . . . . . . . . . B-36
Information about the Fund. . . . . . . . . . . . . . . . . . . . B-37
Custodian, Transfer and Dividend Disbursing Agent, Counsel
and Independent Auditors. . . . . . . . . . . . . . . . . . . . B-38
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."
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 January 31, 1996: MBC Investment Corporation,
Attn. Patricia Nerwinski, 4500 New Linden Hill Road, Wilmington, DE 19808-
2922, 38% record; Boston and Company, P.O. Box 3198, Pittsburgh, PA 15230-
3198, 5% record; Mac & Co., P.O. Box 3198, Pittsburgh, PA 15230-3198, 5%
record.
FEDERAL LAW AFFECTING MELLON BANK
The Glass-Steagall Act of 1933 prohibits national banks from engaging
in the business of underwriting, selling or distributing securities and
prohibits a member bank of the Federal Reserve System from having certain
affiliations with an entity engaged principally in that business. The
activities of Mellon Bank, N.A. ("Mellon Bank") in informing its customers
of, and performing, investment and redemption services in connection with
the Fund, 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 twelve 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 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.
# ELIZABETH BACHMAN. Vice President and Assistant Secretary of the
Company, The Dreyfus/Laurel Funds Trust and The Dreyfus/Laurel Tax
Free Municipal Funds (since January 1996); Counsel, Premier Mutual
Fund Services, Inc. Prior to September 1995, she was enrolled at the
Fordham University School of Law and received her J.D. in May 1995.
Prior to September 1992, she was an Assistant at the National
Association for Public Interest Law. Age: 26 years old. Address: 200
Park Avenue, New York, New York 10166.
# 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 and Assisant Secretary (since January
1996) of the Company, The Dreyfus/Laurel Funds Trust and The
Dreyfus/Laurel Tax-Free Municipal Funds; 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.
# MARGARET PARDO. Assistant Secretary of the Company, The Dreyfus/Laurel
Funds Trust and The Dreyfus/Laurel Tax-Free Municipal Funds (since
January 1996); Paralegal, Premier Mutual Fund Services, Inc. Prior
to April 1995, she was a Medical Coordination Officer at ORBIS
International. Prior to June 1992, she worked as a Program
Coordinator at Physicians World Communications Group. Age: 27 years
old. Address: 200 Park Avenue, New York, New York 10166.
# 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.
# JOHN J. PYBURN. Assistant Treasurer of the Company, The Dreyfus/Laurel
Funds Trust and The Dreyfus/Laurel Tax-Free Municipal Funds (since
January 1996); Vice President of Premier Mutual Fund Services, Inc.
and an officer of other investment companies advised or administered
by Dreyfus. From 1984 to July 1994, he was Assistant Vice President
in the Mutual Fund Accounting Department of Dreyfus. Age: 61 years
old. Address: 200 Park Avenue, New York, New York 10166.
JOSEPH F. TOWER, III. Assistant Treasurer of the Company, The
Dreyfus/Laurel Funds Trust and The Dreyfus/Laurel Tax-Free Municipal
Funds (since January 1996); Senior Vice President, Treasurer and Chief
Financial Officer of Premier Mutual Fund Services, Inc. and an officer
of other investment companies advised or administered by Dreyfus.
From July 1988 to August 1994, he was employed by The Boston Company,
Inc. where he held various management positions in the Corporate
Finance and Treasury areas. Age: 33 years old. Address: 200 Park
Avenue, New York, New York 10166.
____________________________
* "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
January 31, 1996.
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 current 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 $27,800 None None $ 34,500
Francis P. Brennan* 86,683 None None 110,500
Joseph S. DiMartino** None None None $448,618***
James M. Fitzgibbons 27,795 None None 34,500
J. Tomlinson Fort** None None None None
Arthur L. Goeschel 27,604 None None 35,500
Kenneth A. Himmel 26,381 None None 32,750
Arch S. Jeffery** None None None None
Stephen J. Lockwood 26,387 None None 32,750
Robert D. McBride 27,800 None None 35,500
John J. Sciullo 27,800 None None 34,500
Roslyn M. Watson 27,795 None None 34,550
# Amounts required to be paid by the Company directly to the non-interested Directors,
that would be applied to offset a portion of the management fee payable to Dreyfus, are in
fact paid directly by Dreyfus to the non-interested Directors. Amount does not include
reimbursed expenses for attending Board meetings, which amounted to $12,342 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 $17,563, $28,604 and $27,800,
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 $3,186 for expenses
attributable to the Company's Board meetings ($3,186 is not included in the $12,342
above).
*** Estimated amounts for the fiscal year ending October 31, 1995.
</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 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 and a director; Barbara E. Casey, Vice President-Dreyfus
President-Dreyfus Retirement Services; Diane M. Coffey, Vice President-
Corporate Communications; Elie M. Genadry, Vice President-Institutional
Sales; William T. Sandalls, Jr., Senior Vice President, Chief Financial
Officer and a director; 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; Maurice Bendrihem,
Controller; Elvira Oslapas; Assistant Secretary; Mandell L. Berman, Frank
V. Cahouet, Alvin E. Friedman, Lawrence M. Greene and Julian M. Smerling
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.
In-Kind Purchases. If the following conditions are satisfied, the
Fund may at its discretion, permit the purchase of shares through an "in-
kind" exchange of securities. Any securities exchanged must meet the
investment objective, policies and limitations of the Fund, must have a
readily ascertainable market value, must be liquid and must not be subject
to restrictions on resale. The market value of any securities exchanged,
plus any cash, must be at least equal to $25,000. Shares purchased in
exchange for securities generally cannot be redeemed for fifteen days
following the exchange in order to allow time for the transfer to settle.
The basis of the exchange will depend upon the relative NAV of the
Shares purchased and securities exchanged. Securities accepted by the Fund
will be valued in the same manner as the Fund values its assets. Any
interest earned on the securities following their delivery to the Fund and
prior to the exchange will be considered in valuing the securities. All
interest, dividends, subscription or other rights attached to the
securities become the property of the Fund, along with the securities. For
further information about "in-kind" purchases, call 1-800-645-6561.
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 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 0.67% __ __ 1.13%
(9/15/94)
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 0.81% __ __ 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.
From time to time, advertising material for the Fund may include
biographical information relating to its portfolio manager and may refer
to, or include commentary by the portfolio manager relating to investment
strategy, asset growth, current or past business, political, economic or
financial conditions and other matters of general interest to investors.
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.
KPMG Peat Marwick LLP 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 Independent Auditors' Report, 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.
<PAGE>
Dreyfus International Equity Allocation Fund October 31, 1995
- -----------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN DREYFUS INTERNATIONAL
EQUITY ALLOCATION FUND INVESTOR SHARES AND CLASS R SHARES AND THE MORGAN
STANLEY CAPITAL INTERNATIONAL EUROPE, AUSTRALASIA, FAR EAST
(EAFE(R)) INDEX
Morgan Stanley
Capital
International International International
Equity Equity Europe,
Allocation Allocation Australasia,
Fund (Investor Fund Far East
Class Shares) (Class R Shares) (EAFE(R)) Index*
9/15/94 10,000 10,000 10,000
10/31/94 10,050 10,050 10,008
1/31/95 9,386 9,390 9,218
4/30/95 10,027 10,032 10,133
7/31/95 10,338 10,342 10,449
10/31/95 10,128 10,142 9,970
*Source: Lipper Analytical Services, Inc.
Average Annual Total Returns
- -----------------------------------------------------------------------------
Investor Class Shares Class R Shares
-------------------------------- -------------------------------
Period ended 10/31/95 Period ended 10/31/95
-------------------------------- -------------------------------
1 Year 0.67% 1 Year 0.81%
From Inception (9/15/94) 1.13 From Inception (9/15/94) 1.26
Past performance is not predictive of future performance.
The above graph compares a $10,000 investment made in each of the Investor
Class shares and Class R shares of Dreyfus International Equity Allocation
Fund on 9/15/94 (Inception Date) to a $10,000 investment made in the Morgan
Stanley Capital International Europe, Australasia, Far East (EAFERegistration
Mark) Index on that date. For comparative purposes, the value of the Index
on 8/31/94 is used as the beginning value on 9/15/94. All dividends and
capital gain distributions are reinvested.
The Fund's objective is to exceed the total return of the Morgan Stanley
Capital International Europe, Australasia, Far East (EAFERegistration Mark)
Index through active stock selection, country allocation and currency
allocation. The Fund's performance shown in the line graph takes into
account all applicable fees and expenses. The Index, which is the property
of Morgan Stanley & Co. Incorporated, is an unmanaged index composed of a
sample of companies representative of the market structure of European and
Pacific Basin countries and includes net dividends reinvested. The Index
does not take into account charges, fees and other expenses. Further
information relating to Fund performance, including expense reimbursements,
if applicable, is contained in the Financial Highlights section of the
Prospectus and elsewhere in this report.
<PAGE>
Dreyfus International Equity Allocation Fund
- -----------------------------------------------------------------------------
Statement of Investments October 31, 1995
<TABLE>
<CAPTION>
Common Stocks--98.7% Shares Value
- ------------------------------------------------------------------------------ -------- -----------
<S> <C> <C> <C>
Australia--2.6% Amcor ......................................... 24,000 $ 179,603
Broken Hill Proprietary ....................... 3,009 40,686
Coca Cola Amatil .............................. 18,750 144,875
ICI Australia ................................. 1,000 6,844
Pacific Dunlop ................................ 5,912 14,297
Westpac Banking ............................... 17,000 69,684
-----------
455,989
-----------
Austria--.3% Oesterreichische El Wirtsch ................... 300 18,311
Strabag Oesterreich AG ........................ 300 29,963
-----------
48,274
-----------
Belgium--1.4% Electrabell VVPR .............................. 50 11,205
Fortis AG ..................................... 100 10,721
Fortis VVPR AG ................................ 2 216
Petrofina SA .................................. 600 186,051
Solvay Et Cie, Series A, NPV .................. 50 25,207
-----------
233,400
-----------
Denmark--1.1% Danisco ....................................... 4,000 182,350
-----------
Finland--.4% Kone B ........................................ 400 36,488
Nokia AB, Class K ............................. 200 11,691
Pohjola Insurance Co., Class B ................ 1,000 14,614
-----------
62,793
-----------
France--9.2% Accor ......................................... 102 12,137
Banque Nationale de Paris ..................... 1,012 41,723
CPR Cie Parisienne De Reescompte .............. 800 61,607
Cap Gemini Sogeti ............................. 3,000 (a) 82,949
CarnaudMetalbox ............................... 1,400 58,781
Carrefour ..................................... 150 88,233
Casino Guichard Perrachon Et Cie .............. 200 5,734
Chargeurs ..................................... 10 2,060
Compagnie Bancaire SA ......................... 1,533 159,187
Compagnie De St. Gobain ....................... 419 50,031
Compagnie Financiale (Paribas)................. 1,555 85,672
Credit Foncier de France ...................... 351 6,505
L'Oreal ....................................... 50 12,237
</TABLE>
<PAGE>
Dreyfus International Equity Allocation Fund
- ------------------------------------------------------------------------------
Statement of Investments (continued) October 31, 1995
<TABLE>
<CAPTION>
Common Stocks (continued) Shares Value
- ------------------------------------------------------------------------------ -------- -----------
<S> <C> <C> <C>
France (continued) Pechiney International ........................ 600 $ 13,689
Peugeot ....................................... 200 26,093
Pinault-Printemps Redante ..................... 550 119,406
Rhone-Poulenc ................................. 3,068 66,983
SAGEM ......................................... 200 111,418
Saint Louis Bouchon ........................... 100 28,796
Salomon ....................................... 400 231,209
Sanofi ........................................ 1,600 102,209
Sefimeg Ste Francaise ......................... 100 6,635
Simco-Union Pout L'Habitation ................. 104 8,413
Societe National Elf Aquitaine ................ 1,857 126,652
Sommer-Allibert ............................... 100 26,482
Thomson CSF ................................... 1,044 21,788
Total B ....................................... 12 742
Unibail ....................................... 200 18,453
Union Immobiliere De France ................... 150 12,589
-----------
1,588,413
-----------
Germany--7.6% Agiv AG ....................................... 6,500 136,647
BASF AG ....................................... 1,800 395,036
Bayer AG ...................................... 300 79,772
Bilfinger & Berger Bau AG ..................... 50 18,394
Brau Und Brunnen .............................. 50 8,487
Ckag Colonia Koncern .......................... 7 (a) 5,468
Continental AG ................................ 1,000 14,133
Daimler-Benz AG ............................... 200 96,377
Dresdner Bank ................................. 5,000 133,522
Dyckeroff AG .................................. 200 88,068
Linde AG....................................... 100 61,434
RWE Aktiengesellschaft ........................ 300 106,747
Schering AG .................................. 1,000 69,744
Siemen AG ..................................... 200 104,829
-----------
1,318,658
-----------
Hong Kong--3.1% Cheung Kong (Holdings) ........................ 25,000 140,994
China Light & Power ........................... 8,740 46,577
HSBC Holdings PLC ............................. 3,756 54,656
</TABLE>
<PAGE>
Dreyfus International Equity Allocation Fund
- ------------------------------------------------------------------------------
Statement of Investments (continued) October 31, 1995
<TABLE>
<CAPTION>
Common Stocks (continued) Shares Value
- ------------------------------------------------------------------------------ -------- -----------
<S> <C> <C> <C>
Hong Kong (continued) Hong Kong & China Gas.......................... 57,600 $ 93,504
Hong Kong Telecommunications................... 22,700 39,639
Shangri-La Asia................................ 100,000 110,593
South China Morning Post....................... 90,000 52,386
Sun Hung Kai Properties........................ 220 1,757
-----------
540,106
-----------
Italy--1.9% Aedes Spa-Ligure Lombard....................... 5,000 28,284
Assicurazioni Generali......................... 1,200 28,020
Fiat SPA....................................... 20,000 65,241
Italgas........................................ 30,000 79,951
Mediobanca..................................... 10,000 66,939
Telecom Italia Mobile.......................... 30,680 51,583
Telecom Italia Mobile SPA...................... 5,680 (a) 8,639
-----------
328,657
-----------
Japan--42.1% Ajinomoto...................................... 20,800 205,658
Asahi Chemical Industry........................ 70,900 498,399
Asahi Glass.................................... 800 7,831
Bank of Tokyo.................................. 13,000 189,623
Bridgestone.................................... 400 5,560
Canon.......................................... 2,100 35,976
Chugai Pharmaceutical.......................... 400 3,657
Dai-Ichi Kango Bank............................ 4,210 71,300
Dai Nippon Printing............................ 800 12,765
Dai-Tokoy Fire & Marine Insurance.............. 11,000 70,748
Daido Steel.................................... 200 890
Daiichi Pharmaceutical......................... 5,000 69,995
Daikyo Kanko................................... 2,000 13,372
Daishowa Paper Manufacturing................... 400 (a) 2,940
Daiwa House Industry........................... 8,400 125,814
Denki Kagaku Kougyo............................ 600 (a) 2,020
Fuji Bank...................................... 4,900 91,140
Fuji Photo Film................................ 200 4,953
Fujita......................................... 17,000 77,386
Fujitsu........................................ 800 9,554
Furukawa Electric.............................. 13,000 58,414
Haseko......................................... 12,000 42,760
</TABLE>
<PAGE>
Dreyfus International Equity Allocation Fund
- ------------------------------------------------------------------------------
Statement of Investments (continued) October 31, 1995
<TABLE>
<CAPTION>
Common Stocks (continued) Shares Value
- ------------------------------------------------------------------------------ -------- -----------
<S> <C> <C> <C>
Japan (continued) Hitachi........................................ 13,900 $ 142,878
Honda Motor.................................... 400 6,970
House Food Industrial.......................... 220 4,005
Industrial Bank of Japan....................... 2,200 60,088
Ito-Yokado..................................... 1,000 54,723
Itochu......................................... 1,500 8,898
Japan Air Lines................................ 3,600 (a) 21,674
Japan Energy................................... 600 1,721
Joyo Bank...................................... 420 3,017
Kajima......................................... 800 7,393
Kamigumi....................................... 400 3,622
Kandenko....................................... 96 1,184
Kansai Electric Power.......................... 5,999 140,955
Kawasaki Steel................................. 16,600 55,252
Kinki Nippon Railway........................... 966 7,470
Kirin Brewery.................................. 7,000 70,582
Komatsu........................................ 600 4,698
Konica......................................... 25,000 167,645
Kumagai-Gumi................................... 27,000 103,612
Kyocera........................................ 200 16,407
Kyushu Electric Power.......................... 101 2,392
Mabuchi Motor.................................. 1,000 60,597
Maeda Road Construction........................ 200 3,582
Marubeni....................................... 74,000 360,763
Marudai Food................................... 200 1,350
Maruha......................................... 400 (a) 1,174
Marui.......................................... 3,000 51,982
Matsushita Electric Works...................... 10,400 147,626
Mitsubishi..................................... 31,000 342,927
Mitsubishi Bank................................ 210 4,111
Mitsubishi Chemical............................ 900 4,088
Mitsubishi Heavy Industries.................... 44,700 345,259
Mitsubishi Trust & Banking..................... 200 2,799
Mitsui & Company............................... 400 3,187
Mitsui Marine & Fire Insurance................. 600 3,612
Mitsui Trust & Banking......................... 600 4,804
NEC............................................ 800 10,572
</TABLE>
<PAGE>
Dreyfus International Equity Allocation Fund
- ------------------------------------------------------------------------------
Statement of Investments (continued) October 31, 1995
<TABLE>
<CAPTION>
Common Stocks (continued) Shares Value
- ------------------------------------------------------------------------------ -------- -----------
<S> <C> <C> <C>
Japan (continued) Nikon.......................................... 600 $ 8,575
Nippon Express................................. 8,000 65,002
Nippon Fire & Marine Insurance................. 38,000 204,601
Nippon Light Metal............................. 400 2,169
Nippon Oil..................................... 800 4,252
Nippon Steel................................... 5,100 16,925
Nippon Yusen Kaisha............................ 800 4,283
Nomura Securities.............................. 4,000 73,225
Oji Paper...................................... 30,000 275,770
Orient......................................... 26,000 118,100
Orix........................................... 2,000 70,484
Sakura Bank.................................... 8,600 83,348
Sanwa Shutter.................................. 200 1,360
Sekisui House.................................. 12,000 138,619
Seven-Eleven Japan NPV......................... 108 7,210
Sharp.......................................... 8,000 111,209
Shimachu....................................... 4,000 105,726
Shizuoka Bank.................................. 400 4,738
Snow Brand Milk Products....................... 500 3,279
Sony........................................... 940 42,329
Sumitomo Bank.................................. 14,307 253,506
Sumitomo Coal Mining........................... 22,000 93,039
Sumitomo Electric Industries................... 800 9,241
Sumitomo Marine & Fire......................... 6,000 42,878
Sumitomo Metal Industries...................... 40,000 (a) 108,467
Sumitomo Trust & Banking....................... 850 9,818
Takeda Chemical Industries..................... 1,000 14,096
Tokai Bank..................................... 6,800 71,228
Tokio Marine & Fire Insurance.................. 800 8,223
Tokyo Broadcasting System...................... 12,000 176,211
Tokyo Electric Power........................... 1,272 33,387
Tokyo Tatemono................................. 11,000 44,366
Tokyu.......................................... 11,820 75,328
Toppan Printing................................ 12,000 158,590
Toray Industries............................... 21,000 131,365
Toshiba........................................ 10,000 72,540
Toyo Engineering............................... 5,000 27,410
Toyobo......................................... 1,200 3,947
</TABLE>
<PAGE>
Dreyfus International Equity Allocation Fund
- ------------------------------------------------------------------------------
Statement of Investments (continued) October 31, 1995
<TABLE>
<CAPTION>
Common Stocks (continued) Shares Value
- ------------------------------------------------------------------------------ -------- -----------
<S> <C> <C> <C>
Japan (continued) Toyota Motor................................... 25,014 $ 465,262
Ube Industries................................. 600 1,985
Yakult Honsha.................................. 200 2,545
Yamatake Honeywell............................. 5,000 68,037
Yamato Transport............................... 400 4,307
Yasuda Trust & Banking......................... 43,000 192,373
Yokogawa Electric.............................. 2,900 22,143
-----------
7,265,870
-----------
Malaysia--2.0% Malayan Banking Berhad......................... 7,000 56,518
Perusahaan Otomobil............................ 9,000 32,256
Renong Berhad.................................. 14,000 21,394
Resorts World Berhad........................... 23,000 112,327
Tanjong........................................ 45,000 113,432
-----------
335,927
-----------
Netherlands--3.7% Akzo Nobel..................................... 800 91,044
Elsevier....................................... 15,000 193,797
Ihc Caland..................................... 3,000 85,307
Internationale Nederlanden Groep............... 1,025 61,084
Philips Electronics............................ 3,000 115,896
Royal Dutch Petroleum.......................... 100 12,406
Stad Rotterdam................................. 3,040 83,749
-----------
643,283
-----------
New Zealand--.4% Fisher & Paykel................................ 23,446 76,296
-----------
Norway--.6% Aker........................................... 8,500 107,223
-----------
Singapore--1.1% Keppel......................................... 10,000 82,094
Singapore Airlines............................. 11,000 101,982
-----------
184,076
-----------
Spain--1.6% Banco Bilbao Vizcaya........................... 1,800 55,032
Empresa Nacional De Electricidad............... 1,400 69,655
</TABLE>
<PAGE>
Dreyfus International Equity Allocation Fund
- ------------------------------------------------------------------------------
Statement of Investments (continued) October 31, 1995
<TABLE>
<CAPTION>
Common Stocks (continued) Shares Value
- ------------------------------------------------------------------------------ -------- -----------
<S> <C> <C> <C>
Spain (continued) Fomento de Construcciones y Contratas.......... 700 $ 49,459
Repsol......................................... 1,100 32,864
Telefonica de Espana........................... 6,000 75,740
-----------
282,750
-----------
Sweden--2.0% Asea........................................... 2,000 197,543
Astra.......................................... 2,000 72,381
Esselte........................................ 4,000 58,810
Stora Kopparbergs.............................. 1,000 12,139
-----------
340,873
-----------
Switzerland--5.8% BBC Brown Boveri & Cie, Series A............... 63 73,070
CS Holding (Regd Shrs)......................... 1,000 102,157
Ciba Geigy..................................... 100 86,305
Ciba Geigy (Regd Shrs)......................... 45 38,956
Jelmoli Holdings............................... 200 95,992
Nestle......................................... 103 107,943
Roche Holding.................................. 39 283,360
Sandoz......................................... 50 41,611
Sandoz (Regd Shrs)............................. 55 45,385
Schweizerische Bankgesellschaft................ 121 131,070
-----------
1,005,849
-----------
United Kingdom--11.8% Allied Irish Banks............................. 26,036 131,753
Barclays....................................... 14,496 170,275
British Petroleum.............................. 8,134 59,900
British Telecommunications..................... 21,000 125,080
Grand Metropolitan............................. 739 5,120
Hanson......................................... 33,434 102,479
Marks & Spencer................................ 12,000 80,492
Meyer International............................ 12,274 67,961
National Westminster Bank...................... 12,351 123,390
Northumbrian Water............................. 10,000 156,934
Redland........................................ 29,000 159,884
Reed International............................. 3,000 45,656
Scapa Group.................................... 28,241 104,544
Smithkline Beecham Cl A........................ 20,295 212,064
</TABLE>
<PAGE>
Dreyfus International Equity Allocation Fund
- ------------------------------------------------------------------------------
Statement of Investments (continued) October 31, 1995
<TABLE>
<CAPTION>
Common Stocks (continued) Shares Value
- ------------------------------------------------------------------------------ -------- -----------
<S> <C> <C> <C>
United Kingdom (continued) St. James Place Capital........................ 30,000 $ 55,528
TSB Group...................................... 40,000 236,043
Tesco.......................................... 5,560 26,387
Trafalgar House................................ 30,000 10,797
Williams Holdings.............................. 16,000 79,353
Wolseley....................................... 12,184 75,558
-----------
2,029,198
-----------
Total Common Stocks
(cost $16,982,912)........................... $17,029,985
-----------
Preferred Stocks--.4%
- ------------------------------------------------------------------------------
Germany; Friedrich Grohe
(cost $84,265)............................... 300 $ 72,017
-----------
TOTAL INVESTMENTS (cost $17,067,177).......................................... 99.1% $17,102,002
------ -----------
CASH AND RECEIVABLES (NET).................................................... 0.9% $ 159,985
------ -----------
NET ASSETS.................................................................... 100.0% $17,261,987
------ -----------
-----------
<FN>
Note to Statement of Investments;
- ------------------------------------------------------------------------------
(a) Non-income producing.
</TABLE>
See notes to financial statements.
<PAGE>
Dreyfus International Equity Allocation Fund
- -------------------------------------------------------------------------------
Statement of Assets and Liabilities October 31, 1995
<TABLE>
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $17,067,177)--See Statement of Investments...................... $17,102,002
Receivable for investment securities sold............................... 155,979
Dividends receivable.................................................... 62,961
Net unrealized appreciation on forward currency exchange
contracts--Note 1(d).................................................. 61,139
-----------
17,382,081
LIABILITIES:
Due to The Dreyfus Corporation-Note 2(a)................................ $ 1,428
Cash overdraft due to Custodian......................................... 116,258
Directors' fee payable.................................................. 2,408 120,094
--------- -----------
NET ASSETS.................................................................. $17,261,987
-----------
-----------
REPRESENTED BY:
Paid-in capital......................................................... $16,672,149
Accumulated undistributed investment income--net........................ 76,362
Accumulated undistributed net realized gain on investments.............. 414,513
Accumulated net unrealized appreciation on investments and
foreign currency transactions......................................... 98,963
-----------
NET ASSETS at value......................................................... $17,261,987
-----------
-----------
NET ASSET VALUE, offering and redemption price per share:
Investor Shares
(24 million shares of $.001 par value Capital Stock authorized)
($4,088,358 / 404,465 shares of capital stock outstanding)............ $10.11
------
------
Class R Shares
(36 million shares of $.001 par value Capital Stock authorized)
($13,173,629 / 1,302,133 shares of capital stock outstanding)......... $10.12
------
------
</TABLE>
See notes to financial statements.
<PAGE>
Dreyfus International Equity Allocation Fund
- -------------------------------------------------------------------------------
Statement of Operations Year ended October 31, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Cash dividends (net of $38,500 withheld at source)...................... $314,253
Interest................................................................ 18,163
--------
Total Income.......................................................... $332,416
Expenses:
Investment management fee--Note 2(a,b)................................ 249,080
Distribution fee (Investor shares)-Note 2(c).......................... 5,612
Directors' fees and expenses--Note 2(d)............................... 1,273
--------
Total Expenses.................................................... 255,965
--------
INVESTMENT INCOME--NET............................................ 76,451
--------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments and foreign currency
transactions--Note 1(c)............................................... $ 218,728
Net realized gain on forward currency exchange contracts--Note 1(d)..... 195,785
--------
Net Realized Gain..................................................... 414,513
Net unrealized appreciation on investments and foreign currency
transactions-Note 1(c)................................................ 60,242
--------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS.................... 474,755
--------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $551,206
--------
</TABLE>
See notes to financial statements.
<PAGE>
Dreyfus International Equity Allocation Fund
- -------------------------------------------------------------------------------
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended October 31,
------------------------------
1995 1994*
----------- -----------
<S> <C> <C>
Investment income--net............................................... $ 76,451 $ 43,960
Net realized gain (loss) on investments.............................. 414,513 (16,876)
Net unrealized appreciation on investments for the year.............. 60,242 38,721
----------- -----------
Net Increase In Net Assets Resulting From Operations............... 551,206 65,805
----------- -----------
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income--net:
Investor Shares.................................................... (180) --
Class R Shares..................................................... (26,993) --
----------- -----------
Total Dividends.................................................. (27,173) --
----------- -----------
CAPITAL STOCK TRANSACTIONS:
Net proceeds from shares sold:
Investor Shares.................................................... 671,731 69,682
Class R Shares..................................................... 7,539,619 11,819,150
Issued in exchange for shares of Dreyfus/Laurel International Fund;
Investor Shares.................................................... 6,499,140 --
Dividends reinvested:
Investor Shares.................................................... 70 --
Class R Shares..................................................... 12,651 --
Cost of shares redeemed:
Investor Shares.................................................... (3,340,391) (100)
Class R Shares..................................................... (6,559,623) (39,780)
----------- -----------
Increase In Net Assets From Capital Stock Transactions........... 4,823,197 11,848,952
----------- -----------
Total Increase In Net Assets................................... 5,347,230 11,914,757
NET ASSETS:
Beginning of year.................................................... 11,914,757 --
----------- -----------
End of year (including undistributed investment income--net of
$76,362 in 1995 and $27,084 in 1994)............................... $17,261,987 $11,914,757
----------- -----------
----------- -----------
</TABLE>
<TABLE>
<CAPTION>
Investor Shares Class R Shares
------------------------ -------------------------
Year Ended October 31, Year Ended October 31,
------------------------ -------------------------
1995 1994* 1995 1994*
-------- -------- ------- --------
<S> <C> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Shares sold..................................... 266,245 7,045 773,150 1,181,714
Shares issued in connection with the acquisition
of Dreyfus/Laurel International Fund 470,442 -- -- --
Shares issued for dividends reinvested 7 -- 1,314 --
Shares redeemed................................. (339,264) (10) (650,043) (4,002)
-------- ------ -------- ---------
Net Increase In Shares Outstanding............ 397,430 7,035 124,421 1,177,712
-------- ------ -------- ---------
-------- ------ -------- ---------
<FN>
- --------------
* The Fund commenced operations on August 12, 1994.
</TABLE>
See notes to financial statements.
<PAGE>
Dreyfus International Equity Allocation Fund
- -------------------------------------------------------------------------------
Financial Highlights
Reference is made to pages 5 and 6 of the Fund's Prospectus
dated March 1, 1996.
See notes to financial statments.
<PAGE>
Dreyfus International Equity Allocation Fund
- -----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 1--Significant Accounting Policies:
The Dreyfus/Laurel Funds, Inc. (the "Company") is registered under
the Investment Company Act of 1940 ("Act") as a diversified open-end
management investment company and operates as a series company currently
offering sixteen Series including the Dreyfus International Equity Allocation
Fund (the "Fund"). The Dreyfus Corporation ("Manager") serves as the Fund's
investment adviser. The Manager is a direct subsidiary of Mellon Bank, N.A.
("Mellon Bank").
Premier Mutual Fund Services, Inc. (the "Distributor") acts as the
distributor of the Fund's shares. The Distributor, located at One Exchange
Place, Boston, Massachusetts 02109, 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.
The Fund is currently authorized to issue two classes of shares:
Investor shares and Class R shares. Investor shares are sold primarily to
retail investors and bear a distribution fee. Class R shares are sold
primarily to bank trust departments and other financial service providers
(including Mellon Bank, N.A. and its affiliates) acting on behalf of
customers having a qualified trust or investment account or relationship at
such institution, and bear no distribution fee. Each class of shares has
identical rights and privileges, except with respect to the distribution fee
and voting rights on matters affecting a single class. The Company has the
authority to issue 25 billion shares of capital stock with a par value of
$.001.
Investment income, net of expenses (other than class specific
expenses) and realized and unrealized gains and losses are allocated daily to
each class of shares based upon the relative proportion of net assets of each
class.
(a) Portfolio Valuation: Investments in securities (including
options and financial futures) are valued at the last sales price on the
securities exchange on which such securities are primarily traded or at the
last sales price on the national securities market. Securities not listed on
an exchange or the national securities market, or securities for which there
were no transactions, are valued at the average of the most recent bid and
asked prices, except for open short positions, where the asked priced is used
for valuation purposes. Bid price is used when no asked price is available.
Securities for which there are no such valuations are valued at fair value as
determined in good faith under the direction of the Board of Directors.
Investments denominated in foreign currencies are translated to U.S. dollars
at the prevailing rates of exchange. Forward currency exchange contracts are
valued at the offsetting rate.
(b) Securities Transactions and Investment Income: Securities
transactions are recorded on a trade date basis. Realized gain and loss from
securities transactions are recorded on the identified cost basis. Dividend
income is recognized on the ex-dividend date and interest income, including,
where applicable, amortization of discount on investments, is recognized on
the accrual basis.
(c) Foreign Currency Transactions: The Fund does not isolate that
portion of the results of the operations resulting from changes in foreign
exchange rates on investment from the fluctuations arising from changes in
the market prices of securities held. Such fluctuations are included with the
net realized and unrealized gain or loss from investments.
<PAGE>
Dreyfus International Equity Allocation Fund
- -----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
Net realized foreign exchange gains or losses arise from sales and
maturities of short-term securities, sales of foreign currencies, currency
gains or losses realized on securities transactions, the difference between
the amount of dividends, interest, and foreign withholding taxes recorded on
the Fund's books, and the U.S. dollar equivalent of the amounts actually
received or paid. Net unrealized foreign exchange gains and losses arise from
changes in the value of assets and liabilities other than investments in
securities, resulting from changes in exchange rates. Such gains and losses
are included with net realized and unrealized gain or loss on investments.
(d) Forward Currency Exchange Contracts: The Fund enters into
forward currency exchange contracts in order to hedge its exposure to changes
in foreign currency exchange rates on its foreign portfolio holdings. When
executing forward currency exchange contracts, the Fund is obligated to buy
or sell a foreign currency at a specified rate on a certain date in the
future. With respect to sales of forward currency exchange contracts, the
Fund would incur a loss if the value of the contract increases between the
date the forward contract is opened and the date the forward contract is
closed. The Fund realizes a gain if the value of the contract decreases
between those dates. With respect to purchases of forward currency exchange
contracts, the Fund would incur a loss if the value of the contract decreases
between the date the forward contract is opened and the date the forward
contract is closed. The Fund realizes a gain if the value of the contract
increases between those dates. The Fund is also exposed to credit risk
associated with counter party nonperformance on these forward currency
exchange contracts which is typically limited to the unrealized gains on such
contracts that are recognized in the statement of assets and liabilities. At
October 31, 1995, the following summarizes open forward currency exchange
contracts:
<TABLE>
<CAPTION>
Foreign U.S. Dollar Unrealized
Currency Value at Appreciation
Forward Currency Sale Contracts, Amount Proceeds 10/31/95 (Depreciation)
________________________________ ___________ __________ ___________ _____________
<S> <C> <C> <C> <C>
Danish Krone, expiring 11/1/95............. 18,480 $ 3,378 $ 3,383 $ (5)
German Deutschmarks, expiring 11/24/95..... 1,000,000 709,522 710,985 (1,463)
Japanese Yen, expiring 11/21/95............ 120,000,000 1,240,695 1,178,088 62,607
-------
$61,139
-------
-------
</TABLE>
(e) Distributions to Shareholders: Dividends are recorded on the
ex-dividend date. Dividends from investment income-net and dividends from net
realized capital gain are normally declared and paid annually, but the Fund
may make distributions on a more frequent basis to comply with the distributio
n requirements of the Internal Revenue Code. To the extent that net realized
capital gain can be offset by capital loss carryovers, if any, it is the
policy of the Fund not to distribute such gain.
(f) Federal Income Taxes: It is the policy of the Fund to continue
to qualify as a regulated investment company, if such qualification is in the
best interests of its shareholders, by complying with the applicable
provisions of the Internal Revenue Code, and to make distributions of taxable
income sufficient to relieve it from substantially all Federal income and
excise taxes.
<PAGE>
Dreyfus International Equity Allocation Fund
- -----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
The Fund has an unused capital loss carryover of approximately
$1,563,000 available for Federal income tax purposes to be applied against
future net securities profits, if any, realized subsequent to October 31,
1995. The amount of this loss which can be utilized in subsequent years is
subject to an annual limitation due to the Fund's merger with Dreyfus Laurel
International Funds. If not applied, $1,536,000 of the carryover expires in
fiscal 2000 and $27,000 expires in fiscal 2002.
NOTE 2 -- Investment Management Fee and Other Transactions with Affiliates:
(a) Investment Management Fee: Pursuant to an Investment Management
agreement with the Manager, the Manager provides or arranges for one or more
third parties to provide investment advisory, administrative, custody, fund
accounting and transfer agency services to the Fund. The Manager also directs
the investments of the Fund in accordance with its investment objective,
policies and limitations. For these services, the Fund is contractually
obligated to pay the Manager a fee, calculated daily and paid monthly, at the
annual rate of 1.50% of the value of the Fund's average daily net assets. Out
of its fee, the Manager pays all of the expenses of the Fund except brokerage
fees, taxes, interest, Rule 12b-1 distribution fees and expenses, fees and
expenses of non-interested Directors (including counsel fees) and
extraordinary expenses. In addition, the Manager is required to reduce its
fee in an amount equal to the Fund's allocable portion of fees and expenses
of the non-interested Directors (including counsel).
(b) Sub-Advisory Agreement: S.A.M. Finance, S.A. (the
"Sub-Advisor"), a wholly-owned subsidiary of Credit Commercial de France,
serves as the Fund's Sub-Advisor pursuant to a sub-advisory agreement among
the Fund, the Sub-Advisor and the Manager. For its services, the Sub-Advisor
is paid an annual fee of .25% of the value of the Fund's average daily net
assets and is paid by the Manager out of its fee.
(c) Distribution Plan: The Fund has adopted a distribution plan
(the "Plan") pursuant to Rule 12b-1 under the 1940 Act relating to its
Investor shares. Under the Plan, the Fund may pay annually up to .25% of the
value of the average daily net assets attributable to its Investor shares to
compensate the Distributor and Dreyfus Service Corporation, an affiliate of
the Manager, for shareholder servicing activities and the Distributor for
activities primarily intended to result in the sale of Investor shares. The
Class R shares bear no distribution fee. For the year ended October 31, 1995,
the distribution fee for the Investor shares was $5,612.
Under its terms, the Plan shall remain in effect from year to year,
provided such continuance is approved annually by a vote of majority of those
Directors who are not "interested persons" of the Investment Company and who
have no direct or indirect financial interest in the operation of the Plan or
in any agreement related to the Plan.
(d) Directors' Fees: Each director who is not an "interested
person" as defined in the Act receives $27,000 per year, $1,000 for each
Board meeting attended and $750 for each Audit Committee attended and is
reimbursed for travel and out-of-pocket expenses. These expenses are paid in
total by the following funds: the Dreyfus/Laurel Funds, Inc., the
Dreyfus/Laurel Tax-Free Municipal Funds, and the Dreyfus/Laurel Funds Trust.
In addition the Chairman of the Board receives an annual fee of $75,000 per
year. These fees and expenses are charged and allocated to each series based
on net assets.
<PAGE>
Dreyfus International Equity Allocation Fund
- -----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
NOTE 3 -- Securities Transactions:
The aggregate amount of purchases and sales of investment
securities, excluding short-term securities and forward currency exchange
contracts, during the year ended October 31, 1995 amounted to $11,310,006 and
$10,440,123, respectively.
At October 31, 1995, accumulated net unrealized depreciation on
investments and foreign currency contracts was $95,964, consisting of
$1,368,906 gross unrealized appreciation and $1,272,942 gross unrealized
depreciation, excluding foreign currency transactions.
At October 31, 1995, the cost of investments for Federal income tax
purposes was substantially the same as the cost for financial reporting
purposes (see the Statement of Investments).
NOTE 4 -- Reorganization:
On April 19, 1995, the Dreyfus/Laurel International Equity
Allocation Fund, acquired the assets and certain liabilities of the Dreyfus
Laurel International Fund, in exchange for shares of the Dreyfus/Laurel
International Equity Allocation Fund, pursuant to a plan of reorganization
approved by Dreyfus/Laurel International Fund shareholders on May 1, 1995.
Total shares issued by Dreyfus/Laurel International Equity Allocation Fund
and the total net asets of Dreyfus International Fund acquired are set forth
in the Statement of changes in net assets.
<PAGE>
Dreyfus International Equity Allocation Fund
- -----------------------------------------------------------------------------
Independent Auditors' Report
The Board of Directors and Shareholders
The Dreyfus/Laurel Funds, Inc.:
We have audited the accompanying statement of assets and liabilities of
the Dreyfus International Equity Allocation Fund of The Dreyfus/Laurel Funds,
Inc., including the statement of investments, as of October 31, 1995, and the
related statement of operations for the year then ended, the statement of
changes in net assets for the year ended October 31, 1995 and for the period
from August 12, 1994 (commencement of operations) to October 31, 1994, and
the financial highlights for each of the periods indicated herein. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of October 31, 1995, by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of the Dreyfus International Equity Allocation Fund of The
Dreyfus/Laurel Funds, Inc., as of October 31, 1995, and the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each
of the periods indicated herein, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Pittsburgh, Pennsylvania
December 15, 1995
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 516-794-5452
TABLE OF CONTENTS
Page
General Information. . . . . . . . . . . . . . . . . . . . . . . . . . . .3
Investment Information and Risk Factors. . . . . . . . . . . . . . . . . .3
Investment Limitations . . . . . . . . . . . . . . . . . . . . . . . . . .9
Principal Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . 11
Directors and Officers . . . . . . . . . . . . . . . . . . . . . . . . . 12
Investment Management and Other Services . . . . . . . . . . . . . . . . 17
Federal Law Affecting Mellon Bank. . . . . . . . . . . . . . . . . . . . 20
Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . . . . . 21
Net Asset Value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Performance Calculations . . . . . . . . . . . . . . . . . . . . . . . . 23
Dividends, Other Distributions and Taxes . . . . . . . . . . . . . . . . 25
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Other Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
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 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. 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 Funds at January 31, 1996:
MONEY MARKET RESERVES: MAC & Co., P.O. Box 3198, Pittsburgh, PA 15230-
3198, 16% record and Boston & Co., Attn. John Kacinko, 3 Mellon Bank
Center, Pittsburgh, PA 15259, 61% record.
U.S. TREASURY RESERVES: BSDT, P.O. Box 3198, Pittsburgh, PA 15230-3198,
14% record; Boston & Co., P.O. Box 3198, Pittsburgh, PA 15230-3198, 6%
record; Mellon Bank, N.A., P.O. Box 7989, Philadelphia, PA 15259, 46%
record; Boston & Co., Attn. John Kacinko, 3 Mellon Bank Center, Pittsburgh,
PA 15259, 17% record.
MUNICIPAL RESERVES: Boston & Co.; Attn. John Kacinko, 3 Mellon Bank
Center, Pittsburgh, PA 15259, 42% record; Danco, P.O. Box 110, Fort Wayne,
IN 46801-0110; 14% record; Mellon Bank, N.A., 1 Mellon Bank Center,
Pittsburgh, PA 15258-0001, 10% record.
INSTITUTIONAL PRIME FUND: Boston & Co., Attn. John Kacinko, 3 Mellon Bank
Center, Pittsburgh, PA 15259, 38% record; Mellon Bank, N.A., 1 Mellon Bank
Center, Pittsburgh, PA 15258-0001, 28% record.
INSTITUTIONAL GOVERNMENT FUND: Boston & Co., Attn. John Kacinko, 3 Mellon
Bank Center, Pittsburgh, PA 15259, 79% record and Mac & Co., P.O. Box 3198,
Pittsburgh, PA 15230-3198, 7% record.
INSTITUTIONAL TREASURY FUND: Boston & Co., Attn. John Kacinko, 3 Mellon
Bank Center, Pittsburgh, PA 15259, 59% record; MAC & Co., 3 Mellon Bank
Center, Pittsburgh, PA 15259, 20% record; Danco, P.O. Box 110, Fort Wayne,
IN 46801-0110, 8% record.
DIRECTORS AND OFFICERS
The Company has a Board composed of twelve 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; 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 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.
# ELIZABETH BACHMAN. Vice President and Assistant Secretary of the
Company, The Dreyfus/Laurel Funds Trust and The Dreyfus/Laurel Tax
Free Municipal Funds (since January 1996); Counsel, Premier Mutual
Fund Services, Inc. Prior to September 1995, she was enrolled at the
Fordham University School of Law and received her J.D. in May 1995.
Prior to September 1992, she was an Assistant at the National
Association for Public Interest Law. Age: 26 years old. Address: 200
Park Avenue, New York, New York 10166.
# 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 and Assistant Secretary (since January
1996) 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.
# MARGARET PARDO. Assistant Secretary of the Company, The Dreyfus/Laurel
Funds Trust and The Dreyfus/Laurel Tax-Free Municipal Funds (since
January 1996); Paralegal, Premier Mutual Fund Services, Inc. Prior
to April 1995, she was a Medical Coordination Officer at ORBIS
International. Prior to June 1992, she worked as a Program
Coordinator at Physicians World Communications Group. Age: 27 years
old. Address: 200 Park Avenue, New York, New York 10166.
# 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.
# JOHN J. PYBURN. Assistant Treasurer of the Company, The Dreyfus/Laurel
Funds Trust and The Dreyfus/Laurel Tax-Free Municipal Funds (since
January 1996); Vice President of Premier Mutual Fund Services, Inc.
and an officer of other investment companies advised or administered
by Dreyfus. From 1984 to July 1994, he was Assistant Vice President
in the Mutual Fund Accounting Department of Dreyfus. Age: 61 years
old. Address: 200 Park Avenue, New York, New York 10166.
JOSEPH F. TOWER, III. Assistant Treasurer of the Company, The
Dreyfus/Laurel Funds Trust and The Dreyfus/Laurel Tax-Free Municipal
Funds (since January 1996); Senior Vice President, Treasurer and Chief
Financial Officer of Premier Mutual Fund Services, Inc. and an officer
of other investment companies advised or administered by Dreyfus.
From July 1988 to August 1994, he was employed by The Boston Company,
Inc. where he held various management positions in the Corporate
Finance and Treasury areas. Age: 33 years old. Address: 200 Park
Avenue, New York, New York 10166.
_____________________________
* "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
January 31, 1996.
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 current 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 $27,800 None None $ 34,500
Francis P. Brennan* 86,683 None None 110,500
Joseph S. DiMartino** None None None $448,618***
James M. Fitzgibbons 27,795 None None 34,500
J. Tomlinson Fort** None None None None
Arthur L. Goeschel 27,604 None None 35,500
Kenneth A. Himmel 26,381 None None 32,750
Arch S. Jeffery** None None None None
Stephen J. Lockwood 26,387 None None 32,750
Robert D. McBride 27,800 None None 35,500
John J. Sciullo 27,800 None None 34,500
Roslyn M. Watson 27,795 None None 34,550
# Amounts required to be paid by the Company directly to the non-interested Directors,
that would be applied to offset a portion of the management fee payable to Dreyfus, are in
fact paid directly by Dreyfus to the non-interested Directors. Amount does not include
reimbursed expenses for attending Board meetings, which amounted to $12,342 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 $17,563, $28,604 and $27,800,
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 $3,186 for expenses
attributable to the Company's Board meetings ($3,186 is not included in the $12,342
above).
*** Estimated amounts for the fiscal year ending October 31, 1995.
</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.
For the last three fiscal years, each Fund had the following expenses:
For the Fiscal Years Ended October 31,
1995 1994 1993
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 -- -- --
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:
Current Yield Effective Yield
Investor Class R Investor Class R
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%
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%
From time to time, Fund advertisements may include statistical data or
general discussions about the growth and development of Dreyfus Retirement
Services (in terms of new customers, assets under management, market share,
etc.) and its presence in the defined contribution plan market.
From time to time, advertising material for the Fund may include
biographical information relating to its portfolio manager and may refer
to, or include commentary by the portfolio manager relating to investment
strategy, asset growth, current or past business, political, economic or
financial conditions and other matters of general interest to investors.
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 Independent Auditors' Report are included in the Annual Report to
shareholders. A copy of the Annual Report accompanies this Statement of
Additional Information. The financial statements from the Annual Report
are incorporated herein by reference.
OTHER INFORMATION
Auditor. KPMG Peat Marwick LLP was appointed by the Directors to
serve as 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.
<PAGE>
Dreyfus Money Market Reserves
- ------------------------------------------------------------------------------
Statement of Investments October 31, 1995
<TABLE>
<CAPTION>
Principal
Negotiable Bank Certificates of Deposit--5.7% Amount Value
- ------------------------------------------------------------------------- ------------ ------------
<S> <C> <C>
Deutsche Bank AG (London)
5.81%, 1/19/96....................................................... $ 7,000,000 $ 6,999,281
Skandinaviska Enskilda Banken
6.01%, 9/30/96....................................................... 10,000,000 10,000,000
------------
TOTAL NEGOTIABLE BANK CERTIFICATES OF DEPOSIT
(cost $16,999,281)................................................... $ 16,999,281
------------
Commercial Paper--53.1%
- -------------------------------------------------------------------------
AI Credit Corp.
5.85%, 11/1/95....................................................... $ 7,200,000 $ 7,200,000
Allied-Signal Inc.
5.76%, 11/6/95....................................................... 7,500,000 7,494,021
AT & T Corp.
5.87%, 11/1/95....................................................... 7,200,000 7,200,000
Anheuser-Busch Companies Inc.
5.69%, 11/6/95....................................................... 7,500,000 7,494,094
Banc One Funding Corp.
5.74%, 11/6/95....................................................... 2,396,000 2,394,103
Banca Crt Financial Corp.
5.83%, 1/17/96....................................................... 7,000,000 6,913,910
Bankers Trust New York Corp.
5.73%, 12/7/95....................................................... 10,000,000 10,000,000
Bayerische Vereinsbank AG
5.95%, 7/15/96....................................................... 10,000,000(a) 10,000,000
Cargill Inc.
5.85%, 11/1/95....................................................... 7,200,000 7,200,000
Cogentrix of Richmond
5.76%, 11/21/95...................................................... 7,000,000 6,977,717
Commonwealth Bank of Australia
5.88%, 11/1/95....................................................... 7,200,000 7,200,000
Eksport Finans A/S
5.80%, 1/5/96........................................................ 7,000,000 6,927,579
Enel Inc.
5.75%, 12/14/95...................................................... 13,000,000 12,911,958
Generale Bank
5.75%, 3/15/96....................................................... 10,000,000 9,790,375
Great Lakes Chemical Corp.
5.76%, 11/28/95...................................................... 6,000,000 5,974,215
Jefferson Smurfit Inc.
5.78%, 2/6/96........................................................ 5,000,000 4,923,882
Koch Industries
5.90%, 11/1/95....................................................... 7,200,000 7,200,000
Merrill Lynch International Australia
5.77%, 11/29/95...................................................... 4,000,000 3,982,142
Pfizer Inc.
5.72%, 11/3/95....................................................... 7,000,000 6,997,779
Raytheon Co.
5.90%, 11/1/95....................................................... 7,000,000 7,000,000
</TABLE>
<PAGE>
Dreyfus Money Market Reserves
- ------------------------------------------------------------------------------
Statement of Investments (continued) October 31, 1995
<TABLE>
<CAPTION>
Principal
Commercial Paper (continued) Amount Value
- ------------------------------------------------------------------------- ------------ ------------
<S> <C> <C>
San Paolo
5.90%, 11/1/95....................................................... $ 7,200,000 $ 7,200,000
WMX Technologies Inc.
5.76%, 11/16/95...................................................... 7,300,000 7,282,510
------------
TOTAL COMMERCIAL PAPER
(cost $160,264,285).................................................. $160,264,285
------------
Corporate Notes--13.1%
- -------------------------------------------------------------------------
Bear Stearns Companies Inc.
6.03%, 6/12/96....................................................... $ 6,000,000(a) $ 6,000,000
Bear Stearns Ser B Mtn
5.83%, 8/5/96........................................................ 9,000,000(a) 9,000,000
Boatmens Bank
5.84%, 6/12/96....................................................... 5,000,000(a) 5,000,000
Boatmen First Stn
5.85%, 6/12/96....................................................... 10,000,000(a) 10,000,000
Comerica Bank
5.51%, 11/15/95...................................................... 9,500,000(a) 9,499,666
------------
TOTAL CORPORATE NOTES
(cost $39,499,666)................................................... $ 39,499,666
------------
Promissory Note--3.3%
- -------------------------------------------------------------------------
Compagnie Bancair USA Fin
5.76%, 4/29/96
(cost $9,999,021).................................................... $ 10,000,000(a) $ 9,999,021
------------
Short-Term Bank Notes--5.6%
- -------------------------------------------------------------------------
PNC Bank NA
5.88%, 8/12/96....................................................... $ 10,000,000(a) $ 9,995,463
Wachovia Corp., N.C.
5.74%, 11/27/95...................................................... 7,000,000 7,000,000
------------
TOTAL SHORT TERM BANK NOTES
(cost $16,995,463)................................................... $ 16,995,463
------------
Time Deposit--2.3%
- -------------------------------------------------------------------------
Nationsbank Of Texas (Nassau)
5.91%, 11/1/95
(cost $7,000,000).................................................... $ 7,000,000 $ 7,000,000
------------
Repurchase Agreements--16.0%
- -------------------------------------------------------------------------
Lehman Government Securities Inc.
Dated 10/31/95, due 11/1/95 in the amount
of $23,144,760 (fully collateralized by
$22,675,000 U.S. Treasury Notes, 7.50%,
due 1/31/97, value $23,141,000)...................................... $ 23,141,000 $ 23,141,000
</TABLE>
<PAGE>
Dreyfus Money Market Reserves
- ------------------------------------------------------------------------------
Statement of Investments (continued) October 31, 1995
<TABLE>
<CAPTION>
Principal
Repurchase Agreements (continued) Amount Value
- ------------------------------------------------------------------------- ------------ ------------
<S> <C> <C>
Salomon Brothers Inc.
Dated 10/31/95, due 11/1/95 in the amount
of $25,004,063 (fully collateralized by
$24,509,000 U.S. Treasury Notes, 7.00%,
due 4/15/99, value $25,000,000)...................................... $ 25,000,000 $ 25,000,000
------------
TOTAL REPURCHASE AGREEMENTS
(cost $48,141,000)................................................... $ 48,141,000
------------
TOTAL INVESTMENTS
(cost $298,898,716)......................................... 99.1% $298,898,716
CASH AND RECEIVABLES--NET....................................... 0.9% $ 2,707,412
------ ------------
NET ASSETS ..................................................... 100.0% $301,606,128
------ ------------
------ ------------
</TABLE>
Note to Statement of Investments;
- -----------------------------------------------------------------------------
(a) Variable interest rate--subject to change.
See notes to financial statements.
<PAGE>
Dreyfus Money Market Reserves
- ------------------------------------------------------------------------------
Statement of Assets and Liabilities October 31, 1995
<TABLE>
<S> <C> <C>
ASSETS:
Investments in securities, at value (cost $298,898,716)-see Statement of
Investments (including repurchase agreements of $48,141,000).......... $298,898,716
Cash.................................................................... 2,307,100
Interest receivable..................................................... 1,215,050
Other receivables....................................................... 4,005
------------
302,424,871
LIABILITIES:
Due to The Dreyfus Corporation-Note 2(a)................................ $242,499
Dividends payable....................................................... 525,699
Directors' fees payable-Note 2(c)....................................... 50,545 818,743
-------- ------------
NET ASSETS.................................................................. $301,606,128
------------
------------
REPRESENTED BY:
Paid-in capital......................................................... $301,617,006
Accumulated net realized (loss) on investments.......................... (10,878)
------------
NET ASSETS at value......................................................... $301,606,128
------------
------------
NET ASSET VALUE, offering and redemption price per share:
Investor Shares
(2 billion shares of $.001 par value Capital Stock authorized)
($161,819,261 / 161,825,017 shares of Capital Stock outstanding)...... $1.00
-----
-----
Class R Shares
(2 billion shares of $.001 par value Capital Stock authorized)
($139,786,867 / 139,791,989 shares of Capital Stock outstanding)...... $1.00
-----
-----
</TABLE>
See notes to financial statements.
<PAGE>
Dreyfus Money Market Reserves
- ------------------------------------------------------------------------------
Statement of Operations Year ended October 31, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest Income......................................................... $18,194,648
Expenses:
Investment management fee--Note 2(a).................................. $1,479,772
Distribution fee (Investor shares)-Note 2(b).......................... 346,318
Directors' fees and expenses--Note 2(c)............................... 53,795
Total Expenses.................................................... 1,879,885
---------- -----------
INVESTMENT INCOME--NET...................................................... 16,314,763
NET REALIZED (LOSS) ON INVESTMENTS.......................................... (10,878)
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $16,303,885
-----------
-----------
</TABLE>
See notes to financial statements.
<PAGE>
Dreyfus Money Market Reserves
- ------------------------------------------------------------------------------
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended October 31,
-------------------------------
1995 1994
------------ ------------
<S> <C> <C>
OPERATIONS:
Investment income--net............................................... $ 16,314,763 $ 4,078,746
Net realized (loss) on investments................................... (10,878) --
------------ ------------
Net Increase In Net Assets Resulting From Operations............... 16,303,885 4,078,746
------------ ------------
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income--net:
Investor Shares.................................................... (9,095,601) (44,787)
Class R Shares..................................................... (7,219,162) (4,033,959)
------------ ------------
Total Dividends.................................................. (16,314,763) (4,078,746)
------------ ------------
CAPITAL STOCK TRANSACTIONS ($1.00 per share)*:
Net proceeds from shares sold:
Investor Shares.................................................... 314,697,956 6,781,761
Class R Shares..................................................... 225,926,525 214,477,712
Issued in exchange for shares of Dreyfus/Laurel Cash Management Fund:
Investor Shares.................................................... 209,866,862 --
Dividends reinvested:
Investor Shares.................................................... 8,003,722 31,002
Class R Shares..................................................... 4,593,646 2,593,570
Cost of shares redeemed:
Investor Shares.................................................... (374,354,965) (3,201,321)
Class R Shares..................................................... (215,481,690) (196,077,833)
------------ ------------
Increase In Net Assets From Capital Stock Transactions........... 173,252,056 24,604,891
------------ ------------
Total Increase In Net Assets................................... 173,241,178 24,604,891
NET ASSETS:
Beginning of year.................................................... 128,364,950 103,760,059
------------ ------------
End of year.......................................................... $301,606,128 $128,364,950
------------ ------------
------------ ------------
<FN>
- ---------------
* The Fund commenced selling Investor shares on April 6, 1994. Any shares
outstanding prior to April 4, 1994 were designated as Class R shares of the
Fund.
</TABLE>
See notes to financial statements.
<PAGE>
Dreyfus Money Market Reserves
- ------------------------------------------------------------------------------
Financial Highlights
Reference is made to pages 5 and 6 of the Fund's Prospectus
dated March 1, 1996.
See notes to financial statements.
<PAGE>
Dreyfus Money Market Reserves
- ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 1--Significant Accounting Policies:
The Dreyfus/Laurel Funds, Inc. (the "Company") is registered under
the Investment Company Act of 1940 ("Act") as a diversified open-end
management investment company and operates as a series company currently
offering sixteen Series including the Dreyfus Money Market Reserves (the
"Fund"). The Dreyfus Corporation ("Manager") serves as the Fund's investment
adviser. The Manager is a direct subsidiary of Mellon Bank, N.A. ("Mellon
Bank").
Premier Mutual Fund Services, Inc. (the "Distributor") acts as the
distributor of the Fund's shares. The Distributor, located at One Exchange
Place, Boston, Massachusetts 02109, 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.
On August 1, 1995, the Fund's Directors approved a change to the
Fund's name, effective June 9, 1995, from "Dreyfus/Laurel Prime Money Market
Fund" to "Dreyfus Money Market Reserves."
The Fund is currently authorized to issue two classes of shares:
Investor shares and Class R shares. Investor shares are sold primarily to
retail investors and bear a distribution fee. Class R shares are sold
primarily to bank trust departments and other financial service providers
(including Mellon Bank and its affiliates) acting on behalf of customers
having a qualified trust or investment account or relationship at such
institution, and bear no distribution fee. Each class of shares has identical
rights and privileges, except with respect to the distribution fee and voting
rights on matters affecting a single class. The Company has the authority to
issue 25 billion shares of capital stock with a par value of $.001.
Investment income, net of expenses (other than class specific
expenses) and realized and unrealized gains and losses are allocated daily to
each class of shares based upon the relative proportion of net assets of each
class.
(a) Portfolio Valuation: Investments are valued at amortized cost
in accordance with Rule 2a-7 of the Investment Company Act of 1940, which has
been determined by the Fund's Board of Directors to represent the fair value
of the Fund's investments.
It is the Fund's policy to maintain a continuous net asset value
per share of $1.00 for the Fund; the Fund has adopted certain investment,
portfolio valuation and dividend and distribution policies to enable it to do
so. There is no assurance, however, that the Fund will be able to maintain a
stable net asset value of $1.00.
(b) Securities Transactions and Investment Income: Securities
transactions are recorded on a trade date basis. Realized gain and loss from
securities transactions are recorded on the identified cost basis. Interest
income is recognized on the accrual basis. Cost of investments represents
amortized cost.
(c) Repurchase Agreements: The Fund may engage in repurchase
agreement transactions. Under the terms of a typical repurchase agreement, the
Fund, through its custodian and sub-custodian, takes possession of an
underlying debt obligation subject to an obligation of the seller to
repurchase, and the Fund to resell, the obligation at an agreed-upon price and
time, thereby determining the yield during the Fund's holding period. This
arrangement results in a fixed rate of return that is not subject to market
<PAGE>
Dreyfus Money Market Reserves
- ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
fluctuations during the Fund's holding period. The value of the
collateral is at least equal, at all times, to the total amount of the
repurchase obligations, including interest. In the event of a counterparty
default, the Fund has the right to use the collateral to offset losses
incurred. There is potential loss to the Fund in the event the Fund is
delayed or prevented from exercising its rights to dispose of the collateral
securities, including the risk of a possible decline in the value of the
underlying securities during the period while the Fund seeks to assert its
rights. The Fund's manager, acting under the supervision of the Board of
Directors, reviews the value of the collateral and the creditworthiness of
those banks and dealers with which the Fund enters into repurchase agreements
to evaluate potential risks.
(d) Distributions to Shareholders: It is the policy of the Fund to
declare dividends daily from investment income-net; such dividends are paid
monthly. Dividends from net realized capital gain are normally declared and
paid annually, but the Fund may make distributions on a more frequent basis
to comply with the distribution requirements of the Internal Revenue Code. To
the extent that net realized capital gain can be offset by capital loss
carryovers, it is the policy of the Fund not to distribute such gain.
(e) Federal Income Taxes: It is the policy of the Fund to continue
to qualify as a regulated investment company, if such qualification is in the
best interests of its shareholders, by complying with the applicable
provisions of the Internal Revenue Code, and to make distributions of taxable
income sufficient to relieve it from substantially all Federal income and
excise taxes.
The Fund has an unused capital loss carryover of approximately
$11,000 available for Federal income tax purposes to be applied against
future net securities profits, if any, realized subsequent to October 31,
1995. If not applied, the carryover expires in fiscal 2003.
At October 31, 1995, the cost of investments for Federal income tax
purposes was substantially the same as the cost for financial reporting
purposes (see the Statement of Investments).
NOTE 2 -- Investment Management Fee and Other Transactions with Affiliates:
(a) Investment Management Fee: Pursuant to an Investment Management
agreement with the Manager, the Manager provides or arranges for one or more
third parties and or affiliates to provide investment advisory,
administrative, custody, fund accounting and transfer agency services to the
Fund. The Manager also directs the investments of the Fund in accordance with
its investment objective, policies and limitations. For these services, the
Fund is contractually obligated to pay the Manager a fee, calculated daily
and paid monthly, at the annual rate of .50% of the value of the Fund's
average daily net assets. Out of its fee, the Manager pays all of the
expenses of the Fund except brokerage fees, taxes, interest, Rule 12b-1
distribution fees and expenses, fees and expenses of non-interested Directors
(including counsel fees) and extraordinary expenses. In addition, the Manager
is required to reduce its fee in an amount equal to the Fund's allocable
portion of fees and expenses of the non-interested Directors (including
counsel).
(b) Distribution Plan: The Fund has adopted a distribution plan
(the "Plan") pursuant to Rule 12b-1 under the 1940 Act relating to its
Investor shares. Under the Plan, the Fund may pay annually up to .25% of the
value of the average daily net assets attributable to its Investor shares to
compensate the Distributor and Dreyfus Service Corporation, an affiliate of
the Manager, for shareholder servicing activities and the Distributor for
activities primarily intended to result in the sale of Investor shares. The
Class R shares bear no
<PAGE>
Dreyfus Money Market Reserves
- ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
distribution fee. For the year ended October 31, 1995, the
distribution fee for the Investor shares was $346,318.
Under its terms, the Plan shall remain in effect from year to year,
provided such continuance is approved annually by a vote of majority of those
Directors who are not "interested persons" of the Investment Company and who
have no direct or indirect financial interest in the operation of the Plan or
in any agreement related to the Plan.
(c) Directors' Fees: Each director who is not an "interested
person" as defined in the Act receives $27,000 per year, $1,000 for each
Board meeting attended and $750 for each Audit Committee attended and is
reimbursed for travel and out-of-pocket expenses. These expenses are paid in
total by the following funds: the Dreyfus/Laurel Funds, Inc., the
Dreyfus/Laurel Tax-Free Municipal Funds, and the Dreyfus/Laurel Funds Trust.
In addition the Chairman of the Board receives an annual fee of $75,000 per
year. These fees and expenses are charged and allocated to each series based
on net assets.
NOTE 3 -- Reorganization:
On November 7, 1994, Dreyfus Money Market Reserves, acquired the assets
and certain liabilities of the Dreyfus/Laurel Cash Management Fund, in
exchange for shares of Dreyfus Money Market Reserves, pursuant to a plan of
reorganization approved by Dreyfus/Laurel Cash Management Fund shareholders
on May 20, 1994. Total shares issued by Dreyfus Money Market Reserves and the
total net assets of Dreyfus/Laurel Cash Management Fund acquired are set
forth in the Statement of Changes in Net Assets.
<PAGE>
Dreyfus Money Market Reserves
- ------------------------------------------------------------------------------
Independent Auditors' Report
The Board of Directors and Shareholders
The Dreyfus/Laurel Funds, Inc.:
We have audited the accompanying statement of assets and liabilities of
the Dreyfus Money Market Reserves of The Dreyfus/Laurel Funds, Inc.,
including the statement of investments, as of October 31, 1995, and the
related statement of operations for the year then ended, the statement of
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the periods indicated herein. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of October 31, 1995, by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of the Dreyfus Money Market Reserves of The Dreyfus/Laurel Funds,
Inc., as of October 31, 1995, and the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended, and the financial highlights for each of the periods
indicated herein, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Pittsburgh, Pennsylvania
December 15, 1995
<PAGE>
Dreyfus Municipal Reserves
- ----------------------------------------------------------------------------
Statement of Investments October 31, 1995
<TABLE>
<CAPTION>
Principal
Tax Exempt Investments--100% Amount Value
- ------------------------------------------------------------------------- ------------ -----------
<S> <C> <C>
Alabama--1.4%
Columbia Industrial Development Board, PCR, Refunding, VRDN
3.25% (Corporate Guaranty; Alabama Power) (a)........................ $ 3,000,000 $ 3,000,000
Alaska--1.7%
Alaska Housing Finance Corporation, VRDN 3.90%, Series A
(LOC: Credit Suisse, Swiss Bank Corp. and Westdeutche Landesbank) (a,b) 3,000,000 3,000,000
Anchorage, Higher Education Revenue, Refunding, VRDN
(Alaska Pacific University)
3.90% (LOC; First National Bank-Tyiokobe) (a,b)...................... 200,000 200,000
Sitka, School Improvement Project, VRDN 4% (LOC; Sumitomo Bank) (a,b).... 500,000 500,000
Arizona--3.2%
Cochise County Pollution Control Corporation, SWDR
(Arizona Electric Power Co-Op Inc. Project)
3.80%, 3/1/96 (LOC; Cooperative Finance Co.) (b)..................... 1,000,000 1,000,000
Mesa Municipal Development Corporation, Special Tax, CP
3.75%, 11/29/95 (LOC; Union Bank of Switzerland) (b)................. 2,000,000 2,000,000
Pima Industrial Development Authority, VRDN (Tuscon Electric)
4%, Series A (LOC; Bank of America) (a,b)............................ 3,000,000 3,000,000
Pinal County Industrial Development Authority, PCR, VRDN
(Magma Copper Co. Project) 3.95% (LOC; Banque Nationale de Paris) (a,b) 1,000,000 1,000,000
Arkansas--.1%
Arkansas Hospital Equipment Finance Authority,
Hospital Equipment Revenue, VRDN 3.90% (LOC; Credit Suisse) (a,b).... 195,000 195,000
California--6.6%
Anaheim Housing Authority, MFHR, VRDN (Bel Page Project)
3.80%, Series A (LOC; FNMA) (a,b).................................... 300,000 300,000
California Health Facilities Financing Authority, Revenue, VRDN:
(Pooled Loan Program) 3.70%, Series B (Insured; FGIC) (a)............ 200,000 200,000
Refunding (Memorial Health Services) 3.70% (a)....................... 1,300,000 1,300,000
California Pollution Control Financing Authority, RRR, VRDN
(Southdown Incorporate) 3.95% (LOC; Societe Generale) (a,b).......... 1,000,000 1,000,000
City of Concord, MFMR, VRDN (Crossroads)
3.70%, Series B (LOC; FNMA) (a,b).................................... 200,000 200,000
Contra Costa Transportation Authority, Sales Tax Revenue, VRDN
3.75%, Series A (Insured; FGIC) (a).................................. 300,000 300,000
City of Glendale, Reliance Development Revenue, VRDN (Public Parking)
3.90% (LOC; Barclays Bank) (a,b)..................................... 900,000 900,000
Irvine Ranch Water District, District Numbers 140-240-105-250, VRDN
3.95% (LOC; Bank of America) (a,b)................................... 3,200,000 3,200,000
City of Los Angeles, MFHR, VRDN (Masselin Manor)
3.65% (LOC; Bank of America) (a,b)................................... 100,000 100,000
Los Angeles County Community Development Commission, COP, VRDN
(Willowbrook Project) 3.80% (LOC; Wells Fargo Bank) (a,b)............ 1,400,000 1,400,000
</TABLE>
<PAGE>
Dreyfus Municipal Reserves
- ----------------------------------------------------------------------------
Statement of Investments (continued) October 31, 1995
<TABLE>
<CAPTION>
Principal
Tax Exempt Investments (continued) Amount Value
- ------------------------------------------------------------------------- ------------ -----------
<S> <C> <C>
California (continued)
Los Angeles Regional Airports Improvement Corporation, Lease Revenue,
VRDN (American Airlines-Los Angeles International Airport)
4%, Series B (LOC; Wachovia Bank of Georgia) (a,b)................... $ 1,100,000 $ 1,100,000
Moorpark, MFHR, Refunding, VRDN (Le Club Apartments)
3.70%, Series A (LOC; Citibank) (a,b)................................ 500,000 500,000
Orange County, TRAN 4.50%, Series A, 6/30/96............................. 2,000,000 2,000,000
Rincon Del Diablo Municipal Water District, COP, Revenue
(Rincon Public Facility Corp.) 4%, 11/1/95 (LOC; Fuji Bank) (b)...... 1,200,000 1,200,000
San Diego Housing Authority, MFHR, VRDN (Market Street Square Project)
4%, Series G (LOC; Barclays Bank) (a,b).............................. 1,035,000 1,035,000
Colorado--2.3%
Arapahoe County, IDR, VRDN (CSX Beckett Aviation)
3.81% (LOC; Barclays Bank) (a,b)..................................... 700,000 700,000
Colorado Health Facilities Authority, Revenue:
Health Care Systems (Sisters of Charity-Sunny Acre)
3.75%, 5/1/96 (Insured; MBIA and SBPA; Morgan Guaranty Trust Co.).. 1,000,000 1,000,000
VRDN (North Colorado Medical Center)
3.90% (BPA; Credit Suisse and Insured; MBIA) (a)................... 200,000 200,000
Fort Collins, Prerefunded 7.35%, 12/1/95 (Escrowed in; U.S. Treasuries).. 1,000,000 1,027,936
Lakewood, IDR, VRDN (Service Merchandise Co. Project)
3.80% (LOC; Industrial Bank of Japan) (a,b).......................... 200,000 200,000
South Devner Metropolitan District, Revenue
3.55%, 12/1/95 (LOC; Barclays Bank) (b).............................. 2,000,000 2,000,000
Connecticut--.3%
Fairfield Industrial Development Authority, IDR, VRDN
(R. Dakin and Co. Project) 3.75% (LOC; Bank of America) (a,b)........ 600,000 600,000
Delaware--2.5%
Delaware Economic Development Authority, Revenue, VRDN
(Delmarva Power and Light Co. Project):
Exempt Facility 4.05%, Series A
(Corporate Guaranty; Delmarva Power and Light Co.) (a)......... 600,000 600,000
Gas Facility 4.05%
(Corporate Guaranty; Delmarva Power and Light Co.) (a)......... 3,400,000 3,400,000
New Castle County, PCR, VRDN (Johnson Controls Inc.)
4.20% (Corporate Guaranty; Johnson Controls Inc.) (a)................ 300,000 300,000
Wilmington, HR, VRDN (Franciscan Health Systems):
4%, Series A (LOC; Toronto Dominion Bank) (a,b)...................... 800,000 800,000
4%, Series B (LOC; Societe Generale) (a,b)........................... 500,000 500,000
Florida--5.3%
Florida Housing Finance Agency, Residential Mortgage, Revenue
4.25%, 12/15/95 (BPA; Citibank)...................................... 5,300,000 5,300,000
Hillsborough County Port District, Special Purpose Revenue, Refunding,
VRDN (IMC Fertilizer) 3.875% (LOC; Rabobank Nederland) (a,b)......... 2,100,000 2,100,000
</TABLE>
<PAGE>
Dreyfus Municipal Reserves
- ----------------------------------------------------------------------------
Statement of Investments (continued) October 31, 1995
<TABLE>
<CAPTION>
Principal
Tax Exempt Investments (continued) Amount Value
- ------------------------------------------------------------------------- ------------ -----------
<S> <C> <C>
Florida (continued)
Putnam County Development Authority, PCR:
(Seminole Electric Co-Op) 4.25%, Series D, 12/15/95
(Corporate Guaranty; National Rural Utility Co-Op)................. $ 1,300,000 $ 1,300,000
VRDN (Seminole Electric):
3.95%, Series H-1 (Corporate Guaranty; Cooperative Finance Co.) (a) 1,150,000 1,150,000
3.95%, Series H-2 (Corporate Guaranty; Cooperative Finance Co.) (a) 350,000 350,000
West Orange Memorial Hospital, Tax District Revenue, CP
3.50%, Series A-1, 11/9/95 (LOC; Rabobank Nederland) (b)............. 1,500,000 1,500,000
Georgia--4.4%
Burke County Development Authority, PCR, VRDN
(Georgia Power Co. Project-Vogtle) 3.95% (a)......................... 1,000,000 1,000,000
Cobb County Development Authority, Revenue, VRDN
(Nuclear Power Inc. Project) 3.95% (LOC; Trust Co. Bank) (a,b)....... 1,770,000 1,770,000
Fulton County, TAN, CP (General Fund) 4.75%, 12/29/95.................... 3,000,000 3,002,759
Fulton County Development Authority, Industrial Revenue, VRDN
3.90% (LOC; National Westminster Bank) (a,b)......................... 1,900,000 1,900,000
Hart County Industrial Building Authority, IDR, Refunding, VRDN
(Dundee Mills Inc. Project) 4.10% (LOC; Trust Co. Bank) (a,b)........ 2,000,000 2,000,000
Hawaii--2.1%
State of Hawaii, Airports Systems Revenue, Refunding (Second Series)
5%, 7/1/96 (Insured; MBIA)........................................... 1,000,000 1,005,469
Hawaii Department of Budget and Finance, Special Purpose Mortgage Revenue
(Kaiser Permanente Medical Care) 3.75%, Series B, 3/1/96............. 2,700,000 2,700,000
Second Market Services Corporation, Student Loan Revenue, Refunding, VRDN
3.90%, Series II (LOC; National Westminster Bank) (a,b).............. 1,000,000 1,000,000
Idaho--1.4%
Idaho Health Facilities Authority, Revenue, VRDN
(Saint Luke's Regional Medical Center Project)
3.95% (LOC; Credit Suisse) (a,b)..................................... 3,075,000 3,075,000
Illinois--17.8%
Alsip, IDR, VRDN (Ardco Inc. Project)
4.19% (LOC; Harris Trust and Savings Bank) (a,b)..................... 1,675,000 1,675,000
Burbank, IDR, VRDN (Service Merchandise Co. Inc.)
3.80% (LOC; Canadian Imperial Bank of Commerce) (a,b)................ 400,000 400,000
City of Chicago:
GO, VRDN 3.90%, Series B (LOC; Canadian Imperial Bank of Commerce) (a,b) 1,000,000 1,000,000
Tender Notes 3.75%, 10/31/96 (LOC; Morgan Guaranty Trust Co.) (b).... 1,000,000 1,000,000
Chicago O'Hare International Airport, Revenue (General Airport Second Lien)
3.80%, Series B, 1/1/96 (LOC; Westpac Banking Corporation) (b)....... 800,000 800,000
Illinois Development Finance Authority, VRDN:
IDR:
(Columbia Graphics Corporation Project)
4.10% (LOC; Harris Trust and Savings Bank) (a,b)............... 1,300,000 1,300,000
(Overton Gear and Tool Corp.)
4.10% (LOC; Harris Trust and Savings Bank) (a,b)............... 2,100,000 2,100,000
</TABLE>
<PAGE>
Dreyfus Municipal Reserves
- ----------------------------------------------------------------------------
Statement of Investments (continued) October 31, 1995
<TABLE>
<CAPTION>
Principal
Tax Exempt Investments (continued) Amount Value
- ------------------------------------------------------------------------- ------------ -----------
<S> <C> <C>
Illinois (continued)
Illinois Development Finance Authority, VRDN (continued):
Revenue:
(Aurora Central Catholic High School)
3.95% (LOC; Northern Trust Co.) (a,b).......................... $ 1,000,000 $ 1,000,000
(Council Jewish Ederly) 3.90% (LOC; Lasalle National Bank) (a,b)... 2,200,000 2,200,000
(Lyric Opera Chicago Project) 3.90% (LOC: Harris Trust and Savings
Bank,
National Bank of Detroit and Northern Trust Co.) (a,b)......... 1,100,000 1,100,000
(Residention Rental-F.C. Harris Pavilion Project)
3.90% (LOC; FNMA) (a,b)........................................ 3,500,000 3,500,000
(Saint Paul's House Project) 3.85% (LOC; Lasalle National Bank) (a,b) 1,625,000 1,625,000
(WBEZ Alliance Inc. Project) 3.95% (LOC; Lasalle National Bank) (a,b) 1,000,000 1,000,000
Illinois Educational Facilities Authority, Revenues, VRDN:
(Aurora University) 3.95% (LOC; Harris Trust and Savings Bank) (a,b). 500,000 500,000
(Chicago Historical Society) 3.80% (LOC; Northern Trust Co.) (a,b)... 3,400,000 3,400,000
(Newberry Library) 3.90% (LOC; Northern Trust Co.) (a,b)............. 615,000 615,000
Illinois Health Facilities Authority, Revenue:
CP (Alexian Brothers Medical Center) 3.80%, Series B, 11/6/95
(Insured; MBIA and SBPA; Morgan Guaranty Trust Co.)................ 2,570,000 2,570,000
VRDN:
(Condell Memorial Hospital) 3.80% (LOC; Bank of Tokyo) (a,b)....... 400,000 400,000
(Evangelical Hospitals Corp.) 3.75% (LOC; Barclays Bank) (a,b)..... 2,060,000 2,060,000
(Palos Community Hospital) 3.85%, Series B (LOC; ABN-Amro Bank) (a,b) 1,530,000 1,530,000
City of Lockport, IDR, VRDN (Panduit Corp. Project)
3.95% (LOC; Commerzbank) (a,b)....................................... 3,200,000 3,200,000
City of Naperville, IDR, VRDN (Service Merchandise Co.) 3.80% (a)........ 2,000,000 2,000,000
City of New Lenox, IDR, VRDN (Panduit Corporation Project)
3.95% (LOC; Commerzbank) (a,b)....................................... 1,300,000 1,300,000
City of Northbrook, IDR, Refunding, VRDN (Euromarket Designs Inc.)
3.95% (LOC; Harris Trust and Savings Bank) (a,b)..................... 100,000 100,000
City of Zion, Revenue, VRDN (H & M Enterprises LLC Project)
4.35%, Series A (LOC; Federal Home Loan Banks) (a,b)................. 3,050,000 3,050,000
Indiana--2.7%
City of Auburn, EDR, VRDN (RJ Tower Corp. Project)
4.25% (LOC; Comerica Bank) (a,b)..................................... 425,000 425,000
Indiana Development Finance Authority, Exempt Facility Revenue, VRDN
(Mid America Project) 4.10% (LOC; Union Bank of Switzerland) (a,b)... 2,000,000 2,000,000
Indiana Hospital Equipment Financing Authority, Revenue, VRDN
3.90% (Insured; MBIA and SBPA; The Bank of New York) (a)............. 2,600,000 2,600,000
Purdue University, University Revenue, VRDN (Student Fee)
3.80%, Series E (a).................................................. 1,000,000 1,000,000
Iowa--.9%
Iowa Municipalities Workers Compensation Association,
Self Insurance Funding Revenue
4.10%, 7/1/96 (LOC; Dai-Ichi Kangyo Bank) (b)........................ 2,000,000 2,000,000
</TABLE>
<PAGE>
Dreyfus Municipal Reserves
- ----------------------------------------------------------------------------
Statement of Investments (continued) October 31, 1995
<TABLE>
<CAPTION>
Principal
Tax Exempt Investments (continued) Amount Value
- ------------------------------------------------------------------------- ------------ -----------
<S> <C> <C>
Kansas--.3%
City of Wamego, PCR, VRDN (Missouri Public Service Co. Project)
3.90% (LOC; Credit Suisse) (a,b)..................................... $ 700,000 $ 700,000
Kentucky--1.9%
City of Hopkinsville, IDR, VRDN (American Precision Machinery)
4% (LOC; Mitsubishi Bank) (a,b)...................................... 2,250,000 2,250,000
Kentucky Economic Development Finance Authority, VRDN (Sisters of Charity)
4% (a)............................................................... 400,000 400,000
Pendelton County, Self Insurance Funding Revenue
(Kentucky Association Community) 4%, 7/1/96 (LOC; PNC Bank) (b)...... 1,500,000 1,500,000
Louisiana--.6%
East Baton Rouge Parish, PCR, Refunding, VRDN (Rhone-Poulenc Inc. Project)
4% (LOC; Banque Nationale de Paris) (a,b)............................ 100,000 100,000
Plaquemines, Port, Harbor and Terminal District, Port Facilities Revenue
(International Marine Terminal Project)
4.50%, Series B, 3/15/96 (LOC; Morgan Guaranty Trust Co.) (b)........ 1,250,000 1,250,000
Maine--.7%
State of Maine, Notes 4.10%, 2/1/96...................................... 1,500,000 1,500,920
Maryland--1.8%
State of Maryland, Revenue (First Series) 6.50%, 3/1/96.................. 4,000,000 4,037,427
Massachusetts--1.1%
Town of Adams, BAN 4.04%, 6/14/96........................................ 500,000 500,000
Commonwealth of Massachusetts, VRDN
3.80%, Series E (LOC; ABN-Amro Bank) (a,b)........................... 1,000,000 1,000,000
Massachusetts Health and Educational Facilities Authority, Revenue, VRDN
(Harvard University) 3.70%, Series I (a)............................. 1,000,000 1,000,000
Michigan--.7%
Michigan Underground Storage Tank Final Assurance Authority, Revenue, VRDN
3.90%, Series I (LOC; Canadian Imperial Bank of Commerce) (a,b)...... 1,500,000 1,500,000
Minnesota--3.2%
Saint Cloud, Hospital Facilities Revenue, VRDN (Saint Cloud Hospital)
3.90%, Series A (LOC; Kredietbank) (a,b)............................. 3,100,000 3,100,000
Southern Minnesota Municipal Power Agency, Power Supply Systems Revenue
7.125%, Series C, 1/1/96 (Escrowed in; U.S. Treasuries).............. 3,800,000 3,896,762
Mississippi--1.9%
Jackson County, IDR, VRDN (McCarthy-Holman Co. Project)
3.95% (LOC; Barclays Bank) (a,b)..................................... 300,000 300,000
Jackson Water Systems, Revenue, Refunding
3.60%, 2/1/96 (Corporate Guaranty; Chevron USA Inc.)................. 4,000,000 4,000,000
</TABLE>
<PAGE>
Dreyfus Municipal Reserves
- ----------------------------------------------------------------------------
Statement of Investments (continued) October 31, 1995
<TABLE>
<CAPTION>
Principal
Tax Exempt Investments (continued) Amount Value
- ------------------------------------------------------------------------- ------------ -----------
<S> <C> <C>
Missouri--2.4%
Kansas City Industrial Development Authority, MFHR, VRDN
(Timberline Village Apartments Project) 4% (LOC; Bank of America) (a,b) $ 1,300,000 $ 1,300,000
Missouri Health and Educational Facilities Authority,
Health Facilities Revenue, VRDN (Barnes Hospital Project)
3.90% (LOC; Morgan Guaranty Trust Co.) (a,b)......................... 2,000,000 2,000,000
Saint Charles County Industrial Development Authority, Industrial Revenue,
Refunding, VRDN (Cedar Ridge Apartments)
3.95%, Series A (LOC; Bank One) (a,b)................................ 2,045,000 2,045,000
Montana--.1%
Butte-Silver Bow, PCR, VRDN (Rhone-Poulenc Inc. Project):
3.90% (LOC; Banque Nationale de Paris) (a,b)......................... 105,000 105,000
Refunding 3.90% (LOC; Banque Paribas) (a,b).......................... 100,000 100,000
Nevada--.4%
Clark County, IDR, VRDN (Nevada Power Co. Project)
3.90% (LOC; Barclays Bank) (a,b)..................................... 1,000,000 1,000,000
New Hampshire--.7%
New Hampshire Higher Educational and Health Facilities Authority, Revenue
(Dartmouth Educational Loan Corp.) 4.10%, 6/1/96..................... 1,630,000 1,630,000
New Jersey--.4%
Newark, Healthcare Facility Revenue, VRDN (New Community Facility)
3.90%, Series A (Collateralized in; GNMA and Insured; FHA) (a)....... 1,000,000 1,000,000
New York--1.6%
Broome County Industrial Development Agency, IDR, Refunding, VRDN
(Bing Realty Project) 3.75% (LOC; Meridian Bancorp Inc.) (a,b)....... 250,000 250,000
New York City Municipal Water Finance Authority, CP
3.75%, 11/9/95 (LOC; Canadian Imperial Bank of Commerce) (b)......... 2,000,000 2,000,000
New York State Energy, Research and Development Authority, PCR, Refunding,
VRDN (New York State Electric and Gas)
3.70%, Series C (LOC; Morgan Guaranty Trust Co.)(a,b)................ 600,000 600,000
New York State Local Government Assistance Corporation, VRDN
3.80%, Series F (LOC; Toronto-Dominion Bank) (a,b)................... 700,000 700,000
North Carolina--.5%
Halifax County Industrial Facilities and Pollution Control Financing
Authority,
Exempt Facilities Revenue, VRDN (Westmoreland)
4.10% (LOC; Credit Suisse) (a,b)..................................... 1,200,000 1,200,000
North Dakota--.4%
Mercer County, PCR, VRDN (United Power-National Rural)
3.95%, Series C (LOC; Charter Finance Corporation) (a,b)............. 850,000 850,000
Oregon--.5%
Multnomah County School District Number 15, Notes 4.75%, 5/30/96......... 1,000,000 1,005,863
</TABLE>
<PAGE>
Dreyfus Municipal Reserves
- ----------------------------------------------------------------------------
Statement of Investments (continued) October 31, 1995
<TABLE>
<CAPTION>
Principal
Tax Exempt Investments (continued) Amount Value
- ------------------------------------------------------------------------- ------------ -----------
<S> <C> <C>
Pennsylvania--5.9%
Allegheny County Industrial Development Authority, Revenue, CP (Duquesne)
3.75%, Series A, 11/30/95 (LOC; Canadian Imperial Bank of Commerce) (b) $ 3,500,000 $ 3,500,000
Bucks County Industrial Development Authority, Revenue, VRDN
(SHV Real Estate Inc.) 3.85% (LOC; ABN-Amro Bank) (a,b).............. 200,000 200,000
Chartiers Valley, Industrial and Commercial Development Revenue, VRDN
(William Penn Place Project) 4% (LOC; PNC Bank) (a,b)................ 1,100,000 1,100,000
Chester County Industrial Development Authority, IDR, VRDN
(Keystone Foods Corporation) 3.85% (LOC; Bank of Scotland) (a,b)..... 1,700,000 1,700,000
Jeanette Health Service Authority, HR, VRDN
(Jeanette District Memorial Hospital Project)
4.15% (LOC; PNC Bank) (a,b).......................................... 600,000 600,000
Lehigh County Industrial Development Authority, PCR, VRDN
(Allegheny Electric Corp.) 3.90% (LOC; Rabobank Nederland) (a,b)..... 120,000 120,000
Moon Industrial Development Authority, IDR, VRDN
(Executive Office Association Project) 4% (LOC; PNC Bank) (a,b)...... 1,250,000 1,250,000
Pennsylvania Higher Education Assistance Agency, Student Loan Revenue, VRDN
4% (LOC; Student Loan Marketing Association) (a,b)................... 2,300,000 2,300,000
Schuylkill County Industrial Development Authority, Revenue, VRDN
(Pine Grove Landfill Inc.) 4.10% (LOC; Meridian Bancorp) (a,b)....... 300,000 300,000
Upper Allegheny Joint Sanitation Authority, Electric Revenue
(Allegheny Valley North)
4.50%, Series C, 1/15/96 (Escrowed in; U.S. Treasuries).............. 1,550,000 1,550,000
Washington County Industrial Development Authority, IDR, Refunding, VRDN
(Wetterau Finance Co. Project) 4% (LOC; PNC Bank) (a,b).............. 500,000 500,000
South Carolina--3.2%
Lexington County, Industrial Revenue, Prerefunded, VRDN
(Safety-Kleen Corporation Project)
4% (LOC; Union Bank of Switzerland) (a,b)............................ 400,000 400,000
South Carolina Public Service Authority,
Electric Revenue and Electric Systems Revenue, Prerefunded
7.875%, 1/1/96 (Escrowed in U.S. Treasuries)......................... 415,000 425,999
City of Walhalla, Revenue, Refunding, VRDN (Avondale Mills Inc. Project)
3.95% (LOC; Trust Co. Bank) (a,b).................................... 1,600,000 1,600,000
York County, PCR (North Carolina Electric Project):
3.75%, Series N-5, 3/15/96 (LOC; Cooperative Finance Co.) (b)........ 1,965,000 1,965,000
VRDN 3.95%, Series N-2 (LOC; Cooperative Finance Co.) (a,b).......... 2,800,000 2,800,000
Tennessee--.2%
Knox County Industrial Development Board, Industrial Revenue, VRDN
(Service Merchandise Co.) 3.80% (LOC; Industrial Bank of Japan) (a,b) 400,000 400,000
Texas--9.8%
Birdville Independent School District, Revenue
7.50%, 2/15/96 (Guaranteed by; Texas Public School).................. 400,000 403,399
Dallas-Fort Worth International Airport Facility Improvement Corporation,
Revenue, CP 3.55%, 11/1/95 (LOC; National Westminster Bank) (b)...... 1,020,000 1,020,000
</TABLE>
<PAGE>
Dreyfus Municipal Reserves
- ----------------------------------------------------------------------------
Statement of Investments (continued) October 31, 1995
<TABLE>
<CAPTION>
Principal
Tax Exempt Investments (continued) Amount Value
- ------------------------------------------------------------------------- ------------ -----------
<S> <C> <C>
Texas (continued)
Dallas Industrial Development Corporation, IDR, VRDN
(Sealed Power Corp.) 3.75% (LOC; National Bank of Detroit) (a,b)..... $ 1,100,000 $ 1,100,000
Grapevine Industrial Development Corporation, Revenue, VRDN
(Multiple Mode-American Airlines):
4%, Series A-4 (LOC; Sanwa Bank) (a,b)............................. 1,300,000 1,300,000
4%, Series B-1 (LOC; Sanwa Bank) (a,b)............................. 400,000 400,000
Gulf Coast Waste Disposal Authority, Water Pollution Control,
Contract Revenue (Amoco Oil-Amoco Chemicals)
6%, 1/15/96 (Corporate Guaranty; Amoco Credit)....................... 2,640,000 2,641,316
Lower Colorado River Authority, Revenue, CP
3.70%, Series D, 11/9/95 (LOC; Morgan Guaranty Trust Co.) (b)........ 1,000,000 1,000,000
Lubbock Health Facilities Development Corporation, HR (Methodist Hospital)
5.80%, 12/1/95 (Insured; MBIA)....................................... 1,000,000 1,001,025
North Central Health Facility Development Corporation, HR, VRDN
(Presbyterian Medical Center) 4%, Series D (Insured; MBIA) (a)....... 200,000 200,000
North Texas Higher Education Authority, Student Loan Revenue, VRDN
4% (Insured; AMBAC) (a).............................................. 1,300,000 1,300,000
Nueces County Health Facilities Development Corporation, Revenue, VRDN
(Driscoll Foundation Children) 3.95% (LOC; Bank One) (a,b)........... 2,395,000 2,395,000
Rockwall Industrial Development Corporation, IDR, VRDN
(Columbia Extrusion Corporation)
4.20% (LOC; U.S. National Bank of Oregon) (a,b)...................... 1,000,000 1,000,000
San Antonio, Sewer Revenue, Prerefunded
7.25%, 5/1/96 (Escrowed in; U.S. Treasuries)......................... 2,000,000 2,074,643
State of Texas, TRAN 4.75%, Series A, 8/30/96............................ 2,500,000 2,513,360
Texas Public Finance Authority, Revenue, GO, CP
3.75%, Series A, 11/2/95 (Guaranteed by; State of Texas)............. 1,000,000 1,000,000
Tyler Health Facilities Development Corporation, HR, CP
(East Texas Medical Center Regional Health)
3.90%, Series C, 12/8/95 (LOC; Banque Paribas) (b)................... 2,300,000 2,300,000
Utah--3.5%
Intermountain Power Agency, Utah Power Supply Revenue, Prerefunded
7.073%, Series F, 7/1/96 (Escrowed in U.S. Treasuries)............... 1,700,000 1,769,779
State of Utah, Board of Regents, Student Loan Revenue, VRDN:
3.90%, Series B (Insured; AMBAC) (a)................................. 200,000 200,000
4%, Series C (Insured; AMBAC) (a).................................... 300,000 300,000
Washington County School District, TAN (Saint George) 4.375%, 1/31/96.... 2,250,000 2,252,704
City of West Jordan, TRAN 4%, 6/28/96.................................... 3,255,000 3,255,000
Washington--1.1%
State of Washington, Revenue 5.50%, Series C, 7/1/96..................... 1,000,000 1,010,634
Washington State Health Care Facilities Authority, Revenue, VRDN
(Fred Hutchinson Cancer):
4%, Series A (LOC; Morgan Guaranty Trust Co.) (a,b)................ 805,000 805,000
4%, Series B (LOC; Morgan Guaranty Trust Co.) (a,b)................ 595,000 595,000
</TABLE>
<PAGE>
Dreyfus Municipal Reserves
- ----------------------------------------------------------------------------
Statement of Investments (continued) October 31, 1995
<TABLE>
<CAPTION>
Principal
Tax Exempt Investments (continued) Amount Value
- ------------------------------------------------------------------------- ------------ -----------
<S> <C> <C>
West Virginia--1.6%
Putnam County, IDR, VRDN (FMC Corp.)
3.90% (LOC; Union Bank of Switzerland) (a,b)......................... $ 700,000 $ 700,000
West Virginia Public Energy Authority, Energy Revenue, CP
(Morgantown Association Project)
3.65%, 11/6/95 (LOC; Swiss Bank Corp.) (b)........................... 2,800,000 2,800,000
Wisconsin--2.7%
City of Wisconsin, Promisory Notes, Revenue 4.80%, Series A, 2/15/96..... 1,000,000 1,003,085
City of Platteville, IDR, VRDN (Woodward Communications Project)
4.10% (LOC; Harris Trust and Savings Bank) (a,b)..................... 2,950,000 2,950,000
Wisconsin Health and Educational Facilities Authority, Revenue, CP
(Alexian Village Milwaukee Inc.)
3.50%, Series A, 11/8/95 (LOC; Sumitomo Bank) (b).................... 1,300,000 1,300,000
Wisconsin Health Facilities Authority, Revenue, VRDN
(Franciscan Health Care)
3.80%, Series A-1 (LOC; Toronto-Dominion Bank) (a,b)................. 765,000 765,000
Wyoming--.1%
Green River, Revenue, VRDN (Rhone-Poulenc)
4.15% (LOC; Societe Generale) (a,b).................................. 300,000 300,000
------------
TOTAL INVESTMENTS (cost $221,748,080).................................... $221,748,080
------------
------------
</TABLE>
<TABLE>
<CAPTION>
Summary of Abbreviations
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
AMBAC American Municipal Bond Assurance Corporation LOC Letter of Credit
BAN Bond Anticipation Notes MBIA Municipal Bond Investors Assurance
BPA Bond Purchase Agreeement Insurance Association
COP Certificate of Participation MFHR Multi-Family Housing Revenue
CP Commercial Paper MFMR Multi-Family Mortgage Revenue
EDR Economic Development Revenue PCR Pollution Control Revenue
FGIC Financial Guaranty Insurance Company RRR Resources Recovery Revenue
FHA Federal Housing Administration SBPA Standby Bond Purchase Agreeement
FNMA Federal National Mortgage Association SWDR Solid Waste Disposal Revenue
GNMA Government National Mortgage Association TAN Tax Anticipation Notes
GO General Obligation TRAN Tax and Revenue Anticipation Notes
HR Hospital Revenue VRDN Variable Rate Demand Notes
IDR Industrial Development Revenue
</TABLE>
<TABLE>
<CAPTION>
Summary of Combined Ratings (Unaudited)
- -----------------------------------------------------------------------------------------------------------------
Fitch (c) or Moody's or Standard & Poor's Percentage of Value
- --------- --------- -------------------- -----------------------
<S> <C> <C> <C>
F1+/F1 VMIG1/MIG1, P1 (d) SP1+/SP1, A1+/A1 (d) 80.5%
F2 VMIG2/MIG2, P2 SP2, A2 0.5%
AAA/AA (e) Aaa/Aa (e) AAA/AA (e) 14.9%
Not Rated (f) Not Rated (f) Not Rated (f) 4.1%
------
100.0%
------
------
</TABLE>
<PAGE>
Dreyfus Municipal Reserves
- --------------------------------------------------------------------------
Statement of Investments (continued) October 31, 1995
Notes to Statement of Investments:
- -------------------------------------------------------------------------
(a) Securities payable on demand. The interest rate, which is subject to
change, is based upon bank prime rates or an index of market interest
rates.
(b) Secured by letters of credit. At October 31, 1995, 63.4% of the Fund's
net assets are backed by letters of credit issued by domestic banks,
foreign banks, government agencies and brokerage firms.
(c) Fitch currently provides creditworthiness information for a limited
amount of investments.
(d) P1 and A1 are the highest ratings assigned tax-exempt commercial paper by
Moody's and Standard & Poor's, respectively.
(e) Notes which are not F, MIG or SP rated are represented by bond ratings of
the issuers.
(f) Securities which, while not rated by Fitch, Moody's or Standard & Poor's
have been determined by the Fund's Board of Directors to be of comparable
quality to those rated securities in which the Fund may invest.
See notes to financial statements.
<PAGE>
Dreyfus Municipal Reserves
- --------------------------------------------------------------------------
Statement of Assets and Liabilities October 31, 1995
<TABLE>
<S> <C> <C>
ASSETS:
Investments in securities, at value (cost $221,748,080)--see Statement
of Investments $221,748,080
Cash.................................................................... 2,290,216
Interest receivable..................................................... 1,532,757
------------
225,571,053
LIABILITIES:
Due to The Dreyfus Corporation-Note 2(a)................................ $ 160,160
Payable for investment securities purchased............................. 2,000,000
Dividends payable....................................................... 255,196
Directors' fees payable-Note 2 (c)...................................... 19,146 2,434,502
---------- ------------
NET ASSETS.................................................................. $223,136,551
------------
------------
REPRESENTEDBY:
Paid-in capital......................................................... $223,138,979
Accumulated distributions in excess of investment income-net............ (1,575)
Accumulated net realized (loss) on investments ......................... (853)
------------
NET ASSETS at value......................................................... $223,136,551
------------
------------
NET ASSET VALUE, offering and redemption price per share:
Investor Shares
(1 billion shares of $.001 par value Capital Stock authorized)
($17,763,991 / 17,764,150 shares of Capital Stock outstanding)........ $1.00
-----
-----
Class R Shares
(1 billion shares of $.001 par value Capital Stock authorized)
($205,372,560 / 205,374,226 shares of Capital Stock outstanding)...... $1.00
-----
-----
</TABLE>
See notes to financial statements.
<PAGE>
Dreyfus Municipal Reserves
- --------------------------------------------------------------------------
Statement of Operations Year ended October 31, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest Income......................................................... $ 8,734,012
Expenses:
Investment management fee-Note 2(a)................................... $1,074,708
Distribution fee (Investor shares)-Note 2(b).......................... 40,029
Directors' fees and expenses-Note 2(c)................................ 39,012
----------
Total Expenses.................................................... 1,153,749
----------
INVESTMENT INCOME--NET ...................................................... 7,580,263
NET REALIZED (LOSS) ON INVESTMENTS........................................... (853)
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS......................... $7,579,410
----------
----------
</TABLE>
See notes to financial statements.
<PAGE>
Dreyfus Municipal Reserves
- --------------------------------------------------------------------------
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended October 31,
------------------------------
1995 1994*
------------ ------------
<S> <C> <C>
OPERATIONS:
Investment income--net............................................... $ 7,580,263 $ 4,859,332
Net realized (loss) on investments................................... (853) --
Net Increase In Net Assets Resulting From Operations............... 7,579,410 4,859,332
------------ ------------
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income--net:
Investor Shares.................................................... (665,686) (10,965)
Class R Shares..................................................... (6,913,817) (4,850,099)
------------ ------------
Total Dividends.................................................. (7,579,503) (4,861,064)
------------ ------------
CAPITAL STOCK TRANSACTIONS ($1.00 per share)*:
Net proceeds from shares sold:
Investor Shares.................................................... 13,061,878 1,304,565
Class R Shares..................................................... 744,180,112 639,468,498
Issued in exchange for shares of Dreyfus/Laurel Tax Free Money Fund:
Investor Shares.................................................... 21,402,629 --
Class R Shares..................................................... 17,563,875 --
Dividends reinvested:
Investor Shares.................................................... 582,123 9,953
Class R Shares..................................................... 2,258,237 1,778,576
Cost of shares redeemed:
Investor Shares.................................................... (18,443,197) (153,801)
Class R Shares..................................................... (763,734,703) (623,970,062)
------------ ------------
Increase In Net Assets From Capital Stock Transactions............. 16,870,954 18,437,729
------------ ------------
Total Increase In Net Assets..................................... 16,870,861 18,435,997
NET ASSETS:
Beginning of year.................................................... 206,265,690 187,829,693
------------ ------------
End of year (including distributions in excess of investment income-net:
$1,575 and $2,335, respectively)................................... $223,136,551 $206,265,690
------------ ------------
------------ ------------
<FN>
- ---------------
* The Fund commenced selling Investor shares on April 20, 1994. Any shares
outstanding prior to April 4, 1994 were designated as Class R shares of the
Fund.
</TABLE>
See notes to financial statements.
<PAGE>
Dreyfus Municipal Reserves
- ------------------------------------------------------------------------
Financial Highlights
Reference is made to pages 7 and 8 of the Fund's Prospectus
dated March 1, 1996.
See notes to financial statements.
<PAGE>
Dreyfus Municipal Reserves
- ----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 1--Significant Accounting Policies:
The Dreyfus/Laurel Funds, Inc. (the "Company") is registered under the
Investment Company Act of 1940 ("Act") as a diversified open-end management
investment company and operates as a series company currently offering
sixteen Series including the Dreyfus Municipal Reserves (the "Fund"). The
Dreyfus Corporation ("Manager") serves as the Fund's investment adviser. The
Manager is a direct subsidiary of Mellon Bank, N.A. ("Mellon Bank").
Premier Mutual Fund Services, Inc. (the "Distributor") acts as the
distributor of the Fund's shares. The Distributor, located at One Exchange
Place, Boston, Massachusetts 02109, 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.
On August 1, 1995, the Fund's Directors approved a change to the Fund's
name, effective June 9, 1995, from "Dreyfus/Laurel Tax Exempt Money Market
Fund" to "Dreyfus Municipal Reserves."
The Fund is currently authorized to issue two classes of shares: Investor
shares and Class R shares. Investor shares are sold primarily to retail
investors and bear a distribution fee. Class R shares are sold primarily to
bank trust departments and other financial service providers (including
Mellon Bank and its affiliates) acting on behalf of customers having a
qualified trust or investment account or relationship at such institution,
and bear no distribution fee. Each class of shares has identical rights and
privileges, except with respect to the distribution fee and voting rights on
matters affecting a single class. The Company has the authority to issue 25
billion shares of capital stock with a par value of $.001.
Investment income, net of expenses (other than class specific
expenses) and realized and unrealized gains and losses are allocated daily to
each class of shares based upon the relative proportion of net assets of each
class.
(a) Portfolio Valuation: Investments are valued at amortized cost in
accordance with Rule 2a-7 of the Investment Company Act of 1940, which has
been determined by the Fund's Board of Directors to represent the fair value
of the Fund's investments.
It is the Fund's policy to maintain a continuous net asset value per
share of $1.00 for the Fund; the Fund has adopted certain investment,
portfolio valuation and dividend and distribution policies to enable it to do
so. There is no assurance, however, that the Fund will be able to maintain a
stable net asset value of $1.00.
(b) Securities Transactions and Investment Income: Securities
transactions are recorded on a trade date basis. Realized gain and loss from
securities transactions are recorded on the identified cost basis. Interest
income is recognized on the accrual basis. Cost of investments represents
amortized cost.
(c) Repurchase Agreements: The Fund may engage in repurchase agreement
transactions. Under the terms of a typical repurchase agreement, the Fund,
through its custodian and sub-custodian, takes possession of an underlying
debt obligation subject to an obligation of the seller to repurchase, and the
Fund to resell, the obligation at an agreed-upon price and time, thereby
determining the yield during the
<PAGE>
Dreyfus Municipal Reserves
- ----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
Fund's holding period. This arrangement results in a fixed rate of return
that is not subject to market fluctuations during the Fund's holding period.
The value of the collateral is at least equal, at all times, to the total
amount of the repurchase obligations, including interest. In the event of a
counterparty default, the Fund has the right to use the collateral to offset
losses incurred. There is potential loss to the Fund in the event the Fund is
delayed or prevented from exercising its rights to dispose of the collateral
securities, including the risk of a possible decline in the value of the
underlying securities during the period while the Fund seeks to assert its
rights. The Fund's manager, acting under the supervision of the Board of
Directors, reviews the value of the collateral and the creditworthiness of
those banks and dealers with which the Fund enters into repurchase agreements
to evaluate potential risks.
(d) Distributions to Shareholders: It is the policy of the Fund to
declare dividends daily from investment income-net; such dividends are paid
monthly. Dividends from net realized capital gain are normally declared and
paid annually, but the Fund may make distributions on a more frequent basis
to comply with the distribution requirements of the Internal Revenue Code. To
the extent that net realized capital gain can be offset by capital loss
carryovers, it is the policy of the Fund not to distribute such gain.
(e) Federal Income Taxes: It is the policy of the Fund to continue to
qualify as a regulated investment company, which can distribute tax exempt
dividends, by complying with the applicable provisions of the Internal
Revenue Code, and to make distributions of income and net realized capital
gain sufficient to relieve it from substantially all Federal income and
excise taxes.
The Fund has an unused capital loss carryover of approximately $853
available for Federal income tax purposes to be applied against future net
securities profits, if any, realized subsequent to October 31, 1995.
At October 31, 1995, the cost of investments for Federal income tax
purposes was substantially the same as the cost for financial reporting
purposes (see the Statement of Investments).
NOTE 2--Investment Management Fee and other Transactions with Affiliates:
(a) Investment Management Fee: Pursuant to an Investment Management
agreement with the Manager, the Manager provides or arranges for one or more
third parties and or affiliates to provide investment advisory,
administrative, custody, fund accounting and transfer agency services to the
Fund. The Manager also directs the investments of the Fund in accordance with
its investment objective, policies and limitations. For these services, the
Fund is contractually obligated to pay the Manager a fee, calculated daily
and paid monthly, at the annual rate of .50% of the value of the Fund's
average daily net assets. Out of its fee, the Manager pays all of the
expenses of the Fund except brokerage fees, taxes, interest, Rule 12b-1
distribution fees and expenses, fees and expenses of non-interested Directors
(including counsel fees) and extraordinary expenses. In addition, the Manager
is required to reduce its fee in an amount equal to the Fund's allocable
portion of fees and expenses of the non-interested Directors (including
counsel).
(b) Distribution Plan: The Fund has adopted a distribution plan (the
"Plan") pursuant to Rule 12b-1 under the 1940 Act relating to its Investor
shares. Under the Plan, the Fund may pay annually up to .25% of the value of
the average daily net assets attributable to its Investor shares to
compensate the Distributor and
<PAGE>
Dreyfus Municipal Reserves
- ----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
Dreyfus Service Corporation, an affiliate of the Manager, for shareholder
servicing activities and the Distributor for activities primarily intended to
result in the sale of Investor shares. The Class R shares bear no
distribution fee. For the year ended October 31, 1995, the distribution fee
for the Investor shares was $40,029.
Under its terms, the Plan shall remain in effect from year to year,
provided such continuance is approved annually by a vote of majority of those
Directors who are not "interested persons" of the Investment Company and who
have no direct or indirect financial interest in the operation of the Plan or
in any agreement related to the Plan.
(c) Directors' Fees: Each director who is not an "interested
person" as defined in the Act receives $27,000 per year, $1,000 for each
Board meeting attended and $750 for each Audit Committee attended and is
reimbursed for travel and out-of-pocket expenses. These expenses are paid in
total by the following funds: the Dreyfus/Laurel Funds, Inc., the
Dreyfus/Laurel Tax-Free Municipal Funds, and the Dreyfus/Laurel Funds Trust.
In addition the Chairman of the Board receives an annual fee of $75,000 per
year. These fees and expenses are charged and allocated to each series based
on net assets.
NOTE 3--Reorganization:
On November 7, 1994, Dreyfus Municipal Reserves, acquired the assets and
certain liabilities of the Dreyfus/Laurel Tax-Free Money Fund, in exchange
for shares of Dreyfus Municipal Reserves, pursuant to a plan of
reorganization approved by Dreyfus/Laurel Tax-Free Money Fund shareholders on
May 20, 1994. Total shares issued by Dreyfus Municipal Reserves and the total
net assets of Dreyfus/Laurel Tax-Free Money Fund acquired are set forth in
the Statement of Changes in Net Assets.
<PAGE>
Dreyfus Municipal Reserves
- ----------------------------------------------------------------------------
Independent Auditors' Report
The Board of Directors and Shareholders
The Dreyfus/Laurel Funds, Inc.:
We have audited the accompanying statement of assets and liabilities of
the Dreyfus Municipal Reserves of The Dreyfus/Laurel Funds, Inc., including
the statement of investments, as of October 31, 1995, and the related
statement of operations for the year then ended, the statement of changes in
net assets for each of the two years in the period then ended, and the
financial highlights for each of the periods indicated herein. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of October 31, 1995, by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of the Dreyfus Municipal Reserves of The Dreyfus/Laurel Funds, Inc.,
as of October 31, 1995, and the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended, and the financial highlights for each of the periods indicated
herein, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Pittsburgh, Pennsylvania
December 15, 1995
<PAGE>
Dreyfus U.S. Treasury Reserves
- -------------------------------------------------------------------------------
Statement of Investments October 31, 1995
<TABLE>
<CAPTION>
Annualized
Yield on
Date of Principal
U.S. Treasury Bills--58.8% Purchase Amount Value
- -------------------------------------------------------------- ---------- ------------ ------------
<S> <C> <C> <C>
12/21/95.................................................. 5.45% $200,000,000 $198,515,972
2/22/96................................................... 5.41 50,000,000 49,166,625
------------
TOTAL U.S. TREASURY BILLS (cost $247,682,597)................. $247,682,597
------------
Repurchase Agreements--41.4%
- --------------------------------------------------------------
Lehman Government Securities Inc.
Dated 10/31/95, due 11/1/95 in the amount
of $54,578,868 (fully collateralized by
$53,470,000 U.S. Treasury Notes, 7.50%,
due 1/31/97, value $54,570,000)........................... 5.85% $ 54,570,000 $ 54,570,000
Morgan Stanley & Co. Inc.
Dated 10/31/95, due 11/1/95 in the amount
of $40,006,500 (fully collateralized by
$36,805,000 U.S. Treasury Notes, 7.875%,
due 11/15/99, value $40,000,000).......................... 5.85 40,000,000 40,000,000
Salomon Brothers Inc.
Dated 10/31/95, due 11/1/95 in the amount
of $40,006,500 (fully collateralized by
$38,468,000 U.S. Treasury Notes, 7.125-7.375%,
due 11/15/97 to 2/29/00, value $40,000,000)............... 5.85 40,000,000 40,000,000
UBS Securities Inc.
Dated 10/31/95, due 11/1/95 in the amount
of $40,006,500 (fully collateralized by
$40,855,000 U.S. Treasury Notes, 5.625%,
due 10/31/97, value $40,000,000).......................... 5.85 40,000,000 40,000,000
------------
TOTAL REPURCHASE AGREEMENTS (cost $174,570,000)............... $174,570,000
------------
TOTAL INVESTMENTS (cost $422,252,597).............. 100.2% $422,252,597
LIABILITIES, LESS CASH AND RECEIVABLES............. (.2%) $ (993,412)
------ ------------
NET ASSETS......................................... 100.0% $421,259,185
------ ------------
------ ------------
</TABLE>
See notes to financial statements.
<PAGE>
Dreyfus U.S. Treasury Reserves
- ------------------------------------------------------------------------------
Statement of Assets and Liabilities October 31, 1995
<TABLE>
<S> <C> <C>
ASSETS:
Investments in securities, at value (cost $422,252,597)--see
Statement of Investments (including repurchase agreement of
$174,570,000).................................................. $422,252,597
Cash.............................................................. 27,164
Interest receivable............................................... 28,368
Other receivables................................................. 28,334
------------
422,336,463
LIABILITIES:
Due to The Dreyfus Corporation--Note 2(a)......................... $313,260
Due to Distributor--Note 2(b)..................................... 4,010
Dividends payable................................................. 732,922
Directors' fees payable--Note 2(c)................................ 27,086 1,077,278
-------- ------------
NET ASSETS............................................................ $421,259,185
------------
------------
REPRESENTED BY:
Paid-in capital................................................... $421,253,775
Accumulated undistributed net realized gain on investments........ 5,410
------------
NET ASSETS at value................................................... $421,259,185
------------
------------
NET ASSET VALUE, offering and redemption price per share:
Investor Shares
(1 billion shares of $.001 par value Capital Stock authorized)
($21,385,897 / 21,385,272 shares of Capital Stock outstanding) $1.00
-----
-----
Class R Shares
(1 billion shares of $.001 par value Capital Stock authorized)
($399,873,288 / 399,867,932 shares of Capital Stock outstanding) $1.00
-----
-----
</TABLE>
See notes to financial statements.
<PAGE>
Dreyfus U.S. Treasury Reserves
- ------------------------------------------------------------------------------
Statement of Operations Year ended October 31, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest Income................................................... $18,538,414
Expenses:
Investment management fee--Note 2(a)............................ $1,588,710
Distribution fee (Investor shares)--Note 2(b)................... 62,079
Directors' fees and expenses--Note 2(c).......................... 56,019
----------
Total Expenses.............................................. 1,706,808
-----------
INVESTMENT INCOME--NET................................................ 16,831,606
NET REALIZED GAIN ON INVESTMENTS...................................... 5,410
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.................. $16,837,016
-----------
-----------
</TABLE>
See notes to financial statements.
<PAGE>
Dreyfus U.S. Treasury Reserves
- ------------------------------------------------------------------------------
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended October 31,
------------------------------------
1995 1994
-------------- ------------
<S> <C> <C>
OPERATIONS:
Investment income--net...................................... $ 16,831,606 $ 4,320,259
Net realized gain on investments............................ 5,410 --
-------------- ------------
Net Increase In Net Assets Resulting From Operations...... 16,837,016 4,320,259
-------------- ------------
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income--net:
Investor Shares........................................... (1,527,211) (10,949)
Class R Shares............................................ (15,304,349) (4,308,785)
-------------- ------------
Total Dividends....................................... (16,831,560) (4,319,734)
-------------- ------------
CAPITAL STOCK TRANSACTIONS ($1.00 per share)*:
Net proceeds from shares sold:
Investor Shares........................................... 194,173,669 2,966,555
Class R Shares............................................ 1,478,105,952 801,362,826
Issued in exchange for shares of Dreyfus/Laurel Government
Money Fund:
Investor Shares........................................... 44,774,273 --
Dividends reinvested:
Investor Shares........................................... 1,307,881 9,219
Class R Shares............................................ 11,884,976 2,669,895
Cost of shares redeemed:
Investor Shares........................................... (220,194,051) (1,652,274)
Class R Shares............................................ (1,318,919,643) (645,020,921)
-------------- ------------
Increase In Net Assets From Capital Stock Transactions 191,133,057 160,335,300
-------------- ------------
Total Increase In Net Assets........................ 191,138,513 160,335,825
NET ASSETS:
Beginning of year........................................... 230,120,672 69,784,847
-------------- ------------
End of year [including distributions in excess of investment
income--net of ($46) in 1994]............................. $ 421,259,185 $230,120,672
-------------- ------------
-------------- ------------
<FN>
- -------------------
* The Fund commenced selling Investor shares on April 18, 1994. Any shares
outstanding prior to April 4, 1994 were designated as Class R shares of the
Fund.
</TABLE>
See notes to financial statements.
<PAGE>
Dreyfus U.S. Treasury Reserves
- ------------------------------------------------------------------------------
Financial Highlights
Reference is made to pages 9 and 10 of the Fund's Prospectus
dated March 1, 1996.
See notes to financial statements.
<PAGE>
Dreyfus U.S. Treasury Reserves
- ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 1 -- Significant Accounting Policies:
The Dreyfus/Laurel Funds, Inc. (the "Company") is registered under the
Investment Company Act of 1940 ("Act") as a diversified open-end management
investment company and operates as a series company currently offering
sixteen Series including the Dreyfus U.S. Treasury Reserves (the "Fund"). The
Dreyfus Corporation ("Manager") serves as the Fund's investment adviser. The
Manager is a direct subsidiary of Mellon Bank, N.A. ("Mellon Bank").
Premier Mutual Fund Services, Inc. (the "Distributor") acts as the
distributor of the Fund's shares. The Distributor, located at One Exchange
Place, Boston, Massachusetts 02109, 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.
On August 1, 1995, the Fund's Directors approved a change to the Fund's
name, effective June 9, 1995, from "Dreyfus/Laurel U.S. Treasury Money Market
Fund" to "Dreyfus U.S. Treasury Reserves."
The Fund is currently authorized to issue two classes of shares: Investor
shares and Class R shares. Investor shares are sold primarily to retail
investors and bear a distribution fee. Class R shares are sold primarily to
bank trust departments and other financial service providers (including
Mellon Bank and its affiliates) acting on behalf of customers having a
qualified trust or investment account or relationship at such institution,
and bear no distribution fee. Each class of shares has identical rights and
privileges, except with respect to the distribution fee and voting rights on
matters affecting a single class. The Company has the authority to issue 25
billion shares of capital stock with a par value of $.001.
Investment income, net of expenses (other than class specific
expenses) and realized and unrealized gains and losses are allocated daily to
each class of shares based upon the relative proportion of net assets of each
class.
(a) Portfolio Valuation: Investments are valued at amortized cost in
accordance with Rule 2a-7 of the Investment Company Act of 1940, which has
been determined by the Fund's Board of Directors to represent the fair value
of the Fund's investments.
It is the Fund's policy to maintain a continuous net asset value per
share of $1.00 for the Fund; the Fund has adopted certain investment,
portfolio valuation and dividend and distribution policies to enable it to do
so. There is no assurance, however, that the Fund will be able to maintain a
stable net asset value of $1.00.
(b) Securities Transactions and Investment Income: Securities
transactions are recorded on a trade date basis. Realized gain and loss from
securities transactions are recorded on the identified cost basis. Interest
income is recognized on the accrual basis. Cost of investments represents
amortized cost.
(c) Repurchase Agreements: The Fund may engage in repurchase agreement
transactions. Under the terms of a typical repurchase agreement, the Fund,
through its custodian and sub-custodian, takes possession of an underlying
debt obligation subject to an obligation of the seller to repurchase, and the
Fund to resell, the obligation at an agreed-upon price and time, thereby
determining the yield during the
<PAGE>
Dreyfus U.S. Treasury Reserves
- ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
Fund's holding period. This arrangement results in a fixed rate of return
that is not subject to market fluctuations during the Fund's holding period.
The value of the collateral is at least equal, at all times, to the total
amount of the repurchase obligations, including interest. In the event of a
counterparty default, the Fund has the right to use the collateral to offset
losses incurred. There is potential loss to the Fund in the event the Fund is
delayed or prevented from exercising its rights to dispose of the collateral
securities, including the risk of a possible decline in the value of the
underlying securities during the period while the Fund seeks to assert its
rights. The Fund's manager, acting under the supervision of the Board of
Directors, reviews the value of the collateral and the creditworthiness of
those banks and dealers with which the Fund enters into repurchase agreements
to evaluate potential risks.
(d) Distributions to Shareholders: It is the policy of the Fund to
declare dividends daily from investment income-net; such dividends are paid
monthly. Dividends from net realized capital gain are normally declared and
paid annually, but the Fund may make distributions on a more frequent basis
to comply with the distribution requirements of the Internal Revenue Code. To
the extent that net realized capital gain can be offset by capital loss
carryovers, it is the policy of the Fund not to distribute such gain.
(e) Federal Income Taxes: It is the policy of the Fund to continue to
qualify as a regulated investment company, if such qualification is in the
best interests of its shareholders, by complying with the applicable
provisions of the Internal Revenue Code, and to make distributions of taxable
income sufficient to relieve it from substantially all Federal income and
excise taxes.
At October 31, 1995, the cost of investments for Federal income tax
purposes was substantially the same as the cost for financial reporting
purposes (see the Statement of Investments).
NOTE 2 -- Investment Management Fee and Other Transactions With Affiliates:
(a) Investment Management Fee: Pursuant to an Investment Management
agreement with the Manager, the Manager provides or arranges for one or more
third parties and or affiliates to provide investment advisory,
administrative, custody, fund accounting and transfer agency services to the
Fund. The Manager also directs the investments of the Fund in accordance with
its investment objective, policies and limitations. For these services, the
Fund is contractually obligated to pay the Manager a fee, calculated daily
and paid monthly, at the annual rate of .50% of the value of the Fund's
average daily net assets. Out of its fee, the Manager pays all of the
expenses of the Fund except brokerage fees, taxes, interest, Rule 12b-1
distribution fees and expenses, fees and expenses of non-interested Directors
(including counsel fees) and extraordinary expenses. In addition, the Manager
is required to reduce its fee in an amount equal to the Fund's allocable
portion of fees and expenses of the non-interested Directors (including
counsel).
(b) Distribution Plan: The Fund has adopted a distribution plan (the
"Plan") pursuant to Rule 12b-1 under the 1940 Act relating to its Investor
shares. Under the Plan, the Fund may pay annually up to .25% of the value of
the average daily net assets attributable to its Investor shares to
compensate the Distributor and Dreyfus Service Corporation, an affiliate of
the Manager, for shareholder servicing activities and the Distributor for
activities primarily intended to result in the sale of Investor shares. The
Class R shares bear no distribution fee. For the year ended October 31, 1995,
the distribution fee for the Investor shares was $62,079.
<PAGE>
Dreyfus U.S. Treasury Reserves
- ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
Under its terms, the Plan shall remain in effect from year to year,
provided such continuance is approved annually by a vote of majority of those
Directors who are not "interested persons" of the Investment Company and who
have no direct or indirect financial interest in the operation of the Plan or
in any agreement related to the Plan.
(c) Directors' Fees: Each director who is not an "interested
person" as defined in the Act receives $27,000 per year, $1,000 for each
Board meeting attended and $750 for each Audit Committee attended and is
reimbursed for travel and out-of-pocket expenses. These expenses are paid in
total by the following funds: the Dreyfus/Laurel Funds, Inc., the
Dreyfus/Laurel Tax-Free Municipal Funds, and the Dreyfus/Laurel Funds Trust.
In addition the Chairman of the Board receives an annual fee of $75,000 per
year. These fees and expenses are charged and allocated to each series based
on net assets.
NOTE 3 -- Reorganization:
On November 7, 1994, Dreyfus U.S. Treasury Reserves, acquired the assets
and certain liabilities of the Dreyfus/Laurel Government Money Fund, in
exchange for shares of Dreyfus U.S. Treasury Reserves, pursuant to a plan of
reorganization approved by Dreyfus/Laurel Government Money Fund shareholders
on May 20, 1994. Total shares issued by Dreyfus U.S. Treasury Reserves and
the total net assets of Dreyfus/Laurel Government Money Fund acquired are set
forth in the Statement of Changes in Net Assets.
<PAGE>
Dreyfus U.S. Treasury Reserves
- ------------------------------------------------------------------------------
Independent Auditors' Report
The Board of Directors and Shareholders
The Dreyfus/Laurel Funds, Inc.:
We have audited the accompanying statement of assets and liabilities of
the Dreyfus U.S. Treasury Reserves of The Dreyfus/Laurel Funds, Inc.,
including the statement of investments, as of October 31, 1995, and the
related statement of operations for the year then ended, the statement of
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the periods indicated herein. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of October 31, 1995, by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of the Dreyfus U.S. Treasury Reserves of The Dreyfus/Laurel Funds,
Inc., as of October 31, 1995, and the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended, and the financial highlights for each of the periods
indicated herein, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Pittsburgh, Pennsylvania
December 15, 1995
<PAGE>
Dreyfus Institutional Government Money Market Fund
- --------------------------------------------------------------------------------
Statement of Investments October 31, 1995
<TABLE>
<CAPTION>
Annualized
Yield on
Date of Principal
U.S. Government Agencies-71.0% Purchase Amount Value
- ------------------------------------------- ------- --------- ---------
<S> <C> <C> <C>
Federal Farm Credit Banks, Discount Notes
1/18/96................................................... 5.94% $10,000,000 $ 9,874,333
Federal Farm Credit Banks, Consolidated Systemwide Bonds
2/1/96.................................................... 5.57(a) 15,000,000 14,998,828
Federal Farm Credit Banks, Consolidated Systemwide,
Medium Term Notes
7/17/96................................................... 5.51(a) 10,000,000 10,000,000
Federal Home Loan Banks, Discount Notes
12/6/95................................................... 5.62 25,000,000 24,865,347
1/8/96.................................................... 5.88 10,000,000 9,891,389
1/16/96................................................... 5.58 22,000,000 21,745,949
1/31/96................................................... 5.65 30,000,000 29,577,608
2/16/96................................................... 5.54 20,000,000 19,677,811
Federal Home Loan Mortgage Corp., Discount Notes
11/20/95.................................................. 5.65 30,000,000 29,910,858
12/1/95................................................... 5.72 18,100,000 18,015,081
Federal National Mortgage Association, Discount Notes
11/2/95................................................... 5.97 25,000,000 24,995,903
11/7/95................................................... 5.67 25,000,000 24,976,667
12/7/95................................................... 5.62 15,000,000 14,916,750
1/10/96................................................... 5.64 25,000,000 24,729,722
2/15/96................................................... 5.65 15,000,000 14,755,759
2/28/96................................................... 5.68 25,000,000 24,541,354
3/13/96................................................... 5.59 25,000,000 24,494,785
3/18/96................................................... 5.61 25,000,000 24,474,833
-----------
TOTAL U.S. GOVERNMENT AGENCIES (cost $366,442,977)............ $366,442,977
-----------
Repurchase Agreements-32.3%
Barclays De Zoette Wedd Securities, Inc.
dated 10/31/95, due 11/1/95 in the amount of $50,007,917
(fully collateralized by $15,900,000 U.S. Treasury
Notes 9.25%, due 1/15/96 value $16,444,406 and $24,621,000
U.S. Treasury Bonds 8.75% to 14%, due 11/15/2011 to
8/15/2020 value $34,566,413).............................. 5.70% $50,000,000 $ 50,000,000
</TABLE>
<PAGE>
Dreyfus Institutional Government Money Market Fund
- --------------------------------------------------------------------------------
Statement of Investments (continued) October 31, 1995
<TABLE>
<CAPTION>
Annualized
Yield on
Date of Principal
Repurchase Agreements (continued) Purchase Amount Value
- ------------------------------------------- ------- --------- ---------
<S> <C> <C> <C>
Donaldson Lufkin Jenrette Securities, Inc.
dated 10/31/95, due 11/1/95 in the amount of $50,008,160
(fully collateralized by $50,245,000 U.S. Treasury
Notes 4% to 6.75%, due from 1/31/96 to 9/30/2000,
valued $51,000,658)....................................... 5.88% $50,000,000 $ 50,000,000
Goldman Sachs & Co.
dated 10/31/95, due 11/1/95 in the amount of $66,684,737
(fully collateralized by $43,683,000 U.S. Treasury
Bonds 12% to 12.5%, due from 8/15/2013 to 8/15/2014,
valued $68,009,127)....................................... 5.70 66,674,180 66,674,180
------------
TOTAL REPURCHASE AGREEMENTS (cost $166,674,180)............... $166,674,180
------------
TOTAL INVESTMENTS (cost $533,117,157) ............. 103.3% $533,117,157
LIABILITIES, LESS CASH AND RECEIVABLES............. (3.3%) $(17,305,517)
------ ------------
NET ASSETS......................................... 100.0% $515,811,640
------ ------------
------ ------------
<FN>
Note to Statement of Investments;
(a) Variable interest rates-subject to periodic change.
</TABLE>
See notes to financial statements.
<PAGE>
Dreyfus Institutional Government Money Market Fund
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities October 31, 1995
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS:
Investments in securities, at value (cost $533,117,157)-see Statement of
Investments (including repurchase agreements of $166,674,180)......... $533,117,157
Interest receivable..................................................... 49,745
------------
533,166,902
LIABILITIES:
Due to The Dreyfus Corporation-Note 2(a)................................ $ 94,484
Due to Distributor-Note 2(b)............................................ 101,233
Cash overdraft due to Custodian......................................... 146,696
Payable for investment securities purchased............................. 14,998,828
Dividends Payable....................................................... 1,991,959
Accrued expenses and other liabilities.................................. 22,062 17,355,262
----------- ------------
NET ASSETS at value, represented by paid-in capital,
applicable to 515,811,640 outstanding shares of Capital Stock
(2 billion shares of $.001 par value Capital Stock authorized).......... $515,811,640
------------
------------
NET ASSET VALUE, offering and redemption price per share
($515,811,640 / 515,811,640 shares of Capital Stock outstanding)........ $1.00
-----
-----
</TABLE>
See notes to financial statements.
<PAGE>
Dreyfus Institutional Government Money Market Fund
- --------------------------------------------------------------------------------
Statement of Operations Year ended October 31, 1995
<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME:
Interest Income......................................................... $24,655,896
Expenses:
Investment management fee-Note 2(a)................................... $590,518
Shareholder service fee-Note 2(b)..................................... 632,698
Directors' fees and expenses--Note 2(c)............................... 42,180
----------
Total Expenses.................................................... 1,265,396
-----------
INVESTMENT INCOME-NET, representing net increase in net assets
resulting from operations............................................... $23,390,500
-----------
-----------
</TABLE>
See notes to financial statements.
<PAGE>
Dreyfus Institutional Government Money Market Fund
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended October 31,
-------------------------------------
1995 1994
----------------- ---------------
<S> <C> <C>
OPERATIONS;
Investment income--net.............................................. $ 23,390,500 $ 16,679,194
----------------- ---------------
DIVIDENDS TO SHAREHOLDERS FROM;
Investment income--net.............................................. (23,390,500) (16,679,194)
----------------- ---------------
CAPITAL STOCK TRANSACTIONS ($1.00 per share):
Net proceeds from shares sold....................................... 2,466,577,709 2,621,818,115
Dividends reinvested................................................ 2,614,140 2,072,225
Cost of shares redeemed............................................. (2,423,387,079) (2,560,573,095)
----------------- ---------------
Increase In Net Assets From Capital Stock Transactions............ 45,804,770 63,317,245
----------------- ---------------
Total Increase In Net Assets.................................... 45,804,770 63,317,245
NET ASSETS:
Beginning of year................................................... 470,006,870 406,689,625
----------------- ---------------
End of year......................................................... $ 515,811,640 $ 470,006,870
----------------- ---------------
----------------- ---------------
</TABLE>
See notes to financial statements.
<PAGE>
Dreyfus Institutional Government Money Market Fund
- --------------------------------------------------------------------------------
Financial Highlights
Reference is made to page 5 of the Fund's Prospectus dated March 1, 1996.
See notes to financial statments.
<PAGE>
Dreyfus Institutional Government Money Market Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 1-Significant Accounting Policies:
The Dreyfus/Laurel Funds, Inc. (the "Company") is registered under the
Investment Company Act of 1940 ("Act") as a diversified open-end management
investment company and operates as a series company currently offering
sixteen Series including the Dreyfus Institutional Government Money Market
Fund (the "Fund"). The Dreyfus Corporation ("Manager") serves as the Fund's
investment adviser. The Manager is a direct subsidiary of Mellon Bank, N.A.
("Mellon Bank").
Premier Mutual Fund Services, Inc. (the "Distributor") acts as the
distributor of the Fund's shares. The Distributor, located at One Exchange
Place, Boston, Massachusetts 02109, 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 whlch is Boston Institutional Group, Inc.
On July 26, 1995, the Fund's Directors approved a change to the Fund's
name, effective September 15, 1995, from "Dreyfus/Laurel Institutional
Government Money Market Fund" to "Dreyfus Institutional Government Money
Market Fund."
In addition, Class II and Class III shares were eliminated. The
designation Class I of the Funds' only remaining class of shares was
eliminated and these shares were redesignated as shares of the Funds'. The
Company has the authority to issue 25 billion shares of capital stock with a
par value of $.001.
(a) Portfolio Valuation: Investments are valued at amortized cost in
accordance with Rule 2a-7 of the Investment Company Act of 1940, which has
been determined by the Fund's Board of Directors to represent the fair value
of the Fund's investments.
It is the Fund's policy to maintain a continuous net asset value per
share of $1.00 for the Fund; the Fund has adopted certain investment,
portfolio valuation and dividend and distribution policies to enable it to do
so. There is no assurance, however, that the Fund will be able to maintain a
stable net asset value of $1.00.
(b) Securities Transactions and Investment Income: Securities
transactions are recorded on a trade date basis. Realized gain and loss from
securities transactions are recorded on the identified cost basis. Interest
income is recognized on the accrual basis. Cost of investments represents
amortized cost.
(c) Repurchase Agreements: The Fund may engage in repurchase agreement
transactions. Under the terms of a typical repurchase agreement, the Fund,
through its custodian, and sub-custodian takes possession of an underlying
debt obligation subject to an obligation of the seller to repurchase, and the
Fund to resell, the obligation at an agreed-upon price and time, thereby
determining the yield during the Fund's holding period. This arrangement
results in a fixed rate of return that is not subject to market fluctuations
during the Fund's holding period. The value of the collateral is at least
equal, at all times, to the total amount of the repurchase obligations,
including interest. In the event of a counterparty default, the Fund has the
right to use the collateral to offset losses incurred. There is potential
loss to the Fund in the event the Fund is delayed or prevented from
exercising its rights to dispose of the collateral securities, including the
risk of a possible decline in the value of the underlying securities during
the period while the Fund seeks to assert its rights. The Fund's manager,
acting under the supervision of the Board of Directors, reviews the value of
the collateral and the creditworthiness of those banks and dealers with which
the Fund enters into repurchase agreements to evaluate potential risks.
(d) Distributions to Shareholders: It is the policy of the Fund to
declare dividends daily from investment income-net; such dividends are paid
monthly. Dividends from net realized capital gains, if any,
<PAGE>
Dreyfus Institutional Government Money Market Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
are normally declared and paid annually, but the Fund may make
distributions on a more frequent basis to comply with the distribution
requirements of the Internal Revenue Code. To the extent that net realized
capital gain can be offset by capital loss carryovers, if any, it is the
policy of the Fund not to distribute such gains.
(e) Federal Income Taxes: It is the policy of the Fund to continue to
qualify as a regulated investment company, if such qualification is in the
best interests of its shareholders, by complying with the applicable
provisions of the Internal Revenue Code, and to make distributions of taxable
income sufficient to relieve it from substantially all Federal income and
excise taxes.
NOTE 2-Investment Management Fee and Other Transactions with Affiliates:
(a) Investment Management Fee: Pursuant to an Investment Management
agreement with the Manager, the Manager provides or arranges for one or more
third parties and or affiliates to provide investment advisory,
administrative, custody, fund accounting and transfer agency services to the
Fund. The Manager also directs the investments of the Fund in accordance with
its investment objective, policies and limitations. For these services, the
Fund is contractually obligated to pay the Manager a fee, calculated daily
and paid monthly, at the annual rate of .15% of the value of the Fund's
average daily net assets. Out of its fee, the Manager pays all of the
expenses of the Fund except brokerage fees, taxes, interest, Rule 12b-1
distribution fees and expenses, fees and expenses of non-interested Directors
(including counsel fees) and extraordinary expenses. In addition, the Manager
is required to reduce its fee in an amount equal to the Fund's allocable
portion of fees and expenses of the non-interested Directors (including
counsel).
(b) Shareholder Servicing Plan: The Fund has adopted a shareholder
servicing plan (the "Plan"). Under the Plan, the Fund may pay up to .15% of
the value of the average daily net assets annually to compensate certain
banks, brokers, dealers or other financial institutions for shareholder
services. For the year ended October 31, 1995, the Fund incurred service fees
of $632,698.
Under its terms, the shareholder servicing plan shall remain in effect
from year to year, provided such continuance is approved annually by a vote
of a majority of those Directors who are not "interested persons" of the
Investment Company and who have no direct or indirect financial interest in
the operation of the Plan or any agreement related to the Plan.
(c) Directors' Fees: Each director who is not an "interested
person" as defined in the Act receives $27,000 per year, $1,000 for each
Board meeting attended and $750 for each Audit Committee attended and is
reimbursed for travel and out-of-pocket expenses. These expenses are paid in
total by the following funds: the Dreyfus/Laurel Funds, Inc., the
Dreyfus/Laurel Tax-Free Municipal Funds, and the Dreyfus/Laurel Funds Trust.
In addition the Chairman of the Board receives an annual fee of $75,000 per
year. These fees and expenses are charged and allocated to each series based
on net assets.
<PAGE>
Dreyfus Institutional Government Money Market Fund
- --------------------------------------------------------------------------------
Independent Auditors' Report
The Board of Directors and Shareholders
The Dreyfus/Laurel Funds, Inc.:
We have audited the accompanying statement of assets and liabilities of
the Dreyfus Institutional Government Money Market Fund of The Dreyfus/Laurel
Funds, Inc., including the statement of investments, as of October 31, 1995,
and the related statement of operations for the year then ended, the
statement of changes in net assets for each of the two years in the period
then ended, and the financial highlights for each of the periods indicated
herein. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of October 31, 1995, by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of the Dreyfus Institutional Government Money Market Fund of The
Dreyfus/Laurel Funds, Inc., as of October 31, 1995, and the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each
of the periods indicated herein, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Pittsburgh, Pennsylvania
December 15, 1995
<PAGE>
Dreyfus Institutional Prime Money Market Fund
- --------------------------------------------------------------------------------
Statement of Investments October 31, 1995
<TABLE>
<CAPTION>
Principal
Commercial Paper-65.5% Amount Value
- -------------------------------------------------- ------------- -------------
<S> <C> <C>
Air Products & Chemicals Inc.
6.02%, 11/7/95....................................................... $ 15,000,000 $ 14,985,125
Allegheny Power System Inc.
5.78%, 11/29/95...................................................... 16,125,000 16,053,513
Allergan Inc.
5.68%, 12/19/95...................................................... 10,000,000 9,925,333
Asset Securitization Cooperative Corp.
5.84%, 11/10/95...................................................... 22,000,000 21,968,100
British Gas Capital Inc.
5.78%, 1/24/96....................................................... 25,000,000 24,667,500
CSR America Inc.
5.82%, 3/27/96....................................................... 15,000,000 14,653,938
Canadian Wheat Board
5.71%-5.72%, 11/1/95-2/20/96......................................... 42,000,000 41,740,538
Coca-Cola Co.
5.71%, 1/31/96....................................................... 30,000,000 29,573,817
Consolidated Rail Corp.
5.76%, 11/3/95....................................................... 10,000,000 9,996,833
Daimler-Benz North America Corp.
6.01%, 2/13/96....................................................... 15,000,000 14,746,933
Delaware Funding Corp.
5.77%, 11/13/95...................................................... 22,993,000 22,949,313
Eaton Corp.
5.86%, 6/17/96....................................................... 5,000,000 4,821,253
Goldman Sachs & Co.
5.70%, 2/16/96....................................................... 25,000,000 24,586,118
Hanson Finance (U.K.) PLC
5.75%, 11/22/95...................................................... 23,000,000 22,923,928
Heinz (H.J.) Co.
5.70%, 12/18/95...................................................... 30,000,000 29,780,667
Hewlett-Packard
5.69%, 11/29/95...................................................... 15,800,000 15,730,936
Lilly (Eli) & Co.
5.96%, 1/16/96....................................................... 13,000,000 12,840,273
McGraw Hill Inc.
5.96%, 12/19/95...................................................... 22,000,000 21,828,400
Monsanto Co.
5.75%, 1/30/96....................................................... 25,000,000 24,645,625
Preferred Receivables Funding Corp.
5.76%, 11/27/95...................................................... 15,000,000 14,938,250
Societe Generale North America Inc.
5.81%, 3/18/96....................................................... 20,000,000 19,566,833
Sweden (Kingdom of)
5.79%, 1/23/96....................................................... 25,000,000 24,672,611
Toronto-Dominion Holdings USA Inc.
5.76%, 1/30/96....................................................... 10,000,000 9,858,500
Toshiba America Inc
5.76%, 2/23/96-3/18/96............................................... 35,000,000 34,341,208
</TABLE>
<PAGE>
Dreyfus Institutional Prime Money Market Fund
- --------------------------------------------------------------------------------
Statement of Investments (continued) October 31, 1995
<TABLE>
<CAPTION>
Principal
Commercial Paper (continued) Amount Value
- -------------------------------------------------- ------------- -------------
<S> <C> <C>
Transamerica Finance Corp.
5.74%, 12/14/95...................................................... $ 25,000,000 $ 24,830,090
------------- -------------
TOTAL COMMERCIAL PAPER
(cost $506,625,635).................................................. $ 506,625,635
-------------
U.S. Government Agencies-8.3%
- -------------------------------------------------------------------------
Federal Farm Credit Banks,
Discount Notes
5.92%, 1/18/96....................................................... $ 30,000,000 $ 29,624,625
Federal Farm Credit Banks,
Floating Rate Notes
5.51%, 7/17/96(a).................................................... 15,000,000 15,000,000
Federal Home Loan Mortgage Corp.,
Discount Notes
5.72%, 12/1/95....................................................... 20,000,000 19,906,167
-------------
TOTAL U.S. GOVERNMENT AGENCIES
(cost $64,530,792)................................................... $ 64,530,792
-------------
Repurchase Agreements-26.6%
- -------------------------------------------------------------------------
Donaldson, Lufkin & Jenrette Securities Inc., 5.88%
dated 10/31/95, due 11/1/95 in the amount of $100,016,319
(fully collateralized by $11,000 U.S. Treasury Bills
due 7/25/96 value $10,568 and $50,085,000 U.S. Treasury Notes
6.75%, due 6/30/99 value $52,810,061 and by $32,323,000
U.S. Treasury Bonds 9.875% to 11.25%, due 2/15/2015 to
11/15/2015 value $49,180,593)........................................ $100,000,000 $100,000,000
Goldman, Sachs & Co., 5.84%
dated 10/31/95, due 11/1/95 in the amount of $105,484,663
(fully collateralized by $105,543,000 U.S. Treasury Notes 4.375%
to 6.5%, due 11/15/96 to 4/30/99 value $107,577,741)................. 105,467,564 105,467,564
-------------
TOTAL REPURCHASE AGREEMENTS
(cost $205,467,564).................................................. $205,467,564
-------------
TOTAL INVESTMENTS
(cost $776,623,991)......................................... 100.4% $776,623,991
LIABILITIES, LESS CASH AND RECEIVABLES.......................... (.4%) $ (3,021,960)
------ -------------
NET ASSETS ................................................ 100.0% $773,602,031
------ -------------
------ -------------
<FN>
Note to Statement of Investments;
- -------------------------------------------------------------------------
(a) Variable interest rate-subject to periodic change.
</TABLE>
See notes to financial statements.
<PAGE>
Dreyfus Institutional Prime Money Market Fund
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities October 31, 1995
<TABLE>
<S> <C> <C>
ASSETS:
Investments in securities, at value (cost $776,623,991)-See Statement of
Investments (including repurchase agreements of $205,467,564)......... $776,623,991
Cash.................................................................... 1,062,725
Dividends and interest receivable....................................... 68,086
--------------
777,754,802
LIABILITIES:
Due to The Dreyfus Corporation-Note 2(a)................................ $ 180,227
Due to Distributor-Note 2(b)............................................ 209,925
Dividends payable....................................................... 3,749,590
Accrued expenses and other liabilities.................................. 13,029 4,152,771
----------- --------------
NET ASSETS.................................................................. $773,602,031
--------------
--------------
REPRESENTED BY:
Paid-in capital......................................................... $773,599,559
Accumulated undistributed net realized gain on investments.............. 2,472
--------------
NET ASSETS at value applicable to 773,599,559 shares outstanding
(4 billion shares of $.001 par value Capital Stock authorized).......... $773,602,031
--------------
--------------
NET ASSET VALUE, offering and redemption price per share
($773,602,031 / 773,599,559 shares of Capital Stock outstanding)........ $1.00
-----
-----
Statement of Operations Year Ended October 31, 1995
INVESTMENT INCOME:
Interest Income......................................................... $54,648,194
Expenses:
Investment management fee-Note 2(a)................................... $1,294,365
Shareholder service fee-Note 2(b)..................................... 1,280,430
Directors' fees and expenses-Note 2(c)................................ 92,455
--------------
Total Expenses.................................................. 2,667,250
--------------
INVESTMENT INCOME-NET ...................................................... 51,980,944
NET REALIZED GAIN ON INVESTMENTS............................................ 2,472
--------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $51,983,416
--------------
</TABLE>
See notes to financial statements.
<PAGE>
Dreyfus Institutional Prime Money Market Fund
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended October 31,
---------------------------------
1995 1994
--------------- --------------
<S> <C> <C>
OPERATIONS;
Investment income--net............................................... $ 51,980,944 $ 28,636,890
Net realized gain on investments..................................... 2,472 --
--------------- --------------
Net Increase In Net Assets Resulting From Operations............... 51,983,416 28,636,890
--------------- --------------
DIVIDENDS TO SHAREHOLDERS FROM;
Investment income--net............................................... (51,980,944) (28,636,890)
--------------- --------------
CAPITAL STOCK TRANSACTIONS ($1.00 per share):
Net proceeds from shares sold:
Class I shares..................................................... 6,764,968,751 6,346,280,548
Class II shares.................................................... 979,545,884 --
Dividends reinvested:
Class I shares..................................................... 14,679,121 9,455,788
Class II shares.................................................... 6,095,405 --
Cost of shares redeemed:
Class I shares..................................................... (6,687,828,845) (6,498,036,154)
Class II shares.................................................... (985,641,289) --
--------------- --------------
Increase (Decrease) In Net Assets From Capital Stock Transactions.. 91,819,027 (142,299,818)
--------------- --------------
Total Increase (Decrease) In Net Assets.......................... 91,821,499 (142,299,818)
NET ASSETS:
Beginning of year.................................................... 681,780,532 824,080,350
--------------- --------------
End of year.......................................................... $ 773,602,031 $ 681,780,532
--------------- --------------
--------------- --------------
</TABLE>
See notes to financial statements.
<PAGE>
Dreyfus Institutional Prime Money Market Fund
- --------------------------------------------------------------------------------
Financial Highlights
Reference is made to page 4 of the Fund's Prospectus dated March 1, 1996.
See notes to financial statements.
<PAGE>
Dreyfus Institutional Prime Money Market Fund
- --------------------------------------------------------------------------------
Financial Highlights (continued)
Contained below is per share operating performance data for a share of
Capital Stock outstanding, total investment return, ratios to average net
assets and other supplemental data for each period indicated. This
information has been derived from the Fund's financial statements.
<TABLE>
<CAPTION>
Class II shares
--------------------
Period Ended
October 31, 1995(1)
PER SHARE DATA: (Unaudited)
--------------------
<S> <C>
Net asset value, beginning of year......................................... $ --(3)
----------
Investment Operations;
Investment income--net..................................................... .0279
----------
Distributions;
Dividends from investment income--net...................................... (.0279)
----------
Net asset value, end of year............................................... $ --(3)
----------
----------
TOTAL INVESTMENT RETURN........................................................ 2.81%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets.................................... .20%(2)
Ratio of net investment income to average net assets....................... 5.67%(2)
Net Assets, end of year (000's Omitted).................................... $0
<FN>
- ------------------
(1) The Fund commenced selling Class II shares on November 3, 1994.
(2) Annualized.
(3) Beginning and end of the year there were no shares outstanding. All
shares were purchased and redeemed during the year.
</TABLE>
See notes to financial statements.
<PAGE>
Dreyfus Institutional Prime Money Market Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 1-Significant Accounting Policies:
The Dreyfus/Laurel Funds, Inc. (the "Company") is registered under the
Investment Company Act of 1940 ("Act") as a diversified open-end management
investment company and operates as a series company currently offering
sixteen Series including the Dreyfus Institutional Prime Money Market Fund
(the "Fund"). The Dreyfus Corporation ("Manager") serves as the Fund's
investment adviser. The Manager is a direct subsidiary of Mellon Bank, N.A.
("Mellon Bank").
Premier Mutual Fund Services, Inc. (the "Distributor") acts as the
distributor of the Fund's shares. The Distributor, located at One Exchange
Place, Boston, Massachusetts 02109, 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.
On July 26, 1995, the Fund's Directors approved a change to the Fund's
name, effective September 15, 1995, from "Dreyfus/Laurel Institutional Prime
Money Market Fund" to "Dreyfus Institutional Prime Money Market Fund."
In addition, Class II and Class III shares were eliminated. The
designation Class I of the Funds' only remaining class of shares also was
eliminated and these shares were redesignated as shares of the Funds'. The
Company has the authority to issue 25 billion shares of capital stock with a
par value of $.001.
(a) Portfolio Valuation: Investments are valued at amortized cost in
accordance with Rule 2a-7 of the Investment Company Act of 1940, which has
been determined by the Fund's Board of Directors to represent the fair value
of the Fund's investments.
It is the Fund's policy to maintain a continuous net asset value per
share of $1.00 for the Fund; the Fund has adopted certain investment,
portfolio valuation and dividend and distribution policies to enable it to do
so. There is no assurance, however, that the Fund will be able to maintain a
stable net asset value of $1.00.
(b) Securities Transactions and Investment Income: Securities
transactions are recorded on a trade date basis. Realized gain and loss from
securities transactions are recorded on the identified cost basis. Interest
income is recognized on the accrual basis. Cost of investments represents
amortized cost.
(c) Repurchase Agreements: The Fund may engage in repurchase agreement
transactions. Under the terms of a typical repurchase agreement, the Fund,
through its custodian, and sub-custodian, takes possession of an underlying
debt obligation subject to an obligation of the seller to repurchase, and the
Fund to resell, the obligation at an agreed-upon price and time, thereby
determining the yield during the Fund's holding period. This arrangement
results in a fixed rate of return that is not subject to market fluctuations
during the Fund's holding period. The value of the collateral is at least
equal, at all times, to the total amount of the repurchase obligations,
including interest. In the event of a counterparty default, the Fund has the
right to use the collateral to offset losses incurred. There is potential
loss to the Fund in the event the Fund is delayed or prevented from
exercising its rights to dispose of the collateral securities, including the
risk of a possible decline in the value of the underlying securities during
the period while the Fund seeks to assert its rights. The Fund's manager,
acting under the supervision of the Board of Directors, reviews the value of
the collateral and the creditworthiness of those banks and dealers with which
the Fund enters into repurchase agreements to evaluate potential risks.
<PAGE>
Dreyfus Institutional Prime Money Market Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
(d) Distributions to Shareholders: It is the policy of the Fund to
declare dividends daily from investment income-net; such dividends are paid
monthly. Dividends from net realized capital gain are normally declared and
paid annually, but the Fund may make distributions on a more frequent basis
to comply with the distribution requirements of the Internal Revenue Code. To
the extent that net realized capital gain can be offset by capital loss
carryovers, it is the policy of the Fund not to distribute such gain.
(e) Federal Income Taxes: It is the policy of the Fund to continue to
qualify as a regulated investment company, if such qualification is in the
best interests of its shareholders, by complying with the applicable
provisions of the Internal Revenue Code, and to make distributions of taxable
income sufficient to relieve it from substantially all Federal income and
excise taxes.
NOTE 2-Investment Management Fee and Other Transactions with Affiliates:
(a) Investment Management Fee: Pursuant to an Investment Management
agreement with the Manager, the Manager provides or arranges for one or more
third parties and or affiliates to provide investment advisory,
administrative, custody, fund accounting and transfer agency services to the
Fund. The Manager also directs the investments of the Fund in accordance with
its investment objective, policies and limitations. For these services, the
Fund is contractually obligated to pay the Manager a fee, calculated daily
and paid monthly, at the annual rate of .15% of the value of the Fund's
average daily net assets. Out of its fee, the Manager pays all of the
expenses of the Fund except brokerage fees, taxes, interest, Rule 12b-1
distribution fees and expenses, fees and expenses of non-interested Directors
(including counsel fees) and extraordinary expenses. In addition, the Manager
is required to reduce its fee in an amount equal to the Fund's allocable
portion of fees and expenses of the non-interested Directors (including
counsel).
(b) Shareholder Servicing Plan: The Fund has adopted a shareholder
servicing plan (the "Plan"). Under the Plan, the Fund may pay up to .15% of
the value of the average daily net assets annually to compensate certain
banks, brokers, dealers or other financial institutions for shareholder
services. For the year ended October 31, 1995, the Fund incurred service fees
of $1,280,430.
Under its terms, the shareholder servicing plan shall remain in effect
from year to year, provided such continuance is approved annually by a vote
of a majority of those Directors who are not "interested persons" of the
Investment Company and who have no direct or indirect financial interest in
the operation of the Plan or any agreement related to the Plan.
(c) Directors' Fees: Each director who is not an "interested
person" as defined in the Act receives $27,000 per year, $1,000 for each
Board meeting attended and $750 for each Audit Committee attended and is
reimbursed for travel and out-of-pocket expenses. These expenses are paid in
total by the following funds: the Dreyfus/Laurel Funds, Inc., the
Dreyfus/Laurel Tax-Free Municipal Funds, and the Dreyfus/Laurel Funds Trust.
In addition the Chairman of the Board receives an annual fee of $75,000 per
year. These fees and expenses are charged and allocated to each series based
on net assets.
<PAGE>
Dreyfus Institutional Prime Money Market Fund
- --------------------------------------------------------------------------------
Independent Auditors' Report
The Board of Directors and Shareholders
The Dreyfus/Laurel Funds, Inc.:
We have audited the accompanying statement of assets and liabilities of
the Dreyfus Institutional Prime Money Market Fund of The Dreyfus/Laurel
Funds, Inc., including the statement of investments, as of October 31, 1995,
and the related statement of operations for the year then ended, the
statement of changes in net assets for each of the two years in the period
then ended, and the financial highlights for each of the periods indicated
herein. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of October 31, 1995, by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of the Dreyfus Institutional Prime Money Market Fund of The
Dreyfus/Laurel Funds, Inc., as of October 31, 1995, and the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each
of the periods indicated herein, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Pittsburgh, Pennsylvania
December 15, 1995
<PAGE>
Dreyfus Institutional U.S. Treasury Money Market Fund
- ------------------------------------------------------------------------------
Statement of Investments October 31, 1995
<TABLE>
<CAPTION>
Annualized
Yield on
Date of Principal
U.S. Treasury Bills--55.8% Purchase Amount Value
- -------------------------------------------------------------- ----------- ------------ ------------
<S> <C> <C> <C>
11/9/95................................................... 5.20% $ 30,000,000 $ 29,965,600
11/16/95.................................................. 5.49 25,000,000 24,943,542
11/30/95.................................................. 5.48 30,000,000 29,869,500
12/7/95................................................... 5.37 45,000,000 44,761,500
12/14/95.................................................. 5.78 25,000,000 24,830,389
12/21/95.................................................. 5.24 30,000,000 29,784,583
1/11/96................................................... 6.02 25,000,000 24,710,083
1/18/96................................................... 5.33 25,000,000 24,715,083
2/8/96.................................................... 5.51 25,000,000 24,630,469
2/22/96................................................... 5.48 25,000,000 24,580,958
3/7/96.................................................... 5.41 25,000,000 24,532,569
4/4/96.................................................... 5.86 40,000,000 39,026,945
4/18/96................................................... 5.42 25,000,000 24,379,747
5/30/96................................................... 5.50 35,000,000 33,913,790
7/25/96................................................... 5.64 25,000,000 24,006,167
------------
TOTAL U.S. TREASURY BILLS (cost $428,650,925)................. $428,650,925
------------
Repurchase Agreements-44.7%
- --------------------------------------------------------------
Barclays De Zoette Wedd Securities, Inc.
dated 10/31/95, due 11/1/95 in the amount of $125,020,399
(fully collateralized by $105,461,000 U.S. Treasury Notes
4.25% to 9.25%, due 1/31/96 to 8/15/2002 value $109,452,916
and $14,723,000 U.S. Treasury Bonds 7.25% to 14%, due
11/15/2012 to 8/15/2022 value $18,048,139)................ 5.88% $125,000,000 $125,000,000
Donaldson, Lufkin & Jenrette Securities, Inc.
dated 10/31/95, due 11/1/95 in the amount of $150,024,479
(fully collateralized by $144,361,000 U.S. Treasury Notes
7.5%, due 10/31/99 value $153,000,140).................... 5.88 150,000,000 150,000,000
Goldman Sachs & Co.
dated 10/31/95, due 11/1/95 in the amount of $67,835,605
(fully collateralized by $43,540,000 U.S. Treasury Bonds
12.5%, due 8/15/2014 value $69,182,457)................... 5.88 67,824,527 67,824,527
------------
TOTAL REPURCHASE AGREEMENTS (cost $342,824,527)............... $342,824,527
------------
TOTAL INVESTMENTS (cost $771,475,452) ............. 100.5% $771,475,452
LIABILITIES, LESS CASH AND RECEIVABLES............. (.5%) $ (3,527,903)
------ ------------
NET ASSETS......................................... 100.0% $767,947,549
------ ------------
------ ------------
</TABLE>
See notes to financial statements.
<PAGE>
Dreyfus Institutional U.S. Treasury Money Market Fund
- ------------------------------------------------------------------------------
Statement of Assets and Liabilities October 31, 1995
<TABLE>
<S> <C> <C>
ASSETS:
Investments in securities, at value (cost $771,475,452)--see Statement of
Investments
(including repurchase agreements of $342,824,527)..................... $771,475,452
Cash.................................................................... 427,827
Interest receivable..................................................... 55,956
------------
771,959,235
LIABILITIES:
Due to The Dreyfus Corporation--Note 2(a)................................ $ 188,521
Due to Distributor--Note 2(b) ........................................... 197,351
Dividends Payable....................................................... 3,612,348
Accrued expenses and other liabilities.................................. 13,466 4,011,686
----------- ------------
NET ASSETS at value, represented by paid-in capital,
applicable to 767,947,549 outstanding shares of Capital Stock
(2 billion shares of $.001 par value Capital Stock authorized).......... $767,947,549
------------
------------
NET ASSET VALUE, offering and redemption price per share
($767,947,549 / 767,947,549 shares of Capital Stock outstanding)........ $1.00
-----
-----
</TABLE>
See notes to financial statements.
<PAGE>
Dreyfus Institutional U.S. Treasury Money Market Fund
- ------------------------------------------------------------------------------
Statement of Operations Year ended October 31, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest Income....................................................... $39,702,491
Expenses:
Investment management fee--Note 2(a)................................... $ 967,664
Shareholder service fee--Note 2(b)..................................... 1,036,783
Directors' fees and expenses--Note 2(c)................................ 69,119
----------
Total Expenses.................................................... 2,073,566
-----------
INVESTMENT INCOME-NET, representing net increase in net assets
resulting from operations............................................... $37,628,925
-----------
-----------
</TABLE>
See notes to financial statements.
<PAGE>
Dreyfus Institutional U.S. Treasury Money Market Fund
- ------------------------------------------------------------------------------
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended October 31,
---------------------------------
1995 1994
-------------- --------------
<S> <C> <C>
OPERATIONS;
Investment income--net............................................... $ 37,628,925 $ 17,666,894
-------------- --------------
DIVIDENDS TO SHAREHOLDERS FROM;
Investment income--net............................................... (37,628,925) (17,666,894)
-------------- --------------
CAPITAL STOCK TRANSACTIONS ($1.00 per share):
Net proceeds from shares sold........................................ 3,138,307,082 3,029,275,330
Dividends reinvested................................................. 4,562,052 2,102,357
Cost of shares redeemed.............................................. (2,961,699,870) (2,945,252,694)
-------------- --------------
Increase In Net Assets From Capital Stock Transactions............. 181,169,264 86,124,993
-------------- --------------
Total Increase In Net Assets..................................... 181,169,264 86,124,993
NET ASSETS:
Beginning of year.................................................... 586,778,285 500,653,292
-------------- --------------
End of year.......................................................... $ 767,947,549 $ 586,778,285
-------------- --------------
-------------- --------------
</TABLE>
See notes to financial statements.
<PAGE>
Dreyfus Institutional U.S. Treasury Money Market Fund
- ------------------------------------------------------------------------------
Financial Highlights
Reference is made to page 6 of the Fund's Prospectus dated March 1, 1996.
See notes to financial statements.
<PAGE>
Dreyfus Institutional U.S. Treasury Money Market Fund
- ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 1--Significant Accounting Policies:
The Dreyfus/Laurel Funds, Inc. (the "Company") is registered under the
Investment Company Act of 1940 ("Act") as a diversified open-end management
investment company and operates as a series company currently offering
sixteen Series including the Dreyfus Institutional U.S. Treasury Money Market
Fund (the "Fund"). The Dreyfus Corporation ("Manager") serves as the Fund's
investment adviser. The Manager is a direct subsidiary of Mellon Bank, N.A.
("Mellon Bank").
Premier Mutual Fund Services, Inc. (the "Distributor") acts as the
distributor of the Fund's shares. The Distributor, located at One Exchange
Place, Boston, Massachusetts 02109, 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.
On July 26, 1995, the Fund's Directors approved a change to the Fund's
name, effective September 15, 1995, from "Dreyfus/Laurel Institutional U.S.
Treasury Money Market Fund" to "Dreyfus Institutional U.S. Treasury Money
Market Fund."
In addition, Class II and Class III shares were eliminated. The
designation Class I of the Funds' only remaining class of shares also was
eliminated and these shares were redesignated as shares of the Funds'. The
Company has the authority to issue 25 billion shares of capital stock with a
par value of $.001
(a) Portfolio Valuation: Investments are valued at amortized cost in
accordance with Rule 2a-7 of the Investment Company Act of 1940, which has
been determined by the Fund's Board of Directors to represent the fair value
of the Fund's investments.
It is the Fund's policy to maintain a continuous net asset value per
share of $1.00 for the Fund; the Fund has adopted certain investment,
portfolio valuation and dividend and distribution policies to enable it to do
so. There is no assurance, however, that the Fund will be able to maintain a
stable net asset value of $1.00.
(b) Securities Transactions and Investment Income: Securities
transactions are recorded on a trade date basis. Realized gain and loss from
securities transactions are recorded on the identified cost basis. Interest
income is recognized on the accrual basis. Cost of investments represents
amortized cost.
(c) Repurchase Agreements: The Fund may engage in repurchase agreement
transactions. Under the terms of a typical repurchase agreement, the Fund,
through its custodian, and sub-custodian takes possession of an underlying
debt obligation subject to an obligation of the seller to repurchase, and the
Fund to resell, the obligation at an agreed-upon price and time, thereby
determining the yield during the Fund's holding period. This arrangement
results in a fixed rate of return that is not subject to market fluctuations
during the Fund's holding period. The value of the collateral is at least
equal, at all times, to the total amount of the repurchase obligations,
including interest. In the event of a counterparty default, the Fund has the
right to use the collateral to offset losses incurred. There is potential
loss to the Fund in the event the Fund is delayed or prevented from
exercising its rights to dispose of the collateral securities, including the
risk of a possible decline in the value of the underlying securities during
the period while the Fund seeks to assert its rights. The Fund's manager,
acting under the supervision of the Board of Directors, reviews the value of
the collateral and the creditworthiness of those banks and dealers with which
the Fund enters into repurchase agreements to evaluate potential risks.
<PAGE>
Dreyfus Institutional U.S. Treasury Money Market Fund
- ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
(d) Distributions to Shareholders: It is the policy of the Fund to
declare dividends daily from investment income-net; such
dividends are paid monthly. Dividends from net realized capital gain are
normally declared and paid annually, but the Fund may make distributions on a
more frequent basis to comply with the distribution requirements of the
Internal Revenue Code. To the extent that net realized capital gain can be
offset by capital loss carryovers, it the policy of the Fund not to
distribute such gain.
(e) Federal Income Taxes: It is the policy of the Fund to continue to
qualify as a regulated investment company, if such qualification is in the
best interests of its shareholders, by complying with the applicable
provisions of the Internal Revenue Code, and to make distributions of taxable
income sufficient to relieve it from substantially all Federal income and
excise taxes.
NOTE 2--Investment Management Fee and Other Transactions with Affiliates:
(a) Investment Management Fee: Pursuant to an Investment Management
agreement with the Manager, the Manager provides or arranges for one or more
third parties and or affiliates to provide investment advisory,
administrative, custody, fund accounting and transfer agency services to the
Fund. The Manager also directs the investments of the Fund in accordance with
its investment objective, policies and limitations. For these services, the
Fund is contractually obligated to pay the Manager a fee, calculated daily
and paid monthly, at the annual rate of .15% of the value of the Fund's
average daily net assets. Out of its fee, the Manager pays all of the
expenses of the Fund except brokerage fees, taxes, interest, Rule 12b-1
distribution fees and expenses, fees and expenses of non-interested Directors
(including counsel fees) and extraordinary expenses. In addition, the Manager
is required to reduce its fee in an amount equal to the Fund's allocable
portion of fees and expenses of the non-interested Directors (including
counsel).
(b) Shareholder Servicing Plan: The Fund has adopted a shareholder
servicing plan (the "Plan"). Under the Plan, the Fund may pay up to .15% of
the value of the average daily net assets annually to compensate certain
banks, brokers, dealers or other financial institutions for shareholder
services. For the year ended October 31, 1995, the Fund incurred service fees
of $1,036,783.
Under its terms, the shareholder servicing plan shall remain in effect
from year to year, provided such continuance is approved annually by a vote
of a majority of those Directors who are not "interested persons" of the
Investment Company and who have no direct or indirect financial interest in
the operation of the Plan or any agreement related to the Plan.
(c) Directors' Fees: Each director who is not an "interested person" as
defined in the Act receives $27,000 per year, $1,000 for each Board meeting
attended and $750 for each Audit Committee attended and is reimbursed for
travel and out-of-pocket expenses. These expenses are paid in total by the
following funds: the Dreyfus/Laurel Funds, Inc., The Dreyfus/Laurel Tax-Free
Municipal Funds, and the Dreyfus/Laurel Funds Trust. In addition the Chairman
of the Board receives an annual fee of $75,000 per year. These fees and expens
es are charged and allocated to each series based on net assets.
<PAGE>
Dreyfus Institutional U.S. Treasury Money Market Fund
- ------------------------------------------------------------------------------
Independent Auditors' Report
The Board of Directors and Shareholders
The Dreyfus/Laurel Funds, Inc.:
We have audited the accompanying statement of assets and liabilities of
the Dreyfus Institutional U.S. Treasury Money Market Fund of The
Dreyfus/Laurel Funds, Inc., including the statement of investments, as of
October 31, 1995, and the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years in
the period then ended, and the financial highlights for each of the periods
indicated herein. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of October 31, 1995, by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of the Dreyfus Institutional U.S. Treasury Money Market Fund of The
Dreyfus/Laurel Funds, Inc., as of October 31, 1995, and the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each
of the periods indicated herein, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Pittsburgh, Pennsylvania
December 15, 1995
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 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-20
Purchase of Fund Shares. . . . . . . . . . . . . . . . . . . . . B-21
Distribution and Service Plans . . . . . . . . . . . . . . . . . B-23
Redemption of Fund Shares. . . . . . . . . . . . . . . . . . . . B-25
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-35
Information About the Funds. . . . . . . . . . . . . . . . . . . B-37
Custodian, Transfer and Dividend Disbursing Agent, Counsel
and Independent Auditors . . . . . . . . . . . . . . . . . . . B-37
Financial Statements . . . . . . . . . . . . . . . . . . . . . . B-38
Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-39
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 Class A of Limited Term Income Fund at January 31, 1996:
Investment Corporation, 2 Mellon Bank Center, Pittsburgh, PA 15259, 7%
record.
The following shareholder(s) owned 5% or more of the outstanding
voting shares of Class B of Limited Term Income Fund at January 31, 1996:
Everen Clearing Corp. Trust, 5038 Ruby Ave., Racine, WI 53402-2241, 21%
record; Investment Corporation, 2 Mellon Bank Center, Pittsburgh, PA 15259,
8% record.
The following shareholder(s) owned 5% or more of the outstanding
voting shares of Class R of Limited Term Income Fund: Mac & Co., P.O. Box
3198, Pittsburgh, PA 15230-3198, 7% record.
The following shareholder(s) owned 5% or more of the outstanding
voting shares of Class A of Balanced Fund: David Thompson, 48 Broad
Street, P.. Box 474, Glen Falls, NY 12801-0474, 7% record.
The following shareholder(s) owned 5% or more of the outstanding
voting shares of Class B of Balanced Fund: Jacki Anne Addisttee, 16041
Woodvale Road, Encino, CA 91436-3496, 5% record.
The following shareholder(s) owned 5% or more of the outstanding
voting shares of Class R of Balanced Fund: Mac & Co., P.O. Box 3198,
Pittsburgh, PA 15230-3198, 26% record; Mac & Co., c/o Mellon Bank, P.O. Box
3198, Pittsburgh, PA 15230-3198, 14% record; Mac & Co. 180-174, P.O. Box
3198, Pittsburgh, PA 15230-3190, 7% record.
FEDERAL LAW AFFECTING MELLON BANK
The Glass-Steagall Act of 1933 prohibits national banks from engaging
in the business of underwriting, selling or distributing securities and
prohibits a member bank of the Federal Reserve System from having certain
affiliations with an entity engaged principally in that business. The
activities of Mellon Bank, N.A. ("Mellon Bank") in informing its customers
of, and performing, investment and redemption services in connection with
the Funds, and in providing services to the Funds as custodian, 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 twelve 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 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.
# ELIZABETH BACHMAN. Vice President and Assistant Secretary of the
Company, The Dreyfus/Laurel Funds Trust and The Dreyfus/Laurel Tax
Free Municipal Funds (since January 1996); Counsel, Premier Mutual
Fund Services, Inc. Prior to September 1995, she was enrolled at the
Fordham University School of Law and received her J.D. in May 1995.
Prior to September 1992, she was an Assistant at the National
Association for Public Interest Law. Age: 26 years old. Address: 200
Park Avenue, New York, New York 10166.
# 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 and Assisant Secretary (since January
1996) of the Company, The Dreyfus/Laurel Funds Trust and The
Dreyfus/Laurel Tax-Free Municipal Funds; 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.
# MARGARET PARDO. Assistant Secretary of the Company, The Dreyfus/Laurel
Funds Trust and The Dreyfus/Laurel Tax-Free Municipal Funds (since
January 1996); Paralegal, Premier Mutual Fund Services, Inc. Prior
to April 1995, she was a Medical Coordination Officer at ORBIS
International. Prior to June 1992, she worked as a Program
Coordinator at Physicians World Communications Group. Age: 27 years
old. Address: 200 Park Avenue, New York, New York 10166.
# 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.
# JOHN J. PYBURN. Assistant Treasurer of the Company, The Dreyfus/Laurel
Funds Trust and The Dreyfus/Laurel Tax-Free Municipal Funds (since
January 1996); Vice President of Premier Mutual Fund Services, Inc.
and an officer of other investment companies advised or administered
by Dreyfus. From 1984 to July 1994, he was Assistant Vice President
in the Mutual Fund Accounting Department of Dreyfus. Age: 61 years
old. Address: 200 Park Avenue, New York, New York 10166.
JOSEPH F. TOWER, III. Assistant Treasurer of the Company, The
Dreyfus/Laurel Funds Trust and The Dreyfus/Laurel Tax-Free Municipal
Funds (since January 1996); Senior Vice President, Treasurer and Chief
Financial Officer of Premier Mutual Fund Services, Inc. and an officer
of other investment companies advised or administered by Dreyfus.
From July 1988 to August 1994, he was employed by The Boston Company,
Inc. where he held various management positions in the Corporate
Finance and Treasury areas. Age: 33 years old. Address: 200 Park
Avenue, New York, New York 10166.
____________________________
* "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
January 31, 1996.
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 current 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 $27,800 None None $ 34,500
Francis P. Brennan* 86,683 None None 10,500
Joseph S. DiMartino** None None None $448,618***
James M. Fitzgibbons 27,795 None None 34,500
J. Tomlinson Fort** None None None None
Arthur L. Goeschel 27,604 None None 35,500
Kenneth A. Himmel 26,381 None None 32,750
Arch S. Jeffery** None None None None
Stephen J. Lockwood 26,387 None None 32,750
Robert D. McBride 27,800 None None 35,500
John J. Sciullo 27,800 None None 34,500
Roslyn M. Watson 27,795 None None 34,550
# Amounts required to be paid by the Company directly to the non-interested Directors,
that would be applied to offset a portion of the management fee payable to Dreyfus, are in
fact paid directly by Dreyfus to the non-interested Directors. Amount does not include
reimbursed expenses for attending Board meetings, which amounted to $12,342 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 $17,563, $28,604 and $27,800,
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 $3,186 for expenses
attributable to the Company's Board meetings ($3,186 is not included in the $12,342
above).
*** Estimated amounts for the fiscal year ending October 31, 1995.
</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 and a director; Barbara E. Casey, Vice President-Dreyfus
President-Dreyfus Retirement Services; Diane M. Coffey, Vice President-
Corporate Communications; Elie M. Genadry, Vice President-Institutional
Sales; William T. Sandalls, Jr., Senior Vice President, Chief Financial
Officer and a director; 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; Maurice Bendrihem,
Controller; Elvira Oslapas; Assistant Secretary; Mandell L. Berman, Frank
V. Cahouet, Alvin E. Friedman, Lawrence M. Greene and Julian M. Smerling
directors.
For the last three fiscal years, each Fund had the following expenses:
For the Fiscal Years Ended October 31,
---------------------------------------------
1995 1994 1993
____ ____ ____
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.
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.
In-Kind Purchases. If the following conditions are satisfied, the
Fund may at its discretion, permit the purchase of shares through an "in-
kind" exchange of securities. Any securities exchanged must meet the
investment objective, policies and limitations of the Fund, must have a
readily ascertainable market value, must be liquid and must not be subject
to restrictions on resale. The market value of any securities exchanged,
plus any cash, must be at least equal to $25,000. Shares purchased in
exchange for securities generally cannot be redeemed for fifteen days
following the exchange in order to allow time for the transfer to settle.
The basis of the exchange will depend upon the relative NAV of the
Shares purchased and securities exchanged. Securities accepted by the Fund
will be valued in the same manner as the Fund values its assets. Any
interest earned on the securities following their delivery to the Fund and
prior to the exchange will be considered in valuing the securities. All
interest, dividends, subscription or other rights attached to the
securities become the property of the Fund, along with the securities. For
further information about "in-kind" purchases, call 1-800-645-6561.
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 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:
Class A Class B Class 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.
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.
From time to time, Fund advertisements may include statistical data or
general discussions about the growth and development of Dreyfus Retirement
Services (in terms of new customers, assets under management, market
shares, etc.) and its presence in the defined contribution plan market.
From time to time, advertising material for the Fund may include
biographical information relating to its portfolio manager and may refer
to, or include commentary by the portfolio manager relating to investment
strategy, asset growth, current or past business, political, economic or
financial conditions and other matters of general interest to investors.
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 15219, 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.
KPMG Peat Marwick LLP, One Mellon Bank Center, Pittsburgh,
Pennsylvania 15219 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 Independent Auditors' Report 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.
<PAGE>
Premier Limited Term Income Fund October 31, 1995
- --------------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN PREMIER LIMITED TERM
INCOME FUND CLASS R SHARES AND THE LEHMAN BROTHERS INTERMEDIATE
GOVERNMENT/CORPORATE BOND INDEX
Premier Limited Lehman Brothers
Term Income Fund Intermediate Government/
(Class R Shares) Corporate Bond Index *
7/11/91 10,000 10,000
10/31/91 10,550 10,601
10/31/92 11,511 11,662
10/31/93 12,584 12,821
10/31/94 12,275 12,573
10/31/95 13,761 14,150
*Source: Lehman Brothers
<TABLE>
<CAPTION>
Average Annual Total Returns
- ------------------------------------------------------------------------------------------------------------------------------
Class A Shares Class R Shares
- ------------------------------------------------------------ ------------------------------------------------------------
% Return
Reflecting
% Return Without Maximum Initial
Period Ended 10/31/95 Sales Charge Sales Charge (3.0%) Period Ended 10/31/95
- --------------------- ------------ ------------------ ---------------------
<S> <C> <C> <C> <C>
1 Year 11.83% 8.44% 1 Year 12.11%
From Inception (4/7/94) 7.46 5.42 From Inception (7/11/91) 7.69
</TABLE>
<TABLE>
<CAPTION>
Actual Aggregate Total Returns
- ------------------------------------------------------------------------------------------------------------------------------
Class B Shares Class C Shares
- ------------------------------------------------------------ ------------------------------------------------------------
% Return Reflecting % Return Reflecting
Applicable Contingent Applicable Contingent
% Return Deferred Sales % Return Deferred Sales
Assuming No Charge Upon Assuming No Charge Upon
Period Ended 10/31/95 Redemption Redemption * Period Ended 10/31/95 Redemption Redemption**
- --------------------- ------------- -------------------- --------------------- ------------ ---------------------
<S> <C> <C> <C> <C> <C>
From Inception (12/19/94) 11.32% 8.32% From Inception (12/19/94) 11.32% 10.57%
</TABLE>
Past performance is not predictive of future performance.
The above graph compares a $10,000 investment made in Class R shares of
Premier Limited Term Income Fund on 7/11/91 (Inception Date) to a $10,000
investment made in the Lehman Brothers Intermediate Government/Corporate Bond
Index on that date. For comparative purposes, the value of the Index on
6/30/91 is used as the beginning value on 7/11/91. All dividends and capital
gain distributions are reinvested. Performance for Class A shares, Class B
shares and Class C shares will vary from the performance of Class R shares
shown above due to differences in charges and expenses.
The Fund's performance shown in the line graph takes into account all
applicable fees and expenses. The Lehman Brothers Intermediate
Government/Corporate Bond Index is a widely accepted, unmanaged index of
Government and corporate bond market performance composed of U.S. Government,
Treasury and agency securities, fixed-income securities and nonconvertible
investment grade corporate debt with an average maturity of 1-10 years. The
Index does not take into account charges, fees and other expenses. Further
information relating to Fund performance, including expense reimbursements,
if applicable, is contained in the Financial Highlights section of the
Prospectus and elsewhere in this report.
*Maximum contingent deferred sales charge for Class B shares is 3% and is
reduced to 0% after five years.
**Maximum contingent deferred sales charge for Class C shares is .75% within
one year of the date of purchase.
<PAGE>
Premier Limited Term Income Fund
- --------------------------------------------------------------------------------
Statement of Investments October 31, 1995
<TABLE>
<CAPTION>
Principal
Amount CORPORATE BONDS AND NOTES-51.2% Value
--------- -------------
<S> <C> <C>
Banking and Finance- 6.9%
$ 500,000 Associates Corporation of North America
6% due 12/1/1995........................................................ $ 500,069
1,100,000 BankAmerica Corporation
6% due 7/15/1997........................................................ 1,100,000
500,000 International Lease Finance Corporation
6.625% due 6/1/1996..................................................... 502,335
2,500,000 International Lease Finance Corporation
5.75% due 3/15/1998..................................................... 2,481,250
-------------
4,583,654
-------------
Consumer Non-Durables-4.9%
2,000,000 McDonald's Corporation
8.375% due 10/29/1999................................................... 2,170,000
1,000,000 Warner-Lambert Company
8% due 9/1/1998......................................................... 1,052,500
-------------
3,222,500
-------------
Consumer Services-3.5%
2,100,000 Wal-Mart Stores, Inc.
8.625% due 4/1/2001..................................................... 2,331,000
-------------
Energy-4.1%
2,500,000 Exxon Capital Corporation
8.25% due 11/1/1999..................................................... 2,684,375
-------------
Financial Services-18.0%
2,500,000 ADVANTA Corporation
5.125% due 11/15/1996................................................... 2,475,000
500,000 American Express Company
8.50% due 08/15/2001.................................................... 553,125
2,100,000 Commercial Credit Group
7.375% due 11/15/1996................................................... 2,129,484
1,500,000 Dayton Hudson Credit Card Master Trust
Ser. 1995-1, Cl. A, 6.10% due 2/25/2002................................. 1,505,100
250,000 Ford Motor Credit Company
8.875% due 8/1/1996..................................................... 255,317
1,000,000 Ford Motor Credit Company
7.125% due 12/1/1997.................................................... 1,020,000
1,500,000 General Motors Acceptance Corporation
7.875% due 2/28/1997.................................................... 1,535,625
425,834 General Motors Acceptance Corporation Grantor Trust
Ser. 1992-F, Cl. A, 4.50% due 9/15/1997................................. 422,342
2,000,000 U.S. Leasing International Corporation
7% due 11/1/1997........................................................ 2,037,500
-------------
11,933,493
-------------
Technology-5.0%
3,000,000 Rockwell International Corporation
8.375% due 2/15/2001.................................................... 3,296,250
-------------
Utilities-3.0%
2,000,000 Texas Utilities Electric Company
6.375% due 8/1/1997..................................................... 2,007,500
-------------
</TABLE>
<PAGE>
Premier Limited Term Income Fund
- --------------------------------------------------------------------------------
Statement of Investments (continued) October 31, 1995
<TABLE>
<CAPTION>
Principal
Amount CORPORATE BONDS AND NOTES (continued) Value
--------- -------------
<S> <C> <C>
Other-5.8%
$3,000,000 American Home Products Corporation
7.90% due 2/15/2005..................................................... $ 3,285,000
500,000 BP America, Inc.
7.875% due 5/15/2002.................................................... 540,625
-------------
3,825,625
-------------
TOTAL CORPORATE BONDS AND NOTES
(Cost $33,973,815).................................................... 33,884,397
-------------
U.S. TREASURY BONDS AND NOTES-35.1%
1,060,000 U.S. Treasury Bonds
12.375% due 5/15/2004................................................... 1,503,907
1,000,000 U.S. Treasury Bonds
12% due 5/15/2005....................................................... 1,423,970
3,200,000 U.S. Treasury Bonds
10.75% due 8/15/2005.................................................... 4,287,711
2,000,000 U.S. Treasury Notes
7.875% due 1/15/1998.................................................... 2,090,380
1,500,000 U.S. Treasury Notes
8.875% due 11/15/1998................................................... 1,630,665
3,000,000 U.S. Treasury Notes
8.875% due 2/15/1999.................................................... 3,277,800
1,700,000 U.S. Treasury Notes
8.75% due 8/15/2000 .................................................... 1,905,003
700,000 U.S. Treasury Notes
6.25% due 2/15/2003..................................................... 712,166
4,000,000 U.S. Treasury Notes
7.25% due 5/15/2004..................................................... 4,327,599
1,800,000 U.S. Treasury Notes
7.875% due 11/15/2004................................................... 2,027,610
-------------
TOTAL U.S. TREASURY BONDS AND NOTES
(Cost $22,073,955).................................................... 23,186,811
-------------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION-5.6%
1,269,575 Government National Mortgage Association
7% due 11/15/2023....................................................... 1,262,037
1,361,740 Government National Mortgage Association
7% due 3/15/2024........................................................ 1,353,655
1,106,185 Government National Mortgage Association
7.50% due 3/15/2024..................................................... 1,121,741
-------------
TOTAL GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION (Cost $3,827,874) ...................................... 3,737,433
-------------
U.S. GOVERNEMENT AGENCY-1.2%
800,000 Tennessee Valley Authority
6% due 1/15/1997
(Cost $797,730)......................................................... 802,000
-------------
</TABLE>
<PAGE>
Premier Limited Term Income Fund
- --------------------------------------------------------------------------------
Statement of Investments (continued) October 31, 1995
<TABLE>
<CAPTION>
Principal
Amount Short-Term Investment Value
--------- -------------
<S> <C> <C>
REPURCHASE AGREEMENT-5.2%
$3,423,792 Agreement with Goldman Sachs & Company
dated 10/31/95 bearing 5.88% to be
repurchased at $3,424,351 on 11/1/95,
collateralized by $3,424,263 U.S. Treasury Notes,
5.875% due 7/31/97
(Cost $3,423,792)....................................................... $ 3,423,792
-------------
TOTAL INVESTMENTS
(Cost $64,097,166)........................................... 98.3% 65,034,433
CASH AND RECEIVABLES (NET)...................................... 1.7 1,117,286
------- -------------
NET ASSETS...................................................... 100.0% $66,151,719
------- -------------
------- -------------
</TABLE>
See notes to financial statements.
<PAGE>
Premier Limited Term Income Fund
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities October 31, 1995
<TABLE>
<S> <C> <C>
ASSETS:
Investments in securities, at value (cost $64,097,166)-see Statement of
Investments (including repurchase agreement of $3,423,792)............ $65,034,433
Receivable for Capital Stock sold....................................... 213,795
Interest receivable..................................................... 1,288,045
-----------
66,536,273
LIABILITIES:
Due to the Dreyfus Corporation-Note 2(a)................................ $ 50,108
Due to Distributor-Note 2(b)............................................ 285
Dividends payable....................................................... 304,660
Directors' fees payable-Note 2(c)....................................... 19,465
Payable for Capital Stock redeemed...................................... 10,036 384,554
--------- -----------
NET ASSETS.................................................................. $66,151,719
-----------
-----------
REPRESENTED BY:
Paid-in capital......................................................... $67,394,335
Accumulated distributions in excess of investment income-net............ (22,636)
Accumulated net realized (loss) on investments.......................... (2,157,247)
Accumulated net unrealized appreciation on investments-Note 3........... 937,267
-----------
NET ASSETS at value......................................................... $66,151,719
-----------
NET ASSET VALUE, per share:
Class A Shares
(50 million shares of $.001 par value Capital Stock authorized)
($1,149,999 3 106,095 shares of Capital Stock outstanding)............ $10.84
------
------
Class B Shares
(50 million shares of $.001 par value Capital Stock authorized)
($77,501 37,150 shares of Capital Stock outstanding).................. $10.84
------
------
Class C Shares
(50 million shares of $.001 par value Capital Stock authorized)
($16 31.476 shares of capital stock outstanding)...................... $10.84
------
------
Class R Shares
(100 million shares of $.001 par value Capital Stock authorized)
($64,924,203 35,989,689 shares of Capital Stock outstanding).......... $10.84
------
------
</TABLE>
See notes to financial statements.
<PAGE>
Premier Limited Term Income Fund
- --------------------------------------------------------------------------------
Statement of Operations Year ended October 31, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest Income:........................................................ $4,735,190
Expenses:
Investment management fee--Note 2(a).................................. $ 446,781
Directors' fees and expenses-Note 2(c)................................ 13,700
Distribution fee-Note 2(b)............................................ 2,830
Service fee-Note 2(b)................................................. 64
------------
Total Expenses.................................................... 463,375
------------
INVESTMENT INCOME--NET............................................ 4,271,815
REALIZED AND UNREALIZED GAIN ON INVESTMENTS-Note 3:
Net realized (loss) on investments...................................... $ (302,901)
Net unrealized appreciation on investments.............................. 4,840,620
------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS................... 4,537,719
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $8,809,534
------------
------------
</TABLE>
See notes to financial statements.
<PAGE>
Premier Limited Term Income Fund
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended October 31,
------------------------------
1995 1994(1)
------------ -----------
<S> <C> <C>
OPERATIONS:
Investment income-net................................................ $ 4,271,815 $ 4,266,712
Net realized loss on investments..................................... (302,901) (1,876,669)
Net unrealized appreciation (depreciation) on investments for the year 4,840,620 (4,583,309)
------------ -----------
Net Increase (Decrease) In Net Assets Resulting From Operations.... 8,809,534 (2,193,266)
------------ -----------
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income-net:
Class A Shares..................................................... (58,159) (10,352)
Class B Shares..................................................... (1,637) -
Class R Shares..................................................... (4,212,019) (4,462,330)
Net realized gain on investments;
Class R Shares..................................................... - (490,042)
------------ -----------
Total Dividends.................................................. (4,271,815) (4,962,724)
------------ -----------
CAPITAL STOCK TRANSACTIONS:
Net proceeds from shares sold:
Class A Shares..................................................... 999,504 950,058
Class B Shares..................................................... 74,448 -
Class C Shares..................................................... 15 -
Class R Shares..................................................... 41,024,884 65,415,979
Dividends reinvested:
Class A Shares..................................................... 20,894 4,011
Class B Shares..................................................... 1,026 -
Class R Shares..................................................... 2,845,297 3,726,095
Cost of shares redeemed:
Class A Shares..................................................... (865,359) (9,504)
Class R Shares..................................................... (65,824,826) (39,126,060)
------------ -----------
Increase (Decrease) In Net Assets From Capital Stock Transactions (21,724,117) 30,960,579
------------ -----------
Total Increase In Net Assets................................... (17,186,398) 23,804,589
NET ASSETS:
Beginning of year.................................................... 83,338,117 59,533,528
------------ -----------
End of year (including accumulated distributions in excess of
investment income-net: $22,636 in 1995 and $22,636 in 1994)....... $66,151,719 $83,338,117
------------ -----------
------------ -----------
</TABLE>
<TABLE>
<CAPTION>
Shares
----------------------------------------------------------------------------
Class A Class B Class C Class R
---------------------- ---------- -------- ------------------------
Year Ended Year Ended
Year Ended October 31, October 31, October 31, Year Ended October 31,
---------------------- ---------- -------- ------------------------
1995 1994(1) 1995(2) 1995(3) 1995 1994(1)
-------- ------- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Shares sold............ 97,702 91,768 7,054 2 4,035,604 6,051,387
Shares issued for dividends
reinvested........... 1,985 390 96 - 271,316 352,406
Shares redeemed........ (84,833) (917) - - (6,382,003) (3,716,619)
-------- ------- -------- -------- ---------- ----------
Net Increase (Decrease) in
Shares Outstanding. 14,854 91,241 7,150 2 (2,075,083) 2,687,174
-------- ------- -------- -------- ---------- ----------
-------- ------- -------- -------- ---------- ----------
<FN>
- ----------------
(1) The Fund commenced selling Class A shares on April 7, 1994. Any shares outstanding prior to April 4, 1994 were designated
Trust shares. On October 17, 1994, Trust shares were redesignated as Class R shares.
(2) The Fund commenced selling B shares on December 19, 1994.
(3) The Fund commenced selling C shares on April 30, 1995.
</TABLE>
See notes to financial statements.
<PAGE>
Premier Limited Term Income Fund
- --------------------------------------------------------------------------------
Financial Highlights
Reference is made to pages 4 and 5 of the Fund's Prospectus
dated March 1, 1996.
See notes to financial statments.
<PAGE>
Premier Limited Term Income Fund
- --------------------------------------------------------------------------------
Financial Highlights (continued)
Reference is made to pages 6 and 7 of the Fund's Prospectus
dated March 1, 1996.
See notes to financial statements
<PAGE>
Premier Limited Term Income Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 1-Significant Accounting Policies:
The Dreyfus/Laurel Funds, Inc. (the "Company") is registered under the
Investment Company Act of 1940 ("Act") as a diversified open-end management
investment company and operates as a series company currently offering
sixteen Series including the Premier Limited Term Income Fund (the "Fund").
The Dreyfus Corporation ("Manager") serves as the Fund's investment adviser.
The Manager is a direct subsidiary of Mellon Bank, N.A. ("Mellon Bank").
Premier Mutual Fund Services, Inc. (the "Distributor") acts as the
distributor of the Fund's shares. The Distributor, located at One Exchange
Place, Boston, Massachusetts 02109, 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.
The Fund currently offers four classes of shares: Class A, Class B, Class
C and Class R shares. Class A, Class B and Class C shares are sold primarily
to retail investors through financial intermediaries and bear a distribution
fee and/or service fee. Class A shares are sold with a front-end sales
charge, while Class B and Class C shares are subject to a contingent deferred
sales charge ("CDSC") and a service fee. Class R shares are sold primarily to
bank trust departments and other financial service providers (including
Mellon Bank and its affiliates) acting on behalf of customers having a
qualified trust or investment account or relationship at such institution,
and bear no distribution fee or service fee. Class R shares are offered
without a front-end sales load or CDSC. Each class of shares has identical
rights and privileges, except with respect to distribution fees and voting
rights on matters affecting a single class. The Company has the authority to
issue 25 billion shares of capital stock with a par value of $.001.
Investment income, net of expenses (other than class specific expenses)
and realized and unrealized gains and losses are allocated daily to each
class of shares based upon the relative proportion of net assets of each
class.
(a) Portfolio Valuation: The Fund's investments (excluding short-term
investments and U.S. Government obligations) are valued each business day by
an independent pricing service ("Service") approved by the Board of
Directors. Investments for which quoted bid prices are readily available and
are representative of the bid side of the market in the judgment of the
Service are valued at the mean between the quoted bid prices (as obtained by
the Service from dealers in such securities) and asked prices (as calculated
by the Service based upon its evaluation of the market for such securities).
Other investments (which constitute majority of the portfolio securities) are
carried at fair value as determined by the Service, based on methods which
include consideration of: yields or prices of securities of comparable
quality, coupon, maturity and type; indications as to values from dealers;
and general market conditions. Securities for which there are no such
valuations are valued at fair value as determined in good faith under the dire
ction of the Board of Directors. Investments in U.S. Government obligations
are valued at the mean between quoted bid and asked prices. Short-term
investments are carried at amortized cost, which approximates value.
(b) Securities Transactions and Investment Income: Securities
transactions are recorded on a trade date basis. Interest income, adjusted
for amortization of premiums and discounts on investments, is recognized on
the accrual basis. Realized gain and loss from securities transactions are
recorded on the identified cost basis.
<PAGE>
Premier Limited Term Income Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
(c) Repurchase Agreements: The Fund may engage in repurchase agreement
transactions. Under the terms of a typical repurchase agreement, the Fund,
through its custodian, and sub-custodian, takes possession of an underlying
debt obligation subject to an obligation of the seller to repurchase, and the
Fund to resell, the obligation at an agreed-upon price and time, thereby
determining the yield during the Fund's holding period. This arrangement
results in a fixed rate of return that is not subject to market fluctuations
during the Fund's holding period. The value of the collateral is at least
equal, at all times, to the total amount of the repurchase obligation,
including interest. In the event of a counterparty default, the Fund has the
right to use the collateral to offset losses incurred. There is potential
loss to the Fund in the event the Fund is delayed or prevented from
exercising its rights to dispose of the collateral securities, including the
risk of a possible decline in the value of the underlying securities during
the period while the Fund seeks to assert its rights. The Fund's manager,
acting under the supervision of the Board of Directors, reviews the value of
the collateral and the creditworthiness of those banks and dealers with which
the Fund enters into repurchase agreements to evaluate potential risks.
(d) Distributions to Shareholders: It is the policy of the Fund to
declare and pay dividends from investment income-net on each business day.
Dividends from net realized capital gain are normally declared and paid
annually, but the Fund may make distributions on a more frequent basis to comp
ly with the distribution requirements of the Internal Revenue Code. To the
extent that net realized capital gain can be offset by capital loss
carryovers, it the policy of the Fund not to distribute such gain.
(e) Federal Income Taxes: It is the policy of the Fund to continue to
qualify as a regulated investment company, if such qualification is in the
best interests of its shareholders, by complying with the applicable
provisions of the Internal Revenue Code, and to make distributions of taxable
income sufficient to relieve it from substantially all Federal income and
excise taxes.
The Fund has an unused capital loss carryover of approximately $2,147,000
available for Federal income tax purposes to be applied against future net
securities profits, if any, realized subsequent to October 31, 1995. If not
applied, $1,854,000 of the carryover expires in fiscal 2002 and $293,000 of
the carryover expires in fiscal 2003.
NOTE 2-Investment Management Fee and other Transactions with Affiliates:
(a) Investment Management Fee: Pursuant to an Investment Management
agreement with the Manager, the Manager provides or arranges for one or more
third parties and or affiliates to provide investment advisory,
administrative, custody, fund accounting and transfer agency services to the
Fund. The Manager also directs the investments of the Fund in accordance with
its investment objective, policies and limitations. For these services, the
Fund is contractually obligated to pay the Manager a fee, calculated daily
and paid monthly, at the annual rate of .60% of the value of the Fund's
average daily net assets. Out of its fee, the Manager pays all of the
expenses of the Fund except brokerage fees, taxes, interest, Rule 12b-1
distribution fees and expenses, fees and expenses of non-interested Directors
(including counsel fees) and extraordinary expenses. In addition, the Manager
is required to reduce its fee in an amount equal to the Fund's allocable
portion of fees and expenses of the non-interested Directors (including
counsel).
(b) Distribution and Service Plan: The Fund has adopted a distribution
plan (the "Plan") pursuant to Rule 12b-1 under the 1940 Act relating to its
Class A, B and C shares. Under the Plan, the Fund may pay
<PAGE>
Premier Limited Term Income Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
annually up to .25% of the value of its average daily net assets
attributable to its Class A shares to compensate the Distributor and Dreyfus
Service Corporation, an affiliate of the Manager, for shareholder servicing
activities and the Distributor for activities and expenses primarily intended
to result in the sale of Class A shares. Under the Plan, the Fund may pay the
Distributor for distributing the Fund's Class B and Class C shares at an
aggregate annual rate of .50% of the value of the average daily net assets of
Class B and Class C shares. Class B and Class C shares are also subject to a
service plan adopted pursuant to Rule 12b-1, pursuant to which the Fund pays
Dreyfus Service Corporation or the Distributor for providing certain services
to the holders of Class B and Class C shares a fee at the annual rate of .25%
of the value of the average daily net assets of Class B and Class C shares.
Class R shares bear no service or distribution fee. For the year ended
October 31, 1995, the service fee for Class B shares was $64. For the year
ended October 31, 1995, the distribution fee for Class A and Class B shares
was $2,638 and $192, respectively.
Under its terms, the Plan shall remain in effect from year to year,
provided such continuance is approved annually by a vote of majority of those
Directors who are not "interested persons" of the Company and who have no
direct or indirect financial interest in the operation of the Plan or in any
agreement related to the Plan.
(c) Directors' Fees: Each director who is not an "interested person" as
defined in the Act receives $27,000 per year, $1,000 for each Board meeting
attended and $750 for each Audit Committee attended and is reimbursed for
travel and out-of-pocket expenses. These expenses are paid in total by the
following funds: the Dreyfus/Laurel Funds, Inc., The Dreyfus/Laurel Tax-Free
Municipal Funds, and the Dreyfus/Laurel Funds Trust. In addition the Chairman
of the Board receives an annual fee of $75,000 per year. These fees and expens
es are charged and allocated to each series based on net assets.
NOTE 3-Securities Transactions:
The aggregate amount of purchase and sales of investment securities,
other than short-term securities, during the year ended October 31, 1995,
amounted to $51,296,718 and $67,753,570, respectively.
At October 31, 1995, accumulated net unrealized appreciation on
investments was $937,267, consisting of $1,324,143 gross unrealized
appreciation and $386,876 gross unrealized depreciation.
At October 31, 1995, the cost of investments for Federal income tax
purposes was substantially the same as the cost for financial reporting
purposes (see the Statement of Investments).
<PAGE>
Premier Limited Term Income Fund
- --------------------------------------------------------------------------------
Independent Auditors' Report
The Board of Directors and Shareholders
The Dreyfus/Laurel Funds, Inc.:
We have audited the accompanying statement of assets and liabilities of
the Premier Limited Term Income Fund of The Dreyfus/Laurel Funds, Inc.,
including the statement of investments, as of October 31, 1995, and the
related statement of operations for the year then ended, the statement of
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the periods indicated herein. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of October 31, 1995, by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of the Premier Limited Term Income Fund of The Dreyfus/Laurel Funds,
Inc., as of October 31, 1995, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended, and the financial highlights for each of the periods indicated
herein, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Pittsburgh, Pennsylvania
December 15, 1995
<PAGE>
Premier Balanced Fund October 31, 1995
- ----------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN PREMIER BALANCED FUND
CLASS R SHARES WITH THE STANDARD & POOR'S 500 COMPOSITE STOCK PRICE INDEX,
THE LEHMAN BROTHERS INTERMEDIATE GOVERNMENT/CORPORATE BOND INDEX AND
A HYBRID INDEX
[CHART]
- -------------------------------------------------------------------------
Premier Balanced Fund
(Class R Shares)
Standard & Poor's 500
Composite Stock
Price Index *
Lehman Brothers
Intermediate Government/
Corporate Bond Index **
Customized
Blended Index ***
- -------------------------------------------------------------------------
9/15/93 10,000 10,000 10,000 10,000
10/31/93 10,180 10,128 10,068 10,104
10/31/94 10,249 10,519 9,874 10,261
10/31/95 12,449 13,297 11,112 12,423
- -------------------------------------------------------------------------
*Source: Lipper Analytical Services, Inc.
**Source: Lehman Brothers
***Source: Lipper Analytical Services, Inc. and Lehman Brothers
<TABLE>
<CAPTION>
Average Annual Total Returns
- -------------------------------------------------------------------------------------------------------------------------------
Class A Shares Class R Shares
- -------------------------------------------------------------- -----------------------------------------------------------
% Return
Reflecting
% Return Without Maximum Initial
Period Ended 10/31/95 Sales Charge Sales Charge (4.5%) Period Ended 10/31/95
- --------------------- --------------- ------------------ ---------------------
<S> <C> <C> <C> <C>
1 Year 21.17% 15.77% 1 Year 21.46%
From Inception (4/14/94) 16.58 13.15 From Inception (9/15/93) 10.83
</TABLE>
<TABLE>
<CAPTION>
Actual Aggregate Total Returns
- -------------------------------------------------------------------------------------------------------------------------------
Class B Shares Class C Shares
- -------------------------------------------------------------- -------------------------------------------------------------
% Return Reflecting % Return Reflecting
Applicable Contingent Applicable Contingent
% Return Deferred Sales % Return Deferred Sales
Assuming No Charge Upon Assuming No Charge Upon
Period Ended 10/31/95 Redemption Redemption * Period Ended 10/31/95 Redemption Redemption**
- --------------------- ----------- ------------------ --------------------- ------------ --------------------
<S> <C> <C> <C> <C> <C>
From Inception (12/19/94) 23.19% 19.19% From Inception (12/19/94) 23.29% 22.29%
</TABLE>
Past performance is not predictive of future performance.
The above graph compares a $10,000 investment made in Class R shares of
Premier Balanced Fund on 9/15/93 (Inception Date) to a $10,000 investment
made in each of the Standard and Poor's 500 Composite Stock Price Index and
the Lehman Brothers Intermediate Government/Corporate Bond Index on that
date, as well as to a Hybrid Index as described below. For comparative
purposes, the values of the Indicies on 8/31/93 are used as the beginning
value on 9/15/93. All dividends and capital gain distributions are
reinvested. Performance for Class A shares, Class B shares and Class C
shares will vary from the performance of Class R shares shown above due to
differences in charges and expenses.
Premier Balanced Fund invests in common stocks and bonds. The Fund's
performance shown in the line graph takes into account all applicable fees
and expenses. The Standard & Poor's 500 Composite Stock Price Index is a
widely accepted, unmanaged index of overall stock market performance. The
Lehman Brothers Intermediate Government/Corporate Bond Index is a widely
accepted, unmanaged index of Government and corporate bond market performance
composed of U.S. Government, Treasury and agency securities, fixed- income
securities and nonconvertible investment grade corporate debt, with an
average maturity of 1 - 10 years. Both indicies do not take into account
charges, fees and other expenses. The Hybrid Index has been prepared by the
Fund for purposes of more accurate comparison to the Fund's general portfolio
composition. The Hybrid Index is composed of 60% Standard & Poor's 500
Composite Stock Price Index and 40% Lehman Brothers Intermediate
Government/Corporate Bond Index. 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 The Dreyfus
Corporation. Further information relating to Fund performance, including
expense reimbursements, if applicable, is contained in the Financial
Highlights section of the Prospectus and elsewhere in this report.
*Maximum contingent deferred sales charge for Class B shares is 4% and is
reduced to 0% after six years.
**Maximum contingent deferred sales charge for Class C shares is 1% within
one year of the date of purchase.
<PAGE>
Premier Balanced Fund
- -----------------------------------------------------------------------------
Statement of Investments October 31, 1995
<TABLE>
<CAPTION>
Shares COMMON STOCKS--62.2% Value
---------- ------------
<S> <C> <C>
Basic Industry--3.6%
11,100 Champion International Corporation....................................... $ 593,850
5,100 Cummins Engine Company, Inc.............................................. 179,138
4,800 Dow Chemical Company..................................................... 329,400
7,500 du Pont (E.I.) de Nemours & Company..................................... 467,813
12,600 Eastman Chemical......................................................... 749,700
2,700 Federal Paper Board Company, Inc......................................... 113,400
11,400 International Paper Company.............................................. 421,800
7,200 Lyondell Petrochemical................................................... 153,900
3,600 PPG Industries, Inc...................................................... 153,000
2,100 Temple-Inland, Inc....................................................... 95,550
5,100 Union Carbide Corporation................................................ 193,163
4,200 Wellman, Inc............................................................. 98,700
4,200 Weyerhaeuser Company..................................................... 185,325
------------
3,734,739
------------
Capital Spending--13.9%
4,800 3Com..................................................................... 225,600
6,000 Advanced Micro Devices, Inc. ............................................ 143,250
3,600 Alcan Aluminum LTD....................................................... 113,850
4,200 Applied Materials, Inc. +................................................ 210,525
3,000 Arrow Electonics, Inc. +................................................. 152,250
5,100 Avnet, Inc............................................................... 256,913
5,100 Cabletron System +....................................................... 400,988
1,500 Cabot Corporation........................................................ 71,250
10,700 Case Corporation......................................................... 407,938
9,900 Ceridian Corporation..................................................... 430,650
6,700 CISCO Sysytems, Inc. +................................................... 519,250
16,650 Computer Associates International, Inc................................... 915,750
1,700 Deere & Company.......................................................... 151,938
5,700 Dover Corporation........................................................ 225,150
12,000 Eaton Corporation........................................................ 615,000
16,200 General Electric Company................................................. 1,024,650
2,500 Harnischfeger Industries, Inc............................................ 78,750
11,700 Healthcare COMPARE +..................................................... 432,900
4,500 Hewlett Packard Company.................................................. 416,813
4,500 Illinois Tool Works...................................................... 261,563
9,500 Intel Corporation........................................................ 663,813
11,700 International Business Machines.......................................... 1,137,825
8,812 Lockheed Martin.......................................................... 600,318
4,800 Mallinckrodt, Inc........................................................ 166,800
5,700 MBNA Corp ............................................................... 210,188
3,300 McDonnell Douglas Corporation............................................ 269,775
3,600 Medtronic, Inc .......................................................... 207,900
5,200 Microsoft Corporation +.................................................. 520,000
9,800 Newell Corporation....................................................... 236,425
8,100 Oracle Systems Corporation+.............................................. 353,363
5,100 Parker - Hannifin Corporation............................................ 172,125
5,400 Premark International, Inc .............................................. 249,750
6,600 Raytheon Company ........................................................ 287,925
8,400 Rockwell International Corporation....................................... 373,800
</TABLE>
<PAGE>
Premier Balanced Fund
- -----------------------------------------------------------------------------
Statement of Investments (continued) October 31, 1995
<TABLE>
<CAPTION>
Shares COMMON STOCKS (continued) Value
---------- ------------
<S> <C> <C>
Capital Spending (continued)
6,000 Sun Microsystem, Inc. +.................................................. $ 468,000
3,600 Teradyne, Inc. +......................................................... 120,150
11,400 Texas Instruments, Inc................................................... 778,050
200 V.F. Corporation......................................................... 9,575
10,800 Wheelabrator Tech........................................................ 155,250
8,700 Whitman Corporation...................................................... 184,875
------------
14,220,885
------------
Consumer CYC / Discretionary--8.9%
6,600 American Greeting Corporation, Class A................................... 207,900
5,700 Capital Cities/ABC, Inc.................................................. 676,163
9,000 Chrysler Corporation..................................................... 464,625
17,700 Circuit City Stores, Inc................................................. 590,738
5,200 Disney (Walt) Productions................................................ 299,650
6,600 Eckerd Corporation +..................................................... 261,525
16,500 Ford Motor Company....................................................... 474,375
3,000 General Motors Corporation............................................... 131,250
2,700 Goodyear Tire & Rubber Corporation....................................... 102,600
3,600 H.B.O. & Company......................................................... 254,700
4,400 Harley - Davidson........................................................ 117,700
6,900 King World Productions, Inc. +........................................... 240,638
3,300 Magna International, Class A............................................. 142,725
6,375 Mattel, Inc.............................................................. 183,281
12,300 McDonald's Corporation................................................... 504,300
9,000 Mirage Resorts, Inc. +................................................... 294,750
9,900 New York Times Company................................................... 274,725
6,000 Nike Inc., Class B....................................................... 340,500
11,100 Philips Electronics N.V.................................................. 428,738
17,700 Public Service Enterprise Group.......................................... 519,938
6,900 Reynolds & Reynolds Company, Class A .................................... 245,813
11,700 Rite Aid Corporation..................................................... 315,900
12,000 Safeway, Inc.+........................................................... 567,000
15,900 Sears Roebuck & Company.................................................. 540,600
11,100 Tandy Corporation........................................................ 548,063
13,200 Walgreen Company......................................................... 376,200
------------
9,104,397
------------
Consumer Staples--8.2%
27,720 Archer Daniels Midland................................................... 446,985
20,100 Coca-Cola Company........................................................ 1,444,688
11,100 ConAgra, Inc............................................................. 428,738
9,300 CPC International, Inc................................................... 617,288
13,200 Gillette Company......................................................... 638,550
4,500 Heinz (H.J.) Company..................................................... 209,250
7,500 IBP, Inc................................................................. 449,063
17,400 Johnson & Johnson........................................................ 1,418,100
11,100 Pepsico, Inc............................................................. 585,525
16,500 Philip Morris Companies, Inc............................................. 1,394,250
4,200 Procter & Gamble Comany.................................................. 340,200
1,800 Sara Lee Corporation..................................................... 52,875
3,000 Unilever N.V............................................................. 393,000
------------
8,418,512
------------
</TABLE>
<PAGE>
Premier Balanced Fund
- -----------------------------------------------------------------------------
Statement of Investments (continued) October 31, 1995
<TABLE>
<CAPTION>
Shares COMMON STOCKS (continued) Value
---------- ------------
<S> <C> <C>
Energy Related--5.7%
12,500 Amoco Corporation........................................................ $ 798,438
3,300 Atlantic Richfield....................................................... 352,275
3,600 Coastal Corporation...................................................... 116,550
15,600 EXXON Corporation........................................................ 1,191,450
9,300 Mobil Corporation........................................................ 936,975
11,400 Panhandle Eastern Corporation............................................ 287,850
11,600 Royal Dutch Petroleum Company............................................ 1,425,350
7,500 Smith International +.................................................... 120,000
7,800 Tidewater, Inc........................................................... 205,725
10,500 Williams Companies, Inc.................................................. 405,563
------------
5,840,176
------------
Heath Care--5.0%
13,200 Abbott Laboratories...................................................... 524,700
9,600 Amgen, Inc. +............................................................ 460,800
6,300 Becton Dickinson & Company............................................... 409,500
3,900 Boston Scientific Corporation +.......................................... 164,288
14,100 Columbia/HCA Heathcare Corporation....................................... 692,663
20,400 Merck & Company, Inc..................................................... 1,173,000
11,400 Pfizer, Inc.............................................................. 654,075
20,400 Schering-Plough Corporation.............................................. 1,093,950
------------
5,172,976
------------
Interest Sensitive / Regulated--8.3%
21,039 Allstate................................................................. 773,183
2,700 American National Insurance Company...................................... 153,900
10,500 BankAmerica Corporation.................................................. 603,750
7,800 Bank of New York Corporation............................................. 327,600
900 Bear, Stearns & Company Incorporated..................................... 17,870
11,700 Chemical Banking Corporation............................................. 665,438
6,600 Cigna Corporation........................................................ 654,225
15,300 Citicorp................................................................. 992,588
8,700 Dean Witter, Discover & Company.......................................... 432,825
8,400 EXEL Ltd................................................................. 449,400
6,900 First Chicago Corporation................................................ 468,338
3,900 First Interstate Bancorp................................................. 503,100
8,400 First U.S.A., Inc........................................................ 386,400
1,200 Loews.................................................................... 175,950
13,500 NationsBank Corporation.................................................. 887,625
900 Providian Corporation.................................................... 35,325
6,400 Signet Banking Corporation............................................... 152,000
3,300 Standard Fed Bancorp..................................................... 117,150
24 Transport Holdings, Inc. +............................................... 942
4,800 Travelers Group, Inc..................................................... 242,400
5,700 TRW, Inc................................................................. 374,775
5,400 USLIFE Corporation....................................................... 153,900
------------
8,568,684
------------
</TABLE>
<PAGE>
Premier Balanced Fund
- -----------------------------------------------------------------------------
Statement of Investments (continued) October 31, 1995
<TABLE>
<CAPTION>
Shares COMMON STOCKS (continued) Value
---------- ------------
<S> <C> <C>
Metals & Mining--.8%
8,400 ASARCO, Inc.............................................................. $ 270,900
7,800 Inland Steel Industries, Inc............................................. 182,325
3,600 Phelps Dodge Corporation................................................. 228,150
3,000 Reynolds Metal Company................................................... 151,125
------------
832,500
------------
Transportation--1.0%
1,500 AMR Corporation +........................................................ 99,000
3,900 Conrail, Inc............................................................. 268,125
3,300 CSX Corporation.......................................................... 276,375
2,100 Delta Air Lines, Inc..................................................... 137,813
5,100 Illinois Central Corporation............................................. 195,075
------------
976,388
------------
Utilities--6.8%
5,100 AllTel corp.............................................................. 156,188
28,800 Ameritech Corporation.................................................... 1,555,200
15,800 BellSouth Corporation.................................................... 1,208,700
16,800 Consolidated Edison Company, Inc......................................... 510,300
8,100 DQE, Inc. ............................................................... 222,750
15,000 General Public Ultilies Corporation...................................... 468,750
30,900 MCI Communications Corporation........................................... 770,569
3,600 NYNEX Corporation........................................................ 169,200
15,900 PECO Energy Company...................................................... 465,075
12,000 SBC Communications....................................................... 670,500
18,300 Sprint Corporation....................................................... 704,550
2,500 Worldcom, Inc. +......................................................... 81,563
------------
6,983,345
------------
TOTAL COMMON STOCKS
(Cost $46,913,459)................................................... $ 63,852,602
------------
</TABLE>
<PAGE>
Premier Balanced Fund
- -----------------------------------------------------------------------------
Statement of Investments (continued) October 31, 1995
<TABLE>
<CAPTION>
Annnualized
Principal Yield at the Maturity
Amount U.S. Treasury Obligations--16.0% Date of Purchase Date Value
----------- ---------------- -------- ------------
<S> <C> <C> <C> <C>
$ 500,000 U.S. Treasury Bills*................... 5.430% 1/18/96 $ 494,217
------------
Coupon
Rate
---------
100,000 U.S. Treasury Bond..................... 12.375 5/15/04 141,878
500,000 U.S. Treasury Bond..................... 11.625 11/15/04 691,985
700,000 U.S. Treasury Notes.................... 4.375 11/15/96 691,509
1,500,000 U.S. Treasury Notes.................... 7.500 1/31/97 1,533,750
1,500,000 U.S. Treasury Notes.................... 6.625 3/31/97 1,520,355
500,000 U.S. Treasury Notes.................... 6.750 5/31/97 508,185
1,000,000 U.S. Treasury Notes.................... 8.875 11/15/97 1,061,250
800,000 U.S. Treasury Notes.................... 5.625 1/31/98 799,336
200,000 U.S. Treasury Notes.................... 5.125 11/30/98 196,726
200,000 U.S. Treasury Notes.................... 5.125 12/31/98 196,636
400,000 U.S. Treasury Notes.................... 7.000 4/15/99 415,200
1,000,000 U.S. Treasury Notes.................... 6.875 7/31/99 1,036,320
2,000,000 U.S. Treasury Notes.................... 7.500 10/31/99 2,119,819
400,000 U.S. Treasury Notes.................... 6.375 1/15/00 408,476
800,000 U.S. Treasury Notes.................... 6.250 2/15/03 813,904
500,000 U.S. Treasury Notes.................... 5.750 8/15/03 493,170
600,000 U.S. Treasury Notes.................... 7.250 5/15/04 649,140
2,000,000 U.S. Treasury Notes.................... 7.250 8/15/04 2,164,480
500,000 U.S. Treasury Notes.................... 8.875 8/31/97 503,220
------------
15,945,339
------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $15,919,038).................... $ 16,439,556
------------
CORPORATE BONDS AND NOTES -13.4%
Basic Industry--1.1%
$ 100,000 Aluminum Company of America............ 5.750% 2/1/01 $ 98,250
1,000,000 0CSX Corporation....................... 8.400 8/1/96 1,016,250
------------
1,114,500
------------
Consumer Basics--1.1%
100,000 Heinz (H.J.) Company................... 6.875 1/15/03 103,375
1,000,000 Philip Morris Inc...................... 6.000 11/15/99 987,500
------------
1,090,875
------------
Energy--1.7%
200,000 Emerson Electric....................... 6.300 11/1/05 197,750
500,000 Texaco Capital, Inc.................... 6.875 7/15/99 511,250
1,000,000 WMX Technologies....................... 8.125 2/1/98 1,041,250
------------
1,750,250
------------
Financial Services--8.0%
250,000 American General Finance............... 6.625 6/1/97 252,188
100,000 Associates Corporation of N.A. ........ 7.500 5/15/99 104,000
190,000 AVCO Financial Services, In............ 7.500 11/15/96 193,088
500,000 BP North America....................... 9.875 3/15/04 605,000
500,000 Chemical Banking Corporation........... 8.625 5/1/02 553,750
1,000,000 Chrysler Financial Corporation......... 5.625 1/15/99 978,750
75,000 Commercial Credit Group................ 6.700 8/1/99 75,750
800,000 First Chicago MTN...................... 6.830 9/8/97 812,000
150,000 First Chicago Corporation.............. 9.875 8/15/00 171,563
100,000 Ford Motor Credit Corporation.......... 5.625 12/15/98 98,375
500,000 General Motors Acceptance Corporation.. 7.750 1/15/99 521,250
</TABLE>
<PAGE>
Premier Balanced Fund
- -----------------------------------------------------------------------------
Statement of Investments (continued) October 31, 1995
<TABLE>
<CAPTION>
Principal Coupon Maturity
Amount Rate Date Value
----------- ---------------- -------- ------------
<S> <C> <C> <C> <C>
Financial Services (continued)
$ 700,000 Pepsico Inc........................... 7.625% 11/1/98 $ 728,875
700,000 Province of Ontario.................... 7.000 8/4/05 718,375
100,000 International Lease Finance............ 4.750 1/15/97 98,625
150,000 Norwest Financial, Inc................. 7.000 1/15/03 154,500
1,000,000 Republic New York Corporation.......... 9.750 12/1/00 1,147,500
500,000 Republic New York Corporation.......... 7.750 5/15/02 534,375
500,000 Wells Fargo & Company.................. 6.125 11/1/03 479,375
------------
8,227,339
------------
Retail--0.3%
175,000 Sears Roebuck Company.................. 6.250 1/15/04 170,844
150,000 Wal-Mart Stores, Inc................... 5.500 3/1/98 148,312
------------
319,156
------------
Utilities--1.2%
150,000 Consolidated Edison Company............ 6.375 4/1/03 149,250
125,000 Duke Power Company..................... 7.500 4/1/99 130,156
500,000 Duke Power Company..................... 6.125 7/22/03 490,000
500,000 Virginia Electric & Power C............ 7.250 3/1/97 508,750
------------
1,278,156
------------
TOTAL CORPORATE BONDS AND NOTES
(Cost $13,609,966).................. $ 13,780,276
------------
U.S. AGENCY OBLIGATIONS--1.4%
500,000 Federal Home Loan Mortgage............. 5.400 11/1/00 480,530
1,000,000 Federal National Mortgage Association.. 5.300 12/10/98 979,790
------------
TOTAL U.S. AGENCY OBLIGATIONS
(Cost $1,357,813)................... 1,460,320
------------
REPURCHASE AGREEMENT--6.7%
$6,883,681 Agreement with Goldman Sachs, dated 10/31/95
bearing 5.880%, to be repurchased at $6,894,805 on
11/01/95, collateralized by $6,884,476 U.S. Treasury
Notes, 5.875%
due 7/31/97 (Cost $6,883,681).......... 6,883,681
------------
TOTAL INVESTMENTS (Cost $88,436,696)... 99.8% $102,416,435
CASH AND RECEIVABLES (NET)............. 0.2% $ 238,011
------ ------------
NET ASSETS............................. 100.0% $102,654,446
------ ------------
------ ------------
<FN>
Notes to Statement of Investments:
- -------------------------------------------------------------------------
+ Non-income producing.
* Partially held by the custodian in a segregated account as collateral for
open financial futures positions.
</TABLE>
<TABLE>
<CAPTION>
Statement of Financial Futures October 31, 1995
Unrealized
Market Value Appreciation
Number of Covered (Depreciation)
Issuer Contracts by Contracts Expiration at 10/31/95
- ------ --------- ------------ ----------- --------------
<S> <C> <C> <C> <C>
Standard & Poor's 500 (long)................. 37 $10,801,225 December '95 $94,350
5 Year U.S. Treasury Note (short)............ 58 6,283,032 December '95 (70,687)
-------
$23,663
-------
-------
</TABLE>
See notes to financial statements.
<PAGE>
Premier Balanced Fund
- -----------------------------------------------------------------------
Statement of Assets and Liabilities October 31, 1995
<TABLE>
<S> <C> <C>
ASSETS:
Investments in securities, at value (cost $88,436,696)--see statement of
investments (including repurchase agreement of $6,883,681)............ $102,416,435
Cash.................................................................... 6,136
Dividends and interest receivable....................................... 661,792
Receivable for investment securities sold............................... 226,596
Receivable for Capital Stock sold....................................... 142,345
------------
103,453,304
LIABILITIES:
Due to The Dreyfus Corporation.......................................... $128,270
Payable for investment securities purchased............................. 590,846
Payable for futures variation margin.................................... 54,538
Directors' fee payable-Note 2(c)........................................ 19,675
Distribution fee payable-Note 2(b)...................................... 2,856
Payable for Capital Stock redeemed...................................... 2,673
---------
798,858
------------
NET ASSETS.................................................................. $102,654,446
------------
------------
REPRESENTED BY:
Paid-in capital......................................................... $ 87,322,636
Accumulated undistributed investment income-net......................... 690,127
Accumulated net realized gain on investments............................ 638,281
Accumulated net unrealized appreciation on investments (including $23,663
net unrealized appreciation of financial futures)-Note 3.............. 14,003,402
------------
NET ASSETS at value......................................................... $102,654,446
------------
------------
NET ASSET VALUE per share:
Class A Shares
(50 million shares of $.001 par value Capital Stock authorized)
($1,649,870 / 138,547 shares)......................................... $11.91
------
------
Class B Shares
(50 million shares of $.001 par value Capital Stock authorized)
($3,117,867 / 262,182 shares).......................................... $11.89
------
------
Class C Shares
(50 million shares of $.001 par value Capital Stock authorized)
($6,152 / 517 shares).................................................. $11.90
------
------
Class R Shares
(50 million shares of $.001 par value Capital Stock authorized)
($97,880,557 / 8,213,782 shares)...................................... $11.92
------
------
</TABLE>
See notes to financial statements.
<PAGE>
Premier Balanced Fund
- -------------------------------------------------------------------------
Statement of Operations Year ended October 31, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Income:
Interest.............................................................. $2,018,535
Cash dividends........................................................ 1,454,951
----------
Total Income...................................................... $ 3,473,486
Expenses:
Management fee--Note 2(a)............................................. 874,166
Distribution and service fee-Note 2(b)................................ 17,331
Directors' fees and expenses-Note 2(c)................................ 15,345
----------
Total Expenses.................................................... 906,842
-----------
INVESTMENT INCOME--NET............................................ 2,566,644
REALIZED AND UNREALIZED GAIN ON INVESTMENTS-Note 3:
Net realized gain on investments........................................ $2,305,179
Net realized gain on financial futures.................................. 554,117
----------
Net Realized Gain..................................................... 2,859,296
Net unrealized appreciation on investments (including
$23,663 net unrealized appreciation on financial futures)............. 12,325,435
-----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS....................... 15,184,731
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $17,751,375
-----------
-----------
</TABLE>
See notes to financial statements.
<PAGE>
Premier Balanced Fund
- -------------------------------------------------------------------------
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended October 31,
------------------------------
1995 1994
------------ ------------
<S> <C> <C>
OPERATIONS:
Investment income--net............................................... $ 2,566,644 $ 1,412,756
Net realized gain (loss) on investments and financial futures........ 2,859,296 (2,221,015)
Net unrealized appreciation on investments for the year.............. 12,325,435 1,375,144
------------ ------------
Net Increase In Net Assets Resulting From Operations............... 17,751,375 566,885
------------ ------------
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income--net:
Class A Shares..................................................... (54,581) (4,401)
Class B Shares..................................................... (15,467) --
Class C Shares..................................................... (63) --
Class R Shares..................................................... (2,292,181) (971,670)
------------ ------------
Total Dividends.................................................. (2,362,292) (976,071)
------------ ------------
CAPITAL STOCK TRANSACTIONS:
Net proceeds from shares sold:
Class A Shares..................................................... 5,596,014 1,814,520
Class B Shares..................................................... 2,919,383 --
Class C Shares..................................................... 5,416 --
Class R Shares..................................................... 22,961,009 58,817,291
Dividends reinvested:
Class A Shares..................................................... 48,751 3,242
Class B Shares..................................................... 15,934 --
Class C Shares..................................................... 63 --
Class R Shares..................................................... 2,284,969 969,095
Cost of shares redeemed:
Class A Shares..................................................... (6,049,079) (36,563)
Class B Shares..................................................... (67,410) --
Class C Shares..................................................... -- --
Class R Shares..................................................... (17,974,028) (12,538,163)
------------ ------------
Increase In Net Assets From Capital Stock Transactions........... 9,741,022 49,029,422
------------ ------------
Total Increase In Net Assets................................... 25,130,105 48,620,236
NET ASSETS:
Beginning of year.................................................... 77,524,341 28,904,105
------------ ------------
End of year (including undistributed investment income--net:
$690,127 and $485,775, respectively)............................... $102,654,446 $ 77,524,341
------------ ------------
------------ ------------
</TABLE>
<TABLE>
<CAPTION>
Shares
-------------------------------------------------------------------------------
Class A Class B Class C Class R
---------------------- ---------- ---------- -----------------------
Year Ended Year Ended
Year Ended October 31, October 31, October 31, Year Ended October 31,
---------------------- ---------- ---------- -----------------------
1995 1994(1) 1995(2) 1995(2) 1995 1994(3)
-------- ------- ------- ------ --------- ---------
<S> <C> <C> <C> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Shares sold............ 566,013 181,775 266,500 511 2,189,828 5,842,428
Shares issued for dividends
reinvested........... 4,833 328 1,443 6 217,471 97,922
Shares redeemed........ (610,712) (3,690) (5,761) -- (1,700,811) (1,272,959)
-------- ------- ------- ------ --------- ---------
Net Increase (Decrease) in
Shares Outstanding. (39,866) 178,413 262,182 517 706,488 4,667,391
-------- ------- ------- ------ --------- ---------
-------- ------- ------- ------ --------- ---------
<FN>
(1) On April 14, 1994, the Fund commenced selling Investor shares.
On October 17, 1994 Investor shares were redesigned as Class A
Shares.
(2) The Fund commenced selling Class B and Class C shares on December 20,
1994.
(3) On April 14, 1994, the Fund commenced selling Investor shares. Those
shares outstanding prior to April 14, 1994 were redesignated Trust shares.
Effective October 17, 1994, Trust shares were redesignated as Class R shares.
</TABLE>
See notes to financial statements.
<PAGE>
Premier Balanced Fund
- ------------------------------------------------------------------
Financial Highlights
Reference is made to pages 5, 6, 7 and 8 of the Fund's Prospectus
dated March 1, 1996.
See notes to financial statements.
Premier Balanced Fund
- -----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 1--Significant Accounting Policies:
The Dreyfus/Laurel Funds, Inc. (the "Company") is registered under the
Investment Company Act of 1940 ("Act") as a diversified open-end management
investment company and operates as a series company currently offering sixteen
Series including the Premier Balanced Fund (the "Fund"). The Dreyfus
Corporation ("Manager") serves as the Fund's investment adviser. The Manager
is a direct subsidiary of Mellon Bank, N.A. ("Mellon Bank").
Premier Mutual Fund Services, Inc. (the "Distributor") acts as the
distributor of the Fund's shares. The Distributor, located at One Exchange
Place, Boston, Massachusetts 02109, 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.
The Fund currently offers four classes of shares: Class A, Class B, Class
C and Class R shares. Class A, Class B and Class C shares are sold primarily
to retail investors through financial intermediaries and bear a distribution
fee and/or service fee. Class A shares are sold with a front-end sales
charge, while Class B and Class C shares are subject to a contingent deferred
sales charge ("CDSC") and a service fee. Class R shares are sold primarily to
bank trust departments and other financial service providers (including
Mellon Bank and its affiliates) acting on behalf of customers having a
qualified trust or investment account or relationship at such institution,
and bear no distribution fee or service fee. Class R shares are offered
without a front-end sales load or CDSC. Each class of shares has identical
rights and privileges, except with respect to distribution fees and voting
rights on matters affecting a single class. The Company has the authority to
issue 25 billion shares of capital stock with a par value of $.001.
Investment Income, net of expenses (other than class specific expenses)
and realized and unrealized gains and losses are allocated daily to each
class of shares based upon the relative proportion of net assets of each
class.
(a) Portfolio Valuation: Investments in securities are valued at the last
sales price on the securities exchange on which such securities are primarily
traded or at the last sales price on the national securities market.
Securities not listed on an exchange or the national securities market, or
securities for which there were no transactions, are valued to the average of
the most recent bid and asked prices. Bid price is used when no asked price
is available. Securities for which there are no such valuations are valued at
fair value as determined in good faith under the direction of the Board of
Directors.
(b) Securities Transactions and Investment Income: Securities
transactions are recorded on a trade date basis. Interest income, adjusted
for amortization of premiums and original issue discounts on investments, is
earned from settlement date and recognized on the accrual basis. Realized
gain and loss from securities transactions are recorded on the identified
cost basis.
(c) Repurchase Agreements: The Fund may engage in repurchase agreement
transactions. Under the terms of a typical repurchase agreement, the Fund,
through its custodian and sub-custodian, takes possession of an underlying
debt obligation subject to an obligation of the seller to repurchase, and the
Fund to resell, the obligation at an agreed-upon price and time, thereby
determining the yield during the Fund's holding period. This arrangement
results in a fixed rate of return that is not subject to market fluctuations
during the Fund's holding period. The value of the collateral is at least
equal, at all times, to the total amount of the repurchase obligations,
including interest. In the event of a counterparty default, the
<PAGE>
Premier Balanced Fund
- ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
Fund has the right to use the collateral to offset losses incurred. There
is potential loss to the Fund in the event the Fund is delayed or prevented
from exercising its rights to dispose of the collateral securities, including
the risk of a possible decline in the value of the underlying securities
during the period while the Fund seeks to assert its rights. The Fund's
manager, acting under the supervision of the Board of Directors, reviews the
value of the collateral and the creditworthiness of those banks and dealers
with which the Fund enters into repurchase agreements to evaluate potential
risks.
(d) Financial Futures: The Fund may invest in trading financial futures
contracts in order to gain exposure to or protect against changes in the
market. The Fund is exposed to market risk as a result of changes in the
value of the underlying financial instruments. Investments in financial
futures require the Fund to "mark to market" on a daily basis, which reflects
the change in the market value of the contract at the close of each day's
trading. Accordingly, variation margin payments are made or received to
reflect daily unrealized gains or losses. When the contracts are closed, the
Fund recognizes a realized gain or loss. These investments require initial
margin deposits with a custodian, which consist of cash or cash equivalents,
up to approximately 10% of the contract amount. The amount of these deposits
is determined by the exchange or Board of Trade on which the contract is
traded and is subject to change.
(e) Distributions to Shareholders: Dividends are recorded on the
ex-dividend date. Dividends from investment income-net are declared and paid
on a quarterly basis. Dividends from net realized capital gain are normally
declared and paid annually, but the Fund may make distributions on a more
frequent basis to comply with the distribution requirements of the Internal
Revenue Code. This may result in distributions that are in excess of the net
realized gains on the fiscal year basis. To the extent that net realized
capital gain can be offset capital loss carryovers, if any, it is the policy
of the Fund not to distribute such gain.
(f) Federal Income Taxes: It is the policy of the Fund to continue to
qualify as a regulated investment company, if such qualification is in the
best interests of its shareholders, by complying with the applicable
provisions of the Internal Revenue Code, and to make distributions of taxable
income sufficient to relieve it from substantially all Federal income and
excise taxes.
On November 2, 1995, the Board of Directors declared dividends from net
investment income for the Class A, Class B, Class C and Class R shares in the
amount of $0.0738, $0.0510, $0.0510 and $0.0813 per share, respectively,
payable on November 3, 1995 to shareholders of record on November 2, 1995.
NOTE 2--Investment Management Fee and Other Transactions with Affiliates:
(a) Investment Management Fee: Pursuant to an Investment Management
agreement with the Manager, the Manager provides or arranges for one or more
third parties and or affiliates to provide investment advisory,
administrative, custody, fund accounting and transfer agency services to the
Fund. The Manager also directs the investments of the Fund in accordance with
its investment objective, policies and limitations. For these services, the
Fund is contractually obligated to pay the Manager a fee, calculated daily
and paid monthly, at the annual rate of 1.00% of the value of the Fund's
average daily net assets. Out of its fee, the Manager pays all of the
expenses of the Fund except brokerage fees, taxes, interest, Rule 12b-1
distribution fees and expenses, fees and expenses of non-interested Directors
(including counsel fees) and extraordinary expenses. In addition, the Manager
is required to reduce its fee in an amount equal to the Fund's allocable
portion of fees and expenses of the non-interested Directors (including
counsel).
(b) Distribution and Service Plan: The Fund has adopted a distribution
plan (the "Plan") pursuant to
<PAGE>
Premier Balanced Fund
- ----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
Rule 12b-1 under the 1940 Act relating to its Class A, B and C shares.
Under the Plan, the Fund may pay annually up to .25% of the value of its
average daily net assets attributable to its Class A shares to compensate the
Distributor and Dreyfus Service Corporation, an affiliate of the Manager, for
shareholder servicing activities and the Distributor for activities and
expenses primarily intended to result in the sale of Class A shares. Under
the Plan, the Fund may pay the Distributor for distributing the Fund's Class
B and Class C shares at an aggregate annual rate of 1.00% of the value of the
average daily net assets of Class B and Class C shares. Class B and Class C
shares are also subject to a service plan adopted pursuant to Rule 12b-1,
pursuant to which the Fund pays Dreyfus Service Corporation or the
Distributor for providing certain services to the holders of Class B and
Class C shares a fee at the annual rate of .25% of the value of the average
daily net assets of Class B and Class C shares. Class R shares bear no
service or distribution fee. For the year ended October 31, 1995, the service
fee for Class B and C was $2,930 and $7, respectively. For the year ended
October 31, 1995, the distribution fee for Class A, Class B and Class C
shares was $5,584, $8,788 and $22, respectively.
Under its terms, the Plan shall remain in effect from year to year,
provided such continuance is approved annually by a vote of majority of those
Directors who are not "interested persons" of the Company and who have no
direct or indirect financial interest in the operation of the Plan or in any
agreement related to the Plan.
(c) Directors' Fees: Each director who is not an "interested person" as
defined in the Act receives $27,000 per year, $1,000 for each Board meeting
attended and $750 for each Audit Committee attended and is reimbursed for
travel and out-of-pocket expenses. These expenses are paid in total by the
following funds: the Dreyfus/Laurel Funds, Inc., The Dreyfus/Laurel Tax-Free
Municipal Funds, and the Dreyfus/Laurel Funds Trust. In addition the
Chairman of the Board receives an annual fee of $75,000 per year. These fees
and expenses are charged and allocated to each series based on net assets.
NOTE 3--Securities Transactions:
The aggregate amount of purchase and sales of investment securities,
other than short-term securities, during the year ended October 31, 1995,
amounted to $38,786,009 and $38,635,096, respectively.
At October 31, 1995, accumulated net unrealized appreciation on
investments was $14,003,402, consisting of $14,870,267 gross unrealized
appreciation and $866,865 gross unrealized depreciation.
At October 31, 1995, the cost of investments for Federal income tax
purposes was substantially the same as the cost for financial reporting
purposes (see the Statement of Investments).
<PAGE>
Premier Balanced Fund
- -----------------------------------------------------------------------------
Independent Auditors' Report
The Board of Directors and Shareholders
The Dreyfus/Laurel Funds, Inc.:
We have audited the accompanying statement of assets and liabilities of
the Premier Balanced Fund of The Dreyfus/Laurel Funds, Inc., including the
statement of investments and statement of financial futures, as of October
31, 1995, and the related statement of operations for the year then ended,
the statement of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the periods
indicated herein. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of October 31, 1995, by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of the Premier Balanced Fund of The Dreyfus/Laurel Funds, Inc., as
of October 31, 1995, and the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended, and the financial highlights for each of the periods indicated
herein, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Pittsburgh, Pennsylvania
December 15, 1995
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-16
Management Arrangements . . . . . . . . . . . . . . . . . . B-22
Purchase of Fund Shares . . . . . . . . . . . . . . . . . . B-23
Distribution and Service Plans. . . . . . . . . . . . . . . B-25
Redemption of Fund Shares . . . . . . . . . . . . . . . . . B-26
Shareholder Services. . . . . . . . . . . . . . . . . . . . B-27
Determination of Net Asset Value. . . . . . . . . . . . . . B-30
Dividends, Other Distributions and Taxes. . . . . . . . . . B-31
Portfolio Transactions. . . . . . . . . . . . . . . . . . . B-34
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."
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 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 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 Class R shares of
the Fund at January 31, 1996: Mac & Co., 040-336, P.O. Box 3198,
Pittsburgh, PA 15230-3198, 11% record. The following shareholder(s) owned
5% or more of Class A shares of the Fund at January 31, 1996: Merrill
Lynch, Pierce, Fenner & Smith, 4800 Deer Lake Drive, Jacksonville, FL
32246-6484, 5% record; BHC Securities, Attn: Ken Myers, 2005 Market Street,
Philadelphia, PA 19103-7042, 5% record.
FEDERAL LAW AFFECTING MELLON BANK
The Glass-Steagall Act of 1933 prohibits national banks from engaging
in the business of underwriting, selling or distributing securities and
prohibits a member bank of the Federal Reserve System from having certain
affiliations with an entity engaged principally in that business. The
activities of Mellon Bank, N.A. ("Mellon Bank") in informing its customers
of, and performing, investment and redemption services in connection with
the Fund, and in providing services to the Fund as custodian, 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 twelve 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 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.
# ELIZABETH BACHMAN. Vice President and Assistant Secretary of the
Company, The Dreyfus/Laurel Funds Trust and The Dreyfus/Laurel Tax
Free Municipal Funds (since January 1996); Counsel, Premier Mutual
Fund Services, Inc. Prior to September 1995, she was enrolled at the
Fordham University School of Law and received her J.D. in May 1995.
Prior to September 1992, she was an Assistant at the National
Association for Public Interest Law. Age: 26 years old. Address: 200
Park Avenue, New York, New York 10166.
# 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 and Assistant Secretary (since January
1996) 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.
# MARGARET PARDO. Assistant Secretary of the Company, The Dreyfus/Laurel
Funds Trust and The Dreyfus/Laurel Tax-Free Municipal Funds (since
January 1996); Paralegal, Premier Mutual Fund Services, Inc. Prior
to April 1995, she was a Medical Coordination Officer at ORBIS
International. Prior to June 1992, she worked as a Program
Coordinator at Physicians World Communications Group. Age: 27 years
old. Address: 200 Park Avenue, New York, New York 10166.
# 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.
# JOHN J. PYBURN. Assistant Treasurer of the Company, The Dreyfus/Laurel
Funds Trust and The Dreyfus/Laurel Tax-Free Municipal Funds (since January
1996); Vice President of Premier Mutual Fund Services, Inc. and an officer
of other investment companies advised or administered by Dreyfus. From
1984 to July 1994, he was Assistant Vice President in the Mutual Fund
Accounting Department of Dreyfus. Age: 61 years old. Address: 200 Park
Avenue, New York, New York 10166.
JOSEPH F. TOWER, III. Assistant Treasurer of the Company, The
Dreyfus/Laurel Funds Trust and The Dreyfus/Laurel Tax-Free Municipal Funds
(since January 1996); Senior Vice President, Treasurer and Chief Financial
Officer of Premier Mutual Fund Services, Inc. and an officer of other
investment companies advised or administered by Dreyfus. From July 1988 to
August 1994, he was employed by The Boston Company, Inc. where he held
various management positions in the Corporate Finance and Treasury areas.
Age: 33 years old. Address: 200 Park Avenue, New York, New York 10166.
_____________________________
* "Interested person" of the Company, as defined in the 1940 Act.
o Member of the Audit Committee.
+ Member of the Nominating Committee.
# Officer also serves as an officer for other investment companies
advised by Dreyfus.
The officers and Directors of the Company as a group owned
beneficially less than 1% of the total shares of the Fund outstanding as of
January 31, 1996.
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 current 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 $27,800 None None $ 34,500
Francis P. Brennan* 86,683 None None 110,500
Joseph S. DiMartino** None None None $448,618***
James M. Fitzgibbons 27,795 None None 34,500
J. Tomlinson Fort** None None None None
Arthur L. Goeschel 27,604 None None 35,500
Kenneth A. Himmel 26,381 None None 32,750
Arch S. Jeffery** None None None None
Stephen J. Lockwood 26,387 None None 32,750
Robert D. McBride 27,800 None None 35,500
John J. Sciullo 27,800 None None 34,500
Roslyn M. Watson 27,795 None None 34,550
# Amounts required to be paid by the Company directly to the non-interested Directors,
that would be applied to offset a portion of the management fee payable to Dreyfus, are in
fact paid directly by Dreyfus to the non-interested Directors. Amount does not include
reimbursed expenses for attending Board meetings, which amounted to $12,342 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 $17,563, $28,604 and $27,800,
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 $3,186 for expenses
attributable to the Company's Board meetings ($3,186 is not included in the $12,342
above).
*** Estimated amounts for the fiscal year ending October 31, 1995.
</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 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 and a director; Barbara E. Casey, Vice President-Dreyfus
President-Dreyfus Retirement Services; Diane M. Coffey, Vice President-
Corporate Communications; Elie M. Genadry, Vice President-Institutional
Sales; William T. Sandalls, Jr., Senior Vice President, Chief Financial
Officer and a director; 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; Maurice Bendrihem,
Controller; Elvira Oslapas; Assistant Secretary; Mandell L. Berman, Frank
V. Cahouet, Alvin E. Friedman, Lawrence M. Greene and Julian M. Smerling
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.
In-Kind Purchases. If the following conditions are satisfied, the
Fund may at its discretion, permit the purchase of shares through an "in-
kind" exchange of securities. Any securities exchanged must meet the
investment objective, policies and limitations of the Fund, must have a
readily ascertainable market value, must be liquid and must not be subject
to restrictions on resale. The market value of any securities exchanged,
plus any cash, must be at least equal to $25,000. Shares purchased in
exchange for securities generally cannot be redeemed for fifteen days
following the exchange in order to allow time for the transfer to settle.
The basis of the exchange will depend upon the relative NAV of the
Shares purchased and securities exchanged. Securities accepted by the Fund
will be valued in the same manner as the Fund values its assets. Any
interest earned on the securities following their delivery to the Fund and
prior to the exchange will be considered in valuing the securities. All
interest, dividends, subscription or other rights attached to the
securities become the property of the Fund, along with the securities. For
further information about "in-kind" purchases, call 1-800-645-6561.
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 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 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, 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%, respec-
tively. 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.
From time to time, Fund advertisements may include statistical data or
general discussions about the growth and development of Dreyfus Retirement
Services (in terms of new customers, assets under management, market share,
etc.) and its presence in the defined contribution plan market.
From time to time, advertising material for the Fund may include
biographical information relating to its portfolio manager and may refer
to, or include commentary by the portfolio manager relating to investment
strategy, asset growth, current or past business, political, economic or
financial conditions and other matters of general interest to investors.
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 15219, 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.
KPMG Peat Marwick LLP, One Mellon Bank Center, Pittsburgh, PA 15219,
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 Independent Auditors' Report 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.
<PAGE>
Premier Small Company Stock Fund October 31, 1995
- ---------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN PREMIER SMALL COMPANY
STOCK FUND CLASS A SHARES AND CLASS R SHARES AND THE RUSSELL 2500 INDEX
<TABLE>
<CAPTION>
Premier Premier
Small Company Small Company
Stock Fund Stock Fund Russell 2500
Period (Class A Shares) (Class R Shares) Stock Index*
- --------------- ---------------- ---------------- ------------
<S> <C> <C> <C>
9/2/94 9,551 10,000 10,000
10/31/94 9,618 10,070 9,915
1/31/95 9,404 9,855 9,670
4/30/95 10,505 11,018 10,590
7/31/95 12,571 13,194 12,002
10/31/95 12,533 13,162 12,033
<FN>
*Source: The Frank Russell Company
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Returns
- ------------------------------------------------------------------------------------------------------------------------
Class A Shares Class R Shares
- ------------------------------------------------------------------ -------------------------------------------
% Return
Reflecting
% Return Without Maximum Initial
Period Ended 10/31/95 Sales Charge Sales Charge (4.5%) Period Ended 10/31/95
- ---------------------- ------------------- -------------------- ------------------------
<S> <C> <C> <C> <C>
1 Year 30.31% 24.50% 1 Year 30.70%
From Inception (9/2/94) 26.39 21.49 From Inception (9/2/94) 26.72
</TABLE>
<TABLE>
<CAPTION>
Actual Aggregate Total Returns
- ------------------------------------------------------------------------------------------------------------------------
Class B Shares Class C Shares
- ------------------------------------------------------------ ---------------------------------------------------------
% Return Reflecting % Return Reflecting
Applicable Contingent Applicable Contingent
% Return Deferred Sales % Return Deferred Sales
Assuming No Charge Upon Assuming No Charge Upon
Period Ended 10/31/95 Redemption Redemption * Period Ended 10/31/95 Redemption Redemption**
- ----------------------- ------------- ---------------------- -------------------- ------------ -------------------
<S> <C> <C> <C> <C> <C>
From Inception (12/19/94) 37.51% 33.51% From Inception 37.41% 36.41%
(12/19/94)
</TABLE>
Past performance is not predictive of future performance.
The above graph compares a $10,000 investment made in each of the Class A
shares and Class R shares of Premier Small Company Stock Fund on 9/2/94
(Inception Date) to a $10,000 investment made in the Russell 2500 Index on
that date. For comparative purposes, the value of the Index on 8/31/94 is
used as the beginning value on 9/2/94. All dividends and capital gain
distributions are reinvested. Performance for Class B shares and Class C
shares will vary from the performance of both Class A shares and Class R
shares shown above due to differences in charges and expenses.
The Fund's performance shown in the line graph takes into account the maximum
initial sales charge on Class A shares and all other applicable fees and
expenses on Class A shares and Class R shares. The Russell 2500 Index is an
unmanaged index and is composed of the 2,500 smallest companies in the
Russell 3000 Index. The Russell 3000 Index is composed of 3,000 of the
largest U.S. companies by market capitalization. The Index does not take
into account charges, fees and other expenses. Further information relating
to Fund performance, including expense reimbursements, if applicable, is
contained in the Financial Highlights section of the Prospectus and elsewhere
in this report.
*Maximum contingent deferred sales charge for Class B shares is 4% and is
reduced to 0% after six years.
**Maximum contingent deferred sales charge for Class C shares is 1% within
one year of the date of purchase.
<PAGE>
Premier Small Company Stock Fund
- ---------------------------------------------------------------------------
Statement of Investments October 31, 1995
<TABLE>
<CAPTION>
Shares Common Stocks--95.3% Value
- -------------- ------------
<S> <C> <C>
Basic Industries--6.7%
5,700 American Buldings Co+ ............................. $ 143,925
9,700 Cabot Corporation.................................. 460,750
9,500 Chesapeake Corporation of
Virginia......................................... 290,938
18,675 Clayton Homes, Inc. ............................... 490,219
7,400 Cytec Industries, Inc.+ .......................... 405,150
12,100 Federal Paper Board
Company, Inc..................................... 508,200
7,600 Medusa Corporation ................................ 190,000
4,900 Minerals Technologies, Inc. ....................... 195,387
18,600 NL Industries+ .................................... 241,800
7,900 Wellman Inc ....................................... 185,650
-------------
3,112,019
-------------
Consumer Cyclical--16.0%
9,300 Apple South, Inc. ................................. 190,650
9,000 Big B, Inc. ....................................... 132,750
7,400 Borg-Warner Automotive, Inc. ...................... 218,300
18,000 Cash America International ....................... 92,250
2,850 Clear Channel
Communications, Inc.+............................ 233,700
11,200 CompUSA Inc.+ ..................................... 428,400
7,650 Devon Group, Inc.+................................. 298,350
8,950 Dollar General Corporation ........................ 219,275
7,200 Eckerd Corporation+................................ 285,300
14,400 Fila Holding SPA .................................. 621,000
4,400 Franklin Quest Company+............................ 105,050
7,400 Gentex Corporation+................................ 164,650
6,645 Harman International
Industries, Inc.................................. 306,501
17,600 Haverty Furniture
Companies, Inc................................... 244,200
5,400 IHOP Corp + ....................................... 116,100
9,700 Infinity Broadcasting
Corporation, Cl. A +............................. 315,250
13,600 Interface Inc., Cl. A ............................. 205,700
7,900 Morrison Restaurants, Inc. ........................ 123,437
8,500 Outboard Marine Corporation ....................... 176,375
14,200 Players International Inc + ....................... 152,650
8,400 Regal Cinemas + ................................... 329,700
12,200 Rex Stores Corporation+............................ 207,400
12,400 Richfood Holdings, Inc. ........................... 310,000
3,550 Scholastic Corporation+ ........................... 219,213
15,975 Staples Inc.+ ..................................... 425,334
6,600 Stop & Shop Companies, Inc.+ ...................... 136,950
5,500 Toro Company ...................................... 158,812
11,800 Waban Inc.+ ....................................... 184,375
6,400 Wallace Computer Services ......................... 360,800
Consumer Cyclical (continued)
15,300 Warnaco Group, Cl. A. ............................. $ 355,725
17,500 Winnebago Industries, Inc. ........................ 140,000
-------------
7,458,197
-------------
Consumer Services--25.4%
10,000 Adaptec Inc.+...................................... 445,000
8,925 AGCO Corporation .................................. 399,394
8,800 AMETEK, Inc. ...................................... 155,100
5,000 Analysts International Corporation ................ 148,125
12,700 Atmel Corporation+................................. 396,875
5,600 CIDCO Inc. + ...................................... 165,900
11,500 Cypress Semiconductor
Corporation+..................................... 405,375
10,300 Danka Business Systems, ADR ....................... 345,050
11,300 Electronics For Imaging, Inc.+ .................... 929,425
9,300 ELSAG Bailey Process
Automation N.V.+................................. 253,425
14,200 First Alert, Inc.+................................. 220,100
8,500 Gateway 2000 +..................................... 283,687
4,600 Hadco Corp +....................................... 128,800
7,600 Heritage Media
Corporation, Cl. A+.............................. 210,900
6,600 In Focus Systems +................................. 216,975
20,200 Informix Corporation+.............................. 588,325
16,600 Integrated Device
Technology, Inc.+................................ 315,400
8,800 Kennametal, Inc. .................................. 273,900
7,500 Loewen Group, Inc. ................................ 300,352
13,500 NetManage + ....................................... 275,062
5,800 PHH Corporation ................................... 253,750
17,600 Pittston Services Group ........................... 484,000
4,900 Plantronics Inc. + ................................ 163,537
12,000 Quanex Corp. ...................................... 237,000
13,000 Quantum Corporation+ .............................. 225,875
11,800 Read-Rite Corporation+ ............................ 411,525
11,400 Silicon Valley Group, Inc.+ ....................... 369,075
18,000 Sotheby's Holdings, Cl. A ......................... 249,750
8,900 Sterling Software, Inc.+ .......................... 410,513
11,700 SunGard Data System, Inc.+ ........................ 321,750
16,100 Tellabs, Inc.+ .................................... 547,400
6,700 Thermedics + ...................................... 123,113
8,300 Thermo Electron + ................................. 381,800
9,100 Thiokol Corporation ............................... 315,087
10,400 VLSI Technology, Inc. + ........................... 244,400
13,000 Watts Industries, Inc., Cl. A ..................... 268,125
6,050 Zebra Technologies
Corporation, Cl. A+.............................. 359,975
-------------
11,823,845
-------------
</TABLE>
<PAGE>
Premier Small Company Stock Fund
- ---------------------------------------------------------------------------
Statement of Investments (continued) October 31, 1995
<TABLE>
<CAPTION>
Shares Common Stocks (continued) Value
- -------------- ------------
<S> <C> <C>
Consumer Staples--3.6%
4,400 Avid Technology+ .................................. $ 192,500
12,900 Dimon Corp ........................................ 188,663
12,400 IBP, Inc. ......................................... 742,450
5,200 Lancaster Colony Corporation ...................... 172,900
15,800 Morningstar Group+ ................................ 122,450
9,800 Robert Mondavi Corporation,
Cl. A +.......................................... 276,850
-------------
1,695,813
-------------
Electronics--.5%
11,650 ECI Telecommunications, Ltd. ...................... 221,350
-------------
Energy--5.3%
18,400 Benton Oil & Gas+ ................................. 223,100
7,000 Holly Corp ........................................ 152,250
7,000 KN Energy, Inc. ................................... 179,375
22,400 Nabors Industries+ ................................ 193,200
18,500 Pacific Enterprises Company ....................... 457,875
6,300 Petroleum Geo-Services
Corporation, ADS+................................ 122,062
9,700 Pogo Producing Company ............................ 195,213
9,700 Seagull Energy Corporation+ ....................... 166,113
10,500 Smith International, Inc.+ ........................ 168,000
15,500 Southwestern Energy Company ....................... 193,750
10,400 Valero Energy ..................................... 245,700
6,300 WICOR Inc. ....................................... 186,637
-------------
2,483,275
-------------
Finance Companies--.5%
11,300 Franchise Finance Corp. of
America.......................................... 238,713
-------------
Health Care--8.6%
4,600 Cardinal Health, Inc. ............................. 236,325
6,500 Community Health Sytems, Inc.+ .................... 206,375
3,900 Cordis Corporation+ ............................... 430,950
11,600 Lincare Holdings, Inc.+ ........................... 288,550
12,000 MediSense + ....................................... 256,500
21,100 OrNda Healthcorp+ ................................. 371,888
4,400 PacifiCare Health Systems,
Cl. B +.......................................... 320,100
15,000 Teva Pharmaceutical
Industries, ADR.................................. 588,750
7,800 Universal Health Services,
Cl. B +.......................................... 292,500
10,324 Vencor + .......................................... 286,491
11,000 Vivra Inc.+ ....................................... 363,000
8,216 Watson Pharaceutical + ............................ 367,666
-------------
4,009,095
-------------
Insurance--1.0%
12,700 Mutual Risk Management, Ltd. ...................... $ 468,313
-------------
Interest Sensitive--16.7%
4,900 ADVANTA Corporation, Cl. B ........................ 175,175
4,900 AMBAC, Inc. ....................................... 206,412
12,400 AMRESCO, Inc. ..................................... 131,750
5,100 BayBanks Inc. ..................................... 413,100
6,200 CMAC Investment ................................... 294,500
2,900 Columbia First Savings Bank+ ...................... 169,650
6,100 Crestar Financial Corporation ..................... 347,700
5,800 Cullen Frost Bankers .............................. 295,800
9,350 Edwards (AG) Inc. ................................. 238,425
5,200 First Tennessee National .......................... 278,200
12,200 Firstar ADR ....................................... 431,575
12,400 Green Tree Financial
Corporation...................................... 330,150
9,350 Health Care Properties
Investors, Inc................................... 316,731
5,600 Kimco Realty ...................................... 206,500
9,000 Mercantile Bancorp, Inc. .......................... 396,000
6,400 Money Stores, Inc. ................................ 256,000
7,820 Old Kent Financial Corporation .................... 299,115
11,600 Old Republic International
Corporation...................................... 332,050
16,900 Peoples Bank of Bridgeport ........................ 333,775
4,900 PXRE Corporation .................................. 124,950
4,900 RCSB Financial Corp ............................... 109,025
9,300 Regions Financial Corp ............................ 370,837
29,600 Reliance Group Holdings ........................... 218,300
14,100 Signet ............................................ 334,875
4,150 Standard Federal
Bancorporation................................... 147,325
11,600 United Companies Financial
Corporation...................................... 327,700
9,550 USLIFE Corporation ................................ 272,175
10,500 West One Bancorp................................... 446,250
-------------
7,804,045
-------------
Mining and Metals--2.4%
9,200 Brush Wellman, Inc. ............................... 154,100
10,000 IMCO Recycling, Inc. ............................. 215,000
10,400 Potash Corporation
Saskatchewan, Inc................................ 724,100
-------------
1,093,200
-------------
Retail--.7%
20,000 Intimate Brands + ................................. 335,000
-------------
</TABLE>
<PAGE>
Premier Small Company Stock Fund
- ---------------------------------------------------------------------------
Statement of Investments (continued) October 31, 1995
<TABLE>
<CAPTION>
Shares Common Stocks (continued) Value
- -------------- ------------
<S> <C> <C>
Transportation--1.7%
5,700 Air Express International ......................... $ 118,275
21,500 Arkansas Best Corporation ........................ 196,188
6,700 Illinois Central, Ser. A .......................... 256,275
13,600 SkyWest Inc........................................ 232,900
-------------
803,638
-------------
Utilities--6.2%
17,000 California Energy + ............................... 308,125
13,250 DQE, Inc. ......................................... 364,375
17,900 Frontier Corp...................................... 483,300
11,800 Illinova Corporation .............................. 334,825
18,800 LCI International, Inc.+ .......................... 338,400
20,254 MidAmerican Energy ................................ 324,064
16,100 Pinnacle West Capital
Corporation..................................... 442,749
8,000 Southern Indiana Gas &
Electric Company................................. 270,000
-------------
2,865,838
-------------
TOTAL COMMON STOCKS
(Cost $40,607,472)............................... 44,412,341
-------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
- ---------- -------------
<S> <C> <C>
REPURCHASE
AGREEMENT--6.3%
$2,960,344 Agreement with Goldman
Sachs & Company Tri Party
Repurchase Agreement,
dated 10/31/95 bearing
5.88% to be repurchased at
$2,960,028 on 11/1/95,
collateralized by $2,960,304
U.S. Treasury Note,
5.875% due 7/31/97
(Cost $2,960,344).................................. $ 2,960,344
-------------
TOTAL INVESTMENTS
(Cost $43,567,816).................................. 101.6% $47,372,685
LIABILITIES, LESS CASH AND
RECEIVABLES............................. (1.6%) (751,099)
------ -------------
NET ASSETS ........................................... 100.0% $46,621,586
------ -------------
<FN>
Note to Statement of Investments;
- ----------------------------------------------------------------------
+ Non-income producing security.
</TABLE>
See notes to financial statements.
<PAGE>
Premier Small Company Stock Fund
- ----------------------------------------------------------------------
Statement of Assets and Liabilities October 31, 1995
<TABLE>
<S> <C> <C>
ASSETS:
Investments in securities, at value (cost $43,567,816)--see Statement of
Investments (including repurchase agreements of $2,960,344)........... $47,372,685
Cash.................................................................... 2,560
Receivable for investment securities sold............................... 532,727
Receivable for Capital Stock sold....................................... 76,963
Dividends and interest receivable....................................... 35,666
-------------
48,020,601
LIABILITIES:
Due to The Dreyfus Corporation--Note 2(a)............................... $ 89,893
Due to Distributor--Note 2(b)........................................... 1,132
Payable for investment securities purchased............................. 1,294,327
Payable for Capital Stock redeemed...................................... 9,857
Directors' fees payable--Note 2(c)...................................... 3,806 1,399,015
----------- -------------
NET ASSETS.................................................................. $46,621,586
-------------
-------------
REPRESENTED BY:
Paid-in capital......................................................... $41,144,301
Accumulated undistributed investment income--net........................ 17,573
Accumulated undistributed net realized gain on investments.............. 1,654,843
Accumulated net unrealized appreciation on investments--Note 3.......... 3,804,869
-------------
NET ASSETS at value......................................................... $46,621,586
-------------
-------------
NET ASSET VALUE, per share:
Class A Shares
(27 million shares of $.001 par value Capital Stock authorized)
($1,358,723 / 103,808 shares of Capital Stock outstanding)............ $13.09
-------
-------
Class B Shares
(50 million shares of $.001 par value Capital Stock authorized)
($1,025,034 / 78,535 shares of Capital Stock outstanding)............. $13.05
-------
-------
Class C Shares
(50 million shares of $.001 par value Capital Stock authorized)
($146,860 / 11,259 shares of Capital Stock outstanding)............... $13.04
-------
-------
Class R Shares
(41 million shares of $.001 par value Capital Stock authorized)
($44,090,969 / 3,366,367 shares of Capital Stock outstanding)......... $13.10
-------
-------
</TABLE>
See notes to financial statements.
<PAGE>
Premier Small Company Stock Fund
- -------------------------------------------------------------------------
Statement of Operations Year ended October 31, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Income:
Cash dividends........................................................ $ 263,784
Interest.............................................................. 97,514
------------
Total Income...................................................... $ 361,298
Expenses:
Investment management fee-Note 2(a)................................... 278,575
Directors' fees and expenses-Note 2(c)................................ 3,511
Distribution fee-Note 2(b)............................................ 4,034
Service Fee-Note 2(b)................................................. 838
------------
Total Expenses.................................................... 286,958
------------
INVESTMENT INCOME-NET............................................. 74,340
REALIZED AND UNREALIZED GAIN ON INVESTMENTS-Note 3:
Net realized gain on investments........................................ $1,683,118
Net unrealized appreciation on investments.............................. 3,736,077
------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS................... 5,419,195
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $5,493,535
------------
------------
</TABLE>
See notes to financial statements.
<PAGE>
Premier Small Company Stock Fund
- -------------------------------------------------------------------------------
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended October 31,
--------------------------------
1995 1994(1)
-------------- --------------
<S> <C> <C>
OPERATIONS:
Investment income-net................................................ $ 74,340 $ 18,644
Net realized gain (loss) on investments.............................. 1,683,118 (28,275)
Net unrealized appreciation on investments for the year.............. 3,736,077 68,792
-------------- --------------
Net Increase In Net Assets Resulting From Operations............. 5,493,535 59,161
-------------- --------------
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income-net:
Class A Shares..................................................... (550) --
Class R Shares..................................................... (74,861) --
-------------- --------------
Total Dividends.................................................. (75,411) --
-------------- --------------
CAPITAL STOCK TRANSACTIONS:
Net proceeds from shares sold:
Class A Shares.................................................... 1,410,579 59,219
Class B Shares..................................................... 967,580 --
Class C Shares..................................................... 149,491 --
Class R Shares..................................................... 36,992,799 13,289,944
Dividends reinvested:
Class A Shares..................................................... 406 --
Class R Shares..................................................... 54,591 --
Cost of shares redeemed:
Class A Shares..................................................... (272,564) (300)
Class B Shares..................................................... (9,877) --
Class R Shares..................................................... (8,896,002) (2,601,565)
-------------- --------------
Increase In Net Assets From Capital Stock Transactions........... 30,397,003 10,747,298
-------------- --------------
Total Increase In Net Assets................................... 35,815,127 10,806,459
NET ASSETS:
Beginning of year.................................................... 10,806,459 --
-------------- --------------
End of year (including undistributed investment income-net:
$17,573 and $18,644, respectively)................................. $46,621,586 $10,806,459
-------------- --------------
-------------- --------------
</TABLE>
<TABLE>
<CAPTION>
Shares
----------------------------------------------------------------------------------
Class B Class C
Class A Shares Shares Shares Class R Shares
----------------------- --------- ---------- -------------------------
Year Ended Year Ended
Year Ended October 31, October 31, October 31, Year Ended October 31,
----------------------- ---------- ---------- -------------------------
1995 1994(1)(2) 1995(3) 1995(4) 1995 1994(1)(2)
---------- ---------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Shares sold................ 120,861 5,966 79,297 11,259 3,154,920 1,330,335
Shares issued for dividends
reinvested............... 38 -- -- -- 5,116 --
Shares redeemed............ (23,027) (30) (762) -- (861,037) (262,967)
----------- -------- ------ ------- --------- ---------
Net Increase in Shares
Outstanding............ 97,872 5,936 78,535 11,259 2,298,999 1,067,368
----------- -------- ------ ------- --------- ---------
----------- -------- ------ ------- --------- ---------
<FN>
- ------------
(1) The Fund commenced operations on September 2, 1994.
(2) Effective October 17, 1994, the Fund's Investor shares and Trust shares
were redesignated as Class A shares and Class R shares, respectively.
(3) The Fund commenced selling Class B shares on December 19, 1994.
(4) The Fund commenced selling Class C shares on April 30, 1995.
</TABLE>
See notes to financial statements.
<PAGE>
Premier Small Company Stock Fund
- --------------------------------------------------------------------------
Financial Highlights
Reference is made to pages 4, 5, 6 and 7 of the Fund's Prospectus
dated March 1, 1996.
See notes to financial statements.
<PAGE>
Premier Small Company Stock Fund
- ------------------------------------------------------------------
Financial Highlights (continued)
Contained below is per share performance data for a share of Capital Stock
outstanding, total investment return, ratios to
average net assets and other supplemental data for each period indicated.
This information has been derived from the Fund's financial statements.
<TABLE>
<CAPTION>
Class C Shares Class R Shares
--------------------- ------------------------
Year Ended October 31, Year Ended October 31,
--------------------- ------------------------
PER SHARE DATA: 1995(1) 1995 1994(2)(3)
------ ------ --------
<S> <C> <C> <C>
Net asset value, beginning of year.............. $ 9.49 $10.07 $10.00
------ ------ ------
Investment Operations:
Investment income (loss)-net.................... (.01) .04 .02
Net realized and unrealized gain on investments. 3.56 3.04 .05
------ ------ ------
Total from Investment Operations.............. 3.55 3.08 .07
------ ------ ------
Distributions;
Dividends from investment income-net............ -- (.05) --
------ ------ ------
Net asset value, end of year.................... $13.04 $13.10 $10.07
------ ------ ------
------ ------ ------
TOTAL INVESTMENT RETURN............................. 37.41% 30.70% .70%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets......... 2.25%(4) 1.25% 1.25%(4)
Ratio of net investment income to average net assets (.65%)(4) .35% 1.08%(4)
Portfolio Turnover Rate......................... 56.00% 56.00% 8.00%
Net Assets, end of year (000's Omitted)......... $ 147 $44,091 $10,747
- ---------------
<FN>
(1) The Fund commenced selling Class C shares on April 30, 1995.
(2) The Fund commenced operations and commenced selling Trust shares on
September 2, 1994. Effective October 17, 1994, the Fund's Trust shares were
redesignated as Class R shares.
(3) Effective October 17, 1994, The Dreyfus Corporation serves as the Fund's
investment manager. Prior to October 17, 1994, Mellon Bank, N.A. served as
the Fund's investment manager.
(4) Annualized.
</TABLE>
See notes to financial statments.
<PAGE>
Premier Small Company Stock Fund
- --------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 1--Significant Accounting Policies:
The Dreyfus/Laurel Funds, Inc. (the "Company") is registered under the
Investment Company Act of 1940 ("Act") as a diversified open-end management
investment company and operates as a series company currently offering
sixteen Series including the Premier Small Company Stock Fund (the "Fund").
The Dreyfus Corporation ("Manager") serves as the Fund's investment adviser.
The Manager is a direct subsidiary of Mellon Bank, N.A. ("Mellon Bank").
Premier Mutual Fund Services, Inc. (the "Distributor") acts as the
distributor of the Fund's shares. The Distributor, located at One Exchange
Place, Boston, Massachusetts 02109, 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.
The Fund currently offers four classes of shares: Class A, Class B, Class
C and Class R shares. Class A, Class B and Class C shares are sold primarily
to retail investors through financial intermediaries and bear a distribution
fee and/or service fee. Class A shares are sold with a front-end sales
charge, while Class B and Class C shares are subject to a contingent deferred
sales charge ("CDSC") and a service fee. Class R shares are sold primarily to
bank trust departments and other financial service providers (including
Mellon Bank and its affiliates) acting on behalf of customers having a
qualified trust or investment account or relationship at such institution,
and bear no distribution fee or service fee. Class R shares are offered
without a front-end sales load or CDSC. Each class of shares has identical
rights and privileges, except with respect to distribution fees and voting
rights on matters affecting a single class. The Company has the authority to
issue 25 billion shares of capital stock with a par value of $.001.
Investment income, net of expenses (other than class specific expenses)
and realized and unrealized gains and losses are allocated daily to each
class of shares based upon the relative proportion of net assets of each
class.
(a) Portfolio Valuation: Investments in securities are valued at the last
sales price on the securities exchange on which such securities are primarily
traded or at the last sales price on the national securities market.
Securities not listed on an exchange or the national securities market, or
securities for which there were no transactions, are valued to the average of
the most recent bid and asked prices. Bid price is used when no asked price
is available. Securities for which there are no such valuations are valued at
fair value as determined in good faith under the direction of the Board of
Directors.
(b) Securities Transactions and Investment Income: Securities
transactions are recorded on a trade date basis. Realized gain and loss from
securities transactions are recorded on the identified cost basis. Dividend
income is recognized on the ex-dividend date and interest income, including,
where applicable, amortization of discount on investments, is recognized on
the accrual basis.
(c) Repurchase Agreements: The Fund may engage in repurchase agreement
transactions. Under the terms of a typical repurchase agreement, the Fund,
through its custodian, and sub-custodian takes possession of an underlying
debt obligation subject to an obligation of the seller to repurchase, and the
Fund to resell, the obligation at an agreed-upon price and time, thereby
determining the yield during the Fund's holding period. This arrangement
results in a fixed rate of return that is not subject to market
<PAGE>
Premier Small Company Stock Fund
- --------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
fluctuations during the Fund's holding period. The value of the
collateral is at least equal, at all times, to the total amount of the
repurchase obligations, including interest. In the event of a counterparty
default, the Fund has the right to use the collateral to offset losses
incurred. There is potential loss to the Fund in the event the Fund is
delayed or prevented from exercising its rights to dispose of the collateral
securities, including the risk of a possible decline in the value of the
underlying securities during the period while the Fund seeks to assert its
rights. The Fund's manager, acting under the supervision of the Board of
Directors, reviews the value of the collateral and the creditworthiness of
those banks and dealers with which the Fund enters into repurchase agreements
to evaluate potential risks.
(d) Distributions to Shareholders: Dividends are recorded on the
ex-dividend date. Dividends from investment income-net and dividends from net
realized capital gain are normally declared and paid annually, but the Fund
may make distributions on a more frequent basis to comply with the distributio
n requirements of the Internal Revenue Code. To the extent that net realized
capital gain can be offset by capital loss carryovers, if any, it is the
policy of the Fund not to distribute such gain.
On November 2, 1995, the Board of Directors declared dividends from net
investment income for the Class R shares in the amount of $0.0053 per share
payable on November 3, 1995 to shareholders of record on November 2, 1995.
(e) Federal Income Taxes: It is the policy of the Fund to continue to
qualify as a regulated investment company, if such qualification is in the
best interests of its shareholders, by complying with the applicable
provisions of the Internal Revenue Code, and to make distributions of taxable
income sufficient to relieve it from substantially all Federal income and
excise taxes.
NOTE 2 -- Investment Management Fee and Other Transactions with Affiliates:
(a) Investment Management Fee: Pursuant to an Investment Management
agreement with the Manager, the Manager provides or arranges for one or more
third parties and or affiliates to provide investment advisory,
administrative, custody, fund accounting and transfer agency services to the
Fund. The Manager also directs the investments of the Fund in accordance with
its investment objective, policies and limitations. For these services, the
Fund is contractually obligated to pay the Manager a fee, calculated daily
and paid monthly, at the annual rate of 1.25% of the value of the Fund'
average daily net assets. Out of its fee, the Manager pays all of the
expenses of the Fund except brokerage fees, taxes, interest, Rule 12b-1
distribution fees and expenses, fees and expenses of non-interested Directors
(including counsel fees) and extraordinary expenses. In addition, the Manager
is required to reduce its fee in an amount equal to the Fund's allocable
portion of fees and expenses of the non-interested Directors (including
counsel).
(b) Distribution and Service Plan: The Fund has adopted a distribution
plan (the "Plan") pursuant to Rule 12b-1 under the 1940 Act relating to its
Class A, B and C shares. Under the Plan, the Fund may pay annually up to .25%
of the value of its average daily net assets attributable to its Class A
shares to compensate the Distributor and Dreyfus Service Corporation, an
affiliate of the Manager, for shareholder servicing activities and the
Distributor for activities and expenses primarily intended to result in the
sale of Class A shares. Under the Plan, the Fund may pay the Distributor for
distributing the Fund's Class B and Class C shares at an aggregate annual
rate of .75% of the value of the average daily net assets of Class B
<PAGE>
Premier Small Company Stock Fund
- ----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
and Class C shares. Class B and Class C shares are also subject to a
service plan adopted pursuant to Rule 12b-1, pursuant to which the Fund pays
Dreyfus Service Corporation or the Distributor for providing certain services
to the holders of Class B and Class C shares a fee at the annual rate of .25%
of the value of the average daily net assets of Class B and Class C shares.
Class R shares bear no service or distribution fee. For the year ended
October 31, 1995, the service fee for Class B and Class C shares was $810 and
$28, respectively. For the year ended October 31, 1995, the distribution fee
for Class A, Class B and Class C shares was $1,521, $2,429 and $84,
respectively.
Under its terms, the Plan shall remain in effect from year to year,
provided such continuance is approved annually by a vote of the majority of
those Directors who are not "interested persons" of the Company and who have
no direct or indirect financial interest in the operation of the Plan or in
any agreement related to the Plan.
(c) Directors' Fees: Each director who is not an "interested
person" as defined in the Act receives $27,000 per year, $1,000 for each
Board meeting attended and $750 for each Audit Committee attended and is
reimbursed for travel and out-of-pocket expenses. These expenses are paid in
total by the following funds: the Dreyfus/Laurel Funds, Inc., the
Dreyfus/Laurel Tax-Free Municipal Funds, and the Dreyfus/Laurel Funds Trust.
In addition the Chairman of the Board receives an annual fee of $75,000 per
year. These fees and expenses are charged and allocated to each series based
on net assets.
NOTE 3 -- Securities Transactions:
The aggregate amount of purchase and sales of investment securities,
other than short-term securities, during the year ended October 31, 1995,
amounted to $41,314,168 and $12,359,506, respectively.
At October 31, 1995, accumulated net unrealized appreciation on
investments was $3,804,869, consisting of $5,803,153 gross unrealized
appreciation and $1,998,284 gross unrealized depreciation.
At October 31, 1995, the cost of investments for Federal income tax
purposes was substantially the same as the cost for financial reporting
purposes (see the Statement of Investments).
<PAGE>
Premier Small Company Stock Fund
- -------------------------------------------------------------------------
Independent Auditors' Report
The Board of Directors and Shareholders
The Dreyfus/Laurel Funds, Inc.:
We have audited the accompanying statement of assets and liabilities of
the Premier Small Company Stock Fund of The Dreyfus/Laurel Funds, Inc.,
including the statement of investments, as of October 31, 1995, and the
related statement of operations for the year then ended, and the statement of
changes in net assets and the financial highlights for each of the periods
indicated herein. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights
based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of October 31, 1995, by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides
a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of the Premier Small Company Stock Fund of The Dreyfus/Laurel Funds,
Inc., as of October 31, 1995, and the results of its operations for the year
then ended, and the changes in its net assets and the financial highlights
for each of the periods indicated herein, in conformity with generally
accepted accounting principles.
KPMG Peat Marwick LLP
Pittsburgh, Pennsylvania
December 15, 1995
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 January 10, 1996.
- Report of Independent Auditors
- 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 January 31, 1996:
<TABLE>
<CAPTION>
Number of Record Holders
Investor
Title of Class Class Class R
<S> <C> <C> <C> <C>
Dreyfus International Equity Allocation Fund 625 119
Dreyfus Disciplined Midcap Stock Fund 296 104
Dreyfus Institutional S&P 500 Stock Index Fund 1,234
Dreyfus Disciplined Equity Income Fund 237 15
Dreyfus European Fund 117 96
Dreyfus Money Market Reserves 14,895 956
Dreyfus U.S. Treasury Reserves 1,631 263
Dreyfus Municipal Reserves 324 657
Title of Class
Dreyfus Institutional Prime Money Market Fund 170
Dreyfus Institutional U.S. Treasury Money Market Fund 51
Dreyfus Institutional Government Money Market Fund 24
Title of Class Class A Class B Class C Class R
Premier Balanced Fund 146 314 3 109
Premier Small Company Stock Fund 181 142 15 605
Premier Limited Term Income Fund 106 21 1 1,386
</TABLE>
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.
Item 28. Business and Other Connections of Investment Adviser (continued)
________ ________________________________________________________________
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
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*****
and Director Deputy Director:
Mellon Trust****
Chief Executive Officer:
The Boston Company Asset Management,
Inc.*****
President:
Boston Safe Deposit and Trust
Company*****
STEPHEN E. CANTER Director:
Vice Chairman and The Dreyfus Trust Company++
Chief Investment Officer, Formerly, Chairman and Chief Executive
Officer:
and a Director Kleinwort Benson Investment Management
Americas Inc.*
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*****
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
WILLIAM T. SANDALLS, JR. Director:
Senior Vice President and Dreyfus Partnership Management, Inc.*;
Chief Financial Officer Seven Six Seven Agency, Inc.*;
President and Director:
Lion Management, Inc.*;
Executive Vice President and Director:
Dreyfus Service Organization, Inc.*;
Vice President, Chief Financial Officer and
Director:
Dreyfus Acquisition Corporation*;
Vice President and Director:
The Dreyfus Consumer Credit
Corporation*;
The Truepenny Corporation*;
Treasurer, Financial Officer and Director:
The Dreyfus Trust Company++;
Treasurer and Director:
Dreyfus Management, Inc.*;
Dreyfus Personal Management, Inc.*;
Dreyfus Service Corporation*;
Major Trading Corporation*;
Formerly, President and Director:
Sandalls & Co., Inc.
BARBARA E. CASEY President:
Vice President- Dreyfus Retirement Services Division;
Dreyfus Retirement Executive Vice President:
Services Boston Safe Deposit & Trust Co.*****
Dreyfus Service Corporation*
DIANE M. COFFEY None
Vice President-
Corporate Communications
ELIE M. GENADRY President:
Vice President- Institutional Services Division of
Dreyfus
Institutional Sales 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++
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
MARK N. JACOBS Vice President, Secretary and Director:
Vice President and Lion Management, Inc.*;
General Counsel 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
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 Underwriters
________ ______________________
(a) Other investment companies for which Registrant's principal
underwriter (exclusive distributor) acts as principal underwriter or
exclusive distributor:
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 GNMA Fund
7) Dreyfus BASIC Money Market Fund, Inc.
8) Dreyfus BASIC Municipal Fund, Inc.
9) Dreyfus BASIC U.S. Government Money Market Fund
10) Dreyfus California Intermediate Municipal Bond Fund
11) Dreyfus California Tax Exempt Bond Fund, Inc.
12) Dreyfus California Tax Exempt Money Market Fund
13) Dreyfus Capital Value Fund, Inc.
14) Dreyfus Cash Management
15) Dreyfus Cash Management Plus, Inc.
16) Dreyfus Connecticut Intermediate Municipal Bond Fund
17) Dreyfus Connecticut Municipal Money Market Fund, Inc.
18) Dreyfus Edison Electric Index Fund, Inc.
19) Dreyfus Florida Intermediate Municipal Bond Fund
20) Dreyfus Florida Municipal Money Market Fund
21) The Dreyfus Fund Incorporated
22) Dreyfus Global Bond Fund, Inc.
23) Dreyfus Global Growth Fund
24) Dreyfus GNMA Fund, Inc.
25) Dreyfus Government Cash Management
26) Dreyfus Growth and Income Fund, Inc.
27) Dreyfus Growth and Value Funds, Inc.
28) Dreyfus Growth Opportunity Fund, Inc.
29) Dreyfus Institutional Money Market Fund
30) Dreyfus Institutional Short Term Treasury Fund
31) Dreyfus Insured Municipal Bond Fund, Inc.
32) Dreyfus Intermediate Municipal Bond Fund, Inc.
33) Dreyfus International Equity Fund, Inc.
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 Income
68) Dreyfus Strategic Investing
69) Dreyfus Tax Exempt Cash Management
70) The Dreyfus Third Century Fund, Inc.
71) Dreyfus Treasury Cash Management
72) Dreyfus Treasury Prime Cash Management
73) Dreyfus Variable Investment Fund
74) Dreyfus-Wilshire Target Funds, Inc.
75) Dreyfus Worldwide Dollar Money Market Fund, Inc.
76) General California Municipal Bond Fund, Inc.
77) General California Municipal Money Market Fund
78) General Government Securities Money Market Fund, Inc.
79) General Money Market Fund, Inc.
80) General Municipal Bond Fund, Inc.
81) General Municipal Money Market Fund, Inc.
82) General New York Municipal Bond Fund, Inc.
83) General New York Municipal Money Market Fund
84) Pacifica Funds Trust -
Pacifica Prime Money Market Fund
Pacifica Treasury Money Market Fund
85) Peoples Index Fund, Inc.
86) Peoples S&P MidCap Index Fund, Inc.
87) Premier Insured Municipal Bond Fund
88) Premier California Municipal Bond Fund
89) Premier Capital Growth Fund, Inc.
90) Premier Global Investing, Inc.
91) Premier GNMA Fund
92) Premier Growth Fund, Inc.
93) Premier Municipal Bond Fund
94) Premier New York Municipal Bond Fund
95) Premier State Municipal Bond Fund
96) Premier Strategic Growth 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
Executive 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
Margaret Pardo+ Paralegal Assistant
Secretary
Paul Prescott+ Vice President None
Elizabeth Bachman++ Assistant Vice President Vice President
and Assistant
Secretary
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. Dreyfus Transfer, Inc.
P.O. Box 9671
Providence, Rhode Island 02903-9671
4. 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.) certifies that it meets all of the requirements for effectiveness of
this Amendment to the Registration Statement pursuant to Rule 485(b) under
the Securities Act of 1933 and has duly caused this Amendment to the
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York and State of New York on
the 1st day of March, 1996.
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 03/01/96
Marie E. Connolly
/s/Francis P. Brennan*
_______________________ Director,
Francis P. Brennan Chairman of the Board 03/01/96
/s/Ruth Marie Adams*
_______________________ Director 03/01/96
Ruth Marie Adams
/s/Joseph S. DiMartino*
_______________________ Director 03/01/96
Joseph S. DiMartino
/s/James M. Fitzgibbons*
________________________ Director 03/01/96
James M. Fitzgibbons
/s/Kenneth A. Himmel*
________________________ Director 03/01/96
Kenneth A. Himmel
/s/Stephen J. Lockwood*
________________________ Director 03/01/96
Stephen J. Lockwood
/s/Roslyn M. Watson*
________________________ Director 03/01/96
Roslyn M. Watson
/s/J. Tomlinson Fort*
________________________ Director 03/01/96
J. Tomlinson Fort
/s/Arthur L. Goeschel*
________________________ Director 03/01/96
Arthur L. Goeschel
/s/Arch S. Jeffery*
________________________ Director 03/01/96
Arch S. Jeffery
/s/Robert D. McBride*
________________________ Director 03/01/96
Robert D. McBride
/s/John J. Sciullo*
________________________ Director 03/01/96
John J. Sciullo
*By: /s/Eric B. Fischman
______________________
Eric B. Fischman,
Attorney-in-Fact
KIRKPATRICK & LOCKHART LLP
1800 Massachusetts Avenue, NW
2nd Floor
Washington, DC 20036-1800
February 29, 1996
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: The Dreyfus/Laurel Funds, Inc.
Post-Effective Amendment No. 43 (1933 Act File No. 33-16338)
Counsel's Representation Pursuant to Rule 485(b)
Dear Sir or Madam:
In my capacity as counsel to The Dreyfus/Laurel Funds, Inc. (the
"Registrant"), I have reviewed Post-Effective Amendment No. 43 to the
Registrant's Registration Statement on Form N-1A, which is to become
effective on March 1, 1996, pursuant to Rule 485(b) under the Securities
Act of 1933, as amended. In my view, the amendment does not contain any
disclosures that would render it ineligible to become effective pursuant
to Rule 485(b).
Very truly yours,
Thomas M. Leahey
KIRKPATRICK & LOCKHART LLP
1800 Massachusetts Avenue, NW
2nd Floor
Washington, DC 20036-1800
February 29, 1996
The Dreyfus/Laurel Funds, Inc.
200 Park Avenue - 55th Floor
New York, New York 10166
Dear Sir or Madam:
In connection with the filing of Post-Effective Amendment No. 43 to
the Registration Statement on Form N-1A (File No. 33-16338) of The
Dreyfus/Laurel Funds, Inc. which you are about to file with the Securities
and Exchange Commission, we hereby consent to the reference to our firm as
"counsel" in the Statements of Additional Information.
Sincerely yours,
Thomas M. Leahey
Independent Auditors' Consent
The Board of Trustees and Shareholders
The Dreyfus/Laurel Funds, Inc.:
We consent to the use of our report dated December 15, 1995 with respect
to 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, Dreyfus Disciplined Midcap Stock Fund,
Dreyfus Institutional S&P 500 Stock Index Fund, Dreyfus Equity Income
Fund, Dreyfus European Fund, Dreyfus International Equity Allocation Fund,
Premier Balanced Fund, Premier Small Company Stock Fund, and Premier
Limited Term Income Fund of The Dreyfus/Laurel Funds, Inc. incorporated by
reference in the Prospectuses and Statements of Additional Information
under the heading "Financial Statements" and to the reference to our Firm
under the heading "Financial Highlights" in the Prospectuses. In
addition, we consent to the reference to our Firm under the heading
"Custodian, Transfer and Dividend Disbursing Agent, Counsel and
Independent Auditors" in the Statements of Additional Information of
Dreyfus Disciplined Midcap Stock Fund, Dreyfus Institutional S&P 500 Stock
Index Fund, Dreyfus Equity Income Fund, Dreyfus European Fund, Dreyfus
International Equity Allocation Fund, Premier Balanced Fund, Premier Small
Company Stock Fund, and Premier Limited Term Income Fund and under the
heading "Other Information" in the Statements of Additional Information of
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, and Dreyfus Institutional
Government Money Market Fund dated March 1, 1996.
New York, New York
March 1, 1996
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