- ------------------------------------------------------------------------------
PROSPECTUS MARCH 1, 1997
AS REVISED AUGUST 15, 1997
DREYFUS BOND MARKET INDEX FUND
- ------------------------------------------------------------------------------
DREYFUS BOND MARKET INDEX FUND (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. THE FUND SEEKS TO REPLICATE
THE TOTAL RETURN OF THE LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX. IT IS
ANTICIPATED THAT BEGINNING ON OR ABOUT NOVEMBER 14, 1997, THE FUND WILL SEEK
TO REPLICATE THE TOTAL RETURN OF THE LEHMAN BROTHERS AGGREGATE BOND INDEX.
BY THIS PROSPECTUS, THE FUND IS OFFERING INVESTOR SHARES AND BASIC
SHARES. INVESTOR AND BASIC SHARES OF THE FUND WERE FORMERLY CALLED
INSTITUTIONAL AND RETAIL SHARES, RESPECTIVELY.) INVESTOR SHARES AND BASIC
SHARES ARE IDENTICAL, EXCEPT AS TO THE SERVICES OFFERED TO, THE EXPENSES
BORNE BY, AND THE MINIMUM INITIAL PURCHASE AND ACCOUNT BALANCE MAINTENANCE
REQUIREMENTS OF, EACH CLASS. INVESTOR AND BASIC SHARES ARE OFFERED TO ANY
INVESTOR.
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, 1997,
AS REVISED AUGUST 15, 1997, WHICH MAY BE FURTHER 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. THE SEC MAINTAINS A WEB SITE (HTTP://WWW.SEC.GOV) THAT CONTAINS
THE SAI, MATERIAL INCORPORATED BY REFERENCE, AND OTHER INFORMATION REGARDING
THE FUND. FOR A FREE COPY OF THE SAI, 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, 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.
- ------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE 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.......................... 13
HOW TO BUY FUND SHARES.......................... 14
SHAREHOLDER SERVICES............................ 17
HOW TO REDEEM FUND SHARES....................... 21
DISTRIBUTION PLAN (INVESTOR SHARES ONLY)........ 24
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES........ 24
PERFORMANCE INFORMATION......................... 26
GENERAL INFORMATION............................. 27
Page 2
[This Page Intentionally Left Blank]
Page 3
<TABLE>
<CAPTION>
EXPENSE SUMMARY
<S> <C> <C>
INVESTOR SHARES BASIC SHARES
Shareholder Transaction Expenses:
Maximum Sales Load Imposed on Purchases................ none none
Maximum Sales Load Imposed on Reinvestments............ none none
Deferred Sales Load.................................... none none
Redemption Fee......................................... none none
Exchange Fee........................................... none none
Estimated Annual Fund Operating Expenses:
(as a percentage of net assets)
Management Fee ........................................ 0.15% 0.15%
12b-1 Fee(1)........................................... 0.25% none
Other Expenses(2)...................................... 0.00% 0.00%
------- ------
Total Fund Operating Expenses ......................... 0.40% 0.15%
EXAMPLE:
An investor would pay the following expenses
on a $1,000 investment, assuming (1) a 5% annual
return and (2) redemption at the end of each
time period:
INVESTOR SHARES BASIC SHARES
1 YEAR $ 4 $ 2
3 YEARS $13 $ 5
5 YEARS $22 $ 8
10 YEARS $51 $19
</TABLE>
(1)See "Distribution Plan (Investor Shares Only)" for a description of the
Fund's Distribution Plan for the 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 in an amount equal to the Fund's allocable portion
of such fees and expenses, which are estimated to be less than .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. The information in the foregoing table has been restated to reflect
the reduction of the Fund's management fee from .40% to .15% of the Fund's
average daily net assets, effective as of August 15, 1997. 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 banks,
securities brokers or dealers ("Selected Dealers") and other financial
institutions (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 Plan (Investor Shares Only)."
The Company understands that Agents may charge fees to their clients
who are owners of Fund 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 BASIC
share outstanding throughout each fiscal year or period and should be read in
conjunction with the financial statements, related notes and report of
independent auditors that appear in the Fund's Annual Report dated October
31, 1996 and that are incorporated by reference in the SAI. The financial
statements included in the Fund's Annual Report for the year ended October
31, 1996 have been audited by KPMG Peat Marwick LLP, independent auditors.
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 BOND MARKET INDEX FUND
FOR AN INVESTOR SHARE OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.*
YEAR YEAR PERIOD
ENDED ENDED ENDED
10/31/96 10/31/95 10/31/94#
-------- -------- ---------
<S> <C> <C> <C>
Net asset value, beginning of period $9.93 $9.15 $9.44
------ ------ ------
Income from investment operations:
Net investment income 0.57 0.55 0.24
Net realized and unrealized loss on investments (0.15) 0.78 (0.28)
------ ------ ------
Total from investment operations 0.42 1.33 (0.04)
Less distributions:
Distributions from net investment income (0.57) (0.55) (0.25)
------ ------ ------
Net asset value, end of period $9.78 $9.93 $9.15
====== ====== ======
TOTAL RETURN 4.36% 15.01% (0.46)%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $80 $207 $38
Ratio of operating expenses to average net assets 0.65% 0.65% 0.65%
Ratio of net investment income to average net assets 5.80% 5.77% 4.81%
Portfolio turnover rate 42.65% 40.16% 188%
* The Fund commenced selling Investor shares on April 28, 1994. Effective July 15, 1996, Investor Class shares were redesignated
as Institutional shares. Effective August 15, 1997, Institutional shares were
redesignated as Investor shares.
+ Annualized.
++ Total return represents aggregate total return for the 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.
Page 5
DREYFUS BOND MARKET INDEX FUND
FOR A BASIC SHARE OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.*
YEAR YEAR PERIOD
ENDED ENDED ENDED
10/31/96 10/31/95 10/31/94#
-------- -------- ---------
Net asset value, beginning of period $ 9.94 $ 9.15 $10.00
------ ------ ------
Income from investment operations:
Net investment income 0.59 0.58 0.49**
Net realized and unrealized gain (loss) on investments (0.14) 0.79 (0.85)
------ ------ ------
Total from investment operations 0.45 1.37 (0.36)
Less distributions:
Distributions from net investment income (0.59) (0.58) (0.49)
------ ------ ------
Net asset value, end of period $9.80 $9.94 $9.15
====== ====== ======
TOTAL RETURN 4.69% 15.41% (3.68)%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $32,986 $6,824 $4,464
Ratio of operating expenses to average net assets 0.40% 0.40% 0.40%***
Ratio of net investment income to average net assets 6.02% 6.10% 5.05%
Portfolio turnover rate 42.65% 40.16% 188%
* The Fund commenced operations on November 30, 1993. Effective April 28, 1994, the Fund began selling Investor shares and
the shares existing prior to April 28, 1994 were designated Trust Shares.
On October 17, 1994, Trust Shares were redesignated as Class R shares.
Effective July 15, 1996, Class R shares were redesignated as Retail shares.
Effective August 15, 1997, Retail shares were redesignated as BASIC shares.
** Net investment income before reimbursement of expenses by investment manager for the period ended October 31, 1994 was
$.39 per share.
*** Annualized expense ratio before reimbursement of expenses by investment manager for the period ended October 31, 1994 was
1.41%.
+ Annualized.
++ Total return represents aggregate total return for the 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.
</TABLE>
Page 6
DESCRIPTION OF THE FUND
RECENT DEVELOPMENTS
At a meeting of the Board of Directors held on July 31, 1997, the
Board approved changing the Fund's non-fundamental investment objective from
seeking to replicate the Lehman Brothers Government/Corporate Bond Index (the
"Government/Corporate Index") to seeking to replicate the Lehman Brothers
Aggregate Bond Index (the "Aggregate Bond Index"). The Board also approved
changes to the Fund's investment policies to permit the Fund to invest in
mortgage-backed and asset-backed securities in seeking to replicate the
Aggregate Bond Index. It is currently anticipated that the changes to the
Fund's investment objective and policies will become effective on or about
November 14, 1997.
GENERAL
By this Prospectus, the Fund is offering Investor shares and BASIC
shares. (Investor and BASIC shares of the Fund were formerly called
Institutional and Retail, respectively.) Investor shares and BASIC shares are
identical, except as to the services offered to, the expenses borne by, and
the minimum initial purchase and account balance maintenance requirements of,
each Class. Investor and BASIC shares are offered to any investor. You should
consult your Agent to determine which Class of shares is offered by the
Agent. Unless the Fund is otherwise instructed, new purchases and exchanges
by existing shareholders will be in the same Class of shares that the
shareholder then holds. All Agents have agreed to transmit transaction
requests to the 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 BASIC shares.
INVESTMENT OBJECTIVE
The Fund seeks to replicate the total return of the
Government/Corporate Bond Index. It is anticipated that, beginning on or
about November 14, 1997, the Fund will seek to replicate the total return of
the Aggregate Bond Index. There can be no assurance that the Fund will meet
its investment objective.
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 investing judgment.
Instead, the Fund utilizes a "passive" investment approach, attempting to
duplicate the investment performance of the applicable index through the use
of statistical procedures.
The Government/Corporate Index is intended to measure the performance
of the domestic fixed-rate investment grade debt market. The
Government/Corporate Index is composed of (i) all public obligations of the
U.S. Government, its agencies and instrumentalities (excluding "flower" bonds
and pass-through issues such as GNMA Certificates) and (ii) all publicly
issued, fixed-rate, nonconvertible, investment grade, dollar-denominated,
SEC-registered obligations of domestic corporations, foreign governments and
supranational organizations. All non-U.S. Government issues in the
Government/Corporate Index are rated at least Baa by Moody's Investors
Service, Inc. ("Moody's") or, if unrated by Moody's, BBB by Standard & Poor's
Ratings Group ("Standard & Poor's"). As of December 31, 1996, over 4500
issues were included in the Government/Corporate Index, representing $3.26
trillion in market value. U.S. Treasury and agency issues represented 74% of
the total market value, with corporate issues representing the balance of
26%. The average maturity of the Government/Corporate Index was 9.51 years.
The Aggregate Bond Index covers the U.S. investment grade fixed-rate bond
market, including government and corporate securities, agency mortgage
pass-through securities, and asset-backed securities. The Aggregate Bond
Index covers those securities in the Government/Corporate Bond Index, plus
those covered by the Lehman Mortgage-Backed Securities Index ("MBS Index")
and the Lehman Asset-Backed Securities Index ("ABS Index"). The MBS Index
covers all fixed-rate securities backed by mortgage pools of the Government
National Mortgage
Page 7
Association ("GNMA"), Freddie Mac and Fannie Mae. The ABS Index covers three
subsectors - credit and charge cards, auto, and home equity loans - and
includes pass-through, bullet, and controlled amortization structures. As
of December 31, 1996, over 5,700 issues were included in the
Aggregate Bond Index, representing $4.7 trillion in market value, distributed
as follows: 52% governments; 18% corporates; and 30% mortgage-backed
securities.
The inclusion of a security in either the Government/Corporate Bond
Index or the Aggregate Bond Index does not imply that Lehman Brothers
believes the security to be an attractive investment, nor is Lehman Brothers
affiliated with the Fund.
Because of the large number of issues included in the
Government/Corporate Index and the Aggregate Bond Index, the Fund cannot
invest in all such issues. Instead, the Fund holds a representative sample of
the securities in the index, selecting one or two issues to represent an
entire "class" or type of securities in the index. At a minimum, the Fund
seeks to hold securities which reflect the weighting of the major asset
classes in the applicable index - U.S. Treasury and agency issues and
corporate issues in the case of the Government/Corporate Index and, in the
case of the Aggregate Bond Index, both mortgage-backed and asset-backed
securities as well as securities of the foregoing types that are not backed
by mortgages or other assets. As the Fund's assets increase, these classes
will be further delineated along the lines of sector, term-to-maturity,
coupon and credit rating. This sampling technique is expected to be an
effective means of substantially duplicating the income and capital returns
provided by the securities comprising each applicable index. As the Fund
grows, the correlation between the performance of the Fund and the applicable
index is expected to be .95 or higher. A correlation of 1.00 would indicate
perfect correlation.
Securities rated BBB by Standard & Poor's or Baa by Moody's are
considered by those rating agencies to be "investment grade" securities,
although Moody's considers securities rated Baa to have speculative
characteristics. Further, while bonds rated BBB by Standard & Poor's exhibit
adequate protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay interest
and principal for debt in this category than debt in higher rated categories.
The Fund will dispose in a prudent and orderly fashion of bonds whose ratings
drop below these minimum ratings.
The Fund invests 80% or more of its total assets in securities
included in the Government/Corporate Index, and anticipates that, beginning
on or about November 14, 1997, it will invest 80% of more of its assets in
securities included in the Aggregate Bond Index. The Fund may purchase such
securities on a when-issued or delayed-delivery basis. For the purpose of
maintaining liquidity, the Fund may invest up to 20% of its assets in: (1)
U.S. Treasury bills, notes and bonds; (2) other obligations issued or
guaranteed as to interest and principal by the U.S. Government, its agencies
and instrumentalities; (3) instruments of U.S. and foreign banks, including
certificates or deposit, bankers' acceptances, time deposits and 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, rated at the time of purchase at least A-1 by Standard &
Poor's, Prime-1 by Moody's, F-1 by Fitch Investors Services LLP ("Fitch"),
Duff 1 by Phoenix Duff & Phelps Corp. ("Duff & Phelps") or A1 by IBCA, Inc.
("IBCA"); (5) floating rate securities; (6) variable amount master demand
notes; (7) repurchase agreements; (8) reverse repurchase agreements; and (9)
Eurodollar bonds and notes.
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.
Page 8
SECURITIES LENDING. To increase return on Fund securities, the Fund
may lend its portfolio securities, in an amount not to exceed 331/3% of its
total assets, 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.
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, F-1 by Fitch,
Duff 1 by Duff & Phelps or A1 by IBCA.
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 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 sales 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.
FOREIGN SECURITIES. The Fund may purchase securities of foreign
governments 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 future
political and economic developments and the possible imposition of currency
exchange blockages or other foreign governmental laws or restrictions, and
reduced availability of public information concerning issuers. Moreover,
securities of many foreign issuers may be less liquid and their prices more
volatile than those
Page 9
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.
OTHER INVESTMENT COMPANIES. The Fund may invest in securities issued
by other investment companies to the extent that such investments are
consistent with the Fund's investment objective and policies and permissible
under the Investment Company Act of 1940, as amended ("1940 Act"). As a
shareholder of another investment company, the Fund would bear, along with
other shareholders, its pro rata portion of the other investment company's
expenses, including advisory fees. These expenses would be in addition to the
advisory and other expenses that the Fund bears directly in connection with
its own operations.
U.S. GOVERNMENT SECURITIES. The Fund may invest in obligations issued
or guaranteed as to both principal and interest by the U.S. Government or
backed by the full faith and credit of the United States. In addition to
direct obligations of the U.S. Treasury, these include securities issued or
guaranteed by the Federal Housing Administration, Farmers Home
Administration, Export-Import Bank of the United States, Small Business
Administration, GNMA, General Services Administration and Maritime
Administration. Investments may also be made in U.S. Government obligations
that do not carry the full faith and credit guarantee, such as those issued
by the Federal National Mortgage Association, the Federal Home Loan Mortgage
Corporation or other instrumentalities.
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.
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."
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
Page 10
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.
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 invest in variable amount master demand notes
issued only by entities that Dreyfus finds creditworthy.
MORTGAGE-RELATED SECURITIES. Beginning on or about November 14, 1997,
the Fund may invest in mortgage-related securities. Mortgage-related
securities are securities that, directly or indirectly, represent interests
in, or are secured by and payable from, loans secured by real property,
including pass-through securities such as certificates issued or guaranteed
by the GNMA, Fannie Mae or Freddie Mac, private pass-through securities,
commercial mortgage-related securities, and certain collateralized mortgage
obligations. There are currently three basic types of mortgage-related
securities: (1) those issued or guaranteed by the U.S. Government, its
agencies or instrumentalities, such as GNMA, Fannie Mae and Freddie Mac; (2)
those issued by private issuers that represent interests in, or are
collateralized by, mortgage-related securities issued or guaranteed by the
U.S. Government, its agencies or instrumentalities; and (3) those issued by
private issuers that represent interests in, or are collateralized by, whole
loan mortgages or mortgage-related securities without a government guarantee,
but usually with some other form of credit support. Investors should note
that mortgage-related securities in which the Fund may invest are developed
and marketed from time-to-time and that, consistent with its investment
limitations, the Fund may invest in those mortgage-related securities that
Dreyfus believes may assist the Fund in achieving its investment objective.
The yield characteristics of mortgage-related securities differ from
those of traditional debt securities. Among the major differences are that
interest and principal payments on mortgage-related securities are made more
frequently, generally once a month, and that principal prepayments on
mortgage-related securities may occur at any time because the underlying
mortgage loans generally may be prepaid at any time. As a result, if the Fund
purchases mortgage-related securities at a premium, a prepayment rate that is
faster than expected will reduce yield to maturity, while a prepayment rate
that is slower than expected will have the opposite effect of increasing
yield to maturity. Conversely, if the Fund purchases mortgage-related
securities at a discount, faster than expected prepayments will increase,
while slower than expected prepayments will reduce, yield to maturity. The
timing and magnitude of prepayments cannot be predicted. Generally, however,
prepayments on fixed-rate mortgage loans will increase during a period of
falling mortgage interest rates and will decrease during a period of rising
mortgage interest rates. Amounts available for reinvestment by the Fund are
likely to be greater during a period of falling interest rates and, as a
result, are likely to be reinvested at lower interest rates than during a
period of rising interest rates. Accelerated prepayments on mortgage-related
securities purchased by the Fund at a premium also impose a risk of loss of
principal because the premium may not have been fully amortized at the time
the principal is repaid in full. The value of mortgage-related securities may
be significantly affected by changes in interest rates, the market's
perception of the issuers, and the creditworthiness of the parties involved.
Page 11
Timely payment of principal and interest on pass-through securities
issued or guaranteed by GNMA (but not Fannie Mae or Freddie Mac) is
guaranteed by the full faith and credit of the United States. This is not a
guarantee against market decline of the value of these securities or the
shares of the Fund. It is possible that the availability (i.e., liquidity) of
these securities could be adversely affected by actions of the U.S.
Government to tighten the availability of its credit. Timely payment of
principal and interest on pass-through securities of Fannie Mae or Freddie
Mac is guaranteed by the respective entity.
Collateralized mortgage obligations ("CMOs") are debt obligations
collateralized by mortgage-related securities issued by GNMA, Fannie Mae or
FHLMC, or by whole loans or private issuer pass-through securities. CMOs may
be issued by GNMA, Fannie Mae, Freddie Mac or private issuers. CMOs are
structured to direct payments on underlying collateral to different series or
classes of the obligations. CMO classes may be specially structured in a
manner that provides any of a wide variety of investment characteristics,
such as yield, effective maturity and interest rate sensitivity. CMO
structuring is accomplished by in effect stripping out portions of the cash
flows (comprised of principal and interest payments) on the underlying
mortgage assets and prioritizing the payments of those cash flows. In the
most extreme case, one class will be entitled to receive all of the interest,
but none of the principal, from the underlying mortgage assets (the
interest-only or "IO" class) and one class will be entitled to receive all of
the principal, but none of the interest (the principal-only or "PO" class).
CMOs may be structured in other ways that, based on mathematical modeling or
similar techniques, are expected to provide certain results. As market
conditions change, however, and particularly during periods of rapid or
unanticipated changes in market interest rates, the attractiveness of a CMO
class and the ability of a structure to provide the anticipated investment
characteristics may be significantly reduced. Such changes can result in
volatility in the market value, and in some instances reduced liquidity, of
the CMO class.
In determining the Fund's average maturity, the maturity of a
mortgage-related security is deemed to be its effective life (i.e., the
average time in which the principal amount of the security is repaid), as
estimated by Dreyfus based on scheduled principal amortization and an
anticipated rate of principal prepayments, which rate, in turn, is based on
past prepayment patterns, prevailing interest rates and other factors. The
effective life of a mortgage-related security generally is substantially
shorter than its stated maturity, and can be further shortened by greater
than expected prepayments.
ASSET-BACKED SECURITIES. Beginning on or about November 14, 1997 the
Fund may invest in asset-backed securities. Asset-backed securities are
securities that represent direct or indirect participations in, or are
secured by and payable from, assets such as motor vehicle installment sales
contracts, installment loan contracts, leases of various types of real and
personal property, and receivables from revolving credit (credit card)
agreements. Such assets are securitized through the use of trusts and special
purpose corporations. The value of such securities partly depends on loan
repayments by individuals, which may be adversely affected during general
downturns in the economy. Payments or distributions of principal and interest
on asset-backed securities may be supported by credit enhancements, such as
various forms of cash collateral accounts or letters of credit. As with
mortgage-related securities, asset-backed securities are subject to the risk
of prepayment. The risk that recovery on repossessed collateral might be
unavailable or inadequate to support payments on asset-backed securities,
however, is greater than is the case for mortgage-backed securities.
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
Page 12
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 of 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 or 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.
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 July 31, 1997, Dreyfus managed or administered
approximately $92 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 Federal Bank Holding
Company Act of 1956, as amended. Mellon provides a comprehensive range of
financial products and services in domestic and selected international
markets. Mellon is among the twenty-five largest bank holding companies in
the United States based on total assets. 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 $259 billion in
assets as of June 30, 1997, including $88 billion in mutual fund assets. As
of June 30, 1997, Mellon, through various subsidiaries, provided
non-investment services, such as custodial or administration services, for
more than $1.061 trillion in assets, including approximately $58 billion in
mutual fund assets.
Effective August 15, 1997, 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 .40% to .15% of the value of the Fund's average daily net
assets. Dreyfus pays
Page 13
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 may be higher than the investment advisory fees
paid by other 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. 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 management fee by an amount
equal to the Fund's allocable share of such fees and expenses.
From time to time, Dreyfus may voluntarily waive a portion of the investment
management fees payable by the Fund. For the fiscal year ended October 31,
1996, the Fund paid Dreyfus 0.40% of its average daily net assets in
investment management fees, less fees and expenses of the non-interested
Directors (including counsel fees) pursuant to the Investment Management
Agreement as was then in effect.
For the fiscal year ended October 31, 1996, total operating expenses
(excluding Rule 12b-1 fees) of the Fund were 0.40% of the average daily net
assets of each class for both the Investor and BASIC shares.
In addition, Investor shares may be subject to certain distribution
and shareholder servicing fees. See "Distribution Plan (Investor Shares
Only)."
Dreyfus may pay the 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.
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 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 is located at 60 State Street, Boston, Massachusetts
02109. The Distributor's ultimate parent 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, 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 and BASIC shares are offered to any investor. You
may be charged a fee if you effect transactions in Fund shares through an
Agent. 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 for BASIC shares is $10,000 and for
Investor shares is $2,500, or $1,000 if you are a client of an Agent which
maintains an omnibus account in the Investor Class of the
Page 14
Fund and has made an aggregate minimum initial purchase for its customers of
$2,500. Subsequent investments for BASIC shares must be at least $1,000 (or
at least $100 in the case of persons who have held BASIC shares since August
14, 1997) and for Investor shares must be at least $100, or $50 through
Dreyfus-AUTOMATIC Asset BuilderRegistration Mark. However, the minimum initial
investment for BASIC shares with respect to Dreyfus-sponsored Keogh Plans,
IRAs, SEP-IRAs and 403(b)(7) Plans with only one participant (collectively,
"Individual Retirement Plans") is $5,000 (or at least $750 for Individual
Retirement Plans holding BASIC shares since August 14, 1997) and the minimum
initial investment for Investor shares with respect to Individual Retirement
Plans is $750. Subsequent investments for BASIC shares with respect to
Individual Retirement Plans must be at least $1,000 (with no minimum on
subsequent purchases by Individual Retirement Plans holding BASIC shares since
August 14, 1997). There is no minimum on subsequent purchases of Investor
shares with respect to Individual Retirement Plans. Individuals who open an
IRA in Investor shares also may open a non-working spousal IRA in such class
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 for Investor shares 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 for Investor shares 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 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 yo
u 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.
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 corporate partnerships, non-profit
entities or state and local governments. 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." For accounts other than Dreyfus retirement
plan accounts, payments which are mailed should be sent to Dreyfus Bond
Market Index Fund, P.O. Box 6587, Providence, Rhode Island 02940-6587. If you
are opening a new account, please enclose 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. For Dreyfus retirement plan accounts, payments which are mailed
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
Page 15
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 # 044210/Dreyfus Bond Market Index Fund and
applicable Class for purchase of Fund shares in your name. The wire must
indicate which Class of shares is being purchased and it 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 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 "4460" for
Investor shares and "4450" for BASIC 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 BASIC 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. 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.
Page 16
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). Orders 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). Orders received after such close of business
are effective on, and will receive the share price determined on, the next
business day, except where shares are purchased through a dealer as provided
below.
Orders for the purchase of Fund shares received by dealers by the
close of trading on the floor of the 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 NAV determined as the close of
trading on the floor of the NYSE on that day. Otherwise, the orders will be
based on the next determined NAV. It is the dealers' responsibility to
transmit orders so that they will be received by the Distributor or its
designee before the close of the business day.
The public offering price of Investor shares and BASIC 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 calling
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
certain other eligible 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 FUND 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.
Page 17
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, available by calling 1-800-645-6561 or,
by oral request from any of the authorized signatories on the account, also
by calling 1-800-645-6561. If you previously have established the Telephone
Exchange Privilege, you may telephone exchange instructions (including over
The Dreyfus TouchRegistration Mark Automated Telephone System) by calling
1-800-645-6561. If calling from overseas, call 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 Fund shares into funds sold
with a sales load. If you are exchanging Fund 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 certain other eligible funds in the Dreyfus Family of
Funds of which you are currently an investor. WITH RESPECT TO FUND 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 Fund 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
Page 18
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 $50 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 other distributions, if any, paid by the Fund in shares of
certain other eligible 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 other
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 19
appropriate for you. To enroll in Dreyfus Government Direct Deposit, you must
file with the Transfer Agent a completed Direct Deposit Sign-Up Form for each
type of payment that you desire to include in this Privilege. The appropriate
form may be obtained by calling 1-800-645-6561. Death or legal incapacity will
terminate your participation in this Privilege. You may elect at any time to
terminate your participation by notifying in writing the appropriate Federal
agency. Further, the Fund may terminate your participation upon 30 days'
notice to you.
DREYFUS PAYROLL SAVINGS PLAN
Dreyfus Payroll Savings Plan permits you to purchase Fund shares
(minimum of $100 per transaction) automatically on a regular basis. Depending
upon the direct deposit program of your employer, you may have part or all of
your paycheck transferred to your existing Dreyfus account electronically
through the ACH system at each pay period. To establish a Dreyfus Payroll
Savings Plan account, you must file an authorization form with your
employer's payroll department. Your employer must complete the reverse side
of the form and return it to The Dreyfus Family of Funds, P.O. Box 9671,
Providence, Rhode Island 02940-9671. You may obtain the necessary
authorization form by calling 1-800-645-6561. You may change the amount of
purchase or cancel the authorization only by written notification to your
employer. It is the sole responsibility of your employer, not the
Distributor, Dreyfus, the Fund, the Transfer Agent or any other person, to
arrange for transactions under the Dreyfus Payroll Savings Plan. The Fund may
modify or terminate this Privilege at any time or charge a service fee. No
such fee currently is contemplated.
DREYFUS STEP PROGRAM
Dreyfus Step Program enables you to purchase Investor shares without
regard to the Fund's minimum initial investment requirements through Dreyfus-
AUTOMATIC Asset Builder, Dreyfus Government Direct Deposit Privilege or
Dreyfus Payroll Savings Plan. To establish a Dreyfus Step Program account,
you must supply the necessary information on the Fund's Account Application
and file the required authorization form(s) with the Transfer Agent. For more
information concerning this Program, or to request the necessary
authorization form(s), please call toll free 1-800-782-6620. You may
terminate your participation in this Program at any time by discontinuing
your participation in Dreyfus-AUTOMATIC Asset Builder, Dreyfus Government
Direct Deposit Privilege or Dreyfus Payroll Savings Plan, as the case may be,
as provided under the terms of such Privilege(s). The Fund reserves the right
to redeem your account if you have terminated your participation in the
Program and your account's net asset value is $500 or less. See "How to
Redeem Fund Shares." The Fund may modify or terminate this Program at any
time. Investors who wish to purchase Investor shares through the 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 quarterly or monthly
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 sup-
Page 20
port 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 fee
for effecting redemptions of Fund shares. Any certificates representing Fund
shares being redeemed must be submitted with the redemption request. The
value of the shares redeemed may be more or less than their original cost,
depending upon the Fund's then-current NAV.
The Fund ordinarily will make payment for all shares redeemed within
seven days after receipt by the Transfer Agent of a redemption request in
proper form, except as provided by the rules of the SEC. HOWEVER, IF YOU HAVE
PURCHASED FUND SHARES BY CHECK, BY THE DREYFUS TELETRANSFER PRIVILEGE OR
THROUGH DREYFUS-AUTOMATIC ASSET BUILDER AND SUBSEQUENTLY SUBMIT A WRITTEN
REDEMPTION REQUEST TO THE TRANSFER AGENT, THE REDEMPTION PROCEEDS WILL BE
TRANSMITTED TO YOU PROMPTLY UPON BANK CLEARANCE OF YOUR PURCHASE CHECK,
DREYFUS TELETRANSFER PURCHASE OR DREYFUS-AUTOMATIC ASSET BUILDER ORDER, WHICH
MAY TAKE UP TO EIGHT BUSINESS DAYS OR MORE. IN ADDITION, THE FUND WILL REJECT
REQUESTS TO REDEEM SHARES BY WIRE OR TELEPHONE OR PURSUANT TO THE DREYFUS
TELETRANSFER PRIVILEGE FOR A PERIOD OF EIGHT BUSINESS DAYS AFTER RECEIPT BY
THE TRANSFER AGENT OF THE PURCHASE CHECK, THE DREYFUS TELETRANSFER PURCHASE
OR THE DREYFUS-AUTOMATIC ASSET BUILDER ORDER AGAINST WHICH SUCH REDEMPTION IS
REQUESTED. THESE PROCEDURES WILL NOT APPLY IF YOUR SHARES WERE PURCHASED BY
WIRE PAYMENT, OR IF YOU OTHERWISE HAVE A SUFFICIENT COLLECTED BALANCE IN YOUR
ACCOUNT TO COVER THE REDEMPTION REQUEST. PRIOR TO THE TIME ANY REDEMPTION IS
EFFECTIVE, DIVIDENDS ON SUCH SHARES WILL ACCRUE AND BE PAYABLE, AND YOU WILL
BE ENTITLED TO EXERCISE ALL OTHER RIGHTS OF BENEFICIAL OWNERSHIP. Fund shares
will not be redeemed until the Transfer Agent has received your Account
Application.
The Fund reserves the right to redeem your account at its option upon
not less than 45 days' written notice if the NAV of your account in the BASIC
Class is $5,000 or less ($500 or less in the case of holders of BASIC shares
since August 14, 1997) or in the Investor class is $500 or less, and remains
so during the notice period. The Fund reserves the right to charge these
minimum account balance amounts in the future.
PROCEDURES. You may redeem shares by using the regular redemption procedure
through the Transfer Agent, or through the Telephone Redemption Privilege,
which is granted automatically unless you specifically refuse it by checking
the applicable "No" box on the Account Application. The Telephone Redemption
Privilege may be established for an existing account by a separate signed
Shareholder Services Form or by oral request from any of the authorized
signatories on the account by calling 1-800-645-6561. You may also redeem
shares through the Check Redemption Privilege, the Wire Redemption Privilege,
or the Dreyfus TELETRANSFER Privilege, if you have checked the appropriate
box and supplied the necessary information on the Account Application or have
filed a Shareholder
Page 21
Services Form with 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.
The Telephone Redemption Privilege or Telephone Exchange Privilege,
which are granted automatically unless you refuse them, authorizes the
Transfer Agent to act on telephone instructions (including over The Dreyfus
TouchRegistration Mark Automated Telephone System) from any person
representing himself or herself to be you, or a representative of your Agent,
and reasonably believed by the Transfer Agent to be genuine. The Fund will
require the Transfer Agent to employ reasonable procedures, such as requiring
a form of personal identification, to confirm that instructions are genuine
and, if it does not follow such procedures, the Fund or the Transfer Agent
may be liable for any losses due to unauthorized or fraudulent instructions.
Neither the Fund nor the Transfer Agent will be liable for following
telephone instructions reasonably believed to be genuine.
During times of drastic economic or market conditions, you may
experience difficulty in contacting the Transfer Agent by telephone to
request a redemption or an exchange of Fund shares. In such cases, you should
consider using the other redemption procedures described herein. Use of these
other redemption procedures may result in your redemption request being
processed at a later time than it would have been if telephone redemption had
been used. During the delay, the Fund's NAV may fluctuate.
REGULAR REDEMPTION. Under the regular redemption procedure, you may
redeem your shares by written request mailed to The Dreyfus Family of Funds,
P.O. Box 9671, Providence, Rhode Island 02940-9671, or, if for Dreyfus
retirement plan accounts, to the Dreyfus Trust Company, Custodian, P.O. Box
6427, Providence, Rhode Island 02940-6427. Redemption requests may be
delivered in person only to a Dreyfus Financial Center. THESE REQUESTS WILL
BE FORWARDED TO THE FUND AND WILL BE PROCESSED ONLY UPON RECEIPT THEREBY. For
the location of the nearest Dreyfus Financial Center, please call the
telephone number listed under "General Information." Redemption requests must
be signed by each shareholder, including each owner of a joint account, and
each signature must be guaranteed. The Transfer Agent has adopted standards
and procedures pursuant to which signature-guarantees in proper form generally
will be accepted from domestic banks, brokers, dealers, credit unions,
national securities exchanges, registered securities associations, clearing
agencies and savings associations, as well as from participants in the New
York Stock Exchange Medallion Signature Program, the Securities Transfer
Agents Medallion Program ("STAMP"), and the Stock Exchanges Medallion
Program. For more information with respect to signature-guarantees, please
call the telephone number listed under "General Information."
Redemption proceeds of at least $1,000 will be wired to any member
bank of the Federal Reserve System in accordance with a written
signature-guaranteed request.
WIRE REDEMPTION PRIVILEGE. You may request by wire or telephone that
redemption proceeds (minimum $1,000) be wired to your account at a bank which
is a member of the Federal Reserve System, or a correspondent bank if your
bank is not a member. To establish the Wire Redemption Privilege, you must
check the appropriate box and supply the necessary information on the Fund's
Account Application or file a Shareholder Services Form with the Transfer
Agent. You may direct that redemption proceeds be paid by check (maximum
$150,000 per day) made out to the owners of record and mailed to your
address. Redemption proceeds of less than $1,000 will be paid automatically
by check. Holders of jointly registered Fund or bank accounts may have
redemption proceeds of only up 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
Page 22
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 Telephone
Redemption Privilege is granted unless you refuse it. 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.
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.
In addition, the Distributor will accept orders from Selected
Dealers with which it has sales agreements for the repurchase of Fund 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, Fund 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.
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 calling
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 23
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 declares daily and pays monthly dividends from its net
investment income and distributes net realized capital 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. Fund shares begin earning
dividends on the day following the date of purchase. The Fund will not make
distributions from net realized capital gains unless all capital loss
carryovers, if any, have been utilized or have expired. All expenses are
accrued daily and deducted before declaration of dividends to investors.
Dividends paid by each Class are 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 are borne exclusively by that Class. Investor
shares will receive lower per share dividends than BASIC shares because of the
higher expenses borne by the Investor shares. See "Expense Summary."
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 at NAV, 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.
It is expected that the Fund will continue to 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 and realized gains 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 are
taxable to U.S. shareholders, including certain non-qualified Retirement
Plans, as ordinary income to the extent of the Fund's earnings and profits
whether received in cash or reinvested in additional Fund shares. Distribution
s from the Fund's net capital gains (the excess of net long-term capital gain
over net short-term capital loss) are taxable to such shareholders as
long-term capital gains, regardless of how long
Page 24
the shareholders have held their Fund shares and whether such distributions
are received in cash or reinvested in additional Fund shares. The net capital
gain of an individual generally will not be subject to Federal income tax at
a rate in excess of 28%. Dividends and other distributions also may be subject
to state and local taxes.
Dividend distributions paid by the Fund to a non-resident foreign
investor generally will be subject to U.S. withholding tax at the rate of
30%, unless the foreign investor claims the benefit of a lower rate specified
in a tax treaty. Capital gain distributions paid by the Fund to a
non-resident foreign investor, as well as the proceeds of any redemptions by
such an investor, regardless of the extent to which gain or loss may be
realized, generally are not 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 capital gain
distributions, 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 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 laws and regulations generally require the Fund to
withhold ("backup withholding") and remit to the U.S. Treasury 31% of
dividends, capital gain distributions and any redemption proceeds, regardless
of the extent to which gain or loss may be realized, paid to such 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 that a shareholder's TIN is
incorrect or that 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 25
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 BASIC 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. 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-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 Lehman Brothers Government/Corporate Bond 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 26
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 one of seventeen investment portfolios
authorized by the Company's Board of Directors. The Fund's shares are
classified into two Classes_Investor shares and BASIC shares. The Company's
Articles of Incorporation permit the Board of Directors to create an
unlimited number of investment portfolios (each a "fund") without shareholder
approval.
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.
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 proper purpose. Company shareholders may remove a Director by
the affirmative vote of a majority of the Company's voting shares. In
addition, the Board of Directors will call a meeting of shareholders for the
purpose of electing Directors if, at any time, less than a majority of the
Directors then holding office have been elected by shareholders.
The Transfer Agent maintains a record of your ownership and will send
you confirmations and statements of account.
Shareholder inquiries may be made by writing to the 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 27
Bond Market
Index Fund
Prospectus
Registration Mark
Copy Rights 1997 Dreyfus Service Corporation
310/710p081597
Page 28
DREYFUS BOND MARKET INDEX FUND
INVESTOR SHARES AND BASIC SHARES
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
MARCH 1, 1997
AS REVISED AUGUST 15, 1997
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus of
the Dreyfus Bond Market Index Fund (formerly, the Laurel Bond Market Index
Fund) (the "Fund"), dated March 1, 1997, as revised August 15, 1997, as it
may be further 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-9
Management Arrangements B-15
Purchase of Fund Shares B-16
Distribution Plan B-17
Redemption of Fund Shares B-18
Shareholder Services B-20
Determination of Net Asset Value B-23
Dividends, Other Distributions and Taxes B-24
Portfolio Transactions B-26
Performance Information B-27
Information About the Fund B-29
Custodian, Transfer and Dividend Disbursing
Agent, Counsel and Independent Auditors B-30
Financial Statements B-30
Appendix B-31
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Description of the Fund."
Portfolio Securities
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 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. 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 time 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. 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.
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.
Mortgage Pass-Through Certificates. Mortgage pass-through certificates
are issued by governmental, government-related and private entities and are
backed by pools of mortgages (including those on residential properties and
commercial real estate). The mortgage loans are made by savings and loan
institutions, mortgage bankers, commercial banks and other lenders. The
securities are "pass-through" securities because they provide investors with
monthly payments of principal and interest which, in effect, are a
"pass-through" of the monthly payments made by the individual borrowers on
the underlying mortgages, net of any fees paid to the issuer or guarantor of
the pass-through certificates. The principal governmental issuer of such
securities is GNMA, which is a wholly-owned U.S. Government corporation
within the Department of Housing and Urban Development. Government-related
issuers include FHLMC and FNMA, both government sponsored corporations owned
entirely by private stockholders. Commercial banks, savings and loan
institutions, private mortgage insurance companies, mortgage bankers and
other secondary market issuers also create pass-through pools of conventional
residential and commercial mortgage loans. Such issuers may be the
originators of the underlying mortgage loans as well as the guarantors of the
mortgage-related securities.
(1) GNMA Mortgage Pass-Through Certificates ("Ginnie Maes"). Ginnie
Maes represent an undivided interest in a pool of mortgages that are insured
by the Federal Housing Administration or the Farmers Home Administration or
guaranteed by the Veterans Administration. Ginnie Maes entitle the holder to
receive all payments (including prepayments) of principal and interest owed
by the individual mortgagors, net of fees paid to GNMA and to the issuer
which assembles the mortgage pool and passes through the monthly mortgage
payments to the certificate holders (typically, a mortgage banking firm),
regardless of whether the individual mortgagor actually makes the payment.
Because payments are made to certificate holders regardless of whether
payments are actually received on the underlying mortgages, Ginnie Maes are
of the "modified pass-through" mortgage certificate type. The GNMA is
authorized to guarantee the timely payment of principal and interest on the
Ginnie Maes as securities backed by an eligible pool of mortgages. The GNMA
guarantee is backed by the full faith and credit of the United States, and
the GNMA has unlimited authority to borrow funds from the U.S. Treasury to
make payments under the guarantee. The market for Ginnie Maes is highly
liquid because of the size of the market and the active participation in the
secondary market of securities dealers and a variety of investors.
(2) FHLMC Mortgage Participation Certificates ("Freddie Macs"). Freddie
Macs represent interests in groups of specified first lien residential
conventional mortgages underwritten and owned by the FHLMC. Freddie Macs
entitle the holder to timely payment of interest, which is guaranteed by the
FHLMC. The FHLMC guarantees either ultimate collection or timely payment of
all principal payments on the underlying mortgage loans. In cases where the
FHLMC has not guaranteed timely payment of principal, the FHLMC may remit the
amount due on account of its guarantee of ultimate payment of principal at
any time after default on an underlying mortgage, but in no event later than
one year after it becomes payable. Freddie Macs are not guaranteed by the
United States or by any of the Federal Home Loan Banks and do not constitute
a debt or obligation of the United States or of any Federal Home Loan Bank.
The secondary market for Freddie Macs is highly liquid because of the size of
the market and the active participation in the secondary market of the FHLMC,
securities dealers and a variety of investors.
(3) FNMA Guaranteed Mortgage Pass-Through Certificates ("Fannie Maes").
Fannie Maes represent an undivided interest in a pool of conventional
mortgage loans secured by first mortgages or deeds of trust, on one family,
or two to four family, residential properties. The FNMA is obligated to
distribute scheduled monthly installments of principal and interest on the
mortgages in the pool, whether or not received, plus full principal of any
foreclosed or otherwise liquidated mortgages. The obligation of the FNMA
under its guaranty is solely the obligation of the FNMA and is not backed by,
nor entitled to, the full faith and credit of the United States.
(4) Private issuer mortgage certificates are pass-through securities
structured in a similar fashion to GNMA, FNMA and FHLMC certificates.
Private issuer mortgage certificates are generally backed by conventional
single family, multi-family and commercial mortgages. Private issuer
mortgage certificates typically are not guaranteed by the U.S. Government,
its agencies or instrumentalities, but generally have some form of credit
support in the form of over-collateralization, pool insurance or other form
of credit enhancement.
The market value of mortgage-related securities depends on, among other
things, the level of interest rates, the certificates' coupon rates and the
payment history of the mortgagors of the underlying mortgages.
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.
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 Board of 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 Company's 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.
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 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: this limitation shall not apply to standby commitments, and
this limitation shall not apply to the Fund's transactions in futures
contracts and 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 Retail
(currently BASIC) shares of the Fund at February 3, 1997: Mac & Co., P.O.
Box 3198, Pittsburgh, PA 15230-3198, 77% record.
The following shareholder(s) owned 5% or more of the outstanding
Institutional (currently Investor) shares of the Fund at February 3, 1997:
Donaldson, Lufkin Jenrette Securities Corporation Inc., P.O. Box 2052, Jersey
City, NJ 07303-9998, 89% 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 eleven 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").
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; Director,
Access Capital Strategic Community Investment Fund, Inc. - Institutional
Investment Portfolio. Age: 83 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. and Director, Access Capital Strategic Community
Investment Fund, Inc. - Bank Portfolio. Age: 80 years old. Address:
Massachusetts Business Development Corp., 50 Milk Street, Boston,
Massachusetts 02109.
o* JOSEPH S. DiMARTINO. Since January 1995, Chairman of the Board of various
funds in the Dreyfus Family of Funds. He is also Chairman of the Board
of Directors of Noel Group, Inc., a venture capital company, and
Staffing Resources, Inc., a temporary placement agency. Mr. DiMartino
also serves as a director of The Muscular Dystrophy Association;
HealthPlan Services Corporation, a provider of marketing, administrative
and risk management services to health and other benefit programs;
Carlyle Industries, Inc. (formerly, Belding Heminway Company, Inc.), a
button packager and distributor; and Curtis Industries, Inc., a national
distributor of security products, chemicals, and automotive and other
hardware. For more than five years prior to January 1995, he was
President, a director and, until August 1994, Chief Operating Officer of
the Manager and Executive Vice President and a director of Dreyfus
Service Corporation, a wholly-owned subsidiary of the Manager and, until
August 24, 1994, the Fund's distributor. From August 1994 until
December 31, 1994, he was a director of Mellon Bank Corporation. Age:
53 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.; Director, Access Capital
Strategic Community Investment Fund, Inc. - Bank Portfolio. Age: 61
years old. Address: 40 Norfolk Road, Brookline, Massachusetts 02167.
o*J. TOMLINSON FORT. Director of the Company; Partner, Reed, Smith, Shaw &
McClay (law firm). Director, Access Capital Strategic Community
Investment Fund, Inc. - Bank Portfolio. Age: 69 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, Cerex Corporation; Director, National Picture Frame
Corporation; Chairman of the Board and Director, Tetra Corporation 1991-
1993; Director, Medalist Corporation 1992-1993; Director, Access Capital
Strategic Community Investment Fund, Inc. - Institutional Investment
Portfolio. Age: 75 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. ("TBC") and Boston Safe Deposit and Trust Company; President and
Chief Executive Officer, Himmel & Co., Inc.; Vice Chairman, Sutton Place
Gourmet, Inc.; Director, Access Capital Strategic Community Investment
Fund, Inc. - Bank Portfolio; Managing Partner, Franklin Federal
Partners. Age: 51 years old. Address: Himmel and Company, Inc., 399
Boylston St., 11th Floor, Boston, Massachusetts 02116.
o*ARCH S. JEFFERY. Director of the Company; Financial Consultant. Director,
Access Capital Strategic Community Investment Fund, Inc. - Institutional
Investment Portfolio. Age: 80 years old. Address: 1817 Foxcroft Lane,
Unit 306, 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.; Director,
Access Capital Strategic Community Investment Fund, Inc. - Institutional
Investment Portfolio. Age: 50 years old. Address: 401 Edgewater Place,
Wakefield, Massachusetts 01880.
o+JOHN J. SCIULLO. Director of the Company; Dean Emeritus and Professor of
Law, Duquesne University Law School; Director, Urban Redevelopment
Authority of Pittsburgh; Director, Access Capital Strategic Community
Investment Fund, Inc. - Institutional Investment Portfolio. Member of
Advisory Committee on Decendents' Estate Laws of Pennsylvania. Age: 64
years old. Address: 321 Gross Street, Pittsburgh, Pennsylvania 15224
o+ROSLYN M. WATSON. Director of the Company; Principal, Watson Ventures;
Director, American Express Centurion Bank; Director, Harvard/Pilgrim
Community Health Plan, Inc.; Director, Access Capital Strategic
Community Investment Fund, Inc. - Bank Portfolio; 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: 46 years old. Address: 25
Braddock Park, Boston, Massachusetts 02116-5816.
#MARIE E. CONNOLLY. President and Treasurer of the Company, The
Dreyfus/Laurel Funds Trust and The Dreyfus/Laurel Tax-Free Municipal
Funds (since September 1994); Vice President of the Company, The
Dreyfus/Laurel Funds Trust and The Dreyfus/Laurel Tax-Free Municipal
Funds (March 1994 to September 1994); President, Funds Distributor, Inc.
(since 1992); Treasurer, Funds Distributor, Inc. (July 1993 to April
1994); COO, Funds Distributor, Inc. (since April 1994); Director, Funds
Distributor, Inc. (since July 1992); President, COO and Director of the
Distributor (since April 1994); Senior Vice President and Director of
Financial Administration, The Boston Company Advisors, Inc. (December
1988 to May 1993). Age: 39 years old. Address: 60 State Street, Boston,
Massachusetts 02109.
#DOUGLAS C. CONROY. Vice President and Assistant Secretary of the Company,
The Dreyfus/Laurel Funds Trust and The Dreyfus/Laurel Tax-Free Municipal
Funds (since July 1996). Supervisor of Treasury Services and
Administration of Funds Distributor, Inc. From April 1993 to January
1995, Mr. Conroy was a Senior Fund Accountant for Investors Bank & Trust
Company. From December 1991 to March 1993, Mr. Conroy was employed as a
fund accountant at TBC. Prior to December 1991, Mr. Conroy attended
Merrimack College where he received a bachelors degree in Business
Administration. Age: 27 years old. Address: 60 State Street, Boston,
Massachusetts 02109.
#RICHARD W. INGRAM. Vice President and Assistant Treasurer of the Company,
The Dreyfus/Laurel Funds Trust and The Dreyfus/Laurel Tax-Free Municipal
Funds (since July 1996). Senior Vice President and Director of Client
Services and Treasury Operations of Funds Distributor, Inc. From March
1994 to November 1995, Mr. Ingram was Vice President and Division
Manager for First Data Investor Services Group. From 1989 to 1994, Mr.
Ingram was Vice President, Assistant Treasurer and Tax Director - Mutual
Funds of TBC. Age: 40 years old. Address: 60 State Street, Boston,
Massachusetts 02109.
#MARK A. KARPE. Vice President and Assistant Secretary of the Company, The
Dreyfus/Laurel Funds Trust and The Dreyfus/Laurel Tax-Free Municipal
Funds (since October 1996). Senior Paralegal of the Distributor. From
August 1993 to May 1996, he attended Hofstra University School of Law.
Prior to August 1993, he was employed as an Associate Examiner at the
National Association of Securities Dealers, Inc. Age: 28 years old.
Address: 200 Park Avenue, New York, New York 10166.
#ELIZABETH KEELEY. 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 of the Distributor. Prior to Septem
ber 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: 27
years old. Address: 200 Park Avenue, New York, New York 10166.
#MARY A. NELSON. Vice President and Assistant Treasurer of the Company, The
Dreyfus/Laurel Funds Trust and The Dreyfus/Laurel Tax-Free Municipal
Funds (since July 1996). Vice President and Manager of Treasury
Services and Administration of Funds Distributor, Inc. From September
1989 to July 1994, Ms. Nelson was an Assistant Vice President and Client
Manager for TBC. Age: 33 years old. Address: 60 State Street, Boston,
Massachusetts 02109.
#JOHN E. PELLETIER. Vice President and Secretary of the Company, The
Dreyfus/Laurel Funds Trust and The Dreyfus/Laurel Tax-Free Municipal
Funds (since September 1994); Senior Vice President, General Counsel and
Secretary, Funds Distributor, Inc. (since April 1994); Senior Vice
President, General Counsel and Secretary of the Distributor (since
August 1994); Counsel, The Boston Company Advisors, Inc. (February 1992
to March 1994); Associate, Ropes & Gray (August 1990 to February 1992).
Age: 32 years old. Address: 60 State Street, Boston, Massachusetts
02109.
#MICHAEL S. PETRUCELLI. Vice President and Assistant Treasurer of the
Company, The Dreyfus/Laurel Funds Trust and The Dreyfus/Laurel Tax-Free
Municipal Funds (since January 1997); Director of Strategic Client
Initiatives for the Distributor. From December, 1989 through November,
1996 he was employed with GE Investment Services where he held various
financial, business development and compliance positions. He also
served as Treasurer of the GE Funds and as Director of the GE Investment
Services. Age: 35 years old. Address: 200 Park Avenue, New York, New
York 10166.
#JOSEPH F. TOWER, III. Vice President and 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 the Distributor. From 1988 to August
1994, he was employed by TBC where he held various management positions
in the Corporate Finance and Treasury areas. Age: 34 years old.
Address: 60 State Street, Boston, Massachusetts 02109.
__________________________
* "Interested person" of the Company, as defined in the 1940 Act.
o Member of the Audit Committee.
+ Member of the Nominating Committee.
# Officer also serves as an officer for other investment companies advised
by Dreyfus.
The officers and Directors of the Company as a group owned beneficially
less than 1% of the Fund's total shares outstanding as of February 3, 1997.
No officer or employee of the Distributor (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 $25,000
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 reimburse
each Director/Trustee who is not an "interested person" of the Company (as
defined in the 1940 Act), for travel and out-of-pocket expenses.
For the fiscal year ended October 31, 1996, 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 Compensation From the
Aggregate Compensation Company and Fund Complex
Name of Board Member From the Company # Paid to Board Member****
Ruth M. Adams $10,500 $ 31,500
Francis P. Brennan* $18,431.33 $ 70,000
Joseph S. DiMartino** None $517,075***
James M. Fitzgibbons $10,500 $ 31,500
J. Tomlinson Fort** None None
Arthur L. Goeschel $10,833.33 $ 32,500
Kenneth A. Himmel $10,250 $ 30,750
Arch S. Jeffery** None None
Stephen J. Lockwood $10,500 $ 31,500
John J. Sciullo $10,833.33 $ 32,500
Roslyn M. Watson $10,833.33 $ 32,500
# 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
$12,920.43 for the Company.
* Compensation of Francis Brennan includes $25,000 paid by the
Dreyfus/Laurel Funds to be Chairman of the Board. Effective May 1,
1996, the retainer was reduced from $75,000 to $25,000 annually.
** 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, 1996, 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 $10,833.33,
$10,833.33 and $10,833.33, respectively, and for serving as a Board
member of all funds in the Dreyfus/Laurel Funds (including the
Company) were $32,500, $32,500 and $32,500, respectively. In
addition, Dreyfus reimbursed Messrs. DiMartino, Fort and Jeffery a
total of $5,477.33 for expenses attributable to the Company's Board
meetings ($5,477.33 is not included in the $12,920.43 above).
***Actual amounts for the year ending December 31, 1996.
****The Dreyfus Family of Funds consists of 152 mutual funds.
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 Lehman Brothers
Government/Corporate Bond Index through the use of 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: W.
Keith Smith, Chairman of the Board; Christopher M. Condron, President, Chief
Executive Officer, 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; William T. Sandalls, Jr., Senior
Vice President and Chief Financial Officer; William F. Glavin, Jr., Vice
President-Corporate Development; Mark N. Jacobs, Vice President, General
Counsel and Secretary; Patrice M. Kozlowski, Vice President-Corporate
Communications; Mary Beth Leibig, Vice President-Human Resources; Jeffrey N.
Nachman, Vice President-Mutual Fund Accounting; Andrew S. Wasser, Vice
President-Information Systems; Elvira Oslapas, Assistant Secretary; and
Mandell L. Berman, Burton C. Borgelt and Frank V. Cahouet, directors.
For the last three fiscal years, the Fund has had the following
expenses:
For the Fiscal Years Ended October 31,
1996 1995 1994*
Management fees (gross
of waiver) $69,108 $25,294 $19,521
Expense Reimbursement from
investment manager -- -- $57,622
* For the period from November 30, 1993 (commencement of operations) through
October 31, 1994.
Effective August 15, 1997, the Management Agreement was amended to
reflect a reduction in the annual management fee payable by the Fund to
Dreyfus from .40 of 1% to .15 of 1% of the value of the Fund's average daily
net assets.
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 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 net asset value
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 (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 shares of the Fund, the Company has
adopted a Distribution Plan (the "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 Investor shares of the Fund.
For the fiscal year ended October 31, 1996, the Fund paid the
Distributor and Dreyfus Service Corporation $5 and $431, respectively,
pursuant to the Plan with respect to Investor shares.
Frank Russell Investment Management Company served as the Fund's
Administrator prior to September 23, 1994 and was paid $876 in fees by the
Fund for the fiscal period ended October 31, 1994.
REDEMPTION OF FUND SHARES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "How to Redeem Fund
Shares."
Wire Redemption Privilege. By using this Privilege, the investor
authorizes the Transfer Agent to act on wire or telephone redemption
instructions from any person representing himself or herself to be the
investor, or a representative of the investor's 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 might be incurred.
Suspension of Redemptions. The right of redemption may be suspended or
the date of payment postponed (a) during any period when the 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 certain other funds advised or administered by Dreyfus. Shares of
the 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 request an exchange, an investor, or an investor's Agent acting on
the investor's behalf, must give exchange instructions to the Transfer Agent
in writing or by telephone. The ability to issue exchange instructions by
telephone is given to all Fund shareholders automatically, unless the
investor checks the applicable "No" box on the Account Application,
indicating that the investor specifically refuses this Privilege. By using
the Telephone Exchange Privilege, the investor authorizes the Transfer Agent
to act on telephonic instructions (including over The Dreyfus Touchr
Automated Telephone System) 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. Telephone exchanges
may be subject to limitations as to the amount involved or the number of
telephone exchanges permitted. Shares issued in certificate form are not
eligible for telephone exchange.
Exchanges of Fund 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 certain other eligible funds in the Dreyfus Family of Funds. This
Privilege is available only for existing accounts. With respect to Fund
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 distri
butions, 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 automatically their dividends or dividends and capital gain
distributions, if any, from the Fund in shares of certain other funds in the
Dreyfus Family of Funds of which the investor is 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 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 (the "Code"), the
Fund--which is treated as a separate corporation for federal tax purposes--
(1) must distribute to its shareholders each taxable year at least 90% of its
investment company taxable income (generally consisting of net investment
income, net short-term capital gains and net gains from certain foreign
currency transactions) ("Distribution Requirement"), (2) must derive at least
90% of its annual gross income from specified sources ("Income Requirement"),
(3) must derive less than 30% of its annual gross income from gain on the
sale or disposition of any of the following that are held for less than three
months -- (i) securities, (ii) non-foreign-currency options and futures and
(iii) foreign currencies (or foreign currency options, futures and forward
contracts) that are not directly related to the Fund's principal business of
investing in securities (or options and futures with respect thereto) ("Short-
Short Limitation") -- and (4) must meet certain asset diversification and
other requirements.
Any dividend or other distribution paid shortly after an investor's
purchase may have the effect of reducing the net asset value of the shares
below the cost of his investment. Such a dividend or other distribution
would be a return on investment in an economic sense, although taxable as
stated in the Fund's Prospectus. In addition, if a shareholder holds shares
of the Fund for six months or less and has received a capital gain
distribution with respect to those shares, any loss incurred on the sale of
those shares will be treated as a long-term capital loss to the extent of the
capital gain distribution received.
Dividends and other distributions declared by the Fund in October,
November or December of any year and payable to shareholders of record on a
date in any of those months are deemed to have been paid by the Fund and
received by the shareholders on December 31 of that year if the distributions
are paid by the Fund during the following January. Accordingly, those
distributions will be taxed to shareholders for the year in which that
December 31 falls.
A portion of the dividends paid by the Fund, whether received in cash or
reinvested in additional Fund shares, may be eligible for the dividends-
received deduction allowed to corporations. The eligible portion may not
exceed the aggregate dividends received by the Fund from U.S. corporations.
However, dividends received by a corporate shareholder and deducted by it
pursuant to the dividends-received deduction are subject indirectly to the
alternative minimum tax.
Dividends and interest received by the Fund may be subject to income,
withholding or other taxes imposed by foreign countries and U.S. possessions
that would reduce the yield on its securities. Tax conventions between cer
tain countries and the United States may reduce or eliminate these foreign
taxes, however, and many foreign countries do not impose taxes on capital
gains in respect of investments by foreign investors.
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. Dividends
distributed to a foreign shareholder whose ownership of Fund shares is not
effectively connected with a U.S. trade or business carried on by the foreign
shareholder 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.
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 under the 1940 Act.
Brokers or dealers may be selected who provide brokerage and/or research
services to the Fund and/or other accounts over which Dreyfus or its
affiliates exercise investment discretion. Such services may include advice
concerning the value of securities; the advisability of investing in,
purchasing or selling securities; the availability of securities or the
purchasers or sellers of securities; furnishing analyses and reports
concerning issuers, industries, securities, economic factors and trends,
portfolio strategy and performance of accounts; and effecting securities
transactions and performing functions incidental thereto (such as clearance
and settlement).
The receipt of research services from broker-dealers may be useful to
Dreyfus in rendering investment management services to the Fund and/or its
other clients; and, conversely, such information provided by brokers or
dealers who have executed transaction orders on behalf of other clients of
Dreyfus may be useful to these organizations in carrying out their
obligations to the Fund. The receipt of such research services does not
reduce these organizations' normal independent research activities; however,
it enables these organizations to avoid the additional expenses which might
otherwise be incurred if these organizations were to attempt to develop
comparable information through their own staffs.
The Company's Board of Directors periodically reviews Dreyfus'
performance of its responsibilities in connection with the placement of
portfolio transactions on behalf of the Fund and reviews the prices paid by
the Fund over representative periods of time to determine if they are
reasonable in relation to the benefits to the Fund.
Although Dreyfus manages other accounts in addition to the Fund,
investment decisions for the Fund are made independently from decisions made
for these other accounts. It sometimes happens that the same security is held
by more than one of the accounts managed by Dreyfus. Simultaneous
transactions may occur when several accounts are managed by the same
investment manager, particularly when the same investment instrument is
suitable for the investment objective of more than one account.
When more than one account is simultaneously engaged in the purchase or
sale of the same investment instrument, the prices and amounts are allocated
in accordance with a formula considered by Dreyfus to be equitable to each
account. In some cases this system could have a detrimental effect on the
price or volume of the investment instrument as far as the Fund is concerned.
In other cases, however, the ability of the Fund to participate in volume
transactions will produce better executions for the Fund. While the Directors
will continue to review simultaneous transactions, it is their present
opinion that the desirability of retaining Dreyfus as investment manager to
the Fund outweighs any disadvantages that may be said to exist from exposure
to simultaneous transactions.
During the fiscal year ended October 31, 1996, the Fund paid no
brokerage commissions on portfolio transactions. During the fiscal year
ended October 31, 1995, the Fund paid brokerage commissions of $148 on
portfolio transactions.
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 fiscal years ended October 31, 1995 and
October 31, 1996 were 40.16% and 42.65%, 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 shares for the period April 28,
1994 to October 31, 1996 was 19.47%. The Fund's total return for BASIC
shares for the period November 30, 1993 to October 31, 1996 was 16.38%.
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 the Investor
shares of the Fund for each of the periods noted was:
Average Annual Total Return for the
Periods Ended October 31, 1996
1 Year 5 Years 10 Years Inception
Investor Shares 4.36% -- -- 7.34%
(4/28/94)
Inception date appears in parentheses following the average annual total
return since inception.
Average annual total return (expressed as a percentage) for the BASIC
shares of the Fund for each of the periods noted was:
Average Annual Total Return for the
Periods Ended October 31, 1996
1 Year 5 Years 10 Years Inception
BASIC Shares 4.69% -- -- 5.34%
(11/30/93)
Inception date appears in parentheses following the average annual total
return since inception.
The Fund may also advertise yield from time to time. Yields are
computed by using standardized methods of calculation required by the SEC.
Yields are calculated by dividing the net investment income per share earned
during a 30-day (or one month) period by the maximum offering price per share
on the last day of the period, according to the following formula:
YIELD = 2 [(a-b +1)6 -1]
cd
Where: a = dividends and interest earned during the period;
b = expenses accrued for the period (net of
reimbursements);
c = average daily number of shares outstanding
during the period that were entitled to receive
dividends; and
d = the maximum offering price per share on the last
day of the period.
The 30-day yield for each class of the Fund for the period ended October
31, 1996 was:
Investor Shares 5.91%
BASIC Shares 6.15%
Performance information for the Fund may be compared, in reports and
promotional literature, to indexes including, but not limited to: (i) the
Lehman Brothers Government Corporate Bond 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 of
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 is
the Fund's transfer and dividend disbursing agent. Under a transfer agency
agreement with the Fund, the Transfer Agent arranges for the maintenance of
shareholder account records for the Fund, the handling of certain
communications between shareholders and the Fund and the payment of dividends
and distributions payable by the Fund. For these services, the Transfer
Agent receives a monthly fee computed on the basis of the number of
shareholder accounts it maintains for the Fund during the month, and is
reimbursed for certain out-of-pocket expenses. 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, 1997, 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, 1996,
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, and the Independent Auditors' Report thereon, are incorporated herein
by reference.
APPENDIX
DESCRIPTIONS OF SECURITIES RATINGS
Municipal and 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 ("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 changing circumstances are more likely to lead to 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-1, Prime-2, or Prime-3.
Prime-1 indicates a superior capacity for repayment of short-term
promissory obligations. Prime-1 repayment capacity will normally be
evidenced by the following characteristics: (1) leading market positions in
well established industries; (2) high rates of return on funds employed; (3)
conservative capitalization structures with moderate reliance on debt and
ample asset protection; (4) broad margins in earnings coverage of fixed
financial charges and high internal cash generation; and (5) well established
access to a range of financial markets and assured sources of alternative
liquidity.
S&P:
Commercial paper rated by S&P has the following characteristics:
liquidity ratios adequate to meet cash requirements. Long-term senior debt
is rated A or better. The issuer has access to at least two additional
channels of borrowing. Basic earnings and cash flow have an upward trend
with allowance made for unusual circumstances. Typically, the issuer's
industry is well established and the issuer has a strong position within the
industry. The reliability and quality of management are unquestioned.
Relative strength or weakness of the above factors determine whether the
issuer's commercial paper is rated A-1, A-2, or A-3.
A-1 -- This designation indicates that the degree of safety regarding
timely payment is either overwhelming or very strong. Those issues
determined to possess overwhelming safety characteristics are denoted with a
plus (+) sign designation.
A-2 -- Capacity for timely payment on issues with this designation is
strong. However, the relative degree of safety is not as high as for issues
designated A-1.
Fitch Investors Service LLP ("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.
Phoenix Duff and Phelps Corp., Inc.:
Duff & Phelps' short-term ratings are consistent with the rating
criteria utilized by money market participants. The ratings apply to all
obligations with maturities of under one year including commercial paper, the
uninsured portion of certificates of deposit, unsecured bank loans, master
notes, bankers acceptances, irrevocable letters of credit, and current
maturities of long-term debt. Asset-backed commercial paper is also rated
according to this scale.
Emphasis is placed on liquidity which is defined as not only cash from
operations, but also access to alternative sources of funds including trade
credit, bank lines, and the capital markets. An important consideration is
the level of an obligor's reliance on short-term funds on an ongoing basis.
The distinguishing feature of Duff & Phelps' short-term ratings is the
refinement of the traditional "1" category. The majority of short-term debt
issuers carry the highest rating, yet quality differences exist within that
tier. As a consequence, Duff & Phelps has incorporated gradations of "l+"
(one plus) and "1-" (one minus) to assist investors in recognizing those
differences.
Duff l+ -- Highest certainty of timely payment. Short-term liquidity,
including internal operating factors and/or access to alternative sources of
funds, is outstanding, and safety is just below risk-free U.S. Treasury short-
term obligations.
Duff 1 -- Very high certainty of timely payment. Liquidity factors are
excellent and supported by good fundamental protection factors. Risk factors
are minor.
Duff 1- -- High certainty of timely payment. Liquidity factors are
strong and supported by good fundamental protection factors. Risk factors
are very small.
IBCA, Inc.:
In addition to conducting a careful review of an institution's reports
and publish figures, IBCA's analysts regularly visit the companies for
discussions with senior management. These meetings are fundamental to the
preparation of individual reports and ratings. To keep abreast of any
changes that may affect assessments, analysts maintain contact throughout the
year with the management of the companies they cover.
IBCA's analysts speak the languages of the countries they cover, which
is essential to maximize the value of their meetings with management and to
properly analyze a company written materials. They also have a thorough
knowledge of the laws and accounting practices that govern the operations and
reporting of companies within the various countries.
Often, in order to ensure a full understanding of their position,
companies entrust IBCA with confidential data. While these data cannot be
disclosed in reports, they are taken into account when assigning IBCA's
ratings. Before dispatch to subscribers, a draft of the report submitted to
each company to permit correction of any factual errors and to enable
clarification of issues raised.
IBCA's Rating Committees meet at regular intervals to review all ratings
and to ensure that individual ratings are assigned consistently for
institutions in all the countries covered. Following the Committee meetings,
ratings are issued directly to subscribers. At the same time the company is
informed of the ratings as a matter of courtesy, but not for discussion.
Al+ -- Obligations supported by the highest capacity for timely
repayment.
Al -- Obligations supported by a very strong capacity for timely
repayment.
