PROSPECTUS
MARCH 1, 1998
AS REVISED AUGUST 17, 1998
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 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
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, 1998, WHICH
MAY BE REVISED FROM TIME TO TIME, PROVIDES A FURTHER DISCUSSION OF CERTAIN
AREAS IN THIS PROSPECTUS AND OTHER MATTERS WHICH MAY BE OF INTEREST TO SOME
INVESTORS. IT HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
("SEC") AND IS INCORPORATED HEREIN BY REFERENCE. 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. THE FUND IS DISTRIBUTED BY PREMIER
MUTUAL FUND SERVICES, INC. (THE "DISTRIBUTOR").
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
EXPENSE SUMMARY 4
FINANCIAL HIGHLIGHTS 5
DESCRIPTION OF THE FUND 7
MANAGEMENT OF THE FUND 12
HOW TO BUY FUND SHARES 14
SHAREHOLDER SERVICES 17
HOW TO REDEEM FUND SHARES 20
ADDITIONAL INFORMATION ABOUT
PURCHASES, EXCHANGES AND REDEMPTIONS 23
DISTRIBUTION PLAN (INVESTOR SHARES ONLY) 23
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
INVESTOR SHARES BASIC SHARES
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on Purchases none none
Maximum Sales Load Imposed on Reinvestments none none
Deferred Sales Load none none
Redemption Fee none none
Exchange Fee none none
ESTIMATED ANNUAL FUND OPERATING EXPENSES:
(as a percentage of net assets)
Management Fee 0.15% 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 fees). 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. Effective
August 15, 1997, the Fund's management fee was reduced from .40% to .15% of the
Fund's average daily net assets. The information in the foregoing table has been
restated to reflect the Fund's estimated expenses during the current fiscal
year. 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," "How to
Redeem 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 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,
1997 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, 1997 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.*
<S> <C> <C> <C> <C>
YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED
10/31/97 10/31/96 10/31/95 10/31/94#
- ---------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA:
Net asset value, beginning of period $ 9.78 $ 9.93 $ 9.15 $ 9.44
Investment Operations:
Net investment income 0.57 0.57 0.55 0.24
Net realized and unrealized gain or loss on investments 0.21 (0.15) 0.78 (0.28)
Total from investment operations 0.78 0.42 1.33 (0.04)
Less distributions:
Distributions from net investment income (0.57) (0.57) (0.55) (0.25)
Net asset value, end of period $ 9.99 $ 9.78 $ 9.93 $ 9.15
TOTAL RETURN((+)(+)) 8.29% 4.36% 15.01% (0.46)%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $120 $80 $207 $38
Ratio of expenses to average net assets 0.60% 0.65% 0.65% 0.65%(+)
Ratio of net investment income to average net assets 5.82% 5.80% 5.77% 4.81%(+)
Portfolio turnover rate 48.86% 42.65% 40.16% 188%
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*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]
<TABLE>
<CAPTION>
DREYFUS BOND MARKET INDEX FUND
FOR A BASIC SHARE OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.*
<S> <C> <C> <C> <C>
YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED
10/31/97 10/31/96 10/31/95 10/31/94#
- -----------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA:
Net asset value, beginning of period $ 9.80 $ 9.94 $ 9.15 $10.00
Investment Operations:
Net investment income 0.60 0.59 0.58 0.49**
Net realized and unrealized gain (loss) on investments 0.20 (0.14) 0.79 (0.85)
Total from investment operations 0.80 0.45 1.37 (0.36)
Less distributions:
Distributions from net investment income (0.60) (0.59) (0.58) (0.49)
Net asset value, end of period $10.00 $ 9.80 $ 9.94 $ 9.15
TOTAL RETURN((+)(+)) 8.46% 4.69% 15.41% (3.68)%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $33,234 $32,986 $6,824 $4,464
Ratio of expenses to average net assets 0.35% 0.40% 0.40% 0.40%((+))***
Ratio of net investment income to average net assets 6.12% 6.02% 6.10% 5.05%((+))
Portfolio turnover rate 48.86% 42.65% 40.16% 188%
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*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.
[Page 6]
DESCRIPTION OF THE FUND
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 shares, respectively.) Investor shares and BASIC shares are identical,
except as to the services offered to, the expenses borne by, and the minimum
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's investment objective is to replicate the total return of the
Lehman Brothers Aggregate Bond Index (the "Aggregate Bond Index"). There can be
no assurance that the Fund will meet its investment objective. Prior to November
14, 1997, the Fund's investment objective was to seek to replicate the total
return of the Lehman Brothers Government/Corporate Bond Index (the
"Government/Corporate Bond Index").
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 Aggregate Bond Index through the use of
statistical procedures.
The Aggregate Bond Index coversthe 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 Government/Corporate
Bond 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.
The MBS Index covers all fixed-rate securities backed by mortgage pools of the
Government National Mortgage 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, 1997, over 6,333 issues were included in the
Aggregate Bond Index, representing $4,977,199 million in market value,
distributed as follows: 49.49% governments; 19.34% corporates; and 30.22%
mortgage-backed securities.
The inclusion of a security in 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 Aggregate Bond Index,
the Fund cannot invest in all such issues. Instead, the Fund holds a
representative sample of the securities in the Aggregate Bond 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 Aggregate Bond Index - U.S. Treasury
and agency issues, corporate issues, and mortgage-backed and asset-backed
securities. As the Fund's assets increase, these classes will be further
[Page 7]
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 the Aggregate Bond Index. As the Fund grows, the
correlation between the performance of the Fund and the Aggregate Bond Index is
expected to be .95 or higher. A correlation of 1.00 would indicate perfect
correlation.
Securities rated BBB by Standard & Poor's Ratings Group ("Standard & Poor's")
or Baa by Moody's Investors Service, Inc. ("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 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.
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.
SECURITIES LENDING. To increase return on Fund securities, the Fund may lend
its portfolio securities, in an amount not to exceed 33(1)/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
[Page 8]
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 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.
[Page 9]
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 FNMA (also called Fannie Maes) and
FHLMC also called Freddie Macs 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."
ECDS, ETDS, YANKEE CDS AND EURODOLLAR BONDS AND NOTES. 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.
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. All
of these obligations are subject to somewhat different risks than are the
obligations of domestic banks or issuers in the United States. 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 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. Effective 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 GNMA, Fannie Mae or Freddie Mac, private
pass-through securities, commercial mortgage-related securities, and certain
collateralized mortgage
[Page 10]
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 GNMAs, 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.
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
Freddie Mac, 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
[Page 11]
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. Effective 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 Aggregate Bond Index and
not for short-term trading profits, the Fund's turnover rate may exceed 100%. A
portfolio turnover rate of 100% would occur, for example, if all the securities
held by the Fund were replaced once in a period of one year. A higher rate of
portfolio turnover involves correspondingly greater brokerage commissions and
other expenses that must be borne directly by the Fund and, thus, indirectly by
its shareholders. In addition, a high rate of portfolio turnover may result in
the realization of larger amounts of short-term capital gains that, when
distributed to the Fund's shareholders, are taxable to them as ordinary income.
Nevertheless, securities transactions for the Fund will be based only upon
investment considerations and will not be limited by any other considerations
when Dreyfus deems it appropriate to make changes in the Fund's assets.
LIMITING INVESTMENT RISKS. The Fund is subject to a number of investment
limitations. Certain limitations are matters of fundamental policy and may not
be changed without the affirmative vote of the holders of a majority of the
Fund's outstanding shares. The SAI describes all of the Fund's fundamental and
non-fundamental restrictions.
The investment objective, policies, restrictions, practices and procedures of
the Fund, unless otherwise specified, may be changed without shareholder
approval. If the Fund's investment objective, policies, restrictions, practices
or procedures change, shareholders should consider whether the Fund remains an
appropriate investment in light of the shareholder's then-current position and
needs.
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, 1998, Dreyfus managed or administered approximately $110 billion in
assets for approximately 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
[Page 12]
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 more than $350 billion in assets as of June 30, 1998, including
approximately $125 billion in mutual fund assets. As of June 30, 1998, Mellon,
through various subsidiaries, provided non-investment services, such as
custodial or administration services, for more than $1.791 trillion in assets,
including approximately $54 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 all of the Fund's
expenses, except brokerage fees, taxes, interest, fees and expenses of the
non-interested Directors (including counsel fees) , Rule 12b-1 fees (if
applicable) and extraordinary expenses. Although Dreyfus does not pay for the
fees and expenses of the non-interested Directors (including counsel fees),
Dreyfus is contractually required to reduce its 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 which would have the effect of lowering the expense ratio of
the Fund and increasing return to investors. For the fiscal year ended October
31, 1997, the Fund paid Dreyfus a monthly management fee at the effective annual
rate of .35% of the Fund's average daily net assets, less fees and expenses of
the non-interested Directors (including counsel fees).
For the fiscal year ended October 31, 1997, total operating expenses
(excluding Rule 12b-1 fees) of the Fund were 0.35% (annualized) of the Fund's
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, 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.
[Page 13]
DISTRIBUTOR. The Fund's distributor is Premier Mutual Fund Services, Inc.,
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, located at One Mellon Bank Center, Pittsburgh, Pennsylvania 15258,
is the Fund's custodian. Dreyfus Transfer, Inc., a wholly-owned subsidiary of
Dreyfus, P.O. Box 9671, Providence, Rhode Island 02940-9671, is the Fund's
Transfer and Dividend Disbursing Agent (the "Transfer Agent"). 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. The minimum
initial investment 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 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. However, the minimum initial
investment for BASIC shares with respect to Dreyfus-sponsored Keogh Plans, IRAs
(including regular IRAs, spousal IRAs for a non-working spouse, Roth IRAs,
SEP-IRAs and rollover IRAs), and 403(b)(7) Plans with only one participant is
$5,000; subsequent investments for BASIC shares with respect to such accounts
must be at least $1,000 (with no minimum on subsequent purchases by holders of
BASIC shares in such accounts since August 14, 1997). The minimum initial
investment for Investor shares with respect to Dreyfus-sponsored Keogh Plans,
IRAs (including regular IRAs, spousal IRAs for a non-working spouse, Roth IRAs,
SEP-IRAs and rollover IRAs) and 403(b)(7) Plans with only one participant is
$750 and with respect to Dreyfus-sponsored Education IRAs is $500. There is no
minimum on subsequent purchases of Investor shares with respect to such
accounts. 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((reg.tm) ), Dreyfus
Government Direct Deposit Privilege or Dreyfus Payroll Savings Plan pursuant to
the Dreyfus Step Program described under "Shareholder Services". These services
enable you to make regularly scheduled investments and may provide you with a
convenient way to invest for long-term financial goals. You should be aware,
however, that periodic investment plans do not guarantee a profit and will not
protect an investor against loss in a declining market.
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
[Page 14]
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." Payments to open new accounts which are
mailed should be sent to The Dreyfus Family of Funds, P.O. Box 9387, Providence,
Rhode Island 02940-9387 together with your Account Application. For subsequent
investments, your Fund account number should appear on the check and an
investment slip should be enclosed and sent to The Dreyfus Family of Funds, P.O.
Box 105, Newark, New Jersey 07101-0105. For Dreyfus retirement plan accounts,
both initial and subsequent investments should be sent to The Dreyfus Trust
Company, Custodian, P.O. Box 6427, Providence, Rhode Island 02940-6427. Neither
initial nor subsequent investments should be made by third party check. Purchase
orders may be delivered in person only to a Dreyfus Financial Center. THESE
ORDERS WILL BE FORWARDED TO THE FUND AND WILL BE PROCESSED ONLY UPON RECEIPT
THEREBY. For the location of the nearest Dreyfus Financial Center, please call
the telephone number listed under "General Information."
Wire payments may be made if your bank account is in a commercial bank that
is a member of the Federal Reserve System or any other bank having a
correspondent bank in New York City. Immediately available funds may be
transmitted by wire to Boston Safe Deposit and Trust Company, 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 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"). Shares of funds
in the Dreyfus Family of Funds then held by Eligible Benefit Plans will be
aggregated to determine the fee payable. The Distributor reserves the right to
cease paying these fees
[Page 15]
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
dividing the value of net assets attributable to each Class by the number of
shares of that Class outstanding. The valuation of assets for determining NAV
for the Fund may be summarized as follows:
The portfolio securities of the Fund listed or traded on a stock exchange,
except as otherwise noted, are valued at the latest sale price. If no sale is
reported, the mean of the latest bid and asked prices is used. Securities traded
over-the-counter are priced at the mean of the latest bid and asked prices but
will be valued at the last sale price if required by regulations of the SEC.
When market quotations are not readily available, securities and other assets
are valued at fair value as determined in good faith in accordance with
procedures established by the Board of Directors.
Bonds are valued through valuations obtained from a commercial pricing
service or at the most recent mean of the bid and asked prices provided by
investment dealers in accordance with procedures established by the Board of
Directors.
Shares of the Fund are offered on a continuous basis.
NAV is determined as of the close of trading on the floor of the New York
Stock Exchange (" NYSE") (normally 4:00 p.m., New York time), on each day that
the NYSE is open for business. Orders received in proper form by the Transfer
Agent or other entity authorized to receive orders on behalf of the Fund before
the close of trading on the floor of the NYSE are effective on, and will receive
the price determined on, that day. Orders received after such close of trading
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. For certain institutions that have entered into Agreements
with the Distributor, payment for the purchase of Fund shares may be
transmitted, and must be received by the Transfer Agent, within three business
days after the order is placed. If such payment is not received within three
business days after the order is placed, the order may be cancelled and the
institution could be held liable for resulting fees and/or losses.
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 Account Application or have filed
a Shareholder Services Form with the Transfer Agent. The proceeds will be
transferred between the bank account designated in one of these documents and
your Fund account. Only a bank account maintained in a domestic financial
institution which is an ACH member may be so designated. The Fund may modify or
terminate this Privilege at any time or charge a service fee upon notice to
shareholders. No such fee currently is contemplated.
[Page 16]
If you have selected the Dreyfus TELETRANSFER Privilege, you may request a
Dreyfus TELETRANSFER purchase of Fund shares by 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. 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, by a separate signed Shareholder Services Form,
available by calling 1-800-645-6561, or by oral request from any of the
authorized signatories on the account by calling 1-800-645-6561. If you have
established the Telephone Exchange Privilege, you may telephone exchange
instructions (including over The Dreyfus Touch(reg.tm) 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 into a new
account, 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
[Page 17]
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 Island 02940-9671. The Fund may charge a service fee for
the use of this Privilege. No such fee currently is contemplated. The exchange
of shares of one fund for shares of another is treated for Federal income tax
purposes as a sale of the shares given in exchange by the shareholder and,
therefore, an exchanging shareholder may realize, or an exchange on behalf of a
Retirement Plan which is not tax exempt may result in, a taxable gain or loss.
For more information concerning this Privilege and the funds in the Dreyfus
Family of Funds eligible to participate in this Privilege, or to obtain a
Dreyfus Auto-Exchange Authorization Form, please call toll free 1-800-645-6561.
DREYFUS-AUTOMATIC ASSET BUILDER(reg.tm)
Dreyfus-Automatic Asset Builder permits you to purchase Fund shares (minimum
of $100 and maximum of $150,000 per transaction) at regular intervals selected
by you. Fund shares are purchased by transferring funds from the bank account
designated by you. At your option, the bank account designated by you will be
debited in the specified amount, and Fund shares will be purchased, once a
month, on either the first or fifteenth day, or twice a month, on both days.
Only an account maintained at a domestic financial institution which is an ACH
member may be so designated. To establish a Dreyfus-Automatic Asset Builder
account, you must file an authorization form with the Transfer Agent. You may
obtain the necessary authorization form by calling 1-800-645-6561. You may
cancel your participation in this Privilege or change the amount of purchase at
any time by mailing written notification to The Dreyfus Family of Funds, P.O.
Box 9671, Providence, Rhode Island 02940-9671, or, if for Dreyfus retirement
plan accounts, to The Dreyfus Trust Company, Custodian, P.O. Box 6427,
Providence, Rhode Island 02940-6427, and the notification will be effective
three business days following receipt. The Fund may modify or terminate this
Privilege at any time or charge a service fee. No such fee currently is
contemplated.
DREYFUS DIVIDEND OPTIONS
Dreyfus Dividend Sweep enables you to invest automatically dividends or
dividends and other distributions, if any, paid by the Fund in shares of certain
other funds in the Dreyfus Family of Funds of which you are a shareholder.
Shares of the other fund will be purchased at the then-current NAV; however, a
sales load may be charged with respect to investments in shares of a fund sold
with a sales load. If you are investing in a fund that charges a sales load, you
may qualify for share prices which do not include the sales load or which
reflect a reduced sales load. If you are investing in a fund that charges
[Page 18]
a contingent deferred sales charge ("CDSC" ), the shares purchased will be
subject on redemption to the CDSC, if any, applicable to the purchased shares.
See "Shareholder Services" in the SAI. Dreyfus Dividend ACH permits you to
transfer electronically 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. To select a new fund after
cancellation, you must submit a new Dreyfus Dividend Options Form. Enrollment in
or cancellation of these privileges is effective three business days following
receipt. These privileges are available only for existing accounts and may not
be used to open new accounts. Minimum subsequent investments do not apply for
Dreyfus Dividend Sweep. The Fund may modify or terminate these privileges at any
time or charge a service fee. No such fee currently is contemplated. Shares held
under Keogh Plans, IRAs or other retirement plans are not eligible for Dreyfus
Dividend Sweep.
DREYFUS GOVERNMENT DIRECT DEPOSIT PRIVILEGE
Dreyfus Government Direct Deposit Privilege enables you to purchase Fund
shares (minimum of $100 and maximum of $50,000 per transaction) by having
Federal salary, Social Security, or certain veterans' , military or other
payments from the Federal government automatically deposited into your Fund
account. You may deposit as much of such payments as you elect. You should
consider whether Direct Deposit of your entire payment into a fund with
fluctuating NAV, such as the Fund, may be appropriate for you. To enroll in
Dreyfus Government Direct Deposit, you must file with the Transfer Agent a
completed Direct Deposit Sign-Up Form for each type of payment that you desire
to include in this Privilege. The appropriate form may be obtained by calling
1-800-645-6561. Death or legal incapacity will terminate your participation in
this Privilege. You may elect at any time to terminate your participation by
notifying in writing the appropriate Federal agency. Further, the Fund may
terminate your participation upon 30 days' notice to you.
DREYFUS PAYROLL SAVINGS PLAN
Dreyfus Payroll Savings Plan permits you to purchase Fund shares (minimum of
$100 per transaction) automatically on a regular basis. Depending upon your
employer's direct deposit program, 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(reg.tm) , 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
[Page 19]
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 (including regular IRAs, spousal IRAs,
for a non-working spouse, Roth IRAs, SEP-IRAs and rollover 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. An Automatic Withdrawal Plan may be
established by filing an Automatic Withdrawal Plan application with the Transfer
Agent or by oral request from any of the authorized signatories on the account
by calling 1-800-645-6561.
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. 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 (including regular IRAs, spousal IRAs for a non-working
spouse, Roth IRAs, SEP-IRAs, rollover IRAs and, with respect to Investor shares,
Education IRAs), 401(k) Salary Reduction Plans and 403(b)(7) Plans. Plan support
services also are available. You can obtain details on the various plans by
calling the following numbers toll free: for Keogh Plans, please call
1-800-358-5566; for IRAs and IRA "Rollover Accounts," please call
1-800-645-6561; for SEP-IRAs, 401(k) Salary Reduction Plans and 403(b)(7) Plans,
please call 1-800-322-7880.
HOW TO REDEEM FUND SHARES
GENERAL. You may request redemption of your shares at any time. Redemption
requests should be transmitted to the Transfer Agent as described below. When a
request is received in proper form by the Transfer Agent or other entity
authorized to receive orders on behalf of the Fund, 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. 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((reg.tm) ) AND SUBSEQUENTLY SUBMIT A WRITTEN
REDEMPTION REQUEST TO THE TRANSFER AGENT, THE REDEMPTION PROCEEDS WILL BE
TRANSMITTED TO YOU
[Page 20]
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 change 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 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 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 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 any redemption privilege at any time or charge a service fee upon
notice to shareholders. No such fee currently is contemplated. Shares held under
Keogh Plans, IRAs, or other retirement plans, and shares for which certificates
have been issued, are not eligible for the Wire Redemption, Telephone Redemption
or TELETRANSFER Privilege.
The Telephone Redemption Privilege or Telephone Exchange Privilege authorizes
the Transfer Agent to act on telephone instructions (including over The Dreyfus
Touch(reg.tm) 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
[Page 21]
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, telephone or letter 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. 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 SAI sets forth instructions for transmitting
redemption requests by wire.
TELEPHONE REDEMPTION PRIVILEGE. You may request by telephone that redemption
proceeds (maximum $150,000 per day) 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 automatically unless you refuse it.
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 request by telephone that redemption
proceeds (minimum $500 per day) be transferred between your Fund account and
your bank account. Only a bank account maintained in a domestic financial
institution which is an ACH member may be 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. Holders of jointly registered Fund or
bank
[Page 22]
accounts may redeem through the Dreyfus TELETRANSFER Privilege for transfer to
their bank account not more than $250,000 within any 30-day period.
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.
ADDITIONAL INFORMATION ABOUT PURCHASES, EXCHANGES AND REDEMPTIONS
The Fund is intended to be a long-term investment vehicle and is not designed
to provide investors with a means of speculation on short-term market movements.
A pattern of frequent purchases and exchanges can be disruptive to efficient
portfolio management and, consequently, can be detrimental to the Fund's
performance and its shareholders. Accordingly, if the Fund's management
determines that an investor is engaged in excessive trading, the Fund, with or
without prior notice, may temporarily or permanently terminate the availability
of Fund exchanges, or reject in whole or part any purchase or exchange request,
with respect to such investor's account. Such investors also may be barred from
purchasing other funds in the Dreyfus Family of Funds. Generally, an investor
who makes more than four exchanges out of the Fund during any calendar year (for
calendar year 1998, beginning on January 15th) or who makes exchanges that
appear to coincide with an active market-timing strategy may be deemed to be
engaged in excessive trading. Accounts under common ownership or control will be
considered as one account for purposes of determining a pattern of excessive
trading. In addition, the Fund may refuse or restrict purchase or exchange
requests by any person or group if, in the judgment of the Fund's management,
the Fund would be unable to invest the money effectively in accordance with its
investment objective and policies or could otherwise be adversely affected or if
the Fund receives or anticipates receiving simultaneous orders that may
significantly affect the Fund (e.g., amounts equal to 1% or more of the Fund's
total assets) . If an exchange request is refused, the Fund will take no other
action with respect to the shares until it receives further instructions from
the investor. The Fund may delay forwarding redemption proceeds for up to seven
days if the investor redeeming shares is engaged in excessive trading or if the
amount of the redemption request otherwise would be disruptive to efficient
portfolio management or would adversely affect the Fund. The Fund's policy on
excessive trading applies to investors who invest in the Fund directly or
through financial intermediaries, but does not apply to the Dreyfus
Auto-Exchange Privilege, to any automatic investment or withdrawal privilege
described herein, or to participants in employer-sponsored retirement plans.
During times of drastic economic or market conditions, the Fund may suspend
the Exchange Privilege temporarily without notice and treat exchange requests
based on their separate components--redemption orders with a simultaneous
request to purchase the other fund's shares. In such a case, the redemption
request would be processed at the Fund's next determined net asset value but the
purchase order would be effective only at the net asset value next determined
after the fund being purchased receives the proceeds of the redemption, which
may result in the purchase being delayed.
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
[Page 23]
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 its 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 to its shareholders 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. Distributions from net capital gains
(the excess of net long-term capital gain over net short-term capital loss) will
be taxable to such shareholders as long-term capital gains, regardless of how
long the shareholders have held their Fund shares and whether such distributions
are received in cash or reinvested in additional Fund shares. The annual tax
notice and periodic account summaries you receive designate the portions of
capital gain distributions that are subject to (1) the 20% maximum rate of tax
(10% for investors in the 15% marginal tax bracket) enacted by the Taxpayer
Relief Act of 1997 ("Tax Act"), which applies to non-corporate taxpayers' net
capital gain on securities and other capital assets held by more than 18 months,
and (2) the 28% maximum tax rate, applicable to such gain on capital assets held
for more than one year and up to 18 months (which, prior to enactment of the Tax
Act, applied to all such gain on capital assets held for more than one year).
Dividends and other distributions also may be subject to state and local taxes.
[Page 24]
Dividend distributions paid by the Fund to a non-resident foreign investor
generally will be subject to U.S. withholding tax at the rate of 30%, unless the
foreign investor claims the benefit of a lower rate specified in a tax treaty.
Distributions from net capital gain paid by the Fund to a non-resident foreign
investor, as well as the proceeds of any redemptions 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 or her 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
that will include information as to dividends and distributions from net capital
gain, if any, paid during the year. The annual tax notice and periodic account
summaries you receive designate the portions of capital gain distributions that
are subject to (1) the 20% maximum rate of tax (10% for investors in the 15%
marginal tax bracket) enacted by the Taxpayer Relief Act of 1997 ("Tax Act"),
which applies to non-corporate taxpayers' net capital gain on securities and
other capital assets held for more than 18 months, and (2) the 28% maximum tax
rate, applicable to such gain on capital assets held for more than one year and
up to 18 months (which, prior to enactment of the Tax Act, applied to all such
gain on capital assets held for more than one year).
Dividends and other distributions paid by the Fund to qualified retirement
plans ordinarily will not be subject to taxation until the proceeds are
distributed from the retirement plans. The Fund will not report to the IRS
distributions paid to such plans. Generally, distributions from qualified
retirement plans, except those representing returns of non-deductible
contributions thereto, will be taxable as ordinary income and, if made prior to
the time the participant reaches age 59(1)/2, generally will be subject to an
additional tax equal to 10% of the taxable portion of the distribution. If the
distribution from such a retirement plan (other than certain governmental or
church plans) for any taxable year following the year in which the participant
reaches age 70(1) /2 is less than the "minimum required distribution" for that
taxable year, an excise tax equal to 50% of the deficiency may be imposed by the
IRS. The administrator, trustee or custodian of such a retirement plan will be
responsible for reporting distributions from such plans to the IRS. Moreover,
certain contributions to a qualified retirement plan in excess of the amounts
permitted by law may be subject to an excise tax. If a distributee of an
"eligible rollover distribution" from a qualified retirement plan does not elect
to have the eligible rollover distribution paid directly from the plan to an
eligible retirement plan in a "direct rollover," the eligible rollover
distribution will be subject to a 20% income tax withholding.
The Fund must withhold and remit to the U.S. Treasury ("backup withholding")
31% of dividends, capital gain distributions and redemption proceeds, regardless
of the extent to which gain or loss may be realized, paid to an individual or
certain other non-corporate shareholders if such shareholder fails to certify
that the TIN furnished to the Fund is correct. Backup withholding at that rate
also is required from dividends and capital gain distributions payable to such a
shareholder if (1) that shareholder fails to certify that he or she has not
received notice from the IRS of being subject to backup withholding as a result
of a failure properly to report taxable dividend or interest income on a Federal
income tax return or (2) the IRS notifies the Fund to institute backup
withholding because the IRS determines that the shareholder's TIN is incorrect
or that the shareholder has failed properly to report such income.
A TIN is either the Social Security number, individual taxpayer
identification 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.
[Page 25]
The Fund may be subject to a non-deductible 4% excise tax, measured with
respect to certain undistributed amounts of taxable income and capital gains.
You should consult your tax advisers regarding specific questions as to
Federal, state or local taxes.
PERFORMANCE INFORMATION
For purposes of advertising, performance for each Class may be calculated on
the basis of average annual total return and/or total return. These total return
figures reflect changes in the price of the shares and assume that any income
dividends and/or capital gains distributions made by the Fund during the
measuring period were reinvested in shares of the same Class. These figures also
take into account any applicable distribution and shareholder servicing fees. As
a result, at any given time, the performance of Investor shares should be
expected to be lower than that of 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 net asset value
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 Aggregate Bond Index, 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,
[Page 26]
such as total return for periods other than those required to be shown
or cumulative performance data. The Fund may advertise a quotation of yield or
other similar quotation demonstrating the income earned or distributions made by
the Fund.
GENERAL INFORMATION
The Company was incorporated in Maryland on August 6, 1987 under the name The
Laurel Funds, Inc., and changed its name to The Dreyfus/Laurel Funds, Inc. on
October 17, 1994. The Company is registered with the SEC under the 1940 Act as
an open-end management investment company. The Company has an authorized
capitalization of 25 billion shares of $0.001 par value stock with equal voting
rights. The 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 Fund's shares are classified into two Classes--
Investor shares and BASIC shares.
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]
Dreyfus Bond Market Index Fund PROSPECTUS
(c) 1998 Dreyfus Service Corporation
310/710p0898
