File No. 811-5270
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ X ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 61 [ X ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ X ]
Amendment No. 61 [ X ]
(Check appropriate box or boxes.)
THE DREYFUS/LAUREL FUNDS, INC.
___________________________________________________
(Exact Name of Registrant as Specified in Charter)
c/o The Dreyfus Corporation
200 Park Avenue, New York, New York 10166
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (212) 922-6000
Mark N. Jacobs, Esq.
The Dreyfus/Laurel Funds, Inc.
200 Park Avenue
New York, New York 10166
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box)
immediately upon filing pursuant to paragraph (b)
----
X on March 1, 1998 pursuant to paragraph (b)
----
60 days after filing pursuant to paragraph (a)(i)
----
on (date) pursuant to paragraph (a)(i)
----
75 days after filing pursuant to paragraph (a)(ii)
----
on (date) pursuant to paragraph (a)(ii) of Rule 485
----
If appropriate, check the following box:
this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
----
Registrant has registered an indefinite number of shares of beneficial
interest under the Securities Act of 1933 pursuant to Section 24(f) of the
Investment Company Act of 1940, Registrant's Rule 24f-2 Notice for fiscal year
ended October 31, 1997 was filed on January 26, 1998.
THE DREYFUS/LAUREL FUNDS, INC.:
DREYFUS BOND MARKET INDEX FUND
DREYFUS DISCIPLINED STOCK FUND
DREYFUS INTERNATIONAL EQUITY ALLOCATION FUND
DREYFUS INSTITUTIONAL GOVERNMENT MONEY MARKET FUND
DREYFUS INSTITUTIONAL PRIME MONEY MARKET FUND
DREYFUS INSTITUTIONAL U.S. TREASURY MONEY MARKET FUND
DREYFUS MONEY MARKET RESERVES
DREYFUS MUNICIPAL RESERVES
DREYFUS BASIC S&P 500 STOCK INDEX FUND
DREYFUS U.S. TREASURY RESERVES
DREYFUS PREMIER BALANCED FUND
DREYFUS PREMIER LIMITED TERM INCOME FUND
DREYFUS PREMIER SMALL COMPANY STOCK FUND
DREYFUS DISCIPLINED INTERMEDIATE BOND FUND
Cross-Reference Sheet Pursuant to Rule 495(a)
Items in
Part A of Prospectus
Form N-1A Caption Caption
________ _______ __________
1 Cover Page Cover Page
Expense Summary
2 Synopsis Expense Summary
3 Condensed Financial Financial Highlights
Information
4 General Description of Investment Objective and
Registrant Policies; Further Information
About The Fund
5 Management of the Fund Further Information About The
Funds; Management
5(a) Management's Discussion Management's Discussion
of Fund's Performance of Fund's Performance
6 Capital Stock and Cover Page; Investor
Other Securities Line; Distribution; Taxes;
7 Purchase of Securities Expense Summary;
Being Offered Alternative Purchase Methods;
Special Shareholder Services; How
to invest in The Dreyfus/Laurel
Funds; Distribution and Service
Plans; How to Exchange your
Investment From One Fund to
Another;
8 Redemption or How to Redeem Shares
Repurchase
THE DREYFUS/LAUREL FUNDS, INC.:
DREYFUS BOND MARKET INDEX FUND
DREYFUS DISCIPLINED STOCK FUND
DREYFUS INTERNATIONAL EQUITY ALLOCATION FUND
DREYFUS INSTITUTIONAL GOVERNMENT MONEY MARKET FUND
DREYFUS INSTITUTIONAL PRIME MONEY MARKET FUND
DREYFUS INSTITUTIONAL U.S. TREASURY MONEY MARKET FUND
DREYFUS MONEY MARKET RESERVES
DREYFUS MUNICIPAL RESERVES
DREYFUS BASIC S&P 500 STOCK INDEX FUND
DREYFUS U.S. TREASURY RESERVES
DREYFUS PREMIER BALANCED FUND
DREYFUS PREMIER LIMITED TERM INCOME FUND
DREYFUS PREMIER SMALL COMPANY STOCK FUND
DREYFUS DISCIPLINED INTERMEDIATE BOND FUND
Cross-Reference Sheet Pursuant to Rule 495(a) (Continued)
Items in
Part B of Statement of Additional
Form N-1A Information Caption
- ---------
9 Pending Legal N.A.
Proceedings
10 Cover Page Cover
11 Table of Contents Table of Contents
12 General Information Management of the Trust
and History
13 Investment Objectives Investment Policies
and Policies
14 Management of the Fund Management of the Trust; Trustees
and Officers of the Trust
15 Control Persons and Management of the Trust; Principal
Holders of
Securities
16 Investment Advisory Management of the Trust;
and Other Services Investment Manager;
Shareholder Services
17 Investment Allocation Investment Policies
and Other Services Portfolio Transactions
THE DREYFUS/LAUREL FUNDS, INC.:
DREYFUS BOND MARKET INDEX FUND
DREYFUS DISCIPLINED STOCK FUND
DREYFUS INTERNATIONAL EQUITY ALLOCATION FUND
DREYFUS INSTITUTIONAL GOVERNMENT MONEY MARKET FUND
DREYFUS INSTITUTIONAL PRIME MONEY MARKET FUND
DREYFUS INSTITUTIONAL U.S. TREASURY MONEY MARKET FUND
DREYFUS MONEY MARKET RESERVES
DREYFUS MUNICIPAL RESERVES
DREYFUS BASIC S&P 500 STOCK INDEX FUND
DREYFUS U.S. TREASURY RESERVES
DREYFUS PREMIER BALANCED FUND
DREYFUS PREMIER LIMITED TERM INCOME FUND
DREYFUS PREMIER SMALL COMPANY STOCK FUND
DREYFUS DISCIPLINED INTERMEDIATE BOND FUND
Cross-Reference Sheet Pursuant to Rule 495(a) (Continued)
Items in
Part B of Statement of Additional
Form N-1A Information Caption
- ---------
18 Capital Stock and Description of the Trust;
Other Securities See Prospectus -- "Cover Page";
"How to Redeem Fund Shares";
"Further Information About The
Funds; The Dreyfus/Laurel Tax Free
Municipal Funds"
19 Purchase, Redemption Purchase of Shares;
and Pricing of Distribution and Service Plans;
Securities Being Offered Redemption of Shares; Valuation of
Shares
20 Tax Status Taxes
21 Underwriters Purchase of Shares;
Distribution and Service Plans;
Amounts Expended
22 Calculation of Performance Data
Performance Data
23 Financial Statements Financial Statements
24 Financial Statements and Exhibits C-1
25 Persons Controlled by or Under C-4
Common Control with Registrant
26 Number of Holders of Securities C-4
THE DREYFUS/LAUREL FUNDS, INC.:
DREYFUS BOND MARKET INDEX FUND
DREYFUS DISCIPLINED STOCK FUND
DREYFUS INTERNATIONAL EQUITY ALLOCATION FUND
DREYFUS INSTITUTIONAL GOVERNMENT MONEY MARKET FUND
DREYFUS INSTITUTIONAL PRIME MONEY MARKET FUND
DREYFUS INSTITUTIONAL U.S. TREASURY MONEY MARKET FUND
DREYFUS MONEY MARKET RESERVES
DREYFUS MUNICIPAL RESERVES
DREYFUS BASIC S&P 500 STOCK INDEX FUND
DREYFUS U.S. TREASURY RESERVES
DREYFUS PREMIER BALANCED FUND
DREYFUS PREMIER LIMITED TERM INCOME FUND
DREYFUS PREMIER SMALL COMPANY STOCK FUND
DREYFUS DISCIPLINED INTERMEDIATE BOND FUND
Cross-Reference Sheet Pursuant to Rule 495(a) (Continued)
Items in
Part B of Statement of Additional
Form N-1A Information Caption
27 Indemnification C-4
28 Business and Other Connections of C-4
Investment Adviser
29 Principal Underwriters C-12
30 Location of Accounts and Records C-15
31 Management Services C-15
32 Undertakings C-15
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PROSPECTUS March 1, 1998
DREYFUS DISCIPLINED INTERMEDIATE BOND FUND
- ---------------------------------------------------------------------------
DREYFUS DISCIPLINED INTERMEDIATE BOND 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 OUTPERFORM THE LEHMAN BROTHERS AGGREGATE BOND INDEX,
WHILE MAINTAINING A SIMILAR LEVEL OF RISK, BY INVESTING PRIMARILY IN DOMESTIC
AND FOREIGN INVESTMENT-GRADE DEBT SECURITIES AND BY ACTIVELY MANAGING BOND
MARKET AND MATURITY EXPOSURE. UNDER NORMAL MARKET CONDITIONS, THE FUND EXPECTS
TO MAINTAIN A DOLLAR-WEIGHTED AVERAGE MATURITY OF BETWEEN THREE AND TEN
YEARS.
BY THIS PROSPECTUS, THE FUND IS OFFERING INVESTOR SHARES AND
RESTRICTED SHARES. (INVESTOR AND RESTRICTED SHARES OF THE FUND WERE FORMERLY
CALLED INSTITUTIONAL AND RETAIL SHARES, RESPECTIVELY.) INVESTOR SHARES AND
RESTRICTED SHARES ARE IDENTICAL, EXCEPT AS TO THE SERVICES OFFERED TO AND THE
EXPENSES BORNE BY EACH CLASS. RESTRICTED SHARES ARE SOLD PRIMARILY TO BANK
TRUST DEPARTMENTS AND OTHER FINANCIAL SERVICE PROVIDERS (INCLUDING MELLON
BANK, N.A. ("MELLON BANK") AND ITS AFFILIATES) ("BANKS") ACTING ON BEHALF OF
CUSTOMERS HAVING A QUALIFIED TRUST OR INVESTMENT ACCOUNT OR RELATIONSHIP AT
SUCH INSTITUTION, OR TO CUSTOMERS WHO HAVE RECEIVED AND HOLD SHARES OF THE
FUND DISTRIBUTED TO THEM BY VIRTUE OF SUCH AN ACCOUNT OR RELATIONSHIP.
INVESTOR SHARES ARE OFFERED TO ANY INVESTOR.
SHARES OF THE FUND ARE SOLD WITHOUT A SALES LOAD. INVESTOR SHARES OF
THE FUND ARE SUBJECT TO DISTRIBUTION AND SHAREHOLDER SERVICING FEES.
SHARES OF THE FUND MAY BE PURCHASED OR REDEEMED BY TELEPHONE USING
THE DREYFUS TELETRANSFER PRIVILEGE.
THE DREYFUS CORPORATION SERVES AS THE FUND'S INVESTMENT MANAGER. THE
DREYFUS CORPORATION IS REFERRED TO AS "DREYFUS."
THIS PROSPECTUS SETS FORTH CONCISELY INFORMATION ABOUT THE FUND THAT
YOU SHOULD KNOW BEFORE INVESTING. IT SHOULD BE READ CAREFULLY BEFORE YOU
INVEST AND RETAINED FOR FUTURE REFERENCE.
THE STATEMENT OF ADDITIONAL INFORMATION DATED MARCH 1, 1998 ("SAI"),
WHICH MAY BE REVISED FROM TIME TO TIME, PROVIDES A FURTHER DISCUSSION OF
CERTAIN AREAS IN THIS PROSPECTUS AND OTHER MATTERS THAT 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 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").
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
- ---------------------------------------------------------------------------
TABLE OF CONTENTS
PAGE
EXPENSE SUMMARY........................................... 4
FINANCIAL HIGHLIGHTS...................................... 5
DESCRIPTION OF THE FUND................................... 7
MANAGEMENT OF THE FUND.................................... 15
HOW TO BUY FUND SHARES.................................... 16
SHAREHOLDER SERVICES...................................... 19
HOW TO REDEEM FUND SHARES................................. 22
ADDITIONAL INFORMATION ABOUT PURCHASES,
EXCHANGES AND REDEMPTIONS............................. 25
DISTRIBUTION PLAN (INVESTOR SHARES ONLY).................. 25
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES.................. 26
PERFORMANCE INFORMATION................................... 28
GENERAL INFORMATION....................................... 29
[Page 2]
[This Page Intentionally Left Blank]
[Page 3]
<TABLE>
EXPENSE SUMMARY
INVESTOR RESTRICTED
SHARES SHARES
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on Purchases............................... none none
Maximum Sales Load Imposed on Reinvestments........................... none none
Deferred Sales Load................................................... none none
Redemption Fee........................................................ none none
Exchange Fee.......................................................... none none
ESTIMATED ANNUAL FUND OPERATING EXPENSES:
(as a percentage of net assets)
Management Fee........................................................ 0.55% 0.55%
12b-1 Fee(1).......................................................... 0.25% none
Other Expenses(2)..................................................... 0.00% 0.00%
___- ___-
Total Fund Operating Expenses......................................... 0.80% 0.55%
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 RESTRICTED
SHARES SHARES
1 YEAR............................................ $8 $6
3 YEARS........................................... $26 $18
5 YEARS........................................... $44 $31
10 YEARS.......................................... $99 $69
(1) See "Distribution Plan (Investor Shares Only)" for a description of the
Fund's Distribution Plan for Investor shares.
(2) Does not include fees and expenses of the non-interested Directors
(including counsel 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 .01% of the Fund's net assets.
(See "Management of the Fund.")
</TABLE>
THE AMOUNTS LISTED IN THE EXAMPLE SHOULD NOT BE CONSIDERED AS
REPRESENTATIVE OF FUTURE EXPENSES AND ACTUAL EXPENSES MAY
BE GREATER OR LESS THAN THOSE INDICATED. MOREOVER, WHILE THE EXAMPLE ASSUMES
A 5% ANNUAL RETURN, THE FUND'S ACTUAL PERFORMANCE WILL VARY AND MAY RESULT IN
AN ACTUAL RETURN GREATER OR LESS THAN 5%.
The purpose of the foregoing table is to assist you in understanding
the various costs and expenses that investors will bear, directly or
indirectly, the payment of which will reduce investors' return on an annual
basis. Long-term investors in Investor shares could pay more in 12b-1 fees
than the economic equivalent of paying the maximum front-end sales charges
applicable to mutual funds sold by members of the National Association of
Securities Dealers, Inc. Certain banks, securities dealers and brokers
("Selected Dealers") or 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 (including Mellon Bank and its
affiliates) may charge fees to their clients who are owners of the Fund's
shares for various services provided in connection with a client's account.
These fees would be in addition to any amounts received by an Agent under its
Selling Agreement ("Agreement") with 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 Restricted
share outstanding throughout each fiscal year 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.
DREYFUS DISCIPLINED INTERMEDIATE BOND FUND
FOR AN INVESTOR SHARE OUTSTANDING THROUGHOUT EACH YEAR.
<TABLE>
YEAR ENDED OCTOBER 31,
___________________________________
PER SHARE DATA: 1997(1) 1996(1)
________ ________
<S> <C> <C>
Net asset value, beginning of period............................. $12.29 $12.50
________ ________
INVESTMENT OPERATIONS:
Investment income_net........................................... 0.74 0.71
Net realized and unrealized gain (loss) on investments........... 0.23 (0.21)
________ ________
Total from Investment Operations................................. 0.97 0.50
________ ________
DISTRIBUTIONS:
Dividends from investment income_net............................ (0.74) (0.71)
________ ________
Net asset value, end of period................................... $12.52 $12.29
========= =========
TOTAL INVESTMENT RETURN............................................ 8.21% 4.18%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets.......................... 0.80% 0.79%
Ratio of net investment income to average net assets............. 6.01% 5.61%
Portfolio Turnover Rate.......................................... 143.91% 198.16%
Net Assets, end of period (000's Omitted)........................ $317 $126
(1) The Fund commenced selling Investor shares on November 1, 1995.
Effective July 15, 1996, Investor shares were redesignated
as Institutional shares. Effective August 15, 1997, Institutional shares were
redesignated as Investor shares.
</TABLE>
[Page 5]
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
DREYFUS DISCIPLINED INTERMEDIATE BOND FUND
FOR A RESTRICTED SHARE OUTSTANDING THROUGHOUT EACH YEAR.
YEAR ENDED OCTOBER 31,
_______________________________
PER SHARE DATA: 1997(1) 1996(1)
________ ________
<S> <C> <C>
Net asset value, beginning of period............................. $12.29 $12.50
________ ________
INVESTMENT OPERATIONS:
Investment income_net........................................... 0.77 0.74
Net realized and unrealized gain (loss) on investments........... 0.23 (0.21)
________ ________
TOTAL FROM INVESTMENT OPERATIONS................................. 1.00 0.53
________ ________
DISTRIBUTIONS:
Dividends from investment income_net............................ (0.77) (0.74)
________ ________
Net asset value, end of period................................... $12.52 $12.29
========= =========
TOTAL INVESTMENT RETURN............................................ 8.49% 4.45%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets.......................... 0.55% 0.55%
Ratio of net investment income to average net assets............. 6.31% 6.29%
Portfolio Turnover Rate.......................................... 143.91% 198.16%
Net Assets, end of period (000's Omitted)........................ $108,688 $58,466
(1) The Fund commenced selling Class R shares on November 1, 1995. Effective
July 15, 1996, Class R shares were redesignated as
Retail shares. Effective August 15, 1997, Retail shares were redesignated as
Restricted shares.
</TABLE>
[Page 6]
DESCRIPTION OF THE FUND
GENERAL
By this Prospectus, the Fund is offering Investor shares and
Restricted shares. (Investor and Restricted shares of the Fund were formerly
called Institutional and Retail shares, respectively.) Investor shares and
Restricted shares are identical, except as to the services offered to and the
expenses borne by each Class. Investor shares are offered to any investor.
Restricted shares are sold primarily to Banks acting on behalf of customers
having a qualified trust or investment account or relationship at such
institution, or to customers who have received and hold shares of the Fund
distributed to them by virtue of such an account or relationship. Unless the
Fund is otherwise instructed, new purchases or exchanges by existing
shareholders are 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 pay lower dividends than Restricted shares.
INVESTMENT OBJECTIVE
The Fund seeks to outperform the Lehman Brothers Aggregate Bond Index
(the "Benchmark"), while maintaining a similar level of risk, by investing
primarily in domestic and foreign investment-grade debt securities and by
actively managing bond market and maturity exposure. There can be no
assurance that the Fund will achieve its investment objective. Under normal
market conditions, the Fund expects to maintain a dollar-weighted average
maturity of between three and ten years. The Fund is not (nor will it be
operated as) an index fund, and the Fund's portfolio investments will not be
limited to debt issues included in the Benchmark.
MANAGEMENT POLICIES
Dreyfus seeks to achieve the Fund's investment objective by actively
managing the Fund's portfolio. Dreyfus' techniques include security selection
and management of bond market and maturity exposure. Dreyfus selects the
Fund's portfolio investments on the basis of, among other factors, yields,
credit quality, the level of interest rates and inflation, general economic
and financial trends, and its outlook for the securities markets. Although
the Fund may maintain aggregate investment characteristics similar to the
Benchmark, the Fund seeks to invest in individual debt securities that
together will provide a higher total return than the Benchmark. Dreyfus'
investment techniques utilize a disciplined control of fund risk and a
process of rigorous control and testing. Prior to security selection,
quality, duration, coupon, maturity and sector are targeted within
pre-determined ranges as a percentage of the total portfolio. The selection
must fit within strategies that are constantly being developed to meet the
targeted positions. The management process and security selection include,
but are not limited to, computer modeling and scenario testing of a variety
of possible changes in market conditions. Dreyfus will use various investment
techniques to attempt to protect against risks (such as adverse interest rate
fluctuations or bond market movements) and to manage the effective maturity
of the Fund's portfolio securities. However, if Dreyfus judges market
conditions incorrectly or employs a management strategy that does not
correlate well with the Fund's investments, these techniques could result in
a loss, regardless of whether Dreyfus intended to increase the Fund's total
return or to reduce risk.
Under normal market conditions, the Fund will invest at least 65% of
its total assets in debt securities, such as bonds, notes and debentures, of
domestic and foreign issuers. See "Certain Portfolio Securities" below. The
issuers of these debt securities include the U.S. Government and foreign
governments, their political subdivisions, agencies and municipalities, and
domestic and foreign corporations. The Fund currently intends to limit its
investments in debt securities to those rated at least investment-grade.
Investment-grade debt securities are securities that, at the time of
purchase, are rated within one of the four highest grades assigned by Moody's
Investors Service, Inc. ("Moody's") (Aaa, Aa, A or Baa) or Standard & Poor's,
a division of the McGraw Hill Companies, Inc. ("S&P") (AAA, AA, A or BBB) or,
if
[Page 7]
unrated, are determined by Dreyfus to be of comparable quality. At least 55%
of the value of the Fund's net assets will normally consist of debt
securities that, at the time of purchase, are rated at least Aa or AA or, if
unrated, are determined by Dreyfus to be of comparable quality.
Debt securities rated Baa by Moody's or BBB by S&P are considered by
those rating agencies to be "investment grade" securities, although Moody's
considers securities rated Baa to have speculative characteristics.
Furthermore, although bonds rated BBB by S&P exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and principal on debt
in this category than on debt in higher rated categories. The Fund will, in a
prudent and orderly fashion, sell securities whose ratings drop below
investment-grade (or comparable) quality. A discussion of the Moody's and S&P
rating categories appears in the SAI.
The debt securities in which the Fund may invest include: (1) U.S.
Treasury bills, notes and bonds; (2) other obligations issued or guaranteed
as to interest and principal by the U.S. Government, its agencies and
instrumentalities; (3) mortgage-related securities backed by the U.S.
Government, its agencies and instrumentalities, or by private issuers; (4)
taxable obligations issued by or on behalf of states, territories and
possessions of the United States and the District of Columbia and their
political subdivisions, agencies and instrumentalities, or multi-state
agencies or authorities; (5) corporate debt securities; and (6) Eurodollar
bonds and notes. The Fund may invest up to 20% of its total assets in debt
securities issued by foreign governments and foreign corporations.
The Fund generally invests in debt securities with intermediate-term
maturities, which securities are expected to pay higher yields and experience
greater fluctuations in value than securities with short-term maturities.
Under normal market conditions, the Fund expects to maintain a
dollar-weighted average maturity of between three and ten years. Within this
limitation, the Fund may purchase individual debt securities with effective
maturities of less than three years and greater than ten years. Under normal
market conditions, the longer the average maturity of the Fund's holdings,
the greater the expected yield and price volatility.
The Fund may also invest in convertible debt obligations, convertible
and non-convertible preferred stocks, zero coupon bonds and repurchase
agreements and, to maintain liquidity, or to establish temporary liquidity
positions necessary to effect pending investments, may invest in commercial
paper and in obligations of U.S. and foreign banks, including certificates of
deposit, bankers' acceptances, time deposits, Eurodollar Certificates of
Deposit ("ECDs"), Yankee Certificates of Deposit ("Yankee CDs"), and
Eurodollar Time Deposits ("ETDs"). The Fund will not invest in common stocks
and will sell any common stocks received upon the conversion of convertible
securities as promptly as it can and in a manner that it believes will reduce
its risk of loss in connection with the sale.
The debt securities in which the Fund may invest have fixed, floating
or variable rates of interest, and some debt securities, such as zero coupon
bonds, do not pay current interest, but are purchased at a discount from
their face values. The Fund may purchase any of the securities in which it
may invest on a when-issued or delayed delivery basis. The Fund may also
engage in options and futures transactions.
Although Dreyfus normally invests the Fund's assets according to the
Fund's investment strategy, when Dreyfus determines that adverse market
conditions exist, the Fund may adopt a defensive position and invest
temporarily and without limitation in money market and other short-term debt
instruments. To the extent that the Fund so invests, it may not achieve its
investment objective.
The Benchmark is a broad market weighted index which covers the U.S.
investment grade fixed-rate bond market, including government and corporate
securities, agency mortgage pass-through securities, and asset-backed
securities. The Benchmark covers those securities in the Lehman Brothers
Government/Corporate Bond Index, the Lehman Brothers Mortgage-Backed
Securities Index and the Lehman Brothers Asset-Backed Securities Index. All
issues have at least one year to maturity.
[Page 8]
INVESTMENT TECHNIQUES
In connection with its investment objective and policies, the Fund
may engage in the following investment techniques, among others, to attempt
to hedge various market risks or to enhance total return:
BORROWING MONEY. The Fund is authorized, within specified limits, to
borrow money for temporary administrative purposes and to pledge its assets
in connection with such borrowings.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. To secure advantageous
prices or yields, the Fund may purchase debt securities on a when-issued
basis or may purchase or sell securities for delayed delivery. In such
transactions, delivery of the securities occurs beyond the normal settlement
periods, but no payment or delivery is made by the Fund prior to the actual
delivery or payment by the other party to the transaction. The purchase of
securities on a when-issued or delayed delivery basis involves the risk that,
as a result of an increase in yields available in the marketplace, the value
of the securities purchased will decline prior to the settlement date. The
sale of securities for delayed delivery involves the risk that the prices
available in the market on the delivery date may be greater than those
obtained in the sale transaction. The Fund will establish a segregated
account consisting of cash, U.S. Government Securities or other high-grade
debt securities in an amount at least equal at all times to the amount of its
when-issued and delayed delivery commitments.
FUTURES, OPTIONS AND OTHER DERIVATIVE INSTRUMENTS. The Fund may
purchase and sell various financial instruments ("Derivative Instruments"),
such as financial futures contracts (including interest rate, index and
foreign currency futures contracts), options (including options on
securities, indices, foreign currencies and futures contracts), forward
currency contracts and interest rate and currency swaps, caps, collars and
floors. The index Derivative Instruments the Fund may use may be based on
indices of U.S. or foreign equity or debt securities. These Derivative
Instruments may be used, for example, to preserve a return or spread, to lock
in unrealized market value gains or losses, to facilitate or substitute for
the sale or purchase of securities, to manage the duration of securities, to
alter the exposure of a particular investment or portion of the Fund's
portfolio to fluctuations in interest rates or currency rates, to uncap a
capped security or to convert a fixed rate security into a variable rate
security or a variable rate security into a fixed rate security.
The Fund's ability to use Derivative Instruments may be limited by
market conditions, regulatory limits and tax considerations. The Fund might
not use any of these strategies and there can be no assurance that any
strategy that is used will succeed. The Fund may not purchase put or call
options that are traded on a national stock exchange in an amount exceeding
5% of its net assets. See the SAI for more information regarding Derivative
Instruments and the risks relating thereto.
FOREIGN CURRENCY TRANSACTIONS. The Fund may engage in currency
exchange transactions on a spot or forward basis and may hold foreign
currency deposits. (See "ECDs, ETDs and Yankee CDs".) The Fund may exchange
foreign currency on a spot basis at the spot rate then prevailing for
purchasing or selling foreign currencies in the foreign exchange market.
The Fund may also enter into forward currency contracts for the
purchase or sale of a specified currency at a specified future date with
respect to either specific transactions or portfolio positions in order to
minimize the risk to the Fund from adverse changes in the relationship
between the U.S. dollar and foreign currencies. For example, when the Fund
anticipates purchasing or selling a security denominated in a foreign
currency, the Fund may enter into a forward contract in order to set the
exchange rate at which the transaction will be made. The Fund may also enter
into a forward contract to sell an amount of foreign currency approximating
the value of some or all of the Fund's securities positions denominated in
that currency. The Fund will not enter into or maintain a position in forward
contracts if their consummation would obligate the Fund to deliver an amount
of foreign currency greater than the value of the Fund's assets denominated
or quoted in, or currency convertible into, such currency.
[Page 9]
Forward currency contracts may substantially change the Fund's
investment exposure to changes in currency exchange rates
and could result in losses if currencies do not perform as Dreyfus
anticipates. There is no assurance that Dreyfus' use of forward currency
contracts will be advantageous to the Fund or that it will hedge at an
appropriate time.
RISKS OF DERIVATIVE INSTRUMENTS. The use of Derivative Instruments
involves special risks, including: (1) possible imperfect or no correlation
between price movements of the portfolio investments (held or intended to be
purchased) involved in the transaction and price movements of the Derivative
Instruments involved in the transaction; (2) possible lack of a liquid
secondary market for any particular Derivative Instrument at a particular
time; (3) the need for additional portfolio management skills and techniques;
(4) losses due to unanticipated market price movements; (5) the fact that,
while such strategies can reduce the risk of loss, they can also reduce the
opportunity for gain, or even result in losses, by offsetting favorable price
movements in portfolio investments; (6) incorrect forecasts by Dreyfus
concerning interest or currency exchange rates or direction of price
fluctuations of the investment involved in the transaction, which may result
in the strategy being ineffective; (7) loss of premiums paid by the Fund on
options it purchases; and (8) the possible inability of the Fund to purchase
or sell a portfolio security at a time when it would otherwise be favorable
for it to do so, or the need to sell a portfolio security at a
disadvantageous time, due to the need for the Fund to maintain "cover" or to
segregate securities in connection with such transactions and the possible
inability of the Fund to close out or liquidate its positions.
Dreyfus may use Derivative Instruments for hedging purposes (to
adjust the risk characteristics of the Fund's portfolio)and may use these
instruments to adjust the return characteristics of the Fund's portfolio of
investments. This can increase investment risk. If Dreyfus judges market
conditions incorrectly or employs a strategy that does not correlate well
with the Fund's investments, these techniques could result in a loss,
regardless of whether the intent was to reduce risk or increase return. These
techniques may increase volatility of the Fund and may involve a small
investment of cash relative to the magnitude of the risk assumed. In
addition, these techniques could result in a loss if the counterparty to the
transaction does not perform as promised or if there is not a liquid
secondary market to close out a position that the Fund has entered into.
Options and futures transactions may increase portfolio turnover
rates, which results in correspondingly greater commission expenses and
transaction costs, and may result in certain tax consequences.
New financial products and risk management techniques continue to be
developed. The Fund may use these instruments and techniques to the extent
consistent with its investment objective and polices, and regulatory
requirements applicable to investment companies.
MORTGAGE DOLLAR ROLLS. The Fund may enter into mortgage "dollar
rolls" in which the Fund sells mortgage-related securities for delivery in
the current month and simultaneously contracts to purchase substantially
similar securities on a specified future date. The mortgage-related
securities that are purchased will be of the same type and will have the same
interest rate as those securities sold, but generally will be supported by
different pools of mortgages with different prepayment histories than those
sold. The Fund forgoes principal and interest paid during the roll period on
the securities sold in a dollar roll, but the Fund is compensated by the
difference between the current sales price and the lower price for the future
purchase, as well as by any interest earned on the proceeds of the securities
sold. The Fund could be compensated also through the receipt of fee income
equivalent to a lower forward price. The dollar rolls entered into by the
Fund normally will be "covered." A covered roll is a specific type of dollar
roll for which there is an offsetting cash position or a cash equivalent
security position that matures on or before the forward settlement date of
the related dollar roll transaction. Covered rolls are not treated as a
borrowing or other senior security and will be excluded from the calculation
of the Fund's borrowings and other senior securities.
[Page 10]
CERTAIN PORTFOLIO SECURITIES
U.S. GOVERNMENT SECURITIES. The Fund may invest in obligations issued
or guaranteed as to both principal and interest by the U.S. Government or
backed by the full faith and credit of the United States ("U.S. Government
Securities"). In addition to direct obligations of the U.S. Treasury, these
include securities issued or guaranteed by the Federal Housing
Administration, Farmers Home Administration, Export-Import Bank of the United
States, Small Business Administration, Government National Mortgage
Association ("GNMA"), General Services Administration and Maritime
Administration. The Fund may also invest in U.S. Government obligations that
do not carry the full faith and credit guarantee, such as those issued by the
Federal National Mortgage Association ("FNMA"), the Federal Home Loan
Mortgage Corporation ("FHLMC"), or other instrumentalities.
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 GNMA, FNMA and FHLMC certificates, private
pass-through securities, commercial mortgage-related securities, and certain
collateralized mortgage obligations. There are currently three basic types of
mortgage-related securities: (1) those issued or guaranteed by the U.S.
Government, its agencies or instrumentalities, such as GNMA, FNMA and FHLMC;
(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
of GNMA (but not of FNMA or FHLMC) 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 FNMA or FHLMC is guaranteed by the respective entity.
[Page 11]
Collateralized mortgage obligations ("CMOs") are debt obligations
collateralized by mortgage-related securities issued by
GNMA, FNMA or FHLMC, or by whole loans or private issuer pass-through
securities. CMOs may be issued by GNMA, FNMA, FHLMC or private issuers. CMOs
are structured to direct payments on underlying collateral to different
series or classes of the obligations. CMO classes may be specially structured
in a manner that provides any of a wide variety of investment
characteristics, such as yield, effective maturity and interest rate
sensitivity. CMO structuring is accomplished by in effect stripping out
portions of the cash flows (comprised of principal and interest payments) on
the underlying mortgage assets and prioritizing the payments of those cash
flows. In the most extreme case, one class will be entitled to receive all of
the interest, but none of the principal, from the underlying mortgage assets
(the interest-only or "IO" class) and one class will be entitled to receive
all of the principal, but none of the interest (the principal-only or "PO"
class). CMOs may be structured in other ways that, based on mathematical
modeling or similar techniques, are expected to provide certain results. As
market conditions change, however, and particularly during periods of rapid
or unanticipated changes in market interest rates, the attractiveness of a
CMO class and the ability of a structure to provide the anticipated
investment characteristics may be significantly reduced. Such changes can
result in volatility in the market value, and in some instances reduced
liquidity, of the CMO class. The Fund may invest up to 20% of its total
assets in CMOs.
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.
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. Like 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.
FOREIGN SECURITIES. The Fund may purchase securities of foreign
issuers and may invest in obligations of foreign branches of domestic banks
and domestic branches of foreign banks. Investment in foreign securities
presents certain risks, including those resulting from fluctuations in
currency exchange rates, revaluation of currencies, adverse political and
economic developments, the possible imposition of currency exchange blockages
or other foreign governmental laws or restrictions, reduced availability of
public information concerning issuers, and the fact that foreign issuers
generally are not subject to uniform accounting, auditing and financial
reporting standards or to other regulatory practices and requirements
comparable to those applicable to domestic issuers. Moreover, securities of
many foreign issuers may be less liquid and their prices more volatile than
those of comparable domestic issuers. In addition, with respect to certain
foreign countries, there is the possibility of expropriation, confiscatory
taxation and limitations on the use or removal of funds or other assets of
the Fund, including withholding of dividends. Foreign securities may be
subject to foreign government taxes that would reduce the yield on such
securities.
MUNICIPAL BONDS AND OTHER MUNICIPAL OBLIGATIONS. The Fund may invest
in debt obligations issued by or on behalf of states, territories and
possessions of the United States and the District of Columbia and their
political subdivisions, agencies and instrumentalities, or multistate
agencies or authorities. The
[Page 12]
Fund limits its investments in municipal obligations to those obligations the
interest on which is subject to federal income tax. Municipal obligations
generally include debt obligations issued to obtain funds for various public
purposes, as well as industrial development bonds issued by public
authorities. Municipal obligations are classified as general obligation
bonds, revenue bonds and notes. General obligation bonds are secured by the
issuer's pledge of its faith, credit and taxing power for the payment of
principal and interest. Revenue bonds are payable from the revenue derived
from a particular facility or class of facilities or, in some cases, from the
proceeds of a special excise or other specific revenue source, but not from
the general taxing power. Notes are short-term instruments that are
obligations of the issuing municipalities or agencies and are sold in
anticipation of a bond sale, collection of taxes or receipt of other
revenues. Municipal obligations bear fixed, floating or variable rates of
interest that are determined in some instances by formulas under which the
municipal obligation's interest rate will change directly or inversely to
changes in interest rates or an index, or multiples thereof, in many cases
subject to a maximum and minimum.
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 market 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
yield than the balance of the Fund's portfolio, thereby reducing the yield of
the Fund. In periods of rising interest rates, the opposite can be true. The
net asset value of a fund investing in fixed-income securities also may
change as general levels of interest rates fluctuate. When interest rates
rise, the value of a portfolio of fixed-income securities can be expected to
decline. Conversely, when interest rates decline, the value of a portfolio of
fixed-income securities can be expected to rise.
VARIABLE AND FLOATING RATE SECURITIES. The Fund may invest in
variable and floating rate securities. A variable rate security provides for
the adjustment of its interest either at predesignated periodic intervals or
whenever the market rate to which the security's interest rate is tied changes
.. A floating rate security provides for the automatic adjustment of its
interest whenever a specified interest rate changes. Interest rates on
floating rate 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 variable and 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.
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
Investments."
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
[Page 13]
would be in addition to the advisory and other expenses that the Fund bears
directly in connection with its own operations.
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 S&P, Prime-1 by
Moody's, F-1 by Fitch, Duff 1 by Duff & Phelps, Inc., or A1 by IBCA, Inc.
ECDS, ETDS, YANKEE CDS AND EURODOLLAR BONDS AND NOTES. The Fund may
invest in ECDs, ETDs, Yankee CDs. Eurodollar bonds and notes and 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. are obligations that pay principal and
interest in U.S. dollars held in banks outside the United States, primarily
in Europe. ECDs, ETDs and Yankee CDs are subject to somewhat different risks
than are the obligations of domestic banks and issuers of the United States.
(See "Foreign Securities.")
ILLIQUID INVESTMENTS. The Fund will not knowingly invest more than
15% of the value of its net assets in illiquid investments. Investments
currently considered to be illiquid include securities for which market
quotations are not readily available; repurchase agreements and time deposits
with maturities in excess of seven days; certain mortgage-related securities;
securities involved in swap, cap, collar and floor transactions; and certain
options traded in the over-the-counter market and securities used to cover
such options. The Fund may not be able to sell illiquid securities when
Dreyfus considers it desirable to do so or may have to sell such securities
at a price lower than the price that could be obtained if they were more
liquid. Illiquid securities may be more difficult to value due to the
unavailability of reliable market quotations for such securities, and
investment in illiquid securities may have an adverse impact on the Fund's
net asset value. See the SAI for more information regarding these
investments.
PORTFOLIO TURNOVER. While securities are purchased for the Fund on
the basis of potential for high current income and possible capital
appreciation and not for short-term trading profits, the Fund's portfolio
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 (100% or higher) may result in
the realization of larger amounts of short-term and/or long-term capital
gains that, when distributed to the Fund's shareholders, are taxable to them
at the then current rate. 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 RISK. The Fund is subject to a number of
investment limitations. Certain limitations are matters of fundamental policy
and may not be changed without the affirmative vote of the holders of a
majority of the Fund's outstanding shares. The SAI describes all of the
Fund's fundamental and non-fundamental restrictions.
The investment objective, policies, restrictions, practices and
procedures of the Fund, unless otherwise specified, may be changed without
shareholder approval. If the Fund's investment objective, policies,
restrictions, practices or procedures change, shareholders should consider
whether the Fund remains an appropriate investment in light of the
shareholder's then-current position and needs.
[Page 14]
MANAGEMENT OF THE FUND
INVESTMENT MANAGER. Dreyfus, located at 200 Park Avenue, New York,
New York 10166, was formed in 1947. Dreyfus is a wholly-owned subsidiary of
Mellon Bank, which is a wholly-owned subsidiary of Mellon Bank Corporation
("Mellon"). As of January 31, 1998, Dreyfus managed or administered
approximately $96 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 overall
authority of the Company's Board of Directors in accordance with Maryland
law. Pursuant to the Investment Management Agreement, Dreyfus provides, or
arranges for one or more third parties to provide, investment advisory,
administrative, custody, fund accounting and transfer agency services to the
Fund. As the Fund's investment manager, Dreyfus manages the Fund by making
investment decisions based on the Fund's investment objective, policies and
restrictions.
The Fund is managed by Ridgway H. Powell. Mr. Powell is a Vice
President of Mellon Bank and of Boston Safe Deposit and Trust Company. Mr.
Powell has been employed by Dreyfus as portfolio manager of the Fund since
the Fund commenced operations. Mr. Powell has held various offices with
Boston Safe Deposit and Trust Company since 1989, and he is a Chartered
Financial Analyst.
Mellon is a publicly-owned multibank holding company incorporated
under Pennsylvania law in 1971 and registered under the Bank Holding Company
Act of 1956, as amended. Mellon provides a comprehensive range of financial
products and services in domestic and selected international markets. Mellon
is among the twenty-five largest bank holding companies in the United States
based on total assets. Mellon's principal wholly-owned subsidiaries are
Mellon Bank, Mellon Bank (DE) National Association, Mellon Bank (MD), The
Boston Company, Inc., AFCO Credit Corporation and a number of companies known
as Mellon Financial Services Corporations. Through its subsidiaries,
including Dreyfus, Mellon managed more than $305 billion in assets as of
December 31, 1997, including approximately $104 billion in mutual fund
assets. As of December 31, 1997, Mellon, through various subsidiaries,
provided non-investment services, such as custodial or administration
services, for more than $1.532 trillion in assets, including approximately
$60 billion in mutual fund assets.
Under the Investment Management Agreement, the Fund has agreed to pay
Dreyfus a monthly fee at the annual rate of 0.55 of 1% of the value of the
Fund's average daily net assets. Dreyfus pays all of the Fund's expenses,
except brokerage fees, taxes, interest, fees and expenses of the
non-interested Directors (including counsel fees), Rule 12b-1 fees (if
applicable) and extraordinary expenses. In order to compensate Dreyfus for
paying virtually all of the Fund's expenses, the Fund's investment management
fee is higher than the investment advisory fees paid by most investment
companies. Most, if not all, such companies also pay for additional
non-investment advisory expenses that are not paid by such companies'
investment advisers. Although Dreyfus is not obligated to pay the fees and
expenses of the non-interested Directors (including counsel fees), Dreyfus is
contractually required to reduce its investment management fee in an amount
equal to the Fund's allocable share of such fees and expenses. 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 0.55% of its average daily net
assets in investment management fees.
For the fiscal year ended October 31, 1997, total operating expenses
(excluding 12b-1 fees) of the Fund were 0.55% of the average daily net assets
of each Class for both Investor and Restricted 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.
[Page 15]
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.
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., 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 are offered to any investor. Restricted shares are
sold primarily to Banks acting on behalf of customers having a qualified
trust or investment account or relationship at such institution, or to
customers who have received and hold shares of the Fund distributed to them
by virtue of such an account or relationship. 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 is $2,500, or $1,000 if you are a
client of an Agent that maintains an omnibus account in the Fund and has made
an aggregate minimum initial purchase for its customers of $2,500. Subsequent
investments must be at least $100. The minimum initial investment is $750 for
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 and $500 for Dreyfus-sponsored Education
IRAs, with no minimum on subsequent purchases. 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.
[Page 16]
Investor shares are also offered without regard to the minimum initial
investment requirements, through Dreyfus-AUTOMATIC
Asset BuilderRegistration Mark, 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 corporations, partnerships,
non-profit entities or state and local governments. The Internal Revenue Code
of 1986, as amended (the "Code"), imposes various limitations on the amounts
that may be contributed annually, but generally do not directly affect the
amount of plan assets 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 Fund's DDA # 044210/Dreyfus Disciplined Intermediate Bond 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 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 "4970" FOR INVESTOR SHARES AND
"4980" FOR RESTRICTED SHARES.
[Page 17]
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 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 Restricted
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 the NAV for the Fund may be summarized as follows:
The portfolio securities of the Fund listed or traded on a stock
exchange, except as otherwise noted, are valued at the latest sale price. If
no sale is reported, the mean of the latest bid and asked prices is used.
Securities traded over-the-counter are priced at the mean of the latest bid
and asked prices but will be valued at the last sale price if required by
regulations of the SEC. When market quotations are not readily available,
securities and other assets are valued at fair value as determined in good
faith in accordance with procedures established by the Board of Directors.
Bonds are valued through valuations obtained from a commercial
pricing service or at the most recent mean of the bid and asked prices
provided by investment dealers in accordance with procedures established by
the Board of Directors.
NAV is determined 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. For purposes of determining NAV,
options and futures contracts will be valued 15 minutes after the closing of
trading on the floor of the NYSE. 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 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 its business day.
The public offering price of Investor shares and Restricted shares,
both of which are offered on a continuous basis, is the NAV of that Class.
DREYFUS TELETRANSFER PRIVILEGE. You may purchase Fund shares (minimum
$500 and maximum $150,000 per day) by telephone if you have checked the
appropriate box and supplied the necessary information on the 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
[Page 18]
these documents and your Fund account. Only a bank account maintained in a
domestic financial institution which is an ACH member may be so designated.
The Fund may modify or terminate this Privilege at any time or charge a
service fee upon notice to shareholders. No such fee currently is
contemplated.
If you have selected the Dreyfus TELETRANSFER Privilege, you may
request a Dreyfus TELETRANSFER purchase of Fund shares by calling
1-800-645-6561 or, if calling from overseas, 516-794-5452.
SHAREHOLDER SERVICES
The services and privileges described under this heading may not be
available to clients of certain Agents and some Agents may impose certain
conditions on their clients which are different from those described in this
Prospectus. You should consult your Agent in this regard.
FUND EXCHANGES
You may purchase, in exchange for shares of a Class, shares of
certain other eligible funds managed or administered by Dreyfus, to the
extent such shares are offered for sale in your state of residence. These
funds have different investment objectives which may be of interest to you.
If you desire to use this service, please call 1-800-645-6561 to determine if
it is available and whether any conditions are imposed on its use. WITH
RESPECT TO FUND SHARES HELD BY RETIREMENT PLANS, EXCHANGES MAY BE MADE ONLY
BETWEEN A SHAREHOLDER'S RETIREMENT PLAN ACCOUNT IN ONE FUND AND SUCH
SHAREHOLDER'S RETIREMENT PLAN ACCOUNT IN ANOTHER FUND.
To request an exchange, you or your Agent acting on your behalf must
give exchange instructions to the Transfer Agent in writing or by telephone.
Before any exchange, you must obtain and should review a copy of the current
prospectus of the fund into which the exchange is being made. 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, also by
calling 1-800-645-6561. If you have established the Telephone Exchange
Privilege, you may telephone exchange instructions (including over The
Dreyfus TouchRegistration Mark automated telephone system) by calling 1-800-64
5-6561. 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, Check Redemption Privilege, Wire Redemption
Privilege, Telephone Redemption Privilege, Dreyfus TELETRANSFER Privilege,
and the dividends and distributions payment option (except for Dreyfus
Dividend Sweep) selected by the investor.
Shares will be exchanged at the next determined NAV; however, a sales
load may be charged with respect to exchanges of 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
[Page 19]
currently are charged shareholders directly in connection with exchanges,
although the Fund reserves the right, upon not less than 60 days' written
notice, to charge shareholders a nominal fee in accordance with rules
promulgated by the SEC. The Fund reserves the right to reject any exchange
request in whole or in part. The availability of Fund Exchanges may be
modified or terminated at any time upon notice to shareholders.
The exchange of shares of one fund for shares of another is treated
for Federal income tax purposes as a sale of the shares given in exchange
and, therefore, an exchanging shareholder (other than a tax-exempt Retirement
Plan) may realize a taxable gain or loss.
DREYFUS AUTO-EXCHANGE PRIVILEGE
Dreyfus Auto-Exchange Privilege enables you to invest regularly (on a
semi-monthly, monthly, quarterly or annual basis), in exchange for shares of
the Fund, in 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 the 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 and, therefore, an exchanging shareholder (other than a
tax-exempt Retirement Plan) may realize a taxable gain or loss. For more
information concerning this Privilege and the funds in the Dreyfus Family of
Funds eligible to participate in this Privilege, or to obtain a Dreyfus
Auto-Exchange Authorization Form, please call toll free 1-800-645-6561.
DREYFUS-AUTOMATIC ASSET BUILDERRegistration Mark
Dreyfus-AUTOMATIC Asset Builder permits you to purchase Fund shares
(minimum of $100 and maximum of $150,000 per transaction) at regular
intervals selected by you. Fund shares are purchased by transferring funds
from the bank account designated by you. At your option, the bank account
designated by you will be debited in the specified amount, and Fund shares
will be purchased, once a month, on either the first or the 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.
[Page 20]
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 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 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 BuilderRegistration Mark, 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 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
[Page 21]
Program at any time by discontinuing your participation in Dreyfus-AUTOMATIC-
Asset Builder, Dreyfus Government Direct Deposit Privilege or Dreyfus Payroll
Savings Plan, as the case may be, as provided under the terms of such
Privilege(s). The Fund reserves the right to redeem your account if you have
terminated your participation in the Program and your account's net asset
value is $500 or less. See "How to Redeem Fund Shares." The Fund may modify
or terminate this Program at any time. Investors who wish to purchase
Investor shares through the Dreyfus Step Program in conjunction with a
Dreyfus-sponsored retirement plan may do so only for IRAs, SEP-IRAs and IRA
"Rollover Accounts."
AUTOMATIC WITHDRAWAL PLAN
The Automatic Withdrawal Plan permits you to request withdrawal of a
specified dollar amount (minimum of $50) on either a monthly or a quarterly
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 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 THE DREYFUS-AUTOMATIC ASSET BUILDERRegistration Mark AND SUBSEQUENTLY
SUBMIT A WRITTEN REDEMPTION REQUEST TO THE TRANSFER AGENT, THE REDEMPTION
PROCEEDS WILL BE TRANSMITTED TO YOU PROMPTLY UPON BANK CLEARANCE OF YOUR
PURCHASE CHECK, DREYFUS TELETRANSFER PURCHASE, OR DREYFUS-AUTOMATIC ASSET
BUILDER ORDER, WHICH MAY TAKE UP TO EIGHT BUSINESS DAYS OR MORE. IN ADDITION,
THE FUND WILL NOT HONOR REDEMPTION CHECKS UNDER THE CHECK REDEMPTION
[Page 22]
PRIVILEGE, AND WILL REJECT REQUESTS TO REDEEM SHARES BY WIRE OR TELEPHONE OR
PURSUANT TO THE DREYFUS TELETRANSFER PRIVILEGE FOR A PERIOD OF EIGHT BUSINESS
DAYS AFTER RECEIPT BY THE TRANSFER AGENT OF THE PURCHASE CHECK, THE DREYFUS
TELETRANSFER PURCHASE, OR THE DREYFUS-AUTOMATIC ASSET BUILDER ORDER AGAINST
WHICH SUCH REDEMPTION IS REQUESTED. THESE PROCEDURES WILL NOT APPLY IF YOUR
SHARES WERE PURCHASED BY WIRE PAYMENT, OR IF YOU OTHERWISE HAVE A SUFFICIENT
COLLECTED BALANCE IN YOUR ACCOUNT TO COVER THE REDEMPTION REQUEST. PRIOR TO
THE TIME ANY REDEMPTION IS EFFECTIVE, DIVIDENDS ON SUCH SHARES WILL ACCRUE
AND BE PAYABLE, AND YOU WILL BE ENTITLED TO EXERCISE ALL OTHER RIGHTS OF
BENEFICIAL OWNERSHIP. Fund shares will not be redeemed until the Transfer
Agent has received your Account Application.
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 is $500 or
less and remains so during the notice period.
PROCEDURES _ You may redeem Fund shares by using the regular
redemption procedure through the Transfer Agent, or through the Telephone
Redemption Privilege or the Check Redemption Privilege, which are granted
automatically unless you specifically refuse them by checking the applicable
"No" box on the Account Application. The Telephone Redemption Privilege and
the Check Redemption Privilege may be established for an existing account by
a separate signed Shareholder Services Form or, with respect to the Telephone
Redemption Privilege, by oral request from any of the authorized signatories
on the account by calling 1-800-645-6561. You also may 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. If you are a client of a Selected Dealer, you can also redeem
Fund shares through the Selected Dealer. 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 Check Redemption, Wire Redemption, Telephone
Redemption or Dreyfus TELETRANSFER Privilege.
The Telephone Redemption Privilege or Telephone Exchange Privilege
authorizes the Transfer Agent to act on telephone instructions (including
over The Dreyfus TouchRegistration Mark automated telephone system) from any
person representing himself or herself to be you, or a representative of your
Agent, and reasonably believed by the Transfer Agent to be genuine. The Fund
will require the Transfer Agent to employ reasonable procedures, such as
requiring a form of personal identification, to confirm that instructions are
genuine and, if it does not follow such procedures, the Fund or the Transfer
Agent may be liable for any losses due to unauthorized or fraudulent
instructions. Neither the Fund nor the Transfer Agent will be liable for
following telephone instructions reasonably believed to be genuine.
During times of drastic economic or market conditions, you may
experience difficulty in contacting the Transfer Agent by telephone to
request a redemption or an exchange of Fund shares. In such cases, you should
consider using the other redemption procedures described herein. Use of these
other redemption procedures may result in your redemption request being
processed at a later time than it would have been if telephone redemption had
been used. During the delay, the Fund's NAV may fluctuate.
REGULAR REDEMPTION _ Under the regular redemption procedure, you may
redeem your shares by written request mailed to The Dreyfus Family of Funds,
P.O. Box 9671, Providence, Rhode Island 02940-9671 or, if for Dreyfus
retirement plan accounts, to The Dreyfus Trust Company, Custodian, P.O. Box
6427, Providence, Rhode Island 02940-6427. Redemption requests may be
delivered in person only to a Dreyfus Financial Center. THESE REQUESTS WILL
BE FORWARDED TO THE FUND AND WILL BE
[Page 23]
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.
CHECK REDEMPTION PRIVILEGE _ You may write Redemption Checks drawn on
your Fund account. Redemption Checks may be made payable to the order of any
person in the amount of $500 or more. Potential fluctuations in the NAV of
the Fund's shares should be considered in determining the amount of the
check. Redemption Checks should not be used to close your account. Redemption
Checks are free, but the Transfer Agent will impose a fee for stopping
payment of a Redemption Check upon your request or if the Transfer Agent
cannot honor a Redemption Check due to insufficient funds or other valid
reason. You should date your Redemption Checks with the current date when you
write them. Please do not postdate your Redemption Checks. If you do, the
Transfer Agent will honor, upon presentment, even if presented before the
date of the check, all postdated Redemption Checks which are dated within six
months of presentment for payment, if they are otherwise in good order.
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 Redem
ption 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 the 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, the 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.
[Page 24]
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 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 permanentl
y 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
[Page 25]
daily net assets attributable to Investor shares to compensate Dreyfus
Service Corporation, an affiliate of Dreyfus, for shareholder servicing
activities and the Distributor for shareholder servicing activities and for
activities or expenses primarily intended to result in the sale of Investor
shares of the Fund. The Plan allows the Distributor to make payments from the
Rule 12b-1 fees it collects from the Fund to compensate Agents that have
entered into Agreements with the Distributor. Under the Agreements, the
Agents are obligated to provide distribution-related services with regard to
the Fund and/or shareholder services to the Agent's clients that own Investor
shares of the Fund.
The Fund and the Distributor may suspend or reduce payments under the
Plan at any time, and payments are subject to the continuation of the Fund's
Plan and the Agreements described above. From time to time, the Agents, the
Distributor and the Fund may agree to voluntarily reduce the maximum fees
payable under the Plan. See the SAI for more details on the Plan.
Potential investors should read this Prospectus in light of the terms
governing Agreements with their Agents. An Agent entitled to receive
compensation for selling and servicing the Fund's shares may receive
different compensation with respect to one class of shares over another.
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
The Fund declares daily and pays monthly dividends from its net
investment income and distributes net realized capital and foreign currency
gains, if any, once a year, but it may make distributions on a more frequent
basis to comply with the distribution requirements of the Code, in all events
in a manner consistent with the provisions of the 1940 Act. The Fund will not
make distributions from net realized capital gains unless all capital loss
carryovers, if any, have been utilized or have expired. Shares begin accruing
dividends on the day following the date of purchase. The Fund's earnings for
Saturdays, Sundays and holidays are declared as dividends on the next
business day. If you redeem all shares in your account at any time during the
month, all dividends to which you are entitled will be paid to you along with
the proceeds of the redemption. 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 are in the same
amount, except that the expenses attributable solely to a particular Class
are borne exclusively by that Class. Insvestor shares will receive lower per
share dividends than Restricted 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 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, certain foreign
currency 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 the Fund's net capital gain (the
excess of net long-term capital gain over net short-term capital loss) will
be taxable to such shareholders as long-term capital gains, 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.
[Page 26]
Dividend distributions paid by the Fund to a non-resident foreign
investor generally are subject to U.S. withholding tax
at the rate of 30%, unless the non-resident foreign investor claims the
benefit of a lower rate specified in a tax treaty. Capital gain distributions
paid by the Fund to a non-resident foreign investor, as well as the proceeds
of any redemptions by such an investor, regardless of the extent to which
gain or loss may be realized, generally are not subject to U.S. withholding
tax. However, such distributions may be subject to backup withholding, as
described below, unless the foreign investor certifies his 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 capital gain
distributions, 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 591\2, generally will
be subject to an additional tax equal to 10% of the taxable portion of the
distribution. If the distribution from such a Retirement Plan (other than
certain governmental or church plans) for any taxable year following the year
in which the participant reaches age 701\2 is less than the "minimum required
distribution" for that taxable year, an excise tax equal to 50% of the
deficiency may be imposed by the IRS. The administrator, trustee or custodian
of such a Retirement Plan will be responsible for reporting distributions
from such plans to the IRS. Moreover, certain contributions to a qualified
Retirement Plan in excess of the amounts permitted by law may be subject to
an excise tax. If a distributee of an "eligible rollover distribution" from a
qualified Retirement Plan does not elect to have the eligible rollover
distribution paid directly from the plan to an eligible retirement plan in a
"direct rollover," the eligible rollover distribution will be subject to a
20% income tax withholding.
The Fund must withold and remit to the U.S. Treasury ("backup
withholding") 31% of dividends, capital gain distributions and any redemption
proceeds, regardless of the extent to which gain or loss may be realized,
paid to an individual or certain other non-corporate shareholder if such
shareholder fails to certify that the TINfurnished 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 witholding as a result of a failure properly to report
taxable dividend or interest income on a Federal income tax return or (2) the
IRSnotifies the Fund to institute backup withholding because the
IRSdetermines that the shareholder's TINis 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.
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.
[Page 27]
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 Restricted
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 NAVof 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, other indices created by
Lehman Brothers, CDA Technologies indices, the Consumer Price Index, and the
Dow Jones Industrial Average. Performance rankings as reported in CHANGING
TIMES, BUSINESS WEEK, INSTITUTIONAL INVESTOR, THE WALL STREET JOURNAL,
IBC/DONOGHUE'S MONEY FUND REPORT, MUTUAL FUND FORECASTER, NO LOAD INVESTOR,
MONEY MAGAZINE, MORNINGSTAR MUTUAL FUND VALUES, U.S. NEWS AND WORLD REPORT,
FORBES, FORTUNE, BARRON'S and similar publications may also be used in
comparing the Fund's performance. Furthermore, the Fund may quote its shares'
total returns and yields in advertisements or in shareholder reports. The
Fund may also advertise non-standardized performance information, such as
total return for periods other than those required to be shown or cumulative
performance data. The Fund may advertise a quotation of yield or other
similar quotation demonstrating the income earned or distributions made by
the Fund.
[Page 28]
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"). The Fund is one of eighteen investment portfolios authorized by the
Company's Board of Directors. The Fund's shares are classified into two
Classes _ Investor shares and Restricted shares. The Company may in the
future seek to achieve the Fund's investment objective by investing all of
the Fund's assets in another investment company having the same investment
objective and substantially the same investment policies and restrictions as
those applicable to the Fund. Shareholders of the Fund will be given at least
30 days' prior notice of any such investment.
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 29]
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[Page 30]
[This Page Intentionally Left Blank]
[Page 31]
Disciplined
Intermediate
Bond Fund
Prospectus
Registration Mark
Copy Rights 1998 Dreyfus Service Corporation
302/702p0398
[Page 32]
- ----------------------------------------------------------------------------
PROSPECTUS MARCH 1, 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]
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[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
(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.")
</TABLE>
THE AMOUNTS LISTED IN THE EXAMPLE SHOULD NOT BE CONSIDERED AS
REPRESENTATIVE OF FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS
THAN THOSE INDICATED. MOREOVER, WHILE THE EXAMPLE ASSUMES A 5% ANNUAL RETURN,
THE FUND'S ACTUAL PERFORMANCE WILL VARY AND MAY RESULT IN AN ACTUAL RETURN
GREATER OR LESS THAN 5%.
The purpose of the foregoing table is to assist you in understanding
the various costs and expenses that investors will bear, directly or
indirectly, the payment of which will reduce investors' return on an annual
basis. 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 connectio
n 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.*
YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED
10/31/97 10/31/96 10/31/95 10/31/94#
____________ ____________ ____________ ____________
<S> <C> <C> <C> <C>
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%
*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.
</TABLE>
[Page 5]
<TABLE>
<CAPTION>
DREYFUS BOND MARKET INDEX FUND
FOR A BASIC SHARE OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.*
YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED
10/31/97 10/31/96 10/31/95 10/31/94#
_________ ________ ________ ___________
<S> <C> <C> <C> <C>
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%
* The Fund commenced operations on November 30, 1993. Effective
April 28, 1994, the Fund began selling Investor shares
and the shares existing prior to April 28, 1994 were designated Trust Shares.
On October 17, 1994, Trust Shares were redesignated as Class R shares.
Effective July 15, 1996, Class R shares were redesignated as Retail shares.
Effective August 15, 1997, Retail shares were redesignated as BASIC shares.
** Net investment income before reimbursement of expenses by
investment manager for the period ended October 31, 1994 was $.39 per share.
*** Annualized expense ratio before reimbursement of expenses by
investment manager for the period ended October 31, 1994 was 1.41%.
Annualized.
Total return represents aggregate total return for the periods indicated.
# Prior to October 17, 1994, Mellon Bank served as the Fund's
investment manager. Effective October 17, 1994, Dreyfus
began serving as the Fund's investment manager.
</TABLE>
[Page 6]
DESCRIPTION OF THE FUND
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 covers the U.S. investment grade fixed-rate
bond market, including government and corporate securities, agency mortgage
pass-through securities, and asset-backed securities. The Aggregate Bond
Index covers those securities in the Government/Corporate Bond Index, plus
those covered by the Lehman Mortgage-Backed Securities Index ("MBS Index")
and the Lehman Asset-Backed Securities Index ("ABS Index"). The
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: 68.83% governments; 68.83% corporates; and 9.49%
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 331/3% of its
total assets, to broker-dealers and other institutional investors pursuant to
agreements requiring that the loans be continuously secured by collateral
equal at all times in value to at least the market value of the securities
loaned. There may be risks of delay in receiving additional collateral or in
recovering the securities loaned or even a loss of rights to the collateral
should the borrower of the securities fail financially. Securities loans,
however, are made only to borrowers deemed by Dreyfus to be of good standing
and when, in its judgment, the income to be earned from the loan justifies
the attendant risks.
WHEN-ISSUED SECURITIES AND DELAYED DELIVERY TRANSACTIONS. To secure
advantageous prices or yields, the Fund may purchase U.S. Government
securities on a when-issued basis or may
[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 princi
pal 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 pro
[Page 11]
vide 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 January 31, 1998, Dreyfus managed or administered
approximately $96 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 $305 billion in
assets as of December 31, 1997, including approximately $104 billion in
mutual fund assets. As ofDecember 31, 1997, Mellon, through various
subsidiaries, provided non-investment services, such as custodial or
administration services, for more than $1.532 trillion in assets, including
approximately $60 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 Drey
fus-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 sha
res 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 BuilderRegistration
Mark, 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 cor
[Page 14]
porate 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
TouchRegistration Mark automated telephone system) by calling 1-800-645-6561.
If calling from overseas, call 516-794-5452. See "How to Redeem Fund
Shares_Procedures." Upon an exchange 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 pro
[Page 17]
mulgated 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 BUILDERRegistration Mark
Dreyfus-AUTOMATIC Asset Builder permits you to purchase Fund shares
(minimum of $100 and maximum of $150,000 per transaction) at regular
intervals selected by you. Fund shares are purchased by transferring funds
from the bank account designated by you. At your option, the bank account
designated by you will be debited in the specified amount, and Fund shares
will be purchased, once a month, on either the first or fifteenth day, or
twice a month, on both days. Only an account maintained at a domestic
financial institution which is an ACH member may be so designated. To
establish a Dreyfus-AUTOMATIC Asset Builder account, you must file an
authorization form with the Transfer Agent. You may obtain the necessary
authorization form by calling 1-800-645-6561. You may cancel your
participation in this Privilege or change the amount of purchase at any time
by mailing written notification to The Dreyfus Family of Funds, P.O. Box
9671, Providence, Rhode Island 02940-9671, or, if for Dreyfus retirement plan
accounts, to The Dreyfus Trust Company, Custodian, P.O. Box 6427, Providence,
Rhode Island 02940-6427, and the notification will be effective three
business days following receipt. The Fund may modify or terminate this
Privilege at any time or charge a service fee. No such fee currently is
contemplated.
DREYFUS DIVIDEND OPTIONS
Dreyfus Dividend Sweep enables you to invest automatically dividends
or dividends and 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-A
UTOMATIC Asset BuilderRegistration Mark, 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 BUILDERRegistration Mark 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 Privi
lege 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 TouchRegistration Mark automated telephone system) from any
person representing himself or herself to be you, or a representative of your
Agent, and reasonably believed by the Transfer Agent to be genuine. The Fund
will require the Transfer Agent to employ reasonable procedures, such as
requiring a form of personal identification, to confirm that instructions are
genuine and, if it does not follow such procedures, the Fund or the Transfer
Agent may be liable for any losses due to unauthorized or fraudulent
instructions. Neither the Fund nor the Transfer Agent will be liable for
following telephone instructions reasonably believed to be genuine.
During times of drastic economic or market conditions, you may
experience difficulty in contacting the Transfer Agent by telephone to
request a redemption or an exchange of Fund shares. In such cases, you should
consider using the other redemption procedures described herein. Use of these
other redemption procedures may result in your redemption request being
processed at a later time than it would have been if telephone redemption had
been used. During the delay, the Fund's NAV may fluctuate.
REGULAR REDEMPTION. Under the regular redemption procedure, you may redeem
your shares by written request mailed to The Dreyfus Family of Funds, P.O.
Box 9671, Providence, Rhode Island
[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. Redemp
tion 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." Redemptio
n 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 permanentl
y 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. Distribution
s 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 591/2, generally will
be subject to an additional tax equal to 10% of the taxable portion of the
distribution. If the distribution from such a retirement plan (other than
certain governmental or church plans) for any taxable year following the year
in which the participant reaches age 701/2 is less than the "minimum required
distribution" for that taxable year, an excise tax equal to 50% of the
deficiency may be imposed by the IRS. The administrator, trustee or custodian
of such a retirement plan will be responsible for reporting distributions
from such plans to the IRS. Moreover, certain contributions to a qualified
retirement plan in excess of the amounts permitted by law may be subject to
an excise tax. If a distributee of an "eligible rollover distribution" from a
qualified retirement plan does not elect to have the eligible rollover
distribution paid directly from the plan to an eligible retirement plan in a
"direct rollover," the eligible rollover distribution 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. Advertisem
ents of the Fund's performance will include the Fund's average annual total
return for one, five and ten year periods, or for shorter periods depending
upon the length of time during which the Fund has operated. Computations of
average annual total return for periods of less than one year represent an
annualization of the Fund's actual total return for the applicable period.
Total return is computed on a per share basis and assumes the
reinvestment of dividends and other distributions. Total return generally is
expressed as a percentage rate which is calculated by combining the income
and principal changes for a specified period and dividing by the NAV at the
beginning of the period. Advertisements may include the percentage rate of
total return or may include the 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 infor
[Page 26]
mation, 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]
Bond Market
Index Fund
Prospectus
Registration Mark
Copy Rights 1998 Dreyfus Service Corporation
310/710p0398
[Page 28]
- --------------------------------------------------------------------------
PROSPECTUS MARCH 1, 1998
DREYFUS BASIC S&P 500 STOCK INDEX FUND
- --------------------------------------------------------------------------
DREYFUS BASIC S&P 500 STOCK INDEX FUND (THE "FUND"), FORMERLY
CALLED THE "DREYFUSINSTITUTIONAL S&P 500 STOCK INDEX FUND," IS A SEPARATE,
DIVERSIFIED PORTFOLIO OF THE DREYFUS/LAUREL FUNDS, INC., AN OPEN-END
MANAGEMENT INVESTMENT COMPANY (THE "COMPANY"), KNOWN AS A MUTUAL FUND. THE
FUND'S INVESTMENT OBJECTIVE IS TO REPLICATE THE TOTAL RETURN OF THE STANDARD
& POOR'S 500 COMPOSITE STOCK PRICE INDEX PRIMARILY THROUGH INVESTMENTS IN
EQUITY SECURITIES.
SHARES OF THE FUND ARE SOLD WITHOUT A SALES LOAD.
YOU CAN PURCHASE OR REDEEM SHARES BY TELEPHONE USING THE DREYFUS
TELETRANSFER PRIVILEGE.
THE DREYFUS CORPORATION SERVES AS THE FUND'S INVESTMENT MANAGER.
THE DREYFUS CORPORATION IS REFERRED TO AS "DREYFUS."
THIS PROSPECTUS SETS FORTH CONCISELY INFORMATION ABOUT THE FUND
THAT YOU SHOULD KNOW BEFORE INVESTING. IT SHOULD BE READ CAREFULLY BEFORE YOU
INVEST AND RETAINED FOR FUTURE REFERENCE.
THE STATEMENT OF ADDITIONAL INFORMATION ("SAI") DATED MARCH 1,
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
PAGE
EXPENSE SUMMARY.................................. 4
FINANCIAL HIGHLIGHTS............................. 5
DESCRIPTION OF THE FUND.......................... 6
MANAGEMENT OF THE FUND........................... 10
HOW TO BUY FUND SHARES........................... 12
SHAREHOLDER SERVICES............................. 14
HOW TO REDEEM FUND SHARES........................ 17
ADDITIONAL INFORMATION ABOUT PURCHASES, EXCHANGES
AND REDEMPTIONS 19
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES......... 20
PERFORMANCE INFORMATION.......................... 22
GENERAL INFORMATION.............................. 23
[Page 2]
[This Page Intentionally Left Blank]
[Page 3]
<TABLE>
EXPENSE SUMMARY
SHAREHOLDER TRANSACTION EXPENSES:
<S> <C> <C>
Maximum Sales Load Imposed on Purchases..................... none
Maximum Sales Load Imposed on Reinvestments................. none
Deferred Sales Load......................................... none
Redemption Fee.............................................. none
Exchange Fee................................................ none
ESTIMATED ANNUAL FUND OPERATING EXPENSES:
(as a percentage of net assets)
Management Fees............................................. .20%
Other Expenses(1)........................................... .00%
Total Fund Operating Expenses............................... .20%
EXAMPLE:
You would pay the following expenses
on a $1,000 investment, assuming (1) a 5% annual
return and (2) redemption at the end of each
time period:
1 YEAR $ 2
3 YEARS $ 6
5 YEARS $11
10 YEARS $26
(1) Does not include fees and expenses of the non-interested Directors
(including counsel). The investment manager is
contractually required to reduce its Management Fee in an amount equal to the
Fund's allocable portion of such fees and expenses, which are estimated to be
..01% of the Fund's net assets. (See "Management of the Fund.")
</TABLE>
- ------------------------------------------------------------------------------
THE AMOUNTS LISTED IN THE EXAMPLE SHOULD NOT BE CONSIDERED AS
REPRESENTATIVE OF FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS
THAN THOSE INDICATED. MOREOVER, WHILE THE EXAMPLE ASSUMES A 5% ANNUAL RETURN,
THE FUND'S ACTUAL PERFORMANCE WILL VARY AND MAY RESULT IN AN ACTUAL RETURN
GREATER OR LESS THAN 5%.
- ------------------------------------------------------------------------------
The purpose of the foregoing table is to assist you in
understanding the various costs and expenses that investors will bear,
directly or indirectly, the payment of which will reduce investors' return on
an annual basis. The information in the foregoing table does not reflect any
fee waivers or expense reimbursement arrangements that may be in effect.
Certain banks, securities dealers and brokers ("Selected Dealers") or other
financial institutions (collectively, "Agents") may charge their clients
direct fees for effecting transactions in Fund shares. Such fees are not
reflected in the foregoing table. See "Management of the Fund," "How to Buy
Fund Shares" and "How to Redeem Fund Shares."
The Company understands that Agents (including Mellon Bank and its
affiliates) 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 table below is based upon a single 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 the Fund's performance is contained in the Fund's Annual Report which
may be obtained without charge by writing to the address or calling the number
set forth on the cover page of this Prospectus.
<TABLE>
DREYFUS BASIC S&P 500 STOCK INDEX FUND
For a share outstanding throughout each year or period.*
YEAR YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED
10/31/97 10/31/96 10/31/95 10/31/94 10/31/93
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $15.38 $12.75 $10.42 $10.23 $10.00
------- ------- ------- ------- -------
Investment Operations:
Net investment income 0.30 0.29 0.26 0.21# 0.01
Net realized and unrealized gain
on investments 4.52 2.69 2.37 0.14 0.22
------- ------- ------- ------- -------
Total from Investment )perations 4.82 2.98 2.63 0.35 0.23
------- ------- ------- ------- -------
Distributions:
Distributions from net investment income (0.28) (0.30) (0.26) (0.16) _
Distributions from net realized gain on investments (0.19) (0.05) (0.04) (0.00) _
------- ------- ------- ------- -------
Total distributions (0.47) (0.35) (0.30) (0.16) _
------- ------- ------- ------- -------
Net asset value, end of period $19.73 $15.38 $12.75 $10.42 $10.23
======= ======= ======= ======= =======
Total return 31.87% 23.78% 25.75% 3.50% 2.30%**
------- ------- ------- ------- -------
Ratios/supplemental data:
Net assets, end of period (in 000's) $803,142 $449,123 $204,278 $123,994 $24,004
Net of expenses to
average net assets 0.20% 0.20% 0.37% 0.40%*** 0.04%**##
Net of net investment income to
average net assets 1.72% 2.16% 2.36% 2.38% .12%**##
Portfolio turnover rate 3.75% 4.75% 1.03% 13.00% 22.00%###
Average commission rate paid#### $.0299 $.0297 _ _ _
- ------------------------------------------------------------------------------
* The Fund commenced operations on September 30, 1993. The Fund
commenced selling Investor Shares on April 18, 1994.
Those shares outstanding prior to April 4, 1994 were designated Trust shares.
Effective October 17, 1994, the Fund's Trust Shares
were redesignated Class R shares. Effective September 15, 1995, the Fund's
Investor and Class R designations were eliminated and the Fund became a
single class Fund. The Financial Highlights are based upon the Fund's Trust
(Class R) shares for the period prior to September 14, 1995, and its single
class of shares effective September 15, 1995.
** Not annualized.
*** Annualized expense ratio before voluntary reimbursement of
expenses by the investment adviser for the year ended October 31, 1994 was
0.45%.
+ Amount represents less than $0.01.
++ Total return represents aggregate total return for periods indicated.
+++ Prior to October 17, 1994, Mellon Bank served as the Fund's investment manager. Effective October 17, 1994, Dreyfus began
serving as the Fund's investment manager.
# Net investment income per share before reimbursement of expenses by the investment adviser for the year ended October
31, 1994 was $0.21.
## For the period September 30, 1993 (commencement of operations) to October 31, 1993, the investment adviser reimbursed
expenses of the Fund amounting to $0.0103 per share.
### Turnover calculations does not include in-kind purchases amounting to $22,472,314.
####For fiscal years beginning November 1, 1995, the Fund is required to disclose its average commission rate paid per share for
purchases and sales of investment securities.
</TABLE>
[Page 5]
<TABLE>
Debt Outstanding
YEAR ENDED OCTOBER 31, 1997(1)
-------------------------------
<S> <C> <C>
PER SHARE DATA:
Amount of debt outstanding at
end of year (in thousands).............................................. _
Average amount of debt outstanding
throughout year (in thousands)(2)....................................... $ 40
Average number of shares outstanding
throughout year (in thousands)(3)....................................... 34,099
Average amount of debt per
share throughout year................................................... _
- -------------------
(1) From September 30, 1993 through October 31,
1996, the Fund had no outstanding debt.
(2) Based upon daily outstanding borrowings.
(3) Based upon month-end balances.
</TABLE>
DESCRIPTION OF THE FUND
INVESTMENT OBJECTIVE
The Fund's investment objective is to replicate the total return
of the Standard & Poor's 500 Composite Stock Price Index (the "S&P 500 Index"
or the "Index") primarily through investments in equity securities.
MANAGEMENT POLICIES
The Fund is not managed according to traditional methods of
"active" investment management, which involve the buying and selling of
securities based upon economic, financial and market analysis and investment
judgment. Instead, the Fund utilizes a "passive" investment approach,
attempting to duplicate the investment performance of the S&P 500 Index
through statistical procedures.
The S&P 500 Index is composed of 500 common stocks that are
selected by Standard & Poor's to best capture the price performance of a
large cross-section of the U.S. publicly traded stock market. The 500
securities, most of which trade on the New York Stock Exchange ("NYSE"),
represent approximately 75% of the market value of all U.S. common stocks.
Each stock in the S&P 500 Index is weighted by its market capitalization.
That is, each security is weighted by its total market value relative to the
total market value of all the securities in the Index. Component stocks
included in the S&P 500 Index are chosen with the aim of achieving a
distribution at the index level representative of the various components of
the U.S. economy and therefore do not represent the 500 largest companies.
Aggregate market value and trading activity are also considered in the
selection process.
As the Fund's assets increase, the Fund expects to invest in all
500 stocks in the S&P 500 Index, including Mellon Bank Corporation stock, in
proportion to their weighting in the Index. To the extent that the size of
the Fund does not permit it to invest in all 500 stocks in the Index, the
Fund will purchase a representative sample of stock from each industry sector
included in the Index in proportion to that industry's weighting in the
Index.
To the extent that the Fund seeks to replicate the S&P 500 Index
using such sampling techniques, a close correlation between the Fund's
performance and the performance of the Index is anticipated in both rising
and falling markets. The Fund attempts to achieve a correlation between the
performance of its investments and that of the Index of at least 0.95, before
deduction of expenses. A correlation of 1.00 would represent perfect
correlation between Fund and Index performance. It is anticipated that the
correlation of the Fund's performance to that of the Index will increase as
the size of the Fund increases. The Fund's ability to achieve significant
correlation between Fund and Index performance may be affected by changes in
securities markets, changes in the composition of the Index and the timing of
[Page 6]
purchases and redemptions of Fund shares. The Fund's investment manager,
Dreyfus, monitors this correlation and reports periodically to the Board of
Directors. Should the Fund fail to achieve an appropriate level of
correlation, the Board will consider alternative arrangements.
Under normal circumstances, the Fund invests at least 95% of its
total assets in the common stocks included in the S&P 500 Index. To maintain
liquidity, the Fund may invest up to 5% of its assets in the following
instruments: U.S. Government securities, commercial paper, bank certificates
of deposit, bank demand and time deposits, repurchase agreements, when-issued
transactions and variable amount master demand notes. The Fund may also
engage in reverse repurchase agreements, and may lend securities in an amount
not to exceed 331\3% of its total assets. The Fund may also enter into
futures contracts and options to a limited extent. The Fund will invest in
futures contracts or options or money market instruments as part of a
temporary defensive strategy, such as decreasing the Fund's investment in
common stocks to protect against potential stock market declines.
ADDITIONAL INFORMATION ABOUT THE FUND. "Standard & Poor's
Registration Mark," "S&PRegistration Mark," "S&P 500Registration Mark," and
"Standard & Poor's 500," are trademarks of The McGraw-Hill Companies, Inc.
and have been licensed for use by the Company. The Fund is not sponsored,
endorsed, sold or promoted by Standard & Poor's and Standard & Poor's makes
no representation regarding the advisability of investing in the Fund.
Standard & Poor's makes no representation or warranty, express or implied, to
the owners of the Fund or any member of the public regarding the advisability
of investing in securities generally or in the Fund particularly or the
ability of the S&P 500 Index to track general stock market performance.
Standard & Poor's only relationship to the Company is the licensing of certain
trademarks and trade names of Standard & Poor's and of the S&P 500 Index
which is determined, composed and calculated by Standard & Poor's without
regard to the Company or the Fund. Standard & Poor's has no obligation to take
the needs of the Company or the owners of the Fund into consideration in
determining,composing or calculating the S&P 500 Index. Standard & Poor's is
not responsible for and has not participated in the determination of the
prices and amount of the Fund or the timing of the issuance or sale of the
Fund or in the determination or calculation of the equation by which the
Fund is to be converted into cash. Standard & Poor's has no obligation or
liability in connection with the administration, marketing or trading of the
Fund.
STANDARD & POOR'S DOES NOT GUARANTEE THE ACCURACY AND/OR THE
COMPLETENESS OF THE S&P 500 INDEX OR ANY DATA INCLUDED THEREIN AND STANDARD &
POOR'S SHALL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS
THEREIN. STANDARD & POOR'S MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO
RESULTS TO BE OBTAINED BY THE FUND, OWNERS OF THE FUND, OR ANY OTHER PERSON
OR ENTITY FROM THE USE OF THE S&P 500 INDEX OR ANY DATA INCLUDED THEREIN.
STANDARD & POOR'S MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY
DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE OR USE WITH RESPECT TO THE S&P 500 INDEX OR ANY DATA INCLUDED THEREIN.
WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL STANDARD & POOR'S
HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL
DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH
DAMAGES.
INVESTMENT TECHNIQUES
In connection with its investment objective and policies, the
Fund may employ, among others, the following investment techniques:
BORROWING. The Fund is authorized, within specified limits, to
borrow money for temporary administrative purposes and to pledge its assets
in connection with such borrowings.
[Page 7]
SECURITIES LENDING. To increase return on Fund securities, the
Fund may lend its portfolio securities to broker-dealers and other
institutional investors pursuant to agreements requiring that the loans be
continuously secured by collateral equal at all times in value to at least
the market value of the securities loaned. There may be risks of delay in
receiving additional collateral or in recovering the securities loaned or
even a loss of rights to the collateral should the borrower of the securities
fail financially. Securities loans, however, are made only to borrowers
deemed by Dreyfus to be of good standing and when, in its judgment, the
income to be earned from the loan justifies the attendant risks.
REVERSE REPURCHASE AGREEMENTS. The Fund may enter into reverse
repurchase agreements to meet redemption requests where the liquidation of
Fund securities is deemed by Dreyfus to be disadvantageous. Under a reverse
repurchase agreement, the Fund: (i) transfers possession of Fund securities
to a bank or broker-dealer in return for cash in an amount equal to a
percentage of the securities' market value; and (ii) agrees to repurchase the
securities at a future date by repaying the cash with interest. Cash or
liquid high-grade debt securities held by the Fund equal in value to the
repurchase price including any accrued interest will be maintained in a
segregated account while a reverse repurchase agreement is in effect.
WHEN-ISSUED SECURITIES AND DELAYED DELIVERY TRANSACTIONS. To
secure advantageous prices or yields, the Fund may purchase U.S. Government
Securities on a when-issued basis or may purchase or sell securities for
delayed delivery. In such transactions, delivery of the securities occurs
beyond the normal settlement periods, but no payment or delivery is made by
the Fund prior to the actual delivery or payment by the other party to the
transaction. The purchase of securities on a when-issued or delayed delivery
basis involves the risk that, as a result of an increase in yields available
in the marketplace, the value of the securities purchased will decline prior
to the settlement date. The sale of securities for delayed delivery involves
the risk that the prices available in the market on the delivery date may be
greater than those obtained in the sale transaction. The Fund will establish
a segregated account consisting of cash, U.S. Government Securities or other
high-grade debt obligations in an amount equal to the amounts of its
when-issued and delayed delivery commitments.
FUTURES, OPTIONS AND OTHER DERIVATIVE INSTRUMENTS. The Fund may
purchase and sell various financial instruments, including financial futures
contracts (such as index futures contracts) and options (such as options on
U.S. or foreign securities or indices of such securities). These instruments
may be used, for example, to preserve a return or spread or to facilitate or
substitute for the sale or purchase of securities. The Fund's ability to use
these instruments may be limited by market conditions, regulatory limits and
tax considerations. The Fund might not use any of these strategies and there
can be no assurance that any strategy that is used will succeed. See the SAI
for more information regarding these instruments and the risks relating
thereto. The Fund may not purchase put or call options that are traded on a
national stock exchange in an amount exceeding 5% of its net assets.
The use of futures and options involves special risks, including:
(1) possible imperfect or no correlation between price movements of the
portfolio investments (held or intended to be purchased) involved in the
transaction and price movements of the instruments involved in the
transaction; (2) possible lack of a liquid secondary market for any
particular instrument at a particular time; (3) the need for additional
portfolio management skills and techniques; (4) losses due to unanticipated
market price movements; (5) the fact that, while such strategies can reduce
the risk of loss, they can also reduce the opportunity for gain, or even
result in losses, by offsetting favorable price movements in portfolio
investments; (6) incorrect forecasts by Dreyfus concerning direction of price
fluctuations of the investment involved in the transaction, which may result
in the strategy being ineffective; (7) loss of premiums paid by the Fund on
options it purchases; and (8) the possible inability of the Fund to purchase
or sell a portfolio security at a time when it would otherwise be favorable
for it to do so, or the need to sell a portfolio security at a
disadvantageous
[Page 8]
time, due to the need for the Fund to maintain "cover" or to segregate
securities in connection with such transactions and the possible inability of
the Fund to close out or liquidate its positions.
Dreyfus may use futures and options for hedging purposes (to
adjust the risk characteristics of the Fund's portfolio) and may use these
instruments to adjust the return characteristics of the Fund's portfolio of
investments. This can increase investment risk. If Dreyfus judges market
conditions incorrectly or employs a strategy that does not correlate well
with the Fund's investments, these techniques could result in a loss,
regardless of whether the intent was to reduce risk or increase return. These
techniques may increase the volatility of the Fund and may involve a small
investment of cash relative to the magnitude of the risk assumed. In
addition, these techniques could result in a loss if the counterparty to the
transaction does not perform as promised or if there is not a liquid
secondary market to close out a position that the Fund has entered into.
CERTAIN PORTFOLIO SECURITIES
COMMERCIAL PAPER. The Fund may invest in commercial paper. These
instruments are short-term obligations issued by banks and corporations that
have maturities ranging from 2 to 270 days. Each instrument may be backed
only by the credit of the issuer or may be backed by some form of credit
enhancement, typically in the form of a guarantee by a commercial bank.
Commercial paper backed by guarantees of foreign banks may involve additional
risk due to the difficulty of obtaining and enforcing judgments against such
banks and the generally less restrictive regulations to which such banks are
subject. The Fund will only invest in commercial paper of U.S. and foreign
companies rated at the time of purchase at least A-1 by Standard & Poor's,
Prime-1 by Moody's Investors Service, Inc., F-1 by Fitch Investors Service
LLP, Duff 1 by Phoenix Duff & Phelps, Corp., or A1 by IBCA, Inc.
OTHER INVESTMENT COMPANIES. The Fund may invest in securities
issued by other investment companies to the extent that such investments are
consistent with the Fund's investment objective and policies and permissible
under the Investment Company Act of 1940, as amended ("1940 Act"). As a
shareholder of another investment company, the Fund would bear, along with
other shareholders, its pro rata portion of the other investment company's
expenses, including advisory fees. These expenses would be in addition to the
advisory and other expenses that the Fund bears directly in connection with
its own operations.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase
agreements. A repurchase agreement involves the purchase of a security by the
Fund and a simultaneous agreement (generally with a bank or broker-dealer) to
repurchase that security from the Fund at a specified price and date or upon
demand. This technique offers a method of earning income on idle cash. A risk
associated with repurchase agreements is the failure of the seller to
repurchase the securities as agreed, which may cause the Fund to suffer a
loss if the market value of such securities declines before they can be
liquidated on the open market. Repurchase agreements with a duration of more
than seven days are considered illiquid securities and are subject to the
associated limits discussed under "PORTFOLIO SECURITIES _ ILLIQUID
SECURITIES" in the SAI.
U.S. GOVERNMENT SECURITIES. The Fund may invest in obligations
issued or guaranteed as to both principal and interest by the U.S. Government
or backed by the full faith and credit of the United States. In addition to
direct obligations of the U.S. Treasury, these include securities issued or
guaranteed by the Federal Housing Administration, Farmers Home
Administration, Export-Import Bank of the United States, Small Business
Administration, Government National Mortgage Association, General Services
Administration and Maritime Administration. Investments may also be made in
U.S. Government obligations that do not carry the full faith and credit
guarantee, such as those issued by the Federal National Mortgage Association,
the Federal Home Loan Mortgage Corporation, or other instrumentalities.
VARIABLE AMOUNT MASTER DEMAND NOTES. The Fund may invest in
variable amount master demand notes. Variable amount master demand notes are
unsecured obligations that are redeemable
[Page 9]
upon demand and are typically unrated. These instruments are issued pursuant
to written agreements between their issuers and holders. The agreements permit
the holders to increase (subject to an agreed maximum) and the holders and
issuers to decrease the principal amount of the notes, and specify that the
rate of interest payable on the principal fluctuates according to an
agreed-upon formula. If an issuer of a variable amount master demand note
were to default on its payment obligation, the Fund might be unable to
dispose of the note because of the absence of a secondary market and might,
for this or other reasons, suffer a loss to the extent of the default. The
Fund will only invest in variable amount master demand notes issued by
entities that Dreyfus considers creditworthy.
PORTFOLIO TURNOVER. While securities are purchased for the Fund
on the basis of potential for replicating the total return of the Index and
not for short-term trading profits, the Fund's turnover rate may exceed 100%.
A portfolio turnover rate of 100% would occur, for example, if all the
securities held by the Fund were replaced once in a period of one year. A
higher rate of portfolio turnover involves correspondingly greater brokerage
commissions and other expenses that must be borne directly by the Fund and,
thus, indirectly by its shareholders. In addition, a high rate of portfolio
turnover may result in the realization of larger amounts of short-term
capital gains that, when distributed to the Fund's shareholders, are taxable
to them as ordinary income. Nevertheless, securities transactions for the
Fund will be based only upon investment considerations and will not be
limited by any other considerations when Dreyfus deems it appropriate to make
changes in the Fund's assets.
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 January 31, 1998, Dreyfus managed or
administered approximately $96 billion in assets for more than 1.7 million
investor accounts nationwide.
Dreyfus serves as the Fund's investment manager. Dreyfus
supervises and assists in the overall management of the Fund's affairs under
an Investment Management Agreement with the Fund, subject to the overall
authority of the Company's Board of Directors in accordance with Maryland
law. Pursuant to the Investment Management Agreement, Dreyfus provides, or
arranges for one or more third parties to provide, investment advisory,
administrative, custody, fund accounting and transfer agency services to the
Fund. As the Fund's investment manager, Dreyfus manages the Fund by making
investment decisions based on the Fund's investment objective, policies and
restrictions.
Mellon is a publicly owned multibank holding company incorporated
under Pennsylvania law in 1971 and registered under the Bank Holding Company
Act of 1956, as amended. Mellon provides a comprehensive range of financial
products and services in domestic and selected international markets. Mellon
is among the twenty-five largest bank holding companies in the United States
based on total assets. Mellon's principal wholly-owned subsidiaries are
Mellon Bank, Mellon Bank (DE) National Association, Mellon Bank (MD), The
Boston Company, Inc., AFCO Credit Corporation and a number of companies known
as Mellon Financial Services Corporations. Through its subsidiaries,
including Dreyfus, Mellon managed more than $305 billion in assets as of
December 31, 1997, including approximately
[Page 10]
$104 billion in mutual fund assets. As of December 31, 1997, Mellon,
through various subsidiaries, provided non-investment services, such as
custodial or administration services, for more than $1.532 trillion in
assets, including approximately $60 billion in mutual fund assets.
Under the Investment Management Agreement, the Fund has agreed to
pay Dreyfus a monthly fee at the annual rate of 0.20 of 1% of the value of
the Fund's average daily net assets. Dreyfus pays all of the Fund's expenses,
except brokerage fees, taxes, interest, fees and expenses of the
non-interested Directors (including counsel fees), Rule 12b-1 fees (if
applicable) and extraordinary expenses. In order to compensate Dreyfus for
paying virtually all of the Fund's expenses, the Fund's investment management
fee is higher than the investment advisory fees paid by most investment
companies. Most, if not all, such companies also pay for additional
non-investment advisory expenses that are not paid by such companies'
investment advisers. Although Dreyfus does not pay for the fees and expenses
of the non-interested Directors (including counsel fees), Dreyfus is
contractually required to reduce its investment management fee by an amount
equal to the Fund's allocable share of such fees and expenses. From time to
time, Dreyfus may voluntarily waive a portion of the investment management
fees payable by the Fund. For the fiscal year ended October 31, 1997, the Fund
paid Dreyfus a monthly management fee at the annual rate of .20 of 1% of the
Fund's average daily net assets, less fees and expenses of the non-interested
Directors (including counsel fees).
For the fiscal year ended October 31, 1997, total operating
expenses were .20% of the Fund's average daily net assets.
Dreyfus may pay the Distributor for shareholder services from
Dreyfus' own assets, including past profits but not including the management
fee paid by the Fund. The Distributor may use part or all of such payments to
pay Agents in respect of these services.
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.
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. is the Fund's
sub-administrator and, pursuant to a Sub-Administration Agreement, provides
various administrative and corporate secretarial services to the Fund.
[Page 11]
HOW TO BUY FUND SHARES
GENERAL. Fund 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 is $10,000, or $5,000 for
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. Subsequent investments must be at least
$1,000 (or at least $100 in the case of persons who have held Fund shares
since September 14, 1995, except that there is no minimum on subsequent
purchases for holders of Fund shares in a Dreyfus-sponsored Keogh Plan, IRAs,
or 403(b)(7) Plan with only one participant account since September 14,
1995.) The initial investment must be accompanied by the Fund's Account
Application. The Fund reserves the right to offer Fund shares without regard
to minimum purchase requirements to employees participating in certain
qualified or non-qualified employee benefit plans or other programs where
contributions or account information can be transmitted in a manner and form
acceptable to the Fund. The Fund reserves the right to vary further the
initial and subsequent investment minimum requirements at any time.
You may purchase Fund shares by check or wire, or through the
Dreyfus TELETRANSFER Privilege described below. Checks should be made payable
to "The Dreyfus Family of Funds" or, if for Dreyfus retirement plan accounts,
to "The Dreyfus Trust Company, Custodian." Payments to open new accounts
which are mailed should be sent to The Dreyfus Family of Funds, P.O. Box
9387, Providence, Rhode Island 02940-9387. For subsequent investments, your
Fund account number should appear on the check and an investment slip should
be enclosed and sent to The Dreyfus Family of Funds, P.O. Box 105, Newark,
New Jersey 07101-0105. For Dreyfus retirement plan accounts, both initial and
subsequent investments should be sent to The Dreyfus Trust Company,
Custodian, P.O. Box 6427, Providence, Rhode Island 02940-6427. Neither
initial nor subsequent investments should be made by third party check.
Purchase orders may be delivered in person only to a Dreyfus Financial
Center. THESE ORDERS WILL BE FORWARDED TO THE FUND AND WILL BE PROCESSED ONLY
UPON RECEIPT THEREBY. For the location of the nearest Dreyfus Financial
Center, please call the telephone number listed under "General Information."
Wire payments may be made if your bank account is in a commercial
bank that is a member of the Federal Reserve System or any other bank having
a correspondent bank in New York City. Immediately available funds may be
transmitted by wire to Boston Safe Deposit and Trust Company, DDA# 044288
Dreyfus BASIC S&P500 Stock Index Fund, for purchase of Fund shares in your
name. The wire must include your Fund account number (for new accounts, your
Taxpayer Identification Number ("TIN") should be included instead), account
registration and dealer number, if applicable. If your initial purchase of
Fund shares is by wire, you should call 1-800-645-6561 after completing your
wire payment in order to obtain your Fund account number. Please include your
Fund account number on the 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.
[Page 12]
You must direct the institution to transmit immediately available
funds through the ACH system to Boston Safe Deposit and Trust Company with
instructions to credit your Fund account. The instructions must specify your
Fund account registration and Fund account number PRECEDED BY THE DIGITS
"4110."
The Distributor may pay dealers a fee of up to 0.5% of the amount
invested through such dealers in Fund shares by employees participating in
qualified or non-qualified employee benefit plans or other programs where (i)
the employers or affiliated employers maintaining such plans or programs have
a minimum of 250 employees eligible for participation in such plans or
programs or (ii) such plan's or program's aggregate investment in The Dreyfus
Family of Funds or certain other products made available by the Distributor
to such plans or programs exceeds one million dollars ("Eligible Benefit
Plans"). 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 at any time. The
Distributor will pay such fees from its own funds, other than amounts
received from the Fund, including past profits or any other source available
to it.
Federal regulations require that you provide a certified TIN upon
opening or reopening an account. See "Dividends, Other Distributions and
Taxes" and the Fund's Account Application for further information concerning
this requirement. Failure to furnish a certified TIN to the Fund could
subject you to a $50 penalty imposed by the Internal Revenue Service (the
"IRS").
NET ASSET VALUE PER SHARE ("NAV"). An investment portfolio's NAV
refers to the worth of one share. The NAV for Fund shares is computed by
adding the value of the Fund's investments, cash, and other assets, deducting
liabilities and dividing the result by the number of shares outstanding. The
valuation of assets for determining NAV for the Fund may be summarized as
follows:
The portfolio securities of the Fund listed or traded on a stock
exchange, except as otherwise noted, are valued at the latest sale price. If
no sale is reported, the mean of the latest bid and asked prices is used.
Securities traded over-the-counter are priced at the mean of the latest bid
and asked prices but will be valued at the last sale price if required by
regulations of the SEC. When market quotations are not readily available,
securities and other assets are valued at fair value as determined in good
faith in accordance with procedures established by the Board of Directors.
Bonds are valued through valuations obtained from a commercial
pricing service or at the most recent mean of the bid and asked prices
provided by investment dealers in accordance with procedures established by
the Board of Directors.
NAV is determined 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. For purposes of determining NAV,
options and futures contracts will be valued 15 minutes after the close of
trading on the floor of the NYSE. 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 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 of 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 its business day.
The public offering price of Fund shares, which are offered on a
continuous basis, is the net asset value per share.
[Page 13]
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.
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 the Fund, (a) shares
(however the same may be named) of other funds managed or administered by
Dreyfus which you would otherwise be eligible to purchase; (b) shares of
funds managed or administered by Dreyfus which do not have separate share
classes; and (c) shares of other funds specified from time to time, to the
extent such shares are offered for sale in your state of residence. These
funds have different investment objectives which may be of interest to you.
If you desire to use this service, please call 1-800-645-6561 to determine if
it is available and whether any conditions are imposed on its use.
To request an exchange, you or your Agent acting on your behalf
must give exchange instructions to the Transfer Agent in writing or by
telephone. Before any exchange, you must obtain and should review a copy of
the current prospectus of the fund into which the exchange is being made.
Prospectuses may be obtained by calling 1-800-645-6561. Except in the case of
personal retirement plans, the shares being exchanged must have a current
value of at least $500; furthermore, when 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, also by calling 1-800-645-6561. If you have established the
Telephone Exchange Privilege, you may telephone exchange instructions
(including over The Dreyfus TouchRegistration Mark automated telephone
system) by calling 1-800-645-6561. If calling from overseas, call
516-794-5452. See "How to Redeem Fund Shares_Procedures." Upon an exchange
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 into funds sold with a
sales load. If you are exchanging into a fund that charges a sales load, you
may qualify for share prices which do not include the sales load or which
reflect a reduced sales load, if the shares of the fund from which you are
exchanging were: (a) purchased with a sales load, (b) acquired by a previous
exchange from shares purchased with a sales load, or (c) acquired through
reinvestment of dividends or other distributions paid with respect to the
foregoing categories of shares.
[Page 14]
To qualify, at the time of the exchange you must notify the Transfer Agent or
your Agent must notify the Distributor. Any such qualification is subject to
confirmation of your holdings through a check of appropriate records. See
"Shareholder Services" in the SAI. No fees currently are charged shareholders
directly in connection with exchanges, although the Fund reserves the right,
upon not less than 60 days' written notice, to charge shareholders a nominal
fee in accordance with rules promulgated by the SEC. The Fund reserves the
right to reject any exchange request in whole or in part. The availability of
Fund Exchanges may be modified or terminated at any time upon notice to
shareholders.
The exchange of shares of one fund for shares of another is
treated for Federal income tax purposes as a sale of the shares given in
exchange by the shareholder and, therefore, an exchanging shareholder may
realize a taxable gain or loss.
DREYFUS AUTO-EXCHANGE PRIVILEGE
Dreyfus Auto-Exchange Privilege enables you to invest regularly
(on a semi-monthly, monthly, quarterly or annual basis), in exchange for
shares of the Fund, in (a) shares (however the same may be named) of certain
other funds in the Dreyfus Family of Funds; and (b) shares of other funds
specified from time to time, of which you are currently an investor. The
amount you designate, which can be expressed either in terms of a specific
dollar or share amount ($100 minimum), will be exchanged automatically on the
first and/or fifteenth day of the month according to the schedule you have
selected. Shares will be exchanged at the then-current net asset value;
however a sales load may be charged with respect to exchanges into funds sold
with a sales load. The right to exercise this Privilege may be modified or
canceled by the Fund or the Transfer Agent. You may modify or cancel your
exercise of this Privilege at any time by mailing written notification to The
Dreyfus Family of Funds, P.O. Box 9671, Providence, Rhode Island 02940-9671.
The Fund may charge a service fee for the use of this Privilege. No such fee
currently is contemplated. The exchange of shares of one fund for shares of
another is treated for Federal income tax purposes as a sale of the shares
given in exchange by the shareholder and, therefore, an exchanging
shareholder may realize a taxable gain or loss. For more information
concerning this Privilege and the funds in the Dreyfus Family of Funds
eligible to participate in this Privilege, or to obtain a Dreyfus
Auto-Exchange Authorization Form, please call toll free 1-800-645-6561.
DREYFUS-AUTOMATIC ASSET BUILDERRegistration Mark
Dreyfus-AUTOMATIC Asset Builder permits you to purchase Fund
shares (minimum of $100 and maximum of $150,000 per transaction) at regular
intervals selected by you. Fund shares are purchased by transferring funds
from the bank account designated by you. At your option, the bank account
designated by you will be debited in the specified amount, and Fund shares
will be purchased, once a month, on either the first or fifteenth day, or
twice a month, on both days. Only an account maintained at a domestic
financial institution which is an ACH member may be so designated. To
establish a Dreyfus-AUTOMATIC Asset Builder account, you must file an
authorization form with the Transfer Agent. You may obtain the necessary
authorization form by calling 1-800-645-6561. You may cancel your
participation in this Privilege or change the amount of purchase at any time
by mailing written notification to the Dreyfus Family of Funds, P.O. Box
9671, Providence, Rhode Island 02940-9671, or, if for Dreyfus retirement plan
accounts to The Dreyfus Trust Company, Custodian, P.O. Box 6427, Providence,
Rhode Island 02940-6427, and the notification will be effective three
business days following receipt. The Fund may modify or terminate this
Privilege at any time or charge a service fee. No such fee currently is
contemplated.
DREYFUS DIVIDEND OPTIONS
Dreyfus Dividend Sweep enables you to invest automatically
dividends or dividends and capital gain distributions, if any, paid by the
Fund in (a) shares (however the same may be named) of certain other funds in
The Dreyfus Family of Funds; and (b) shares of other funds specified from
time to time, of which you are a shareholder. Shares of the other fund will
be purchased at the then-current NAV; however, a
[Page 15]
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 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 capital
gain distributions, if any, from the Fund to a designated bank account. Only
an account maintained at a domestic financial institution which is an ACH
member may be so designated. Banks may charge a fee for this service.
For more information concerning these Privileges, or to request a
Dreyfus Dividend Options Form, please call toll free 1-800-645-6561. You may
cancel these Privileges by mailing written notification to The Dreyfus Family
of Funds, P.O. Box 9671, Providence, Rhode Island 02940-9671. To select a new
fund after cancellation, you must submit a new Dividend Options Form.
Enrollment in or cancellation of these Privileges is effective three business
days following receipt. These Privileges are available only for existing
accounts and may not be used to open new accounts. Minimum subsequent
investments do not apply for 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.
Shares held under Keogh Plans, IRAs or other retirement plans are not
eligible for this Privilege.
AUTOMATIC WITHDRAWAL PLAN
The Automatic Withdrawal Plan permits you to request withdrawal
of a specified dollar amount (minimum of $50) on either a monthly or
quarterly basis if you have a $5,000 minimum account. An Automatic
[Page 16]
Withdrawal Plan may be established by filing an Automatic Withdrawal Plan
application with the Transfer Agent or by oral request fromany of the
authorized signatories on the account by calling 1-800-645-6561.
The Automatic Withdrawal Plan may be ended at any time by the shareholder,
the Fund or the Transfer Agent. Shares for which certificates have been
issued may not be redeemed through the Automatic Withdrawal Plan.
RETIREMENT PLANS
The Fund offers a variety of pension and profit-sharing plans,
including Keogh Plans, IRAs (including regular IRAs, spousal IRAs for a
non-working spouse, Roth IRAs, SEP-IRAs and rollover 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.
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 net asset value.
The Fund ordinarily will make payment for all shares redeemed
within seven days after receipt by the Transfer Agent of a redemption request
in proper form, except as provided by the rules of the SEC. HOWEVER, IF YOU
HAVE PURCHASED FUND SHARES BY CHECK, BY THE DREYFUS TELETRANSFER PRIVILEGE OR
THROUGH DREYFUS-AUTOMATIC ASSET BUILDERRegistration Mark AND SUBSEQUENTLY
SUBMIT A WRITTEN REDEMPTION REQUEST TO THE TRANSFER AGENT, THE REDEMPTION
PROCEEDS WILL BE TRANSMITTED TO YOU PROMPTLY UPON BANK CLEARANCE OF YOUR
PURCHASE CHECK, DREYFUS TELETRANSFER PURCHASE OR DREYFUS-AUTOMATIC ASSET
BUILDER ORDER, WHICH MAY TAKE UP TO EIGHT BUSINESS DAYS OR MORE. IN ADDITION,
THE FUND WILL REJECT REQUESTS TO REDEEM SHARES BY WIRE OR TELEPHONE OR
PURSUANT TO THE DREYFUS TELETRANSFER PRIVILEGE FOR A PERIOD OF EIGHT BUSINESS
DAYS AFTER RECEIPT BY THE TRANSFER AGENT OF THE PURCHASE CHECK, THE DREYFUS
TELETRANSFER PURCHASE OR THE DREYFUS-AUTOMATIC ASSET BUILDER ORDER AGAINST
WHICH SUCH REDEMPTION IS REQUESTED. THESE PROCEDURES WILL NOT APPLY IF YOUR
SHARES WERE PURCHASED BY WIRE PAYMENT, OR IF YOU OTHERWISE HAVE A SUFFICIENT
COLLECTED BALANCE IN YOUR ACCOUNT TO COVER THE REDEMPTION REQUEST. PRIOR TO
THE TIME ANY REDEMPTION IS EFFECTIVE, DIVIDENDS ON SUCH SHARES WILL ACCRUE
AND BE PAYABLE, AND YOU WILL BE ENTITLED TO EXERCISE ALL OTHER RIGHTS OF
BENEFICIAL OWNERSHIP. Fund shares will not be redeemed until the Transfer
Agent has received your Account Application.
The Fund reserves the right to redeem a shareholder's account at its
option upon not less than 45 days' written notice if the NAV of such account
is $5,000 or less ($500 or less in the case of Fund shareholders since
September 14, 1995) and remains at or below such amount during the notice
period. These amounts may be changed by the Fund at its option.
PROCEDURES. You may redeem Fund 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
[Page 17]
Shareholder Services Form or by oral request from any of the authorized
signatories on the account by calling 1-800-645-6561. You also may 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. If you are a client of a Selected
Dealer, you can also redeem Fund shares through the Selected Dealer. 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 TouchRegistration Mark automated telephone
system) from any person representing himself or herself to be you, or a
representative of your Agent, and reasonably believed by the Transfer Agent
to be genuine. The Fund will require the Transfer Agent to employ reasonable
procedures, such as requiring a form of personal identification, to confirm
that instructions are genuine and, if it does not follow such procedures, the
Fund or the Transfer Agent may be liable for any losses due to unauthorized
or fraudulent instructions. Neither the Fund nor the Transfer Agent will be
liable for following telephone instructions reasonably believed to be
genuine.
During times of drastic economic or market conditions, you may
experience difficulty in contacting the Transfer Agent by telephone to
request a redemption or an exchange of Fund shares. In such cases, you should
consider using the other redemption procedures described herein. Use of these
other redemption procedures may result in your redemption request being
processed at a later time than it would have been if telephone redemption had
been used. During the delay, the Fund's NAV may fluctuate.
REGULAR REDEMPTION. Under the regular redemption procedure, you
may redeem your shares by written request mailed to The Dreyfus Family of
Funds, P.O. Box 9671, Providence, Rhode Island 02940-9671, or, if for Dreyfus
retirement plan accounts, to The Dreyfus Trust Company, Custodian, P.O. Box
6427, Providence, Rhode Island 02940-6427. Redemption requests may be
delivered in person only to a Dreyfus Financial Center. THESE REQUESTS WILL
BE FORWARDED TO THE FUND AND WILL BE PROCESSED ONLY UPON RECEIPT THEREBY. For
the location of the nearest Dreyfus Financial Center, please call the
telephone number listed under "General Information." Redemption requests must
be signed by each shareholder, including each owner of a joint account, and
each signature must be guaranteed. The Transfer Agent has adopted standards
and procedures pursuant to which signature-guarantees in proper form
generally will be accepted from domestic banks, brokers, dealers, credit
unions, national securities exchanges, registered securities associations,
clearing agencies and savings associations, as well as from participants in
the New York Stock Exchange Medallion Signature Program, the Securities
Transfer Agents Medallion Program ("STAMP"), and the Stock Exchanges
Medallion Program. For more information with respect to signature-guarantees,
please call the telephone number listed under "General Information."
Redemption proceeds of at least $1,000 will be wired to any
member bank of the Federal Reserve System in accordance with a written
signature-guaranteed request.
WIRE REDEMPTION PRIVILEGE. You may request by wire, 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.
[Page 18
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 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
[Page 19]
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 NAV 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.
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
The Fund ordinarily declares and pays dividends from its net
investment income, if any, four times yearly, and distributes net realized
capital gains, if any, once a year, but it may make distributions on a more
frequent basis to comply with the distribution requirements of the Internal
Revenue Code of 1986, as amended (the "Code"), in all events in a manner
consistent with the provisions of the 1940 Act. The Fund will not make
distributions from net realized capital gains unless all capital loss
carryovers, if any, have been utilized or have expired. Investors other than
qualified retirement plans may choose whether to receive dividends and other
distributions in cash, to receive dividends in cash and reinvest other
distributions in additional Fund shares at NAV, or to reinvest both dividends
and other distributions in additional Fund shares at NAV; dividends and other
distributions paid to qualified retirement plans are reinvested automatically
in additional Fund shares at NAV. All expenses are accrued daily and deducted
before declaration of dividends to investors.
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 its earnings 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 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 the Fund's net capital gain (the excess of
net long-term capital gain over net short-term capital loss) will be taxable
to such shareholders as long-term capital gains, 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. Dividends and other
distributions also may be subject to state and local taxes.
Dividend distributions paid by the Fund to a non-resident foreign
investor generally are subject to U.S. withholding tax at the rate of 30%,
unless the foreign investor claims the benefit of a lower rate specified in a
tax treaty. Distributions from net capital gain paid by the Fund to a
non-resident foreign
[Page 20]
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 591\2, generally will
be subject to an additional tax equal to 10% of the taxable portion of the
distribution. If the distribution from such a retirement plan (other than
certain governmental or church plans) for any taxable year following the year
in which the participant reaches age 701\2 is less than the "minimum required
distribution" for the 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. Morever, certain contributions to a qualified
retirment plan in excess of the amounts permitted by law may be subject to an
excise tax. If a distributee of an "eligible rollover distribution" from a
qualified retirement plan does not elect to have the eligible rollover
distribution paid directly from the plan to an eligible retirement plan in a
"direct rollover," the eligible rollover distribution is subject to a 20%
income tax withholding.
The Fund must withhold and remit to the U.S. Treasury ("backup
withholding") 31% of dividends, distributions and any redemption proceeds,
regardless of the extent to which gain or loss may be realized, paid to an
individual or certain other non-corporate shareholder 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 back up 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, and may be claimed as a credit on the record
owner's federal income tax return.
The Fund may be subject to a non-deductible 4% excise tax,
measured with respect to certain undistributed amounts of taxable income and
capital gains.
You should consult your tax advisers regarding specific questions
as to Federal, state or local taxes.
[Page 21]
PERFORMANCE INFORMATION
For purposes of advertising, performance may be calculated on the
basis of average annual total return and/or total return. These total return
figures reflect changes in the price of the shares and assume that any income
dividends and/or capital gains distributions made by the Fund during the
measuring period were reinvested in shares of the Fund.
Average annual total return is calculated pursuant to a
standardized formula which assumes that an investment was purchased with an
initial payment of $1,000 and that the investment was redeemed at the end of
a stated period of time, after giving effect to the reinvestment of dividends
and other distributions during the period. The return is expressed as a
percentage rate which, if applied on a compounded annual basis, would result
in the redeemable value of the investment at the end of the period.
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 its yield. The Fund's yield is
calculated by dividing the Fund's annualized net investment income per share
during a recent 30-day (or one month) period by the net asset value of such
share on the last day of that period. Since yields fluctuate, yield data
cannot necessarily be used to compare an investment in Fund shares with bank
deposits, savings accounts, and similar investment alternatives which often
provide an agreed-upon or guaranteed fixed yield for a stated period of time.
Performance will vary from time to time and past results are not
necessarily representative of future results. You should remember that
performance is a function of portfolio management in selecting the type and
quality of portfolio securities and is affected by operating expenses.
Performance information, such as that described above, may not provide a
basis for comparison with other investments or other investment companies
using a different method of calculating performance.
The Fund may compare the performance of its shares with various
industry standards of performance including Lipper Analytical Services, Inc.
ratings, S&P 500 Composite Stock Price Index, and the Consumer Price Index.
Performance rankings as reported in CHANGING TIMES, BUSINESS WEEK,
INSTITUTIONAL INVESTOR, THE WALL STREET JOURNAL, IBC/DONOGHUE'S MONEY FUND
REPORT, MUTUAL FUND FORECASTER, NO LOAD INVESTOR, MONEY MAGAZINE, MORNINGSTAR
MUTUAL FUND VALUES, U.S. NEWS AND WORLD REPORT, FORBES, FORTUNE, BARRON'S and
similar publications may also be used in comparing the Fund's performance.
Furthermore, the Fund may quote its shares' total returns and yields in
advertisements or in shareholder reports. The Fund may also advertise
non-standardized performance information, such as total return for periods
other than those required to be shown or cumulative performance data. The
Fund may advertise a quotation of yield or other similar quotation
demonstrating the income earned or distributions made by the Fund.
[Page 22]
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 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 has one vote. All shares of all funds (and Classes
thereof, as applicable) vote together as a single class, except as to any
matter for which a separate vote of any fund or Class is required by the 1940
Act, and except as to any matter which affects the interests of one or more
particular funds or Classes, in which case only the shareholders of the
affected fund or Classes are entitled to vote, each as a separate class.
Unless otherwise required by the 1940 Act, ordinarily it will not
be necessary for the Fund to hold annual meetings of shareholders. As a
result, Fund shareholders may not consider each year the election of
Directors or the appointment of auditors. However, pursuant to the Company's
By-Laws, the holders of at least 10% of the shares outstanding and entitled
to vote may require the Company to hold a special meeting of shareholders for
purposes of removing a Director from office and for any other purpose.
Company shareholders may remove a Director by the affirmative vote of a
majority of the Company's voting shares. In addition, the Board of Directors
will call a meeting of shareholders for the purpose of electing Directors if,
at any time, less than a majority of the Directors then holding office have
been elected by shareholders.
The Transfer Agent maintains a record of your ownership and will
send you confirmations and statements of account.
Shareholder inquiries may be made by writing to the Fund at 144
Glenn Curtiss Boulevard, Uniondale, New York 11556-0144, or by calling toll
free 1-800-645-6561.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE
ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND IN THE
FUND'S OFFICIAL SALES LITERATURE IN CONNECTION WITH THE OFFER OF THE FUND'S
SHARES, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER IN ANY STATE IN WHICH, OR TO ANY PERSON TO WHOM,
SUCH OFFERING MAY NOT LAWFULLY BE MADE.
[Page 23]
BASIC
S&P 500
Stock Index Fund
Prospectus
Copy Rights 1998 Dreyfus Service Corporation
313/713p0398
Registration Mark
- ------------------------------------------------------------------------------
PROSPECTUS MARCH 1, 1998
DREYFUS INTERNATIONAL EQUITY ALLOCATION FUND
- ------------------------------------------------------------------------------
DREYFUS INTERNATIONAL EQUITY ALLOCATION 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'S OBJECTIVE IS TO EXCEED THE TOTAL RETURN OF THE MORGAN
STANLEY CAPITAL INTERNATIONAL _ EUROPE AUSTRALASIA FAR EAST (MSCI EAFE)
INDEXRegistration Mark. THE FUND PURSUES ITS OBJECTIVE THROUGH AN INVESTMENT
PROCESS CONSISTING OF: (I) COUNTRY ALLOCATION; (II) STOCK SELECTION; (III)
CURRENCY ALLOCATION; AND (IV) PORTFOLIO CONSTRUCTION AND RISK MANAGEMENT.
BY THIS PROSPECTUS, THE FUND IS OFFERING INVESTOR SHARES AND
RESTRICTED SHARES. (INVESTOR AND RESTRICTED SHARES OF THE FUND WERE FORMERLY
CALLED INSTITUTIONAL AND RETAIL SHARES, RESPECTIVELY.) INVESTOR SHARES AND
RESTRICTED SHARES ARE IDENTICAL, EXCEPT AS TO THE SERVICES OFFERED TO AND THE
EXPENSES BORNE BY EACH CLASS. RESTRICTED SHARES ARE SOLD PRIMARILY TO BANK
TRUST DEPARTMENTS AND OTHER FINANCIAL SERVICE PROVIDERS (INCLUDING MELLON
BANK, N.A. ("MELLON BANK") AND ITS AFFILIATES) ("BANKS") ACTING ON BEHALF OF
CUSTOMERS HAVING A QUALIFIED TRUST OR INVESTMENT ACCOUNT OR RELATIONSHIP AT
SUCH INSTITUTION, OR TO CUSTOMERS WHO HAVE RECEIVED AND HOLD SHARES OF THE
FUND DISTRIBUTED TO THEM BY VIRTUE OF SUCH AN ACCOUNT OR RELATIONSHIP.
INVESTOR SHARES ARE 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 DATED MARCH 1, 1998 (THE
"SAI"), 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 GLENNCURTISS BOULEVARD,
UNIONDALE, NEW YORK 11556-0144, OR CALL 1-800-645-6561. WHEN TELEPHONING, ASK
FOR OPERATOR 144.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
THE NET ASSET VALUE OF FUNDS OF THIS TYPE WILL FLUCTUATE FROM TIME TO TIME.
THE FEES TO WHICH THE FUND IS SUBJECT ARE SUMMARIZED IN THE "EXPENSE
SUMMARY" SECTION OF THE FUND'S PROSPECTUS. THE FUND PAYS AN AFFILIATE OF
MELLON BANK TO BE ITS INVESTMENT MANAGER. MELLON BANK OR AN AFFILIATE MAY BE
PAID FOR PERFORMING OTHER SERVICES FOR THE FUND, SUCH AS CUSTODIAN, TRANSFER
AGENT OR FUND ACCOUNTANT SERVICES. THE FUND IS DISTRIBUTED BY PREMIER MUTUAL
FUND SERVICES, INC. (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.
- ------------------------------------------------------------------------------
(Continued from Page 1)
SHARES OF THE FUND ARE SOLD WITHOUT A SALES LOAD. INVESTOR SHARES OF
THE FUND ARE SUBJECT TO DISTRIBUTION AND SHAREHOLDER SERVICING FEES.
SHARES OF THE FUND MAY BE PURCHASED OR REDEEMED BY TELEPHONE USING
THE DREYFUS TELETRANSFER PRIVILEGE.
TABLE OF CONTENTS
EXPENSE SUMMARY........................ 4
FINANCIAL HIGHLIGHTS................... 5
DESCRIPTION OF THE FUND................ 6
MANAGEMENT OF THE FUND................. 12
HOW TO BUY FUND SHARES................. 14
SHAREHOLDER SERVICES................... 17
HOW TO REDEEM FUND SHARES.............. 20
ADDITIONAL INFORMATION ABOUT PURCHASES, EXCHANGES
AND REDEMPTIONS.................... 23
DISTRIBUTION PLAN (INVESTOR SHARES ONLY)... 24
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES.... 24
PERFORMANCE INFORMATION..................... 26
GENERAL INFORMATION......................... 27
[Page 2]
[This Page Intentionally Left Blank]
[Page 3]
<TABLE>
<CAPTION>
EXPENSE SUMMARY
INVESTOR SHARES RESTRICTED SHARES
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on Purchases................ none none
Maximum Sales Load Imposed on Reinvestments............ none none
Deferred Sales Load.................................... none none
Redemption Fee......................................... none none
Exchange Fee........................................... none none
ESTIMATED ANNUAL FUND OPERATING EXPENSES:
(as a percentage of net assets)
Management Fee ........................................ 1.25% 1.25%
12b-1 Fee(1)........................................... 0.25% none
Other Expenses(2)...................................... 0.00% 0.00%
----- -----
Total Fund Operating Expenses ......................... 1.50% 1.25%
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 RESTRICTED SHARES
1 YEAR $ 15 $ 13
3 YEARS $ 48 $ 40
5 YEARS $ 82 $ 69
10 YEARS $180 $152
(1) See "Distribution Plan (Investor Shares Only)" for a description of the
Fund's Distribution Plan for Investor shares.
(2) Does not include fees and expenses of the non-interested Directors
(including counsel 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.")
- -------------------------------------------------------------------------------
</TABLE>
THE AMOUNTS LISTED IN THE EXAMPLE SHOULD NOT BE CONSIDERED AS
REPRESENTATIVE OF FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS
THAN THOSE INDICATED. MOREOVER, WHILE THE EXAMPLE ASSUMES A 5% ANNUAL RETURN,
THE FUND'S ACTUAL PERFORMANCE WILL VARY AND MAY RESULT IN AN ACTUAL RETURN
GREATER OR LESS THAN 5%.
- -------------------------------------------------------------------------------
The purpose of the foregoing table is to assist you in
understanding the various costs and expenses that investors will bear,
directly or indirectly, the payment of which will reduce investors' return on
an annual basis. Long-term investors in Investor shares could pay more in
12b-1 fees than the economic equivalent of paying the maximum front-end sales
charges applicable to mutual funds sold by members of the National
Association of Securities Dealers, Inc. The information in the foregoing
table does not reflect any fee waivers or expense reimbursement arrangements
that may be in effect. Certain banks, securities dealers and brokers
("Selected Dealers") or 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 (including Mellon Bank and
its affiliates) 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
Restricted 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 audit
ors. Further information about, and management's discussion of, the Fund's
performance is contained in the Fund's Annual Report, which may be obtained
without charge by writing to the address or calling the number set forth on
the cover page of this Prospectus.
<TABLE>
<CAPTION>
DREYFUS INTERNATIONAL EQUITY ALLOCATION FUND
FOR AN INVESTOR SHARE OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.*
YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED
10/31/97 10/31/96 10/31/95 10/31/94#
-------- -------- -------- ---------
<S> <C> <C> <C> <C>
Net asset value, beginning of period....... $11.12 $10.11 $10.06 $10.00
-------- -------- -------- ---------
Investment operations:
Net investment income (loss)............... 0.05 (0.12) 0.01 0.01
Net realized and unrealized gain on investments......... 0.10 1.37 0.06 0.05
-------- -------- -------- ---------
Total from investment operations........... 0.15 1.25 0.07 0.06
-------- -------- -------- ---------
Distributions:
Dividends from net investment income..... (0.01) (0.06) (0.02) ._
Dividends from net realized gain on investments........ (0.61) (0.18) ._ ._
-------- -------- -------- ---------
Total Distributions........................ (0.62) (0.24) (0.02) ._
-------- -------- -------- ---------
Net asset value, end of period............. $10.65 $11.12 $10.11 $10.06
======== ======== ======== =========
Total Return............................... 1.38% 12.62% 0.67% (0.60%)##
Ratios to average net assets/Supplemental data:
Net Assets, end of period (in 000's)....... $1,375 $1,561 $4,088 $71
Ratio of expenses to average net assets.. 1.50% 1.71% 1.75% 0.39%##
Ratio of net investment income to average net assets.... 0.62% 0.03% 0.04% 0.44%##
Portfolio turnover rate.................... 7.39% 34.24% 64.85% ._
Average Commission rate paid###............ $.0287 $.0219 ._ ._
- ---------------------------------------------------------------------------------
* The Fund commenced operations on August 12, 1994. Effective July 15, 1996,
the Fund's Investor shares were redesignated as Institutional shares.
Effective August 15, 1997, Institutional shares were redesignated as Investor
shares.
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.
## Not annualized.
### For fiscal years beginning November 1, 1995, the Fund is required to
disclose its average commission rate paid per share for purchases and sales
of investment securities.
</TABLE>
[Page 5]
<TABLE>
<CAPTION>
DREYFUS INTERNATIONAL EQUITY ALLOCATION FUND
FOR A RESTRICTED SHARE OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.*
YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED
10/31/97 10/31/96 10/31/95 10/31/94#
-------- -------- -------- ---------
<S> <C> <C> <C> <C>
Net asset value, beginning of period....... $11.12 $10.12 $10.06 $10.00
-------- -------- -------- ---------
Investment operations:
Net investment income (loss)............... 0.10 0.04 0.06 0.02
Net realized and unrealized gain on investments 0.08 1.23 0.02 0.04
-------- -------- -------- ---------
Total from investment operations........... 0.18 1.27 0.08 0.06
-------- -------- -------- ---------
Distributions:
Dividends from net investment income....... (0.04) (0.09) (0.02) __
Dividends from net realized gain on investments...... (0.61) (0.18) __ __
-------- -------- -------- ---------
Total Distributions........................ (0.65) (0.27) (0.02) __
-------- -------- -------- ---------
Net asset value, end of period............. $10.65 $11.12 $10.12 $10.06
======== ======== ======== =========
Total Return............................... 1.64% 12.80% 0.81% (0.60%)##
Ratios to average net assets/Supplemental data:
Net Assets, end of period (in 000's)..... $14,332 $18,702 $13,174 $11,844
Ratio of expenses to average net assets..... 1.25% 1.43% 1.50% 0.33%##
Ratio of net investment income to average net assets.... 0.86% 0.36% 0.52% 0.49%##
Portfolio turnover rate.................... 7.39% 34.24% 64.85% __
Average Commission rate paid###............ $.0287 $.0219 __ __
- ---------------------------------------------------------------------------------
* The Fund commenced operations on August 12, 1994. Effective October 17,
1994, the Fund's Trust Shares were redesignated as Class R shares. Effective
July 15, 1996, the Fund's Class R shares were redesignated as Retail shares.
Effective August 15, 1997, Retail shares were redesignated as Restricted shares.
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.
## Not annualized.
### For fiscal years beginning November 1, 1995, the Fund is required to
disclose its average commission rate paid per share for purchases and sales
of investment securities.
</TABLE>
DESCRIPTION OF THE FUND
RECENT DEVELOPMENTS
At a meeting of the Board of Directors of the Company held on
January 28, 1998, the Board approved, subject to shareholder approval, an
Agreement and Plan of Reorganization (the "Plan") between the Company, on
behalf of the Fund, and the Dreyfus Index Funds, Inc., on behalf of Dreyfus
International Stock Index Fund (the "Acquiring Fund"), a fund with an
investment objective similar to that of the Fund. The Plan provides for the
transfer of assets of the Fund to the Acquiring Fund, in a tax free exchange
for shares of common stock of the Acquiring Fund and the assumption by the
Acquiring Fund of liabilities of the Fund, the distribution of shares of the
Acquiring Fund to Fund shareholders and the subsequent termination of the
Fund (the "Reorganization").
It is currently contemplated that shareholders of the Fund will
be asked to approve the Plan at a special meeting of shareholders to be held
on or about June 9, 1998. If the Plan is approved, the Reorganization will
become effective on or about June 19, 1998. A Proxy Statement/Prospectus with
respect to the proposed Reorganization will be mailed to holders of record of
shares of the Fund on the
[Page 6]
record date (on or about March 31, 1998), prior to the meeting.
The Proxy Statement/Prospectus will describe the Acquiring Fund and other
matters. Investors may obtain a free copy of the prospectus of the Acquiring
Fund by calling the number on the cover page of this Prospectus.
GENERAL
By this Prospectus, the Fund is offering Investor shares and
Restricted shares. (Investor and Restricted shares of the Fund were formerly
called Institutional and Retail shares, respectively.) Investor shares and
Restricted shares are identical, except as to the services offered to and the
expenses borne by each Class. Investor shares are offered to any investor.
Restricted shares are sold primarily to Banks acting on behalf of customers
having a qualified trust or investment account or relationship at such
institution, or to customers who have received and hold shares of the Fund
distributed to them by virtue of such an account or relationship. Unless the
Fund is otherwise instructed, new purchases or exchanges by existing
shareholders are 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 pay lower dividends than Restricted shares.
INVESTMENT OBJECTIVE
The Fund's objective is to exceed the total return of the Morgan
Stanley Capital International_Europe Australasia Far East (MSCI EAFE)
IndexRegistration Mark (the "Benchmark"). The Fund pursues its objective
through country allocation, stock selection, currency allocation, and
portfolio construction and risk management. The Fund is not an index fund. In
addition to investing in securities in countries represented in the Benchmark,
the Fund may invest up to 20% of its total assets in securities of issuers in
emerging market countries. There can be no assurance that the Fund will meet
its investment objective. Under normal circumstances, the Fund will invest at
least 65% of its total assets in equity securities of issuers in at least
three countries outside of the United States.
MANAGEMENT POLICIES
The Benchmark is a diversified, capitalization-weighted index of
equity securities of companies located in Australia and 15 countries of
Europe and 5 countries of the Far East. The countries represented in the
Benchmark are: Australia, Austria, Belgium, Denmark, Finland, France,
Germany, Hong Kong, Ireland, Italy, Japan, the Netherlands, New Zealand,
Norway, Portugal, Singapore/Malaysia, Spain, Sweden, Switzerland and the
United Kingdom. The Fund may also invest in securities of issuers in other
countries added to the Benchmark from time to time. Stocks in the Benchmark
are selected to represent proportionally each country and each major
industrial sector within each country. Each stock in the Benchmark is
weighted according to its market value as a percentage of the total market
value of all stock in the Benchmark.
The investment process utilized by Dreyfus in structuring the
Fund has four basic components: (1) country allocation; (2) stock selection;
(3) currency allocation; and (4) portfolio construction and risk management.
The country and currency allocation components employ a combination of
quantitative research using proprietary financial models and fundamental
research.
Under normal circumstances, the Fund expects to be fully invested
in securities of issuers in countries included in the Benchmark, securities
of emerging market countries, and derivative securities, except for such
amounts as are needed to meet short-term cash needs and redemptions and
amounts pending investment. These amounts may be held as cash or temporarily
invested in repurchase agreements and in high quality short-term debt
instruments of the U.S. Government or foreign governments, their agencies or
instrumentalities. Generally, the Fund's assets are allocated to the
countries contained in the Benchmark, with the exception of Australia,
France, Germany, Hong Kong, Italy, Japan, the Netherlands, Switzerland and
the United Kingdom, approximately in proportion to the weightings of such
countries within the Benchmark (the "Tier One Country Allocation"). Dreyfus
uses
[Page 7]
its country allocation model to allocate the Fund's remaining
assets among Australia, France, Germany, Hong Kong, Italy, Japan, the
Netherlands, Switzerland and the United Kingdom, based generally on earning
and dividend forecasts of stocks in each of these countries (the "Tier Two
Country Allocation"). Dreyfus may, however, alter the amount of assets it
allocates between the Tier One Country Allocation and the Tier Two Country
Allocation if it believes it to be in the best interests of the Fund and may
reduce the amount of assets it allocates pursuant to the Tier One Country
Allocation and/or the Tier Two Country Allocation to enable it to invest in
emerging market countries and derivative securities and to enable it to
maintain amounts needed to meet short-term cash needs and redemptions and
amounts pending investment. No more than 20% of the Fund's total assets will
be invested in the securities of emerging market countries, including
Argentina, Brazil, Chile, People's Republic of China, Colombia, Czech
Republic, Greece, South Korea, Hungary, India, Indonesia, Israel, Jordan,
Mexico, Pakistan, Peru, Philippines, Poland, Sri Lanka, Taiwan, Thailand,
Turkey and Venezuela, subject to the satisfaction of regulatory standards for
the custody of assets and securities clearance systems. The Fund may also
invest in securities of other emerging markets. Each emerging market country
is analyzed from a macroeconomic and financial perspective giving equal
consideration to four factors: (1) the relative and historical market
valuation; (2) the currency risk; (3) the outlook for economic growth; and
(4) the country political risk.
Unless all of the stocks contained in the Benchmark can be
purchased on behalf of the Fund, Dreyfus will utilize statistical sampling
techniques to purchase a representative sample of stocks from each industry
sector included in the Benchmark in proportion to the industry weighting in
the Benchmark for the Fund's portfolio. Dreyfus employs an active process for
selecting stocks of emerging market countries for the Fund's portfolio.
The Fund may invest in forward foreign currency exchange
contracts, futures contracts, options on securities and on foreign
currencies, currency indices, futures contracts, and securities indices to
adjust its risk exposure relative to the Benchmark and to its investment in
emerging market countries. Dreyfus will manage currency exposure for the Fund
utilizing its proprietary currency allocation model, which is designed to
forecast the movement of foreign currencies based generally on differences in
real interest rates among countries. Dreyfus will manage and monitor the
total risk of the portfolio, including the country and currency exposure
resulting from the implementation of its country and currency models.
The Fund may invest more than 25% of its total assets in the
securities of issuers located in a single country. Investment in a particular
country of 25% or more of the Fund's assets will make the Fund's performance
more dependent on the political and economic circumstances of a particular
country than a mutual fund that is more widely diversified among issuers in
different countries. See "Certain Portfolio Securities _ Foreign
Securities." The country allocation model used by Dreyfus takes into account
a number of criteria in determining whether the Fund should invest more than
25% of its assets in issuers located in a particular country.
In no event will the Fund purchase securities which would cause
25% or more of the market value of the Fund's total assets to be invested in
securities of one or more issuers having their principal business activities
in the same industry. This limit does not apply with respect to the Fund's
investments in securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities. The Fund has a non-fundamental investment
limitation which provides that in no event will it purchase securities which
would cause more than 25% of the market value of its total assets to be
invested in securities issued or guaranteed by a single government or its
agencies and instrumentalities. The Fund may also invest in commercial paper
and may lend its portfolio securities. Under unusual circumstances, such as
drastic political or economic changes, severe social unrest or acts of war,
the Fund may be primarily invested in securities of U.S. companies, and
securities of the U.S. Government, its agencies, instrumentalities and
municipalities.
[Page 8]
INVESTMENT TECHNIQUES
In connection with its investment objective and policies, the
Fund may employ, among others, the following investment techniques:
BORROWING; SHORT SETTLEMENT. The Fund is authorized, within
specified limits, to borrow money for temporary administrative purposes and
to pledge its assets in connection with such borrowings. Short settling is a
process whereby a trader of securities, such as the Fund, negotiates with the
broker to execute and settle the securities transactions on a next day basis
instead of under the normal 3 day settlement process. The agent holding the
securities for the seller is directed to transfer the securities delivery vs.
payment for next day settlement, so that both the delivery of securities and
the sales proceeds are effected one day after trading. The commissions on the
transaction may be somewhat higher to accommodate the short settlement period
and to compensate the broker adequately for the early advancement of funds.
The ability to short settle is necessary to meet certain time sensitive
liquidity needs of the Fund. Brokers may determine whether or not they are
willing to engage in short-selling on a transaction by transaction basis. The
practice will be negotiated on an as needed basis which is expected to be
infrequently. In certain instances, to accommodate net withdrawals the Fund
may utilize a line of credit provided by a third party lender, short settling
with unaffiliated brokers, or reverse repurchase agreements with independent
parties.
SECURITIES LENDING. To increase return on Fund securities, the
Fund may lend its portfolio securities to broker-dealers and other
institutional investors pursuant to agreements requiring that the loans be
continuously secured by collateral equal at all times in value to at least
the market value of the securities loaned. There may be risks of delay in
receiving additional collateral or in recovering the securities loaned or
even a loss of rights to the collateral should the borrower of the securities
fail financially. Securities loans, however, are made only to borrowers
deemed by Dreyfus to be of good standing and when, in its judgment, the
income to be earned from the loan justifies the attendant risks.
CURRENCY EXCHANGE TRANSACTIONS. The Fund may engage in currency
exchange transactions. Generally, the Fund's foreign currency exchange
transactions will be conducted on a spot basis at the spot rate then
prevailing for purchasing or selling currencies in the foreign exchange
market. The Fund may, to a limited extent, deal in forward foreign currency
exchange contracts involving currencies of the different countries in which
it will invest as a hedge against possible variations in the foreign exchange
rates between these currencies. This is accomplished through contractual
agreements to purchase or sell a specified currency at a specified future
date (up to one year) and price set at the time of the contract. The Fund's
dealings in forward foreign currency exchange contracts are limited to
hedging involving either specific transactions or portfolio positions.
Transaction hedging is the purchase or sale of forward foreign currency
exchange contracts with respect to specific receivables (including dividends)
or payables of the Fund accruing in connection with the ownership, purchase
and sale of its portfolio securities and the sale and redemption of shares of
the Fund. Position hedging is the sale of forward foreign currency contracts
with respect to portfolio security positions denominated or quoted in such
foreign currency. The Fund will not enter into or maintain a position in such
contracts if their consummation would obligate the Fund to deliver an amount
of foreign currency greater than the value of the Fund's assets denominated
or quoted in, or currency convertible into, such currency.
Forward contracts provide for the future sale by one party and
purchase by another party of a specified amount of a specified security or
securities index or currency at a specified future time and at a specified
price. Forward contracts differ from futures contracts as the terms of the
contract are not standardized and forward contracts are not traded on
regulated exchanges. Transactions are executed over the counter. If the
counterparty defaults, the Fund might incur a loss. Dreyfus seeks to minimize
the risk of loss through forward contracts by analyzing the creditworthiness
of the counterparty under forward contract agreements. The Fund's use of
forward contracts will be restricted to the purchase or
[Page 9]
sale of foreign currency. The Fund will selectively employ currency forward
contracts in order to hedge currency risk allocated with investments in
foreign equity securities.
WHEN-ISSUED SECURITIES AND DELAYED DELIVERY TRANSACTIONS. To
secure advantageous prices or yields, the Fund may purchase U.S. Government
securities on a when-issued basis or may purchase or sell securities for
delayed delivery. In such transactions, delivery of the securities occurs
beyond the normal settlement periods, but no payment or delivery is made by
the Fund prior to the actual delivery or payment by the other party to the
transaction. The purchase of securities on a when-issued or delayed delivery
basis involves the risk that, as a result of an increase in yields available
in the marketplace, the value of the securities purchased will decline prior
to the settlement date. The sale of securities for delayed delivery involves
the risk that the prices available in the market on the delivery date may be
greater than those obtained in the sale transaction. The Fund will establish
a segregated account consisting of cash, U.S. Government securities or other
high-grade debt obligations in an amount at least equal at all times to the
amounts of its when-issued and delayed delivery commitments.
FUTURES, OPTIONS AND OTHER DERIVATIVE INSTRUMENTS. The Fund may
purchase and sell various financial instruments ("Derivative Instruments"),
such as financial futures contracts (such as interest rate, index and foreign
currency futures contracts), options (such as options on securities, indices,
foreign currencies and futures contracts), forward currency contracts and
interest rate, equity index and currency swaps, caps, collars and floors. The
index Derivative Instruments the Fund may use may be based on indices of U.S.
or foreign equity or debt securities. These Derivative Instruments may be
used, for example, to preserve a return or spread, to lock in unrealized
market value gains or losses, to facilitate or substitute for the sale or
purchase of securities, to adjust its risk exposure relative to the
Benchmark, or to alter the exposure of a particular investment or portion of
the Fund's portfolio to fluctuations in interest rates or currency rates.
The Fund's ability to use these instruments may be limited by market
conditions, regulatory limits and tax considerations. The Fund might not use
any of these strategies and there can be no assurance that any strategy that
is used will succeed. See the SAI for more information regarding these
instruments and the risks relating thereto.
The Fund may not purchase put or call options that are traded on a
national stock exchange in an amount exceeding 5% of its net assets.
RISK FACTORS
RISKS OF DERIVATIVE INSTRUMENTS. The use of Derivative Instruments
involves special risks, including: (1) possible imperfect or no correlation
between price movements of the portfolio investments (held or intended to be
purchased) involved in the transaction and price movements of the Derivative
Instruments involved in the transaction; (2) possible lack of a liquid
secondary market for any particular Derivative Instrument at a particular
time; (3) the need for additional portfolio management skills and techniques;
(4) losses due to unanticipated market price movements; (5) the fact that,
while such strategies can reduce the risk of loss, they can also reduce the
opportunity for gain, or even result in losses, by offsetting favorable price
movements in portfolio investments: (6) incorrect forecasts by Dreyfus
concerning interest or currency exchange rates or direction of price
fluctuations of the investment involved in the transaction, which may result
in the strategy being ineffective; (7) loss of premiums paid by the Fund on
options it purchases; and (8) the possible inability of the Fund to purchase
or sell a portfolio security at a time when it would otherwise be favorable
for it to do so, or the need to sell a portfolio security at a
disadvantageous time, due to the need for the Fund to maintain "cover" or to
segregate securities in connection with such transactions and the possible
inability of the Fund to close out or liquidate its positions.
Dreyfus may use Derivative Instruments for hedging purposes (to
adjust the risk characteristics of the Fund's portfolio) and may use these
instruments to adjust the return characteristics of the Fund's
[Page 10]
portfolio of investments. This can increase the investment risk. If Dreyfus
judges market conditions incorrectly or employs a strategy that does not
correlate well with the Fund's investments, these techniques could result in
a loss, regardless of whether the intent was to reduce risk or increase
return. These techniques may increase the volatility of the Fund and may
involve a small investment of cash relative to the magnitude of the risk
assumed. In addition, these techniques could result in a loss if the
counterparty to the transaction does not perform as promised or if there is
not a liquid secondary market to close out a position that the Fund has
entered into.
Options and futures transactions may increase portfolio turnover
rates, which results in correspondingly greater commission expenses and
transaction costs, and may result in certain tax consequences.
FOREIGN SECURITIES. The Fund will purchase securities of foreign
issuers and may invest in obligations of foreign branches of domestic banks
and domestic branches of foreign banks. Investment in foreign securities
presents certain risks, including those resulting from fluctuations in
currency exchange rates, revaluation of currencies, adverse political and
economic developments and the possible imposition of currency exchange
blockages or other foreign governmental laws or restrictions, reduced
availability of public information concerning issuers, and the fact that
foreign issuers are not generally subject to uniform accounting, auditing and
financial reporting standards or to other regulatory practices and
requirements comparable to those applicable to domestic issuers. Moreover,
securities of many foreign issuers may be less liquid and their prices more
volatile than those of comparable domestic issuers. In addition, with respect
to certain foreign countries, there is the possibility of expropriation,
confiscatory taxation and limitations on the use or removal of funds or other
assets of the Fund, including withholding of dividends. Foreign securities
may be subject to foreign government taxes that would reduce the yield on
such securities.
Among the foreign securities in which the Fund may invest are
those issued by companies located in developing countries, which are
countries in the initial stages of their industrialization cycles. Investing
in the equity and debt markets of developing countries involves exposure to
economic structures that are generally less diverse and less mature, and to
political systems that can be expected to have less stability, than those of
developed countries. The markets of developing countries historically have
been more volatile than the markets of the more mature economies of developed
countries, but often have produced higher rates of return to investors.
CERTAIN PORTFOLIO SECURITIES
COMMERCIAL PAPER. The Fund may invest in commercial paper. These
instruments are short-term obligations issued by banks and corporations that
have maturities ranging from 2 to 270 days. Each instrument may be backed
only by the credit of the issuer or may be backed by some form of credit
enhancement, typically in the form of a guarantee by a commercial bank.
Commercial paper backed by guarantees of foreign banks may involve additional
risk due to the difficulty of obtaining and enforcing judgments against such
banks and the generally less restrictive regulations to which such banks are
subject. The Fund will only invest in commercial paper of U.S. and foreign
companies rated at the time of purchase at least A-1 by Standard & Poor's,
Prime-1 by Moody's Investors Service, Inc., F-1 by Fitch Investors Service
LLP, Duff 1 by Phoenix Duff & Phelps, Corp., or A1 by IBCA, Inc.
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 11]
REPURCHASE AGREEMENTS. The Fund may enter into repurchase
agreements. A repurchase agreement involves the purchase of a security by the
Fund and a simultaneous agreement (generally with a bank or broker-dealer) to
repurchase that security from the Fund at a specified price and date or upon
demand. This technique offers a method of earning income on idle cash. A risk
associated with repurchase agreements is the failure of the seller to
repurchase the securities as agreed, which may cause the Fund to suffer a
loss if the market value of such securities declines before they can be
liquidated on the open market. Repurchase agreements with a duration of more
than seven days are considered illiquid securities and are subject to the
associated limits discussed under "Certain Portfolio Securities _ Illiquid
Securities."
U.S. GOVERNMENT SECURITIES. The Fund may invest in obligations
issued or guaranteed as to both principal and interest by the U.S. Government
or backed by the full faith and credit of the United States. In addition to
direct obligations of the U.S. Treasury, these include securities issued or
guaranteed by the Federal Housing Administration, Farmers Home
Administration, Export-Import Bank of the United States, Small Business
Administration, Government National Mortgage Association, General Services
Administration and Maritime Administration. Investments may also be made in
U.S. Government obligations that do not carry the full faith and credit
guarantee, such as those issued by the Federal National Mortgage Association,
the Federal Home Loan Mortgage Corporation or other instrumentalities.
PORTFOLIO TURNOVER. While securities are purchased for the Fund
on the basis of potential for exceeding the total return of the Benchmark and
not for short-term trading profits, the Fund's turnover rate may exceed 100%.
A portfolio turnover rate of 100% would occur, for example, if all the
securities held by the Fund were replaced once in a period of one year. A
higher rate of portfolio turnover (100% or more) involves correspondingly
greater brokerage commissions and other expenses that must be borne directly
by the Fund and, thus, indirectly by its shareholders. In addition, a high
rate of portfolio turnover may result in the realization of larger amounts of
short-term capital gains that, when distributed to the Fund's shareholders,
are taxable to them as ordinary income. Nevertheless, securities transactions
for the Fund will be based only upon investment considerations and will not
be limited by any other considerations when Dreyfus 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 January 31, 1998, Dreyfus managed or
administered approximately $96 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 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
[Page 12]
agency services to the Fund. As the Fund's investment manager, Dreyfus
manages the Fund by making investment decisions based on the Fund's
investment objective, policies and restrictions.
Mellon is a publicly owned multibank holding company incorporated
under Pennsylvania law in 1971 and registered under the Bank Holding Company
Act of 1956, as amended. Mellon provides a comprehensive range of financial
products and services in domestic and selected international markets. Mellon
is among the twenty-five largest bank holding companies in the United States
based on total assets. Mellon's principal wholly-owned subsidiaries are
Mellon Bank, Mellon Bank (DE) National Association, Mellon Bank (MD), The
Boston Company, Inc., AFCO Credit Corporation and a number of companies known
as Mellon Financial Services Corporations. Through its subsidiaries,
including Dreyfus, Mellon managed more than $305 billion in assets as of
December 31, 1997, including approximately $104 billion in mutual fund
assets. As of December 31, 1997, Mellon, through various subsidiaries,
provided non-investment services, such as custodial or administration
services, for more than $1.532 trillion in assets, including approximately
$60 billion in mutual fund assets.
Under the Investment Management Agreement, the Fund has agreed to
pay Dreyfus a monthly fee at the annual rate of 1.25% of the value of the
Fund's average daily net assets. Dreyfus pays all of the Fund's expenses,
except brokerage fees, taxes, interest, fees and expenses of the
non-interested Directors (including counsel fees), Rule 12b-1 fees (if
applicable) and extraordinary expenses. In order to compensate Dreyfus for
paying virtually all of the Fund's expenses, the Fund's investment management
fee is higher than the investment advisory fees paid by most investment
companies. Most, if not all, such companies also pay for additional
non-investment advisory expenses that are not paid by such companies'
investment advisers. Although Dreyfus is not obligated to pay the fees and
expenses of the non-interested Directors (including counsel fees), Dreyfus is
contractually required to reduce its investment management fee in an amount
equal to the Fund's allocable share of such expenses. From time to time,
Dreyfus may voluntarily waive a portion of the investment management fees
payable by the Fund. For the fiscal year ended October 31, 1997, the Fund paid
Dreyfus a monthly management fee at the annual rate of 1.25% 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 1.25% of the average
daily net assets of each Class for both the Investor and Restricted shares.
The Fund's portfolio manager is Charles J. Jacklin. Mr. Jacklin
has managed the Fund since August 5, 1996 and is a portfolio manager at
Dreyfus. He is also a Senior Vice President and Director of Asset Allocation
Strategies for Mellon Capital Management Corporation ("MCM") since January
1994. He manages and develops global asset allocation strategies, and
implements MCM's value-added investment strategies. Prior to joining MCM, Mr.
Jacklin was an Assistant Professor at Stanford University. He also has served
as Senior Staff Economist for Financial Markets and Banking for the
President's Council of Economic Advisors. He has published a number of
articles on finance and investment in academic research journals, and is an
associate editor for the Review of Quantitative Finance and Accounting. Mr.
Jacklin holds a Ph.D. in Finance from Stanford University.
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
[Page 13]
administered by Dreyfus as factors in the selection of broker-dealers to
execute portfolio transactions for the Fund. See "Portfolio Transactions" in
the SAI.
Dreyfus is authorized to allocate purchase and sale orders for
portfolio securities to certain financial institutions, including, in the
case of agency transactions, financial institutions that are affiliated with
Dreyfus or Mellon Bank or that have sold shares of the Fund, if Dreyfus
believes that the quality of the transaction and the commission are
comparable to what they would be with other qualified brokerage firms. From
time to time, to the extent consistent with its investment objective,
policies and restrictions, the Fund may invest in securities of companies
with which Mellon Bank has a lending relationship.
DISTRIBUTOR. The Fund's distributor is Premier Mutual Fund Services,
Inc., 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. Boston Safe Deposit andTrust Company, located at One
Boston Place, Boston, Massachusetts 02109, an indirect wholly-owned
subsidiary of Mellon, serves as 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. Restricted shares are sold primarily to Banks acting on
behalf of customers having a qualified trust or investment account or
relationship at such institution, or to customers who have received and hold
shares of the Fund distributed to them by virtue of such an account or
relationship. Investor shares are 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 is $2,500, or $1,000 if you are a
client of an Agent which maintains an omnibus account in the Fund and has
made an aggregate minimum initial purchase for its customers of $2,500.
Subsequent investments must be at least $100. The minimum initial investment
is $750 for 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, with no minimum on subsequent
purchases. 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 also offered without regard to the minimum
initial investment requirements, through Dreyfus-AUTOMATIC Asset
BuilderRegistration Mark, Dreyfus Government Direct Deposit Privilege or
Dreyfus Payroll Savings Plan pursuant to the Dreyfus Step Program
(described under "Shareholder Services").
[Page 14]
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 corporations,
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 Fund's DDA # 044210/Dreyfus International Equity Allocation Fund and
applicable Class for purchase of Fund shares in your name. The wire must
indicate which Class of shares is being purchased and it must include your
Fund account number (for new accounts, your Taxpayer Identification Number
("TIN") should be included instead), account registration and dealer number,
if applicable. If your initial purchase of Fund shares is by wire, you should
call 1-800-645-6561 after you have completed the wire payment in order to
obtain your Fund account number. You should include your Fund account number
on the Fund's Account Application and promptly mail the Account Application
to the Fund, as no redemptions will be permitted until the Account
Application is received. You may obtain further information about remitting
funds in this manner from your bank. All payments should be made in U.S.
dollars and, to avoid fees and delays, should be drawn only on U.S. banks. A
charge will be imposed if any check used for investment in your account does
not clear. The Fund makes available to certain large institutions the ability
to issue purchase instructions through compatible computer facilities.
Subsequent investments also may be made by electronic transfer of
funds from an account maintained in a bank or other domestic financial
institution that is an Automated Clearing House ("ACH") member. You must
direct the institution to transmit immediately available funds through the
ACH to Boston Safe Deposit and Trust Company with instructions to credit your
Fund account. The instructions must specify your Fund account registration
and Fund account number PRECEDED BY THE DIGITS "4480" for Investor shares and
"4470" for Restricted shares.
[Page 15]
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 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 Restricted
shares is computed by dividing the value of net assets attributable to each
Class by the number of shares of that Class outstanding. Shares of each Class
of the Fund are offered on a continuous basis. The valuation of assets for
determining NAV for the Fund may be summarized as follows:
Equity securities of the Fund listed or traded on a stock
exchange, except as otherwise noted, are valued at the latest sale price. If
no sale is reported, the current bid is used. An equity security which is
listed or traded on more than one exchange is valued at the quotation on the
exchange determined to be the primary market for such security by Dreyfus.
All other equity securities not so traded are valued at the last sales price
prior to the time of valuation.
Bonds are valued through valuations obtained from a commercial
pricing service or at the most recent mean of the bid and asked prices
provided by investment dealers in accordance with procedures established by
the Board of Directors.
For purposes of determining the Fund's NAV, all assets and
liabilities initially expressed in foreign currency values will be converted
into U.S. dollar values at the mean between the bid and offered quotations of
such currencies against U.S. dollars as last quoted by any recognized dealer.
If an event were to occur after the value of a portfolio instrument was so
established but before the NAV is determined which is likely to materially
change the NAV, then the portfolio instrument would be valued using fair
value considerations established by the Company's Board of Directors. Because
of the need to obtain prices as of the close of trading of various worldwide
exchanges, the calculation of NAV does not take place contemporaneously with
the determination of the prices of the majority of the Fund's securities.
NAV is determined 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. For purposes of determining NAV,
options and futures contracts will be valued 15 minutes after the close of
trading on the floor of the NYSE. 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 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
5:15p.m., New York time) will be based on the NAV determined as of
[Page 16]
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 its business day.
The public offering price of Investor shares and Restricted
shares, both of which are sold on a continuous basis, is the NAV of that
Class.
DREYFUS TELETRANSFER PRIVILEGE. You may purchase Fund shares
(minimum $500 and maximum $150,000 per day) by telephone if you have checked
the appropriate box and supplied the necessary information on the Fund's
Account Application or have filed a Shareholder Services Form with the Transfe
r Agent. The proceeds will be transferred between the bank account designated
in one of these documents and your Fund account. Only a bank account
maintained in a domestic financial institution which is an ACH member may be
so designated. The Fund may modify or terminate this Privilege at any time or
charge a service fee upon notice to shareholders. No such fee currently is
contemplated.
If you have selected the Dreyfus TELETRANSFER Privilege, you may
request a Dreyfus TELETRANSFER purchase of Fund shares by 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 TouchRegistration Mark automated telephone system) by calling
1-800-645-6561. If calling from overseas, 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.
[Page 17]
Shares will be exchanged at the next determined NAV; however, a
sales load may be charged with respect to exchanges of Fund shares into funds
sold with a sales load. If you are exchanging Fund shares into a fund that
charges a sales load, you may qualify for share prices which do not include
the sales load or which reflect a reduced sales load, if the shares of the
fund from which you are exchanging were: (a) purchased with a sales load, (b)
acquired by a previous exchange from shares purchased with a sales load, or
(c) acquired through reinvestment of dividends or other distributions paid
with respect to the foregoing categories of shares. To qualify, at the time
of the exchange you must notify the Transfer Agent or your Agent must notify
the Distributor. Any such qualification is subject to confirmation of your
holdings through a check of appropriate records. See "Shareholder Services"
in the SAI. No fees currently are charged shareholders directly in connection
with exchanges, although the Fund reserves the right, upon not less than 60
days' written notice, to charge shareholders a nominal fee in accordance with
rules promulgated by the SEC. The Fund reserves the right to reject any
exchange request in whole or in part. The availability of Fund Exchanges may
be modified or terminated at any time upon notice to shareholders.
The exchange of shares of one fund for shares of another is
treated for Federal income tax purposes as a sale of the shares given in
exchange by the shareholder and, therefore, an exchanging shareholder may
realize, or an exchange on behalf of a Retirement Plan which is not tax
exempt may result in, a taxable gain or loss.
DREYFUS AUTO-EXCHANGE PRIVILEGE
Dreyfus Auto-Exchange Privilege enables you to invest regularly
(on a semi-monthly, monthly, quarterly or annual basis), in exchange for
shares of the Fund, in shares of certain other eligible funds in the Dreyfus
Family of Funds of which you are currently an investor. WITH RESPECT TO FUND
SHARES HELD BY RETIREMENT PLANS, EXCHANGES PURSUANT TO THE DREYFUS
AUTO-EXCHANGE PRIVILEGE MAY BE MADE ONLY BETWEEN A SHAREHOLDER'S RETIREMENT
PLAN ACCOUNT IN ONE FUND AND SUCH SHAREHOLDER'S RETIREMENT PLAN ACCOUNT IN
ANOTHER FUND. The amount you designate, which can be expressed either in
terms of a specific dollar or share amount ($100 minimum), will be exchanged
automatically on the first and/or fifteenth day of the month according to the
schedule you have selected. Shares will be exchanged at the then-current NAV;
however, a sales load may be charged with respect to exchanges of Fund shares
into funds sold with a sales load. The right to exercise this Privilege may
be modified or canceled by the Fund or the Transfer Agent. You may modify or
cancel your exercise of this Privilege at any time by mailing written
notification to The Dreyfus Family of Funds, P.O. Box 9671, Providence, Rhode
Island 02940-9671. The Fund may charge a service fee for the use of this
Privilege. No such fee currently is contemplated. The exchange of shares of
one fund for shares of another is treated for Federal income tax purposes as
a sale of the shares given in exchange by the shareholder and, therefore, an
exchanging shareholder may realize, or an exchange on behalf of a Retirement
Plan which is not tax exempt may result in, a taxable gain or loss. For more
information concerning this Privilege and the funds in the Dreyfus Family of
Funds eligible to participate in this Privilege, or to obtain a Dreyfus
Auto-Exchange Authorization Form, please call toll free 1-800-645-6561.
DREYFUS-AUTOMATIC ASSET BUILDERRegistration Mark
Dreyfus-AUTOMATIC Asset Builder permits you to purchase Fund
shares (minimum of $100 and maximum of $150,000 per transaction) at regular
intervals selected by you. Fund shares are purchased by transferring funds
from the bank account designated by you. At your option, the bank account
designated by you will be debited in the specified amount, and Fund shares
will be purchased, once a month, on either the first or fifteenth day, or
twice a month, on both days. Only an account maintained at a domestic
financial institution which is an ACH member may be so designated. To
establish a
[Page 18]
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 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 Dividends 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
[Page 19]
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 BuilderRegistration Mark, Dreyfus Government Direct
Deposit Privilege or Dreyfus Payroll Savings Plan. To establish a Dreyfus Step
Program account, you must supply the necessary information on the Fund's
Account Application and file the required authorization form(s) with the
Transfer Agent. For more information concerning this Program, or to request
the necessary authorization form(s), please call toll free 1-800-782-6620.
You may terminate your participation in this Program at any time by
discontinuing your participation in Dreyfus-AUTOMATIC Asset Builder, Dreyfus
Government Direct Deposit Privilege or Dreyfus Payroll Savings Plan, as the
case may be, as provided under the terms of such Privilege(s). The Fund
reserves the right to redeem your account if you have terminated your
participation in the Program and your account's net asset value is $500 or
less. See "How to Redeem Fund Shares." The Fund may modify or terminate this
Program at any time. Investors who wish to purchase Investor shares through
the Dreyfus Step Program in conjunction with a Dreyfus-sponsored retirement
plan may do so only for IRAs, SEP-IRAs and IRA "Rollover Accounts."
AUTOMATIC WITHDRAWAL PLAN
The Automatic Withdrawal Plan permits you to request withdrawal
of a specified dollar amount (minimum of $50) on either a monthly or
quarterly 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 and rollover 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
[Page 20]
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 BUILDERRegistration Mark AND SUBSEQUENTLY
SUBMIT A WRITTEN REDEMPTION REQUEST TO THE TRANSFER AGENT, THE REDEMPTION
PROCEEDS WILL BE TRANSMITTED TO YOU PROMPTLY UPON BANK CLEARANCE OF YOUR
PURCHASE CHECK, DREYFUS TELETRANSFER PURCHASE OR DREYFUS-AUTOMATIC ASSET
BUILDER ORDER, WHICH MAY TAKE UP TO EIGHT BUSINESS DAYS OR MORE. IN ADDITION,
THE FUND WILL REJECT REQUESTS TO REDEEM SHARES BY WIRE OR TELEPHONE OR
PURSUANT TO THE DREYFUS TELETRANSFER PRIVILEGE FOR A PERIOD OF EIGHT BUSINESS
DAYS AFTER RECEIPT BY THE TRANSFER AGENT OF THE PURCHASE CHECK, THE DREYFUS
TELETRANSFER PURCHASE OR THE DREYFUS-AUTOMATIC ASSET BUILDER ORDER AGAINST
WHICH SUCH REDEMPTION IS REQUESTED. THESE PROCEDURES WILL NOT APPLY IF YOUR
SHARES WERE PURCHASED BY WIRE PAYMENT, OR IF YOU OTHERWISE HAVE A SUFFICIENT
COLLECTED BALANCE IN YOUR ACCOUNT TO COVER THE REDEMPTION REQUEST. PRIOR TO
THE TIME ANY REDEMPTION IS EFFECTIVE, DIVIDENDS ON SUCH SHARES WILL ACCRUE
AND BE PAYABLE, AND YOU WILL BE ENTITLED TO EXERCISE ALL OTHER RIGHTS OF
BENEFICIAL OWNERSHIP. Fund shares will not be redeemed until the Transfer
Agent has received your Account Application.
The Fund reserves the right to redeem your account at its option
upon not less than 45 days' written notice if the net asset value of your
account is $500 or less and remains so during the notice period.
PROCEDURES. You may redeem Fund shares by using the regular
redemption procedure through the Transfer Agent, 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 also
may 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. If you are a client of a
Selected Dealer, you can also redeem Fund shares through the Selected Dealer.
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 TouchRegistration Mark automated telephone
system) from any person representing himself or herself to be you, or a
representative of your Agent, and reasonably believed by the Transfer Agent
to be genuine. The Fund will require the Transfer Agent to employ reasonable
procedures, such as requiring a form of personal identification, to confirm
that
[Page 21]
instructions are genuine and, if it does not follow such procedures, the Fund
or the Transfer Agent may be liable for any losses due to unauthorized or
fraudulent instructions. Neither the Fund nor the Transfer Agent will be
liable for following telephone instructions reasonably believed to be genuine.
During times of drastic economic or market conditions, you may
experience difficulty in contacting the Transfer Agent by telephone to
request a redemption or an exchange of Fund shares. In such cases, you should
consider using the other redemption procedures described herein. Use of these
other redemption procedures may result in your redemption request being
processed at a later time than it would have been if telephone redemption had
been used. During the delay, the Fund's NAV may fluctuate.
REGULAR REDEMPTION. Under the regular redemption procedure, you
may redeem your shares by written request mailed to The Dreyfus Family of
Funds, P.O. Box 9671, Providence, Rhode Island 02940-9671, or, if for the
Dreyfus retirement plan accounts, to The Dreyfus Trust Company, Custodian,
P.O. Box 6427, Providence, Rhode Island 02940-6427. Redemption requests may
be delivered in person only to a Dreyfus Financial Center. THESE REQUESTS
WILL BE FORWARDED TO THE FUND AND WILL BE PROCESSED ONLY UPON RECEIPT
THEREBY. For the location of the nearest Dreyfus Financial Center, please
call the telephone number listed under "General Information." Redemption
requests must be signed by each shareholder, including each owner of a joint
account, and each signature must be guaranteed. The Transfer Agent has
adopted standards and procedures pursuant to which signature-guarantees in
proper form generally will be accepted from domestic banks, brokers, dealers,
credit unions, national securities exchanges, registered securities
associations, clearing agencies and savings associations, as well as from
participants in the New York Stock Exchange Medallion Signature Program, the
Securities Transfer Agents Medallion Program ("STAMP") and the Stock Exchanges
Medallion Program. For more information with respect to signature-guarantees,
please call the telephone number listed under "General Information."
Redemption proceeds of at least $1,000 will be wired to any
member bank of the Federal Reserve System in accordance with a written
signature-guaranteed request.
WIRE REDEMPTION PRIVILEGE. You may request by wire, 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 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
[Page 22]
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 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.
[Page 23]
DISTRIBUTION PLAN
(INVESTOR SHARES ONLY)
Investor shares are subject to a Distribution Plan (the "Plan")
adopted pursuant to Rule 12b-1 under the 1940 Act ("Rule 12b-1"). The
Investor shares of the Fund bear some of the cost of selling those shares
under the Plan. The Plan allows the Fund to spend annually up to 0.25% of its
average daily net assets attributable to Investor shares to compensate
Dreyfus Service Corporation, an affiliate of Dreyfus, for shareholder
servicing activities and the Distributor for shareholder servicing activities
and for activities or expenses primarily intended to result in the sale of
Investor shares of the Fund. The Plan allows the Distributor to make payments
from the Rule 12b-1 fees it collects from the Fund to compensate Agents that
have entered into Agreements with the Distributor. Under the Agreements, the
Agents are obligated to provide distribution related services with regard to
the Fund and/or shareholder services to the Agent's clients that own Investor
shares of the Fund.
The Fund and the Distributor may suspend or reduce payments under
the Plan at any time, and payments are subject to the continuation of the
Fund's Plan and the Agreements described above. From time to time, the
Agents, the Distributor and the Fund may agree to voluntarily reduce the
maximum fees payable under the Plan. See the SAI for more details on the
Plan.
Potential investors should read this Prospectus in light of the
terms governing Agreements with their Agents. An Agent entitled to receive
compensation for selling and servicing the Fund's shares may receive
different compensation with respect to one class of shares over another.
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
The Fund ordinarily pays dividends from its net investment income
and distributes net realized capital gains, if any, once a year, but it may
make distributions on a more frequent basis to comply with the distribution
requirements of the Code, in all events in a manner consistent with the
provisions of the 1940 Act. 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 Restricted 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 gain (the excess of net long-term capital gain
over net short-
[Page 24]
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. Dividends and other distributions also may be subject
to state and local taxes.
Dividend distributions paid by the Fund to a non-resident foreign
investor generally will be subject to U.S. withholding tax at the rate of
30%, unless the non-resident foreign investor claims the benefit of a lower
rate specified in a tax treaty. Capital gain distributions paid by the Fund
to a non-resident foreign investor, as well as the proceeds of any
redemptions by such an investor, regardless of the extent to which gain or
loss may be realized, generally are not subject to U.S. withholding tax.
However, such distributions may be subject to backup withholding, as described
below, unless the foreign investor certifies his 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 which will include information as to dividends and
capital gain distributions, 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 591/2, generally will
be subject to an additional tax equal to 10% of the taxable portion of the
distribution. If the distribution from such a retirement plan (other than
certain governmental or church plans) for any taxable year following the year
in which the participant reaches age 701/2 is less than the "minimum required
distribution" for that taxable year, an excise tax equal to 50% of the
deficiency may be imposed by the IRS. The administrator, trustee or custodian
of such a retirement plan will be responsible for reporting distributions
from such plans to the IRS. Moreover, certain contributions to a qualified
retirement plan in excess of the amounts permitted by law may be subject to
an excise tax. If a distributee of an eligible rollover distribution from a
qualified retirement plan does not elect to have the eligible rollover
distribution paid directly from the plan to an eligible retirement plan a
"direct rollover," the eligible rollover distribution 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 any redemption
proceeds, regardless of the extent to which gain or loss may be realized,
paid to an individual or certain other non-corporate shareholder 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 IRSof being
subject to back- up withholding as a result of a failure properly to report
taxable dividend or interest income on a Federal income tax return or (2) the
IRSnotifies the Fund to institute backup withholding because the IRS
determines that the shareholder's TINis 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
[Page 25]
withholding does not constitute an additional tax imposed on the record owner
of the account and may be claimed as a credit on the record owner's federal
income tax return.
The Fund may be subject to a non-deductible 4% excise tax,
measured with respect to certain undistributed amounts of taxable 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 Restricted
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 NAV 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, Morgan Stanley Capital International _ Europe Australia Far East
Index, CDA Technologies Indexes, the Consumer Price Index, and the Dow Jones
Industrial Average. Performance rankings as reported in CHANGING TIMES,
BUSINESS WEEK, INSTITUTIONAL INVESTOR, THE WALL STREET JOURNAL,
IBC/DONOGHUE'S MONEY FUND REPORT, MUTUAL FUND FORECASTER, NO LOAD INVESTOR,
MONEY MAGAZINE, MORNINGSTAR MUTUAL FUND VALUES, U.S. NEWS AND WORLD REPORT,
FORBES, FORTUNE, BARRON'S and similar publications may also be used in
comparing the Fund's performance.
[Page 26]
Furthermore, the Fund may quote its shares' total returns and
yields in advertisements or in shareholder reports. The Fund may also
advertise non-standardized performance information, such as total return for
periods other than those required to be shown or cumulative performance data.
The Fund may advertise a quotation of yield or other similar quotation
demonstrating the income earned or distributions made by the Fund.
GENERAL INFORMATION
The Company was incorporated in Maryland on August 6, 1987 under
the name The Laurel Funds, Inc., and changed its name to The Dreyfus/Laurel
Funds, Inc. on October 17, 1994. The Company is registered with the SEC under
the 1940 Act as an open-end management investment company. The Company has an
authorized capitalization of 25 billion shares of $0.001 par value stock with
equal voting rights. The Fund is one of eighteen investment portfolio
authorized by the Company's Board of Directors. The Fund's shares are
classified into two Classes_Investor shares and Restricted shares. The
Company may in the future seek to achieve the Fund's investment objective by
investing all of the Fund's assets in another investment company having the
same investment objective and substantially the same investment policies and
restrictions as those applicable to the Fund. Shareholders of the Fund will
be given at least 30 days' prior notice of any such investment.
Each share (regardless of Class) has one vote. All shares of all
funds (and Classes thereof) vote together as a single class, except as to any
matter for which a separate vote of any fund or Class is required by the 1940
Act, and except as to any matter which affects the interests of one or more
particular funds or Classes, in which case only the shareholders of the
affected fund or Class are entitled to vote, each as a separate class. Only
holders of Investor shares will be entitled to vote on matters submitted to
shareholders pertaining to the Distribution Plan relating to that Class.
Unless otherwise required by the 1940 Act, ordinarily it will not
be necessary for the Fund to hold annual meetings of shareholders. As a
result, Fund shareholders may not consider each year the election of
Directors or the appointment of auditors. However, the holders of at least
10% of the shares outstanding and entitled to vote may require the Company to
hold a special meeting of shareholders for purposes of removing a Director
from office and for any other proper purpose. Company shareholders may remove
a Director by the affirmative vote of a majority of the Company's outstanding
voting shares. In addition, the Board of Directors will call a meeting of
shareholders for the purpose of 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]
International
Equity Allocation
Fund
Prospectus
Registration Mark
Copy Rights 1998 Dreyfus Service Corporation
323/723p0398
- ------------------------------------------------------------------------------
PROSPECTUS March 1, 1998
DREYFUS DISCIPLINED STOCK FUND
- ------------------------------------------------------------------------------
DREYFUS DISCIPLINED STOCK 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 INVESTMENT RETURNS (INCLUDING CAPITAL APPRECIATION AND INCOME)
CONSISTENTLY SUPERIOR TO THE STANDARD & POOR'S 500 COMPOSITE STOCK PRICE
INDEX BY INVESTING IN A BROADLY DIVERSIFIED LIST OF EQUITY SECURITIES
GENERATED BY THE APPLICATION OF QUANTITATIVE SECURITY SELECTION AND RISK
CONTROL TECHNIQUES.
SHARES OF THE FUND ARE SOLD WITHOUT A SALES LOAD.
YOU CAN PURCHASE OR REDEEM SHARES BY TELEPHONE USING THE DREYFUS
TeleTransfer PRIVILEGE.
THE DREYFUS CORPORATION SERVES AS THE FUND'S INVESTMENT MANAGER. THE
DREYFUS CORPORATION IS REFERRED TO AS "DREYFUS."
THIS PROSPECTUS SETS FORTH CONCISELY INFORMATION ABOUT THE FUND THAT
YOU SHOULD KNOW BEFORE INVESTING. IT SHOULD BE READ CAREFULLY BEFORE YOU
INVEST AND RETAINED FOR FUTURE REFERENCE.
THE STATEMENT OF ADDITIONAL INFORMATION ("SAI") DATED MARCH 1, 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 GLENNCURTISS BOULEVARD, UNIONDALE, NEW YORK
11556-0144, OR CALL 1-800-645-6561. WHEN TELEPHONING, ASK FOR OPERATOR 144.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
THE NET ASSET VALUE OF FUNDS OF THIS TYPE WILL FLUCTUATE FROM TIME TO TIME.
THE FEES TO WHICH THE FUND IS SUBJECT ARE SUMMARIZED IN THE "EXPENSE
SUMMARY" SECTION OF THE FUND'S PROSPECTUS. THE FUND PAYS AN AFFILIATE OF
MELLON BANK, 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......................... 6
MANAGEMENT OF THE FUND.......................... 9
HOW TO BUY FUND SHARES.......................... 10
SHAREHOLDER SERVICES............................ 13
HOW TO REDEEM FUND SHARES....................... 16
ADDITIONAL INFORMATION ABOUT PURCHASES,
EXCHANGES AND REDEMPTIONS..................... 19
DISTRIBUTION PLAN............................... 20
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES........ 20
PERFORMANCE INFORMATION......................... 22
GENERAL INFORMATION............................. 23
[Page 2]
[This Page Intentionally Left Blank]
[Page 3]
EXPENSE SUMMARY
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on Purchases . . . . . . . . . . . . . none
Maximum Sales Load Imposed on Reinvestments . . . . . . . . . . . none
Deferred Sales Load . . . . . . . . . . . . . . . . . . . . . . . none
Redemption Fee . . . . . . . . . . . . . . . . . . . . . . . . . . none
Exchange Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . none
ESTIMATED ANNUAL FUND OPERATING EXPENSES:
(as a percentage of net assets)
Management Fee . . . . . . . . . . . . . . . . . . . . . . . . . . .90%
12b-1 Fee(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . .10%
Other Expenses(2) . . . . . . . . . . . . . . . . . . . . . . . . .00%
______
Total Fund Operating Expenses . . . . . . . . . . . . . . . . . . 1.00%
EXAMPLE:
You would pay the following expenses
on a $1,000 investment, assuming (1) a 5% annual
return and (2) redemption at the end of each time period:
1 Year . . . . . . . . . . . . . . . . . . . . . . $ 10
3 Years . . . . . . . . . . . . . . . . . . . . . $ 32
5 Years . . . . . . . . . . . . . . . . . . . . . $ 55
10 Years . . . . . . . . . . . . . . . . . . . . . $122
- --------------------
(1) See "Distribution Plan" for a description of the Fund's Distribution Plan.
(2) Does not include fees and expenses of the non-interested Directors
(including counsel). The investment manager is contractually required to
reduce its Management Fee in an amount equal to the Fund's allocable
portion of such fees and expenses, which are estimated to be .01% of the
Fund's net assets. (See "Management of the Fund.")
- -------------------------------------------------------------------------------
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 December 15, 1997, the Fund's "Retail" and "Institutional"
designations were eliminated and the Fund became a single class fund without
any separate class designation. The information in the foregoing table
reflects the Fund's adoption of a .10 of 1% amended Rule 12b-1 Distribution
Plan to which Fund shares are subject, effective as of December 15, 1997.
Prior to December 15, 1997, the Fund's Institutional Class was subject to a
..25 of 1% Rule 12b-1 Distribution Plan fee (which was terminated on December
15, 1997); the Fund's Retail Class was not subject to any Rule 12b-1 plan
fee. Long-term investors 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."
The Company understands that Agents (including Mellon Bank and its
affiliates) 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 table below is based upon a single share outstanding throughout each 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 DISCIPLINED STOCK FUND
FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.*
- ---------------------------------------------------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
10/31/97 10/31/96 10/31/95 10/31/94## 10/31/93 10/31/92 10/31/91 10/31/90 10/31/89 10/31/88
-------- -------- -------- ---------- -------- -------- -------- -------- -------- --------
PER SHARE DATA
Net asset value, beginning
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
of year... $26.65 $22.09 $18.54 $18.69 $17.21 $16.40 $12.41 $13.73 $11.08 $10.00
-------- -------- -------- ---------- -------- -------- -------- -------- -------- --------
Income from investment
operations:
Net investment income.. 0.25 0.28 0.30 0.26# 0.30 0.27 0.27 0.23 0.33 0.11
Net realized and
unrealized gain/
(loss) on investments. 7.92 5.13 4.02 .25 2.56 1.33 4.04 (0.60) 2.62 0.97
-------- -------- -------- ---------- -------- -------- -------- -------- -------- --------
Total from investment
operations.. 8.17 5.41 4.32 .51 2.86 1.60 4.31 (0.37) 2.95 1.08
-------- -------- -------- ---------- -------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net
investment income.... (0.26) (0.29) (0.30) (0.26) (0.31) (0.27) (0.27) (0.28) (0.30) _
Distributions from net
realized gains....... (1.78) (0.56) (0.47) (0.40) (1.07) (0.52) (0.05) (0.67) _ _
-------- -------- -------- ---------- -------- -------- -------- -------- -------- --------
Total distributions.. (2.04) (0.85) (0.77) (0.66) (1.38) (0.79) (0.32) (0.95) (0.30) _
-------- -------- -------- ---------- -------- -------- -------- -------- -------- --------
Net asset value, end of
period.... $32.78 $26.65 $22.09 $18.54 $18.69 $17.21 $16.40 $12.41 $13.73 $11.08
======== ======== ======== ========== ======== ======== ======== ======== ======== ========
Total return......... 32.32% 25.14% 24.33% 2.82% 17.46% 10.06% 35.27% (3.09)% 27.12% 10.80%
-------- -------- -------- ---------- -------- -------- -------- -------- -------- --------
Ratios to average net
assets/
supplemental data:
Net assets, end of year
(in 000's)........... $1,482,176 $807,680 $382,646 $239,069 $92,955 $43,742 $25,931 $9,51 $2,614 $1,619
Ratio of expenses to
average net assets.. 0.90% 0.90% 0.90% 0.90% 0.90% 0.90% 0.90% 0.82% 0.35% 0.35%**
Ratio of net investment
income to average net
assets... 0.87% 1.23% 1.61% 1.54% 1.82% 1.73% 1.92% 2.22% 2.85% 2.58%**
Portfolio turnover rate.. 68.87% 64% 60% 106% 64% 84% 69% 76% 93% 42%
Average Commission rate
paid###... $.0558 $.0485 _ - _ _ _ _ _ _
- -------------------------
</TABLE>
* The Fund commenced operations on December 31, 1987. The Fund commenced
selling Investor Shares on April 6, 1994. Those shares outstanding prior to
April 4, 1994 were designated Trust Shares. Effective as of October 17, 1994,
Trust Shares were redesignated as Class R shares. Effective July 15, 1996, the
Fund's Class R shares were redesignated as Retail shares and Investor shares
were redesignated as Institutional shares. Effective December 15, 1997, the
Fund's "Retail" and "Institutional" designations were eliminated and the Fund
became a single class fund without a separate class designation. The Financial
Highlights for the year ended October 31, 1997 were calculated using the
performance of a Retail share outstanding. The Financial Highlights for the
year ended October 31, 1996 were calculated using the performance of a Class R
share outstanding from November 1, 1995 to July 14, 1996 and the performance
of a Retail share outstanding from July 15, 1996 to October 31, 1996. The
amounts shown for the
year ended October 31, 1995 are based upon a Class R share outstanding. The
amounts shown for the year ended October 31, 1994 were calculated using the
performance of a Trust share outstanding from November 1, 1993 to October 16,
1994 and a Class R share outstanding from October 17, 1994 to October 31,
1994. The Financial Highlights for the year ended October 31, 1993 and prior
periods are based upon a Trust share outstanding. The Financial Highlights do
not reflect the effect of the Fund's adoption of a .10% amended Rule 12b-1
Distribution Plan fee to which Fund shares are subject, effective as of
December 15, 1997. See "Distribution Plan."
** Annualized.
Expense ratio before reimbursement of expenses by the investment
manager was .96% for the year ended October 31, 1994.
Total return represents aggregate total return for the periods
indicated.
For the years or period ended October 31, 1990, 1989, and 1988, the
Manager waived a portion of its advisory fee
amounting to $.0322, $.1032, and $.0392 per share, respectively. For the
years or period ended October 31, 1993, 1992, 1991, 1990, 1989, and 1988, the
Manager reimbursed expenses of the Fund amounting to $.0627, $.0981, $.1721,
$.3329, $.7153 and $.6040 per share, respectively.
# Net investment income per share before reimbursement of expenses by
the investment manager was $0.25 for the year ended October 31, 1994.
## Prior to October 17, 1994, Mellon Bank served as the Fund's investment
manager. Effective October 17, 1994, Dreyfus began serving as the Fund's
investment manager.
### For fiscal years beginning November 1, 1995, the Fund is required to
disclose its average commission rate paid per share for purchases and sales of
investment securities.
[Page 5]
DESCRIPTION OF THE FUND
INVESTMENT OBJECTIVE
The Fund seeks investment returns (including capital appreciation and
income) consistently superior to the Standard and Poor's 500 Composite Stock
Price Index ("S&P 500") by investing in a broadly diversified list of equity
securities generated by the application of quantitative security selection
and risk control techniques. There can be no assurance that the Fund will
meet its stated investment objective.
MANAGEMENT POLICIES
Individual security selection is the foundation of the Fund's
investment approach. Consistency of returns which exceed the S&P 500 and
stability of the Fund's asset value relative to the S&P 500 are primary goals
of the investment process. Information from diverse sources is collected and
used to construct valuation models which are combined to form a comprehensive
computerized valuation ranking system identifying common stocks which appear
to be over or under valued. These models include measures of actual and
estimated earnings changes and relative value based on dividend discount
calculations, price to book, price to earnings and return on equity ratios.
The computerized ranking system incorporates information from the most recent
time period available to the system and categorizes individual securities
within each industry according to relative attractiveness. Dreyfus then
applies fundamental analysis to select the most attractive of the top-rated
securities and those issues that should be sold.
This investment process utilizes disciplined control of fund risk and
a process of rigorous security selection. Risk is managed by controlling the
structure of the Fund so that characteristics of the Fund's portfolio
securities such as economic sector, industry exposure, growth, size,
volatility and quality are maintained similar to those of the S&P 500 at all
times. Common stocks held in the Fund, most but not all of which pay
dividends, typically include a broad range of investment characteristics. The
Fund is not an index fund and its investments are not limited to securities
of issuers in the S&P 500.
Under normal circumstances, at least 65% of the Fund's total assets
will be invested in equity securities. The Fund also invests in high quality
money market instruments to meet liquidity needs in amounts not generally
expected to exceed 20%. Beyond that, Dreyfus will not attempt to time
movements in the market by raising substantial amounts of short-term reserves
for subsequent reinvestment. The Fund may also invest in futures contracts
and options to a limited extent but does not currently intend to invest more
than 5% of its assets in such instruments.
The S&P 500 is composed of 500 common stocks, most of which are
traded on the New York Stock Exchange, chosen to reflect the industries of
the U.S. economy. The inclusion of a stock in the S&P 500 does not imply that
Standard and Poor's believes the stock to be an attractive or appropriate
investment, nor is Standard & Poor's affiliated with the Company or the Fund.
"S&P 500" is a trademark of Standard & Poor's.
INVESTMENT TECHNIQUES
In connection with its investment objective and policies, the Fund
may employ, among others, the following investment techniques:
BORROWING. The Fund is authorized, within specified limits, to borrow
money for temporary administrative purposes and to pledge its assets in
connection with such borrowings.
SECURITIES LENDING. To increase return on Fund securities, the Fund
may lend its portfolio securities to broker-dealers and other institutional
investors pursuant to agreements requiring that the loans be continuously
secured by collateral equal at all times in value to at least the market
value of the securities loaned. There may be risks of delay in receiving
additional collateral or in recovering the securities loaned or even a loss
of rights to the collateral should the borrower of the securities fail
financially. However, loans are made only to borrowers deemed by Dreyfus to
be of good standing and when, in its judgment, the income to be earned from
the loan justifies the attendant risks.
[Page 6]
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements.
A repurchase agreement involves the purchase of a security by the Fund and a
simultaneous agreement (generally with a bank or broker-dealer) to repurchase
that security from the Fund at a specified price and date or upon demand. This
technique offers a method of earning income on idle cash. A risk associated
with repurchase agreements is the failure of the seller to repurchase the
securities as agreed, which may cause the Fund to suffer a loss if the market
value of such securities declines before they can be liquidated on the open
market. Repurchase agreements with a duration of more than seven days are
considered illiquid securities and are subject to the associated limits
discussed under "Certain Portfolio Securities _ Illiquid Securities."
REVERSE REPURCHASE AGREEMENTS. The Fund may enter into reverse
repurchase agreements to meet redemption requests where the liquidation of
Fund securities is deemed by Dreyfus to be disadvantageous. Under a reverse
repurchase agreement, the Fund: (i) transfers possession of Fund securities
to a bank or broker-dealer in return for cash in an amount equal to a
percentage of the securities' market value; and (ii) agrees to repurchase the
securities at a future date by repaying the cash with interest. Cash or
liquid high-grade debt securities held by the Fund equal in value to the
repurchase price including any accrued interest will be maintained in a
segregated account while a reverse repurchase agreement is in effect.
WHEN-ISSUED SECURITIES AND DELAYED DELIVERY TRANSACTIONS. To secure
advantageous prices or yields, the Fund may purchase U.S. Government
Securities on a when-issued basis or may purchase or sell securities for
delayed delivery. In such transactions, delivery of the securities occurs
beyond the normal settlement periods, but no payment or delivery is made by
the Fund prior to the actual delivery or payment by the other party to the
transaction. The purchase of securities on a when-issued or delayed delivery
basis involves the risk that, as a result of an increase in yields available
in the marketplace, the value of the securities purchased will decline prior
to the settlement date. The sale of securities for delayed delivery involves
the risk that the prices available in the market on the delivery date may be
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 Investors Service, Inc., F-1 by Fitch Investors Service
LLP, Duff 1 by Duff & Phelps, Inc., or A1 by IBCA, Inc.
FOREIGN SECURITIES. The Fund may purchase securities of foreign
issuers and may invest in obligations of foreign branches of domestic banks
and domestic branches of foreign banks. Investment in foreign securities
presents certain risks, including those resulting from fluctuations in
currency exchange rates, revaluation of currencies, adverse political and
economic developments and the possible imposition of currency exchange
blockages or other foreign governmental laws or restrictions, reduced
availability of public information concerning issuers, and the fact that
foreign issuers are not generally subject to uniform accounting, auditing and
financial reporting standards or to other regulatory practices and
requirements comparable to those applicable to domestic issuers. Moreover,
securities of many foreign issuers may be less liquid and their prices more
volatile than those of comparable domestic issuers. In addition,
[Page 7]
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 return on such securities.
ILLIQUID SECURITIES. The Fund will not knowingly invest more than 15%
of the value of its net assets in illiquid securities, including time
deposits and repurchase agreements having maturities longer than seven days.
Securities that have readily available market quotations are not deemed
illiquid for purposes of this limitation (irrespective of any legal or
contractual restrictions on resale). The Fund may invest in commercial
obligations issued in reliance on the so-called "private placement" exemption
from registration afforded by Section 4(2) of the Securities Act of 1933, as
amended ("Section 4(2) paper"). The Fund may also purchase securities that
are not registered under the Securities Act of 1933, as amended, but that can
be sold to qualified institutional buyers in accordance with Rule 144A under
that Act ("Rule 144A securities"). Liquidity determinations with respect to
Section 4(2) paper and Rule 144A securities will be made by the Board of
Directors or by Dreyfus pursuant to guidelines established by the Board of
Directors. The Board or Dreyfus will consider availability of reliable price
information and other relevant information in making such determinations.
Section 4(2) paper is restricted as to disposition under the federal
securities laws, and generally is sold to institutional investors, such as
the Fund, that agree that they are purchasing the paper for investment and
not with a view to public distribution. Any resale by the purchaser must be
pursuant to registration or an exemption therefrom. Section 4(2) paper
normally is resold to other institutional investors like the Fund through or
with the assistance of the issuer or investment dealers who make a market in
the Section 4(2) paper, thus providing liquidity. Rule 144A securities
generally must be sold to other qualified institutional buyers. If a
particular investment in Section 4(2) paper or Rule 144A securities is not
determined to be liquid, that investment will be included within the
percentage limitation on investment in illiquid securities. The ability to
sell Rule 144A securities to qualified institutional buyers is a recent
development and it is not possible to predict how this market will mature.
Investing in Rule 144A securities could have the effect of increasing the
level of Fund illiquidity to the extent that qualified institutional buyers
become, for a time, uninterested in purchasing these securities from the Fund
or other holder.
OTHER INVESTMENT COMPANIES. The Fund may invest in securities issued
by other investment companies to the extent that such investments are
consistent with the Fund's investment objective and policies and permissible
under the Investment Company Act of 1940, as amended ("1940 Act"). As a
shareholder of another investment company, the Fund would bear, along with
other shareholders, its pro rata portion of the other investment company's
expenses, including advisory fees. These expenses would be in addition to the
advisory and other expenses that the Fund bears directly in connection with
its own operations.
PORTFOLIO TURNOVER. While securities are purchased for the Fund on
the basis of potential for capital appreciation and income and not for
short-term trading profits, the Fund's turnover rate may exceed 100%. A
portfolio turnover rate of 100% would occur, for example, if all the
securities held by the Fund were replaced once in a period of one year. A
higher rate of portfolio turnover involves correspondingly greater brokerage
commissions and other expenses that must be borne directly by the Fund and,
thus, indirectly by its shareholders. In addition, a high rate of portfolio
turnover may result in the realization of larger amounts of short-term
capital gains that, when distributed to the Fund's shareholders, are taxable
to them as ordinary income. Nevertheless, securities transactions for the
Fund will be based only upon investment considerations and will not be
limited by any other considerations when Dreyfus deems it appropriate to make
changes in the Fund's assets.
LIMITING INVESTMENT RISKS. The Fund is subject to a number of
investment limitations. Certain limitations are matters of fundamental policy
and may not be changed without the affirmative vote of the
[Page 8]
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 January 31, 1998, Dreyfus managed or administered
approximately $96 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 overall
authority of the Company's Board of Directors in accordance with Maryland
law. Pursuant to the Investment Management Agreement, Dreyfus provides, or
arranges for one or more third parties to provide, investment advisory,
administrative, custody, fund accounting and transfer agency services to the
Fund. As the Fund's investment manager, Dreyfus manages the Fund by making
investment decisions based on the Fund's investment objective, policies and
restrictions.
The Fund is managed by Bert Mullins. Mr. Mullins has managed the Fund
since its inception and has been employed by Dreyfus as portfolio manager of
the Fund since October 17, 1994. Mr. Mullins has been employed by Laurel
Capital Advisors since October 1990. Mr. Mullins also is a Vice President,
portfolio manager and Senior Securities Analyst for Mellon Bank, where he has
been employed since 1966.
Mellon is a publicly owned multibank holding company incorporated
under Pennsylvania law in 1971 and registered under the Bank Holding Company
Act of 1956, as amended. Mellon provides a comprehensive range of financial
products and services in domestic and selected international markets. Mellon
is among the twenty-five largest bank holding companies in the United States
based on total 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 $305 billion in assets as of
December 31, 1997, including approximately $104 billion in mutual fund
assets. As of December 31, 1997, Mellon, through various subsidiaries,
provided non-investment services, such as custodial or administration
services, for more than $1.532 trillion in assets, including approximately
$60 billion in mutual fund assets.
Under the Investment Management Agreement, the Fund has agreed to pay
Dreyfus a monthly fee at the annual rate of 0.90 of 1% of the value of the
Fund's average daily net assets. Dreyfus pays all of the Fund's expenses,
except brokerage fees, taxes, interest, fees and expenses of the
non-interested Directors (including counsel fees), Rule 12b-1 fees (if
applicable) and extraordinary expenses. In order to compensate Dreyfus for
paying virtually all of the Fund's expenses, the Fund's investment management
fee is higher than the investment advisory fees paid by most investment
companies. Most, if not all, such companies also pay for additional
non-investment advisory expenses that are not paid by such companies'
investment advisers. Although Dreyfus is not obligated to pay the fees and
expenses of the non-interested Directors (including counsel fees), Dreyfus is
contractually required to reduce its investment management fee in an amount
equal to the Fund's allocable share of such fees and expenses. 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
[Page 9]
investors. For the fiscal year ended October 31, 1997, the Fund paid Dreyfus
0.90% of its average daily net assets in investment management fees, less
fees and expenses of the non-interested Directors (including counsel fees).
For the fiscal year ended October 31, 1997, total operating expenses
(excluding Rule 12b-1 fees) of the Fund were 0.90% of the Fund's average
daily net assets.
In addition, Fund shares may be subject to certain distribution and
shareholder service fees. See "Distribution Plan."
Dreyfus may pay the Fund's distributor for shareholder services from
Dreyfus' own assets, including past profits but not including the management
fee paid by the Fund. The Fund's distributor may use part or all of such
payments to pay Agents in respect of these services.
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.
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. is the Fund's
sub-administrator and, pursuant to a Sub-Administration Agreement with
Dreyfus, provides various administrative and corporate secretarial services
to the Fund.
HOW TO BUY FUND SHARES
GENERAL _ Fund shares are sold without a sales charge. 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 is $2,500, or $1,000 if you are a
client of an Agent which maintains an omnibus account in the Fund and has
made an aggregate minimum initial purchase for its customers of $2,500.
Subsequent investments must be at least $100. The minimum initial investment
is $750 for 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 and $500 for Dreyfus-sponsored
Education IRAs, with no minimum on subsequent purchases. The initial
investment must be accompanied by the Fund's Account Application. For
full-time or part-time employees of Dreyfus or any of its affiliates or
subsidiaries, directors of Dreyfus, board members of a fund advised by
Dreyfus including members of the Company's Board, or the spouse or minor
child of any of the foregoing, the minimum initial investment is $1,000. For
full-time or part-time employees of Dreyfus or any of its affiliates or
subsidiaries who elect to have a portion of their pay directly deposited into
their Fund account, the minimum initial investment is $50. The Fund reserves
the right to offer Fund shares without
[Page 10]
regard to minimum purchase requirements to employees participating in
certain qualified or non-qualified employee benefit plans or other programs
where contributions or account information can be transmitted in a manner and
form acceptable to the Fund. The Fund reserves the right to vary further the
initial and subsequent investment minimum requirements at any time.
Fund shares are also offered without regard to the minimum initial
investment requirements through Dreyfus-AUTOMATIC Asset BuilderRegistration
Mark, 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 corporations, 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. 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 Fund's DDA # 044210/Dreyfus Disciplined Stock Fund, for purchase of Fund
shares in your name. The wire must include your Fund account number (for new
accounts, your Taxpayer Identification Number ("TIN") should be included
instead), account registration and dealer number, if applicable. If your
initial purchase of Fund shares is by wire, you should call 1-800-645-6561
after completing your wire payment in order to obtain your Fund account
number. Please include your Fund account number on the 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")
[Page 11]
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
"4050."
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 at any time. The
Distributor will pay such fees from its own funds, other than amounts
received from the Fund, including past profits or any other source available
to it.
Federal regulations require that you provide a certified TIN upon
opening or reopening an account. See "Dividends, Other Distributions and
Taxes" and the Fund's Account Application for further information concerning
this requirement. Failure to furnish a certified TIN to the Fund could
subject you to a $50 penalty imposed by the Internal Revenue Service (the
"IRS").
NET ASSET VALUE PER SHARE ("NAV") _ An investment portfolio's NAV
refers to the worth of one share. The NAV for Fund shares is computed by
adding the value of the Fund's investments, cash, and other assets, deducting
liabilities and dividing the result by the number of shares outstanding. The
valuation of assets for determining NAV for the Fund may be summarized as
follows:
The portfolio securities of the Fund listed or traded on a stock
exchange, except as otherwise noted, are valued at the latest sale price. If
no sale is reported, the mean of the latest bid and asked prices is used.
Securities traded over-the-counter are priced at the mean of the latest bid
and asked prices but will be valued at the last sale price if required by
regulations of the SEC. When market quotations are not readily available,
securities and other assets are valued at fair value as determined in good
faith in accordance with procedures established by the Board of Directors.
Bonds are valued through valuations obtained from a commercial
pricing service or at the most recent mean of the bid and asked prices
provided by investment dealers in accordance with procedures established by
the Board of Directors.
NAV is determined 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. For purposes of determining NAV, options
and futures contracts will be valued 15 minutes after the close of trading on
the floor of the NYSE. 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 share price determined on, that day. Orders received after such close of
trading are effective on, and 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 NAV determined as of the close of
trading on the floor of the NYSE on that day. Otherwise, the orders will be
based on the next determined 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 its 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
[Page 12]
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 Fund shares, which are offered on a
continuous basis, is the NAV.
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.
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 the Fund, shares of
certain other funds managed or administered by Dreyfus, which you would
otherwise be eligible to purchase, 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, you should consult your Agent or 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
Registration Mark automated telephone system) by calling 1-800-645-6561. If
calling from overseas, call 516-794-5452. See "How to Redeem Fund Shares _
Procedures." Upon an exchange 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:
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.
[Page 13]
Shares will be exchanged at the next determined NAV; however, a sales
load may be charged with respect to exchanges of Fund shares into funds sold
with a sales load. If you are exchanging Fund shares into a fund that charges
a sales load, you may qualify for share prices which do not include the sales
load or which reflect a reduced sales load, if the shares of the fund from
which you are exchanging were: (a) purchased with a sales load, (b) acquired
by a previous exchange from shares purchased with a sales load, or
(c) acquired through reinvestment of dividends or other distributions paid
with respect to the foregoing categories of shares. To qualify, at the time of
the exchange you must notify the Transfer Agent or your Agent must notify the
Distributor. Any such qualification is subject to confirmation of your
holdings through a check of appropriate records. See "Shareholder Services" in
the SAI. No fees currently are charged shareholders directly in connection
with exchanges, although the Fund reserves the right, upon not less than 60
days' written notice, to charge shareholders a nominal fee in accordance with
rules promulgated by the SEC. The Fund reserves the right to reject any
exchange request in whole or in part. The availability of Fund Exchanges may
be modified or terminated at any time upon notice to shareholders.
The exchange of shares of one fund for shares of another is treated
for Federal income tax purposes as a sale of the shares given in exchange by
the shareholder and, therefore, an exchanging shareholder may realize, or an
exchange on behalf of a Retirement Plan which is not tax exempt may result
in, a taxable gain or loss.
DREYFUS AUTO-EXCHANGE PRIVILEGE
Dreyfus Auto-Exchange Privilege enables you to invest regularly (on a
semi-monthly, monthly, quarterly or annual basis), in exchange for shares of
the Fund, in shares of certain other eligible funds in the Dreyfus Family of
Funds of which you are currently an investor. WITH RESPECT TO FUND SHARES
HELD BY RETIREMENT PLANS, EXCHANGES PURSUANT TO THE DREYFUS AUTO-EXCHANGE
PRIVILEGE MAY BE MADE ONLY BETWEEN A SHAREHOLDER'S RETIREMENT PLAN ACCOUNT IN
ONE FUND AND SUCH SHAREHOLDER'S RETIREMENT PLAN ACCOUNT IN ANOTHER FUND. The
amount you designate, which can be expressed either in terms of a specific
dollar or share amount ($100 minimum), will be exchanged automatically on the
first and/or fifteenth day of the month according to the schedule you have
selected. Shares will be exchanged at the then-current net asset value;
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 BUILDERRegistration Mark
Dreyfus-AUTOMATIC Asset Builder permits you to purchase Fund shares
(minimum of $100 and maximum of $150,000 per transaction) at regular
intervals selected by you. Fund shares are purchased by transferring funds
from the bank account designated by you. At your option, the bank account
designated by you will be debited in the specified amount, and Fund shares
will be purchased, once a month, on either the first or fifteenth day, or
twice a month, on both days. Only an account maintained at a domestic
financial institution which is an ACH member may be so designated. To
establish a Dreyfus-AUTOMATIC Asset Builder account, you must file an
authorization form with the Transfer Agent. You may obtain the necessary
authorization by calling 1-800-645-6561. You may cancel your participation
[Page 14]
in this Privilege or change the amount of purchase at any time by mailing
written notification to The Dreyfus Family of Funds, P.O. Box 9671,
Providence, Rhode Island 02940-9671, or, if to Dreyfus retirement plan
accounts to The Dreyfus Trust Company, Custodian, P.O. Box 6427, Providence,
Rhode Island 02940-6427, and the notification will be effective three
business days following receipt. The Fund may modify or terminate this
Privilege at any time or charge a service fee. No such fee currently is
contemplated.
DREYFUS DIVIDEND OPTIONS
Dreyfus Dividend Sweep enables you to invest automatically dividends
or dividends and 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 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 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
[Page 15]
the amount of purchase or cancel the authorization only by written
notification to your employer. It is the sole responsibility of your
employer, not the Distributor, Dreyfus, the Fund, the Transfer Agent or any
other person, to arrange for transactions under the Dreyfus Payroll Savings
Plan. The Fund may modify or terminate this Privilege at any time or charge a
service fee. No such fee currently is contemplated. Shares held under Keogh
Plans, IRAs or other retirement plans are not eligible for this Privilege.
DREYFUS STEP PROGRAM
Dreyfus Step Program enables you to purchase Fund shares without
regard to the Fund's minimum initial investment requirements through Dreyfus-
AUTOMATIC Asset BuilderRegistration Mark, 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 Account
Application and file the required authorization form(s) with the Transfer
Agent. For more information concerning this Program, or to request the
necessary authorization form(s), please call toll free 1-800-782-6620. You
may terminate your participation in this Program at any time by discontinuing
your participation in Dreyfus-AUTOMATIC Asset Builder, Dreyfus Government
Direct Deposit Privilege or Dreyfus Payroll Savings Plan, as the case may be,
as provided under the terms of such Privilege(s). The Fund reserves the right
to redeem your account if you have terminated your participation in the
Program and your account's net asset value is $500 or less. See "How to
Redeem Fund Shares." The Fund may modify or terminate this Program at any
time. Investors who wish to purchase Fund 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).
AUTOMATIC WITHDRAWAL PLAN
The Automatic Withdrawal Plan permits you to request withdrawal of a
specified dollar amount (minimum of $50) on either a monthly or quarterly
basis if you have a $5,000 minimum account. An 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 and rollover 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 net asset value as described below.
[Page 16]
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 BUILDERRegistration Mark AND SUBSEQUENTLY
SUBMIT A WRITTEN REDEMPTION REQUEST TO THE TRANSFER AGENT, THE REDEMPTION
PROCEEDS WILL BE TRANSMITTED TO YOU PROMPTLY UPON BANK CLEARANCE OF YOUR
PURCHASE CHECK, DREYFUS TELETRANSFER PURCHASE OR DREYFUS-AUTOMATIC ASSET
BUILDER ORDER, WHICH MAY TAKE UP TO EIGHT BUSINESS DAYS OR MORE. IN ADDITION,
THE FUND WILL REJECT REQUESTS TO REDEEM SHARES BY WIRE OR TELEPHONE OR
PURSUANT TO THE DREYFUS TELETRANSFER PRIVILEGE FOR A PERIOD OF EIGHT BUSINESS
DAYS AFTER RECEIPT BY THE TRANSFER AGENT OF THE PURCHASE CHECK, THE DREYFUS
TELETRANSFER PURCHASE OR THE DREYFUS-AUTOMATIC ASSET BUILDER ORDER AGAINST
WHICH SUCH REDEMPTION IS REQUESTED. THESE PROCEDURES WILL NOT APPLY IF YOUR
SHARES WERE PURCHASED BY WIRE PAYMENT, OR IF YOU OTHERWISE HAVE A SUFFICIENT
COLLECTED BALANCE IN YOUR ACCOUNT TO COVER THE REDEMPTION REQUEST. PRIOR TO
THE TIME ANY REDEMPTION IS EFFECTIVE, DIVIDENDS ON SUCH SHARES WILL ACCRUE
AND BE PAYABLE, AND YOU WILL BE ENTITLED TO EXERCISE ALL OTHER RIGHTS OF
BENEFICIAL OWNERSHIP. Fund shares will not be redeemed until the Transfer
Agent has received your Account Application.
The Fund reserves the right to redeem your account at its option upon
not less than 45 days' written notice if the NAV of your account is $500 or
less and remains so during the notice period.
PROCEDURES _ You may redeem Fund shares by using the regular
redemption procedure through the Transfer Agent, 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 also
may 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. If you are a client of a
Selected Dealer, you can also redeem Fund shares through the Selected Dealer.
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 TouchRegistration Mark automated telephone system) from any
person representing himself or herself to be you, or a representative of your
Agent, and reasonably believed by the Transfer Agent to be genuine. The Fund
will require the Transfer Agent to employ reasonable procedures, such as
requiring a form of personal identification, to confirm that
[Page 17]
instructions are genuine and, if it does not follow such procedures, the Fund
or the Transfer Agent may be liable for any losses due to unauthorized or
fraudulent instructions. Neither the Fund nor the Transfer Agent will be
liable for following telephone instructions reasonably believed to be
genuine.
During times of drastic economic or market conditions, you may
experience difficulty in contacting the Transfer Agent by telephone to
request a redemption or an exchange of Fund shares. In such cases, you should
consider using the other redemption procedures described herein. Use of these
other redemption procedures may result in your redemption request being
processed at a later time than it would have been if telephone redemption had
been used. During the delay, the Fund's NAV may fluctuate.
REGULAR REDEMPTION. Under the regular redemption procedure, you may
redeem your shares by written request mailed to The Dreyfus Family of Funds,
P.O. Box 9671, Providence, Rhode Island 02940-9671, or, if for Dreyfus
retirement plan accounts, to The Dreyfus Trust Company, Custodian, P.O. Box
6427, Providence, Rhode Island 02940-6427. Redemption requests may be
delivered in person only to a Dreyfus Financial Center. THESE REQUESTS WILL
BE FORWARDED TO THE FUND AND WILL BE PROCESSED ONLY UPON RECEIPT THEREBY. For
the location of the nearest financial center, please call the telephone
number listed under "General Information." Redemption requests must be signed
by each shareholder, including each owner of a joint account, and each
signature must be guaranteed. The Transfer Agent has adopted standards and
procedures pursuant to which signature-guarantees in proper form generally
will be accepted from domestic banks, brokers, dealers, credit unions,
national securities exchanges, registered securities associations, clearing
agencies and savings associations, as well as from participants in the New
York Stock Exchange Medallion Signature Program, the Securities Transfer
Agents Medallion Program ("STAMP"), and the Stock Exchanges Medallion
Program. For more information with respect to signature-guarantees, please
call the telephone number listed under "General Information."
Redemption proceeds of at least $1,000 will be wired to any member
bank of the Federal Reserve System in accordance with a written
signature-guaranteed request.
WIRE REDEMPTION PRIVILEGE. You may request by wire, 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 Redem
ption 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 pm., New York Time), the redemption request will be effective
on the 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
[Page 18]
designee prior to the close of its business day (normally 5:15 p.m., New York
time) are effected at the price determined as of the close of trading on the
floor of the NYSE on that day. Otherwise, the 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 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.
[Page 19]
DISTRIBUTION PLAN
Fund shares are subject to a Distribution Plan (the "Plan") adopted
pursuant to Rule 12b-1 under the 1940 Act ("Rule 12b-1"). The Plan allows the
Fund to spend annually up to 0.10% of its average daily net assets to
compensate Mellon Bank and its affiliates (including but not limited to
Dreyfus and Dreyfus Service Corporation) for shareholder servicing activities
and the Distributor for shareholder servicing activities and expenses
primarily intended to result in the sale of Fund shares. The Plan allows the
Distributor to make payments from the Rule 12b-1 fees it collects from the
Fund to compensate Agents that have entered into Agreements with the
Distributor. Under the Agreements, the Agents are obligated to provide
distribution related services with regard to the Fund and/or shareholder
services to the Agent's clients that own Fund shares.
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.
On December 1, 1997, a class action lawsuit was filed in the United
States District Court for the Southern District of New York by two persons
who claim to be holders of the Fund's former Retail shares and who purport to
act on behalf of themselves and other similarly situated shareholders (the
"Action"). The defendants in the Action are the Company, its Directors, the
Fund, Dreyfus, Mellon Bank, Mellon and the Fund's portfolio manager. The
complaint in the Action asserts that the adoption of the Plan with respect to
the Fund's Retail shares was in violation of the 1940 Act and common law. The
Action seeks unspecified damages. The Company intends to defend the Action
vigorously.
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
The Fund ordinarily declares and pays dividends from its net
investment income, if any, quarterly, and distributes net realized capital
gains, if any, on an annual basis, but it may make distributions on a more
frequent basis to comply with the distribution requirements of the Code, in
all events in a manner consistent with the provisions of the 1940 Act. The
Fund will not make distributions from net realized 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.
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 its earnings 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. Distribution
s from the Fund's net capital gain (the excess of net long-term capital gain
over net short-term capital loss) will be taxable to
[Page 20]
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 Code provides
that an individual generally will be taxed on his or her net capital gain at
a maximum rate of 28% with respect to capital gain from securities held for
more than one year but not more than 18 months and at a maximum rate of 20%
with respect to capital gain from securities held for more than 18 months.
Dividends and other distributions also may be subject to state and local
taxes.
Dividend distributions paid by the Fund to a non-resident foreign
investor generally are subject to U.S. withholding tax at the rate of 30%,
unless the non-resident foreign investor claims the benefit of a lower rate
specified in a tax treaty. Distributions from net capital gain paid by the
Fund to a non-resident foreign investor, as well as the proceeds of any
redemptions 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 591/2, generally will
be subject to an additional tax equal to 10% of the taxable portion of the
distribution. If the distribution from such a Retirement Plan (other than
certain governmental or church plans) for any taxable year following the year
in which the participant reaches age 701/2 is less than the "minimum required
distribution" for that taxable year, an excise tax equal to 50% of the
deficiency may be imposed by the IRS. The administrator, trustee or custodian
of such a Retirement Plan will be responsible for reporting distributions
from such plans to the IRS. Moreover, certain contributions to a qualified
Retirement Plan in excess of the amounts permitted by law may be subject to
an excise tax. If a distributee of an "eligible rollover distribution" from a
qualified Retirement Plan does not elect to have the eligible rollover
distribution paid directly from the plan to an eligible retirement plan in a
"direct rollover," the eligible rollover distribution is subject to a 20%
income tax withholding.
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.
[Page 21]
A TIN is either the Social Security number, IRS 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.
The Fund may be subject to a non-deductible 4% excise tax, measured
with respect to certain undistributed amounts of taxable investment income
and capital gains.
You should consult your tax advisers regarding specific questions as
to Federal, state or local taxes.
PERFORMANCE INFORMATION
For purposes of advertising, performance may be calculated on the
basis of average annual total return and/or total return. These total return
figures reflect changes in the price of the shares and assume that any income
dividends and/or capital gains distributions made by the Fund during the
measuring period were reinvested in shares of the Fund. These figures also
take into account any applicable distribution and shareholder servicing fees.
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.
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 its yield. The Fund's yield is calculated
by dividing the Fund's annualized net investment income per share during a
recent 30-day (or one month) period by the NAV per share on the last day of
that period. Since yields fluctuate, yield data cannot necessarily be used to
compare an investment in Fund shares with bank deposits, savings accounts,
and similar investment alternatives which often provide an agreed-upon or
guaranteed fixed yield for a stated period of time.
Performance will vary from time to time and past results are not
necessarily representative of future results. You should remember that
performance is a function of portfolio management in selecting the type and
quality of portfolio securities and is affected by operating expenses.
Performance information, such as that described above, may not provide a
basis for comparison with other investments or other investment companies
using a different method of calculating performance.
The Fund may compare the performance of its shares with various
industry standards of performance including Lipper Analytical Services, Inc.
ratings, S&P 500, CDA Technologies indexes, indexes created by Lehman
Brothers, the Consumer Price Index, and the Dow Jones Industrial Average.
Performance rankings as reported in CHANGING TIMES, BUSINESS WEEK,
INSTITUTIONAL INVESTOR, THE WALL STREET JOURNAL, IBC/DONOGHUE'S MONEY FUND
REPORT, MUTUAL FUND FORECASTER, NO LOAD INVESTOR, MONEY MAGAZINE, MORNINGSTAR
MUTUAL FUND VALUES, U.S. NEWS AND WORLD REPORT, FORBES, FORTUNE, BARRON'S and
similar publications may also be used in comparing the Fund's performance.
Furthermore, the Fund may quote its shares' total returns and yields in
advertisements or in shareholder reports. The Fund may also advertise
non-standardized performance information, such as total return for periods
other than those required to be shown or cumulative performance data. The
Fund may advertise a quotation of yield or other similar quotation
demonstrating the income earned or distributions made by the Fund.
[Page 22]
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 Company may in the future seek to achieve the Fund's investment
objective by investing all of the Fund's assets in another investment company
having the same investment objective and substantially the same investment
policies and restrictions as those applicable to the Fund. Shareholders of
the Fund will be given at least 30 days' prior notice of any such investment.
On December 15, 1997, the Fund's "Institutional" and "Retail" Class
designations were eliminated and the Fund became a single class fund without
any separate class designation.
Each share has one vote. All shares of all funds (and Classes
thereof, as applicable) vote together as a single class, except as to any
matter for which a separate vote of any fund or Class is required by the 1940
Act, and except as to any matter which affects the interests of one or more
particular funds or Classes, in which case only the shareholders of the
affected fund or Class are entitled to vote, each as a separate class.
Unless otherwise required by the 1940 Act, ordinarily it will not be
necessary for the Fund to hold annual meetings of shareholders. As a result,
Fund shareholders may not consider each year the election of Directors or the
appointment of auditors. However, the holders of at least 10% of the shares
outstanding and entitled to vote may require the Company to hold a special
meeting of shareholders for purposes of removing a Director from office and
for any other purpose. Company shareholders may remove a Director by the
affirmative vote of a majority of the Company's outstanding voting shares. In
addition, the Board of Directors will call a meeting of shareholders for the
purpose of electing Directors if, at any time, less than a majority of the
Directors then holding office have been elected by shareholders.
The Transfer Agent maintains a record of your ownership and will send
you confirmations and statements of account.
Shareholder inquiries may be made by writing to the Fund at 144 Glenn
Curtiss Boulevard, Uniondale, New York 11556-0144, or by calling toll free
1-800-645-6561.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND IN THE
FUND'S OFFICIAL SALES LITERATURE IN CONNECTION WITH THE OFFER OF THE FUND'S
SHARES, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER IN ANY STATE IN WHICH, OR TO ANY PERSON TO WHOM,
SUCH OFFERING MAY NOT LAWFULLY BE MADE.
[Page 23]
Disciplined
Stock
Fund
Prospectus
Registration Mark
Copy Rights 1998 Dreyfus Service Corporation
328/728p0398
- ------------------------------------------------------------------------------
PROSPECTUS MARCH 1, 1998
DREYFUS PREMIER BALANCED FUND
- ------------------------------------------------------------------------------
Dreyfus Premier Balanced Fund (the "Fund"), formerly called the
"Premier Balanced Fund," is a separate, diversified portfolio of The
Dreyfus/Laurel Funds, Inc., an open-end management investment company (the
"Company"), known as a mutual fund. The Fund seeks to outperform a hybrid
index, 60% of which is the Standard & Poor's 500 Composite Stock Price Index
and 40% of which is the Lehman Brothers Intermediate Government/Corporate
Bond Index, by investing in common stocks and bonds in proportions consistent
with their expected returns and risks as determined by the Fund's investment
manager.
By this Prospectus, the Fund is offering four Classes of shares_Class
A, Class B, Class C and Class R_which are described herein. See "Alternative
Purchase Methods."
Each Class of shares may be purchased or redeemed by telephone using
the TELETRANSFER Privilege.
The Dreyfus Corporation serves as the Fund's investment manager. The
Dreyfus Corporation is referred to as "Dreyfus."
This Prospectus sets forth concisely information about the Fund that
you should know before investing. It should be read carefully before you
invest and retained for future reference.
The Statement of Additional Information ("SAI") dated March 1, 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 1-800-554-4611. When telephoning, ask for Operator
144.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
ALL MUTUAL FUND SHARES INVOLVE CERTAIN INVESTMENT RISKS, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL.
THE FEES TO WHICH THE FUND IS SUBJECT ARE SUMMARIZED IN THE "EXPENSE
SUMMARY" SECTION OF THE FUND'S PROSPECTUS. THE FUND PAYS AN AFFILIATE OF
MELLON BANK, N.A. ("MELLON BANK") TO BE ITS INVESTMENT MANAGER. MELLON BANK
OR AN AFFILIATE MAY BE PAID FOR PERFORMING OTHER SERVICES FOR THE FUND, SUCH
AS CUSTODIAN, TRANSFER AGENT OR FUND ACCOUNTANT SERVICES. THE FUND IS
DISTRIBUTED BY PREMIER MUTUAL FUND SERVICES, INC. (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
Alternative Purchase Methods........................................ 9
Description of the Fund............................................. 10
Management of the Fund.............................................. 15
How to Buy Fund Shares.............................................. 16
Shareholder Services................................................ 20
How to Redeem Fund Shares........................................... 22
Additional Information About Purchases, Exchanges and Redemptions... 25
Distribution Plans (Class A Plan and Class B and C Plans)........... 26
Dividends, Other Distributions and Taxes............................ 26
Performance Information............................................. 28
General Information................................................. 29
[Page 2]
[This Page Intentionally Left Blank]
[Page 3]
<TABLE>
<CAPTION>
Expense Summary
Shareholder Transaction Expenses CLASS A CLASS B CLASS C CLASS R
--------- --------- -------- -------
<S> <C> <C> <C> <C>
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)......... 5.75% none none none
Maximum Deferred Sales Charge Imposed
on Redemptions (as a percentage of
the amount subject to charge)......... none* 4.00% 1.00% none
Annual Fund Operating Expenses
(as a percentage of average daily net assets)
Management Fee.............................. 1.00% 1.00% 1.00% 1.00%
12b-1 Fee1.................................. .25% 1.00% 1.00% none
Other Expenses2............................. .00% .00% .00% .00%
--------- --------- -------- --------
Total Fund Operating Expenses............... 1.25% 2.00% 2.00% 1.00%
Example
You would pay the following expenses on a
$1,000 investment, assuming (1) a 5% annual
return and (2) except where noted,
redemption at the end of each time period:
1 YEAR...................................... $ 70 $ 60/$203 $ 30/$203 $ 0
3 YEARS..................................... $ 95 $ 93/$633 $ 63 $ 32
5 YEARS..................................... $122 $128/$1083 $108 $ 55
10 YEARS.................................... $200 $196** $234 $122
- -----------------------------------------------------------------------------
* A contingent deferred sales charge of 1.00% may be assessed on certain
redemptions of Class A shares purchased without an initial sales charge as
part of an investment of $1 million or more. See "How to Buy Fund Shares _
Class A shares."
**Assumes conversion of Class B shares to Class A shares approximately six
years after the date of purchase and, therefore, reflects Class A expenses
for years seven through ten.
(1) See "Distribution Plans (Class A Plan and Class B and C Plans)" for a
description of the Fund's Distribution Plans and Service Plan for Class A,
B and C shares.
(2) Does not include fees and expenses of the non-interested Directors
(including counsel). The investment manager is contractually required to
reduce its management fee 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").
(3) Assuming no redemption of shares.
</TABLE>
- -----------------------------------------------------------------------------
The amounts listed in the example should not be considered as representative
of past or future expenses and actual expenses may be greater or less than
those indicated. Moreover, while the example assumes a 5% annual return, the
Fund's actual performance will vary and may result in an actual return greater
or less than 5%.
- -----------------------------------------------------------------------------
The purpose of the foregoing table is to assist you in understanding
the various costs and expenses that investors will bear, directly or
indirectly, the payment of which will reduce investors' return on an annual
basis. Long-term investors in Class A, B or C shares could pay more in 12b-1
fees than the economic equivalent of paying the maximum front-end sales
charges applicable to mutual funds sold by members of the National
Association of Securities Dealers, Inc. ("NASD"). The information in the
foregoing table does not reflect any fee waivers or expense reimbursement
arrangements that may be in effect. Certain banks, securities dealers and
brokers ("Selected Dealers") or other financial institutions (including
Mellon Bank and its affiliates) (collectively "Agents") may charge their
clients direct fees for effecting transactions in Fund shares; such fees are
not reflected in the foregoing table. See "Management of the Fund," "How to
Buy Fund Shares," "How to Redeem Fund Shares" and "Distribution Plans (Class
A Plan and Class B and C Plans)."
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 Class A, Class B, Class C
and Class R share outstanding throughout the year or period and should be
read in conjunction with the financial statements, 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 PREMIER BALANCED FUND
FOR A CLASS A SHARE OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.*
Year Year Year Period
Ended Ended Ended Ended
10/31/97 10/31/96 10/31/95 10/31/94#
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period..................... $13.71 $11.91 $10.08 $ 9.73
------ ------ ------ -------
Income from investment operations:
Net investment income................................ 0.34 0.31 0.28 0.11
Net realized and unrealized gain on investments...... 2.77 1.88 1.82 0.34
Total from investment operations..................... 3.11 2.19 2.10 0.45
------ ------ ------ -------
Less distributions:
Distributions from net investment income................. (0.28) (0.31) (0.27) (0.10)
Distributions from net realized gain (loss) on investments.... (1.37) (0.08) __ __
------ ------ ------ -------
Total Distributions...................................... (1.65) (0.39) (0.27) (0.10)
------ ------ ------ -------
Net asset value, end of period........................... $15.17 $13.71 $11.91 $10.08
====== ====== ====== =======
Total return............................................. 25.24% 18.71% 21.17% 4.68%**
------ ------ ------ -------
Ratios to average net assets/supplemental data:
Net assets, end of period (000's).................... $14,687 $6,275 $1,650 $1,798
Ratio of operating expenses to average net assets.... 1.25% 1.25% 1.25% 0.71%**
Ratio of net investment income to average net assets... 2.21% 2.39% 2.65% 1.09%**
Portfolio turnover rate.................................. 98.88% 85.21% 53.20% 83.00%
Average commission rate paid***.......................... $.0511 $.0540 __ __
- -------------------------------------------------------------------------------
* The Fund commenced selling Investor shares on April 14, 1994. On
October 17, 1994, the Investor shares were redesignated as Class A shares.
** Not annualized.
*** For fiscal years beginning November 1, 1995, the Fund is required to
disclose its average commission rate paid per share for purchases and sales
of investment securities.
Total return represents aggregate total return for the periods
indicated and is exclusive of sales load.
# Prior to October 17, 1994, Mellon Bank served as the Fund's investment
manager. Effective October 17, 1994, Dreyfus began serving as the Fund's
investment manager.
</TABLE>
[Page 5]
<TABLE>
<CAPTION>
DREYFUS PREMIER BALANCED FUND
FOR A CLASS B SHARE OUTSTANDING THROUGHOUT THE YEAR OR PERIOD.*
Year Year Period
Ended Ended Ended
10/31/97 10/31/96 10/31/95
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period....................................... $13.68 $11.89 $ 9.76
------ ------ -------
Income from investment operations:
Net investment income..................................................... 0.23 0.21 0.14
Net realized and unrealized gain on investments........................... 2.77 1.87 2.11
------ ------ -------
Total from investment operations.......................................... 3.00 2.08 2.25
------ ------ -------
Less distributions:
Distributions from net investment income...................................... (0.19) (0.21) (0.12)
Distributions from net realized gain on investments........................... (1.37) (0.08) __
------ ------ -------
Total Distributions.......................................................... (1.56) (0.29) (0.12)
------ ------ -------
Net asset value, end of period.............................................. $15.12 $13.68 $11.89
====== ======= =======
Total return.................................................................. 24.27% 17.76% 23.19%
------ ------ -------
Ratios to average net assets/supplemental data:
Net assets, end of period (000's)............................................ $28,940 $9,141 $3,118
Ratio of operating expenses to average net assets............................ 2.00% 2.00% 1.73%**
Ratio of net investment income to average net assets........................ 1.47% 1.65% 2.16%**
Portfolio turnover rate....................................................... 98.88% 85.21% 53.20%
Average commission rate paid................................................. $.0511 $.0540 __
- ------------------------------------------------------------------------------
* The Fund commenced operations on September 15, 1993. The Fund commenced
selling Class B shares on December 20, 1994.
** Not annualized.
For fiscal years beginning November 1, 1995, the Fund is required to
disclose its average commission rate paid per share for purchases and sales
of investment securities.
</TABLE>
[Page 6]
<TABLE>
<CAPTION>
DREYFUS PREMIER BALANCED FUND
FOR A CLASS C SHARE OUTSTANDING THROUGHOUT THE YEAR OR PERIOD.*
Year Year Period
Ended Ended Ended
10/31/97 10/31/96 10/31/95
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period........................................ $13.70 $11.90 $9.76
------ ------ -----
Income from investment operations:
Net investment income....................................................... 0.24 0.25 0.11
Net realized and unrealized gain on investments............................. 2.78 1.84 2.15
------ ------ -----
Total from investment operations............................................ 3.02 2.09 2.26
------ ------ -----
Less distributions:
Distributions from net investment income...................................... (0.19) (0.21) (0.12)
Distribution from net realized gain on investments............................ (1.37) (0.08) __
------ ------ -----
Total Distributions........................................................... (1.56) (0.29) (0.12)
------ ------ -----
Net asset value, end of period............................................... $15.16 $13.70 $11.90
====== ====== ======
Total return.................................................................. 24.41% 17.83% 23.29%**
------ ------ -----
Ratios to average net assets/supplemental data:
Net assets, end of period (000's)........................................... $2,017 $237 $6
Ratio of operating expenses to average net assets........................... 2.00% 2.00% 1.73%**
Ratio of net investment income to average net assets........................ 1.47% 1.62% 2.16%**
Portfolio turnover rate....................................................... 98.88% 85.21% 53.20%
Average commission rate paid.................................................. $.0511 $.0540 __
- ------------------------------------------------------------------------------
* The Fund commenced operations on September 15, 1993. The Fund commenced
selling Class C shares on December 20, 1994.
**Not annualized.
For fiscal years beginning November 1, 1995, the Fund is required to
disclose its average commission rate paid per share for purchases and sales
of investment securities.
</TABLE>
[Page 7]
<TABLE>
<CAPTION>
DREYFUS PREMIER BALANCED FUND
FOR A CLASS R SHARE OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.*
Year Year Year Year Period
Ended Ended Ended Ended Ended
10/31/97 10/31/96 10/31/95 10/31/94## 10/31/93*
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning or period................ $13.72 $11.92 $10.09 $10.18 $10.00
------ ------ ------ ------ ------
Income from investment operations:
Net investment income............................. 0.36 0.34 0.31 0.20** 0.02
Net realized and unrealized gain/(loss)
on investments................................ 2.79 1.88 1.81 (0.13) 0.16
------ ------ ------ ------ ------
Total from investment operations.................. 3.15 2.22 2.12 0.07 0.18
------ ------ ------ ------ ------
Less distributions:
Distributions from net investment income............ (0.32) (0.34) (0.29) (0.16) __
Distributions from net realized gain
on investments.................................... (1.37) (0.08) __ __ __
------ ------ ------ ------ ------
Total Distributions................................. (1.69) (0.42) (0.29) (0.16) __
------ ------ ------ ------ ------
Net asset value, end of period...................... $15.18 $13.72 $11.92 $10.09 $10.18
====== ====== ====== ====== ======
Total return........................................ 25.56% 18.99% 21.46% 0.68% 1.80%
---___ ------ ------ ------ ------
Ratios to average net assets/supplemental data:
Net Assets, end of period (000's)................. $148,605 $129,744 $97,881 $75,720 $28,904
Ratio of operating expenses to
average net assets............................ 1.00% 1.00% 1.00% 1.04%*** 0.15%#(1)
Ratio of net investment income to
average net assets............................ 2.44% 2.68% 2.89% 2.23% 0.25%(1)
Portfolio turnover rate............................. 98.88% 85.21% 53.20% 83% _
Average commission rate paid###..................... $.0511 $.0540 __ __ __
- -------------------------------------------------------------------------------
* The Fund commenced operations on September 15, 1993. On April 14, 1994,
the Fund commenced selling Investor shares. Those shares outstanding prior to
April 14, 1994 were designated Trust shares. On October 17, 1994, Trust Shares
were redesignated as Class R shares.
** Net investment income before reimbursement of expenses by the
investment adviser for the year ended October 31, 1994 was $0.2031.
*** Expense ratio before voluntary reimbursement of expenses by the
investment adviser for the year ended October 31, 1994 was 1.09%.
Total return represents aggregate total return for the periods indicated.
Not annualized.
# For the period September 15, 1993 (commencement of operations) to
October 31, 1993, the adviser reimbursed expenses of the Fund amounting to
$0.0109.
## Prior to October 17, 1994, Mellon Bank served as the Fund's investment
manager. Effective October 17, 1994, Dreyfus began serving as the Fund's
investment manager.
### For fiscal years beginning November 1, 1995, the Fund is required to
disclose its average commission rate paid per share for purchases and sales
of investment securities.
(1) These ratios have been restated to reflect current year's presentation.
</TABLE>
[Page 8]
Alternative Purchase Methods
The Fund offers four methods of purchasing Fund shares; you may choose
the Class of shares that best suits your needs, given the amount of your
purchase, the length of time you expect to hold your shares and any other
relevant circumstances. Each Fund share represents an identical pro rata
interest in the Fund's investment portfolio. All Fund shares are sold on a
continuous basis. Class A, Class B and Class C shares are sold primarily to
clients of Agents that have entered into Agreements with the Distributor.
Class A shares are sold at net asset value per share plus a maximum
initial sales charge of 5.75% of the public offering price imposed at the
time of purchase. The initial sales charge may be reduced or waived for
certain purchases. See "How to Buy Fund Shares_Class A shares." These shares
are subject to an annual 12b-1 fee at the rate of 0.25 of 1% of the value of
the average daily net assets of Class A. See "Distribution Plan _ Class A
shares."
Class B shares are sold at net asset value per share with no initial
sales charge at the time of purchase; as a result, the entire purchase price
is immediately invested in the Fund. Class B shares are subject to a maximum
4% contingent deferred sales charge ("CDSC"), which is assessed only if you
redeem Class B shares within six years of purchase. See "How to Buy Fund
Shares _ Class B shares" and "How to Redeem Fund Shares _ Contingent Deferred
Sales Charge _ Class B shares." These shares also are subject to an annual
distribution fee at the rate of 0.75 of 1%, and an annual service fee at the
rate of 0.25 of 1%, of the value of the average daily net assets of Class B.
See "Distribution and Service Plans _ Class B and Class C shares." The
distribution and service fees paid by Class B will cause such Class to have a
higher expense ratio and to pay lower dividends than Class A. Approximately
six years after the date of purchase (or, in the case of Class B shares of
the Fund acquired through exchange of Class B shares of another fund advised
by Dreyfus, the date of purchase of the original Class B shares of the fund
exchanged), Class B shares will automatically convert to Class A shares,
based on the relative net asset values for shares of each such Class, and
will no longer be subject to the service plan fee of Class B shares and will
be subject to the lower distribution fee of Class A shares. (Such conversion
is subject to suspension by the Board of Directors if adverse tax
consequences might result.) Class B shares that have been acquired through
the reinvestment of dividends and other distributions will be converted on a
pro rata basis together with other Class B shares, in the proportion that a
shareholder's Class B shares converting to Class A shares bears to the total
Class B shares not acquired through the reinvestment of dividends and other
distributions.
Class C shares are sold at net asset value per share with no initial
sales charge at the time of purchase; as a result, the entire purchase price
is immediately invested in the Fund. Class C shares are subject to a 1% CDSC,
which is assessed only if you redeem Class C shares within one year of
purchase. See "How to Redeem Fund Shares _ Class C shares." These shares also
are subject to an annual distribution fee at the rate of 0.75 of 1%, and an
annual service fee at the rate of 0.25 of 1%, of the value of the average
daily net assets of Class C. See "Distribution and Service Plans _ Class B
and C shares." The distribution and service fees paid by Class C will cause
such Class to have a higher expense ratio and to pay lower dividends than
Class A.
Class R shares generally may not be purchased directly by
individuals, although eligible institutions may purchase Class R shares for
accounts maintained by individuals. Class R shares are sold at net asset
value per share primarily to bank trust departments and other financial
service providers (including Mellon Bank and its affiliates) ("Banks") acting
on behalf of customers having a qualified trust or investment account or
relationship at such institution, or to customers who have received and hold
shares of the Fund distributed to them by virtue of such an account or
relationship.
The decision as to which Class of shares is most beneficial to you
depends on the amount and the intended length of your investment. You should
consider whether, during the anticipated life of your investment in the Fund,
the accumulated distribution fee, service fee and CDSC, if any, on Class B or
Class C shares would be less than the accumulated distribution fee and
initial sales charge on Class A shares purchased at the same time, and to
what extent, if any, such differential would be offset by the return of Class
A shares. Additionally, investors qualifying for reduced initial sales
charges who expect to maintain their investment for an extended period of
time might consider purchasing Class A shares because the accumulated
continuing distribution and service fees on Class B or Class C shares may
exceed the accumulated distribution fee and initial sales charge on Class A
shares during the life of the investment. Finally, you should consider the
effect of the CDSC period and any conversion rights of the Classes in the
context of your own investment time frame. For example, while Class C shares
have a shorter CDSC period than Class B shares, Class C shares do not have a
conversion feature and, therefore, are subject to ongoing distribution and
service fees. Thus, Class B shares may be more attractive than Class C shares
to investors with longer term investment outlooks. Generally, Class A shares
may be more appropriate for investors who invest $1,000,000 or more in Fund
shares, but will not be appropriate for investors who invest less than
$50,000 in Fund shares.
[Page 9]
Description of the Fund
Investment Objective
The Fund seeks to outperform a hybrid index, 60% of which is the
Standard & Poor's 500 Composite Stock Price IndexRegistration Mark ("S&P 500")
and 40% of which is the Lehman Brothers Intermediate Government/Corporate Bond
Index ("Intermediate Index"), by investing in common stocks and bonds in
proportions consistent with their expected returns and risks as determined by
Dreyfus. There can be no assurance that the Fund will meet its stated
objective.
Management Policies
To outperform the hybrid index, Dreyfus first employs a disciplined
valuation methodology to the return and risks of common stocks and bonds.
Dreyfus considers various factors in determining the relative attractiveness
of investing in common stocks and bonds. The factors which are evaluated
include an interest-rate adjusted market price/earnings ratio, interest rate
spreads reflecting the term structure of interest rates, and the level and
volatility of the return premium for common stocks. The final decision as to
which asset class is relatively more attractive is determined by a formal
decision rule process based on extensive research by Dreyfus.
After developing the expected return and risks of each asset class,
Dreyfus utilizes computer models designed to identify imbalances in the
pricing of common stocks and bonds. Dreyfus then invests the Fund's assets in
common stocks and bonds in proportions intended to exploit the perceived
imbalances. Under normal circumstances, the Fund's total assets are allocated
approximately 60% to common stocks and 40% to bonds. However, the Fund is
permitted to invest up to 75%, and as little as 40%, of its total assets in
common stocks and up to 60%, and as little as 25%, of its total assets in
bonds, as deemed advisable by Dreyfus. Allocation of assets among common
stocks and bonds permits the Fund to exhibit less risk than a fund consisting
entirely of common stocks.
Common stocks are selected so that, in the aggregate, the investment
characteristics and risk profile of the equity portion of the Fund are
similar to the S&P 500. These characteristics include such measures as
dividend yield (before expenses), price-to-earnings ratio, "beta" (relative
volatility), return on equity, and market price-to-book value ratio. However,
while it may maintain aggregate investment characteristics similar to the S&P
500, the Fund seeks to invest in individual common stocks which together will
provide a higher total return than the S&P 500. The Fund will not be operated
as an index fund, and the Fund's equity portion will not be limited to stocks
included in the S&P 500. Individual security selection is the foundation upon
which Dreyfus seeks to implement the investment objective and policies of the
equity portion of the Fund. Dreyfus collects information from diverse sources
from which Dreyfus constructs and combines valuation models into a
computerized comprehensive valuation ranking system identifying common stocks
that are undervalued and should be purchased or retained by the Fund. These
models include measures of changes in earnings and relative value based on
present and historical price-to-earnings ratios, as well as dividend discount
calculations. Once the ranking of common stocks is complete, Dreyfus'
experienced investment analysts construct the right component of the Fund to
resemble in the aggregate the S&P 500, but weighted toward the most
attractive stocks as determined by the valuation models.
The bond portion of the Fund normally is invested in U.S.
dollar-denominated fixed income obligations of domestic and foreign issuers.
The Fund's dollar-weighted average maturity may not exceed ten years.
Investment selections are based on fundamental economic, market, and other
factors leading to valuation by sector, maturity, and quality. The Fund
invests in investment grade bonds rated at least Baa by Moody's Investors
Service, Inc. ("Moody's") or BBB by Standard & Poor's, or if unrated,
determined to be of comparable quality by Dreyfus. The Fund will, in a
prudent and orderly fashion, sell bonds whose ratings drop below these
minimum ratings. Securities rated BBB by Standard & Poor's or Baa by Moody's
are considered by those rating agencies to be "investment grade" securities,
although Moody's considers securities rated Baa to have speculative
characteristics. Furthermore, while bonds rated BBB by Standard & Poor's
exhibit adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity to pay
interest and principal for debt in this category than debt in higher rated
categories. Investment in foreign obligations may be affected by governmental
action in the issuer's country of domicile. Examples of such governmental
actions would be the imposition of currency controls, interest limitations,
seizure of assets, or the declaration of a moratorium on payment of principal
or interest. In addition, evidences of ownership of the Fund's securities may
be held outside the United States and the Fund may be subject to the risks
associated with the holding of such property overseas.
To implement a particular allocation strategy or for liquidity
purposes, other instruments in which the Fund may also invest are: (1) U.S.
Treasury bills, notes and bonds; (2) other obligations issued or guaranteed
as to interest and principal by the U.S. Government, its agencies and
instrumentalities; (3) mortgage-related securities backed by the U.S.
Government, its agencies and instrumentalities, or by private organizations;
(4) corporate obligations rated at least Baa by Moody's or BBB by Standard &
Poor's, or if unrated, determined to be of comparable quality by Dreyfus; (5)
instruments of U.S. and foreign banks, including certificates of deposit,
banker's acceptances
[Page 10]
and time deposits, and may include Eurodollar Certificates of Deposit
("ECDs"), Yankee Certificates of Deposit ("Yankee CDs") and Eurodollar Time
Deposits ("ETDs"); (6) foreign securities evidenced by American Depository
Receipts ("ADRs"); (7) Eurodollar bonds and notes; (8) when-issued
transactions; (9) repurchase agreements; and (10) commercial paper.
The Fund may utilize securities lending and reverse repurchase
agreements. It may also enter into options and futures contracts subject to
certain limitations.
The S&P 500 is composed of 500 common stocks which are chosen by
Standard & Poor's to best capture the price performance of a large
cross-section of the U.S. publicly traded stock market. The S&P 500 is
structured to approximate the general distribution of industries in the U.S.
economy. The inclusion of a stock in the S&P 500 does not imply that Standard
& Poor's believes the stock to be an attractive or appropriate investment,
nor is Standard & Poor's in any way affiliated with the Fund. The 500
securities, most of which trade on the New York Stock Exchange, represent
approximately 75% of the market value of all U.S. common stocks. Each stock
in the S&P 500 is weighted by its market capitalization. That is, each
security is weighted by its total market value relative to the total market
values of all the securities in the S&P 500. Component stocks included in the
S&P 500 are chosen with the aim of achieving a distribution at the index
level representative of the various components of the U.S. economy and
therefore do not represent the 500 largest companies. Aggregate market value
and trading activity are also considered in the selection process. A limited
percentage of the S&P 500 may include foreign securities.
The Intermediate Index is an index established by Lehman Brothers,
Inc. which includes fixed rate debt issues rated investment grade or higher
by Moody's, Standard & Poor's, or Fitch Investors Service LLP ("Fitch"). All
issues have at least one year to maturity and an outstanding par value of at
least $100 million for U.S. Government issues and $50 million for all others.
The Intermediate Index includes bonds with maturities of up to ten years.
The Lehman Brothers Government/Corporate Bond Index is a combination
of the Lehman Brothers Corporate Bond, Government Bond, and Yankee Bond
Indices. The Corporate Bond Index includes public, fixed rate,
non-convertible investment grade domestic corporate debt. Issues included in
this index are rated at least Baa by Moody's or BBB by Standard & Poor's or,
in the case of bonds unrated by Moody's or Standard & Poor's, at least BBB by
Fitch. Collateralized mortgage obligations are not included in the Corporate
Bond Index. The Yankee Bond Index includes U.S. dollar denominated, SEC
registered, public, non-convertible debt issued or guaranteed by foreign
sovereign governments, foreign municipalities, foreign governmental agencies,
or international agencies. The Government Bond Index is a combination of the
Treasury Bond Index and the Agency Bond Index. The Treasury Bond Index
includes public obligations of the U.S. treasury; flower bonds and
foreign-targeted bonds are excluded. The Agency Bond Index includes publicly
issued debt of agencies of the U.S. Government, quasi-federal corporations,
and corporate debt guaranteed by the U.S. Government. Mortgage-backed
securities are not included in the Agency Index.
Investment Techniques
In connection with its investment objective and policies, the Fund
may employ, among others, the following investment techniques:
BORROWING. The Fund is authorized, within specified limits, to borrow
money for temporary administrative purposes and to pledge its assets in
connection with such borrowings.
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 to broker-dealers and other institutional
investors pursuant to agreements requiring that the loans be continuously
secured by collateral equal at all times in value to at least the market
value of the securities loaned. There may be risks of delay in receiving
additional collateral or in recovering the securities loaned or even a loss
of rights to the collateral should the borrower of the securities fail
financially. Securities loans, however, are made only to borrowers deemed by
Dreyfus to be of good standing and when, in its judgment, the income to be
earned from the loan justifies the attendant risks.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. To secure advantageous
prices or yields, the Fund may purchase U.S. Government Securities on a
when-issued basis or may purchase or sell securities for delayed delivery. In
such transactions, delivery of the securities occurs beyond the normal
settlement periods, but no payment or delivery is made by the Fund prior to
the actual delivery or payment by the other party to the transaction. The
purchase of securities on a when-issued or delayed delivery basis involves
the risk that, as a result of an increase in yields available in the
marketplace, the value of the securities purchased will decline prior to the
settlement date. The sale of securities for
[Page 11]
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.
FUTURES, OPTIONS AND OTHER DERIVATIVE INSTRUMENTS. The Fund may
purchase and sell various financial instruments ("Derivative Instruments"),
such as financial futures contracts (including interest rate and index
futures contracts) and options (including options on securities, indices and
futures contracts). The index Derivative Instruments the Fund may use may be
based on indices of U.S. or foreign equity or debt securities. These
Derivative Instruments may be used, for example, to preserve a return or
spread, to lock in unrealized market value gains or losses, to facilitate or
substitute for the sale or purchase of securities, or to alter the exposure
of a particular investment or portion of the Fund's portfolio to fluctuations
in interest rates.
The Fund's ability to use these instruments may be limited by market
conditions, regulatory limits and tax considerations. The Fund might not use
any of these strategies and there can be no assurance that any strategy that
is used will succeed. See the SAI for more information regarding these
instruments and the risks relating thereto.
The Fund may not purchase put or call options that are traded on a
national stock exchange in an amount exceeding 5% of its net assets.
RISKS OF DERIVATIVE INSTRUMENTS. The use of Derivative Instruments
involves special risks, including: (1) possible imperfect or no correlation
between price movements of the portfolio investments (held or intended to be
purchased) involved in the transaction and price movements of the Derivative
Instruments involved in the transaction; (2) possible lack of a liquid
secondary market for any particular Derivative Instrument at a particular
time; (3) the need for additional portfolio management skills and techniques;
(4) losses due to unanticipated market price movements; (5) the fact that,
while such strategies can reduce the risk of loss, they can also reduce the
opportunity for gain, or even result in losses, by offsetting favorable price
movements in portfolio investments; (6) incorrect forecasts by Dreyfus
concerning interest or currency exchange rates or direction of price
fluctuations of the investment involved in the transaction, which may result
in the strategy being ineffective; (7) loss of premiums paid by the Fund on
options it purchases; and (8) the possible inability of the Fund to purchase
or sell a portfolio security at a time when it would otherwise be favorable
for it to do so, or the need to sell a portfolio security at a
disadvantageous time, due to the need for the Fund to maintain "cover" or to
segregate securities in connection with such transactions and the possible
inability of the Fund to close out or liquidate its positions.
Dreyfus may use Derivative Instruments for hedging purposes (to
adjust the risk characteristics of the Fund's portfolio) and may use these
instruments to adjust the return characteristics of the Fund's portfolio of
investments. This can increase investment risk. If Dreyfus judges market
conditions incorrectly or employs a strategy that does not correlate well
with the Fund's investments, these techniques could result in a loss,
regardless of whether the intent was to reduce risk or increase return. These
techniques may increase the volatility of the Fund and may involve a small
investment of cash relative to the magnitude of the risk assumed. In
addition, these techniques could result in a loss if the counterparty to the
transaction does not perform as promised or if there is not a liquid
secondary market to close out a position that the Fund has entered into.
Options and futures transactions may increase portfolio turnover
rates, which results in correspondingly greater commission expenses and
transaction costs, and may result in certain tax consequences.
Certain Portfolio Securities
AMERICAN DEPOSITORY RECEIPTS. The Fund may invest in U.S.
dollar-denominated ADRs. ADRs typically are issued by an American bank or
trust company and evidence ownership of underlying securities issued by
foreign companies. ADRs are traded in the United States on national
securities exchanges or in the over-the-counter market. Investment in
securities of foreign issuers presents certain risks. See "Foreign
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, Inc., or A1 by
IBCA, Inc.
FOREIGN SECURITIES. The Fund may purchase securities of foreign
issuers and may invest in obligations of foreign branches of domestic banks
and domestic branches of foreign banks. Investment in foreign securities
presents certain risks, including those resulting from fluctuations in
currency exchange rates, revaluation of currencies, adverse political and
economic developments and the possible imposition of currency exchange
blockages or other foreign governmental laws or restrictions, reduced
availability of public information concerning issuers, and the fact that
foreign
[Page 12]
issuers are not generally subject to uniform accounting, auditing and
financial reporting standards or to other regulatory practices and
requirements comparable to those applicable to domestic issuers. Moreover,
securities of many foreign issuers may be less liquid and their prices more
volatile than those of comparable domestic issuers. In addition, with respect
to certain foreign countries, there is the possibility of expropriation,
confiscatory taxation and limitations on the use or removal of funds or other
assets of the Fund, including withholding of dividends. Foreign securities
may be subject to foreign government taxes that would reduce the yield on
such securities.
ILLIQUID SECURITIES. The Fund will not knowingly invest more than 15%
of the value of its net assets in illiquid securities, including time
deposits and repurchase agreements having maturities longer than seven days.
Securities that have readily available market quotations are not deemed
illiquid for purposes of this limitation (irrespective of any legal or
contractual restrictions on resale). The Fund may invest in commercial
obligations issued in reliance on the so-called "private placement" exemption
from registration afforded by Section 4(2) of the Securities Act of 1933, as
amended ("Section 4(2) paper"). The Fund may also purchase securities that
are not registered under the Securities Act of 1933, as amended, but that can
be sold to qualified institutional buyers in accordance with Rule 144A under
that Act ("Rule 144A securities"). Liquidity determinations with respect to
Section 4(2) paper and Rule 144A securities will be made by the Board of
Directors or by Dreyfus pursuant to guidelines established by the Board of
Directors. The Board of Directors or Dreyfus will consider availability of
reliable price information and other relevant information in making such
determinations. Section 4(2) paper is restricted as to disposition under the
federal securities laws, and generally is sold to institutional investors,
such as the Fund that agree that they are purchasing the paper for investment
and not with a view to public distribution. Any resale by the purchaser must
be pursuant to registration or an exemption therefrom. Section 4(2) paper
normally is resold to other institutional investors like the Fund through or
with the assistance of the issuer or investment dealers who make a market in
the Section 4(2) paper, thus providing liquidity. Rule 144A securities
generally must be sold to other qualified institutional buyers. If a
particular investment in Section 4(2) paper or Rule 144A securities is not
determined to be liquid, that investment will be included within the
percentage limitation on investment in illiquid securities. The ability to
sell Rule 144A securities to qualified institutional buyers is a recent
development and it is not possible to predict how this market will mature.
Investing in Rule 144A securities could have the effect of increasing the
level of Fund illiquidity to the extent that qualified institutional buyers
become, for a time, uninterested in purchasing these securities.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements.
A repurchase agreement involves the purchase of a security by the Fund and a
simultaneous agreement (generally with a bank or broker-dealer) to repurchase
that security from the Fund at a specified price and date or upon demand.
This investment technique offers a method of earning income on idle cash. A
risk associated with repurchase agreements is the failure of the seller to
repurchase the securities as agreed, which may cause the Fund to suffer a
loss if the market value of such securities declines before they can be
liquidated on the open market. Repurchase agreements with a duration of more
than seven days are considered illiquid securities and are subject to the
associated limits discussed above.
ECDS, ETDS, YANKEE CDS AND EURODOLLAR BANKS AND NOTES. The Fund may
invest in ECDs, ETDs, Yankee CDs and Eurodollar banks and notes. 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
that 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."
FIXED-INCOME SECURITIES. The Fund may invest in fixed-income
securities. In periods of declining interest rates, the Fund's yield (its
income from portfolio investments over a stated period of time) may tend to
be higher than prevailing market rates, and in periods of rising interest
rates, the Fund's yield may tend to be lower than prevailing interest rates.
Also, in periods of falling interest rates, the inflow of net new money to
the Fund from the continuous sale of its shares will likely be invested in
portfolio instruments producing lower yields than the balance of the Fund's
portfolio, thereby reducing the yield of the Fund. In periods of rising
interest rates, the opposite can be true. The net asset value of a fund
investing in fixed-income securities also may change as general levels of
interest rates fluctuate. When interest rates increase, the value of a
portfolio of fixed-income securities can be expected to decline. Conversely,
when interest rates decline, the value of a portfolio of fixed-income
securities can be expected to increase.
GNMA CERTIFICATES. The Fund may invest in Government National
Mortgage Association ("GNMA") Certificates. GNMA Certificates are
mortgage-backed securities representing part ownership of a pool of mortgage
loans. These loans are made by mortgage bankers, commercial banks, savings
and loan associations, and other lenders and are either insured by the
Federal Housing Administration or guaranteed by the Veterans Administration.
A "pool" or group of such mortgages is assembled and, after being approved by
GNMA, is offered to investors through securities dealers. Once approved by
GNMA, the timely payment of interest and principal on each mortgage is
guaranteed by the full faith and credit of the U.S. Government. Although the
mortgage loans in a pool underlying a GNMA
[Page 13]
Certificate will have maturities of up to 30 years, the average life
of a GNMA Certificate will be substantially less because the mortgages will
be subject to normal principal amortization and also may be prepaid prior to
maturity. Prepayment rates vary widely and may be affected by changes in
mortgage interest rates. In periods of falling interest rates, the rate of
prepayment on higher interest mortgage rates tends to increase, thereby
shortening the actual average life of the GNMA Certificate. Conversely, when
interest rates are rising, the rate of prepayment tends to decrease, thereby
lengthening the average life of the GNMA Certificate. Reinvestment of
prepayments may occur at higher or lower rates than the original yield of the
certificates. Due to the prepayment feature and the need to reinvest
prepayments of principal at current rates, GNMA Certificates, with underlying
mortgages bearing higher interest rates, can be less effective than typical
non-callable bonds of similar maturities at locking in yields during periods
of declining interest rates, although they may have comparable risks of
decline in value during periods of rising interest rates.
MORTGAGE PASS-THROUGH CERTIFICATES. The Fund may invest in mortgage
pass-through certificates. Mortgage pass-through certificates are issued by
governmental, government-related and private organizations and are backed by
pools of mortgage loans. These mortgage loans are made by lenders such as
savings and loan associations, mortgage bankers, commercial banks and others
to residential home buyers throughout the United States. The securities are
deemed "pass-through" securities because they provide investors with monthly
payments of principal and interest that, in effect, are a "pass-through" of
the monthly payments made by the individual borrowers on the underlying
mortgage loans. The principal governmental issuer of such securities is GNMA,
which is a wholly owned U.S. government corporation within the Department of
Housing and Urban Development. Government related issuers include the Federal
Home Loan Mortgage Corporation ("FHLMC"), and the Federal National Mortgage
Association ("FNMA"), both government-sponsored corporations owned entirely
by private stockholders. Commercial banks, savings and loan institutions,
private mortgage insurance companies, mortgage bankers and other secondary
market issuers also create pass-through pools of conventional residential
mortgage loans. Such issuers may be the originators of the underlying
mortgage loans as well as the guarantors of the mortgage-related securities.
The market value of mortgage-related securities depends on, among other
things, the level of interest rates, the certificates' coupon rates and the
payment history of underlying mortgage loans. For further information, see
the SAI.
OTHER INVESTMENT COMPANIES. The Fund may invest in securities issued
by other investment companies to the extent that such investments are
consistent with the Fund's investment objective and policies and permissible
under the Investment Company Act of 1940, as amended (the "1940 Act"). As a
shareholder of another investment company, the Fund would bear, along with
other shareholders, its pro rata portion of the other investment company's
expenses, including advisory fees. These expenses would be in addition to the
advisory and other expenses that the Fund bears directly in connection with
its own operations.
U.S. GOVERNMENT SECURITIES. The Fund may invest in obligations issued
or guaranteed as to both principal and interest by the U.S. Government or
backed by the full faith and credit of the United States ("U.S. Government
Securities"). In addition to direct obligations of the U.S. Treasury, U.S.
Government Securities include securities issued or guaranteed by the Federal
Housing Administration, Farmers Home Administration, Export-Import Bank of
the United States, Small Business Administration, GNMA, General Services
Administration and Maritime Administration. Investments may also be made in
U.S. Government obligations that do not carry the full faith and credit
guarantee, such as those issued by FNMA, FHLMC or other instrumentalities.
VARIABLE AMOUNT MASTER DEMAND NOTES. The Fund may invest in Variable
Amount Master Demand Notes. Variable amount master demand notes are unsecured
obligations that are redeemable upon demand and are typically unrated. These
instruments are issued pursuant to written agreements between their issuers
and holders. The agreements permit the holders to increase (subject to an
agreed maximum) and the holders and issuers to decrease the principal amount
of the notes, and specify that the rate of interest payable on the principal
fluctuates according to an agreed-upon formula. If an issuer of a variable
amount master demand note were to default on its payment obligation, the Fund
might be unable to dispose of the note because of the absence of a secondary
market and might, for this or other reasons, suffer a loss to the extent of
the default. The Fund will only invest in variable amount master demand notes
issued by entities that Dreyfus considers creditworthy.
PORTFOLIO TURNOVER. While both stocks and other securities are
purchased for the Fund on the basis of potential for capital appreciation and
income and not for short-term trading profits, the Fund's turnover rate for
stocks and/or other securities may exceed 100%. A portfolio turnover rate of
100% would occur, for example, if all the securities held by the Fund were
replaced once in a period of one year. A higher rate of portfolio turnover
involves correspondingly greater brokerage commissions and other expenses
that must be borne directly by the Fund and, thus, indirectly by its
shareholders. In addition, a high rate of portfolio turnover may result in
the realization of larger amounts of short-term capital gains that, when
distributed to the Fund's shareholders, are taxable to them as ordinary
income. Nevertheless, Fund transactions in stocks and other securities will
be based only upon investment considerations and will not be limited by any
other considerations when Dreyfus deems it appropriate to make changes in the
Fund's assets.
[Page 14]
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 January 31, 1998, Dreyfus managed or administered
approximately $96 billion in assets for more than 1.7 million investor
accounts nationwide.
Dreyfus serves as the Fund's investment manager. Dreyfus supervises
and assists in the overall management of the Fund's affairs under an
Investment Management Agreement with the Fund, subject to the overall
authority of the Company's Board of Directors in accordance with Maryland
law. Pursuant to the Investment Management Agreement, Dreyfus provides, or
arranges for one or more third parties to provide, investment advisory,
administrative, custody, fund accounting and transfer agency services to the
Fund. As the Fund's investment manager, Dreyfus manages the Fund by making
investment decisions based on the Fund's investment objective, policies and
restrictions.
The fixed income portion of the Fund is managed by Laurie Carroll.
Ms. Carroll has managed the fixed income portion of the Fund since September
15, 1993. Ms. Carroll is a Senior Vice President and portfolio manager at
Mellon Bank. Ms. Carroll has been employed by Mellon Bank since 1986. The
equity portion of the Fund is managed by Ron Gala. Mr. Gala has managed the
equity portion of the Fund since September 15, 1993. Mr. Gala is Vice
President and portfolio manager for Mellon Bank and is a portfolio manager
for Mellon Equity Associates. Mr. Gala is also responsible for Mellon Equity
Associates' asset allocation. Mr. Gala has been employed by Mellon Bank in
various capacities since 1982. Ms. Carroll and Mr. Gala have been employed by
Dreyfus as portfolio managers since October 17, 1994.
Mellon is a publicly owned multibank holding company incorporated
under Pennsylvania law in 1971 and registered under the Bank Holding Company
Act of 1956, as amended. Mellon provides a comprehensive range of financial
products and services in domestic and selected international markets. Mellon
is among the twenty-five largest bank holding companies in the United States
based on total assets. Mellon's principal wholly-owned subsidiaries are
Mellon Bank, Mellon Bank (DE) National Association, Mellon Bank (MD), The
Boston Company, Inc., AFCO Credit Corporation and a number of companies known
as Mellon Financial Services Corporations. Through its subsidiaries,
including Dreyfus, Mellon managed more than $305 billion in assets as of
December 31, 1997, including approximately $104 billion in mutual fund
assets. As of December 31, 1997, Mellon, through various subsidiaries,
provided non-investment services, such as custodial or administration
services, for more than $1.532 trillion in assets, including approximately
$60 billion in mutual fund assets.
Under the Investment Management Agreement, the Fund has agreed to pay
Dreyfus a monthly fee at the annual rate of 1.00 of 1% of the value of the
Fund's average daily net assets. Dreyfus pays all of the Fund's expenses,
except brokerage fees, taxes, interest, fees and expenses of non-interested
Directors (including counsel fees), Rule 12b-1 fees (if applicable) and
extraordinary expenses. In order to compensate Dreyfus for paying virtually
all of the Fund's expenses, the Fund's investment management fee is higher
than the investment advisory fees paid by most investment companies. Most, if
not all, such companies also pay for additional non-investment advisory
expenses that are not paid by such companies' investment advisers. Although
Dreyfus does not pay for the fees and expenses of the non-interested
Directors (including counsel fees), Dreyfus is contractually required to
reduce its management fee by an amount equal to the Fund's allocable share of
such fees and expenses. From time to time, Dreyfus may voluntarily waive a
portion of the investment management fees payable by the Fund. For the fiscal
year ended October 31, 1997, the Fund paid Dreyfus 1.00% of its average daily
net assets in investment management fees, less fees and expenses of the
non-interested Directors (including counsel fees).
For the fiscal year ended October 31, 1997, total operating expenses
(excluding Rule 12b-1 fees) of the Fund were 1.00% of the average daily net
assets for each of the Fund's Class A, Class B, Class C and Class R shares.
In addition, Class A, B and C shares are subject to certain Rule
12b-1 distribution and shareholder servicing fees. See "Distribution Plans
(Class A Plan and Class B and C Plans)."
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.
[Page 15]
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.
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, PA 15258 is the
Fund's custodian. Dreyfus Transfer, Inc., a wholly-owned subsidiary of
Dreyfus, P.O. Box 967, 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 _ Class A shares, Class B shares and Class C shares may be purchased
only by clients of Agents, except that full-time or part-time employees 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 may purchase
Class A shares directly through the Distributor. Subsequent purchases may be
sent directly to the Transfer Agent or your Agent.
Class R shares are sold primarily to Banks acting on behalf of
customers having a qualified trust or investment account or relationship at
such institution, or to customers who have received and hold shares of the
Fund distributed to them by virtue of such an account or relationship. In
addition, holders of Class R shares of the Fund who have held their shares
since April 4, 1994, may continue to purchase Class R shares of the Fund,
whether or not they otherwise would be eligible to do so. Class R shares may
be purchased for a retirement plan only by a custodian, trustee, investment
manager or other entity authorized to act on behalf of such plan.
When purchasing Fund shares, you must specify which Class is being
purchased. Stock certificates are issued only upon your written request. No
certificates are issued for fractional shares. The Fund reserves the right to
reject any purchase order. Agents effecting transactions in Fund shares for
the accounts of their clients may charge their clients direct fees in
connection with such transactions.
Agents may receive different levels of compensation for selling
different Classes of shares. Management understands that some Agents may
impose certain conditions on their clients which are different from those
described in this Prospectus, and, to the extent permitted by applicable
regulatory authority, may charge their clients direct fees which would be in
addition to any amounts which might be received under the Distribution and
Service Plans. Each Agent has agreed to transmit to its clients a schedule of
such fees. You should consult your Agent in this regard.
The minimum initial investment is $1,000. Subsequent investments must
be at least $100. The minimum initial investment is $750 for
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 and $500 for Dreyfus-sponsored Education
IRAs, with no minimum on subsequent purchases. The initial investment must be
accompanied by the Fund's Account Application. The Fund reserves the right to
offer Fund shares without regard to minimum purchase requirements to
employees participating in certain qualified or non-qualified employee
benefit plans or other programs where contributions or account information
can be transmitted in a manner and form acceptable to the Fund. The Fund
reserves the right to vary further the initial and subsequent investment
minimum requirements at any time.
The Internal Revenue Code of 1986, as amended (the "Code"), imposes
various limitations on the amount that may be contributed to certain
qualified or non-qualified employee benefit plans or other programs,
including pension, profit-sharing and other deferred compensation plans,
whether established by corporations, partnerships, non-profit entities or
state and local governments ("Retirement Plans"). These limitations apply
with respect to participants at the plan level and, therefore, do not
directly affect the amount that may be invested in the Fund by a Retirement
Plan. Participants and plan sponsors should consult their tax advisers for
details.
You may purchase Fund shares by check or wire, or through the
TeleTransfer Privilege described below. Checks should be made payable to "The
Dreyfus Family of Funds," or if for Dreyfus retirement plan accounts, to "The
Dreyfus
[Page 16]
Trust Company, Custodian." Payments which are mailed should be sent
to Dreyfus Premier Balanced Fund, P.O. Box 6587, Providence, Rhode Island
02940-6587. If you are opening a new account, please enclose your Account
Application indicating which Class of shares is being purchased. For
subsequent investments, your Fund account number should appear on the check
and an investment slip should be enclosed. For Dreyfus retirement plan
accounts, payments which are mailed should be sent to The Dreyfus Trust
Company, Custodian, P.O. Box 6427, Providence, Rhode Island 02940-6427.
Neither initial nor subsequent investments should be made by third party check.
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 Fund's DDA #044350/Dreyfus Premier Balanced 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 1-800-554-4611
after completing your wire payment to obtain your Fund account number. Please
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.
Fund shares also may be purchased through Dreyfus-AUTOMATIC Asset
BuilderRegistration Mark and the Government Direct Deposit Privilege 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.
Subsequent investments also may be made by electronic transfer of
funds from an account maintained in a bank or other domestic financial
institution that is an Automated Clearing House ("ACH") member. You must
direct the institution to transmit immediately available funds through the
ACH System to Boston Safe Deposit and Trust Company with instructions to
credit your Fund account. The instructions must specify your Fund account
registration and Fund account number PRECEDED BY THE DIGITS "4130" for Class
A shares, "4140" for Class B shares, "4150" for Class C shares and "4160" for
Class R shares.
The Distributor may pay dealers a fee of up to 0.5% of the amount
invested through such dealers in Fund shares by employees participating in
qualified or non-qualified employee benefit plans or other programs where (i)
the employers or affiliated employers maintaining such plans or programs have
a minimum of 250 employees eligible for participation in such plans or
programs or (ii) such plan's or program's aggregate investment in the Dreyfus
Premier Family of Funds or 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 Premier Family of Funds or 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 at any time. The
Distributor will pay such fees from its own funds, other than amounts
received from the Fund, including past profits or any other source available
to it.
Federal regulations require that you provide a certified TIN upon
opening or reopening an account. See "Dividends, Other Distributions and
Taxes" and the Fund's Account Application for further information concerning
this requirement. Failure to furnish a certified TIN to the Fund could
subject you to a $50 penalty imposed by the Internal Revenue Service (the
"IRS").
NET ASSET VALUE PER SHARE ("NAV") _ An investment portfolio's NAV refers to
the worth of one share. The NAV for shares of each Class of the Fund is
computed by dividing the value of net assets attributable to each Class by
the number of shares of that Class outstanding. Shares of each Class of the
Fund are offered on a continuous basis. The valuation of assets for
determining NAV for the Fund may be summarized as follows:
The portfolio securities of the Fund, except as otherwise noted,
listed or traded on a stock exchange, are valued at the latest sale price. If
no sale is reported, the mean of the latest bid and asked prices is used.
Securities traded over-the-counter are priced at the mean of the latest bid
and asked prices but will be valued at the last sale price if required by
regulations of the SEC. When market quotations are not readily available,
securities and other assets are valued at a fair value as determined in good
faith in accordance with procedures established by the Board of Directors.
Bonds are valued through valuations obtained from a commercial
pricing service or at the most recent mean of the bid and asked prices
provided by investment dealers in accordance with procedures established by
the Board of Directors.
[Page 17]
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. For purposes of determining NAV, options
and futures contracts will be valued 15 minutes after the close of trading on
the floor of the NYSE. 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. Except in the case of certain orders
transmitted by dealers as described in the following paragraph, orders
received after such close of trading are effective on, and receive the share
price determined on, the next business day.
Orders for the purchase of Fund shares received by dealers by the
close of trading on the floor of the NYSE on any business day and transmitted
to the Distributor or its designee by the close of its business day (normally
5:15 p.m., New York time) will be based on the public offering price per
share determined as of the close of trading on the floor of the NYSE on that
day. Otherwise, the orders will be based on the next determined public
offering price. It is the dealers' responsibility to transmit orders so that
they will be received by the Distributor or its designee before the close of
its 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.
CLASS A SHARES _ The public offering price of Class A shares is the NAV of
that Class plus, except for shareholders beneficially owning Class A shares
on November 30, 1996, a sales load as shown below:
<TABLE>
<CAPTION>
Total Sales Load
---------------------------------
As a % of As a % of Dealers' Reallowance
Offering Price Net Asset Value as a % of
Amount of Transaction Per Share Per Share Offering Price
_____________________ _______________ ______________ __________________
<S> <C> <C> <C>
Less than $50,000...................................... 5.75 6.10 5.00
$50,000 to less than $100,000.......................... 4.50 4.70 3.75
$100,000 to less than $250,000......................... 3.50 3.60 2.75
$250,000 to less than $500,000......................... 2.50 2.60 2.25
$500,000 to less than $1,000,000....................... 2.00 2.00 1.75
$1,000,000 or more..................................... 0 0 0
For shareholders who opened Fund accounts after December 19, 1994,
but who beneficially owned Class A shares on November 30, 1996, the public
offering price for Class A shares is the NAV of that Class plus a sales load
as shown below:
Total Sales Load
_________________________________
As a % of As a % of Dealers' Reallowance
Offering Price Net Asset Value as a % of
Amount of Transaction Per Share Per Share Offering Price
______________________ _______________ ______________ _________________
Less than $50,000...................................... 4.50 4.70 4.25
$50,000 to less than $100,000.......................... 4.00 4.20 3.75
$100,000 to less than $250,000......................... 3.00 3.10 2.75
$250,000 to less than $500,000......................... 2.50 2.60 2.25
$500,000 to less than $1,000,000....................... 2.00 2.00 1.75
$1,000,000 or more..................................... 0 0 0
</TABLE>
Holders of Class A accounts of the Fund as of December 19, 1994 may
continue to purchase Class A shares of the Fund at NAV. However, investments
by such holders in other funds advised by Dreyfus will be subject to any
applicable front-end sales load.
There is no initial sales charge on purchases of $1,000,000 or more
of Class A shares. However, if you purchase Class A shares without an initial
sales charge as part of an investment of at least $1,000,000 and redeem all
or a portion of those shares within one year of purchase, a CDSC of 1.00%
will be imposed at the time of redemption. The Distributor may pay Agents an
amount up to 1% of the NAV of Class A shares purchased by their clients that
are subject to a CDSC. The terms contained in the sections of the Fund's
Prospectus entitled "How to Redeem Fund Shares _ Contingent Deferred Sales
Charge _ Class B" (other than the amount of the CDSC and its time periods)
and "How to Redeem Fund Shares_Waiver of CDSC" are applicable to the Class A
shares subject to a CDSC. Letter of Intent and Right of Accumulation apply to
such purchases of Class A shares.
Full-time employees of NASD member firms and full-time employees of
other financial institutions which have entered into an agreement with the
Distributor pertaining to the sale of Fund shares (or which otherwise have a
brokerage related or clearing arrangement with an NASD member firm or
financial institution with respect to the sale of such shares) may purchase
Class A shares for themselves directly or pursuant to an employee benefit
plan or other program, or for their spouses or minor children, at NAV,
provided that they have furnished the Distributor with such information
[Page 18]
as it may request from time to time in order to verify eligibility for this
privilege. This privilege also applies to full-time employees of financial
institutions affiliated with NASD member firms whose full-time employees are
eligible to purchase Class A shares at NAV. In addition, Class A shares are
offered at NAV to full-time or part-time employees of Dreyfus or any of its
affiliates or subsidiaries, directors of Dreyfus, Board members of a fund
advised by Dreyfus, including members of the Company's Board, or the spouse or
minor child of any of the foregoing.
Class A shares will be offered at NAV without a sales load to
employees participating in Eligible Benefit Plans. Class A shares also may be
purchased (including by exchange) at NAV without a sales load for
Dreyfus-sponsored IRA "Rollover Accounts" with the distribution proceeds from
a qualified retirement plan or a Dreyfus-sponsored 403(b)(7) plan, provided
that, at the time of such distribution, such qualified retirement plan or
Dreyfus-sponsored 403(b)(7) plan (a) met the requirements of an Eligible
Benefit Plan and all or a portion of such plan's assets were invested in funds
in the Dreyfus Premier Family of Funds, the Dreyfus Family of Funds or certain
other products made available by the Distributor to such plans, or (b)
invested all of its assets in certain funds in the Dreyfus Premier Family of
Funds or the Dreyfus Family of Funds or certain other products made available
by the Distributor to such plans.
Class A shares may be purchased at NAV through certain broker-dealers
and other financial institutions which have entered into an agreement with
the Distributor, which includes a requirement that such shares be sold for
the benefit of clients participating in a "wrap account" or a similar program
under which such clients pay a fee to such broker-dealer or other financial
institution.
Class A shares also may be purchased at NAV, subject to appropriate
documentation, through a broker-dealer or other financial institution with
the proceeds from the redemption of shares of a registered open-end
management investment company not managed by Dreyfus or its affiliates. The
purchase of Class A shares of the Fund must be made within 60 days of such
redemption and the shareholder must have either (i) paid an initial sales
charge or a CDSC or (ii) been obligated to pay at any time during the holding
period, but did not actually pay on redemption, a deferred sales charge with
respect to such redeemed shares.
Class A shares also may be purchased at NAV, subject to appropriate
documentation, by (i) qualified separate accounts maintained by an insurance
company pursuant to the laws of any State or territory of the United States,
(ii) a State, county or city or instrumentality thereof, (iii) a charitable
organization (as defined in Section 501(c)(3) of the Code) investing $50,000
or more in Fund shares, and (iv) a charitable remainder trust (as defined in
Section 501(c)(3) of the Code).
The dealer reallowance may be changed from time to time but will
remain the same for all dealers. The Distributor, at its expense, may provide
additional promotional incentives to dealers that sell shares of funds
advised by Dreyfus which are sold with a sales load, such as Class A shares.
In some instances, those incentives may be offered only to certain dealers
who have sold or may sell significant amounts of shares. Dealers receive a
larger percentage of the sales load from the Distributor than they receive
for selling most other funds.
CLASS B SHARES _ The public offering price for Class B shares is the NAV of
that Class. No initial sales charge is imposed at the time of purchase. A
CDSC is imposed, however, on certain redemptions of Class B shares as
described under "How to Redeem Fund Shares." The Distributor compensates
certain Agents for selling Class B and Class C shares at the time of purchase
from the Distributor's own assets. The proceeds of the CDSC and the
distribution fee, in part, are used to defray these expenses.
CLASS C SHARES _ The public offering price for Class C shares is the NAV of
that Class. No initial sales charge is imposed at the time of purchase. A
CDSC is imposed, however, on redemptions of Class C shares made within the
first year of purchase. See "Class B shares" above and "How to Redeem Fund
Shares."
CLASS R SHARES _ The public offering price for Class R shares is the NAV of
that Class.
RIGHT OF ACCUMULATION_CLASS A SHARES _ Reduced sales loads apply to any
purchase of Class A shares, shares of other funds in the Dreyfus Premier
Family of Funds, shares of certain other funds advised by Dreyfus which are
sold with a sales load and shares acquired by a previous exchange of such
shares (hereinafter referred to as "Eligible Funds"), by you and any related
"purchaser" as defined in the SAI, where the aggregate investment, including
such purchase, is $50,000 or more. If, for example, you previously purchased
and still hold Class A shares of the Fund, or shares of any other Eligible
Fund or combination thereof, with an aggregate current market value of
$40,000 and subsequently purchase Class A shares of the Fund or shares of an
Eligible Fund having a current value of $20,000, the sales load applicable to
the subsequent purchase would be reduced to 4.50% of the offering price. All
present holdings of Eligible Funds may be combined to determine the current
offering price of the aggregate investment in ascertaining the sales load
applicable to each subsequent purchase. Class A shares purchased by
shareholders beneficially owning Fund shares on November 30, 1996, but who
opened their Fund accounts after December 19, 1994, are subject to a different
sales load schedule, as described above under "Class A shares."
To qualify for reduced sales loads, at the time of purchase you or
your Agent must notify the Distributor if orders are made by wire, or the
Transfer Agent if orders are made by mail. The reduced sales load is subject
to confirmation of your holdings through a check of appropriate records.
[Page 19]
TELETRANSFER PRIVILEGE _ You may purchase Fund shares (minimum $500 and
maximum $150,000 per day) by telephone if you have checked the appropriate
box and supplied the necessary information on the Fund's Account Application
or have a filed Shareholder Services Form with the Transfer Agent. The
proceeds will be transferred between the bank account designated in one of
these documents and your Fund account. Only a bank account maintained in a
domestic financial institution which is an ACH member may be so designated.
The Fund may modify or terminate this privilege at any time or charge a
service fee upon notice to shareholders. No such fee currently is
contemplated.
If you have selected the TELETRANSFER Privilege, you may request a
TELETRANSFER purchase of Fund shares by calling 1-800-554-4611 or, if calling
from overseas, 516-794-5452.
Shareholder Services
The services and privileges described under this heading may not be
available to clients of certain Agents and some Agents may impose certain
conditions on their clients which are different from those described in this
Prospectus. You should consult your Agent in this regard.
Fund Exchanges
You may purchase, in exchange for shares of a Class, shares of the
same class of certain other funds managed or administered by Dreyfus, to the
extent such shares are offered for sale in your state of residence. These
funds have different investment objectives which may be of interest to you.
If you desire to use this service, please call 1-800-554-4611 to determine if
it is available and whether any conditions are imposed on its use. WITH
RESPECT TO CLASS R SHARES HELD BY RETIREMENT PLANS, EXCHANGES MAY BE MADE
ONLY BETWEEN A SHAREHOLDER'S RETIREMENT PLAN ACCOUNT IN ONE FUND AND SUCH
SHAREHOLDER'S RETIREMENT PLAN ACCOUNT IN ANOTHER FUND.
To request an exchange, you or your Agent acting on your behalf must
give exchange instructions to the Transfer Agent in writing or by telephone.
Before any exchange, you must obtain and should review a copy of the current
prospectus of the fund into which the exchange is being made. Prospectuses
may be obtained by calling 1-800-554-4611. 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 1-800-554-4611, or by
oral request from any of the authorized signatories on the account by calling
1-800-554-4611. If you have established the Telephone Exchange Privilege, you
may telephone exchange instructions (including over The Dreyfus
TouchRegistration Mark automated telephone system) by calling 1-800-645-4611
or, 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, TELETRANSFER Privilege and the dividends and
distributions payment option (except for Dividend Sweep) selected by the
investor.
Shares will be exchanged at the next determined NAV; however,
a sales load may be charged with respect to exchanges of Class A shares into
funds sold with a sales load. No CDSC will be imposed on Class B or Class C
shares at the time of an exchange; however, Class B or Class C shares acquired
through an exchange will be subject on redemption to the higher CDSC
applicable to the exchanged or acquired shares. The CDSC applicable on
redemption of the acquired Class B or Class C shares will be calculated from
the date of the initial purchase of the Class B or Class C shares exchanged,
as the case may be. If you are exchanging Class A shares into a fund that
charges a sales load, you may qualify for share prices which do not include
the sales load or which reflect a reduced sales load, if the shares of the
fund from which you are exchanging were: (a) purchased with a sales load, (b)
acquired by a previous exchange from shares purchased with a sales load, or
(c) acquired through reinvestment of dividends or other distributions paid
with respect to the foregoing categories of shares. To qualify, at the time
of the exchange your Agent must notify the Distributor. Any such
qualification is subject to confirmation of your holdings through a check of
appropriate records. See "Shareholder Services" in the SAI. No fees currently
are charged shareholders directly in connection with exchanges, although the
Fund reserves the right, upon not less than 60 days' written notice, to
charge shareholders a nominal fee in accordance with rules promulgated by the
SEC. The Fund reserves the right to reject any exchange request in whole or
in part. The availability of Fund Exchanges may be modified or terminated at
any time upon notice to shareholders.
The exchange of shares of one fund for shares of another is treated
for Federal income tax purposes as a sale of the shares given in exchange by
the shareholder and, therefore, an exchanging shareholder may realize, or an
exchange on behalf of a Retirement Plan which is not tax exempt may result
in, a taxable gain or loss.
[Page 20]
Auto-Exchange Privilege
Auto-Exchange Privilege enables you to invest regularly (on a
semi-monthly, monthly, quarterly or annual basis), in exchange for shares of
the Fund, in shares of the same class of other funds in the Dreyfus Premier
Family of Funds or certain other funds in the Dreyfus Family of Funds of
which you are currently an investor. WITH RESPECT TO CLASS R SHARES HELD BY
RETIREMENT PLANS, EXCHANGES PURSUANT TO THE AUTO-EXCHANGE PRIVILEGE MAY BE
MADE ONLY BETWEEN A SHAREHOLDER'S RETIREMENT PLAN ACCOUNT IN ONE FUND AND
SUCH SHAREHOLDER'S RETIREMENT PLAN ACCOUNT IN ANOTHER FUND. The amount you
designate, which can be expressed either in terms of a specific dollar or
share amount ($100 minimum), will be exchanged automatically on the first
and/or fifteenth day of the month according to the schedule you have
selected. Shares will be exchanged at the then-current NAV; however, a sales
load may be charged with respect to exchanges of Class A shares into funds
sold with a sales load. No CDSC will be imposed on Class B or Class C shares
at the time of an exchange; however, Class B or Class C shares acquired
through an exchange will be subject on redemption to the higher CDSC
applicable to the exchanged or acquired shares. The CDSC applicable on
redemption of the acquired Class B or Class C shares will be calculated from
the date of the initial purchase of the Class B or Class C shares exchanged,
as the case may be. See "Shareholder Services" in the SAI. The right to
exercise this privilege may be modified or canceled by the Fund or the
Transfer Agent. You may modify or cancel your exercise of this Privilege at
any time by mailing written notification to Dreyfus Premier Balanced Fund,
P.O. Box 6587, Providence, Rhode Island 02940-6587. The Fund may charge a
service fee for the use of this Privilege. No such fee currently is
contemplated. The exchange of shares of one fund for shares of another is
treated for Federal income tax purposes as a sale of the shares given in
exchange by the shareholder and, therefore, an exchanging shareholder may
realize, or an exchange on behalf of a Retirement Plan which is not tax exempt
may result in, a taxable gain or loss. For more information concerning this
privilege and the funds in the Dreyfus Premier Family of Funds or the Dreyfus
Family of Funds eligible to participate in this privilege, or to obtain an
Auto-Exchange Authorization Form, please call toll free 1-800-554-4611.
Dreyfus-AUTOMATIC Asset BuilderRegistration Mark
Dreyfus-AUTOMATIC Asset Builder permits you to purchase Fund shares
(minimum of $100 and maximum of $150,000 per transaction) at regular
intervals selected by you. Fund shares are purchased by transferring funds
from the bank account designated by you. At your option, the bank account
designated by you will be debited in the specified amount, and Fund shares
will be purchased, once a month, on either the first or fifteenth day, or
twice a month, on both days. Only an account maintained at a domestic
financial institution which is an ACH member may be so designated. To
establish a Dreyfus-AUTOMATIC Asset Builder account, you must file an
authorization form with the Transfer Agent. You may obtain the necessary
authorization form by calling 1-800-554-4611. You may cancel your
participation in this Privilege or change the amount of purchase at any time
by mailing written notification to Dreyfus Premier Balanced Fund, P.O. Box
6587, Providence, Rhode Island 02940-6587, and the notification will be
effective three business days following receipt. The Fund may modify or
terminate this Privilege at any time or charge a service fee. No such fee
currently is contemplated.
Dividend Options
Dividend Sweep enables you to invest automatically dividends or
dividends and other distributions, if any, paid by the Fund in shares of the
same class of other funds in the Dreyfus Premier Family of Funds or 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 or class
that charges a CDSC, the shares purchased will be subject on redemption to
the CDSC, if any, applicable to the purchased shares. See "Shareholder
Services" in the SAI. Dividend ACH permits you to transfer electronically
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
Dividend Options Form, please call toll free 1-800-554-4611. You may cancel
these Privileges by mailing written notification to Dreyfus Premier Balanced
Fund, P.O. Box 6587, Providence, Rhode Island 02940-6587. To select a new
fund after cancellation, you must submit a new Dividend Options Form.
Enrollment in or cancellation of these Privileges is effective three business
days following receipt. These Privileges are available only for existing
accounts and may not be used to open new accounts. Minimum subsequent
investments do not apply for Dividend Sweep. The Fund may modify or terminate
these Privileges at any time or charge a service fee. No such fee currently is
contemplated. Shares held under Keogh Plans, IRAs or other retirement plans
are not eligible for Dividend Sweep.
Government Direct Deposit Privilege
Government Direct Deposit Privilege enables you to purchase Fund
shares (minimum of $100 and maximum of $50,000 per transaction) by having
Federal salary, Social Security, or certain veterans', military or other
payments from
[Page 21]
the Federal government automatically deposited into your Fund
account. You may deposit as much of such payments as you elect. You should
consider whether Direct Deposit of your entire payment into a fund with
fluctuating NAV, such as the Fund, may be appropriate for you. To enroll in
Government Direct Deposit, you must file with the Transfer Agent a completed
Direct Deposit Sign-Up Form for each type of payment that you desire to
include in this privilege. The appropriate form may be obtained by calling
1-800-554-4611. Death or legal incapacity will terminate your participation
in this Privilege. You may elect at any time to terminate your participation
by notifying in writing the appropriate Federal agency. Further, the Fund may
terminate your participation upon 30 days' notice to you.
Automatic Withdrawal Plan
The Automatic Withdrawal Plan permits you to request withdrawal of a
specified dollar amount (minimum of $50) on either a monthly or quarterly
basis if you have a $5,000 minimum account. 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 1-800-554-4611.
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.
No CDSC with respect to Class B shares will be imposed on withdrawals
made under the Automatic Withdrawal Plan, provided that the amounts withdrawn
under the plan do not exceed on an annual basis 12% of the account value at
the time the shareholder elects to participate in the Automatic Withdrawal
Plan. Withdrawals with respect to Class B shares under the Automatic
Withdrawal Plan that exceed on an annual basis 12% of the value of the
shareholder's account will be subject to a CDSC on the amounts exceeding 12%
of the initial account value. Class C shares, and Class A shares to which a
CDSC applies, that are withdrawn pursuant to the Automatic Withdrawal Plan
will be subject to any applicable CDSC. Purchases of additional Class A
shares where the sales load is imposed concurrently with withdrawals of Class
A shares generally are undesirable.
Retirement Plans
The Fund offers a variety of pension and profit-sharing plans,
including Keogh Plans, IRAs (including regular IRAs, spousal IRAs for a
non-working spouse, Roth IRAs, SEP-IRAs, Rollover IRAs and Educational 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 1-800-554-4611; for SEP-IRAs,
401(k) Salary Reduction Plans and 403(b)(7) Plans, please call
1-800-322-7880.
Letter of Intent_Class A shares
By signing a Letter of Intent form, which can be obtained by calling
1-800-554-4611, you become eligible for the reduced sales load applicable to
the total number of Eligible Fund shares purchased in a 13-month period
pursuant to the terms and conditions set forth in the Letter of Intent. A
minimum initial purchase of $5,000 is required. To compute the applicable
sales load, the offering price of shares you hold (on the date of submission
of the Letter of Intent) in any Eligible Fund that may be used toward "Right
of Accumulation" benefits described above may be used as a credit toward
completion of the Letter of Intent. However, the reduced sales load will be
applied only to new purchases.
The Transfer Agent will hold in escrow 5% of the amount indicated in
the Letter of Intent for payment of a higher sales load if you do not
purchase the full amount indicated in the Letter of Intent. The escrow will
be released when you fulfill the terms of the Letter of Intent by purchasing
the specified amount. If your purchases qualify for a further sales load
reduction, the sales load will be adjusted to reflect your total purchase at
the end of 13 months. If total purchases are less than the amount specified,
you will be requested to remit an amount equal to the difference between the
sales load actually paid and the sales load applicable to the aggregate
purchases actually made. If such remittance is not received within 20 days,
the Transfer Agent, as attorney-in-fact pursuant to the terms of the Letter
of Intent, will redeem an appropriate number of Class A shares of the Fund
held in escrow to realize the difference. Signing a Letter of Intent does not
bind you to purchase, or the Fund to sell, the full amount indicated at the
sales load in effect at the time of signing, but you must complete the
intended purchase to obtain the reduced sales load. At the time you purchase
Class A shares, you must indicate your intention to do so under a Letter of
Intent. Purchases pursuant to a Letter of Intent will be made at the
then-current NAV plus the applicable sales load in effect at the time such
Letter of Intent was executed.
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 net asset
[Page 22]
value as described below. If you hold Fund shares of more than one Class, any
request for redemption must specify the Class of shares being redeemed. If
you fail to specify the Class of shares to be redeemed or if you own fewer
shares of the Class than specified to be redeemed, the redemption request may
be delayed until the Transfer Agent receives further instructions from you or
your Agent.
The Fund imposes no charges (other than any applicable CDSC) when
shares are redeemed. 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 TELETRANSFER PRIVILEGE OR THROUGH
DREYFUS-AUTOMATIC ASSET BUILDERRegistration Mark AND SUBSEQUENTLY SUBMIT A
WRITTEN REDEMPTION REQUEST TO THE TRANSFER AGENT, THE REDEMPTION PROCEEDS
WILL BE TRANSMITTED TO YOU PROMPTLY UPON BANK CLEARANCE OF YOUR PURCHASE
CHECK, TELETRANSFER PURCHASE OR 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 PURSUANT TO THE TELETRANSFER PRIVILEGE FOR A PERIOD
OF EIGHT BUSINESS DAYS AFTER RECEIPT BY THE TRANSFER AGENT OF THE PURCHASE
CHECK, THE TELETRANSFER PURCHASE OR THE DREYFUS-AUTOMATIC ASSET BUILDER ORDER
AGAINST WHICH SUCH REDEMPTION IS REQUESTED. THESE PROCEDURES WILL NOT APPLY
IF YOUR SHARES WERE PURCHASED BY WIRE PAYMENT, OR IF YOU OTHERWISE HAVE A
SUFFICIENT COLLECTED BALANCE IN YOUR ACCOUNT TO COVER THE REDEMPTION REQUEST.
PRIOR TO THE TIME ANY REDEMPTION IS EFFECTIVE, DIVIDENDS ON SUCH SHARES WILL
ACCRUE AND BE PAYABLE, AND YOU WILL BE ENTITLED TO EXERCISE ALL OTHER RIGHTS
OF BENEFICIAL OWNERSHIP. Fund shares will not be redeemed until the Transfer
Agent has received your Account Application.
The Fund reserves the right to redeem your account at its option upon
not less than 45 days' written notice if the net asset value of your account
is $500 or less and remains so during the notice period.
CONTINGENT DEFERRED SALES CHARGE_CLASS B SHARES. A CDSC payable to the
Distributor is imposed on any redemption of Class B shares which reduces the
current net asset value of your Class B shares to an amount which is lower
than the dollar amount of all payments by you for the purchase of Class B
shares of the Fund held by you at the time of redemption. No CDSC will be
imposed to the extent that the NAV of the Class B shares redeemed does not
exceed (i) the current net asset value of Class B shares acquired through
reinvestment of dividends or other distributions, plus (ii) increases in the
NAV of your Class B shares above the dollar amount of all your payments for
the purchase of Class B shares held by you at the time of redemption.
If the aggregate value of Class B shares redeemed has declined below
their original cost as a result of the Fund's performance, a CDSC may be
applied to the then-current NAV rather than the purchase price.
In circumstances where the CDSC is imposed, the amount of the charge
will depend on the number of years from the time you purchased the Class B
shares until the time of redemption of such shares. Solely for purposes of
determining the number of years from the time of any payment for the purchase
of Class B shares, all payments during a month will be aggregated and deemed
to have been made on the first day of the month. The following table sets
forth the rates of the CDSC:
YEAR SINCE CDSC AS A % OF AMOUNT
PURCHASE PAYMENT INVESTED OR REDEMPTION
WAS MADE PROCEEDS
__________ _______________________
First.................................... 4.00
Second................................... 4.00
Third.................................... 3.00
Fourth................................... 3.00
Fifth.................................... 2.00
Sixth.................................... 1.00
In determining whether a CDSC is applicable to a redemption, the
calculation will be made in a manner that results in the lowest possible rate.
It will be assumed that the redemption is made first of amounts representing
shares acquired pursuant to the reinvestment of dividends and other
distributions; then of amounts representing the increase in NAV of Class B
shares above the total amount of payments for the purchase of Class B shares
made during the preceding six years; then of amounts representing the cost of
shares purchased six years prior to the redemption; and finally, of amounts
representing the cost of shares held for the longest period of time within the
applicable six-year period.
For example, assume an investor purchased 100 shares at $10 share for
a cost of $1,000. Subsequently, the shareholder acquired five additional
shares through dividend reinvestment. During the second year after the
purchase the investor decided to redeem $500 of his or her investment.
Assuming at the time of the redemption the NAV had appreciated to $12 per
share, the value of the investor's shares would be $1,260 (105 shares at $12
per share). The CDSC would not be applied to the value of the reinvested
dividend shares and the amount which represents appreciation
[Page 23]
($260). Therefore, $240 of the $500 redemption proceeds ($500 minus
$260) would be charged at a rate of 4% (the applicable rate in the second
year after purchase) for a total CDSC of $9.60.
For purposes of determining the applicable CDSC payable with respect
to redemption of Class B shares of the Fund where such shares were acquired
through exchange of Class B shares of another fund advised by Dreyfus, the
year since purchase payment was made is based on the date of purchase of the
original Class B shares of the fund exchanged.
CONTINGENT DEFERRED SALES CHARGE_CLASS C SHARES. A CDSC of 1% payable to the
Distributor is imposed on any redemption of Class C shares within one year of
the date of purchase. The basis for calculating the payment of any such CDSC
will be the method used in calculating the CDSC for Class B shares. See
"Contingent Deferred Sales Charge_Class B shares" above.
WAIVER OF CDSC. The CDSC applicable to Class B and Class C shares (and to
certain Class A shares) will be waived in connection with (a) redemptions
made within one year after the death or disability, as defined in Section
72(m)(7) of the Code, of the shareholder, (b) redemptions by employees
participating in Eligible Benefit Plans, (c) redemptions as a result of a
combination of any investment company with the Fund by merger, acquisition of
assets or otherwise, (d) a distribution following retirement under a
tax-deferred retirement plan or upon attaining age 701\2 in the case of an
IRA or Keogh plan or custodial account pursuant to Section 403(b) of the
Code, and (e) redemptions pursuant to the Automatic Withdrawal Plan, as
described under "Shareholder Services _ Automatic Withdrawal Plan" above. If
the Company's Board of Directors determines to discontinue the waiver of the
CDSC, the disclosure in the Fund's prospectus will be revised appropriately.
Any Fund shares subject to a CDSC which were purchased prior to the
termination of such waiver will have the CDSC waived as provided in the
Fund's Prospectus at the time of the purchase of such shares.
To qualify for a waiver of the CDSC, at the time of redemption you
must notify the Transfer Agent or your Agent must notify the Distributor. Any
such qualification is subject to confirmation of your entitlement.
PROCEDURES _ You may redeem Fund shares by using the regular redemption
procedure through the Transfer Agent, or 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, through the
TELETRANSFER Privilege. If you are a client of a Selected Dealer, you may also
redeem Fund shares through the Selected Dealer. 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 TELETRANSFER Privilege.
You may redeem Fund shares by telephone if you have checked the
appropriate box on the Account Application or have filed a Shareholder
Services Form with the Transfer Agent. If you select the TELETRANSFER
redemption privilege or telephone exchange privilege, which is granted
automatically unless you refuse it, you authorize the Transfer Agent to act
on telephone instructions (including over The Dreyfus TouchRegistration Mark
automated telephone system) from any person representing himself or herself
to be you, or a representative of your Agent, and reasonably believed by the
Transfer Agent to be genuine. The Fund will require the Transfer Agent to
employ reasonable procedures, such as requiring a form of personal
identification, to confirm that instructions are genuine and, if it does not
follow such procedures, the Fund or the Transfer Agent may be liable for any
losses due to unauthorized or fraudulent instructions. Neither the Fund nor
the Transfer Agent will be liable for following telephone instructions
reasonably believed to be genuine.
During times of drastic economic or market conditions, you may
experience difficulty in contacting the Transfer Agent by telephone to
request a TeleTransfer redemption or an exchange of Fund shares. In such
cases, you should consider using the other redemption procedures described
herein. Use of these other redemption procedures may result in your
redemption request being processed at a later time than it would have been if
TeleTransfer redemption had been used. During the delay, the Fund's NAV may
fluctuate.
REGULAR REDEMPTION _ Under the regular redemption procedure, you may redeem
your shares by written request mailed to Dreyfus Premier Balanced Fund, P.O.
Box 6587, Providence, Rhode Island 02940-6587. Redemption requests must be
signed by each shareholder, including each owner of a joint account, and each
signature must be guaranteed. The Transfer Agent has adopted standards and
procedures pursuant to which signature-guarantees in proper form generally
will be accepted from domestic banks, brokers, dealers, credit unions,
national securities exchanges, registered securities associations, clearing
agencies and savings associations, as well as from participants in the New
York Stock Exchange Medallion Signature Program, the Securities Transfer
Agents Medallion Program ("STAMP"), and the Stock Exchanges Medallion Program.
For more information with respect to signature-guarantees, please call
1-800-554-4611.
[Page 24]
Redemption proceeds of at least $1,000 will be wired to any member
bank of the Federal Reserve System in accordance with a written
signature-guaranteed request.
TELETRANSFER PRIVILEGE. You may request by telephone that redemption proceeds
(minimum $500 per day) be transferred between your Fund account and your bank
account. Only such 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 accounts may redeem through the TELETRANSFER Privilege for transfer
to their bank account not more than $250,000 within any 30-day period.
If you have selected the TeleTransfer Privilege, you may request a
TeleTransfer redemption of Fund shares by calling 1-800-554-4611 or, if
calling from overseas, 516-794-5452.
REDEMPTION THROUGH A SELECTED DEALER _ If you are a customer of a Selected
Dealer, you may make redemption requests to your Selected Dealer. If the
Selected Dealer transmits the redemption request so that it is received by
the Transfer Agent prior to the close of trading on the floor of the NYSE
(currently 4:00 p.m., New York time), the redemption request will be
effective on that day. If a redemption request is received by the Transfer
Agent after the close of trading on the floor of the NYSE, the redemption
request will be effective on the next business day. It is the responsibility
of the Selected Dealer to transmit a request so that it is received in a
timely manner. The proceeds of the redemption are credited to your account
with the Selected Dealer. See "How to Buy Fund Shares" for a discussion of
additional conditions or fees that may be imposed upon redemption.
In addition, the Distributor or its designee will accept orders from
Selected Dealers with which the Distributor has sales agreements for the
repurchase of shares held by shareholders. Repurchase orders received by
dealers by the close of trading on the floor of the NYSE on any business day
and transmitted to the Distributor or its designee prior to the close of its
business day (normally 5:15 p.m., New York time) are effected at the price
determined as of the close of trading on the floor of the NYSE on that day.
Otherwise, the shares will be redeemed at the next determined NAV. It is the
responsibility of the Selected Dealer to transmit orders on a timely basis.
The Selected Dealer may charge the shareholder a fee for executing the order.
This repurchase arrangement is discretionary and may be withdrawn at any
time.
REINVESTMENT PRIVILEGE _ Upon written request, you may reinvest up to the
number of Class A or Class B shares you have redeemed, within 45 days of
redemption, at the then-prevailing NAV without a sales load, or reinstate
your account for the purpose of exercising Fund Exchanges. Upon
reinstatement, with respect to Class B shares, or Class A shares if such
shares were subject to a CDSC, the shareholder's account will be credited
with an amount equal to the CDSC previously paid upon redemption of the Class
A or Class B shares reinvested. The Reinvestment Privilege may be exercised
only once.
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
[Page 25]
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 Plans
(Class A Plan and Class B and C Plans)
Class A shares are subject to a Distribution Plan adopted pursuant to
Rule 12b-1 under the 1940 Act ("Rule 12b-1"). Class B and Class C shares are
subject to a Distribution Plan and a Service Plan, each adopted pursuant to
Rule 12b-1. 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. Potential investors should read this
Prospectus in light of the terms governing Agreements with their Agents. The
fees payable under the Distribution and Service Plans are payable without
regard to actual expenses incurred. The Fund and the Distributor may suspend
or reduce payments under the Distribution and Service Plans at any time, and
payments are subject to the continuation of the Fund's Plans 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 Distributor and Service Plans. See the SAI for more details on the Plans.
DISTRIBUTION PLAN_CLASS A SHARES_The Class A shares of the Fund bear some
of the cost of selling those shares under the Distribution Plan (the "Plan").
The Plan allows the Fund to spend annually up to 0.25% of its average daily
net assets attributable to Class A shares to compensate Dreyfus Service
Corporation, an affiliate of Dreyfus, for shareholder servicing activities
and the Distributor for shareholder servicing activities and expenses
primarily intended to result in the sale of Class A shares of the Fund. The
Plan allows the Distributor to make payments from the Rule 12b-1 fees it
collects from the Fund to compensate Agents that have entered into Agreements
with the Distributor. Under the Agreements, the Agents are obligated to
provide distribution related services with regard to the Fund and/or
shareholder services to the Agent's clients that own Class A shares of the
Fund.
DISTRIBUTION AND SERVICE PLANS_CLASS B AND C SHARES_ Under a Distribution
Plan adopted pursuant to Rule 12b-1, the Fund pays the Distributor for
distributing the Fund's Class B and Class C shares at an aggregate annual
rate of .75 of 1% of the value of the average daily net assets of Class B and
Class C. Under a Service Plan adopted pursuant to Rule 12b-1, the Fund pays
Dreyfus Service Corporation or the Distributor for the provision of certain
services to the holders of Class B and Class C shares a fee at the annual
rate of .25 of 1% of the value of the average daily net assets of Class B and
Class C. The services provided may include personal services relating to
shareholder accounts, such as answering shareholder inquiries regarding the
Fund and providing reports and other information, and providing services
related to the maintenance of such shareholder accounts. With regard to such
services, each Agent is required to disclose to its clients any compensation
payable to it by the Fund and any other compensation payable by its clients
in connection with the investment of their assets in Class B and Class C
shares. The Distributor may pay one or more Agents in respect of services for
these Classes of shares. The Distributor determines the amounts, if any, to
be paid to Agents under the Service Plan and the basis on which such payments
are made.
Dividends, Other Distributions and Taxes
The Fund declares and pays dividends from its net investment income,
if any, four times yearly and distributes net realized 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. 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. Class B and
C shares will receive lower per share dividends than Class A shares which
will receive lower per share dividends than Class R shares, because of the
higher expenses borne by the relevant Class. See "Expense Summary."
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 its earnings and realized gains are distributed to its
shareholders in accordance with applicable provisions of the Code.
[Page 26]
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. Dividends
and other distributions may also be subject to state and local taxes.
Distributions from net capital gain (the excess of net long-term capital gain
over net short-term capital loss) will be taxable to such shareholders as
long-term capital gains, 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. Dividends and other distributions also
may be subject to state and local taxes.
Dividend distributions paid by the Fund to a non-resident foreign
investor generally are subject to U.S. withholding tax at the rate of 30%,
unless the foreign investor claims the benefit of a lower rate specified in a
tax treaty. Distributions from net capital gain paid by the Fund to a
non-resident foreign investor, as well as the proceeds of any redemptions 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).
The Code provides for the "carryover" of some or all of the sales
load imposed on Class A shares if (1) an investor redeems those shares or
exchanges those shares for shares of another fund advised or administered by
Dreyfus within 91 days of purchase and (2) in the case of a redemption,
acquires other Fund Class A shares through exercise of the Reinvestment
Privilege or, in the case of an exchange, such other fund reduces or
eliminates its otherwise applicable sales load for the purpose of the
exchange. In this case, the amount of the sales load charged the investor for
the original Class A shares, up to the amount of the reduction of the sales
load pursuant to the Reinvestment Privilege or on the exchange, as the case
may be, is not included in the basis of such shares for purposes of computing
gain or loss on the redemption or the exchange, and instead is added to the
basis of the fund shares received pursuant to the Reinvestment Privilege or
the exchange.
Dividends and other distributions paid by the Fund to qualified
retirement plans ordinarily will not be subject to taxation until the
proceeds are distributed from the retirement plans. The Fund will not report
to the IRS distributions paid to such plans. Generally, distributions from
qualified retirement plans, except those representing returns of
non-deductible contributions thereto, will be taxable as ordinary income and,
if made prior to the time the participant reaches age 591\2, generally will
be subject to an additional tax equal to 10% of the taxable portion of the
distribution. If the distribution from such a retirement plan (other than
certain governmental or church plans) for any taxable year following the year
in which the participant reaches age 701\2 is less than the "minimum required
distribution" for that taxable year, an excise tax equal to 50% of the
deficiency may be imposed by the IRS. The administrator, trustee or custodian
of such a retirement plan will be responsible for reporting distributions
from such plans to the IRS. Moreover, certain contributions to a qualified
retirement plan in excess of the amounts permitted by law may be subject to
an excise tax. If a distributee of an "eligible rollover distribution" from a
qualified retirement plan does not elect to have the eligible rollover
distribution paid directly from the plan to an eligible retirement plan in a
"direct rollover," the eligible rollover distribution will be subject to a
20% income tax withholding.
The Fund must withhold and remit to the U.S. Treasury 31% ("backup
withholding") of dividends, capital gain distributions and any redemption
proceeds, regardless of the extent to which gain or loss may be realized,
paid to such an individual or certain other non-corporate shareholder 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
[Page 27]
Federal income tax return. 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 backupwithholding 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.
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 Class B and C should be expected to be lower than that of Class A and the
performance of Class A, B and C should be expected to be lower than that of
Class R. Performance for each Class will be calculated separately.
Average annual total return is calculated pursuant to a standardized
formula which assumes that an investment was purchased with an initial
payment of $1,000 and that the investment was redeemed at the end of a stated
period of time, after giving effect to the reinvestment of dividends and
other distributions during the period. The return is expressed as a
percentage rate which, if applied on a compounded annual basis, would result
in the redeemable value of the investment at the end of the period.
Advertisements of the Fund's performance will include the Fund's average
annual total return for one, five and ten year periods, or for shorter periods
depending upon the length of time during which the Fund has operated.
Computations of average annual total return for periods of less than one year
represent an annualization of the Fund's actual total return for the
applicable period.
Total return is computed on a per share basis and assumes the
reinvestment of dividends and other distributions. Total return generally is
expressed as a percentage rate which is calculated by combining the income
and principal changes for a specified period and dividing by the net asset
value (or maximum offering price in the case of Class A shares) per share at
the beginning of the period. Advertisements may include the percentage rate
of total return or may include the value of a hypothetical investment at the
end of the period which assumes the application of the percentage rate of
total return. Total return also may be calculated by using the net asset
value per share at the beginning of the period instead of the maximum
offering price per share at the beginning of the period for Class A shares or
without giving effect to any applicable CDSC at the end of the period for
Class B or C shares. Calculations based on the net asset value per share do
not reflect the deduction of the sales load on the Fund's Class A shares,
which, if reflected, would reduce the performance quoted.
The Fund may also advertise the yield on a Class of shares. The
Fund's yield is calculated by dividing a Class of shares' annualized net
investment income per share during a recent 30-day (or one month) period by
the maximum public offering price per share of such Class on the last day of
that period. Since yields fluctuate, yield data cannot necessarily be used to
compare an investment in a Class of shares with bank deposits, savings
accounts, and similar investment alternatives which often provide an
agreed-upon or guaranteed fixed yield for a stated period of time.
Performance will vary from time to time and past results are not
necessarily representative of future results. You should remember that
performance is a function of portfolio management in selecting the type and
quality of portfolio securities and is affected by operating expenses.
Performance information, such as that described above, may not provide a
basis for comparison with other investments or other investment companies
using a different method of calculating performance.
The Fund may compare the performance of its shares with various
industry standards of performance including Lipper Analytical Services, Inc.
ratings, Standard & Poor's Composite Index of 500 Stocks, Lehman Brothers
Government/Corporate Intermediate Bond Index, CDA Technologies indexes, other
indexes created by Lehman Brothers, the Consumer Price Index, and the Dow
Jones Industrial Average. Performance rankings as reported in CHANGING TIMES,
BUSINESS WEEK, INSTITUTIONAL INVESTOR, THE WALL STREET JOURNAL,
IBC/DONOGHUE'S MONEY FUND REPORT, MUTUAL FUND FORECASTER, NO LOAD INVESTOR,
MONEY MAGAZINE, MORNINGSTAR MUTUAL FUND VALUES, U.S. NEWS AND WORLD REPORT,
FORBES, FORTUNE, BARRON'S and similar publications may also be used in
comparing the Fund's performance. Furthermore, the Fund may quote its shares'
total returns and yields in advertisements or in shareholder reports. The
Fund may also advertise non-standardized performance information, such as
total return for periods other than those required to be shown or cumulative
performance data. The Fund may advertise a quotation of yield or other
similar quotation demonstrating the income earned or distributions made by
the Fund.
[Page 28]
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 four classes_Class A, Class B, Class C and Class R. 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 Class are entitled to vote, each as a separate class. Only
holders of Class A, B or C shares, as the case may be, will be entitled to
vote on matters submitted to shareholders pertaining to the Distribution
and/or Service Plan relating to that Class.
Unless otherwise required by the 1940 Act, ordinarily it will not be
necessary for the Fund to hold annual meetings of shareholders. As a result,
Fund shareholders may not consider each year the election of Directors or the
appointment of auditors. However, the holders of at least 10% of the shares
outstanding and entitled to vote may require the Company to hold a special
meeting of shareholders for purposes of removing a Director from office and
for any other purpose. Company shareholders may remove a Director by the
affirmative vote of a majority of the Company's outstanding voting shares. In
addition, the Board of Directors will call a meeting of shareholders for the
purpose of electing Directors if, at any time, less than a majority of the
Directors then holding office have been elected by shareholders.
The Transfer Agent maintains a record of your ownership and will send
you confirmations and statements of account.
Shareholder inquiries may be made by writing to the Fund at 144 Glenn
Curtiss Boulevard, Uniondale, New York 11556-0144.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND IN THE
FUND'S OFFICIAL SALES LITERATURE IN CONNECTION WITH THE OFFER OF THE FUND'S
SHARES, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER IN ANY STATE IN WHICH, OR TO ANY PERSON TO WHOM,
SUCH OFFERING MAY NOT LAWFULLY BE MADE.
[Page 29]
[Application p1 here]
[Page 30]
[Application p2 here]
[Page 31]
Copy Rights 1998 Dreyfus Service Corporation 342p0398
[Page 32]
- ------------------------------------------------------------------------------
PROSPECTUS MARCH 1, 1998
DREYFUS PREMIER LIMITED TERM INCOME FUND
- ------------------------------------------------------------------------------
Dreyfus Premier Limited Term Income Fund (the "Fund"), formerly
called the "Premier Limited Term Income Fund," is a separate, diversified
portfolio of The Dreyfus/Laurel Funds, Inc., an open-end management
investment company (the "Company"), known as a mutual fund. The Fund seeks to
obtain as high a level of current income as is consistent with safety of
principal and maintenance of liquidity by investing in fixed income
obligations and maintaining a dollar-weighted average maturity of ten years
or less.
By this Prospectus, the Fund is offering four Classes of
shares_Class A, Class B, Class C and Class R_which are described herein. See
"Alternative Purchase Methods."
Each Class of shares may be purchased or redeemed by telephone
using the TELETRANSFER Privilege.
The Dreyfus Corporation serves as the Fund's investment manager.
The Dreyfus Corporation is referred to as "Dreyfus."
This Prospectus sets forth concisely information about the Fund
that you should know before investing. It should be read carefully before you
invest and retained for future reference.
The Statement of Additional Information ("SAI") dated March 1,
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 1-800-554-4611. When telephoning, ask
for Operator 144.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
AGENCY. ALL MUTUAL FUND SHARES INVOLVE CERTAIN INVESTMENT RISKS, INCLUDING
THE POSSIBLE LOSS OF PRINCIPAL.
THE FEES TO WHICH THE FUND IS SUBJECT ARE SUMMARIZED IN THE
"EXPENSE SUMMARY" SECTION OF THE FUND'S PROSPECTUS. THE FUND PAYS AN
AFFILIATE OF MELLON BANK, N.A. ("MELLON BANK") TO BE ITS INVESTMENT MANAGER.
MELLON BANK OR AN AFFILIATE MAY BE PAID FOR PERFORMING OTHER SERVICES FOR THE
FUND, SUCH AS CUSTODIAN, TRANSFER AGENT OR FUND ACCOUNTANT SERVICES. THE FUND
IS DISTRIBUTED BY PREMIER MUTUAL FUND SERVICES, INC. (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
Alternative Purchase Methods.............................. 9
Description of the Fund................................... 10
Management of the Fund.................................... 13
How to Buy Fund Shares.................................... 14
Shareholder Services...................................... 18
How to Redeem Fund Shares................................. 21
Additional Information About Purchases, Exchanges and..... 23
Redemption
Distribution Plans (Class A Plan and Class B and C Plans). 24
Dividends, Other Distributions and Taxes.................. 24
Performance Information................................... 26
General Information....................................... 27
[Page 2]
[This Page Intentionally Left Blank]
[Page 3]
<TABLE>
<CAPTION>
Expense Summary
Shareholder Transaction Expenses CLASS A CLASS B CLASS C CLASS R
------- ------- ------- -------
<S> <C> <C> <C> <C>
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) 3.00% none none none
Maximum Contingent Deferred Sales Charge
Imposed on Redemptions
(as a percentage of the amount
subject to charge) none* 3.00% .75% none
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average daily net assets)
Management Fee.............................. .60% .60% .60% .60%
12b-1 Fee1.................................. .25% .75% .75% none
Other Expenses2............................. .00% .00% .00% .00%
------- ------- ------- -------
Total Fund Operating Expenses............... .85% 1.35% 1.35% .60%
EXAMPLE:
You would pay the following expenses on a
$1,000 investment, assuming (1) a 5% annual
return and (2) except where noted,
redemption at the end of each time period:
1 YEAR...................................... $ 38 $ 44/$143 $ 21/$143 $ 6
3 YEARS..................................... $ 56 $63/$433 $ 43 $19
5 YEARS..................................... $ 76 $ 84/$743 $ 74 $33
10 YEARS.................................... $132 $136** $162 $75
</TABLE>
- ---------------------------------------------
* A contingent deferred sales charge of 1.00% may be assessed on certain
redemptions of Class A shares purchased without an initial sales charge as
part of an investment of $1 million or more. See "How to Buy Fund
Shares_Class A shares."
** Assumes conversion of Class B shares to Class A shares approximately six
years after the date of purchase and, therefore, reflects Class A expenses
for years seven through ten.
(1)See "Distribution Plans (Class A Plan and Class B and C Plans)" for a
description of the Fund's Distribution Plans and Service Plan for Class A, B
and C shares.
(2)Does not include fees and expenses of the non-interested Directors
(including counsel). The investment manager is contractually required to
reduce its management fee 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.
(3)Assuming no redemption of shares.
- ------------------------------------------------------------------------------
The amounts listed in the example should not be considered as representative
of past or future expenses and actual expenses may be greater or less than
those indicated. Moreover, while the example assumes a 5% annual return, the
Fund's actual performance will vary and may result in an actual return
greater or less than 5%.
- ------------------------------------------------------------------------------
The purpose of the foregoing table is to assist you in understanding
the various costs and expenses that investors will bear, directly or
indirectly, the payment of which will reduce investors' return on an annual
basis. Long-term investors in Class A, B or C shares could pay more in 12b-1
fees than the economic equivalent of paying the maximum front-end sales
charges applicable to mutual funds sold by members of the National
Association of Securities Dealers, Inc. ("NASD"). The information in the
foregoing table does not reflect any fee waivers or expense reimbursement
arrangements that may be in effect. Certain banks, securities dealers and
brokers ("Selected Dealers") or other financial institutions (including
Mellon Bank and its affiliates) (collectively "Agents") may charge their
clients direct fees for effecting transactions in Fund shares; such fees are
not reflected in the foregoing table. See "Management of the Fund," "How to
Buy Fund Shares," "How to Redeem Fund Shares" and "Distribution Plans (Class
A Plan and Class B and C Plans)."
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 Class A, Class B, Class C
and Class R share outstanding throughout each fiscal year or period and
should be read in conjunction with the financial statements, 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, the 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 PREMIER LIMITED TERM INCOME FUND
FOR A CLASS A SHARE OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.
YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED
10/31/97 10/31/96 10/31/95 10/31/94*#
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period..................... $10.78 $10.84 $10.22 $10.49
------ ------ ------ ------
Investment Operations:
Net investment income................................ 0.62 0.58 0.56 0.28
Net realized and unrealized gain(loss)
on investments....................................... 0.19 (0.07) 0.62 (0.27)
------ ------ ------ ------
Total from investment operations..................... 0.81 0.51 1.18 0.01
------ ------ ------ ------
Less distributions:
Distributions from net investment income............. (0.63) (0.57) (0.56) (0.28)
------ ------ ------ ------
Net asset value, end of period........................... $10.96 $10.78 $10.84 $10.22
====== ====== ====== ======
Total return............................................. 7.80% 4.85% 11.83% 0.11%
------ ------ ------ ------
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's)................. $1,169 $1,001 $1,150 $ 932
Ratio of operating expenses to average net assets.... 0.85% 0.85% 0.85% 0.83%**
Ratio of net investment income to
average net assets................................... 5.80% 5.38% 5.33% 4.47%**
Portfolio turnover rate.................................. 129.94% 153.63% 73.00% 117.00%
</TABLE>
- -------------------------------------------------------------------------------
* The Fund commenced selling Investor Shares on April 7, 1994. Effective
as of October 17, 1994, the Fund's Investor Shares were redesignated as
Class A shares.
** Annualized.
Total return represents aggregate total return for the periods indicated
and is exclusive of sales load.
# 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 PREMIER LIMITED TERM INCOME FUND
FOR A CLASS B SHARE OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.
YEAR YEAR PERIOD
ENDED ENDED ENDED
10/31/97 10/31/96 10/31/95*
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period........................................... $10.78 $10.84 $10.15
------ ------ ------
Investment Operations:
Net investment income..................................................... 0.56 0.52 0.47
Net realized and unrealized gain on investments.......................... 0.23 (0.07) 0.69
------ ------ ------
Total from investment operations........................................... 0.79 0.45 1.16
------ ------ ------
Less distributions:
Distributions from net investment income.................................... (0.57) (0.51) (0.47)
------ ------ ------
Net asset value, end of period................................................ $11.00 $10.78 $10.84
====== ====== ======
Total return................................................................. 7.56% 4.33% 11.32%
====== ====== ======
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's)........................................ $542 $143 $78
Ratio of operating expenses to average net assets........................... 1.35% 1.35% 1.35%**
Ratio of net investment income to average net assets........................ 5.06% 4.86% 4.85%**
Portfolio turnover rate...................................................... 129.94% 153.63% 73.00%
</TABLE>
- ------------------------------------------------------------------------------
* The Fund commenced selling Class B shares on December 19, 1994.
** Annualized.
[Page 6]
<TABLE>
<CAPTION>
DREYFUS PREMIER LIMITED TERM INCOME FUND
FOR A CLASS C SHARE OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.
YEAR YEAR PERIOD
ENDED ENDED ENDED
10/31/97 10/31/96 10/31/95*
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period....................................... $10.73 $10.84 $10.15
------ ------ ------
Income from investment operations:
Net investment income (loss)................................................. (1.98) 3.05 0.48
Net realized and unrealized gain (loss) on investments....................... 2.65 (2.65) 0.69
------ ------ ------
Total from investment operations............................................ 0.67 0.40 1.17
------ ------ ------
Less distributions:
Distributions from net investment income.................................... (0.56) (0.51) (0.48)
------ ------ ------
Net asset value, end of period................................................ $10.84 $10.73 $10.84
====== ====== ======
Total return.................................................................. 6.49% 3.83% 11.32%
====== ====== ======
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's)........................................ $349 ._ ._
Ratio of operating expenses to average net assets........................... 1.35% 1.41% ._
Ratio of net investment income to average net assets........................ 4.98% 5.50% ._
Portfolio turnover rate....................................................... 129.94% 153.63% 73.00%
- ---------------------------------------------------------------------------------------------------------------------------------
*The Fund commenced selling Class C shares on December 19, 1994.
</TABLE>
<TABLE>
<CAPTION>
Page [7]
DREYFUS PREMIER LIMITED TERM INCOME FUND
FOR A CLASS R SHARE OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.*
YEAR YEAR YEAR YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED ENDED
10/31/97 10/31/96 10/31/95 10/31/94*# 10/31/93 10/31/92 10/31/91
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period............ $10.78 $10.84 $10.22 $11.07 $10.71 $10.41 $10.00
Investment Operations:
Net investment income.......... 0.65 0.60 0.58 0.49 0.51 0.62 0.19
Net realized and unrealized
gain/(loss) on investments..... 0.19 (0.06) 0.62 (0.75) 0.46 0.30 0.36
------- ------- ------ ------- ------- ------- ------
Total from
investment operations.......... 0.84 0.54 1.20 (0.26) 0.97 0.92 0.55
------- ------- ------ ------- ------- ------- ------
Less distributions:
Distributions from net
investment income.............. (.66) (0.60) (0.58) (0.53) (0.52) (0.62) (0.14)
Distributions from net realized
capital gains.................. ._ ._ ._ (0.06) (0.09) ._ ._
------- ------- ------ ------- ------- ------- ------
Total Distributions ........... (0.66) (0.60) (0.58) (0.59) (0.61) (0.62) (0.14)
------- ------- ------ ------- ------- ------- ------
Net asset value, end of period... $10.96 $10.78 $10.84 $10.22 $11.07 $10.71 $10.41
======= ======= ====== ======= ======= ======= ======
Total return................... 8.09% 5.12% 12.11% (2.46%) 9.33% 9.11% 5.49%
------- ------- ------ ------- ------- ------- ------
Ratios to average net assets/
supplemental data:
Net assets,
end of year (in 000's)......... $47,532 $49,664 $69,924 $82,406 $59,534 $20,619 $9,608
Ratio of expenses to average
net assets..................... 0.60% 0.60% 0.60% 0.60% 0.60% 0.51% 0.02%**
Ratio of net investment income
to average net assets.......... 6.06% 5.62% 5.58% 4.70% 4.81% 5.91% 7.16%**
Portfolio turnover rate.......... 129.94% 153.63% 73% 117% 112% 67% 23%
</TABLE>
* The Fund commenced operations on July 11, 1991. The Fund commenced
selling Class A shares on April 7, 1994. Those shares
outstanding prior to April 4, 1994 were designated Trust Shares.
Effective as of October 17, 1994, the Fund's Trust shares were redesigna
ted as Class R shares.
** Annualized.
Total return represents aggregate total return for the periods indicated.
For the year ended October 31, 1992 and the period ended
October 31, 1991, the investment adviser waived all or a portion of
its advisory fee amounting to $0.0064 and $0.0107 per share,
respectively. For the years ended October 31, 1993 and 1992 and the
period ended October 31, 1991, the investment adviser reimbursed
expenses of the Fund amounting to $.0509, $.1147, and $.0732 per share,
respectively.
# Prior to October 17, 1994, Mellon Bank served as the Fund's investment
manager. Effective October 17, 1994, Dreyfus began serving as the Fund's
investment manager.
Page [8]
Alternative Purchase Methods
The Fund offers you four methods of purchasing Fund shares; you may
choose the Class of shares that best suits your needs, given the amount of
your purchase, the length of time you expect to hold your shares and any
other relevant circumstances. Each Fund share represents an identical pro
rata interest in the Fund's investment portfolio. All Fund shares are sold on
a continuous basis. Class A, Class B and Class C shares are sold primarily to
clients of Agents that have entered into Agreements with the Distributor.
Class A shares are sold at net asset value per share plus a maximum
initial sales charge of 3.0% of the public offering price imposed at the time
of purchase. The initial sales charge may be reduced or waived for certain
purchases. See "How to Buy Fund Shares_Class A shares." These shares are
subject to an annual 12b-1 fee at the rate of 0.25 of 1% of the value of the
average daily net assets of Class A. See "Distribution Plan_Class A shares."
Class B shares are sold at net asset value per share with no initial
sales charge at the time of purchase; as a result, the entire purchase price
is immediately invested in the Fund. Class B shares are subject to a maximum
3% contingent deferred sales charge ("CDSC"), which is assessed only if you
redeem Class B shares within five years of purchase. See "How to Buy Fund
Shares _ Class B shares" and "How to Redeem Fund Shares _ Contingent Deferred
Sales Charge _ Class B shares." These shares also are subject to an annual
distribution fee at the rate of 0.50 of 1%, and an annual service fee at the
rate of 0.25 of 1%, of the value of the average daily net assets of Class B.
See "Distribution and Service Plans _ Class B and C shares." The distribution
and service fees paid by Class B will cause such Class to have a higher
expense ratio and to pay lower dividends than Class A. Approximately six
years after the date of purchase (or in the case of Class B shares of the
Fund acquired through exchange of Class B shares of another fund advised by
Dreyfus, the date of purchase of the original Class B shares of the fund
exchanged), Class B shares will automatically convert to Class A shares,
based on the relative net asset values for shares of each such Class, and
will no longer be subject to the service plan fee of Class B shares and will
be subject to the lower distribution fee of Class A shares. (Such conversion
is subject to suspension by the Board of Directors if adverse tax
consequences might result.) Class B shares that have been acquired through
the reinvestment of dividends and other distributions will be converted on a
pro rata basis together with other Class B shares, in the proportion that a
shareholder's Class B shares converting to Class A shares bears to the total
Class B shares not acquired through the reinvestment of dividends and other
distributions.
Class C shares are sold at net asset value per share with no initial
sales charge at the time of purchase; as a result, the entire purchase price
is immediately invested in the Fund. Class C shares are subject to a .75%
CDSC, which is assessed only if you redeem Class C shares within one year of
purchase. See "How to Redeem Fund Shares _ Class C shares." These shares also
are subject to an annual distribution fee at the rate of 0.50 of 1%, and an
annual service fee at the rate of 0.25 of 1%, of the value of the average
daily net assets of Class C. See "Distribution and Service Plans _ Class B
and C shares." The distribution and service fees paid by Class C will cause
such Class to have a higher expense ratio and to pay lower dividends than
Class A.
Class R shares generally may not be purchased directly by
individuals, although eligible institutions may purchase Class R shares for
accounts maintained by individuals. Class R shares are sold at net asset
value per share primarily to bank trust departments and other financial
service providers (including Mellon Bank and its affiliates) ("Banks")
acting on behalf of customers having a qualified trust or investment account
or relationship at such institution, or to customers who have received and
hold shares of the Fund distributed to them by virtue of such an account or
relationship.
The decision as to which Class of shares is most beneficial to you
depends on the amount and the intended length of your investment. You should
consider whether, during the anticipated life of your investment in the Fund,
the accumulated distribution fee, service fee and CDSC, if any, on Class B or
Class C shares would be less than the accumulated distribution fee and
initial sales charge on Class A shares purchased at the same time, and to
what extent, if any, such differential would be offset by the return of Class
A shares. Additionally, investors qualifying for reduced initial sales
charges who expect to maintain their investment for an extended period of
time might consider purchasing Class A shares because the accumulated
continuing distribution and service fees on Class B or Class C shares may
exceed the accumulated distribution fee and initial sales charge on Class A
shares during the life of the investment. Finally, you should consider the
effect of the CDSC period and any conversion rights of the Classes in the
context of your own investment time frame. For example, while Class C shares
have a shorter CDSC period than Class B shares, Class C shares do not have a
conversion feature and, therefore, are subject to ongoing distribution and
service fees. Thus, Class B shares may be more attractive than Class C shares
to investors with longer term investment outlooks. Generally, Class A shares
may be more appropriate for investors who invest $1,000,000 or more in Fund
shares, but will not be appropriate for investors who invest less than
$100,000 in Fund shares.
Page [9]
Description of the Fund
Investment Objective
The Fund seeks to obtain as high a level of current income as is
consistent with safety of principal and maintenance of liquidity by investing
in fixed income obligations and maintaining a dollar-weighted average
maturity of ten years or less. There can be no assurance that the Fund will
meet its stated investment objective.
Management Policies
Investment selections will be based on fundamental economic, market
and other factors leading to valuation by sector, maturity, quality and such
other criteria as are appropriate to meet the stated objective. Under normal
circumstances, at least 65% of the Fund's total assets will be invested in
fixed income obligations of domestic and foreign issuers. The Fund will
invest in investment grade bonds rated at least Baa by Moody's Investors
Service, Inc. ("Moody's") or BBB by Standard and Poor's rating services, or,
if unrated, determined to be of comparable quality by the Fund's investment
adviser, Dreyfus. The Fund's dollar-weighted average maturity will not be in
excess of ten years.
Securities rated BBB by Standard & Poor's or Baa by Moody's are
considered by those rating agencies to be "investment grade" securities,
although Moody's considers securities rated Baa to have some speculative
characteristics. Further, while bonds rated BBB by Standard & Poor's exhibit
adequate protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay interest
and principal for debt in this category than debt in higher rated categories.
The Fund will not invest in securities rated less than Baa by Moody's
or BBB by Standard & Poor's, or in unrated securities determined to be of a
lesser credit quality than those designations. The Fund will dispose in a
prudent and orderly fashion of bonds whose ratings drop below these minimum
ratings.
The Fund may invest in obligations of foreign issuers which are U.S.
dollar-denominated. Investments in foreign obligations may be affected by
governmental action in the country of domicile. In addition, evidences of
ownership of Fund securities may be held outside of the U.S. and the Fund may
be subject to the risks associated with the holding of such property
overseas. Examples of governmental actions would be the imposition of
currency controls, interest limitations, seizure of assets, or the declaration
of a moratorium on payment of principal or interest.
Other instruments in which the Fund will invest include (1) U.S.
Treasury bills, notes and bonds; (2) other obligations issued or guaranteed
as to interest and principal by the U.S. Government, its agencies or
instrumentalities; (3) mortgage-related securities backed by U.S. Government
agencies or instrumentalities; (4) instruments of U.S. and foreign banks,
including certificates of deposit, bankers' acceptances and time deposits,
and may include Eurodollar Certificates of Deposit ("ECDs"), Yankee
Certificates of Deposit ("Yankee CDs") and Eurodollar Time Deposits ("ETDs");
(5) commercial paper of U.S. and foreign companies, rated at the time of
purchase at least A-1 by Standard & Poor's, Prime-1 by Moody's, F-1 by Fitch
Investors Service ("Fitch"), Duff 1 by Duff & Phelps, Inc. or A1 by IBCA,
Inc.; (6) floating rate securities; (7) variable amount master demand notes;
(8) repurchase agreements; (9) when-issued transactions; (10) Eurodollar bonds
and notes; and (11) American Depository Receipts ("ADRs").
The Fund may utilize reverse repurchase agreements. It may also enter
into futures contracts and related options for hedging purposes, but does not
intend to do so during the coming year.
Investment Techniques
In connection with its investment objective and policies, the Fund
may employ, among others, the following investment techniques:
BORROWING. The Fund is authorized, within specified limits, to borrow
money for temporary administrative purposes and to pledge its assets in
connection with such borrowings.
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 to broker-dealers and other institutional
investors pursuant to agreements requiring that the loans be continuously
secured by collateral equal at all times in value to at least the market
value of the securities loaned. There may be risks of delay in receiving
additional collateral or in recovering the securities loaned or even a loss
of rights to the collateral should the borrower of the securities fail
financially. However, loans are made only to borrowers deemed by Dreyfus to
be of good standing and when, in its judgment, the income to be earned from
the loan justifies the attendant risks.
Page 10]
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. To secure advantageous
prices or yields, the Fund may purchase U.S. Government Securities on a
when-issued basis or may purchase or sell securities for delayed delivery. In
such transactions, delivery of the securities occurs beyond the normal
settlement periods, but no payment or delivery is made by the Fund prior to
the actual delivery or payment by the other party to the transaction. The
purchase of securities on a when-issued or delayed delivery basis involves
the risk that, as a result of an increase in yields available in the
marketplace, the value of the securities purchased will decline prior to the
settlement date. The sale of securities for delayed delivery involves the
risk that the prices available in the market on the delivery date may be
greater than those obtained in the sale transaction. The Fund will establish
a segregated account consisting of cash, U.S. Government Securities or other
high-grade debt obligations in an amount at least equal at all times to the
amounts of its when-issued and delayed delivery commitments.
Certain Portfolio Securities
AMERICAN DEPOSITORY RECEIPTS. The Fund may invest in U.S.
dollar-denominated ADRs. ADRs typically are issued by an American bank or
trust company and evidence ownership of underlying securities issued by
foreign companies. ADRs are traded in the United States on national
securities exchanges or in the over-the-counter market. Investment in
securities of foreign issuers presents certain risks. See "Foreign
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, Inc., or A1 by
IBCA, Inc.
ECDS, ETDS, YANKEE CDS AND EURODOLLAR BONDS AND NOTES. The Fund may
invest in ECDs, ETDs, Yankee CDs and Eurodollar bonds and notes. 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
that 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."
FIXED-INCOME SECURITIES. The Fund may invest in fixed-income
securities. In periods of declining interest rates, the Fund's yield (its
income from portfolio investments over a stated period of time) may tend to
be higher than prevailing market rates, and in periods of rising interest
rates, the Fund's yield may tend to be lower than prevailing interest rates.
Also, in periods of falling interest rates, the inflow of net new money to
the Fund from the continuous sale of its shares will likely be invested in
portfolio instruments producing lower yields than the balance of the Fund's
portfolio, thereby reducing the yield of the Fund. In periods of rising
interest rates, the opposite can be true. The net asset value of a fund
investing in fixed-income securities also may change as general levels of
interest rates fluctuate. When interest rates increase, the value of a
portfolio of fixed-income securities can be expected to decline. Conversely,
when interest rates decline, the value of a portfolio of fixed-income
securities can be expected to increase.
FLOATING RATE SECURITIES. The Fund may invest in floating rate
securities. A floating rate security provides for the automatic adjustment of
its interest whenever a specified interest rate changes. Interest rates on
these securities are ordinarily tied to, and are a percentage of, a widely
recognized interest rate, such as the yield on 90-day U.S. Treasury bills or
the prime rate of a specified bank. These rates may change as often as twice
daily. Generally, changes in interest rates will have a smaller effect on the
market value of floating rate securities than on the market value of
comparable fixed income obligations. Thus, investing in variable and floating
rate securities generally allows less opportunity for capital appreciation
and depreciation than investing in comparable fixed income securities.
FOREIGN SECURITIES. The Fund may purchase securities of foreign
issuers and may invest in obligations of foreign branches of domestic banks
and domestic branches of foreign banks. Investment in foreign securities
presents certain risks, including those resulting from fluctuations in
currency exchange rates, revaluation of currencies, adverse political and
economic developments and the possible imposition of currency exchange
blockages or other foreign governmental laws or restrictions, reduced
availability of public information concerning issuers, and the fact that
foreign issuers are not generally subject to uniform accounting, auditing and
financial reporting standards or to other regulatory practices and
requirements comparable to those applicable to domestic issuers. Moreover,
securities of many foreign issuers may be less liquid and their prices more
volatile than those of comparable domestic issuers. In addition, with respect
to certain foreign countries, there is the possibility of expropriation,
confiscatory taxation and limitations on the use or removal of funds or other
assets of the Fund, including withholding of dividends. Foreign securities
may be subject to foreign government taxes that would reduce the yield on
such securities.
Page [11]
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements.
A repurchase agreement involves the purchase of a security by the Fund and a
simultaneous agreement (generally with a bank or broker-dealer) to repurchase
that security from the Fund at a specified price and date or upon demand.
This investment technique offers a method of earning income on idle cash. A
risk associated with repurchase agreements is the failure of the seller to
repurchase the securities as agreed, which may cause the Fund to suffer a
loss if the market value of such securities declines before they can be
liquidated on the open market. Repurchase agreements with a duration of more
than seven days are considered illiquid securities and are subject to the
associated limits discussed under "Certain Portfolio Securities _ Illiquid
Securities."
GNMA CERTIFICATES. The Fund may invest in Government National
Mortgage Association ("GNMA") Certificates. GNMA Certificates are
mortgage-backed securities representing part ownership of a pool of mortgage
loans. These loans are made by mortgage bankers, commercial banks, savings
and loan associations, and other lenders and are either insured by the
Federal Housing Administration or guaranteed by the Veterans Administration.
A "pool" or group of such mortgages is assembled and, after being approved by
GNMA, is offered to investors through securities dealers. Once approved by
GNMA, the timely payment of interest and principal on each mortgage is
guaranteed by the full faith and credit of the U.S. Government. Although the
mortgage loans in a pool underlying a GNMA Certificate will have maturities
of up to 30 years, the average life of a GNMA Certificate will be
substantially less because the mortgages will be subject to normal principal
amortization and also may be prepaid prior to maturity. Prepayment rates vary
widely and may be affected by changes in mortgage interest rates. In periods
of falling interest rates, the rate of prepayment on higher interest mortgage
rates tends to increase, thereby shortening the actual average life of the
GNMA Certificate. Conversely, when interest rates are rising, the rate of
prepayment tends to decrease, thereby lengthening the average life of the
GNMA Certificates. Reinvestment of prepayments may occur at higher or lower
rates than the original yield of the Certificates. Due to the prepayment
feature and the need to reinvest prepayments of principal at current rates,
GNMA Certificates, with underlying mortgages bearing higher interest rates
can be less effective than typical non-callable bonds of similar maturities
at locking in yields during periods of declining interest rates, although
they may have comparable risks of decline in value during periods of rising
interest rates.
ILLIQUID SECURITIES. The Fund will not knowingly invest more than 15%
of the value of its net assets in illiquid securities, including time
deposits and repurchase agreements having maturities longer than seven days.
Securities that have readily available market quotations are not deemed
illiquid for purposes of this limitation (irrespective of any legal or
contractual restrictions on resale). The Fund may invest in commercial
obligations issued in reliance on the so-called "private placement" exemption
from registration afforded by Section 4(2) of the Securities Act of 1933, as
amended ("Section 4(2) paper"). The Fund may also purchase securities that
are not registered under the Securities Act of 1933, as amended, but that can
be sold to qualified institutional buyers in accordance with Rule 144A under
that Act ("Rule 144A securities"). Liquidity determinations with respect to
Section 4(2) paper and Rule 144A securities will be made by the Board of
Directors or by Dreyfus pursuant to guidelines established by the Board of
Directors. The Board or Dreyfus will consider availability of reliable price
information and other relevant information in making such determinations.
Section 4(2) paper is restricted as to disposition under the federal
securities laws, and generally is sold to institutional investors such as the
Fund that agree that they are purchasing the paper for investment and not
with a view to public distribution. Any resale by the purchaser must be in an
exempt transaction. Section 4(2) paper normally is resold to other
institutional investors like the Fund through or with the assistance of the
issuer or investment dealers who make a market in the Section 4(2) paper,
thus providing liquidity. Rule 144A securities generally must be sold to
other qualified institutional buyers. If a particular investment in Section
4(2) paper or Rule 144A securities is not determined to be liquid, that
investment will be included within the percentage limitation on investment in
illiquid securities. The ability to sell Rule 144A securities to qualified
institutional buyers is a recent development and it is not possible to
predict how this market will mature. Investing in Rule 144A securities could
have the effect of increasing the level of Fund illiquidity to the extent
that qualified institutional buyers become, for a time, uninterested in
purchasing these securities.
MORTGAGE PASS-THROUGH CERTIFICATES. The Fund may invest in mortgage
pass-through certificates that are issued by governmental or
government-related organizations and are backed by pools of mortgage loans.
These mortgage loans are made by lenders such as savings and loan
associations, mortgage bankers, commercial banks and others to residential
home buyers throughout the Untied States. The securities are "pass-through"
securities because they provide investors with monthly payments of principal
and interest that, in effect, are a "pass-through" of the monthly payments
made by the individual borrowers on the underlying mortgage loans. The
principal governmental issuer of such securities is GNMA. Government related
issuers include the Federal Home Loan Mortgage Corporation ("FHLMC"), and the
Federal National Mortgage Association ("FNMA"), both government-sponsored
corporations owned entirely by private stockholders. The market value of
mortgage-related securities depends on, among other things, the level of
interest rates, the certificates' coupon rates and the payment history of
underlying mortgage loans. For further information, see the SAI.
Page [12]
OTHER INVESTMENT COMPANIES. The Fund may invest in securities issued
by other investment companies to the extent that such investments are
consistent with the Fund's investment objective and policies and permissible
under the Investment Company Act of 1940, as amended (the "1940 Act"). As a
shareholder of another investment company, the Fund would bear, along with
other shareholders, its pro rata portion of the other investment company's
expenses, including advisory fees. These expenses would be in addition to the
advisory and other expenses that the Fund bears directly in connection with
its own operations.
U.S. GOVERNMENT SECURITIES. The Fund may invest in obligations issued
or guaranteed as to both principal and interest by the U.S. Government or
backed by the full faith and credit of the United States ("U.S. Government
Securities"). In addition to direct obligations of the U.S. Treasury, U.S.
Government Securities include securities issued or guaranteed by the Federal
Housing Administration, Farmers Home Administration, Export-Import Bank of
the United States, Small Business Administration, GNMA, General Services
Administration and Maritime Administration. Investments may also be made in
U.S. Government obligations that do not carry the full faith and credit
guarantee, such as those issued by FNMA, FHLMC, or other instrumentalities.
VARIABLE AMOUNT MASTER DEMAND NOTES. The Fund may invest in Variable
Amount Master Demand Notes. Variable amount master demand notes are unsecured
obligations that are redeemable upon demand and are typically unrated. These
instruments are issued pursuant to written agreements between their issuers
and holders. The agreements permit the holders to increase (subject to an
agreed maximum) and the holders and issuers to decrease the principal amount
of the notes, and specify that the rate of interest payable on the principal
fluctuates according to an agreed-upon formula. If an issuer of a variable
amount master demand note were to default on its payment obligation, the Fund
might be unable to dispose of the note because of the absence of a secondary
market and might, for this or other reasons, suffer a loss to the extent of
the default. The Fund will only invest in variable amount master demand notes
issued by entities that Dreyfus considers creditworthy.
PORTFOLIO TURNOVER. While securities are purchased for the Fund on
the basis of potential for high current income and not for short-term trading
profits, in the past the portfolio turnover rate of the Fund has exceeded
100% and may exceed 100% in the future. A portfolio turnover rate of 100%
would occur, for example, if all the securities held by the Fund were
replaced once in a period of one year. In past years the Fund's rate of
portfolio turnover exceeded that of certain other mutual funds with a similar
investment objective. A higher rate of portfolio turnover (100% or greater)
involves correspondingly greater brokerage commissions and other expenses
that must be borne directly by the Fund and, thus, indirectly by its
shareholders. In addition, a high rate of portfolio turnover may result in
the realization of larger amounts of short-term capital gains that, when
distributed to the Fund's shareholders, are taxable to them as ordinary
income. Nevertheless, security transactions will be based only upon
investment considerations and will not be limited by any other considerations
when Dreyfus deems it appropriate to make changes in the Fund's assets.
LIMITING INVESTMENT RISKS. The Fund is subject to a number of
investment limitations. Certain limitations are matters of fundamental policy
and may not be changed without the affirmative vote of the holders of a
majority of the Fund's outstanding shares. The SAI describes all of the
Fund's fundamental and non-fundamental restrictions.
The investment objective, policies, restrictions, practices and
procedures of the Fund, unless otherwise specified, may be changed without
shareholder approval. If the Fund's investment objective, policies,
restrictions, practices or procedures change, shareholders should consider
whether the Fund remains an appropriate investment in light of the
shareholder's then-current position and needs.
Management of the Fund
INVESTMENT MANAGER. Dreyfus, located at 200 Park Avenue, New York,
New York 10166, was formed in 1947. Dreyfus is a wholly-owned subsidiary of
Mellon Bank, which is a wholly-owned subsidiary of Mellon Bank Corporation
("Mellon"). As of January 31, 1998, Dreyfus managed or administered
approximately $96 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 overall
authority of the Company's Board of Directors in accordance with Maryland
law. Pursuant to the Investment Management Agreement, Dreyfus provides, or
arranges for one or more third parties to provide, investment advisory,
administrative, custody, fund accounting and transfer agency services to the
Fund. As the Fund's investment manager, Dreyfus manages the Fund by making
investment decisions based on the Fund's investment objective, policies and
restrictions.
The Fund is managed by Laurie Carroll. Ms. Carroll has managed the
Fund since its commencement of operations and has been employed by Dreyfus as
a portfolio manager since October 17, 1994. Ms. Carroll is a Senior Vice
President and portfolio manager at Mellon Bank. Ms. Carroll has been employed
by Mellon Bank since 1986.
Mellon is a publicly owned multibank holding company incorporated
under Pennsylvania law in 1971 and registered under the Bank Holding Company
Act of 1956, as amended. Mellon provides a comprehensive range of financial
Page [13]
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 $305 billion in assets as of
December 31, 1997, including $104 billion in mutual fund assets.
As of December 31, 1997, Mellon, through various subsidiaries, provided
non-investment services, such as custodial or administration services, for
more than $1.532 trillion in assets, including approximately $60 billion in
mutual fund assets.
Under the Investment Management Agreement, the Fund has agreed to pay
Dreyfus a monthly fee at the annual rate of 0.60 of 1% of the value of the
Fund's average daily net assets. Dreyfus pays all of the Fund's expenses,
except brokerage fees, taxes, interest, fees and expenses of the
non-interested Directors (including counsel fees), Rule 12b-1 fees (if
applicable) and extraordinary expenses. In order to compensate Dreyfus for
paying virtually all of the Fund's expenses, the Fund's investment management
fee is higher than the investment advisory fees paid by most investment
companies. Most, if not all, such companies also pay for additional
non-investment advisory expenses that are not paid by such companies'
investment advisers. Although Dreyfus does not pay for the fees and expenses
of the non-interested Directors (including counsel fees), Dreyfus is
contractually required to reduce its investment management fee by an amount
equal to the Fund's allocable share of such fees and expenses. From time to
time, Dreyfus may voluntarily waive a portion of the investment management
fees payable by the Fund. For the fiscal year ended October 31, 1997, the
Fund paid Dreyfus 0.60% of its average daily net assets in investment
management fees, less fees and expenses of the non-interested Directors
(including counsel fees).
For the fiscal year ended October 31, 1997, total operating expenses
(excluding Rule 12b-1 fees, as applicable) of the Fund for Class A, Class B,
Class C and Class R shares were 0.60% of the average daily net assets for
each of the Fund's Class A, Class B, Class C and Class R shares.
In addition, Class A, B and C shares may be subject to certain
distribution and shareholder servicing fees. See "Distribution Plans (Class A
Plan and Class B and C Plans)."
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.
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, PA 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_ Class A shares, Class B shares and Class C shares may be purchased
only by clients of Agents, except that full-time or part-time employees 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 may purchase
Class A shares directly through the Distributor. Subsequent purchases may be
sent directly to the Transfer Agent or your Agent.
Class R shares are sold primarily to Banks acting on behalf of
customers having a qualified trust or investment account or relationship at
such institution, or to customers who have received and hold shares of the
Fund distributed to them by virtue of such an account or relationship. In
addition, holders of Class R shares of the Fund who have held their shares
since April 4, 1994, may continue to purchase Class R shares of the Fund,
whether or not they otherwise
Page [14]
would be eligible to do so. Class R shares may be purchased for a retirement
plan only by a custodian, trustee, investment manager or other entity
authorized to act on behalf of such plan.
When purchasing Fund shares, you must specify which Class is being
purchased. Stock certificates are issued only upon your written request. No
certificates are issued for fractional shares. The Fund reserves the right to
reject any purchase order. Agents effecting transactions in Fund shares for
the accounts of their clients may charge their clients direct fees in
connection with such transactions.
Agents may receive different levels of compensation for selling
different Classes of shares. Management understands that some Agents may
impose certain conditions on their clients which are different from those
described in this Prospectus, and, to the extent permitted by applicable
regulatory authority, may charge their clients direct fees which would be in
addition to any amounts which might be received under the Distribution and
Service Plans. Each Agent has agreed to transmit to its clients a schedule of
such fees. You should consult your Agent in this regard.
The minimum initial investment is $1,000. Subsequent investments must
be at least $100. The minimum initial investment is $750 for 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 and $500 for Dreyfus-sponsored Education IRAs, with no minimum
on subsequent purchases. The initial investment must be accompanied by the
Fund's Account Application. The Fund reserves the right to offer Fund shares
without regard to minimum purchase requirements to employees participating in
certain qualified or non-qualified employee benefit plans or other programs
where contributions or account information can be transmitted in a manner and
form acceptable to the Fund. The Fund reserves the right to vary further the
initial and subsequent investment minimum requirements at any time.
The Internal Revenue Code of 1986, as amended (the "Code"), imposes
various limitations on the amount that may be contributed to certain
qualified or non-qualified employee benefit plans or other programs,
including pension, profit-sharing and other deferred compensation plans,
whether established by corporations, partnerships, non-profit entities or
state and local governments ("Retirement Plans"). These limitations apply
with respect to participants at the plan level and, therefore, do not
directly affect the amount that may be invested in the Fund by a Retirement
Plan. Participants and plan sponsors should consult their tax advisers for
details.
You may purchase Fund shares by check or wire, or through the
TELETRANSFER Privilege described below. Checks should be made payable to
"The Dreyfus Family of Funds," or if for Dreyfus retirement plan accounts, to
"The Dreyfus Trust Company, Custodian." Payments which are mailed should be
sent to Dreyfus Premier Limited Term Income Fund, P.O. Box 6587, Providence,
Rhode Island 02940-6587. If you are opening a new account, please enclose your
Account Application indicating which Class of shares is being purchased. For
subsequent investments, your Fund account number should appear on the check
and an investment slip should be enclosed. For Dreyfus retirement plan
accounts, payments which are mailed should be sent to The Dreyfus Trust
Company, Custodian, P.O. Box 6427, Providence, Rhode Island 02940-6427.
Neither initial nor subsequent investments should be made by third party
check.
Wire payments may be made if your bank account is in a commercial
bank that is a member of the Federal Reserve System or any other bank having
a correspondent bank in New York City. Immediately available funds may be
transmitted by wire to Boston Safe Deposit and Trust Company, DDA #
044350/Dreyfus Premier Limited Term Income 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 1-800-554-4611
after completing your wire payment to obtain your Fund account number. Please
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.
Fund shares also may be purchased through Dreyfus-AUTOMATIC Asset
BuilderRegistration Mark and the Government Direct Deposit Privilege
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.
Subsequent investments also may be made by electronic transfer of
funds from an account maintained in a bank or other domestic financial
institution that is an Automated Clearing House ("ACH") member. You must
direct the institution to transmit immediately available funds through the
ACH System to Boston Safe Deposit and Trust Company with instructions to
credit your Fund account. The instructions must specify your Fund account
registration and Fund account number PRECEDED BY THE DIGITS "4240" for Class
A shares, "4250" for Class B shares, "4260" for Class C shares and "4270"
for Class R shares.
Page [15]
The Distributor may pay dealers a fee of up to .5% of the amount
invested through such dealers in Fund shares by employees participating in
qualified or non-qualified employee benefit plans or other programs where (i)
the employers or affiliated employers maintaining such plans or programs have
a minimum of 250 employees eligible for participation in such plans or
programs or (ii) such plan's or program's aggregate investment in the Dreyfus
Premier Family of Funds or 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 Premier Family of Funds or 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 at any time. The
Distributor will pay such fees from its own funds, other than amounts
received from the Fund, including past profits or any other source available
to it.
Federal regulations require that you provide a certified TIN upon
opening or reopening an account. See "Dividends, Other Distributions and
Taxes" and the Fund's Account Application for further information concerning
this requirement. Failure to furnish a certified TIN to the Fund could
subject you to a $50 penalty imposed by the Internal Revenue Service (the
"IRS").
NET ASSET VALUE PER SHARE ("NAV") _ An investment portfolio's NAV refers to
the worth of one share. The NAV for shares of each Class of the Fund is
computed by dividing the value of net assets attributable to each Class by
the number of shares of that Class outstanding. Shares of each Class of the
Fund are offered on a continuous basis. The valuation of assets for
determining NAV for the Fund may be summarized as follows:
The portfolio securities of the Fund, except as otherwise noted,
listed or traded on a stock exchange, are valued at the latest sale price. If
no sale is reported, the mean of the latest bid and asked prices is used.
Securities traded over-the-counter are priced at the mean of the latest bid
and asked prices but will be valued at the last sale price if required by
regulations of the SEC. When market quotations are not readily available,
securities and other assets are valued at a fair value as determined in good
faith in accordance with procedures established by the Board of Directors.
Bonds are valued through valuations obtained from a commercial
pricing service or at the most recent mean of the bid and asked prices
provided by investment dealers in accordance with procedures established by
the Board of Directors.
NAV is determined 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. Except in the case of
certain orders transmitted by dealers as described in the following
paragraph, orders received after such close of trading are effective on, and
receive the share price determined on, the next business day.
Orders for the purchase of Fund shares received by dealers by the
close of trading on the floor of the NYSE on any business day and transmitted
to the Distributor or its designee by the close of its business day (normally
5:15 p.m., New York time) will be based on the public offering price per
share determined as of the close of trading on the floor of the NYSE on that
day. Otherwise, the orders will be based on the next determined public
offering price. It is the dealers' responsibility to transmit orders so that
they will be received by the Distributor or its designee before the close of
its 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.
CLASS A SHARES _ The public offering price of Class A shares is the NAV of
that Class plus a sales load as shown below:
<TABLE>
<CAPTION>
Total Sales Load
_________________________________
As a % of As a % of Dealers' Reallowance
Offering Price Net Asset Value as a % of
Amount of Transaction Per Share Per Share Offering Price
_________________________ _______________ _________________ ___________________
<S> <C> <C> <C>
Less than $100,000..................................... 3.00 3.10 2.75
$100,000 to less than $250,000......................... 2.75 2.80 2.50
$250,000 to less than $500,000......................... 2.25 2.30 2.00
$500,000 to less than $1,000,000....................... 2.00 2.00 1.75
</TABLE>
There is no initial sales charge on purchases of $1,000,000 or more of
Class A shares. However, if you purchase Class A shares without an initial
sales charge as part of an investment of at least $1,000,000 and redeem all or
a portion of those shares within one year of purchase, a CDSC of 1.00% will be
imposed at the time of redemption. The Distributor may pay Agents an amount up
to 1% of the NAVof Class A shares purchased by their clients that are subject
to a CDSC. The terms contained in the section of the Fund's Prospectus
entitled "How to Redeem Fund Shares _ Contingent Deferred Sales Charge _
Class B" (other than the amount of the CDSC and its time periods) and "How to
Redeem Fund Shares_Waiver of CDSC" are applicable to the Class A shares
subject to a CDSC. Letter of Intent and Right of Accumulation apply to such
purchases of Class A shares.
Page [16]
Full-time employees of NASD member firms and full-time employees of
other financial institutions which have entered into an agreement with the
Distributor pertaining to the sale of Fund shares (or which otherwise have a
brokerage related or clearing arrangement with an NASD member firm or
financial institution with respect to the sale of such shares) may purchase
Class A shares for themselves directly or pursuant to an employee benefit
plan or other program, or for their spouses or minor children, at NAV,
provided that they have furnished the Distributor with such information as it
may request from time to time in order to verify eligibility for this
privilege. This privilege also applies to full-time employees of financial
institutions affiliated with NASD member firms whose full-time employees are
eligible to purchase Class A shares at NAV. In addition, Class A shares are
offered at NAV to full-time or part-time employees of Dreyfus or any of its
affiliates or subsidiaries, directors of Dreyfus, Board members of a fund
advised by Dreyfus, including members of the Company's Board, or the spouse
or minor child of any of the foregoing.
Class A shares will be offered at NAV without a sales load to
employees participating in Eligible Benefit Plans. Class A shares also may be
purchased (including by exchange) at NAV without a sales load for
Dreyfus-sponsored IRA "Rollover Accounts" with the distribution proceeds from
a qualified retirement plan or a Dreyfus-sponsored 403(b)(7) plan, provided
that, at the time of such distribution, such qualified retirement plan or
Dreyfus-sponsored 403(b)(7) plan (a) met the requirements of an Eligible Benef
it Plan and all or a portion of such plan's assets were invested in funds in
the Dreyfus Premier Family of Funds, the Dreyfus Family of Funds or certain
other products made available by the Distributor to such plans, or (b)
invested all of its assets in certain funds in the Dreyfus Premier Family of
Funds or the Dreyfus Family of Funds or certain other products made available
by the Distributor to such plans.
Holders of Class A accounts of the Fund as of December 19, 1994, may
continue to purchase Class A shares of the Fund at NAV. However, investments
by such holders in other funds advised by Dreyfus will be subject to any
applicable front-end sales load.
Class A shares may be purchased at NAV through certain broker-dealers
and other financial institutions which have entered into an agreement with
the Distributor, which includes a requirement that such shares be sold for
the benefit of clients participating in a "wrap account" or a similar program
under which such clients pay a fee to such broker-dealer or other financial
institution.
Class A shares also may be purchased at NAV, subject to appropriate
documentation, through a broker-dealer or other financial institution with
the proceeds from the redemption of shares of a registered open-end
management investment company not managed by Dreyfus or its affiliates. The
purchase of Class A shares of the Fund must be made within 60 days of such
redemption and the shareholders must have either (i) paid an initial sales
charge or a CDSC or (ii) been obligated to pay at any time during the holding
period, but did not actually pay on redemption, a deferred sales charge with
respect to such redeemed shares.
Class A shares also may be purchased at NAV, subject to appropriate
documentation, by (i) qualified separate accounts maintained by an insurance
company pursuant to the laws of any State or territory of the United States,
(ii) a State, county or city or instrumentality thereof, (iii) a charitable
organization (as defined in Section 501(c)(3) of the Code) investing $50,000
or more in Fund shares, and (iv) a charitable remainder trust (as defined in
Section 501(c)(3) of the Code).
The dealer reallowance may be changed from time to time but will
remain the same for all dealers. The Distributor, at its expense, may provide
additional promotional incentives to dealers that sell shares of funds
advised by Dreyfus which are sold with a sales load, such as Class A shares.
In some instances, those incentives may be offered only to certain dealers
who have sold or may sell significant amounts of shares. Dealers receive a
larger percentage of the sales load from the Distributor than they receive
for selling most other funds.
CLASS B SHARES_The public offering price for Class B shares is the NAV of
that Class. No initial sales charge is imposed at the time of purchase. A
CDSC is imposed, however, on certain redemptions of Class B shares as
described under "How to Redeem Fund Shares." The Distributor compensates
certain Agents for selling Class B and Class C shares at the time of purchase
from the Distributor's own assets. The proceeds of the CDSC and the
distribution fee, in part, are used to defray these expenses.
CLASS C SHARES_The public offering price for Class C shares is the NAV of
that Class. No initial sales charge is imposed at the time of purchase. A
CDSC, however, is imposed on redemptions of Class C shares made within the
first year of purchase. See "Class B shares" above and "How to Redeem Fund
Shares."
CLASS R SHARES_The public offering price for Class R shares is the NAV of
that Class.
RIGHT OF ACCUMULATION_CLASS A SHARES_Reduced sales loads apply to any
purchase of Class A shares, shares of other funds in the Dreyfus Premier
Family of Funds, shares of certain other funds advised by Dreyfus which are
sold with a sales load and shares acquired by a previous exchange of such
shares (hereinafter referred to as "Eligible Funds"), by you and any related
"purchaser" as defined in the SAI, where the aggregate investment, including
such purchase, is $100,000 or more. If, for example, you previously purchased
and still hold Class A shares of the Fund or shares of any other Eligible
Fund or combination thereof, with an aggregate current market value of
$80,000 and subsequently purchase Class A shares of the Fund or shares of an
Eligible Fund having a current value of $40,000, the
Page [17]
sales load applicable to the subsequent purchase would be reduced to 2.75% of
the offering price. All present holdings of Eligible Funds may be combined to
determine the current offering price of the aggregate investment in
ascertaining the sales load applicable to each subsequent purchase.
To qualify for reduced sales loads, at the time of purchase you or
your Agent must notify the Distributor if orders are made by wire, or the
Transfer Agent if orders are made by mail. The reduced sales load is subject
to confirmation of your holdings through a check of appropriate records.
TELETRANSFER PRIVILEGE _ You may purchase Fund shares (minimum $500 and
maximum $150,000 per day) by telephone if you have checked the appropriate
box and supplied the necessary information on the Fund's Account Application
or have a filed Shareholder Services Form with the Transfer Agent. The
proceeds will be transferred between the bank account designated in one of
these documents and your Fund account. Only a bank account maintained in a
domestic financial institution which is an ACH member may be so designated.
The Fund may modify or terminate this Privilege at any time or charge a
service fee upon notice to shareholders. No such fee currently is
contemplated.
If you have selected the TELETRANSFER Privilege, you may request a
TELETRANSFER purchase of Fund shares by calling 1-800-554-4611 or, if calling
from overseas, 516-794-5452.
Shareholder Services
The services and privileges described under this heading may not be
available to clients of certain Agents and some Agents may impose certain
conditions on their clients which are different from those described in this
Prospectus. You should consult your Agent in this regard.
Fund Exchanges
You may purchase, in exchange for shares of a Class, shares of the
same class of certain other funds managed or administered by Dreyfus, to the
extent such shares are offered for sale in your state of residence. These
funds have different investment objectives which may be of interest to you.
If you desire to use this service, please call 1-800-554-4611 to determine if
it is available and whether any conditions are imposed on its use. WITH
RESPECT TO CLASS R SHARES HELD BY RETIREMENT PLANS, EXCHANGES MAY BE MADE
ONLY BETWEEN A SHAREHOLDER'S RETIREMENT PLAN ACCOUNT IN ONE FUND AND SUCH
SHAREHOLDER'S RETIREMENT PLAN ACCOUNT IN ANOTHER FUND.
To request an exchange, you or your Agent acting on your behalf must
give exchange instructions to the Transfer Agent in writing or by telephone.
Before any exchange, you must obtain and should review a copy of the current
prospectus of the fund into which the exchange is being made. Prospectuses
may be obtained by calling 1-800-554-4611. 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 1-800-554-4611, or by
oral request from any of the authorized signatories on the account, by
calling 1-800-554-4611. If you have established the Telephone Exchange Privile
ge, you may telephone exchange instructions (including over The Dreyfus
TouchRegistration Mark automated telephone system) by calling 1-800-554-4611
or, 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, TELETRANSFER Privilege and the dividends and
distributions payment option (except for Dividend Sweep) selected by the
investor.
Shares will be exchanged at the next determined NAV; however, a sales
load may be charged with respect to exchanges of Class A shares into funds
sold with a sales load. No CDSC will be imposed on Class B or Class C shares
at the time of an exchange; however, Class B or Class C shares acquired
through an exchange will be subject on redemption to the higher CDSC
applicable to the exchanged or acquired shares. The CDSC applicable on
redemption of the acquired Class B or Class C shares will be calculated from
the date of the initial purchase of the Class B or Class C shares exchanged,
as the case may be. If you are exchanging Class A shares into a fund that
charges a sales load, you may qualify for share prices which do not include
the sales load or which reflect a reduced sales load, if the shares of the
fund from which you are exchanging were: (a) purchased with a sales load, (b)
acquired by a previous exchange from shares purchased with a sales load, or
(c) acquired through reinvestment of dividends or other distributions paid
with respect to the foregoing categories of shares. To qualify, at the time
of the exchange your Agent must notify the Distributor. Any such
qualification is subject to confirmation of your holdings through a check of
appropriate records. See "Shareholder Services" in the SAI. No fees currently
are charged shareholders directly in connection with exchanges, although the
Fund reserves the right, upon not less than 60 days' written notice, to
charge shareholders a nominal fee in accordance with rules promulgated by the
SEC. The Fund reserves
Page [18]
the right to reject any exchange request in whole or in part. The availability
of Fund Exchanges may be modified or terminated at any time upon notice to
shareholders.
The exchange of shares of one fund for shares of another is treated
for Federal income tax purposes as a sale of the shares given in exchange by
the shareholder and, therefore, an exchanging shareholder may realize, or an
exchange on behalf of a Retirement Plan which is not tax exempt may result
in, a taxable gain or loss.
Auto-Exchange Privilege
Auto-Exchange Privilege enables you to invest regularly (on a
semi-monthly, monthly, quarterly or annual basis), in exchange for shares of
the Fund, in shares of the same class of other funds in the Dreyfus Premier
Family of Funds or certain other funds in the Dreyfus Family of Funds of
which you are currently an investor. WITH RESPECT TO CLASS R SHARES HELD BY
RETIREMENT PLANS, EXCHANGES PURSUANT TO THE AUTO-EXCHANGE PRIVILEGE MAY BE
MADE ONLY BETWEEN A SHAREHOLDER'S RETIREMENT PLAN ACCOUNT IN ONE FUND AND
SUCH SHAREHOLDER'S RETIREMENT PLAN ACCOUNT IN ANOTHER FUND. The amount you
designate, which can be expressed either in terms of a specific dollar or
share amount ($100 minimum), will be exchanged automatically on the first
and/or fifteenth day of the month according to the schedule you have
selected. Shares will be exchanged at the then-current net asset value;
however, a sales load may be charged with respect to exchanges of Class A
shares into funds sold with a sales load. No CDSC will be imposed on Class B
or Class C shares at the time of an exchange; however, Class B or Class C
shares acquired through an exchange will be subject on redemption to the
higher CDSC applicable to the exchanged or acquired shares. The CDSC
applicable on redemption of the acquired Class B or Class C shares will be
calculated from the date of the initial purchase of the Class B or Class C
shares exchanged, as the case may be. See "Shareholder Services" in the SAI.
The right to exercise this Privilege may be modified or canceled by the Fund
or the Transfer Agent. You may modify or cancel your exercise of this
Privilege at any time by mailing written notification to Dreyfus Premier
Limited Term Income Fund, P.O. Box 6587, Providence, Rhode Island 02940-6587.
The Fund may charge a service fee for the use of this Privilege. No such fee
currently is contemplated. The exchange of shares of one fund for shares of
another is treated for Federal income tax purposes as a sale of the shares
given in exchange by the shareholder and, therefore, an exchanging
shareholder may realize, or an exchange on behalf of a Retirement Plan which
is not tax exempt may result in, a taxable gain or loss. For more information
concerning this Privilege and the funds in the Dreyfus Premier Family of
Funds or the Dreyfus Family of Funds eligible to participate in this
Privilege, or to obtain an Auto-Exchange Authorization Form, please call toll
free 1-800-554-4611.
Dreyfus-AUTOMATIC Asset BuilderRegistration Mark
Dreyfus-AUTOMATIC Asset Builder permits you to purchase Fund shares
(minimum of $100 and maximum of $150,000 per transaction) at regular
intervals selected by you. Fund shares are purchased by transferring funds
from the bank account designated by you. At your option, the bank account
designated by you will be debited in the specified amount, and Fund shares
will be purchased, once a month, on either the first or fifteenth day, or
twice a month, on both days. Only an account maintained at a domestic
financial institution which is an ACH member may be so designated. To
establish a Dreyfus-AUTOMATIC Asset Builder account, you must file an
authorization form with the Transfer Agent. You may obtain the necessary
authorization form by calling 1-800-554-4611. You may cancel your
participation in this Privilege or change the amount of purchase at any time
by mailing written notification to Dreyfus Premier Limited Term Income Fund,
P.O. Box 6587, Providence, Rhode Island 02940-6587, and the notification will
be effective three business days following receipt. The Fund may modify or
terminate this Privilege at any time or charge a service fee. No such fee
currently is contemplated.
Dividend Options
Dividend Sweep enables you to invest automatically dividends or
dividends and capital gain distributions, if any, paid by the Fund in shares
of the same class of other funds in the Dreyfus Premier Family of Funds or
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 or class that charges a CDSC, the shares purchased will be subject on
redemption to the CDSC, if any, applicable to the purchased shares. See
"Shareholder Services" in the SAI. Dividend ACH permits you to transfer
electronically 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
Dividend Options Form, please call toll free 1-800-554-4611. You may cancel
these Privileges by mailing written notification to Dreyfus Premier Limited
Term Income Fund, P.O. Box 6587, Providence, Rhode Island 02940-6587. To
select a new fund after cancellation, you must submit a new Dividend Options
Form. Enrollment in or cancellation of these Privileges is effective three
business days following receipt. These privileges are available only for
existing accounts and may not be used to open new accounts. Minimum
subsequent investments do not apply for Dividend Sweep. The Fund may modify
or terminate these
Page [19]
Privileges at any time or charge a service fee. No such fee currently
is contemplated. Shares held under Keogh Plans, IRAs or other retirement
plans are not eligible for Dividend Sweep.
Government Direct Deposit Privilege
Government Direct Deposit Privilege enables you to purchase Fund
shares (minimum of $100 and maximum of $50,000 per transaction) by having
Federal salary, Social Security, or certain veterans', military or other
payments from the Federal government automatically deposited into your Fund
account. You may deposit as much of such payments as you elect. You should
consider whether Direct Deposit of your entire payment into a fund with
fluctuating NAV, such as the Fund, may be appropriate for you. To enroll in
Government Direct Deposit, you must file with the Transfer Agent a completed
Direct Deposit Sign-Up Form for each type of payment that you desire to
include in this Privilege. The appropriate form may be obtained from the
Distributor by calling 1-800-554-4611. Death or legal incapacity will
terminate your participation in this Privilege. You may elect at any time to
terminate your participation by notifying in writing the appropriate Federal
agency. Further, the Fund may terminate your participation upon 30 days'
notice to you.
Automatic Withdrawal Plan
The Automatic Withdrawal Plan permits you to request withdrawal of a
specified dollar amount (minimum of $50) on either a monthly or quarterly
basis if you have a $5,000 minimum account. 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 1-800-554-4611.
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.
No CDSC with respect to Class B shares will be imposed on withdrawals
made under the Automatic Withdrawal Plan, provided that the amounts withdrawn
under the plan do not exceed on an annual basis 12% of the account value at
the time the shareholder elects to participate in the Automatic Withdrawal
Plan. Withdrawals with respect to Class B shares under the Automatic
Withdrawal Plan that exceed on an annual basis 12% of the value of the
shareholder's account will be subject to a CDSC on the amounts exceeding 12%
of the initial account value. Class C shares, and Class A shares to which a
CDSC applies, that are withdrawn pursuant to the Automatic Withdrawal Plan
will be subject to any applicable CDSC. Purchases of additional Class A
shares where the sales load is imposed concurrently with withdrawals of Class
A shares generally are undesirable.
Retirement Plans
The Fund offers a variety of pension and profit-sharing plans,
including Keogh Plans, IRAs (including regular IRAs, Spousal IRAs for a
non-working spouse, Roth IRAs, SEP-IRAs, Rollover IRAs and Educations 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 1-800-554-4611; for SEP-IRAs,
401(k) Salary Reduction Plans and 403(b)(7) Plans, please call
1-800-322-7880.
Letter of Intent_Class A shares
By signing a Letter of Intent form, which can be obtained by calling
1-800-554-4611, you become eligible for the reduced sales load applicable to
the total number of Eligible Fund shares purchased in a 13-month period
pursuant to the terms and conditions set forth in the Letter of Intent. A
minimum initial purchase of $5,000 is required. To compute the applicable
sales load, the offering price of shares you hold (on the date of submission
of the Letter of Intent) in any Eligible Fund that may be used toward "Right
of Accumulation" benefits described above may be used as a credit toward
completion of the Letter of Intent. However, the reduced sales load will be
applied only to new purchases.
The Transfer Agent will hold in escrow 5% of the amount indicated in
the Letter of Intent for payment of a higher sales load if you do not
purchase the full amount indicated in the Letter of Intent. The escrow will
be released when you fulfill the terms of the Letter of Intent by purchasing
the specified amount. If your purchases qualify for a further sales load
reduction, the sales load will be adjusted to reflect your total purchase at
the end of 13 months. If total purchases are less than the amount specified,
you will be requested to remit an amount equal to the difference between the
sales load actually paid and the sales load applicable to the aggregate
purchases actually made. If such remittance is not received within 20 days,
the Transfer Agent, as attorney-in-fact pursuant to the terms of the Letter
of Intent, will redeem an appropriate number of Class A shares of the Fund
held in escrow to realize the difference. Signing a Letter of Intent does not
bind you to purchase, or the Fund to sell, the full amount indicated at the
sales load in effect at the time of signing, but you must complete the
intended purchase to obtain the reduced sales load. At the time you purchase
Class A shares, you must indicate your intention to do so under a Letter of
Intent. Purchases pursuant to a Letter
Page [20]
of Intent will be made at the then-current NAVplus the applicable sales load
in effect at the time such Letter of Intent was executed.
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 net asset value as described below. If you hold
Fund shares of more than one Class, any request for redemption must specify
the Class of shares being redeemed. If you fail to specify the Class of
shares to be redeemed or if you own fewer shares of the Class than specified
to be redeemed, the redemption request may be delayed until the Transfer
Agent receives further instructions from you or your Agent.
The Fund imposes no charges (other than any applicable CDSC) when
shares are redeemed. 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 net asset value.
The Fund ordinarily will make payment for all shares redeemed within
seven days after receipt by the Transfer Agent of a redemption request in
proper form, except as provided by the rules of the SEC. HOWEVER, IF YOU HAVE
PURCHASED FUND SHARES BY CHECK, BY THE TELETRANSFER PRIVILEGE OR THROUGH
DREYFUS-AUTOMATIC ASSET BUILDERRegistration Mark AND SUBSEQUENTLY SUBMIT A
WRITTEN REDEMPTION REQUEST TO THE TRANSFER AGENT, THE REDEMPTION PROCEEDS
WILL BE TRANSMITTED TO YOU PROMPTLY UPON BANK CLEARANCE OF YOUR PURCHASE
CHECK, TELETRANSFER PURCHASE OR DREYFUS-AUTOMATIC ASSET BUILDERRegistration
Mark ORDER, WHICH MAY TAKE UP TO EIGHT BUSINESS DAYS OR MORE. IN ADDITION,
THE FUND WILL REJECT REQUESTS TO REDEEM SHARES PURSUANT TO THE TELETRANSFER
PRIVILEGE FOR A PERIOD OF EIGHT BUSINESS DAYS AFTER RECEIPT BY THE TRANSFER
AGENT OF THE PURCHASE CHECK, THE TELETRANSFER PURCHASE OR THE
DREYFUS-AUTOMATIC ASSET BUILDER ORDER AGAINST WHICH SUCH REDEMPTION IS
REQUESTED. THESE PROCEDURES WILL NOT APPLY IF YOUR SHARES WERE PURCHASED BY
WIRE PAYMENT, OR IF YOU OTHERWISE HAVE A SUFFICIENT COLLECTED BALANCE IN YOUR
ACCOUNT TO COVER THE REDEMPTION REQUEST. PRIOR TO THE TIME ANY REDEMPTION IS
EFFECTIVE, DIVIDENDS ON SUCH SHARES WILL ACCRUE AND BE PAYABLE, AND YOU WILL
BE ENTITLED TO EXERCISE ALL OTHER RIGHTS OF BENEFICIAL OWNERSHIP. Fund shares
will not be redeemed until the Transfer Agent has received your Account
Application.
The Fund reserves the right to redeem your account at its option upon
not less than 45 days' written notice if the net asset value of your account
is $500 or less and remains so during the notice period.
CONTINGENT DEFERRED SALES CHARGE_CLASS B SHAREs_A CDSC payable to the
Distributor is imposed on any redemption of Class B shares which reduces the
current net asset value of your Class B shares to an amount which is lower
than the dollar amount of all payments by you for the purchase of Class B
shares of the Fund held by you at the time of redemption. No CDSC will be
imposed to the extent that the net asset value of the Class B shares redeemed
does not exceed (i) the current net asset value of Class B shares acquired
through reinvestment of dividends or other distributions, plus (ii) increases
in the net asset value of your Class B shares above the dollar amount of all
your payments for the purchase of Class B shares held by you at the time of
redemption.
If the aggregate value of Class B shares redeemed has declined below
their original cost as a result of the Fund's performance, a CDSC may be
applied to the then-current net asset value rather than the purchase price.
In circumstances where the CDSC is imposed, the amount of the charge
will depend on the number of years from the time you purchased the Class B
shares until the time of redemption of such shares. Solely for purposes of
determining the number of years from the time of any payment for the purchase
of Class B shares, all payments during a month will be aggregated and deemed
to have been made on the first day of the month. The following table sets
<TABLE>
<CAPTION>
forth the rates of the CDSC:
YEAR SINCE CDSC AS A % OF AMOUNT
PURCHASE PAYMENT INVESTED OR REDEMPTION
WAS MADE PROCEEDS
_________________ ______________________
<S> <C> <C>
First.......................................................................... 3.00
Second......................................................................... 3.00
Third.......................................................................... 2.00
Fourth......................................................................... 2.00
Fifth.......................................................................... 1.00
Sixth.......................................................................... .00
</TABLE>
In determining whether a CDSC is applicable to a redemption, the
calculation will be made in a manner that results in the lowest possible rate.
It will be assumed that the redemption is made first of amounts representing
shares acquired pursuant to the reinvestment of dividends and other
distributions; then of amounts representing the increase in net asset value of
Class B shares above the total amount of payments for the purchase of Class B
shares made during the preceding
Page [21]
five years; then of amounts representing the cost of shares purchased five
years prior to the redemption; and finally, of amounts representing the cost
of shares held for the longest period of time within the applicable five-year
period.
For example, assume an investor purchased 100 shares at $10 share for
a cost of $1,000. Subsequently, the shareholder acquired five additional
shares through dividend reinvestment. During the second year after the
purchase the investor decided to redeem $500 of his or her investment.
Assuming at the time of the redemption the NAV had appreciated to $12 per
share, the value of the investor's shares would be $1,260 (105 shares at $12
per share). The CDSC would not be applied to the value of the reinvested
dividend shares and the amount which represents appreciation ($260).
Therefore, $240 of the $500 redemption proceeds ($500 minus $260) would be
charged at a rate of 3% (the applicable rate in the second year after
purchase) for a total CDSC of $7.20.
For purposes of determining the applicable CDSC payable with respect
to redemption of Class B shares of the Fund where such shares were acquired
through exchange of Class B shares of another fund advised by Dreyfus, the
year since purchase payment was made is based on the date of purchase of the
original Class B shares of the Fund exchanged.
CONTINGENT DEFERRED SALES CHARGE_CLASS C SHARES_A CDSC of .75% payable to
the Distributor is imposed on any redemption of Class C shares within one
year of the date of purchase. The basis for calculating the payment of any
such CDSC will be the method used in calculating the CDSC for Class B shares.
See "Contingent Deferred Sales Charge_Class B shares" above.
WAIVER OF CDSC_The CDSC applicable to Class B and Class C shares (and to
certain Class A shares), will be waived in connection with (a) redemptions
made within one year after the death or disability, as defined in Section
72(m)(7) of the Code, of the shareholder, (b) redemptions by employees
participating in Eligible Benefit Plans, (c) redemptions as a result of a
combination of any investment company with the Fund by merger, acquisition of
assets or otherwise, (d) a distribution following retirement under a
tax-deferred retirement plan or upon attaining age 701\2 in the case of an IRA
or Keogh plan or custodial account pursuant to Section 403(b) of the Code, and
(e) redemptions pursuant to the Automatic Withdrawal Plan, as described under
"Shareholder Services _ Automatic Withdrawal Plan" above. If the Company's
Board of Directors determines to discontinue the waiver of the CDSC, the
disclosure in the Fund's Prospectus will be revised appropriately. Any Fund
shares subject to a CDSC which were purchased prior to the termination of
such waiver will have the CDSC waived as provided in the Fund's Prospectus at
the time of the purchase of such shares.
To qualify for a waiver of the CDSC, at the time of redemption you
must notify the Transfer Agent or your Agent must notify the Distributor. Any
such qualification is subject to confirmation of your entitlement.
PROCEDURES_You may redeem Fund shares by using the regular redemption
procedure through the Transfer Agent, or 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, through the
TELETRANSFER Privilege. If you are a client of a Selected Dealer, you may
redeem Fund shares through the Selected Dealer. 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 TELETRANSFER Privilege.
You may redeem Fund shares by telephone if you have checked the
appropriate box on the Account Application or have filed a Shareholder
Services Form with the Transfer Agent. If you select the TELETRANSFER
redemption privilege or telephone exchange privilege, which is granted
automatically unless you refuse it, you authorize the Transfer Agent to act
on telephone instructions (including over The Dreyfus TouchRegistration Mark
automated telephone system) from any person representing himself or herself
to be you, or a representative of your Agent, and reasonably believed by the
Transfer Agent to be genuine. The Fund will require the Transfer Agent to
employ reasonable procedures, such as requiring a form of personal
identification, to confirm that instructions are genuine and, if it does not
follow such procedures, the Fund or the Transfer Agent may be liable for any
losses due to unauthorized or fraudulent instructions. Neither the Fund nor
the Transfer Agent will be liable for following telephone instructions
reasonably believed to be genuine.
During times of drastic economic or market conditions, you may
experience difficulty in contacting the Transfer Agent by telephone to
request a TELETRANSFER redemption or an exchange of Fund shares. In such
cases, you should consider using the other redemption procedures described
herein. Use of these other redemption procedures may result in your
redemption request being processed at a later time than it would have been if
TELETRANSFER redemption had been used. During the delay, the Fund's net asset
value may fluctuate.
REGULAR REDEMPTION. Under the regular redemption procedure, you may redeem
your shares by written request mailed to Dreyfus Premier Limited Term Income
Fund, P.O. Box 6587, Providence, Rhode Island 02940-6587. Redemption requests
must be signed by each shareholder, including each owner of a joint account,
and each signature
Page [22]
must be guaranteed. The Transfer Agent has adopted standards and
procedures pursuant to which signature-guarantees in proper form generally
will be accepted from domestic banks, brokers, dealers, credit unions,
national securities exchanges, registered securities associations, clearing
agencies and savings associations, as well as from participants in the New
York Stock Exchange Medallion Signature Program, the Securities Transfer
Agents Medallion Program ("STAMP"), and the Stock Exchanges Medallion
Program. For more information with respect to signature-guarantees, please
call 1-800-554-4611.
Redemption proceeds of at least $1,000 will be wired to any member
bank of the Federal Reserve System in accordance with a written
signature-guaranteed request.
TELETRANSFER PRIVILEGE. You may 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
accounts may redeem through the TELETRANSFER Privilege for transfer to their
bank account not more than $250,000 within any 30-day period.
If you have selected the TELETRANSFER Privilege, you may request a
TELETRANSFER redemption of Fund shares by calling 1-800-554-4611 or, if
calling from overseas, 516-794-5452.
REDEMPTION THROUGH A SELECTED DEALER _ If you are a customer of a Selected
Dealer, you may make redemption requests to your Selected Dealer. If the
Selected Dealer transmits the redemption request so that it is received by
the Transfer Agent prior to the close of trading on the floor of the NYSE
(currently 4:00 p.m., New York time), the redemption request will be
effective on that day. If a redemption request is received by the Transfer
Agent after the close of trading on the floor of the NYSE, the redemption
request will be effective on the next business day. It is the responsibility
of the Selected Dealer to transmit a request so that it is received in a
timely manner. The proceeds of the redemption are credited to your account
with the Selected Dealer. See "How to Buy Fund Shares" for a discussion of
additional conditions or fees that may be imposed upon redemption.
In addition, the Distributor or its designee will accept orders from
Selected Dealers with which the Distributor has sales agreements for the
repurchase of shares held by shareholders. Repurchase orders received by
dealers by the close of trading on the floor of the NYSE on any business day
and transmitted to the Distributor or its designee prior to the close of its
business day (normally 5:15 p.m., New York time) are effected at the price
determined as of the close of trading on the floor of the NYSE on that day.
Otherwise, the shares will be redeemed at the next determined NAV. It is the
responsibility of the Selected Dealer to transmit orders on a timely basis.
The Selected Dealer may charge the shareholder a fee for executing the order.
This repurchase arrangement is discretionary and may be withdrawn at any
time.
REINVESTMENT PRIVILEGE _ Upon written request, you may reinvest up to the
number of Class A or Class B shares you have redeemed, within 45 days of
redemption, at the then-prevailing NAV without a sales load, or reinstate
your account for the purpose of exercising Fund Exchanges. Upon
reinstatement, with respect to Class B shares, or Class A shares if such
shares were subject to a CDSC, the shareholder's account will be credited
with an amount equal to the CDSC previously paid upon redemption of the Class
A or Class B shares reinvested. The Reinvestment Privilege may be exercised
only once.
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
Page [23]
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 Plans
(Class A Plan and Class B and C Plans)
Class A shares are subject to a Distribution Plan adopted pursuant to
Rule 12b-1 under the 1940 Act ("Rule 12b-1"). Class B and Class C shares are
subject to a Distribution Plan and a Service Plan, each adopted pursuant to
Rule 12b-1. 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. Potential investors should read this
Prospectus in light of the terms governing Agreements with their Agents. The
fees payable under the Distribution and Service Plans are payable without
regard to actual expenses incurred. The Fund and the Distributor may suspend
or reduce payments under the Distribution and Service Plans at any time, and
payments are subject to the continuation of the Fund's Plans 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 Distribution and Service Plans. See the SAI for more details on the
Distribution and Service Plans.
DISTRIBUTION PLAN_CLASS A SHARES_The Class A shares of the Fund bear some
of the cost of selling those shares under the Distribution Plan (the "Plan").
The Plan allows the Fund to spend annually up to 0.25% of its average daily
net assets attributable to Class A shares to compensate Dreyfus Service
Corporation, an affiliate of Dreyfus, for shareholder servicing activities
and the Distributor for shareholder servicing activities and activities or
expenses primarily intended to result in the sale of Class A shares of the
Fund. The Plan allows the Distributor to make payments from the Rule 12b-1
fees it collects from the Fund to compensate Agents that have entered into
Agreements with the Distributor. Under the Agreements, the Agents are
obligated to provide distribution related services with regard to the Fund
and/or shareholder services to the Agent's clients that own Class A shares of
the Fund.
DISTRIBUTION AND SERVICE PLANS_CLASS B AND C SHARES _ Under a Distribution
Plan adopted pursuant to Rule 12b-1, the Fund pays the Distributor for
distributing the Fund's Class B and Class C shares at an aggregate annual
rate of .50 of 1% of the value of the average daily net assets of Class B and
Class C. Under a Service Plan adopted pursuant to Rule 12b-1, the Fund pays
Dreyfus Service Corporation or the Distributor for the provision of certain
services to the holders of Class B and Class C shares a fee at the annual
rate of .25 of 1% of the value of the average daily net assets of Class B and
Class C. The services provided may include personal services relating to
shareholder accounts, such as answering shareholder inquiries regarding the
Fund and providing reports and other information, and providing services
related to the maintenance of such shareholder accounts. With regard to such
services, each Agent is required to disclose to its clients any compensation
payable to it by the Fund and any other compensation payable by its clients
in connection with the investment of their assets in Class B and Class C
shares. The Distributor may pay one or more Agents in respect of services for
these Classes of shares. The Distributor determines the amounts, if any, to
be paid to Agents under the Service Plan and the basis on which such payments
are made.
Dividends, Other Distributions and Taxes
The Fund declares daily and pays monthly (on the first business day
of the following month) dividends from its net investment income, if any, and
distributes net realized 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. 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. Shares purchased on a day on which the
Fund calculates its NAV will begin to accrue dividends on that day, and
redemption orders effected on any particular day will receive dividends
declared only through the business day prior to the day of redemption.
Dividends paid by each Class 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. Class B and
C shares will receive lower per share dividends than Class A shares which
will receive lower per share dividends than Class R shares, because of the hig
her expenses borne by the relevant Class. See "Expense Summary."
Page [24]
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 its earnings and realized capital 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 the Fund's net capital gain (the excess of net long-term
capital gain over net short-term capital loss) will be taxable to such
shareholders as long-term capital gains, 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. Dividends and other
distributions also may be subject to state and local taxes.
Dividend distributions paid by the Fund to a non-resident foreign
investor generally are subject to U.S. withholding tax at the rate of 30%,
unless the foreign investor claims the benefit of a lower rate specified in a
tax treaty. Distributions from net capital gain paid by the Fund to a
non-resident foreign investor, as well as the proceeds of any redemptions 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).
The Code provides for the "carryover" of some or all of the sales
load imposed on Class A shares if (1) an investor redeems those shares or
exchanges those shares for shares of another fund advised or administered by
Dreyfus within 91 days of purchase and (2) in the case of a redemption,
acquires other Fund Class A shares through exercise of the Reinvestment
Privilege or, in the case of an exchange, such other fund reduces or
eliminates its otherwise applicable sales load for the purpose of the
exchange. In this case, the amount of the sales load charged the investor for
the original Class A shares, up to the amount of the reduction of the sales
load pursuant to the Reinvestment Privilege or on the exchange, as the case
may be, is not included in the basis of such shares for purposes of computing
gain or loss on the redemption or the exchange, and instead is added to the
basis of the fund shares received pursuant to the Reinvestment Privilege or
the exchange.
Dividends and other distributions paid by the Fund to qualified
Retirement Plans ordinarily will not be subject to taxation until the
proceeds are distributed from the Retirement Plans. The Fund will not report
to the IRS distributions paid to such plans. Generally, distributions from
qualified Retirement Plans, except those representing returns of
non-deductible contributions thereto, will be taxable as ordinary income and,
if made prior to the time the participant reaches age 591\2, generally will
be subject to an additional tax equal to 10% of the taxable portion of the
distribution. If the distribution from such a Retirement Plan (other than
certain governmental or church plans) for any taxable year following the year
in which the participant reaches age 701\2 is less than the "minimum required
distribution" for that taxable year, an excise tax equal to 50% of the
deficiency may be imposed by the IRS. The administrator, trustee or custodian
of such a Retirement Plan will be responsible for reporting distributions
from such plans to the IRS. Moreover, certain contributions to a qualified
Retirement Plan in excess of the amounts permitted by law may be subject to
an excise tax. If a distributee of an "eligible rollover distribution" from a
qualified Retirement Plan does not elect to have the eligible rollover
distribution paid directly from the plan to an eligible retirement plan in a
"direct rollover," the eligible rollover distribution 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 any redemption
proceeds, regardless of the extent to which gain or loss may be realized,
paid to an individual or certain other non-corporate shareholder 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
Page [25]
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 determined 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.
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 Class B and C should be expected to be lower than that of Class A and the
performance of Class A, B and C should be expected to be lower than that of
Class R. Performance for each Class will be calculated separately.
Average annual total return is calculated pursuant to a standardized
formula which assumes that an investment was purchased with an initial
payment of $1,000 and that the investment was redeemed at the end of a stated
period of time, after giving effect to the reinvestment of dividends and
other distributions during the period. The return is expressed as a
percentage rate which, if applied on a compounded annual basis, would result
in the redeemable value of the investment at the end of the period.
Advertisements of the Fund's performance will include the Fund's average
annual total return for one, five and ten year periods, or for shorter periods
depending upon the length of time during which the Fund has operated.
Computations of average annual total return for periods of less than one year
represent an annualization of the Fund's actual total return for the
applicable period.
Total return is computed on a per share basis and assumes the
reinvestment of dividends and other distributions. Total return generally is
expressed as a percentage rate which is calculated by combining the income
and principal changes for a specified period and dividing by the net asset
value (or maximum offering price in the case of Class A shares) per share at
the beginning of the period. Advertisements may include the percentage rate
of total return or may include the value of a hypothetical investment at the
end of the period which assumes the application of the percentage rate of
total return. Total return also may be calculated by using the net asset
value per share at the beginning of the period instead of the maximum
offering price per share at the beginning of the period for Class A shares or
without giving effect to any applicable CDSC at the end of the period for
Class B or C shares. Calculations based on the net asset value per share do
not reflect the deduction of the sales load on the Fund's Class A shares,
which, if reflected, would reduce the performance quoted.
The Fund may also advertise the yield on a Class of shares. The
Fund's yield is calculated by dividing a Class of shares' annualized net
investment income per share during a recent 30-day (or one month) period by
the maximum public offering price per Class of such share on the last day of
that period. Since yields fluctuate, yield data cannot necessarily be used to
compare an investment in a Class of shares with bank deposits, savings
accounts, and similar investment alternatives which often provide an agreed-up
on or guaranteed fixed yield for a stated period of time.
Performance will vary from time to time and past results are not
necessarily representative of future results. You should remember that
performance is a function of portfolio management in selecting the type and
quality of portfolio securities and is affected by operating expenses.
Performance information, such as that described above, may not provide a
basis for comparison with other investments or other investment companies
using a different method of calculating performance.
The Fund may compare the performance of its shares with various
industry standards of performance including Lipper Analytical Services, Inc.
ratings, CDA Technologies indexes, indexes created by Lehman Brothers, the
Consumer Price Index, and the Dow Jones Industrial Average. Performance
rankings as reported in CHANGING TIMES, BUSINESS WEEK, INSTITUTIONAL
INVESTOR, THE WALL STREET JOURNAL, IBC/DONOGHUE'S MONEY FUND REPORT, MUTUAL
FUND FORECASTER, NO LOAD INVESTOR, MONEY MAGAZINE, MORNINGSTAR MUTUAL FUND
VALUES, U.S. NEWS AND WORLD REPORT, FORBES, FORTUNE, BARRON'S and similar
publications may also be used in comparing the Fund's performance.
Furthermore, the Fund may quote its shares' total returns and yields in
advertisements or in shareholder reports. The Fund may also advertise
non-standardized performance information, such as total return for periods
other than those required to be shown or cumulative
Page [26]
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 Articles of Incorporation permit the Board of
Directors to create an unlimited number of investment portfolios (each a
"fund") without shareholder approval. The Company's shares are classified
into four classes_Class A, Class B, Class C and Class R. 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 Class A, B or C shares, as the case may be, will be entitled to
vote on matters submitted to shareholders pertaining to the Distribution and
Service Plan relating to that Class.
Unless otherwise required by the 1940 Act, ordinarily it will not be
necessary for the Fund to hold annual meetings of shareholders. As a result,
Fund shareholders may not consider each year the election of Directors or the
appointment of auditors. However, the holders of at least 10% of the shares
outstanding and entitled to vote may require the Company to hold a special
meeting of shareholders for purposes of removing a Director from office and
for any other purpose. Company shareholders may remove a Director by the
affirmative vote of a majority of the Company's outstanding voting shares. In
addition, the Board of Directors will call a meeting of shareholders for the
purpose of electing Directors if, at any time, less than a majority of the
Directors then holding office have been elected by shareholders.
The Transfer Agent maintains a record of your ownership and will send
you confirmations and statements of account.
Shareholder inquiries may be made by writing to the Fund at 144 Glenn
Curtiss Boulevard, Uniondale, New York 11556-0144.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND IN THE
FUND'S OFFICIAL SALES LITERATURE IN CONNECTION WITH THE OFFER OF THE FUND'S
SHARES, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER IN ANY STATE IN WHICH, OR TO ANY PERSON TO WHOM,
SUCH OFFERING MAY NOT LAWFULLY BE MADE.
Page [27]
[Application p1 here]
Page [28]
[Application p2 here]
Page [29]
[This Page Intentionally Left Blank]
Page [30]
[This Page Intentionally Left Blank]
Page [31]
Copy Rights 1998 Dreyfus Service Corporation 345p0398
- --------------------------------------------------------------------------
PROSPECTUS March 1, 1998
Dreyfus Premier Small Company Stock Fund
- --------------------------------------------------------------------------
Dreyfus Premier Small Company Stock Fund (the "Fund"), formerly
called the "Premier Small Company Stock Fund," is a separate, diversified
portfolio of The Dreyfus/Laurel Funds, Inc., an open-end management
investment company (the "Company"), known as a mutual fund. The Fund seeks to
consistently exceed the total return performance of the Russell 2500trademark
Stock Index while maintaining a similar level of risk. The Fund is neither
sponsored by nor affiliated with Frank Russell Company.
By this Prospectus, the Fund is offering four Classes of
shares_Class A, Class B, Class C and Class R _ which are described herein.
See "Alternative Purchase Methods."
Each Class of shares may be purchased or redeemed by telephone
using the TeleTransfer Privilege.
The Dreyfus Corporation serves as the Fund's investment manager.
The Dreyfus Corporation is referred to as "Dreyfus."
This Prospectus sets forth concisely information about the Fund
that you should know before investing. It should be read carefully before you
invest and retained for future reference.
The Statement of Additional Information ("SAI") dated March 1,
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 1-800-554-4611. When telephoning, ask
for Operator 144.
Mutual fund shares are not deposits or obligations of, or
guaranteed or endorsed by, any bank, and are not federally insured by the
Federal Deposit Insurance Corporation, the Federal Reserve Board, or any
other agency. All mutual fund shares involve certain investment risks,
including the possible loss of principal.
The fees to which the Fund is subject are summarized in the
"Expense Summary" section of the Fund's Prospectus. The Fund pays an
affiliate of Mellon Bank, N.A. ("Mellon Bank") to be its investment manager.
Mellon Bank or an affiliate may be paid for performing other services for the
Fund, such as custodian, transfer agent or fund accountant services. The Fund
is distributed by Premier Mutual Fund Services, Inc. (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
Page
Expense Summary................................................. 3
Financial Highlights............................................ 4
Alternative Purchase Methods.................................... 6
Description of the Fund......................................... 7
Management of the Fund.......................................... 11
How to Buy Fund Shares.......................................... 12
Shareholder Services............................................ 16
How to Redeem Fund Shares....................................... 18
Additional Information About Purchases, Exchanges and Redemptions 21
Distribution Plans (Class A Plan and Class B and C Plans)....... 22
Dividends, Other Distributions and Taxes........................ 22
Performance Information......................................... 24
General Information............................................. 24
[Page 2]
<TABLE>
<CAPTION>
Expense Summary
<S> <C> <C> <C> <C>
Shareholder Transaction Expenses CLASS A CLASS B CLASS C CLASS R
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) 5.75% none none none
Maximum Deferred Sales Charge Imposed
on Redemptions
(as a percentage of the amount subject
...to charge) none* 4.00% 1.00% none
Annual Fund Operating Expenses
(as a percentage of average daily net assets)
Management Fee.............................. 1.25% 1.25% 1.25% 1.25%
12b-1 Fee1.................................. .25% 1.00% 1.00% none
Other Expenses2............................. .00% .00% .00% .00%
_________ _________ ________ ________
______
Total Fund Operating Expenses............... 1.50% 2.25% 2.25% 1.25%
Example
You would pay the following expenses on a
$1,000 investment, assuming (1) a 5% annual
return and (2) except where noted,
redemption at the end of each time period:
1 Year...................................... $ 72 $63/233 $33/233 $ 13
3 Years..................................... $102 $101/713 $71 $ 40
5 Years..................................... $135 $141/1223 $122 $ 69
10 Years.................................... $227 $224** $261 $150
</TABLE>
* A contingent deferred sales charge of 1.00% may be assessed on certain
redemptions of Class A shares purchased without an initial sales charge as
part of an investment of $1 million or more. See "How to Buy Fund
Shares_Class A shares."
** Assumes conversion of Class B shares to Class A shares approximately
six years after the date of purchase and, therefore, reflects Class A
expenses for years seven through ten.
1 See "Distribution Plans (Class A Plan and Class B and C Plans)" for a
description of the Fund's Distribution Plans and Service Plan for Class A, B
and C shares.
2 Does not include fees and expenses of the non-interested Directors
(including counsel). The investment manager is contractually required to
reduce its management fee 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").
3 Assuming no redemption of shares.
The amounts listed in the example should not be considered as representative
of past or future expenses and actual expenses may be greater or less than
those indicated. Moreover, while the example assumes a 5% annual return, the
Fund's actual performance will vary and may result in an actual return
greater or less than 5%.
The purpose of the foregoing table is to assist you in
understanding the various costs and expenses that investors will bear,
directly or indirectly, the payment of which will reduce investors' return on
an annual basis. Long-term investors in Class A, B or C shares could pay more
in 12b-1 fees than the economic equivalent of paying the maximum front-end
sales charges applicable to mutual funds sold by members of the National
Association of Securities Dealers, Inc. ("NASD"). The information in the
foregoing table does not reflect any fee waivers or expense reimbursement
arrangements that may be in effect. Certain banks, securities dealers and
brokers ("Selected Dealers") or other financial institutions (including
Mellon Bank and its affiliates) (collectively "Agents") may charge their
clients direct fees for effecting transactions in Fund shares; such fees are
not reflected in the foregoing table. See "Management of the Fund," "How to
Buy Fund Shares," "How to Redeem Fund Shares" and "Distribution Plans (Class
A Plan and Class B and C Plans)."
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 3
Financial Highlights
The tables below are based upon a single Class A, Class B, Class C
and Class R share outstanding throughout the year or period and should be
read in conjunction with the financial statements, related notes and report
of independent audiors 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 PREMIER SMALL COMPANY STOCK FUND
FOR A CLASS A SHARE OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.
YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED
10/31/97 10/31/96 10/31/95 10/31/94*#
----------- --------- -------- ----------
<S> <C> <C> <C> <C>
Net asset value, beginning of period..................... $15.13 $13.09 $10.07 $10.00
----------- --------- -------- ----------
INVESTMENT OPERATIONS:
Net investment income (loss)......................... (0.04) (0.02) 0.02 0.01
Net realized and unrealized gain on investments...... 4.52 2.48 3.03 0.06
----------- --------- -------- ----------
TOTAL FROM INVESTMENT OPERATIONS..................... 4.48 2.46 3.05 0.07
----------- --------- -------- ----------
DISTRIBUTIONS
Distributions from net investment income............. __ __ (.03) __
Distributions from net realized gain on investments.. (0.72) (0.42) __ __
----------- --------- -------- ----------
TOTAL DISTRIBUTIONS...................................... (0.72) (0.42) (0.03) __
----------- --------- -------- ----------
Net asset value, end of period....................... $18.89 $15.13 $13.09 $10.07
========== ========= ========= ========
TOTAL RETURN............................................. 30.73% 19.22% 30.31% 0.70%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)................. $9,190 $3,884 $1,359 $60
Ratio of operating expenses to average net assets.... 1.50% 1.50% 1.50% 0.25%
Ratio of net investment income (loss) to average net assets (0.35%) (0.16%) 0.10% 0.14%
Portfolio turnover rate.................................. 39.18% 49.03% 56.00% 8.00%
Average commission rate paid##....................... $.0561 $.0528 _ __
</TABLE>
*The Fund commenced selling Investor shares on September 2, 1994.
Effective October 17, 1994, the Fund's Investor shares were redesignated
as Class A shares.
Not annualized.
Total return represents aggregate total return for the periods indicated
and is exclusive of sales load.
#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.
##For fiscal years beginning November 1, 1995, the Fund is required to
disclose its average commission rate paid per share for purchases and
sales of investment securities.
[Page 4]
<TABLE>
<CAPTION>
DREYFUS PREMIER SMALL COMPANY STOCK FUND
FOR A CLASS B SHARE OUTSTANDING THROUGHOUT THE YEAR OR PERIOD.
YEAR YEAR PERIOD
ENDED ENDED ENDED
10/31/97 10/31/96 10/31/95*
---------- ---------- ---------
<S> <C> <C> <C>
Net asset value, beginning of period......................................... $14.95 $13.05 $ 9.49
---------- ---------- ---------
INVESTMENT OPERATIONS:
Net investment income (loss)............................................... (0.03) (0.07) (0.03)
Net realized and unrealized gain on investments............................ 4.31 2.39 3.59
---------- ---------- ---------
TOTAL FROM INVESTMENT OPERATIONS........................................... 4.28 2.32 3.56
---------- ---------- ---------
DISTRIBUTIONS:
Distributions from net realized gain on investments........................ (0.72) (0.42) __
---------- ---------- ---------
Net asset value, end of period............................................. $18.51 $14.95 $13.05
========= ========= ========
TOTAL RETURN................................................................. 29.72% 18.17% 37.51%**
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)....................................... $19,257 $4,633 $1,025
Ratio of operating expenses to average net assets.......................... 2.25% 2.25% 1.95%**
Ratio of net investment income (loss) to average net assets................ (1.02%) (0.93%) (.56%)**
Portfolio turnover rate...................................................... 39.18% 49.03% 56.00%
average commission rate paid***............................................ $.0561 $.0528 __
</TABLE>
*The Fund commenced operations on September 2, 1994. The Fund commenced
selling Class B shares on December 19, 1994.
Total represents aggregate total return for the periods indicated and is
exclusive of sales load.
** Not annualized.
***For fiscal years beginning November 1, 1995, the Fund is required to
disclose its average commission rate paid per share
for purchases and sales of investment securities.
<TABLE>
<CAPTION>
DREYFUS PREMIER SMALL COMPANY STOCK FUND
FOR A CLASS C SHARE OUTSTANDING THROUGHOUT THE YEAR OR PERIOD.
YEAR YEAR PERIOD
ENDED ENDED ENDED
10/31/97 10/31/96 10/31/95*
---------- ---------- ---------
<S> <C> <C> <C>
Net asset value, beginning of period......................................... $14.95 $13.04 $ 9.49
---------- ---------- ---------
INVESTMENT OPERATIONS:
Net investment income (loss)............................................... 0.01 (0.09) (0.01)
Net realized and unrealized gain on investments............................ 4.28 2.42 3.56
---------- ---------- ---------
TOTAL FROM INVESTMENT OPERATIONS........................................... 4.29 2.33 3.55
---------- ---------- ---------
DISTRIBUTIONS:
Distributions from net realized gain on investments........................ (0.72) (0.42) _
---------- ---------- ---------
Net asset value, end of period............................................. $18.52 $14.95 $13.04
---------- ---------- ---------
TOTAL RETURN................................................................. 29.79% 18.27% 37.41%**
---------- ---------- ---------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)....................................... $3,647 $514 $147
Ratio of operating expenses to average net assets.......................... 2.25% 2.25% 1.14%**
Ratio of net investment income (loss) to average net assets................ (1.01%) (0.93%) (0.33%)**
Portfolio turnover rate...................................................... 39.18% 49.03% 56.00%
average commission rate paid***............................................ $.0561 $.0528 _
</TABLE>
*The Fund commenced operations on September 2, 1994. The Fund commenced
offering Class C shares on April 30, 1995.
Total represents aggregate total return for the periods indicated and is
exclusive of sales load.
** Not annualized.
*** For fiscal years beginning November 1, 1995, the Fund is required to
disclose its average commission rate paid per share
for purchases and sales of investment securities.
[Page 5]
<TABLE>
<CAPTION>
DREYFUS PREMIER SMALL COMPANY STOCK FUND
FOR A CLASS R SHARE OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.
YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED
10/31/97 10/31/96 10/31/95 10/31/94*#
----------- --------- -------- ----------
<S> <C> <C> <C> <C>
Net asset value, beginning of period..................... $15.15 $13.10 $10.07 $10.00
----------- --------- -------- ----------
INVESTMENT OPERATIONS:
Net investment income................................ __ 0.01 0.04 0.02
Net realized and unrealized gain on investments...... 4.53 2.48 3.04 0.05
----------- --------- -------- ----------
TOTAL FROM INVESTMENT OPERATIONS..................... 4.53 2.49 3.08 0.07
----------- --------- -------- ----------
DISTRIBUTIONS
Distributions from net investment income............. __ (0.02) (0.05) __
Distributions from net realized gain on investments.. (0.72) (0.42) __ __
----------- --------- -------- ----------
TOTAL DISTRIBUTIONS.................................. (0.72) (0.44) (0.05) __
----------- --------- -------- ----------
Net asset value, end of period....................... $18.96 $15.15 $13.10 $10.07
========= ======== ======== ========
TOTAL RETURN............................................. 31.04% 19.43% 30.70% 0.70%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)................. $244,292 $112,209 $44,091 $10,747
Ratio of operating expenses to average net assets.... 1.25% 1.25% 1.25% .21%
Ratio of net investment income to
average net assets................................... 0.02% 0.09% 0.35% .18%
Portfolio turnover rate.................................. 39.18% 49.03% 56.00% 8.00%
Average commission rate paid##........................... $.0561 $.0528 _ __
</TABLE>
*The Fund commenced selling Trust shares on September 2, 1994.
Effective October 17, 1994, the Fund's Trust shares were
redesignated as Class R shares.
Not 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.
##For fiscal years beginning November 1, 1995, the Fund is required to
disclose its average commission rate paid per share for purchases and
sales of investment securities.
Alternative Purchase Methods
The Fund offers you four methods of purchasing Fund shares; you may
choose the Class of shares that best suits your needs, given the amount of
your purchase, the length of time you expect to hold your shares and any
other relevant circumstances. Each Fund share represents an identical pro
rata interest in the Fund's investment portfolio. All Fund shares are sold on
a continuous basis. Class A, Class B and Class C shares are sold primarily to
clients of Agents that have entered into Agreements with the Distributor.
Class A shares are sold at net asset value per share plus a maximum
initial sales charge of 5.75% of the public offering price imposed at the
time of purchase. The initial sales charge may be reduced or waived for
certain purchases. See "How to Buy Fund Shares_Class A shares." These shares
are subject to an annual 12b-1 fee at the rate of 0.25 of 1% of the value of
the average daily net assets of Class A. See "Distribution Plan _ Class A
shares."
Class B shares are sold at net asset value per share with no
initial sales charge at the time of purchase; as a result, the entire
purchase price is immediately invested in the Fund. Class B shares are
subject to a maximum 4% contingent deferred sales charge ("CDSC"), which is
assessed only if you redeem Class B shares within six years of purchase. See
"How to Buy Fund Shares _ Class B shares" and "How to Redeem Fund Shares _
Contingent Deferred Sales Charge _ Class B shares." These shares also are
subject to an annual distribution fee at the rate of 0.75 of 1%, and an
annual service fee at the rate of 0.25 of 1%, of the value of the average
daily net assets of Class B. See "Distribution and Service Plans _ Class B
and C shares." The distribution and service fees paid by Class B will cause
such Class to have a higher expense ratio and to pay lower dividends than
Class A. Approximately six years after the date of purchase (or in the case
of Class B shares of the Fund acquired through exchange of Class B shares of
another fund advised by Dreyfus, the date of purchase of the original Class B
shares of the fund exchanged), Class B shares will automatically convert to
Class A shares, based on the relative net asset values for shares of each
such Class, and will no longer be subject to the service plan fee of Class B
shares and will be subject to the lower distribution fee of Class A shares.
(Such conversion is subject to suspension by the Board of Directors if
adverse tax consequences might result.) Class B shares that have been
acquired through the reinvestment of dividends and other distributions will
be converted on a pro rata basis together with other Class B shares, in the
proportion that a shareholder's Class B shares converting to Class A shares
bears to the total Class B shares not acquired through the reinvestment of
dividends and other distributions.
[Page 6]
Class C shares are sold at net asset value per share with no
initial sales charge at the time of purchase; as a result, the entire
purchase price is immediately invested in the Fund. Class C shares are
subject to a 1% CDSC, which is assessed only if you redeem Class C shares
within one year of purchase. See "How to Redeem Fund Shares _ Class C
shares." These shares also are subject to an annual distribution fee at the
rate of 0.75 of 1%, and an annual service fee at the rate of 0.25 of 1%, of
the value of the average daily net assets of Class C. See "Distribution and
Service Plans _ Class B and C shares." The distribution and service fees
paid by Class C will cause such Class to have a higher expense ratio and to
pay lower dividends than Class A.
Class R shares generally may not be purchased directly by
individuals, although eligible institutions may purchase Class R shares for
accounts maintained by individuals. Class R shares are sold at net asset
value per share primarily to bank trust departments and other financial
service providers (including Mellon Bank and its affiliates) ("Banks") acting
on behalf of customers having a qualified trust or investment account or
relationship at such institution, or to customers who have received and hold
shares of the Fund distributed to them by virtue of such an account or
relationship.
The decision as to which Class of shares is most beneficial to you
depends on the amount and the intended length of your investment. You should
consider whether, during the anticipated life of your investment in the Fund,
the accumulated distribution fee, service fee and CDSC, if any, on Class B or
Class C shares would be less than the accumulated distribution fee and
initial sales charge on Class A shares purchased at the same time, and to
what extent, if any, such differential would be offset by the return of Class
A shares. Additionally, investors qualifying for reduced initial sales
charges who expect to maintain their investment for an extended period of
time might consider purchasing Class A shares because the accumulated
continuing distribution and service fees on Class B or Class C shares may
exceed the accumulated distribution fee and initial sales charge on Class A
shares during the life of the investment. Finally, you should consider the
effect of the CDSC period and any conversion rights of the Classes in the
context of your own investment time frame. For example, while Class C shares
have a shorter CDSC period than Class B shares, Class C shares do not have a
conversion feature and, therefore, are subject to ongoing distribution and
service fees. Thus, Class B shares may be more attractive than Class C shares
to investors with longer term investment outlooks. Generally, Class A shares
may be more appropriate for investors who invest $1,000,000 or more in Fund
shares, but will not be appropriate for investors who invest less than
$50,000 in Fund shares.
Description of the Fund
Investment Objective
The Fund seeks to consistently exceed the total return performance
of the Russell 2500trademark Stock Index while maintaining a similar level of
risk. There can be no assurance that the Fund will meet its stated investment
objective.
Management Policies
The Fund pursues its investment objective by investing in a
portfolio of small to medium sized primarily domestic companies which offer
above-average growth potential. The Russell 2500trademark Index is composed
of common stocks issued by small and medium-sized companies, typically with
market capitalizations between $100 million and $3.0 billion. Investments in
small to medium sized companies may involve greater risks because the
operating and investment performance histories of these companies generally
are more limited than those of companies with larger capitalization, and
their securities often experience higher price volatility. The Fund will
normally invest at least 65% of its total assets in small to medium sized
domestic companies. The Fund may also invest in (1) securities of foreign
companies, (2) American Depository Receipts ("ADRs"), (3) stock index futures
and options contracts, (4) repurchase agreements, (5) reverse repurchase
agreements, (6) when-issued transactions, (7) commercial paper and (8)
initial public offerings.
Individual security selection is the foundation of the Fund's
investment approach. Consistency of returns which exceed the Russell
2500trademark Stock Index and stability of the Fund's asset value relative to
the Russell 2500trademark Stock Index are primary goals of the investment
process. Information from diverse sources is collected and used to construct
valuation models which are combined to form a comprehensive computerized
valuation ranking system identifying common stocks which appear to be over or
under valued. These models include measures of actual and estimated earnings
changes and relative value based on dividend discount calculations, price to
book, price to earnings and return on equity ratios. The computerized ranking
system incorporates information from the most recent time period available to
the system and categorizes individual securities within each sector or
industry according to relative attractiveness. Dreyfus then applies
fundamental analysis to select the most attractive of the top-rated securities
and to determine those issues that should be sold.
This investment process utilizes disciplined control of fund risk
and a process of rigorous security selection. Risk is managed by controlling
the structure of the Fund so that characteristics of the Fund's portfolio
securities such as economic sector, industry exposure, growth, size,
volatility and quality are maintained similar to those of the Russell
2500trademark Stock Index at all times. In addition, the Fund's managers do
not attempt to time the financial market, or use sector or industry rotation
techniques.
[Page 7]
The Russell 2500trademark Stock Index, published by Frank Russell
Company, is comprised of the bottom 500 companies in the Russell
1000trademark Index as ranked by total market capitalization, and all 2,000
stocks in the Russell 2000trademark Index. The Russell 2000trademark Index
consists of the smallest 2,000 companies in the Russell Index 3000trademark,
representing approximately 10% of the Russell 3000trademark Index total
market capitalization. The Russell 3000trademark Index is composed of 3,000
large U.S. companies, as determined by market capitalization. The Russell
1000trademark Index consists of the 1,000 largest companies in the Russell
3000trademark Index.
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 to broker-dealers and other institutional
investors pursuant to agreements requiring that the loans be continuously
secured by collateral equal at all times in value to at least the market
value of the securities loaned. There may be risks of delay in receiving
additional collateral or in recovering the securities loaned or even a loss
of rights to the collateral should the borrower of the securities fail
financially. Securities loans, however, are made only to borrowers deemed by
Dreyfus to be of good standing and when, in its judgment, the income to be
earned from the loan justifies the attendant risks.
When-Issued And Delayed Delivery Transactions. To secure
advantageous prices or yields, the Fund may purchase U.S. Government
Securities on a when-issued basis or may purchase or sell securities for
delayed delivery. In such transactions, delivery of the securities occurs
beyond the normal settlement periods, but no payment or delivery is made by
the Fund prior to the actual delivery or payment by the other party to the
transaction. The purchase of securities on a when-issued or delayed delivery
basis involves the risk that, as a result of an increase in yields available
in the marketplace, the value of the securities purchased will decline prior
to the settlement date. The sale of securities for delayed delivery involves
the risk that the prices available in the market on the delivery date may be
greater than those obtained in the sale transaction. The Fund will establish
a segregated account consisting of cash, U.S. Government Securities or other
high-grade debt obligations in an amount at least equal at all times to the
amounts of its when-issued and delayed delivery commitments.
Futures, Options and Other Derivative Instruments. The Fund may
purchase and sell various financial instruments ("Derivative Instruments"),
such as financial futures contracts (such as interest rate, index and foreign
currency futures contracts), options (such as options on securities, indices,
foreign currencies and futures contracts), forward currency contracts and
interest rate, equity index and currency swaps, caps, collars and floors. The
index Derivative Instruments the Fund may use may be based on indices of U.S.
or foreign equity or debt securities. These Derivative Instruments may be
used, for example, to preserve a return or spread, to lock in unrealized
market value gains or losses, to facilitate or substitute for the sale or
purchase of securities, to manage the duration of securities, to alter the
exposure of a particular investment or portion of the Fund's portfolio to
fluctuations in interest rates or currency rates, to uncap a capped security
or to convert a fixed rate security into a variable rate security or a
variable rate security into a fixed rate security.
The Fund's ability to use these instruments may be limited by
market conditions, regulatory limits and tax considerations. The Fund might
not use any of these strategies and there can be no assurance that any
strategy that is used will succeed. See the SAI for more information
regarding these instruments and the risks relating thereto.
The Fund may not purchase put or call options that are traded on a
national stock exchange in an amount exceeding 5% of its net assets.
Foreign Currency Transactions. The Fund may engage in currency
exchange transactions on a spot or forward basis. The Fund may exchange
foreign currency on a spot basis at the spot rate then prevailing for
purchasing or selling foreign currencies in the foreign exchange market.
The Fund may also enter into forward currency contracts for the
purchase or sale of a specified currency at a specified future date either
with respect to specific transactions or portfolio positions in order to
minimize the risk to the Fund from adverse changes in the relationship
between the U.S. dollar and foreign currencies. For example,
[Page 8]
when the Fund anticipates purchasing or selling a security
denominated in a foreign currency, the Fund may enter into a forward contract
in order to set the exchange rate at which the transaction will be made. The
Fund may also enter into a forward contract to sell an amount of foreign
currency approximating the value of some or all of the Fund's securities
positions denominated in that currency.
Forward currency contracts may substantially change the Fund's
investment exposure to changes in currency exchange rates and could result in
losses if currencies do not perform as Dreyfus anticipates. There is no
assurance that Dreyfus' use of forward currency contracts will be
advantageous to the Fund or that it will hedge at an appropriate time.
Risks of Derivative Instruments. The use of Derivative Instruments
involves special risks, including: (1) possible imperfect or no correlation
between price movements of the portfolio investments (held or intended to be
purchased) involved in the transactions and price movements of the Derivative
Instruments involved in the transaction; (2) possible lack of a liquid
secondary market for any particular Derivative Instrument at a particular
time; (3) the need for additional portfolio management skills and techniques;
(4) losses due to unanticipated market price movements; (5) the fact that,
while such strategies can reduce the risk of loss, they can also reduce the
opportunity for gain, or even result in losses, by offsetting favorable price
movements in portfolio investments; (6) incorrect forecasts by Dreyfus
concerning interest or currency exchange rates or direction of price
fluctuations of the investment involved in the transaction, which may result
in the strategy being ineffective; (7) loss of premiums paid by the Fund on
options it purchases; and (8) the possible inability of the Fund to purchase
or sell a portfolio security at a time when it would otherwise be favorable
for it to do so, or the need to sell a portfolio security at a
disadvantageous time, due to the need for the Fund to maintain "cover" or to
segregate securities in connection with such transactions and the possible
inability of the Fund to close out or liquidate its positions.
Dreyfus may use Derivative Instruments for hedging purposes (to
adjust the risk characteristics of the Fund's portfolio) and may use these
instruments to adjust the return characteristics of the Fund's portfolio of
investments. This can increase the investment risk. If Dreyfus judges market
conditions incorrectly or employs a strategy that does not correlate well
with the Fund's investments, these techniques could result in a loss,
regardless of whether the intent was to reduce risk or increase return. These
techniques may increase the volatility of the Fund and may involve a small
investment of cash relative to the magnitude of the risk assumed. In
addition, these techniques could result in a loss if the counterparty to the
transaction does not perform as promised or if there is not a liquid
secondary market to close out a position that the Fund has entered into.
Options and futures transactions may increase portfolio turnover
rates, which results in correspondingly greater commission expenses and
transaction costs, and may result in certain tax consequences.
Certain Portfolio Securities
American Depository Receipts. The Fund may invest in U.S.
dollar-denominated ADRs. ADRs typically are issued by an American bank or
trust company and evidence ownership of underlying securities issued by
foreign companies. ADRs are traded in the United States on national
securities exchanges or in the over-the-counter market. Investment in
securities of foreign issuers presents certain risks. See "Foreign
Securities."
Commercial Paper. The Fund may invest in commercial paper. These
instruments are short-term obligations issued by banks and corporations that
have maturities ranging from 2 to 270 days. Each instrument may be backed
only by the credit of the issuer or may be backed by some form of credit
enhancement, typically in the form of a guarantee by a commercial bank.
Commercial paper backed by guarantees of foreign banks may involve additional
risk due to the difficulty of obtaining and enforcing judgments against such
banks and the generally less restrictive regulations to which such banks are
subject. The Fund will only invest in commercial paper of U.S. and foreign
companies rated at the time of purchase at least A-1 by Standard & Poor's,
Prime-1 by Moody's Investors Service, F-1 by Fitch Investors Service, Inc.,
Duff 1 by Duff & Phelps, Inc., or A1 by IBCA, Inc.
Foreign Securities. The Fund may purchase securities of foreign
issuers and may invest in obligations of foreign branches of domestic banks
and domestic branches of foreign banks. Investment in foreign securities
presents certain risks, including those resulting from fluctuations in
currency exchange rates, revaluation of currencies, adverse political and
economic developments and the possible imposition of currency exchange
blockages or other foreign governmental laws or restrictions, reduced
availability of public information concerning issuers, and the fact that
foreign issuers are not generally subject to uniform accounting, auditing and
financial reporting standards or to other regulatory practices and
requirements comparable to those applicable to domestic issuers. Moreover,
securities of many foreign issuers may be less liquid and their prices more
volatile than those of comparable domestic issuers. In addition, with respect
to certain foreign countries, there is the possibility of expropriation,
confiscatory taxation and limitations on the use or removal of funds or other
assets of the Fund, including withholding of dividends. Foreign securities
may be subject to foreign government taxes that would reduce the yield on
such securities.
Illiquid Securities. The Fund will not knowingly invest more than
15% of the value of its net assets in illiquid securities, including time
deposits and repurchase agreements having maturities longer than seven days.
Securities
[Page 9]
that have readily available market quotations are not deemed
illiquid for purposes of this limitation (irrespective of any legal or
contractual restrictions on resale). The Fund may invest in commercial
obligations issued in reliance on the so-called "private placement" exemption
from registration afforded by Section 4(2) of the Securities Act of 1933, as
amended ("Section 4(2) paper"). The Fund may also purchase securities that
are not registered under the Securities Act of 1933, as amended, but that can
be sold to qualified institutional buyers in accordance with Rule 144A under
that Act ("Rule 144A securities"). Liquidity determinations with respect to
Section 4(2) paper and Rule 144A securities will be made by the Board of
Directors or by Dreyfus pursuant to guidelines established by the Board of
Directors. The Board or Dreyfus will consider availability of reliable price
information and other relevant information in making such determinations.
Section 4(2) paper is restricted as to disposition under the federal
securities laws, and generally is sold to institutional investors, such as
the Fund, that agree that they are purchasing the paper for investment and
not with a view to public distribution. Any resale by the purchaser must be
pursuant to registration or an exemption therefrom. Section 4(2) paper
normally is resold to other institutional investors like the Fund through or
with the assistance of the issuer or investment dealers who make a market in
the Section 4(2) paper, thus providing liquidity. Rule 144A securities
generally must be sold to other qualified institutional buyers. If a
particular investment in Section 4(2) paper or Rule 144A securities is not
determined to be liquid, that investment will be included within the
percentage limitation on investment in illiquid securities. The ability to
sell Rule 144A securities to qualified institutional buyers is a recent
development and it is not possible to predict how this market will mature.
Investing in Rule 144A securities could have the effect of increasing the
level of Fund illiquidity to the extent that qualified institutional buyers
become, for a time, uninterested in purchasing these securities.
Repurchase Agreements. The Fund may enter into repurchase
agreements. A repurchase agreement involves the purchase of a security by the
Fund and a simultaneous agreement (generally with a bank or broker-dealer) to
repurchase that security from the Fund at a specified price and date or upon
demand. This technique offers a method of earning income on idle cash. A risk
associated with repurchase agreements is the failure of the seller to
repurchase the securities as agreed, which may cause the Fund to suffer a
loss if the market value of such securities declines before they can be
liquidated on the open market. Repurchase agreements with a duration of more
than seven days are considered illiquid securities and are subject to the
associated limits discussed above.
Initial Public Offerings ("IPOs"). The Fund may invest in an IPO, a
corporation's first offering of stock to the public. Shares are given a
market value reflecting expectations for the corporation's future growth.
Special rules of the NASD apply to the distribution of IPOs. Corporations offe
ring IPOs generally have a limited operating history and may involve greater
risk.
Other Investment Companies. The Fund may invest in securities
issued by other investment companies to the extent that such investments are
consistent with the Fund's investment objective and policies and permissible
under the Investment Company Act of 1940, as amended (the "1940 Act"). As a
shareholder of another investment company, the Fund would bear, along with
other shareholders, its pro rata portion of the other investment company's
expenses, including advisory fees. These expenses would be in addition to the
advisory and other expenses that the Fund bears directly in connection with
its own operations.
U.S. Government Securities. The Fund may invest in obligations
issued or guaranteed as to both principal and interest by the U.S. Government
or backed by the full faith and credit of the United States ("U.S. Government
Securities"). In addition to direct obligations of the U.S. Treasury, U.S.
Government Securities include securities issued or guaranteed by the Federal
Housing Administration, Farmers Home Administration, Export-Import Bank of
the United States, Small Business Administration, General Services
Administration and Maritime Administration. Investments may also be made in
U.S. Government obligations that do not carry the full faith and credit
guarantee, such as those issued by the Federal National Mortgage Association,
Federal Home Loan Mortgage Corporation or other instrumentalities.
Portfolio Turnover. Under normal market conditions the Fund's
portfolio turnover rate is expected to be less than 100%. A portfolio
turnover rate of 100% would occur, for example, if all the securities held by
the Fund were replaced once in a period of one year. A higher rate of
portfolio turnover involves correspondingly greater brokerage commissions and
other expenses that must be borne directly by the Fund and, thus, indirectly
by its shareholders. In addition, a high rate of portfolio turnover may
result in the realization of larger amounts of short-term capital gains that,
when distributed to the Fund's shareholders, are taxable to them as ordinary
income. Nevertheless, security transactions for the Fund will be based only
upon investment considerations and will not be limited by any other
considerations when Dreyfus deems it appropriate to make changes in the
Fund's assets.
Limiting Investment Risks. The Fund is subject to a number of
investment limitations. Certain limitations are matters of fundamental policy
and may not be changed without the affirmative vote of the holders of a
majority of the Fund's outstanding shares. The SAI describes all of the
Fund's fundamental and non-fundamental limitations.
[Page 10]
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 January 31, 1998, Dreyfus managed or administered
approximately $96 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 overall
authority of the Company's Board of Directors in accordance with Maryland
law. Pursuant to the Investment Management Agreement, Dreyfus provides, or
arranges for one or more third parties to provide, investment advisory,
administrative, custody, fund accounting and transfer agency services to the
Fund. As the Fund's investment manager, Dreyfus manages the Fund by making
investment decisions based on the Fund's investment objective, policies and
restrictions.
The Fund is managed by two portfolio managers, James Wadsworth and
Anthony Galise. Each individual is employed by Dreyfus as a portfolio manager
for the Fund.
Mr. Wadsworth has been with Mellon Bank since 1977 and is currently
a First Vice President and Chief Equity Officer of Mellon Private Asset
Management and Chief Investment Officer of Laurel Capital Advisors. He holds
a Bachelor's degree from Muskingum College and a Master's degree from the
University of Michigan. A Chartered Financial Analyst, he is a member and
past president of the Pittsburgh Society of Financial Analysts.
Mr. Galise came to Mellon Bank in 1993 with over 20 years of equity
investment experience. He is currently a Vice President and Portfolio Manager
of Mellon Private Asset Management and Laurel Capital Advisors. He holds a
Bachelor's and Master's degree from Suffolk University. A Chartered Financial
Analyst, he is also a member of the Pittsburgh and Boston Financial Analysts
Societies.
Mellon is a publicly owned multibank holding company incorporated
under Pennsylvania law in 1971 and registered under the Bank Holding Company
Act of 1956, as amended. Mellon provides a comprehensive range of financial
products and services in domestic and selected international markets. Mellon
is among the twenty-five largest bank holding companies in the United States
based on total assets. Mellon's principal wholly-owned subsidiaries are
Mellon Bank, Mellon Bank (DE) National Association, Mellon Bank (MD), The
Boston Company, Inc., AFCO Credit Corporation and a number of companies known
as Mellon Financial Services Corporations. Through its subsidiaries,
including Dreyfus, Mellon managed more than $305 billion in assets as of
December 31, 1997, including approximately $104 billion in mutual fund
assets. As of December 31, 1997, Mellon, through various subsidiaries,
provided non-investment services, such as custodial or administration
services, for more than $1.532 trillion in assets, including approximately
$60 billion in mutual fund assets.
Under the Investment Management Agreement, the Fund has agreed to
pay Dreyfus a monthly fee at the annual rate of 1.25% of the value of the
Fund's average daily net assets. Dreyfus pays all of the Fund's expenses,
except brokerage fees, taxes, interest, fees and expenses of non-interested
Directors (including counsel fees), Rule 12b-1 fees (if applicable) and
extraordinary expenses. In order to compensate Dreyfus for paying virtually
all of the Fund's expenses, the Fund's investment management fee is higher
than the investment advisory fees paid by most investment companies. Most, if
not all, such companies also pay for additional non-investment advisory
expenses that are not paid by such companies' investment advisers. Although
Dreyfus does not pay for the fees and expenses of the non-interested
Directors (including counsel fees), Dreyfus is contractually required to
reduce its investment management fee by an amount equal to the Fund's
allocable share of such fees and expenses. From time to time, Dreyfus may
voluntarily waive a portion of the investment management fees payable by the
Fund. For the fiscal year ended October 31, 1997, the Fund paid Dreyfus 1.25%
of its average daily net assets in investment management fees, less fees and
expenses of the non-interested Directors (including counsel fees).
For the fiscal year ended October 31, 1997, total operating
expenses (excluding Rule 12b-1 fees, as applicable) of the Fund for Class A,
Class B, Class C and Class R shares were 1.25% of the average daily net
assets for each of the Fund's Class A, Class B, Class C and Class R shares.
In addition, Class A, B and C shares may be subject to certain
distribution and shareholder servicing fees. See "Distribution Plans (Class A
Plan and Class B and C Plans)."
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.
[Page 11]
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.
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 _ Class A shares, Class B shares and Class C shares may be purchased
only by clients of Agents, except that full-time or part-time employees 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 may purchase
Class A shares directly through the Distributor. Subsequent purchases may be
sent directly to the Transfer Agent or your Agent.
Class R shares are sold primarily to Banks acting on behalf of
customers having a qualified trust or investment account or relationship at
such institution, or to customers who have received and hold shares of the
Fund distributed to them by virtue of such an account or relationship. Class
R shares may be purchased for a retirement plan only by a custodian, trustee,
investment manager or other entity authorized to act on behalf of such plan.
When purchasing Fund shares, you must specify which Class is being
purchased. Stock certificates are issued only upon your written request. No
certificates are issued for fractional shares. The Fund reserves the right to
reject any purchase order. Agents effecting transactions in Fund shares for
the accounts of their clients may charge their clients direct fees in
connection with such transactions.
Agents may receive different levels of compensation for selling
different Classes of shares. Management understands that some Agents may
impose certain conditions on their clients which are different from those
described in this Prospectus, and, to the extent permitted by applicable
regulatory authority, may charge their clients direct fees which would be in
addition to any amounts which might be received under the Distribution and
Service Plans. Each Agent has agreed to transmit to its clients a schedule of
such fees. You should consult your Agent in this regard.
The minimum initial investment is $1,000. Subsequent investments
must be at least $100. The minimum initial investment is $750 for
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 and $500 for Dreyfus-sponsored Education
IRAs, with no minimum on subsequent purchases. The initial investment must be
accompanied by the Fund's Account Application. The Fund reserves the right to
offer Fund shares without regard to minimum purchase requirements to
employees participating in certain qualified or non-qualified employee
benefit plans or other programs where contributions or account information
can be transmitted in a manner and form acceptable to the Fund. The Fund
reserves the right to vary further the initial and subsequent investment
minimum requirements at any time.
The Internal Revenue Code of 1986, as amended (the "Code"), imposes
various limitations on the amount that may be contributed to certain
qualified or non-qualified employee benefit plans or other programs,
including pension, profit-sharing and other deferred compensation plans,
whether established by corporations, partnerships, non-profit entities or
state and local governments ("Retirement Plans"). These limitations apply
with respect to participants at the plan level and, therefore, do not
directly affect the amount that may be invested in the Fund by a Retirement
Plan. Participants and plan sponsors should consult their tax advisers for
details.
You may purchase Fund shares by check or wire, or through the Tele
Transfer 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 which are mailed should be sent
to Dreyfus Premier Small Company Stock
[Page 12]
Fund, P.O. Box 6587, Providence, Rhode Island 02940-6587. If you
are opening a new account, please enclose your Account Application indicating
which Class of shares is being purchased. For subsequent investments, your
Fund account number should appear on the check and an investment slip should
be enclosed. For Dreyfus retirement plan accounts, payments which are mailed
should be sent to The Dreyfus Trust Company, Custodian, P.O. Box 6427,
Providence, Rhode Island 02940-6427. Neither initial nor subsequent
investments should be made by third party check.
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 Fund's DDA #044350/Dreyfus Premier Small Company Stock 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 1-800-554-4611 after completing your wire payment to obtain your Fund
account number. Please 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.
Fund shares also may be purchased through Dreyfus-AUTOMATIC Asset
BuilderRegistration Mark and the Government Direct Deposit Privilege
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, howeer, that
periodic investment plans do not guarantee a profit and will not protect an
investor against loss in a declining market.
Subsequent investments also may be made by electronic transfer of
funds from an account maintained in a bank or other domestic financial
institution that is an Automated Clearing House ("ACH") member. You must
direct the institution to transmit immediately available funds through the
ACH System to Boston Safe Deposit and Trust Company with instructions to
credit your Fund account. The instructions must specify your Fund account
registration and Fund account number preceded by the digits "4410" for Class
A shares, "4420" for Class B shares, "4430" for Class C shares and "4960" for
Class R shares.
The Distributor may pay dealers a fee of up to 0.5% of the amount
invested through such dealers in Fund shares by employees participating in
qualified or non-qualified employee benefit plans or other programs where (i)
the employers or affiliated employers maintaining such plans or programs have
a minimum of 250 employees eligible for participation in such plans or
programs or (ii) such plan's or program's aggregate investment in the Dreyfus
Premier Family of Funds or 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 Premier Family of Funds or 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 at any time. The
Distributor will pay such fees from its own funds, other than amounts
received from the Fund, including past profits or any other source available
to it.
Federal regulations require that you provide a certified TIN upon
opening or reopening an account. See "Dividends, Other Distributions and
Taxes" and the Fund's Account Application for further information concerning
this requirement. Failure to furnish a certified TIN to the Fund could
subject you to a $50 penalty imposed by the Internal Revenue Service (the
"IRS").
Net Asset Value Per Share ("NAV") _ An investment portfolio's NAV refers to
the worth of one share. The NAV for shares of each Class of the Fund is
computed by dividing the value of net assets attributable to such Class by
the number of shares of that Class outstanding. Shares of each Class of the
Fund are offered on a continuous basis. The valuation of assets for
determining NAV for the Fund may be summarized as follows:
The portfolio securities of the Fund, except as otherwise noted,
listed or traded on a stock exchange, are valued at the latest sale price. If
no sale is reported, the mean of the latest bid and asked prices is used.
Securities traded over-the-counter are priced at the mean of the latest bid
and asked prices but will be valued at the last sale price if required by
regulations of the SEC. When market quotations are not readily available,
securities and other assets are valued at a fair value as determined in good
faith in accordance with procedures established by the Board of Directors.
Bonds are valued through valuations obtained from a commercial
pricing service or at the most recent mean of the bid and asked prices
provided by investment dealers in accordance with procedures established by
the Board of Directors.
NAV is determined 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. For purposes of determining NAV,
options and futures contracts will be valued 15 minutes after the close of
trading on the floor of the NYSE. Orders received in
[Page 13]
proper form by the Transfer Agent or other entity authorized to
receive orders on behalf of the Fund before such close of trading are
effective on, and will receive the price determined on, that day. Except in
the case of certain orders transmitted by dealers as described in the
following paragraph, orders received after such close of trading are
effective on, and receive the share price determined on, the next business
day.
Orders for the purchase of Fund shares received by dealers by the
close of trading on the floor of the NYSE on any business day and transmitted
to the Distributor or its designee by the close of its business day (normally
5:15 p.m., New York time) will be based on the public offering price per
share determined as of the close of trading on the floor of the NYSE on that
day. Otherwise, the orders will be based on the next determined public
offering price. It is the dealers' responsibility to transmit orders so that
they will be received by the Distributor or its designee before the close of
its 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.
Class A shares _ The public offering price of Class A shares is the NAV of
that Class, plus, except for shareholders beneficially owning Class A shares
on November 30, 1996, a sales load as shown below:
Total
Sales Load
<TABLE>
<CAPTION>
__________________________
As a % of As a % of Dealers' Reallowance
Offering PriceNet Asset Value as a % of
Amount of Transaction Per Share Per Share Offering Price
_________________ ___________ ___________ _____________
<S> <C> <C> <C>
Less than $50,000......... 5.75 6.10 5.00
$50,000 to less than $100,000 4.50 4.70 3.75
$100,000 to less than $250,0003.50 3.60 2.75
$250,000 to less than $500,0002.50 2.60 2.25
$500,000 to less than $1,000,000 2.00 2.00 1.75
$1,000,000 or more........ 0 0 0
For shareholders who opened Fund accounts after December 19, 1994,
but who beneficially owned Class A shares on November 30, 1996, the public
offering price for Class A shares is the NAV of that Class plus a sales load
as shown below:
Total Sales Load
__________________________
As a % of As a % of Dealers' Reallowance
Offering PriceNet Asset Value as a % of
Amount of Transaction Per Share Per Share Offering Price
_________________ ___________ ___________ _____________
Less than $50,000......... 4.50 4.70 4.25
$50,000 to less than $100,000 4.00 4.20 3.75
$100,000 to less than $250,0003.00 3.10 2.75
$250,000 to less than $500,0002.50 2.60 2.25
$500,000 to less than $1,000,000 2.00 2.00 1.75
$1,000,000 or more........ 0 0 0
</TABLE>
Holders of Class A accounts of the Fund as of December 19, 1994 may
continue to purchase Class A shares of the Fund at NAV. However, investments
by such holders in other funds advised by Dreyfus will be subject to any
applicable front-end sales load.
There is no initial sales charge on purchases of $1,000,000 or more
of Class A shares. However, if you purchase Class A shares without an initial
sales charge as part of an investment of at least $1,000,000 and redeem all
or a portion of those shares within one year of purchase, a CDSC of 1.00%
will be imposed at the time of redemption. The Distributor may pay Agents an
amount up to 1% of the NAV of Class A shares purchased by their clients that
are subject to a CDSC. The terms contained in the sections of the Fund's
Prospectus entitled "How to Redeem Fund Shares _ Contingent Deferred Sales
Charge _ Class B" (other than the amount of the CDSC and its time periods)
and "How to Redeem Fund Shares_Waiver of CDSC" are applicable to the Class A
shares subject to a CDSC. Letter of Intent and Right of Accumulation apply to
such purchases of Class A shares.
Full-time employees of NASD member firms and full-time employees of
other financial institutions which have entered into an agreement with the
Distributor pertaining to the sale of Fund shares (or which otherwise have a
brokerage related or clearing arrangement with an NASD member firm or
financial institution with respect to the sale of such shares) may purchase
Class A shares for themselves directly or pursuant to an employee benefit
plan or other program, or for their spouses or minor children, at NAV,
provided that they have furnished the Distributor with such information as it
may request from time to time in order to verify eligibility for this
privilege. This privilege also applies to full-time employees of financial
institutions affiliated with NASD member firms whose full-time employees are
eligible to purchase Class A shares at NAV. In addition, Class A shares are
offered at NAV to full-time or part-time employees
[Page 14]
of Dreyfus or any of its affiliates or subsidiaries, directors of
Dreyfus, Board members of a fund advised by Dreyfus, including members of the
Company's Board, or the spouse or minor child of any of the foregoing.
Class A shares will be offered at NAV without a sales load to
employees participating in Eligible Benefit Plans. Class A shares also may be
purchased (including by exchange) at NAV without a sales load for
Dreyfus-sponsored IRA "Rollover Accounts" with the distribution proceeds from
a qualified retirement plan or a Dreyfus-sponsored 403(b)(7) plan, provided
that, at the time of such distribution, such qualified retirement plan or
Dreyfus-sponsored 403(b)(7) plan (a) met the requirements of an Eligible Benef
it Plan and all or a portion of such plan's assets were invested in funds in
the Dreyfus Premier Family of Funds, the Dreyfus Family of Funds or certain
other products made available by the Distributor to such plans or (b)
invested all of its assets in certain funds in the Dreyfus Premier Family of
Funds or the Dreyfus Family of Funds or certain other products made available
by the Distributor to such plans.
Class A shares may be purchased at NAV through certain
broker-dealers and other financial institutions which have entered into an
agreement with the Distributor, which includes a requirement that such shares
be sold for the benefit of clients participating in a "wrap account" or a
similar program under which such clients pay a fee to such broker-dealer or
other financial institution.
Class A shares also may be purchased at NAV, subject to appropriate
documentation, through a broker-dealer or other financial institution with
the proceeds from the redemption of shares of a registered open-end
management investment company not managed by Dreyfus or its affiliates. The
purchase of Class A shares of the Fund must be made within 60 days of such
redemption and the shareholder must have either (i) paid an initial sales
charge or a CDSC or (ii) been obligated to pay at any time during the holding
period, but did not actually pay on redemption, a deferred sales charge with
respect to such redeemed shares.
Class A shares also may be purchased at NAV, subject to appropriate
documentation, by (i) qualified separate accounts maintained by an insurance
company pursuant to the laws of any State or territory of the United States,
(ii) a State, county or city or instrumentality thereof, (iii) a charitable
organization (as defined in Section 501(c)(3) of the Code) investing $50,000
or more in Fund shares and (iv) a charitable remainder trust (as defined in
Section 501(c)(3) of the Code).
The dealer reallowance may be changed from time to time but will
remain the same for all dealers. The Distributor, at its expense, may provide
additional promotional incentives to dealers that sell shares of funds
advised by Dreyfus which are sold with a sales load, such as Class A shares.
In some instances, those incentives may be offered only to certain dealers
who have sold or may sell significant amounts of shares. Dealers receive a
larger percentage of the sales load from the Distributor than they receive
for selling most other funds.
Class B shares _ The public offering price for Class B shares is the NAV of
that Class. No initial sales charge is imposed at the time of purchase. A
CDSC is imposed, however, on certain redemptions of Class B shares as
described under "How to Redeem Fund Shares." The Distributor compensates
certain Agents for selling Class B and Class C shares at the time of purchase
from the Distributor's own assets. The proceeds of the CDSC and the
distribution fee, in part, are used to defray these expenses.
Class C shares _ The public offering price for Class C shares is the NAV of
that Class. No initial sales charge is imposed at the time of purchase. A
CDSC is imposed, however, on redemptions of Class C shares made within the
first year of purchase. See "Class B shares" above and "How to Redeem Fund
Shares."
Class R shares _ The public offering price for Class R shares is the NAV of
that Class.
Right of Accumulation _ Class A shares _ Reduced sales loads apply to any
purchase of Class A shares, shares of other funds in the Dreyfus Premier
Family of Funds, shares of certain other funds advised by Dreyfus which are
sold with a sales load and shares acquired by a previous exchange of such
shares (hereinafter referred to as "Eligible Funds"), by you and any related
"purchaser" as defined in the SAI, where the aggregate investment, including
such purchase, is $50,000 or more. If, for example, you previously purchased
and still hold Class A shares of the Fund, or shares of any other Eligible
Fund or combination thereof, with an aggregate current market value of
$40,000 and subsequently purchase Class A shares of the Fund or shares of an
Eligible Fund having a current value of $20,000, the sales load applicable to
the subsequent purchase would be reduced to 4.50% of the offering price. All
present holdings of Eligible Funds may be combined to determine the current
offering price of the aggregate investment in ascertaining the sales load
applicable to each subsequent purchase. Class A shares purchased by
shareholders beneficially owning Fund shares on November 30, 1996, but who
opened their Fund accounts after December 19, 1994, are subject to a
different sales load schedule, as described above under "Class A shares."
To qualify for reduced sales loads, at the time of purchase you or
your Agent must notify the Distributor if orders are made by wire, or the
Transfer Agent if orders are made by mail. The reduced sales load is subject
to confirmation of your holdings through a check of appropriate records.
TeleTransfer Privilege _ You may purchase Fund shares (minimum $500 and
maximum $150,000 per day) by telephone if you have checked the appropriate
box and supplied the necessary information on the Fund's Account Application
or have filed a Shareholder Services Form with the Transfer Agent. The
proceeds will be transferred between
[Page 15]
the bank account designated in one of these documents and your Fund account.
Only a bank account maintained in a domestic financial institution which is
an ACH member may be so designated. The Fund may modify or terminate this
privilege at any time or charge a service fee upon notice to shareholders. No
such fee currently is contemplated.
If you have selected the TeleTransfer Privilege, you may request a
TeleTransfer purchase of Fund shares by calling 1-800-554-4611 or, if calling
from overseas, 516-794-5452.
Shareholder Services
The services and privileges described under this heading may not be
available to clients of certain Agents and some Agents may impose certain
conditions on their clients which are different from those described in this
Prospectus. You should consult your Agent in this regard.
Fund Exchanges
You may purchase, in exchange for shares of a Class, shares of the
same Class of certain other funds managed or administered by Dreyfus, to the
extent such shares are offered for sale in your state of residence. These
funds have different investment objectives which may be of interest to you.
If you desire to use this service, please call 1-800-554-4611 to determine if
it is available and whether any conditions are imposed on its use. With
respect to Class R shares held by Retirement Plans, exchanges may be made
only between a shareholder's Retirement Plan account in one fund and such
shareholder's Retirement Plan account in another fund.
To request an exchange, you or your Agent acting on your behalf
must give exchange instructions to the Transfer Agent in writing or by
telephone. Before any exchange, you must obtain and should review a copy of
the current prospectus of the fund into which the exchange is being made.
Prospectuses may be obtained by calling 1-800-554-4611. 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
1-800-554-4611, or by oral request from any of the authorized signatories on
the account by calling 1-800-554-4611. If you have established the Telephone
Exchange Privilege, you may telephone exchange instructions (including over
The Dreyfus TouchRegistration Mark automated telephone system) by calling
1-800-554-4611. 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, TeleTransfer Privilege and
the dividends and distributions payment option (except for Dividend Sweep)
selected by the investor.
Shares will be exchanged at the next determined NAV; however, a
sales load may be charged with respect to exchanges of Class A shares into
funds sold with a sales load. No CDSC will be imposed on Class B or Class C
shares at the time of an exchange; however, Class B or Class C shares
acquired through an exchange will be subject on redemption to the higher CDSC
applicable to the exchanged or acquired shares. The CDSC applicable on
redemption of the acquired Class B or Class C shares will be calculated from
the date of the initial purchase of the Class B or Class C shares exchanged,
as the case may be. If you are exchanging Class A shares into a fund that
charges a sales load, you may qualify for share prices which do not include
the sales load or which reflect a reduced sales load, if the shares of the
fund from which you are exchanging were: (a) purchased with a sales load, (b)
acquired by a previous exchange from shares purchased with a sales load, or
(c) acquired through reinvestment of dividends or other distributions paid
with respect to the foregoing categories of shares. To qualify, at the time
of the exchange your Agent must notify the Distributor. Any such
qualification is subject to confirmation of your holdings through a check of
appropriate records. See "Shareholder Services" in the SAI. No fees currently
are charged shareholders directly in connection with exchanges, although the
Fund reserves the right, upon not less than 60 days written notice, to charge
shareholders a nominal fee in accordance with rules promulgated by the SEC.
The Fund reserves the right to reject any exchange request in whole or in
part. The availability of Fund Exchanges may be modified or terminated at any
time upon notice to shareholders.
The exchange of shares of one fund for shares of another is treated
for Federal income tax purposes as a sale of the shares given in exchange by
the shareholder and, therefore, an exchanging shareholder may realize, or an
exchange on behalf of a Retirement Plan which is not tax exempt may result
in, a taxable gain or loss.
Auto-Exchange Privilege
Auto-Exchange Privilege enables you to invest regularly (on a
semi-monthly, monthly, quarterly or annual basis), in exchange for shares of
the Fund, in shares of the same class of other funds in the Dreyfus Premier
Family of Funds or certain other funds in the Dreyfus Family of Funds of
which you are currently an investor. With respect to Class
[Page 16]
R shares held by Retirement Plans, exchanges pursuant to the
Auto-Exchange Privilege may be made only between a shareholder's Retirement
Plan account in one fund and such shareholder's Retirement Plan account in
another fund. The amount you designate, which can be expressed either in
terms of a specific dollar or share amount ($100 minimum), will be exchanged
automatically on the first and/or fifteenth day of the month according to the
schedule you have selected. Shares will be exchanged at the then-current NAV;
however, a sales load may be charged with respect to exchanges of Class A
shares into funds sold with a sales load. No CDSC will be imposed on Class B
or Class C shares at the time of an exchange; however, Class B orClass C
shares acquired through an exchange will be subject on redemption to the
higher CDSC applicable to the exchanged or acquired shares. The CDSC
applicable on redemption of the acquired Class B or Class C shares will be
calculated from the date of the initial purchase of the Class B or Class C
shares exchanged, as the case may be. See "Shareholder Services" in the SAI.
The right to exercise this Privilege may be modified or canceled by the Fund
or the Transfer Agent. You may modify or cancel your exercise of this
Privilege at any time by mailing written notification to Dreyfus Premier
Small Company Stock Fund, P.O. Box 6587, Providence, Rhode Island 02940-6587.
The Fund may charge a service fee for the use of this Privilege. No such fee
currently is contemplated. The exchange of shares of one fund for shares of
another is treated for Federal income tax purposes as a sale of the shares
given in exchange by the shareholder and, therefore, an exchanging
shareholder may realize, or an exchange on behalf of a Retirement Plan which
is not tax exempt may result in, a taxable gain or loss. For more information
concerning this Privilege and the funds in the Dreyfus Premier Family of
Funds or the Dreyfus Family of Funds eligible to participate in this Privilege
, or to obtain an Auto-Exchange Authorization Form, please call toll free
1-800-554-4611.
Dreyfus-AUTOMATIC Asset BuilderRegistration Mark
Dreyfus-AUTOMATIC Asset Builder permits you to purchase Fund shares
(minimum of $100 and maximum of $150,000 per transaction) at regular
intervals selected by you. Fund shares are purchased by transferring funds
from the bank account designated by you. At your option, the bank account
designated by you will be debited in the specified amount, and Fund shares
will be purchased, once a month, on either the first or fifteenth day, or
twice a month, on both days. Only an account maintained at a domestic
financial institution which is an ACH member may be so designated. To
establish a Dreyfus-AUTOMATIC Asset Builder account, you must file an
authorization form with the Transfer Agent. You may obtain the necessary
authorization form by calling 1-800-554-4611. You may cancel your
participation in this Privilege or change the amount of purchase at any time
by mailing written notification to Dreyfus Premier Small Company Stock Fund,
P.O. Box 6587, Providence, Rhode Island 02940-6587, and the notification will
be effective three business days following receipt. The Fund may modify or
terminate this Privilege at any time or charge a service fee. No such fee
currently is contemplated.
Dividend Options
Dividend Sweep enables you to invest automatically dividends or
dividends and other distributions, if any, paid by the Fund in shares of the
same class of other funds in the Dreyfus Premier Family of Funds or 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 a CDSC, the shares purchased will be subject on redemption to the
CDSC, if any, applicable to the purchased shares. See "Shareholder Services"
in the SAI. Dividend ACH permits you to transfer electronically 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
Dividend Options Form, please call toll free 1-800-554-4611. You may cancel
these Privileges by mailing written notification to Dreyfus Premier Small
Company Stock Fund, P.O. Box 6587, Providence, Rhode Island 02940-6587. To
select a new fund after cancellation, you must submit a new Dividend Options
Form. Enrollment in or cancellation of these Privileges is effective three
business days following receipt. These Privileges are available only for
existing accounts and may not be used to open new accounts. Minimum
subsequent investments do not apply for Dividend Sweep. The Fund may modify
or terminate these Privileges at any time or charge a service fee. No such
fee currently is contemplated. Shares held under Keogh Plans, IRAs or other
retirement plans are not eligible for Dividend Sweep.
Government Direct Deposit Privilege
Government Direct Deposit Privilege enables you to purchase Fund
shares (minimum of $100 and maximum of $50,000 per transaction) by having
Federal salary, Social Security, or certain veterans', military or other
payments from the Federal government automatically deposited into your Fund
account. You may deposit as much of such payments as you elect. You should
consider whether Direct Deposit of your entire payment into a fund with
fluctuating NAV, such as the Fund, may be appropriate for you. To enroll in
Government Direct Deposit, you must file with the Transfer Agent a completed
Direct Deposit Sign-Up Form for each type of payment that you desire to
include in this Privilege. The
[Page 17]
appropriate form may be obtained by calling 1-800-554-4611. Death
or legal incapacity will terminate your participation in this Privilege. You
may elect at any time to terminate your participation by notifying in writing
the appropriate Federal agency. Further, the Fund may terminate your
participation upon 30 days notice to you.
Automatic Withdrawal Plan
The Automatic Withdrawal Plan permits you to request withdrawal of
a specified dollar amount (minimum of $50) on either a monthly or quarterly
basis if you have a $5,000 minimum account. 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 1-800-554-4611.
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.
No CDSC with respect to Class B shares will be imposed on
withdrawals made under the Automatic Withdrawal Plan, provided that the
amounts withdrawn under the plan do not exceed on an annual basis 12% of the
account value at the time the shareholder elects to participate in the
Automatic Withdrawal Plan. Withdrawals with respect to Class B shares under
the Automatic Withdrawal Plan that exceed on an annual basis 12% of the value
of the shareholder's account will be subject to a CDSC on the amounts exceedin
g 12% of the initial account value. Class C shares, and Class A shares to
which a CDSC applies, that are withdrawn pursuant to the Automatic Withdrawal
Plan will be subject to any applicable CDSC. Purchases of additional Class A
shares where the sales load is imposed concurrently with withdrawals of Class
A shares generally are undesirable.
Retirement Plans
The Fund offers a variety of pension and profit-sharing plans,
including Keogh Plans, IRAs (including regular IRAs, Spousal IRAs for a
non-working spouse, Roth IRAs, SEP-IRAs, Rollover IRAs and 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 1-800-554-4611; for
SEP-IRAs, 401(k) Salary Reduction Plans and 403(b)(7) Plans, please call
1-800-322-7880.
Letter of Intent_Class A shares
By signing a Letter of Intent form, which can be obtained by
calling 1-800-554-4611, you become eligible for the reduced sales load
applicable to the total number of Eligible Fund shares purchased in a
13-month period pursuant to the terms and conditions set forth in the Letter
of Intent. A minimum initial purchase of $5,000 is required. To compute the
applicable sales load, the offering price of shares you hold (on the date of
submission of the Letter of Intent) in any Eligible Fund that may be used towa
rd "Right of Accumulation" benefits described above may be used as a credit
toward completion of the Letter of Intent. However, the reduced sales load
will be applied only to new purchases.
The Transfer Agent will hold in escrow 5% of the amount indicated
in the Letter of Intent for payment of a higher sales load if you do not
purchase the full amount indicated in the Letter of Intent. The escrow will
be released when you fulfill the terms of the Letter of Intent by purchasing
the specified amount. If your purchases qualify for a further sales load
reduction, the sales load will be adjusted to reflect your total purchase at
the end of 13 months. If total purchases are less than the amount specified,
you will be requested to remit an amount equal to the difference between the
sales load actually paid and the sales load applicable to the aggregate
purchases actually made. If such remittance is not received within 20 days,
the Transfer Agent, as attorney-in-fact pursuant to the terms of the Letter
of Intent, will redeem an appropriate number of Class A shares of the Fund
held in escrow to realize the difference. Signing a Letter of Intent does not
bind you to purchase, or the Fund to sell, the full amount indicated at the
sales load in effect at the time of signing, but you must complete the
intended purchase to obtain the reduced sales load. At the time you purchase
Class A shares, you must indicate your intention to do so under a Letter of
Intent. Purchases pursuant to a Letter of Intent will be made at the
then-current NAV plus the applicable sales load in effect at the time such
Letter of Intent was executed.
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.
[Page 18]
The Fund imposes no charges (other than any applicable CDSC) 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 TeleTransfer Privilege or through
Dreyfus-AUTOMATIC Asset BuilderRegistration Mark and subsequently submit a
written redemption request to the Transfer Agent, the redemption proceeds
will be transmitted to you promptly upon bank clearance of your purchase
check, TeleTransfer purchase or 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 pursuant to the TeleTransfer Privilege for a period
of eight business days after receipt by the Transfer Agent of the purchase
check, the TeleTransfer purchase or the Dreyfus-AUTOMATIC Asset Builder order
against which such redemption is requested. These procedures will not apply
if your shares were purchased by wire payment, or if you otherwise have a
sufficient collected balance in your account to cover the redemption request.
Prior to the time any redemption is effective, dividends on such shares will
accrue and be payable, and you will be entitled to exercise all other rights
of beneficial ownership. Fund shares will not be redeemed until the Transfer
Agent has received your Account Application.
The Fund reserves the right to redeem your account at its option
upon not less than 45 days written notice if the net asset value of your
account is $500 or less and remains so during the notice period.
Contingent Deferred Sales Charge_Class B shares_A CDSC payable to the
Distributor is imposed on any redemption of Class B shares which reduces the
current NAV of your Class B shares to an amount which is lower than the
dollar amount of all payments by you for the purchase of Class B shares of
the Fund held by you at the time of redemption. No CDSC will be imposed to
the extent that the NAV of the Class B shares redeemed does not exceed (i)
the current NAV of Class B shares acquired through reinvestment of dividends
or other distributions, plus (ii) increases in the NAV of your Class B shares
above the dollar amount of all your payments for the purchase of Class B
shares held by you at the time of redemption.
If the aggregate value of Class B shares redeemed has declined
below their original cost as a result of the Fund's performance, a CDSC may
be applied to the then-current NAV rather than the purchase price.
In circumstances where the CDSC is imposed, the amount of the
charge will depend on the number of years from the time you purchased the
Class B shares until the time of redemption of such shares. Solely for
purposes of determining the number of years from the time of any payment for
the purchase of Class B shares, all payments during a month will be
aggregated and deemed to have been made on the first day of the month. The
following table sets forth the rates of the CDSC:
<TABLE>
<CAPTION>
Year Since
CDSC as a % of Amount
Purchase Payment
Invested or Redemption
Was Made
Proceeds
_____________
_________________
<S> <C> <C>
First.................................................... 4.00
Second................................................... 4.00
Third.................................................... 3.00
Fourth................................................... 3.00
Fifth.................................................... 2.00
Sixth.................................................... 1.00
</TABLE>
In determining whether a CDSC is applicable to a redemption, the
calculation will be made in a manner that results in
the lowest possible rate. It will be assumed that the redemption is made
first of amounts representing shares acquired pursuant to the reinvestment of
dividends and other distributions; then of amounts representing the increase
in NAV of Class B shares above the total amount of payments for the purchase
of Class B shares made during the preceding six years; then of amounts
representing the cost of shares purchased six years prior to the redemption;
and finally, of amounts representing the cost of shares held for the longest
period of time within the applicable six-year period.
For example, assume an investor purchased 100 shares at $10 per
share for a cost of $1,000. Subsequently, the shareholder acquired five
additional shares through dividend reinvestment. During the second year after
the purchase the investor decided to redeem $500 of his or her investment.
Assuming at the time of the redemption the NAV had appreciated to $12 per
share, the value of the investor's shares would be $1,260 (105 shares at $12
per share). The CDSC would not be applied to the value of the reinvested
dividend shares and the amount which represents appreciation ($260).
Therefore, $240 of the $500 redemption proceeds ($500 minus $260) would be
charged at a rate of 4% (the applicable rate in the second year after
purchase) for a total CDSC of $9.60.
[Page 19]
For purposes of determining the applicable CDSC payable with
respect to redemption of Class B shares of the Fund where such shares were
acquired through exchange of Class B shares of another fund advised by
Dreyfus, the year since purchase payment was made is based on the date of
purchase of the original Class B shares of the fund exchanged.
Contingent Deferred Sales Charge_Class C shares_A CDSC of 1% payable to the
Distributor is imposed on any redemption of Class C shares within one year of
the date of purchase. The basis for calculating the payment of any such CDSC
will be the method used in calculating the CDSC for Class B shares. See
"Contingent Deferred Sales Charge_Class B shares" above.
Waiver of CDSC_The CDSC applicable to Class B and Class C shares (and to
certain Class A shares) will be waived in connection with (a) redemptions
made within one year after the death or disability, as defined in Section
72(m)(7) of the Code, of the shareholder, (b) redemptions by employees
participating in Eligible Benefit Plans, (c) redemptions as a result of a
combination of any investment company with the Fund by merger, acquisition of
assets or otherwise, (d) a distribution following retirement under a
tax-deferred retirement plan or upon attaining age 701\2 in the case of an
IRA or Keogh plan or custodial account pursuant to Section 403(b) of the
Code, and (e) redemptions pursuant to the Automatic Withdrawal Plan, as
described under "Shareholder Services _ Automatic Withdrawal Plan" above. If
the Company's Board of Directors determines to discontinue the waiver of the
CDSC, the disclosure in the Fund's Prospectus will be revised appropriately.
Any Fund shares subject to a CDSC which were purchased prior to the
termination of such waiver will have the CDSC waived as provided in the
Fund's Prospectus at the time of the purchase of such shares.
To qualify for a waiver of the CDSC, at the time of redemption you
must notify the Transfer Agent or your Agent must notify the Distributor. Any
such qualification is subject to confirmation of your entitlement.
PROCEDURES _ You may redeem Fund shares by using the regular redemption
procedure through the Transfer Agent, or, 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, through the TELETRA
NSFER Privilege. If you are a client of a Selected Dealer, you may redeem
Fund shares through the Selected Dealer. 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 TELETRANSFER Privilege.
You may redeem Fund shares by telephone if you have checked the
appropriate box on the Account Application or have filed a Shareholder
Services Form with the Transfer Agent. If you select the TELETRANSFER
redemption privilege or telephone exchange privilege, which is granted
automatically unless you refuse it, you authorize the Transfer Agent to act
on telephone instructions (including over The Dreyfus TouchRegistration Mark
automated telephone system) from any person representing himself or herself
to be you, or a representative of your Agent, and reasonably believed by the
Transfer Agent to be genuine. The Fund will require the Transfer Agent to
employ reasonable procedures, such as requiring a form of personal identificat
ion, 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 Dreyfus Premier Small Company Stock
Fund, P.O. Box 6587, Providence, Rhode Island 02940-6587. Redemption requests
must be signed by each shareholder, including each owner of a joint account,
and each signature must be guaranteed. The Transfer Agent has adopted
standards and procedures pursuant to which signature-guarantees in proper
form generally will be accepted from domestic banks, brokers, dealers, credit
unions, national securities exchanges, registered securities associations,
clearing agencies and savings associations, as well as from participants in
the New York Stock Exchange Medallion Signature Program, the Securities
Transfer Agents Medallion Program ("STAMP"), and the Stock Exchanges
Medallion Program. For more information with respect to signature-guarantees,
please call 1-800-554-4611.
Redemption proceeds of at least $1,000 will be wired to any member
bank of the Federal Reserve System in accordance with a written
signature-guaranteed request.
[Page 20]
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 such 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 accounts may redeem through the TeleTransfer
Privilege for transfer to their bank account not more than $250,000 within
any 30-day period.
If you have selected the TELETRANSFER Privilege, you may request a T
eleTransfer redemption of Fund shares by calling 1-800-554-4611 or, if
calling from overseas, 1-516-794-5452.
Redemption Through a Selected Dealer _ If you are a customer of a Selected
Dealer, you may make redemption requests to your Selected Dealer. If the
Selected Dealer transmits the redemption request so that it is received by
the Transfer Agent prior to the close of trading on the floor of the NYSE
(currently 4:00 p.m., New York time), the redemption request will be
effective on that day. If a redemption request is received by the Transfer
Agent after the close of trading on the floor of the NYSE, the redemption
request will be effective on the next business day. It is the responsibility
of the Selected Dealer to transmit a request so that it is received in a
timely manner. The proceeds of the redemption are credited to your account
with the Selected Dealer. See "How to Buy Fund Shares" for a discussion of
additional conditions or fees that may be imposed upon redemption.
In addition, the Distributor or its designee will accept orders
from Selected Dealers with which the Distributor has sales agreements for
the repurchase of shares held by shareholders. Repurchase orders received by
dealers by the close of trading on the floor of the NYSE on any business day
and transmitted to the Distributor or its designee prior to the close of its
business day (normally 5:15 p.m., New York time) are effected at the price
determined as of the close of trading on the floor of the NYSE on that day.
Otherwise, the shares will be redeemed at the next determined NAV. It is the
responsibility of the Selected Dealer to transmit orders on a timely basis.
The Selected Dealer may charge the shareholder a fee for executing the order.
This repurchase arrangement is discretionary and may be withdrawn at any
time.
Reinvestment Privilege _ Upon written request, you may reinvest up to the
number of Class A or Class B shares you have redeemed, within 45 days of
redemption, at the then-prevailing NAV without a sales load, or reinstate
your account for the purpose of exercising Fund Exchanges. Upon
reinstatement, with respect to Class B shares, or Class A shares if such
shares were subject to a CDSC, the shareholder's account will be credited
with an amount equal to the CDSC previously paid upon redemption of the Class
A or Class B shares reinvested. The Reinvestment Privilege may be exercised
only once.
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 permanentl
y 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 gro
up 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
[Page 21]
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 Plans
(Class A Plan and Class B and C Plans)
Class A shares are subject to a Distribution Plan adopted pursuant
to Rule 12b-1 under the 1940 Act ("Rule 12b-1"). Class B and Class C shares
are subject to a Distribution Plan and a Service Plan, each adopted pursuant
to Rule 12b-1. 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. Potential investors should read this
Prospectus in light of the terms governing Agreements with their Agents. The
fees payable under the Distribution and Service Plans are payable without
regard to actual expenses incurred. The Fund and the Distributor may suspend
or reduce payments under the Distribution and Service Plans at any time, and
payments are subject to the continuation of the Fund's Plans 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 Plans. See the SAI for more details on the Distribution and Service
Plans.
Distribution Plan_Class A shares_The Class A shares of the Fund bear some of
the cost of selling those shares under the Distribution Plan (the "Plan").
The Plan allows the Fund to spend annually up to 0.25% of its average daily
net assets attributable to Class A shares to compensate Dreyfus Service
Corporation, an affiliate of Dreyfus, for shareholder servicing activities
and the Distributor for shareholder servicing activities and expenses
primarily intended to result in the sale of Class A shares of the Fund. The
Plan allows the Distributor to make payments from the Rule 12b-1 fees it
collects from the Fund to compensate Agents that have entered into Agreements
with the Distributor. Under the Agreements, the Agents are obligated to
provide distribution related services with regard to the Fund and/or
shareholder services to the Agent's clients that own Class A shares of the
Fund.
Distribution and Service Plans_Class B and C shares_ Under a Distribution
Plan adopted pursuant to Rule 12b-1, the Fund pays the Distributor for
distributing the Fund's Class B and Class C shares at an aggregate annual
rate of .75 of 1% of the value of the average daily net assets of Class B and
Class C. Under a Service Plan adopted pursuant to Rule 12b-1, the Fund pays
Dreyfus Service Corporation or the Distributor for the provision of certain
services to the holders of Class B and Class C shares a fee at the annual
rate of .25 of 1% of the value of the average daily net assets of Class B and
Class C. The services provided may include personal services relating to
shareholder accounts, such as answering shareholder inquiries regarding the
Fund and providing reports and other information, and providing services
related to the maintenance of such shareholder accounts. With regard to such
services, each Agent is required to disclose to its clients any compensation
payable to it by the Fund and any other compensation payable by its clients
in connection with the investment of their assets in Class B and Class C
shares. The Distributor may pay one or more Agents in respect of services for
these Classes of shares. The Distributor determines the amounts, if any, to
be paid to Agents under the Service Plan and the basis on which such payments
are made.
Dividends, Other Distributions and Taxes
The Fund ordinarily declares and pays (on the first business day of
the following month) dividends four times yearly from its net investment
income and distributes net realized 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. 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. Class B and C shares will receive
lower per share dividends than Class A shares which will receive lower per
share dividends than Class R shares, because of the higher expenses borne by
the relevant Class. See "Expense Summary."
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 its earnings and realized gains are distributed to its
shareholders in accordance with applicable provisions of the Code.
[Page 22]
Dividends derived from net investment income, together with
distributions from net realized short-term capital gains and all or a portion
of any gains realized from the sale or other disposition of certain market
discount bonds (collectively, "dividend distributions"), paid by the Fund are
taxable to U.S. shareholders, including certain non-qualified Retirement
Plans, as ordinary income to the extent of the Fund's earnings and profits
whether received in cash or reinvested in additional Fund shares. Distribution
s from the Fund's net capital gain (the excess of net long-term capital gain
over net short-term capital loss) will be taxable to such shareholders as
long-term capital gains 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. Dividends and other distributions also
may be subject to state and local taxes.
Dividend distributions paid by the Fund to a non-resident foreign
investor generally are subject to U.S. withholding tax at the rate of 30%,
unless the non-resident foreign investor claims the benefit of a lower rate
specified in a tax treaty. Capital gain distributions paid by the Fund to a
non-resident foreign investor, as well as the proceeds of any redemptions by
such an investor, regardless of the extent to which gain or loss may be
realized, generally are not subject to U.S. withholding tax. However, such
distributions may be subject to backup withholding, as described below,
unless the foreign investor certifies his non-U.S. residency status.
Notice as to the tax status of your dividends and other
distributions will be mailed to you annually. You also will receive periodic
summaries of your account which will include information as to dividends and
capital gain distributions, if any, paid during the year. 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 Taxpaye
r 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).
The Code provides for the "carryover" of some or all of the sales
load imposed on Class A shares if (1) an investor redeems those shares or
exchanges those shares for shares of another fund advised or administered by
Dreyfus within 91 days of purchase and (2) in the case of a redemption,
acquires other Fund Class A shares through exercise of the Reinvestment
Privilege or, in the case of an exchange, such other fund reduces or
eliminates its otherwise applicable sales load for the purpose of the
exchange. In this case, the amount of the sales load charged the investor for
the original Class A shares, up to the amount of the reduction of the sales
load pursuant to the Reinvestment Privilege or on the exchange, as the case
may be, is not included in the basis of such shares for purposes of computing
gain or loss on the redemption or the exchange, and instead is added to the
basis of the fund shares received pursuant to the Reinvestment Privilege or
the exchange.
Dividends and other distributions paid by the Fund to qualified
retirement plans ordinarily will not be subject to taxation until the
proceeds are distributed from the retirement plans. The Fund will not report
to the IRS distributions paid to such plans. Generally, distributions from
qualified retirement plans, except those representing returns of
non-deductible contributions thereto, will be taxable as ordinary income and,
if made prior to the time the participant reaches age 591\2, generally will
be subject to an additional tax equal to 10% of the taxable portion of the
distribution. If the distribution from such a retirement plan (other than
certain governmental or church plans) for any taxable year following the year
in which the participant reaches age 701\2 is less than the "minimum required
distribution" for that taxable year, an excise tax equal to 50% of the
deficiency may be imposed by the IRS. The administrator, trustee or custodian
of such a retirement plan will be responsible for reporting distributions
from such plans to the IRS. Moreover, certain contributions to a qualified
retirement plan in excess of the amounts permitted by law may be subject to
an excise tax. If a distributee of an "eligible rollover distribution" from a
qualified retirement plan does not elect to have the eligible rollover
distribution paid directly from the plan to an eligible retirement plan in a
"direct rollover," the eligible rollover distribution 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 any redemption
proceeds, regardless of the extent to which gain or loss may be realized,
paid to an individual or certain other non-corporate shareholder 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 23]
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 Class B and C should be expected to be lower than that of Class A and the
performance of Class A, B and C should be expected to be lower than that of
Class R. Performance for each Class will be calculated separately.
Average annual total return is calculated pursuant to a
standardized formula which assumes that an investment was purchased with an
initial payment of $1,000 and that the investment was redeemed at the end of
a stated period of time, after giving effect to the reinvestment of dividends
and other distributions during the period. The return is expressed as a
percentage rate which, if applied on a compounded annual basis, would result
in the redeemable value of the investment at the end of the period. Advertisem
ents of the Fund's performance will include the Fund's average annual total
return for one, five and ten year periods, or for shorter periods depending
upon the length of time during which the Fund has operated. Computations of
average annual total return for periods of less than one year represent an
annualization of the Fund's actual total return for the applicable period.
Total return is computed on a per share basis and assumes the
reinvestment of dividends and other distributions. Total return generally is
expressed as a percentage rate which is calculated by combining the income
and principal changes for a specified period and dividing by the NAV (or
maximum offering price in the case of Class A shares) per share at the
beginning of the period. Advertisements may include the percentage rate of
total return or may include the value of a hypothetical investment at the end
of the period which assumes the application of the percentage rate of total
return. Total return also may be calculated by using the NAV per share at the
beginning of the period instead of the maximum offering price per share at
the beginning of the period for Class A shares or without giving effect to
any applicable CDSC at the end of the period for Class B or C shares.
Calculations based on the NAV per share do not reflect the deduction of the
sales load on the Fund's Class A shares, which, if reflected, would reduce
the performance quoted.
The Fund may also advertise the yield on a Class of shares. The
Fund's yield is calculated by dividing a Class of shares' annualized net
investment income per share during a recent 30-day (or one month) period by
the maximum public offering price per share of such Class on the last day of
that period. Since yields fluctuate, yield data cannot necessarily be used to
compare an investment in a Class of shares with bank deposits, savings
accounts, and similar investment alternatives which often provide an agreed-up
on or guaranteed fixed yield for a stated period of time.
Performance will vary from time to time and past results are not
necessarily representative of future results. You should remember that
performance is a function of portfolio management in selecting the type and
quality of portfolio securities and is affected by operating expenses.
Performance information, such as that described above, may not provide a
basis for comparison with other investments or other investment companies
using a different method of calculating performance.
The Fund may compare the performance of its shares with various
industry standards of performance including Lipper Analytical Services, Inc.
Ratings, Standard and Poor's Composite Index of 500 Stocks, Russell 2500
Stock Index, CDA Technologies indexes, indexes created by Lehman Brothers,
the Consumer Price Index, and the Dow Jones Industrial Average. Performance
rankings as reported in Changing Times, Business Week, Institutional
Investor, The Wall Street Journal, Mutual Fund Forecaster, No Load Investor,
Money Magazine, Morningstar Mutual Fund Values, U.S. News and World Report,
Forbes, Fortune, Barron's and similar publications may also be used in
comparing the Fund's performance. Furthermore, the Fund may quote its shares'
total returns and yields in advertisements or in shareholder reports. The
Fund may also advertise non-standardized performance information, such as
total return for periods other than those required to be shown or cumulative
performance data. The Fund may advertise a quotation of yield or other
similar quotation demonstrating the income earned or distributions made by
the Fund.
General Information
The Company was incorporated in Maryland on August 6, 1987 under
the name The Laurel Funds, Inc., and changed its name to The Dreyfus/Laurel
Funds, Inc. on October 17, 1994. The Company is registered with the SEC under
the 1940 Act, as an open-end management investment company. The Company has
an authorized capitalization of 25 billion shares of $0.001 par value stock
with equal voting rights. The Company's Articles of
[Page 24]
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 four Classes_Class A, Class B, Class C
and Class R. 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 investments.
Each share (regardless of Class) has one vote. All shares of all
funds (and Classes thereof) vote together as a single Class, except as to any
matter for which a separate vote of any fund or Class is required by the 1940
Act, and except as to any matter which affects the interests of one or more
particular funds or Classes, in which case only the shareholders of the
affected fund or Class are entitled to vote, each as a separate Class. Only
holders of Class A, B or C shares, as the case may be, will be entitled to
vote on matters submitted to shareholders pertaining to the Distribution
and/or Service Plan relating to that Class.
Unless otherwise required by the 1940 Act, ordinarily it will not
be necessary for the Fund to hold annual meetings of shareholders. As a
result, Fund shareholders may not consider each year the election of
Directors or the appointment of auditors. However, the holders of at least
10% of the shares outstanding and entitled to vote may require the Company to
hold a special meeting of shareholders for purposes of removing a Director
from office and for any other purpose. Company shareholders may remove a Direc
tor by the affirmative vote of a majority of the Company's outstanding voting
shares. In addition, the Board of Directors will call a meeting of
shareholders for the purpose of electing Directors if, at any time, less than
a majority of the Directors then holding office have been elected by
shareholders.
The Transfer Agent maintains a record of your ownership and will
send you confirmations and statements of account.
Shareholder inquiries may be made by writing to the Fund at 144
Glenn Curtiss Boulevard, Uniondale, New York 11556-0144.
No person has been authorized to give any information or to make
any representations other than those contained in this Prospectus and in the
Fund's official sales literature in connection with the offer of the Fund's
shares, and, if given or made, such other information or representations must
not be relied upon as having been authorized by the Fund. This Prospectus
does not constitute an offer in any State in which, or to any person to whom,
such offering may not lawfully be made.
[Page 25]
[Application page 1]
[Page 26]
[Application page 2]
[Page 27]
Copy Rights 1998 Dreyfus Service Corporation 385p0398
[Page 28]
- ----------------------------------------------------------------------------
PROSPECTUS March 1, 1998
DREYFUS INSTITUTIONAL PRIME MONEY MARKET FUND
DREYFUS INSTITUTIONAL GOVERNMENT MONEY MARKET FUND
DREYFUS INSTITUTIONAL U.S. TREASURY MONEY MARKET FUND
- ----------------------------------------------------------------------------
THIS PROSPECTUS DESCRIBES THE FOLLOWING THREE INVESTMENT PORTFOLIOS
MANAGED BY THE DREYFUS CORPORATION ("DREYFUS"): DREYFUS INSTITUTIONAL PRIME
MONEY MARKET FUND, DREYFUS INSTITUTIONAL GOVERNMENT MONEY MARKET FUND, AND
DREYFUS INSTITUTIONAL U.S. TREASURY MONEY MARKET FUND (EACH A "FUND," AND
COLLECTIVELY, THE "FUNDS"). THE FUNDS ARE SEPARATE, DIVERSIFIED MONEY MARKET
INVESTMENT PORTFOLIOS OF THE DREYFUS/LAUREL FUNDS, INC., AN OPEN-END
MANAGEMENT INVESTMENT COMPANY KNOWN AS A MUTUAL FUND (THE "COMPANY").
EACH FUND SEEKS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER
SHARE. INVESTMENTS IN A FUND ARE NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT AND THERE CAN BE NO ASSURANCE THAT ANY FUND WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
THIS PROSPECTUS SETS FORTH CONCISELY INFORMATION ABOUT THE FUNDS THAT
YOU SHOULD KNOW BEFORE INVESTING. IT SHOULD BE READ CAREFULLY BEFORE YOU
INVEST AND RETAINED FOR FUTURE REFERENCE.
THE STATEMENT OF ADDITIONAL INFORMATION ("SAI") DATED MARCH 1, 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 FUNDS. FOR A FREE COPY OF
THE SAI, WRITE TO THE FUNDS AT 144 GLENN CURTISS BOULEVARD, UNIONDALE, NEW
YORK 11556-0144, OR CALL 1-800-554-4611. WHEN TELEPHONING, ASK FOR OPERATOR
144.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
ALL MONEY MARKET FUNDS INVOLVE CERTAIN INVESTMENT RISKS, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL.
THE FEES TO WHICH EACH FUND IS SUBJECT ARE SUMMARIZED IN THE "EXPENSE
SUMMARY" SECTION OF THE FUNDS' PROSPECTUS. EACH FUND PAYS AN AFFILIATE OF
MELLON BANK, N.A. ("MELLON BANK") TO BE ITS INVESTMENT MANAGER. MELLON BANK
OR AN AFFILIATE MAY BE PAID FOR PERFORMING OTHER SERVICES FOR THE FUNDS, SUCH
AS CUSTODIAN, TRANSFER AGENT OR FUND ACCOUNTANT SERVICES. THE FUNDS ARE
DISTRIBUTED BY PREMIER MUTUAL FUND SERVICES, INC. (THE "DISTRIBUTOR").
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE PAGE
<S> <C> <C> <C>
EXPENSE SUMMARY......................... 3 HOW TO REDEEM FUND SHARES............. 17
FINANCIAL HIGHLIGHTS.................... 4 SHAREHOLDER SERVICING PLAN............ 19
DESCRIPTION OF THE FUNDS................ 7 PERFORMANCE INFORMATION............... 19
MANAGEMENT OF THE FUNDS................. 10 DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES 20
HOW TO BUY FUND SHARES.................. 12 GENERAL INFORMATION.................... 21
SHAREHOLDER SERVICES.................... 14
</TABLE>
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
[This Page Intentionally Left Blank]
[Page 2]
EXPENSE SUMMARY
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on Purchases........ none
Maximum Sales Load Imposed on Reinvestments.... none
Deferred Sales Load............................ none
Redemption Fee................................. none
Exchange Fee................................... none
ESTIMATED ANNUAL FUND OPERATING EXPENSES:
(as a percentage of net assets)
Management Fee.................................0.15%
Shareholder Servicing Fee(1)...................0.15%
Other Expenses(2)..............................0.00%
_____
Total Fund Operating Expenses..................0.30%
EXAMPLE:
You would pay the following expenses
on a $1,000 investment, assuming (1) a 5% annual
return and (2) redemption at the end of each
time period:
1 YEAR................................. $ 3
3 YEARS................................ $10
5 YEARS................................ $17
10 YEARS............................... $38
(1) See "Shareholder Servicing Plan" for a description of the Funds'
shareholder servicing plan.
(2) Does not include fees and expenses of the non-interested Directors
(including counsel). The investment manager is
contractually required to reduce its Management Fee by an amount equal to a
Fund's allocable portion of such fees and expenses, which are estimated to be
less than 0.01% of a Fund's net assets. (See "Management of the Funds.")
THE AMOUNTS LISTED IN THE EXAMPLE SHOULD NOT BE CONSIDERED AS
REPRESENTATIVE OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER
OR LESS THAN THOSE INDICATED. MOREOVER, WHILE THE EXAMPLE ASSUMES A 5% ANNUAL
RETURN, EACH FUND'S ACTUAL PERFORMANCE WILL VARY AND MAY RESULT IN AN ACTUAL
RETURN GREATER OR LESS THAN 5%.
The purpose of the foregoing table is to assist you in understanding
the various costs and expenses that investors will bear, directly or
indirectly, the payment of which will reduce investors' return on an annual
basis. (See "Management of the Funds.") Long-term shareholders of the Funds'
shares could pay more in Shareholder Servicing Fees than the economic
equivalent of the maximum front-end sales charges applicable to mutual funds
sold by members of the National Association of Securities Dealers, Inc. The
information in the foregoing table does not reflect any fee waivers or
expense reimbursement arrangements that may be in effect. Certain banks,
securities brokers or dealers and other financial institutions (including
Mellon Bank and its affiliates) (collectively, "Agents") may charge their
clients direct fees for effecting transactions in Fund shares; such fees are
not reflected in the foregoing table. See "Management of the Funds,""How to
Buy Fund Shares," "How to Redeem Fund Shares" and "Shareholder Servicing
Plan."
[Page 3]
FINANCIAL HIGHLIGHTS
The tables below for each Fund are based upon a single share
outstanding throughout each year or period and should be read in conjuction
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 each Fund's Annual Report for the year ended October 31, 1997
have been audited by KPMG Peat Marwick LLP, independent auditors.
<TABLE>
<CAPTION>
DREYFUS INSTITUTIONAL PRIME MONEY MARKET FUND
FOR FUND SHARES OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.*
Year Year Year Year Year Year Year Year Year Period
Ended Ended Ended Ended Ended Ended Ended Ended Ended Ended
10/31/97 10/31/96 10/31/95 10/31/94# 10/31/93 10/31/92 10/31/91 10/31/90 10/31/89 10/31/88**
-------- -------- -------- --------- -------- -------- -------- -------- -------- --------
Net asset value,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
beginning of year..... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
_______ ______ ______ ______ ______ ______ ______ ______ ______ ______
Investment Operations:
Net investment income 0.053 0.05 20.056 0.035 0.030 0.040 0.064 0.08 10.090 0.041
_______ ______ ______ ______ ______ ______ ______ ______ ______ ______
Less distributions:
Distributions from net
investment income..... (0.053) (0.052) (0.056) (0.035) (0.030) (0.040) (0.064) (0.081) (0.090) (0.041)
_______ ______ ______ ______ ______ ______ ______ ______ ______ ______
Net asset value, end of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ====== ====== ====== ====== ====== ====== ====== ====== ======
Total return 5.42% 5.33% 5.77% 3.67% 3.04% 4.09% 6.60% 8.41% 9.35% 4.12%
_______ ______ ______ ______ ______ ______ ______ ______ ______ ______
Ratios to average net assets/
supplemental data:
Net assets, end of year
(in 000's)............ $533,154 $575,700 $773,602 $681,781 $824,080 $950,322 $943,636 $360,534 $97,366 $181,525
Ratio of expenses
to average net assets. 0.30% 0.30% 0.30% 0.29% 0.27% 0.29% 0.30% 0.28% 0.30% 0.30%
Ratio of net investment
income to
average net assets.... 5.27% 5.25% 5.61% 3.58% 2.99% 4.04% 6.22% 8.07% 8.74% 7.82%
</TABLE>
* Prior to October 31, 1995, shares of the Fund were designated Class
Ishares. Effective November 1, 1995, the Fund's Class I and Class II
designations were eliminated and the Fund became a single class Fund.
** The Fund commenced operations on April 15, 1988.
Annualized.
Total return represents aggregate total return for the periods
indicated.
For the years ended October 31, 1993, 1992, 1991, 1989 and 1988, the
investment adviser reimbursed expenses of $0.00005, $0.0001, $0.0007,
$0.0022, $0.0044 and $0.0018 per share, respectively. For the period ended
October 31, 1988, the investment adviser waived a portion of its advisory fee
amounting to $0.0006 per share.
# Prior to October 17, 1994, Mellon Bank served as the Fund's investment
manager. Effective October 17, 1994, Dreyfus began serving as the Fund's
investment manager.
[Page 4]
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS (CONTINUED)
DREYFUS INSTITUTIONAL GOVERNMENT MONEY MARKET FUND
FOR FUND SHARES OUTSTANDING THROUGHOUT EACH YEAR.*
Year Year Year Year Year Year Year Year Year Period
Ended Ended Ended Ended Ended Ended Ended Ended Ended Ended
10/31/97 10/31/96 10/31/95 10/31/94# 10/31/93 10/31/92 10/31/91 10/31/90 10/31/89 10/31/88
-------- -------- -------- --------- -------- -------- -------- -------- -------- --------
Net asset value,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
beginning of year..... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
_______ ______ ______ ______ ______ ______ ______ ______ ______ ______
Investment Operations:
Net investment income 0.052 0.051 0.056 0.036 0.029 0.039 0.062 0.080 0.087 0.069
_______ ______ ______ ______ ______ ______ ______ ______ ______ ______
Less distributions:
Distributions from
net investment income. (0.051) (0.051) (0.056) (0.036) (0.029) (0.039) (0.062) (0.080) (0.087) (0.069)
_______ ______ ______ ______ ______ ______ ______ ______ ______ ______
Net asset value, end of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ====== ====== ====== ====== ====== ====== ====== ====== ======
Total return........... 5.25% 5.25% 5.71% 3.63% 2.97% 3.92% 6.36% 8.26% 9.10% 7.15%
_______ ______ ______ ______ ______ ______ ______ ______ ______ ______
Ratios to average net assets/
supplemental data:
Net assets, end of year
(in 000's)............ $191,853 $295,434 $515,812 $470,007 $406,690 $391,364 $308,136 $84,283 $66,077 $147,430
Ratio of expenses
to average net assets. 0.30% 0.30% 0.30% 0.30% 0.30% 0.30% 0.30% 0.30% 0.30% 0.30%
Ratio of net
investment income
to average net assets. 5.14% 5.14% 5.55% 3.60% 2.93% 3.82% 6.00% 8.03% 8.63% 6.70%
</TABLE>
The Fund commenced operations on October 8, 1987.
* Prior to October 31, 1995, shares of the Fund were designated Class
Ishares. Effective November 1, 1995, the Fund's Class I and Class II
designations were eliminated and the Fund became a single class Fund.
Total return represents aggregate total return for the periods
indicated.
For the years ended October 31, 1993, 1992, 1991, 1990, 1989, and 1988,
the investment adviser reimbursed expenses of $0.0001, $0.0004, $0.0014,
$0.0035, $0.0037, and $0.0016 per share, respectively.
# Prior to October 17, 1994, Mellon Bank served as the Fund's investment
manager. Effective October 17, 1994, Dreyfus began serving as the Fund's
investment manager.
[Page 5]
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
DREYFUS INSTITUTIONAL U.S. TREASURY MONEY MARKET FUND
FOR FUND SHARES OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.*
YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
10/31/97 10/31/96 10/31/95 10/31/94# 10/31/93 10/31/92 10/31/91 10/31/90 10/31/89**
-------- -------- -------- --------- -------- -------- -------- -------- --------
Net asset value,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
beginning of year. . . . $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
_______ ______ ______ ______ ______ ______ ______ ______ ______
Investment Operations:
Net investment income 0.050 0.050 0.054 0.035*** 0.029 0.038 0.062 0.079 0.076
_______ ______ ______ ______ ______ ______ ______ ______ ______
Less distributions:
Distributions from net
investment income. . . (0.050) (0.051) (0.054) (0.035) (0.029) (0.038) (0.062) (0.079) (0.076)
_______ ______ ______ ______ ______ ______ ______ ______ ______
Net asset value, end of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ======= ======= ======= ======= ======= ======= ======= =======
Total return. . . . . . . . . 5.16% 5.17% 5.57% 3.55% 2.91% 3.88% 6.39% 8.23% 7.88%
_______ ______ ______ ______ ______ ______ ______ ______ ______
Ratios to average net assets/
supplemental data:
Net assets, end of year
(in 000's). . . . . . . $776,726 $666,360 $767,948 $586,778 $500,653 $666,378 $452,333 $270,664 $80,135
Ratio of expenses to
average net assets. . . 0.30% 0.30% 0.30% 0.30%**** 0.30% 0.30% 0.30% 0.30% 0.30%
Ratio of net investment income
to average net assets. . 5.04% 5.06% 5.44% 3.55% 2.87% 3.81% 6.04% 8.08% 8.83%
* Prior to October 31, 1995, shares of the Fund were designated Class Ishares.
Effective November 1, 1995, the Fund's Class I and Class II designations were eliminated and the Fund
became a single class Fund.
** The Fund commenced operations on December 22, 1988.
*** Net investment income before reimbursement of expenses by the investment manager for the year ended October 31, 1994 was
$0.035 per share.
****Annualized expense ratio before reimbursement of expenses by investment manager for the year ended October 31, 1994 was
0.31%.
Annualized.
Total return represents aggregate total return for the periods indicated.
For the years ended October 31, 1993, 1992, 1991, 1990 and 1989 the
investment adviser reimbursed expenses of $0.0004,
$0.0003, $0.0008, $0.0023 and $0.0028 per share, respectively. For the period
ended October 31, 1989, the investment adviser waived a portion of its
advisory fee amounting to $0.0005 per share.
# Prior to October 17, 1994, Mellon Bank served as the Fund's investment
manager. Effective October 17, 1994, Dreyfus began
serving as the Fund's investment manager.
</TABLE>
[Page 6]
DESCRIPTION OF THE FUNDS
INVESTMENT OBJECTIVE AND POLICIES
Described below are the investment objective and policies of each
Fund. There can be no assurance that a Fund will meet its stated investment
objective. See "Other Investment Policies and Risk Factors" on page 8 for a
detailed description of risks and other Fund investment policies. Each Fund's
investment objective is not fundamental and each Fund also employs other
non-fundamental policies. Fundamental and non-fundamental policies, and
restrictions on amending those policies, are included in the SAI.
DREYFUS INSTITUTIONAL U.S. TREASURY MONEY MARKET FUND seeks a high
level of current income consistent with stability of principal and
conservative investment risk by investing in direct obligations of the U.S.
Treasury and repurchase agreements secured by such obligations.
DREYFUS INSTITUTIONAL PRIME MONEY MARKET FUND seeks a high level of
current income consistent with stability of principal by investing in high
grade money market instruments.
The instruments in which Dreyfus Institutional Prime Money Market
Fund invests include: (1) U.S. Treasury bills, notes and bonds; (2) other
obligations issued or guaranteed as to interest and principal by the U.S.
Government, its agencies and instrumentalities; (3) instruments of U.S. and
foreign banks, including certificates of deposit, banker's acceptances, and
time deposits, and may include Eurodollar Certificates of Deposit ("ECDs"),
Yankee Certificates of Deposit ("Yankee CDs"), and Eurodollar Time Deposits
("ETDs"); (4) commercial paper of U.S. and foreign companies; (5) corporate
obligations; (6) mortgage-related securities backed by U.S. Government
agencies or instrumentalities; (7) variable amount master demand notes; (8)
floating rate notes; and (9) repurchase agreements. The Dreyfus Institutional
Prime Money Market Fund also may utilize reverse repurchase agreements. (See
"Other Investment Policies and Risk Factors.")
DREYFUS INSTITUTIONAL GOVERNMENT MONEY MARKET FUND seeks a high level
of current income consistent with stability of principal and conservative
investment risk by investing principally in high grade money market
instruments issued or guaranteed by the U.S. Government and its agencies and
instrumentalities.
During normal market conditions, the Dreyfus Institutional Government
Money Market Fund will invest at least 65% of its total assets in securities
issued or guaranteed by the U.S. Government and its agencies and
instrumentalities. The Fund may invest in: (1) U.S. Treasury bills, notes and
bonds and other obligations issued or guaranteed as to principal and interest
by the U.S. Government and its agencies and instrumentalities; (2)
instruments of U.S. and foreign banks, including certificates of deposit,
bankers' acceptances, and time deposits, and may include ECDs, Yankee CDs,
and ETDs; (3) commercial paper of U.S. and foreign companies; (4) variable
amount master demand notes; (5) floating rate notes; and (6) repurchase
agreements.
Each Fund expects to maintain, but does not guarantee, a net asset
value of $1.00 per share. To do so, each Fund uses the amortized cost method
of valuing its securities pursuant to Rule 2a-7 under the Investment Company
Act of 1940, as amended (the "1940 Act") which Rule includes various
maturity, quality and diversification requirements, certain of which are
summarized as follows. In accordance with Rule 2a-7, each Fund must maintain
a dollar-weighted average portfolio maturity of 90 days or less and invest
only in U.S. dollar-denominated securities with remaining maturities of 397
days or less and which are determined to be of high quality with minimal
credit risk in accordance with procedures adopted by the board of directors.
In determining whether a security is of high quality with minimal credit
risk, Dreyfus must consider whether the security is rated in one of the two
highest short-term rating categories by nationally recognized statistical
rating organizations ("NRSROs") or determined to be of comparable quality by
Dreyfus in accordance with requirements of these procedures. (See the SAI for
a description of
[Page 7]
NRSROs.) These procedures are reasonably designed to assure that the prices
determined by the amortized cost valuation will approximate the current
market value of each Fund's securities.
OTHER INVESTMENT POLICIES AND RISK FACTORS
BANK INSTRUMENTS. Dreyfus Institutional Prime Money Market Fund and
Dreyfus Institutional Government Money Market Fund may purchase bank
instruments. Bank instruments consist mainly of certificates of deposit, time
deposits and bankers' acceptances.
BORROWINGS. When a Fund borrows money, the net asset value of a share
may be subject to greater fluctuation until the borrowing is paid off.
Borrowings may be used to provide cash to satisfy unusually heavy redemption
requests without having to sell portfolio securities, or for other temporary
or emergency purposes.
COMMERCIAL INSTRUMENTS. Commercial instruments consist of short-term
U.S.dollar-denominated obligations issued by domestic corporations or issued
in the United States by foreign corporations and foreign commercial banks.
Investments by Dreyfus Institutional Prime Money Market Fund and Dreyfus
Institutional Government Money Market Fund in commercial paper will consist
of issues rated in a manner consistent with such Fund's investment policies
and objectives. In addition, each such Fund may acquire unrated commercial
paper and corporate bonds that are determined by Dreyfus at the time of
purchase to be of comparable quality to rated instruments that may be
acquired by such Fund.
FLOATING RATE SECURITIES. Dreyfus Institutional Prime Money Market
Fund and Dreyfus Institutional Government Money Market Fund may invest in
floating rate securities. A floating rate security provides for the automatic
adjustment of its interest rate whenever a specified interest rate changes.
Interest rates on these securities are ordinarily tied to, and are a
percentage of, a widely recognized interest rate, such as the yield on 90-day
U.S. Treasury bills or the prime rate of a specified bank. These rates may
change as often as twice daily. Generally, changes in interest rates will
have a smaller effect on the market value of floating rate securities than on
the market value of comparable fixed income obligations. Thus, investing in
variable and floating rate securities generally allows less opportunity for
capital appreciation and depreciation than investing in comparable fixed
income securities.
FOREIGN SECURITIES. Dreyfus Institutional Prime Money Market Fund and
Dreyfus Institutional Government Money Market Fund may purchase securities of
foreign issuers and may invest in obligations of foreign branches of domestic
banks and domestic branches of foreign banks. Investments in foreign
securities present certain risks, including those resulting from fluctuations
in currency exchange rates, revaluation of currencies, future political and
economic developments and the possible imposition of currency exchange
blockages or other foreign governmental laws or restrictions, reduced
availability of public information concerning issuers, and the fact that
foreign issuers are not generally subject to uniform accounting, auditing and
financial reporting standards or to other regulatory practices and
requirements comparable to those applicable to domestic issuers. Moreover,
securities of many foreign issuers may be less liquid and their prices more
volatile than those of securities of comparable domestic issuers. In addition,
with respect to certain foreign countries, there is the possibility of
expropriation, confiscatory taxation and limitations on the use or removal of
funds or other assets of a Fund, including withholding of dividends. Foreign
securities may be subject to foreign government taxes that would reduce the
yield on such securities.
ILLIQUID SECURITIES. No Fund will knowingly invest more than 10% of
the value of its net assets in illiquid securities, including time deposits
and repurchase agreements having maturities longer than seven days.
Securities that have readily available market quotations are not deemed
illiquid for purposes of this limitation (irrespective of any legal or
contractual restrictions on resale). A Fund may invest in commercial
obligations issued in reliance on the so-called "private placement" exemption
from registration afforded by Section4(2) of the Securities Act of 1933, as
amended ("Section 4(2) paper"). A Fund may also purchase securities that are
not registered under the Securities Act of 1933, as amended, but which can be
sold to qualified institutional buyers in accordance with Rule 144A under
that Act ("Rule
[Page 8]
144A securities"). Liquidity determinations with respect to Section 4(2)
paper and Rule 144A securities will be made by the Board of Directors as
required. The Board will consider availability of reliable price information
and other relevant information in making such determinations. Section 4(2)
paper is restricted as to disposition under the federal securities laws, and
generally is sold to institutional investors such as a Fund that agrees that
they are purchasing the paper for investment and not with a view to public
distribution. Any resale by the purchaser must be in an exempt transaction.
Section 4(2) paper normally is resold to other institutional investors like a
Fund through or with the assistance of the issuer or investment dealers who
make a market in the Section 4(2) paper, thus providing liquidity. Rule 144A
securities generally must be sold to other qualified institutional buyers. If
a particular investment in Section 4(2) paper or Rule 144A Securities is not
determined to be liquid, that investment will be included within the
percentage limitation on investment in illiquid securities. The ability to
sell Rule 144A securities to qualified institutional buyers is a recent
development and it is not possible to predict how this market will mature.
Investing in Rule 144A securities could have the effect of increasing the
level of Fund illiquidity to the extent that qualified institutional buyers
become, for a time, uninterested in purchasing these securities.
OTHER INVESTMENT COMPANIES. Each Fund may invest in securities issued
by other investment companies to the extent that such investments are
consistent with its respective investment objective and policies and
permissible under the 1940 Act. As a shareholder of another investment company
, a Fund would bear, along with other shareholders, its pro rata portion of
the other investment company's expenses, including advisory fees. These
expenses would be in addition to the advisory and other expenses that the
Fund bears directly in connection with its own operations.
REPURCHASE AGREEMENTS. Each Fund may enter into repurchase
agreements. A repurchase agreement involves the purchase of a security by a
Fund and a simultaneous agreement (generally with a bank or broker-dealer) to
repurchase that security from such Fund at a specified price and date or upon
demand. This technique offers a method of earning income on idle cash. A risk
associated with repurchase agreements is the failure of the seller to
repurchase the securities as agreed, which may cause the Fund to suffer a
loss if the market value of such securities declines before they can be
liquidated on the open market. Repurchase agreements with a duration of more
than seven days are considered illiquid securities and are subject to the
limit stated above.
REVERSE REPURCHASE AGREEMENTS. Dreyfus Institutional Prime Money
Market Fund may enter into reverse repurchase agreements to meet redemption
requests where the liquidation of Fund securities is deemed by Dreyfus to be
disadvantageous. Under a reverse repurchase agreement, the Fund: (1)
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 (2) 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. Reverse repurchase agreements may be considered to be
borrowings.
SECURITIES LENDING. To increase return on portfolio securities, each
Fund may lend its securities to broker-dealers and other institutional
investors pursuant to agreements requiring that the loans be continuously
secured by collateral equal at all times in value to at least the market
value of the securities loaned. There may be risks of delay in receiving
additional collateral or in recovering the securities loaned or even a loss
of rights in the collateral should the borrower of the securities fail
financially. However, loans are made only to borrowers deemed by Dreyfus to
be of good standing and when, in its judgment, the income to be earned from
the loan justifies the attendant risks.
U.S. GOVERNMENT OBLIGATIONS. Dreyfus Institutional Prime Money Market
Fund and Dreyfus Institutional Government Money Market Fund may invest in
U.S. Government obligations consistent with each such Fund's investment
objective and policies. U.S. Government obligations consist of
[Page 9]
marketable securities and instruments issued or guaranteed by the U.S.
Government or any of its agencies, authorities or instrumentalities. Direct
obligations are issued by the U.S. Treasury and include all U.S. Treasury
instruments (i.e., bills, notes and bonds). Obligations of U.S. Government
agencies, authorities and instrumentalities are issued by
government-sponsored agencies and enterprises acting under authority of
Congress. Although obligations of federal agencies, authorities and
instrumentalities are not debts of the U.S. Treasury, in some cases payment
of interest and principal on such obligations is guaranteed by the U.S.
Government; in other cases payment of interest and principal are not
guaranteed, e.g., obligations of the Federal Home Loan Bank System and the
Federal Farm Credit Bank. No assurances can be given that the U.S. Government
would provide financial support to government-sponsored instrumentalities if
it is not obligated to do so by law.
VARIABLE AMOUNT MASTER DEMAND NOTES. Dreyfus Institutional Prime
Money Market Fund and Dreyfus Institutional Government Money Market Fund may
invest in variable amount master demand notes. Variable amount master demand
notes are unsecured obligations that are redeemable upon demand and are
typically unrated. These instruments are issued pursuant to written
agreements between their issuers and holders. The agreements permit the
holders to increase (subject to an agreed maximum) and the holders and
issuers to decrease the principal amount of the notes, and specify that the
rate of interest payable on the principal fluctuates according to an
agreed-upon formula. If an issuer of a variable amount master demand note
were to default on its payment obligation, a Fund might be unable to dispose
of the note because of the absence of a secondary market and might, for this
or other reasons, suffer a loss to the extent of the default. A Fund will
invest in variable amount master demand notes issued only by entities that
Dreyfus considers creditworthy.
WHEN-ISSUED, DELAYED DELIVERY AND FORWARD COMMITMENT SECURITIES. Each
Fund may purchase when-issued, delayed delivery and forward commitment
securities. The purchase of new issues of securities on a "when-issued,"
"delayed delivery" or "forward commitment" basis occurs when the payment and
delivery for securities takes place at a future date. Because actual payment
for and delivery of such securities generally take place 15 to 45 days after
the purchase date, purchasers of such securities bear the risk that interest
rates on debt securities at the time of delivery may be higher or lower than
those contracted for on the security purchased.
LIMITING INVESTMENT RISKS. Each Fund is subject to a number of
investment limitations. Certain limitations are matters of fundamental policy
and may not be changed without the affirmative vote of the holders of a
majority of a Fund's outstanding shares. The SAI describes each of the Funds'
fundamental and non-fundamental investment restrictions.
The investment objective, policies, restrictions, practices and
procedures of each Fund, unless otherwise specified, may be changed without
shareholder approval. If a Fund's investment objective, policies,
restrictions, practices or procedures change, shareholders should consider
whether such Fund remains an appropriate investment in light of their then
current position and needs.
MANAGEMENT OF THE FUNDS
INVESTMENT MANAGER. Dreyfus, located at 200 Park Avenue, New York,
New York 10166, was formed in 1947. Dreyfus is a wholly-owned subsidiary of
Mellon Bank, which is a wholly-owned subsidiary of Mellon Bank Corporation
("Mellon"). As of January 31, 1998, Dreyfus managed or administered
approximately $96 billion in assets for approximately 1.7 million investor
accounts nationwide.
Dreyfus serves as the Funds' investment manager. Dreyfus supervises
and assists in the overall management of the Funds' affairs under an
Investment Management Agreement with the Funds, subject to the overall
authority of the Company's Board of Directors in accordance with Maryland
law. Pursuant to the Investment Management Agreement, Dreyfus provides, or
arranges for one or more third parties to provide, investment advisory,
administrative, custody, fund accounting and transfer agency services
[Page 10]
to the Funds. As the Funds' investment manager, Dreyfus manages the Funds by
making investment decisions based on the Funds' investment objectives,
policies and restrictions.
Mellon is a publicly-owned multibank holding company incorporated
under Pennsylvania law in 1971 and registered under the Bank Holding Company
Act of 1956, as amended. Mellon provides a comprehensive range of financial
products and services in domestic and selected international markets. Mellon
is among the twenty-five largest bank holding companies in the United States
based on total assets. Mellon's principal wholly-owned subsidiaries are
Mellon Bank, Mellon Bank (DE) National Association, Mellon Bank (MD), The
Boston Company, Inc., AFCO Credit Corporation and a number of companies known
as Mellon Financial Services Corporations. Through its subsidiaries,
including Dreyfus, Mellon managed more than $305 billion in assets as of
December 31, 1997, including approximately $104 billion in mutual fund
assets. As of December 31, 1997, Mellon, through various subsidiaries,
provided non-investment services, such as custodial or administration
services, for more than $1.532 trillion in assets, including approximately
$60 billion in mutual fund assets.
Under the Investment Management Agreement, each Fund pays Dreyfus a
fee computed daily, and paid monthly, at the annual rate of 0.15% of the
Fund's average daily net assets. Dreyfus pays all of the expenses of each
Fund except brokerage fees, taxes, interest, fees and expenses of the
non-interested Directors (including counsel fees), Rule 12b-1 fees
(shareholder servicing fees in the case of these Funds) and extraordinary
expenses. In order to compensate Dreyfus for paying virtually all of a Fund's
expenses, the Fund's investment management fee is higher than the investment
advisory fees paid by most investment companies. Most, if not all, such
companies also pay for additional non-investment advisory expenses that are
not paid by such companies' investment advisers. Although Dreyfus does not
pay for the fees and expenses of the non-interested Directors (including
counsel fees), Dreyfus is contractually required to reduce its investment
management fee by an amount equal to each 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 a Fund. For the fiscal year ended
October 31, 1997, each Fund paid Dreyfus 0.15% of the Fund's average daily
net assets in investment management fees, less fees and expenses of the
non-interested Directors (including counsel fees).
For the fiscal year ended October 31, 1997, total operating expenses
(excluding shareholder servicing fees) of each Fund were 0.15% of the Fund's
average daily net assets.
In addition, Fund shares may be subject to certain shareholder
servicing fees. See "Shareholder Servicing Plan."
Dreyfus may pay the Distributor for shareholder services from
Dreyfus' own assets, including past profits but not including the management
fee paid by the Funds. The Distributor may use part or all of such payments
to pay Agents in respect of these services.
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 Funds or other funds
managed, advised or administered by Dreyfus as factors in the selection of
broker-dealers to execute portfolio transactions for the Funds. 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 Funds, if Dreyfus
believes that the quality of the transaction and the commission are
comparable to what they would be with other qualified brokerage firms. From
time to time, to the extent consistent with their investment objectives,
policies and restrictions, the Funds may invest in securities of companies
with which Mellon Bank has a lending relationship.
DISTRIBUTOR. The Funds' 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.
[Page 11]
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT, AND
SUB-ADMINISTRATOR. Mellon Bank, located at One Mellon Bank Center,
Pittsburgh, Pennsylvania 15258 is the Funds' custodian. Dreyfus Transfer,
Inc., a wholly-owned subsidiary of Dreyfus, P.O. Box 9671, Providence, Rhode
Island 02940-9671, is the Funds' transfer and dividend disbursing agent (the
"Transfer Agent"). Premier Mutual Fund Services, Inc. is the Funds'
sub-administrator and, pursuant to a Sub-Administration Agreement with
Dreyfus, provides various administrative and corporate secretarial services
to the Funds.
HOW TO BUY FUND SHARES
General. You can purchase shares of a Fund without a sales charge directly
from the Distributor; you may be charged a fee if you effect transactions in
shares of a Fund through an Agent. Share certificates are issued only upon
your written request. No certificates are issued for fractional shares. The
Funds reserve the right to reject any purchase order. Agents effecting
transactions in Fund shares for the accounts of their clients may charge
their clients direct fees in connection with such transactions.
The minimum initial investment to establish a new account in each
Fund is$1 million. There is no minimum requirement for subsequent
investments.
You may purchase shares of a Fund by check or wire, or through the
Dreyfus TELETRANSFER Privilege described below. Checks should be made payable
to "The Dreyfus Family of Funds." Payments to open new accounts which are
mailed should be sent to The Dreyfus Family of Funds, P.O. Box 9387,
Providence, Rhode Island 02940-9387, together with your Account Application.
For subsequent investments, your Fund account number should appear on the
check and an investment slip should be enclosed and sent to The Dreyfus
Family of Funds, P.O. Box 105, Newark, New Jersey 07101-0105. Neither initial
nor subsequent investments should be made by third party check. Purchase
orders may be delivered in person only to a Dreyfus Financial Center. THESE
ORDERS WILL BE FORWARDED TO THE FUNDS 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 DDA# 044288/Dreyfus Institutional Prime Money Market Fund, Dreyfus
Institutional Government Money Market Fund or Dreyfus Institutional U.S.
Treasury Money Market Fund for purchase of Fund shares in your name. The wire
must indicate which Fund 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, please call
1-800-645-6561 after completing your wire payment to obtain your Fund account
number. Please include your Fund account number on the Account Application
and promptly mail the Account Application to the Fund, as no redemptions will
be permitted until the Account Application is received. You may obtain
further information about remitting funds in this manner from your bank. All
payments should be made in U.S. dollars and, to avoid fees and delays, should
be drawn only on U.S. banks. A charge will be imposed if any check used for
investment in your account does not clear. The Funds make available to
certain large institutions the ability to issue purchase instructions through
compatible computer facilities.
Subsequent investments also may be made by electronic transfer of
funds from an account maintained in a bank or other domestic financial
institution that is an Automated Clearing House ("ACH") member. You must
direct the institution to transmit immediately available funds through the
ACH System to
[Page 12]
Boston Safe Deposit and Trust Company with instructions to credit your Fund
account. The instructions must specify your Fund account registration and
your Fund account number PRECEDED BY THE DIGITS:
"4640" for Dreyfus Institutional Prime Money Market Fund;
"4610" for Dreyfus Institutional Government Money Market Fund;
"4670" for Dreyfus Institutional U.S. Treasury Money Market Fund.
Federal regulations require that you provide a certified TIN upon
opening or reopening an account. See "Dividends, Distributions and Taxes" and
the Account Application for further information concerning this requirement.
Failure to furnish a certified TIN to a Fund could subject you to a $50
penalty imposed by the Internal Revenue Service ("IRS").
NET ASSET VALUE PER SHARE ("NAV"). The price of Fund shares, which are
offered on a continuous basis, is their NAV. The NAV of each Fund is
determined on each day that the New York Stock Exchange ("NYSE") is open (a
"business day").
DREYFUS INSTITUTIONAL GOVERNMENT MONEY MARKET FUND and DREYFUS INSTITUTIONAL
U.S. TREASURY MONEY MARKET FUND. The NAV of each of these Funds is calculated
at 3 p.m., Eastern time. Purchase orders (except for purchase orders through
Dreyfus TeleTransfer Privilege) received in proper form by the Transfer Agent
by 3 p.m., Eastern time, on a business day will become effective on, and will
receive the share price next determined on, that day; purchase orders
received after 3 p.m., Eastern time, will become effective on, and will
receive the share price determined on, the next business day. Shares begin
accruing dividends on the day the purchase order for the shares is effected
if the instructions to purchase shares and immediately available funds are
received by the Transfer Agent prior to 3 p.m., Eastern time for a Fund.
Dividends begin accruing on shares on the next business day with regard to
purchase orders effected after 3 p.m., Eastern Time.
DREYFUS INSTITUTIONAL PRIME MONEY MARKET FUND. The NAV of this Fund is
calculated at 5 p.m., Eastern time. Purchase orders (except for purchase
orders through Dreyfus TeleTransfer Privilege) received in proper form by the
Transfer Agent or the Distributor or its designee by 5 p.m., Eastern time,
will become effective at the price determined at 5 p.m., Eastern time, on
that day and the shares purchased will receive the dividend on Fund shares
declared that day, provided Federal Funds are received by 6 p.m., Eastern
time, on that day. A purchase order received in proper form after 5 p.m.,
Eastern time, will become effective on, and dividends will begin accruing on
shares on, the next business day.
An investment portfolio's NAV refers to the worth of one share. The
NAV for Fund shares is calculated on the basis of amortized cost, which
involves initially valuing a portfolio instrument at its cost and thereafter
assuming a constant amortization to maturity of any discount or premium,
regardless of the impact of fluctuating interest rates on the market value of
the instrument. Each Fund intends to maintain a constant NAV of $1.00 per
share, although there is no assurance that this can be done on a continuing
basis.
PROCEDURES FOR MULTIPLE ACCOUNTS. Special procedures have been designed for
banks and other institutions that wish to open multiple accounts. The
institution may open a single master account by filing one application with
the Transfer Agent and may open individual sub-accounts at the same time or
at some later date. For further information, please refer to the SAI.
DREYFUS TELETRANSFER PRIVILEGE. You may purchase shares of a Fund (minimum
$500 and maximum $150,000 per day) by telephone if you have checked the
appropriate box and supplied the necessary information on the Account
Application or have filed a Shareholder Services Form with the Transfer
Agent. The proceeds will be transferred between the bank account designated
in one of these documents and your Fund account. Only a bank account
maintained in a domestic financial institution which is an ACH member may be
so designated. The Funds may modify or terminate this Privilege at any time
or charge a service fee upon notice to shareholders. No such fee currently is
contemplated.
[Page 13]
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 Fund, 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.
To request an exchange, you or your Agent acting on your behalf must
give exchange instructions to the Transfer Agent in writing or by telephone.
Before any exchange, you must obtain and should review a copy of the current
prospectus of the fund into which the exchange is being made. Prospectuses
may be obtained by calling 1-800-645-6561. Except in the case of personal
retirement plans, the shares being exchanged must have a current value of at
least $500; furthermore, when establishing a new account by exchange, the
shares being exchanged must have a value of at least the minimum initial
investment required for the fund into which the exchange is being made. The
ability to issue exchange instructions by telephone is given to all Fund
shareholders automatically, unless you check the relevant "No" box on the
Account Application, indicating that you specifically refuse this Privilege.
The Telephone Exchange Privilege may be established for an existing account
by written request signed by all shareholders on the account or by a separate
signed Shareholder Services Form, available by calling
1-800-645-6561, or by oral request from any of the authorized signatories on
the account, also by calling 1-800-645-6561. If you have established the
Telephone Exchange Privilege, you may telephone exchange instructions
(including over The Dreyfus TouchRegistration Mark automated telephone
system) by calling 1-800-645-6561. If calling from overseas, call
516-794-5452. See "How to Redeem Fund Shares_Procedures." Upon an exchange
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 other distributions payment option (except for
Dreyfus Dividend Sweep) selected by the investor.
Shares will be exchanged at the next determined NAV; however, a sales
load may be charged with respect to exchanges into funds sold with a sales
load. If you are exchanging into a fund that charges a sales load, you may
qualify for share prices which do not include the sales load or which reflect
a reduced sales load, if the shares of the fund from which you are exchanging
were: (a) purchased with a sales load, (b) acquired by a previous exchange
from shares purchased with a sales load, or (c) acquired through reinvestment
of dividends or other distributions paid with respect to the foregoing
categories of shares. To qualify, at the time of the exchange you must notify
the Transfer Agent or your Agent must notify the Distributor. Any such
qualification is subject to confirmation of your holdings through a check of
appropriate records. See "Shareholder Services" in the SAI. No fees currently
are charged shareholders directly in connection with exchanges, although the
Funds reserve the right, upon not less than 60 days' written notice, to
charge shareholders a nominal fee in accordance with rules promulgated by the
SEC. The Funds reserve the right to reject any exchange request in whole or
in part. The availability of Fund Exchanges may be modified or terminated at
any time upon notice to shareholders.
[Page 14]
The exchange of shares of one fund for shares of another is treated
for Federal income tax purposes as a sale of the
shares given in exchange by the shareholder and, therefore, an exchanging
shareholder may realize a taxable gain or loss.
DREYFUS AUTO-EXCHANGE PRIVILEGE
Dreyfus Auto-Exchange Privilege enables you to invest regularly (on a
semi-monthly, monthly, quarterly or annual basis), in exchange for shares of
a Fund, in shares of certain other eligible funds in the Dreyfus Family of
Funds of which you are currently an investor. The amount you designate, which
can be expressed either in terms of a specific dollar or share amount ($100
minimum), will be exchanged automatically on the first and/or fifteenth day
of the month according to the schedule you have selected. Shares will be
exchanged at the then-current NAV; however a sales load may be charged with
respect to exchanges into funds sold with a sales load. The right to exercise
this Privilege may be modified or canceled by the Funds or the Transfer
Agent. You may modify or cancel your exercise of this Privilege at any time
by mailing written notification to The Dreyfus Family of Funds, P.O. Box
9671, Providence, Rhode Island 02940-9671. The Funds may charge a service fee
for the use of this Privilege. No such fee currently is contemplated. The
exchange of shares of one fund for shares of another is treated for Federal
income tax purposes as a sale of the shares given in exchange by the
shareholder and, therefore, an exchanging shareholder may realize a taxable
gain or loss. For more information concerning this Privilege and the funds in
the Dreyfus Family of Funds eligible to participate in this Privilege, or to
obtain a Dreyfus Auto-Exchange Authorization Form, please call toll free
1-800-645-6561.
DREYFUS-AUTOMATIC ASSET BUILDERRegistration Mark
Dreyfus-AUTOMATIC Asset Builder permits you to purchase Fund shares
(minimum of $100 and maximum of $150,000 per transaction) at regular
intervals selected by you. Fund shares are purchased by transferring funds
from the bank account designated by you. At your option, the bank account
designated by you will be debited in the specified amount, and Fund shares
will be purchased, once a month, on either the first or fifteenth day, or
twice a month, on both days. Only an account maintained at a domestic
financial institution which is an ACH member may be so designated. To
establish a Dreyfus-AUTOMATIC Asset Builder account, you must file an
authorization form with the Transfer Agent. You may obtain the necessary
authorization by calling 1-800-645-6561. You may cancel your participation in
this Privilege or change the amount of purchase at any time by mailing
written notification to The Dreyfus Family of Funds, P.O. Box 9671,
Providence, Rhode Island 02940-9671 and the notification will be effective
three business days following receipt. The Funds may modify or terminate this
Privilege at any time or charge a service fee. No such fee currently is
contemplated.
DREYFUS DIVIDEND OPTIONS
Dreyfus Dividend Sweep enables you to invest automatically dividends
or dividends and other distributions, if any, paid by a Fund in shares of
certain other eligible 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 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 and other distributions,
if any, from a Fund to a designated bank account. Only an account maintained
at a domestic financial institution which is an ACH member may be so
designated. Banks may charge a fee for this service.
For more information concerning these privileges, or to request a
Dreyfus Dividend Options Form, please call toll free 1-800-645-6561. You may
cancel these privileges by mailing written notifi
[Page 15]
cation 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 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 Funds may modify or terminate these Privileges at any time or
charge a service fee. No such fee currently is contemplated. Shares held
under Keogh Plans, IRAs or other retirement plans are not eligible for
Dreyfus Dividend Sweep.
DREYFUS GOVERNMENT DIRECT DEPOSIT PRIVILEGE
Dreyfus Government Direct Deposit Privilege enables you to purchase
Fund shares (minimum of $100 and maximum of $50,000 per transaction) by
having Federal salary, Social Security, or certain veterans', military or
other payments from the Federal government automatically deposited into your
Fund account. You may deposit as much of such payments as you elect. To
enroll in Dreyfus Government Direct Deposit, you must file with the Transfer
Agent a completed Direct Deposit Sign-Up Form for each type of payment that
you desire to include in this Privilege. The appropriate form may be obtained
by calling 1-800-645-6561. Death or legal incapacity will terminate your
participation in this Privilege. You may elect at any time to terminate your
participation by notifying in writing the appropriate Federal agency.
Further, the Funds may terminate your participation upon 30 days' notice to
you.
DREYFUS PAYROLL SAVINGS PLAN
Dreyfus Payroll Savings Plan permits you to purchase Fund shares
(minimum of $100 per transaction) automatically on a regular basis. Depending
upon 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 Funds, the Transfer Agent or any other person, to
arrange for transactions under the Dreyfus Payroll Savings Plan. The Funds may
modify or terminate this Privilege at any time or charge a service fee. No
such fee currently is contemplated.
AUTOMATIC WITHDRAWAL PLAN
The Automatic Withdrawal Plan permits you to request withdrawal of a
specified dollar amount (minimum of $50) on either a monthly or quarterly
basis if you have a $5,000 minimum account. 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. The Automatic Withdrawal Plan may be
ended at any time by the shareholder, a Fund or the Transfer Agent. Shares
for which certificates have been issued may not be redeemed through the
Automatic Withdrawal Plan.
RETIREMENT PLANS
The Funds offer 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 and rollover 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.
[Page 16]
HOW TO REDEEM FUND SHARES
GENERAL. You may request redemption of your shares at any time. Redemption
requests should be transmitted to the Transfer Agent as described below. When
a request is received in proper form, a Fund will redeem the shares at the
next determined NAV.
The Funds impose no charges when shares are redeemed. 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 a Fund's
then-current NAV.
The Funds ordinarily will make payment for all shares redeemed within
seven days after receipt by the Transfer Agent of a redemption request in
proper form, except as provided by the rules of the SEC. HOWEVER, IF YOU HAVE
PURCHASED FUND SHARES BY CHECK, BY THE DREYFUS TELETRANSFER PRIVILEGE OR
THROUGH DREYFUS-AUTOMATIC ASSET BUILDERRegistration Mark AND SUBSEQUENTLY
SUBMIT A WRITTEN REDEMPTION REQUEST TO THE TRANSFER AGENT, THE REDEMPTION
PROCEEDS WILL BE TRANSMITTED TO YOU PROMPTLY UPON BANK CLEARANCE OF YOUR
PURCHASE CHECK, DREYFUS TELETRANSFER PURCHASE OR DREYFUS-AUTOMATIC ASSET
BUILDER ORDER, WHICH MAY TAKE UP TO EIGHT BUSINESS DAYS OR MORE. IN ADDITION,
THE FUNDS WILL REJECT REQUESTS TO REDEEM SHARES BY WIRE OR TELEPHONE OR
PURSUANT TO THE DREYFUS TELETRANSFER PRIVILEGE FOR A PERIOD OF EIGHT BUSINESS
DAYS AFTER RECEIPT BY THE TRANSFER AGENT OF THE PURCHASE CHECK, THE DREYFUS
TELETRANSFER PURCHASE OR THE DREYFUS-AUTOMATIC ASSET BUILDER ORDER AGAINST
WHICH SUCH REDEMPTION IS REQUESTED. THESE PROCEDURES WILL NOT APPLY IF YOUR
SHARES WERE PURCHASED BY WIRE PAYMENT, OR IF YOU OTHERWISE HAVE A SUFFICIENT
COLLECTED BALANCE IN YOUR ACCOUNT TO COVER THE REDEMPTION REQUEST. PRIOR TO
THE TIME ANY REDEMPTION IS EFFECTIVE, DIVIDENDS ON SUCH SHARES WILL ACCRUE
AND BE PAYABLE, AND YOU WILL BE ENTITLED TO EXERCISE ALL OTHER RIGHTS OF
BENEFICIAL OWNERSHIP. Fund shares will not be redeemed until the Transfer
Agent has received your Account Application.
Each Fund reserves the right to redeem a shareholder's account at its
option upon not less than 45 days' written notice if the net asset value of
such account is $10,000 or less ($500 or less in the case of holders of
shares of any of the Funds since September 14, 1995) and remains at or below
such amount during the notice period.
PROCEDURES. You may redeem Fund shares by using the regular redemption
procedure through the Transfer Agent, 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 also may
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 Funds
make 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 Dreyfus
TELETRANSFER Privilege.
[Page 17]
The Telephone Redemption Privilege or Telephone Exchange Privilege
authorizes the Transfer Agent to act on telephone
instructions (including over The Dreyfus TouchRegistration Mark automated
telephone system) from any person representing himself or herself to be you,
or a representative of your Agent, and reasonably believed by the Transfer
Agent to be genuine. The Funds will require the Transfer Agent to employ
reasonable procedures, such as requiring a form of personal identification,
to confirm that instructions are genuine and, if it does not follow such
procedures, the Funds or the Transfer Agent may be liable for any losses due
to unauthorized or fraudulent instructions. Neither the Funds nor the
Transfer Agent will be liable for following telephone instructions reasonably
believed to be genuine.
During times of drastic economic or market conditions, you may
experience difficulty in contacting the Transfer Agent by telephone to
request a redemption or an exchange of Fund shares. In such cases, you should
consider using the other redemption procedures described herein. Use of these
other redemption procedures may result in your redemption request being
processed at a later time than it would have been if telephone redemption had
been used.
REGULAR REDEMPTION. Under the regular redemption procedure, you may redeem
your shares by written request mailed to The Dreyfus Family of Funds, P.O.
Box 9671, Providence, Rhode Island 02940-9671. Redemption requests may be
delivered in person only to a Dreyfus Financial Center. THESE REQUESTS WILL
BE FORWARDED TO THE FUNDS AND WILL BE PROCESSED ONLY UPON RECEIPT THEREBY. For
the location of the nearest financial center, please call the telephone
number listed under "General Information." Redemption requests must be signed
by each shareholder, including each owner of a joint account, and each
signature must be guaranteed. The Transfer Agent has adopted standards and
procedures pursuant to which signature-guarantees in proper form generally
will be accepted from domestic banks, brokers, dealers, credit unions,
national securities exchanges, registered securities associations, clearing
agencies and savings associations, as well as from participants in the New
York Stock Exchange Medallion Signature Program, the Securities Transfer
Agents Medallion Program ("STAMP"), and the Stock Exchanges Medallion
Program. For more information with respect to signature-guarantees, please
call the telephone number listed under "General Information."
Redemption proceeds of at least $1,000 will be wired to any member
bank of the Federal Reserve System in accordance with a written
signature-guaranteed request.
WIRE REDEMPTION PRIVILEGE. You may request by wire, 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.
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 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.
[Page 18]
DREYFUS INSTITUTIONAL GOVERNMENT MONEY MARKET FUND AND DREYFUS INSTITUTIONAL
U.S. TREASURY MONEY MARKET FUND. Requests to redeem or exchange Fund shares
received in proper form by the Transfer Agent by 3 p.m., Eastern time, on a
business day are effective on, and will receive the share price next
determined on, that day. Redemption and exchange requests received after 3
p.m., Eastern time, are effective on, and will receive the share price
determined on, the next business day. If the redemption is requested to be
made by wire, the proceeds of the redemption ordinarily will be sent on the
same day the request is effective and the shares will not receive the
dividend declared on that day.
DREYFUS INSTITUTIONAL PRIME MONEY MARKET FUND. Redemption or exchange
requests received in proper form by the Transfer Agent or its designee by 5
p.m., Eastern time, on a business day are effective on that day; such
requests received after 5 p.m., Eastern time, will be effective on the next
business day. If the redemption is requested to be made by wire, the proceeds
of the redemption ordinarily will be sent on the day the request is effective
and the shares will not receive the dividend declared on that day.
SHAREHOLDER SERVICING PLAN
The Funds are subject to a shareholder servicing plan (the "Plan").
The Plan permits the Funds to compensate Agents that have entered into
Selling Agreements ("Agreements") with the Company. Payments under the Plan
are calculated daily and paid monthly at a rate or rates set from time to
time by a Fund, provided that the annual rate may not exceed 0.15% of the
average daily net asset value of the Fund's shares.
The fees payable under the Plan are used primarily to compensate or
reimburse Agents for shareholder services provided, and related expenses
incurred by such Agents. The shareholder services provided by Agents may
include: (i) aggregating and processing purchase and redemption requests for
Fund shares from their customers and transmitting net purchase and redemption
orders to the Distributor or Transfer Agent; (ii) providing customers with a
service that invests the assets of their accounts in Fund shares pursuant to
specific or pre-authorized instructions; (iii) processing dividend and
distribution payments from a Fund on behalf of customers; (iv) providing
information periodically to customers showing their positions in Fund shares;
(v) arranging for bank wires; and (vi) providing general shareholder liaison
services.
The Company may suspend or reduce payments under the Plan at any
time, and payments are subject to the continuation of the Plan and the
Agreements described above. From time to time, the Agents and the Company may
agree to voluntarily reduce the maximum fees payable under the Plan. See the
SAI for more details on the Plan.
The Company understands that Agents may charge fees to their clients
who are owners of a Fund's shares for various services provided in connection
with a client's account. These fees would be in addition to any amounts
received by an Agent under its Agreement with the Company. The Agreement
requires each Agent to disclose to their clients any compensation payable to
such Agent by the Company and any other compensation payable by the clients
for various services provided in connection with their accounts. Potential
investors should read this Prospectus in light of the terms governing their
accounts with their Agents.
PERFORMANCE INFORMATION
From time to time, each Fund may advertise the yield and "effective
yield" on its shares. YIELD FIGURES ARE BASED ON HISTORICAL EARNINGS AND ARE
NOT INTENDED TO INDICATE FUTURE PERFORMANCE.
The "yield" of a Fund refers to the income generated by an investment
in such Fund over a seven-day period identified in the advertisement. This
income is then "annualized." That is, the amount of income generated by the
investment during that week is assumed to be generated each
[Page 19]
week over a 52-week period and is shown as a percentage of the investment.
The "effective yield" is calculated similarly, but, when annualized, the
income earned by an investment in a Fund is assumed to be reinvested. The
"effective yield" will be slightly higher than the "yield" because of the
compounding effect of this assumed reinvestment. Since yields fluctuate,
yield data cannot necessarily be used to compare an investment in a Fund with
bank deposits, savings accounts, and similar investment alternatives which
often provide an agreed-upon or guaranteed fixed yield for a stated period of
time.
A Fund may compare its performance with various industry standards of
performance including Lipper Analytical Services, Inc. ratings, and the
Consumer Price Index. Performance rankings as reported in CHANGING TIMES,
BUSINESS WEEK, INSTITUTIONAL INVESTOR, THE WALL STREET JOURNAL,
IBC/DONOGHUE'S MONEY FUND REPORT, MUTUAL FUND FORECASTER, NO LOAD INVESTOR,
MONEY MAGAZINE, MORNINGSTAR MUTUAL FUND VALUES, U.S. NEWS AND WORLD REPORT,
FORBES, FORTUNE, BARRON'S, FINANCIAL PLANNING,FINANCIAL PLANNING ON WALL
STREET, CERTIFIED FINANCIAL PLANNER TODAY, INVESTMENT ADVISOR, KIPLINGER'S,
SMART MONEY, and similar publications may also be used in comparing a Fund's
performance. Furthermore, a Fund may quote its shares' yields in
advertisements or in shareholder reports.
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
Each Fund ordinarily declares dividends from net investment income on
each day that the NYSE is open for business. A Fund's earnings for Saturdays,
Sundays and holidays are declared as dividends on the preceding business day.
Dividends usually are paid on the last calendar day of each month, and are
automatically reinvested in additional Fund shares at net asset value or, at
your option, paid in cash. If you redeem all shares in your account at any
time during the month, all dividends to which you are entitled will be paid
to you along with the proceeds of the redemption. If you are an omnibus
accountholder and indicate in a partial redemption request that a portion of
any accrued dividends to which such account is entitled belongs to an
underlying accountholder who has redeemed all shares in his or her account,
such portion of the accrued dividends will be paid to you along with the
proceeds of the redemption. Dividends from net realized short-term securities
gains, if any, generally are declared and paid once a year, but a Fund 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. A Fund will not make distributions from net
realized securities gains unless capital loss carryovers, if any, have been
utilized or have expired. Each Fund does not expect to realize any long-term
capital gains or losses and does not anticipate payment of any capital gain
distributions. You may choose whether to receive distributions in cash or to
reinvest in additional Fund shares at net asset value. All expenses are
accrued daily and deducted before declaration of dividends to investors.
Each Fund intends to qualify, or to continue to qualify, for
treatment as a regulated investment company under the Code so that it will be
relieved of federal income tax on that part of its investment company taxable
income (consisting generally of net investment income and net short-term
capital gain) that is distributed to its shareholders.
Dividends from a Fund's investment company taxable income are taxable
to you as ordinary income, to the extent of the Fund's earnings and profits.
None of the dividends paid by any of the Funds will be eligible for the
dividends-received deduction allowed to corporations.
Dividends and other distributions are taxable to you regardless of
whether they are received in cash or reinvested in additional Fund shares,
even if the value of your shares is below your cost.
Dividends and other distributions paid by a Fund to qualified
Retirement Plans ordinarily will not be subject to taxation until the
proceeds are distributed from the Retirement Plans. A Fund will not report to
the IRSdistributions paid to such plans. Generally, distributions from
qualified retirement plans, except those representing returns of
non-deductible contributions thereto, will be taxable as
[Page 20]
ordinary income and, if made prior to the time the participant reaches age
59 1\2, generally will be subject to an additional tax equal to 10% of the
taxable portion of the distribution. If the distribution from such a
retirement plan (other than certain governmental or church plans) for any
taxable year following the year in which the participant reaches age 70 1\2
is less than the "minimum required distribution" for that taxable year, an
excise tax equal to 50% of the deficiency may be imposed by the IRS. The
administrator, trustee or custodian of such a retirement plan will be
responsible for reporting such distributions to the IRS. Moreover, certain
contributions to a qualified retirement plan in excess of the amounts
permitted by law may be subject to an excise tax. If a distributee of an
"eligible rollover distribution" from a qualified Retirement Plan does not
elect to have the eligible rollover distribution paid directly from the plan
to an eligible retirement plan in a "direct rollover," the eligible rollover
distribution is subjec to a 20% income withholding tax.
In January of each year, your Fund will send you a Form 1099-DIV
notifying you of the status for federal income tax purposes of your
distributions for the preceding year.
You must furnish your Fund with your TIN and state whether you are
subject to withholding for prior under-reporting, certified under penalties
of perjury as prescribed by the Code and the regulations thereunder. Unless
previously furnished, investments received without such a certification will
be returned. Each Fund is required to withhold 31% of all dividends payable
to any individuals and certain other non-corporate shareholders who do not
provide the Fund with a correct TIN or who otherwise are subject to backup
withholding.
Each Fund may be subject to a 4% nondeductible excise tax to the
extent it fails to distribute by the end of any calendar year substantially
all of its ordinary income for that year and capital gains net income for the
one-year period ending October 31 of that year, plus certain other amounts.
Each Fund expects to make such distributions as are necessary to avoid the
imposition of this tax.
The foregoing is only a summary of some of the important tax
considerations generally affecting each Fund and its shareholders; see the
SAI for a further discussion. There may be other federal, state or local tax
considerations applicable to a particular investor. You therefore should
consult your own tax adviser.
GENERAL INFORMATION
The Company was incorporated in Maryland on August 6, 1987 under the
name The Laurel Funds, Inc., and changed its name to The Dreyfus/Laurel
Funds, Inc. on October 17, 1994. The Company is registered with the SEC under
the 1940 Act as an open-end management investment company. The Company has an
authorized capitalization of 25 billion shares of $0.001 par value stock with
equal voting rights. The Articles of Incorporation permit the Board of
Directors to create an unlimited number of investment portfolios (each a
"fund") without shareholder approval. The Company may in the future seek to
achieve a 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 a Fund will be given at least
30 days' prior notice of any such investment.
Each share has one vote. All shares of all funds vote together,
except as to any matter for which a separate vote of any fund is required by
the 1940 Act, and except as to any matter which affects the interests of one
or more particular funds, in which case only the shareholders of the affected
fund are entitled to vote.
Unless otherwise required by the 1940 Act, ordinarily it will not be
necessary for the Funds to hold annual meetings of shareholders. As a result,
Fund shareholders may not consider each year the election of Directors or the
appointment of auditors. However, the holders of at least 10% of the shares
outstanding and entitled to vote may require the Company to hold a special
meeting of shareholders for
[Page 21]
purposes of removing a Director from office and for any other proper purpose.
Company shareholders may remove a Director by the affirmative vote of a
majority of the Company's voting shares. In addition, the Board of Directors
will call a meeting of shareholders for the purpose of electing Directors if,
at any time, less than a majority of the Directors then holding office have
been elected by shareholders.
The Transfer Agent maintains a record of your ownership and will send
you confirmations and statements of account.
Shareholder inquiries may be made by writing to the Funds at 144 Glenn
Curtiss Boulevard, Uniondale, New York 11556-0144, or by calling toll free
1-800-645-6561.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND IN THE
FUNDS' OFFICIAL SALES LITERATURE IN CONNECTION WITH THE OFFER OF THE FUNDS'
SHARES, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUNDS. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER IN ANY STATE IN WHICH, OR TO ANY PERSON TO WHOM,
SUCH OFFERING MAY NOT LAWFULLY BE MADE.
[Page 22]
[This PageIntentionally Left Blank]
[Page 23]
Dreyfus Institutional Prime Money Market Fund
Dreyfus Institutional Government Money Market Fund
Dreyfus Institutional U.S. Treasury Money Market Fund
Prospectus
Copy Rights 1998 Dreyfus Service Corporation
LFISTp0398
Registration Mark
[Page 24]
- -------------------------------------------------------------------------------
PROSPECTUS MARCH 1, 1998
DREYFUS MONEY MARKET RESERVES
DREYFUS MUNICIPAL RESERVES
DREYFUS U.S. TREASURY RESERVES
- -------------------------------------------------------------------------------
THIS PROSPECTUS DESCRIBES THE THREE SEPARATE, DIVERSIFIED INVESTMENT
PORTFOLIOS LISTED BELOW (EACH A "FUND" AND COLLECTIVELY THE "FUNDS") OF THE
DREYFUS/LAUREL FUNDS, INC., AN OPEN-END MANAGEMENT INVESTMENT COMPANY KNOWN
AS A MUTUAL FUND (THE "COMPANY"). THIS PROSPECTUS DESCRIBES TWO CLASSES OF
SHARES_INVESTOR SHARES AND CLASS R SHARES OF THE FUNDS.
DREYFUS MONEY MARKET RESERVES SEEKS A HIGH LEVEL OF CURRENT INCOME
CONSISTENT WITH STABILITY OF PRINCIPAL BY INVESTING IN HIGH-GRADE MONEY
MARKET INSTRUMENTS.
DREYFUS MUNICIPAL RESERVES SEEKS INCOME EXEMPT FROM FEDERAL INCOME
TAX CONSISTENT WITH STABILITY OF PRINCIPAL BY INVESTING IN TAX-EXEMPT
MUNICIPAL OBLIGATIONS.
DREYFUS U.S. TREASURY RESERVES SEEKS A HIGH LEVEL OF CURRENT INCOME
CONSISTENT WITH STABILITY OF PRINCIPAL BY INVESTING IN DIRECT OBLIGATIONS OF
THE U.S. TREASURY AND REPURCHASE AGREEMENTS SECURED BY SUCH OBLIGATIONS.
EACH FUND SEEKS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER
SHARE. INVESTMENTS IN A FUND ARE NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT AND THERE CAN BE NO ASSURANCE THAT ANY FUND WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
SHARES OF THE FUNDS ARE SOLD WITHOUT A SALES LOAD. INVESTOR SHARES OF
THE FUNDS ARE SUBJECT TO DISTRIBUTION AND SHAREHOLDER SERVICING FEES.
YOU CAN PURCHASE OR REDEEM SHARES BY TELEPHONE USING THE DREYFUS TELET
RANSFER PRIVILEGE.
THE DREYFUS CORPORATION SERVES AS THE FUNDS' INVESTMENT MANAGER. THE
DREYFUS CORPORATION IS REFERRED TO AS "DREYFUS."
THIS PROSPECTUS SETS FORTH CONCISELY INFORMATION ABOUT THE FUNDS THAT
YOU SHOULD KNOW BEFORE INVESTING. IT SHOULD BE READ CAREFULLY BEFORE YOU
INVEST AND RETAINED FOR FUTURE REFERENCE.
THE STATEMENT OF ADDITIONAL INFORMATION ("SAI") DATED MARCH 1, 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 FUNDS. FOR A FREE COPY OF
THE SAI, WRITE TO THE FUNDS AT 144 GLENN CURTISS BOULEVARD, UNIONDALE, NEW
YORK 11556-0144, OR CALL 1-800-645-6561. WHEN TELEPHONING, ASK FOR OPERATOR
144.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
ALL MONEY MARKET FUNDS INVOLVE CERTAIN INVESTMENT RISKS, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL.
THE FEES TO WHICH EACH FUND IS SUBJECT ARE SUMMARIZED IN THE "EXPENSE
SUMMARY" SECTION OF THE FUNDS' PROSPECTUS. EACH FUND PAYS AN AFFILIATE OF
MELLON BANK, N.A. ("MELLON BANK") TO BE ITS INVESTMENT MANAGER. MELLON BANK
OR AN AFFILIATE MAY BE PAID FOR PERFORMING OTHER SERVICES FOR THE FUNDS, SUCH
AS CUSTODIAN, TRANSFER AGENT OR FUND ACCOUNTANT SERVICES. THE FUNDS ARE
DISTRIBUTED BY PREMIER MUTUAL FUND SERVICES, INC. (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.
- -------------------------------------------------------------------------------
(Continued from page 1)
BY THIS PROSPECTUS, THE FUNDS ARE OFFERING INVESTOR SHARES AND CLASS
R SHARES. (CLASS R SHARES OF THE FUNDS WERE FORMERLY CALLED TRUST SHARES.)
INVESTOR SHARES AND CLASS R SHARES ARE IDENTICAL, EXCEPT AS TO THE SERVICES
OFFERED TO AND THE EXPENSES BORNE BY EACH CLASS. CLASS R SHARES ARE SOLD
PRIMARILY TO BANK TRUST DEPARTMENTS AND OTHER FINANCIAL SERVICE PROVIDERS
(INCLUDING MELLON BANK AND ITS AFFILIATES) ("BANKS") ACTING ON BEHALF OF
CUSTOMERS HAVING A QUALIFIED TRUST OR INVESTMENT ACCOUNT OR RELATIONSHIP AT
SUCH INSTITUTION, OR TO CUSTOMERS WHO HAVE RECEIVED AND HOLD SHARES OF A FUND
DISTRIBUTED TO THEM BY VIRTUE OF SUCH AN ACCOUNT OR RELATIONSHIP. INVESTOR
SHARES ARE SOLD PRIMARILY TO INVESTORS MAINTAINING RELATED SECURITIES,
BROKERAGE, COMMODITIES TRADING OR SIMILAR ACCOUNTS WITH BANKS, SECURITIES
BROKER/DEALERS ("SELECTED DEALERS") OR OTHER FINANCIAL INSTITUTIONS
(INCLUDING MELLON BANK AND ITS AFFILIATES) (COLLECTIVELY, "AGENTS") THAT HAVE
ENTERED INTO A SELLING AGREEMENT ("AGREEMENT") WITH THE DISTRIBUTOR.
Table of Contents
Page
EXPENSE SUMMARY................................ 4
FINANCIAL HIGHLIGHTS........................... 5
DESCRIPTION OF THE FUNDS....................... 11
MANAGEMENT OF THE FUNDS........................ 18
HOW TO BUY FUND SHARES......................... 19
SHAREHOLDER SERVICES........................... 22
HOW TO REDEEM FUND SHARES...................... 25
DISTRIBUTION PLAN (INVESTOR SHARES ONLY)....... 27
PERFORMANCE INFORMATION........................ 28
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES....... 28
GENERAL INFORMATION............................ 30
Page [2]
[This Page Intentionally Left Blank]
Page [3]
<TABLE>
EXPENSE SUMMARY
ALL FUNDS
___________________________________
INVESTOR SHARES CLASS R SHARES
--------------- ---------------
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases....................... none none
Maximum Sales Load Imposed on Reinvestments................... none none
Deferred Sales Load........................................... none none
Redemption Fee................................................ none none
Exchange Fee.................................................. none none
DREYFUS MUNICIPAL RESERVES
________________--------------------_
ESTIMATED ANNUAL FUND OPERATING EXPENSES
(as a percentage of net assets)
Management Fee................................................ 0.50% 0.50%
12b-1 Fees(1)................................................. 0.20% none
Other Expenses(2)............................................. 0.02% 0.02%
------ ------
Total Fund Operating Expenses................................. 0.72% 0.52%
EXAMPLE
You would pay the following expenses on a $1,000 investment, assuming
(1) a 5% annual return and (2) redemption at the end of each time
period: INVESTOR SHARES CLASS R SHARES
--------------- ---------------
1 YEAR....................................................... $ 7 $ 5
3 YEARS...................................................... $23 $17
5 YEARS...................................................... $40 $29
10 YEARS..................................................... $91 $65
DREYFUS MONEY MARKET RESERVES
DREYFUS U.S. TREASURY RESERVES
____________________-----------------
ESTIMATED ANNUAL FUND OPERATING EXPENSES
(as a percentage of net assets)
Management Fee................................................ 0.50% 0.50%
12b-1 Fees(1)................................................. 0.20% none
Other Expenses(2)............................................. 0.00% 0.00%
------ ------
Total Fund Operating Expenses................................. 0.70% 0.50%
EXAMPLE
You would pay the following expenses on a $1,000 investment, assuming
(1) a 5% annual return and (2) redemption at the end of each time
period: INVESTOR SHARES CLASS R SHARES
________------- --------------
1 YEAR....................................................... $ 7 $ 5
3 YEARS...................................................... $22 $16
5 YEARS...................................................... $39 $28
10 YEARS..................................................... $87 $63
- ---------------------------------
(1) See "Distribution Plan (Investor Shares Only)" for a description of
each Fund's Distribution Plan for Investor shares.
(2) Does not include fees and expenses of the non-interested Directors
(including counsel). The investment manager is contractually
required to reduce its Management Fee by an amount equal to a
Fund's allocable portion of such fees and expenses, which are
estimated to be less than 0.01% of a Fund's net assets.
(See "Management of the Funds.")
</TABLE>
- -------------------------------------------------------------------------------
THE AMOUNTS LISTED IN THE EXAMPLE SHOULD NOT BE CONSIDERED AS
REPRESENTATIVE OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER
OR LESS THAN THOSE INDICATED. MOREOVER, WHILE THE EXAMPLE ASSUMES A 5% ANNUAL
RETURN, EACH FUND'S ACTUAL PERFORMANCE WILL VARY AND MAY RESULT IN AN ACTUAL
RETURN GREATER OR LESS THAN 5%.
- -------------------------------------------------------------------------------
The purpose of the foregoing table is to assist you in understanding
the various costs and expenses that investors will bear, directly or
indirectly, the payment of which will reduce investors' return on an annual
basis. Long-term holders of Investor shares could pay more in Rule 12b-1 fees
than the economic equivalent of the maximum front-end sales charges
applicable to mutual funds sold by members of the National Association of
Securities Dealers, Inc. Certain Agents may charge their clients direct fees
for effecting transactions in Fund shares; such fees are not reflected in the
foregoing table. See "Management of the Funds," "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 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 for each Fund are based upon a single Investor share
or Class R share outstanding throughout each year or period and should be
read in conjunction with the financial statements, 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 each Fund's Annual Report for the year ended October
31, 1997 have been audited by KPMG Peat Marwick LLP, independent auditors.
<TABLE>
DREYFUS MONEY MARKET RESERVES
FOR AN INVESTOR SHARE OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.*
YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED
10/31/97 10/31/96 10/31/95 10/31/94
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period............. $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------- ------
Investment Operations:
Net investment income.......................... 0.049 0.048 0.052 0.021
------ ------ ------- ------
Less distributions:
Dividends from net investment income........... (0.049) (0.048) (0.052) (0.021)
------ ------ ------- ------
Net asset value, end of period................... $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ======= ======
Total return..................................... 5.04% 4.94% 5.28% 2.14%#
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's)........... $204,851 $144,168 $161,819 $3,611
Ratio of expenses to average net assets........ 0.70% 0.70% 0.70% 0.71%##
Ratio of net investment income to average net assets 4.95% 4.84% 5.25% 3.31%##
- ---------------------------------------------------------------------------------------------------------------------------------
* The Fund commenced selling Investor shares on April 6, 1994. Prior to
October 17, 1994, Mellon Bank served as the Fund's investment manager.
Effective October 17, 1994, Dreyfus began serving as the Fund's
investment manager.
Total return represents aggregate total return for the periods
indicated.
# Not annualized.
## Annualized.
</TABLE>
Page [5]
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
DREYFUS MONEY MARKET RESERVES
FOR A CLASS R SHARE OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.*
Year Year Year Year Year Year Year Year Year Period
Ended Ended Ended Ended Ended Ended Ended Ended Ended Ended
10/31/97 10/31/96 10/31/95 10/31/94*## 10/31/93 10/31/92 10/31/91 10/31/90 10/31/89 10/31/88
-------- -------- -------- ----------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Investment Operations:
Net investment income.. 0.051 0.050 0.053 0.034 0.028 0.039 0.062 0.082 0.067 0.060
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Less distributions:
Dividends from net
investment income..... (0.051) (0.050) (0.053) (0.034) (0.028) (0.039) (0.062) (0.082) (0.067) (0.060)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end
of year........ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 1.00 $ 1.00
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Total return........ 5.25% 5.16% 5.44% 3.52% 2.84% 3.92% 6.39% 8.55% 7.95% 6.18%
Ratios to average net
assets/supplemental
data:
Net assets, end of
year (in 000's)... $232,032 $170,409 $139,787 $124,75 $103,760 $91,848 $105,329 $93,366 $92,257 $530
Ratio of expenses to
average net assets.... 0.50% 0.50% 0.50% 0.51% 0.50%** 0.50%** 0.50%** 0.16%** 0.00%** 0.60%#**
Ratio of net investment
income to average net
assets..... 5.13% 5.01% 5.40% 3.51% 2.80% 3.88% 6.13% 8.21% 8.97% 6.69%#
- ------------------------------
* The Fund commenced operations on November 18, 1987. The Fund
commenced selling Investor shares on April 6, 1994. Those
shares outstanding prior to April 4, 1994 were designated Trust Shares.
Effective as of October 17, 1994, the Fund's Trust Shares were redesignated
Class R shares.
** For the year or period ended October 31, 1992, 1991, 1990, 1989 and
1988, the investment adviser waived all or a portion of its advisory fee
amounting to $0.0007, $0.0010, $0.0038, $0.0043 and $0.0045 per share,
respectively. For the year or period ended October 31, 1993, 1992, 1991, 1990,
1989 and 1988, the investment adviser reimbursed expenses of the Fund
amounting to $0.0036, $0.0027, $0.0018, $0.0026, $0.0062 and $0.3952 per
share, respectively.
Net investment income before expenses reimbursed by the investment
adviser for the year ended October 31, 1994 was $0.0331.
Total return represents aggregate total return for the years indicated.
Annualized operating expense ratio before expenses reimbursed by the
investment adviser for the year ended October 31, 1994 was 0.64%.
# Annualized.
## Prior to October 17, 1994, Mellon Bank served as the Fund's investment
manager. Effective October 17, 1994, Dreyfus began serving as the Fund's
investment manager.
</TABLE>
Page [6]
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
DREYFUS MUNICIPAL RESERVES
FOR AN INVESTOR SHARE OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.*
YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED
10/31/97 10/31/96 10/31/95 10/31/94
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period........... $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ ------
Income from investment operations:
Net investment income.......................... 0.030 0.029 0.032 0.012
------ ------ ------ ------
Less distributions:
Dividends from net investment income........... (0.029) (0.029) (0.032) (0.012)
------ ------ ------ ------
Dividends from net realized gain on investments....... (0.001) _ _ _
Total Distributions............................ (0.030) (0.029) (0.032) (0.012)
Net asset value, end of period................. $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ======
Total return................................... 3.00% 2.96% 3.28% 1.23%#
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's)........... $19,486 $14,074 $17,764 $1,161
Ratio of operating expenses to
average net assets............................. 0.72% 0.70% 0.70% 0.70%##
Ratio of net investment income to
average net assets............................. 2.92% 2.92% 3.33% 2.11%##
- ---------------------------------------------------------------------------------------------------------------------------------
* The Fund commenced selling Investor shares on April 20, 1994. Prior to
October 17, 1994, Mellon Bank served as the Fund's investment manager.
Effective October 17, 1994, Dreyfus began serving as the Fund's investment
manager.
Total return represents aggregate total return for the periods
indicated.
# Not annualized.
## Annualized.
</TABLE>
Page [7]
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
DREYFUS MUNICIPAL RESERVES
FOR A CLASS R SHARE OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.*
Year Year Year Year Year Year Year Year Year Period
Ended Ended Ended Ended Ended Ended Ended Ended Ended Ended
10/31/97 10/31/96 10/31/95 10/31/94*## 10/31/93 10/31/92 10/31/91 10/31/90 10/31/89 10/31/88
-------- -------- -------- ----------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year.. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------ ------ ------ ------ ------ ------ ------ ------ ------
Investment Operations:
Net investment income.. 0.032 0.031 0.034 0.023 0.021 0.029 0.045 0.056 0.059 0.041
------- ------ ------ ------ ------ ------ ------ ------ ------ ------
Less distributions:
Dividends from net
investment income... (0.031) (0.031) (0.034) (0.023) (0.021) (0.029) (0.045) (0.056) (0.059) (0.041)
------- ------ ------ ------ ------ ------ ------ ------ ------ ------
Dividends from net
realized gain on
investments... (0.001) _ _ _ _ _ _ _ _ _
------- ------ ------ ------ ------ ------ ------ ------ ------ ------
Total Distributions:.. (0.032) (0.031) (0.034) (0.023) (0.021) (0.001) _ _ _ _
Net asset value, end
of year.... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ====== ====== ====== ====== ====== ====== ====== ====== ======
Total return..... 3.21% 3.17% 3.48% 2.29% 2.10% 2.94% 4.64% 5.79% 6.08% 4.22%
Ratios to average net
assets/supplemental
data:
Net assets, end of
year (in 000's)..... $194,158 $221,178 $205,373 $205,105 $187,830 $184,719 $152,260 $88,247 $56,224 $20,472
Ratio of expenses
to average net assets. 0.52% 0.50% 0.50% 0.51% 0.50%** 0.50%** 0.50%** 0.55%** 0.70%** 0.70%**#
Ratio of net investment
income to average
net assets... 3.10% 3.11% 3.41% 2.30% 2.08% 2.90% 4.49% 5.66% 5.95% 4.61%#
- -------------------------------
* The Fund commenced operations on December 10, 1987. The Fund commenced
selling Investor shares on April 20, 1994. Those shares in existence prior to
April 4, 1994 were designated Trust Shares. Effective as of October 17, 1994,
the Fund's Trust Shares were reclassified
as Class R shares.
** For the period ended October 31, 1988, the investment adviser waived a
portion of its advisory fee amounting to $0.0040 per share. For the years or
period ended October 31, 1993, 1992, 1991, 1990, 1989 and 1988, the
investment adviser reimbursed expenses of the Fund amounting to $0.0024,
$0.0029, $0.0036, $0.0052, $0.0044 and $0.0031 per share, respectively.
Net investment income before expenses reimbursed by the investment
adviser for the year ended October 31, 1994 was $0.0218.
Total return represents aggregate total return for the periods indicated.
Annualized operating expense ratio before expenses reimbursed by the
investment adviser for the year ended October 31, 1994 was 0.61%.
# Annualized.
## Prior to October 17, 1994, Mellon Bank served as the Fund's investment
manager. Effective October 17, 1994, Dreyfus began serving as the Fund's
investment manager.
</TABLE>
Page [8]
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
DREYFUS U.S. TREASURY RESERVES
FOR AN INVESTOR SHARE OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.*
YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED
10/31/97 10/31/96 10/31/95 10/31/94
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period............. $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ ------
Investment Operations:
Net investment income............................ 0.048 0.046 0.049 0.020
------ ------ ------ ------
Less distributions:
Dividends from net investment income............. (0.048) (0.046) (0.049) (0.020)
------ ------ ------ ------
Net asset value, end of period................... $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ======
Total return..................................... 4.89% 4.74% 5.02% 1.96%#
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's)............. $112,900 $21,826 $21,386 $1,324
Ratio of expenses to average net assets.......... 0.70% 0.70% 0.70% 0.70%##
Ratio of net investment income to average net assets...... 4.81% 4.64% 4.92% 3.42%##
- ---------------------------------------------------------------------------------------------------------------------------------
* The Fund commenced selling Investor shares on April 18, 1994. Prior to
October 17, 1994, Mellon Bank served as the Fund's investment manager.
Effective October 17, 1994, Dreyfus began serving as the Fund's investment
manager.
Total return represents aggregate total return for the periods
indicated.
# Not annualized.
## Annualized.
</TABLE>
Page [9]
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
DREYFUS U.S. TREASURY RESERVES
FOR A CLASS R SHARE OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.*
YEAR YEAR YEAR YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED ENDED
10/31/97 10/31/96 10/31/95 10/31/94## 10/31/93 10/31/92 10/31/91
-------- -------- -------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
______ ------ ------ ------ ------ ------ ------
Investment Operations:
Net investment income......... 0.050 0.048 0.051 0.033 0.027 0.037 0.042
______ ------ ------ ------ ------ ------ ------
Less distributions:
Dividends from net investment income... (0.050) (0.048) (0.051) (0.033) (0.027) (0.037) (0.042)
______ ------ ------ ------ ------ ------ ------
Net asset value, end of year.... $1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ====== ====== ====== ======
Total return..................... 5.10% 4.94% 5.23% 3.37% 2.77% 3.73% 4.32%
______ ------ ------ ------ ------ ------ ------
Ratios to average net assets/
supplemental data:
Net assets, end of year (in 000's)...... $522,178 $464,303 $399,873 $228,797 $69,785 $69,187 $45,998
Ratio of expenses to
average net assets............ 0.50% 0.50% 0.50% 0.50% 0.50%** 0.50%** 0.34%#**
Ratio of net investment income to
average net assets............ 4.98% 4.79% 5.14% 3.62% 2.74% 3.63% 5.55%#
- -------------------------------
* The Fund commenced operations on February 4, 1991. The Fund commenced
selling Investor shares on April 18, 1994. Those shares outstanding prior to
April 4, 1994 were designated as Trust Shares. Effective as of October 17,
1994, the Fund's Trust Shares were redesignated as Class R shares.
** For the period ended October 31, 1991, the investment adviser waived a
portion of its advisory fee amounting to $0.0010 per share. For the years or
period ended October 31, 1993, 1992 and 1991, the investment adviser
reimbursed expenses of the Fund amounting to $0.0040, $0.0040 and $0.0048 per
share, respectively.
Net investment income before expenses reimbursed by the investment
adviser for the year ended October 31, 1994 was $0.0323.
Total return represents aggregate total return for the periods indicated.
Annualized expense ratio before expenses reimbursed by the investment
adviser for the year ended October 31, 1994 was 0.59%.
# Annualized.
## Prior to October 17, 1994, Mellon Bank served as the Fund's investment
manager. Effective October 17, 1994, Dreyfus began serving as the Fund's
investment manager.
</TABLE>
Page [10]
DESCRIPTION OF THE FUNDS
GENERAL
By this Prospectus, each Fund is offering Investor shares and Class R
shares. (Class R shares of the Funds were formerly called Trust Shares.)
Investor shares and Class R shares are identical, except as to the services
offered to and the expenses borne by each Class. Class R shares are sold
primarily to Banks acting on behalf of customers having a qualified trust or
investment account or relationship at such institution, or to customers who
have received and hold shares of a Fund distributed to them by virtue of such
an account or relationship. Investor shares are sold primarily to investors
maintaining related securities, brokerage, commodities trading or similar
accounts with Agents that have entered into Agreements with the Distributor.
If shares of a Fund are held in an account at a Bank or with an Agent, such
Bank or Agent may require you to place all Fund purchase, exchange and
redemption orders through them. All Banks and Agents have agreed to transmit
transaction requests to each Fund's transfer agent or to the Distributor.
Distribution and shareholder servicing fees paid by Investor shares will
cause Investor shares to have a higher expense ratio and to pay lower
dividends than Class R shares.
DREYFUS MONEY MARKET RESERVES
INVESTMENT OBJECTIVE AND POLICIES
Dreyfus Money Market Reserves seeks a high level of current income
consistent with stability of principal by investing in high-grade money
market instruments. There can be no assurance that Dreyfus Money Market
Reserves will meet its stated investment objective. See "Other Investment
Policies and Risk Factors" for a detailed description of risks and other Fund
investment policies.
The instruments in which Dreyfus Money Market Reserves may invest
include: (1) U.S. Treasury bills, notes and bonds; (2) other obligations
issued or guaranteed as to interest and principal by the U.S. Government, its
agencies and instrumentalities; (3) instruments of U.S. and foreign banks,
including certificates of deposit, banker's acceptances, and time deposits,
and may include Eurodollar Certificates of Deposit ("ECDs"), Yankee
Certificates of Deposit ("Yankee CDs"), and Eurodollar Time Deposits ("ETDs");
(4) commercial paper of U.S. and foreign companies; (5) corporate
obligations; (6) mortgage-related securities backed by U.S. Government
agencies or instrumentalities; (7) variable amount master demand notes; (8)
variable and floating rate notes; and (9) repurchase agreements. Dreyfus
Money Market Reserves also may utilize reverse repurchase agreements. (See
"Other Investment Policies and Risk Factors.")
DREYFUS MUNICIPAL RESERVES
INVESTMENT OBJECTIVE AND POLICIES
Dreyfus Municipal Reserves seeks income exempt from Federal income
tax consistent with stability of principal by investing in tax-exempt
municipal obligations. There can be no assurance that Dreyfus Municipal
Reserves will meet its stated investment objective. See "Other Investment
Policies and Risk Factors" for a detailed description of risks and other Fund
investment policies.
Dreyfus Municipal Reserves intends to invest 100%, and has adopted a
policy requiring that it invest at least at 80%, of its total assets in
municipal obligations.
TYPES OF MUNICIPAL SECURITIES. Municipal securities are obligations
issued by or on behalf of states, territories and possessions of the United
States and their political subdivisions, agencies, and instrumentalities, the
interest from which is, in the opinion of bond counsel, exempt from regular
Federal income tax. The municipal securities in which Dreyfus Municipal
Reserves may invest include:
(1) municipal notes, including tax anticipation and revenue anticipation
notes, bond anticipation notes, construction loan notes and tax-exempt
commercial paper; (2) short-term municipal bonds, including general
obligation bonds, revenue bonds, industrial revenue bonds and private
activity bonds; and
(3) municipal leases.
Page [11]
Dreyfus Municipal Reserves may purchase certain municipal securities,
including certain industrial development bonds and bonds issued after August
7, 1986 to finance "private activities," the interest on which may constitute
a "tax preference item" for purposes of the Federal alternative minimum tax,
even though the interest will continue to be fully tax-exempt for Federal
income tax purposes. Dreyfus Municipal Reserves may invest without limitation
in such municipal securities as long as such investment is consistent with the
Fund's investment objective.
YIELD FACTORS AND RATINGS. Yields on municipal securities are
dependent on a variety of factors, including the general conditions of the
money market and of the municipal bond and municipal note markets, the size
of a particular offering, the maturity of the obligation and the rating of
the issue. The achievement of Dreyfus Municipal Reserves' investment
objective is dependent in part on the continuing ability of the issuers of
the municipal securities in which Dreyfus Municipal Reserves invests to meet
their obligations for the payment of principal and interest when due.
Obligations of issuers of municipal securities are subject to the provisions
of bankruptcy, insolvency and other laws affecting the rights and remedies of
creditors. The possibility exists, therefore, that, as a result of litigation
or other conditions, the ability of any issuer to pay, when due, the
principal of and interest on its municipal securities may be materially
affected.
All of Dreyfus Municipal Reserves' municipal securities, including
municipal leases, must at the time of purchase present minimal credit risks
and either be backed by the full faith and credit of the United States or be
of high quality as determined in accordance with procedures adopted by the
Board of Directors.
ADDITIONAL INFORMATION. Dreyfus Municipal Reserves may invest more
than 25% of its assets in industrial development bonds, in participation
interests therein issued by banks and in municipal securities and other
obligations guaranteed by the U.S. Government, its agencies or
instrumentalities. A participation interest gives Dreyfus Municipal Reserves
an undivided interest in a municipal bond owned by a bank and generally is
backed by the bank's irrevocable letter of credit or guarantee.
TAXABLE INVESTMENTS. Dreyfus Municipal Reserves will attempt to
invest 100% of its assets in municipal securities, the interest on which, in
the opinion of bond counsel, is exempt from regular Federal income tax.
Dreyfus Municipal Reserves may under certain circumstances, however, invest
up to 20% of the value of its total assets in certain securities the interest
income on which is subject to regular Federal income tax.
Dreyfus Municipal Reserves may invest in any of the following taxable
instruments: (1) U.S. Treasury bills, notes and bonds; (2) other obligations
issued or guaranteed as to interest and principal by the U.S. Government, its
agencies and instrumentalities; (3) instruments of U.S. and foreign banks,
including certificates of deposit, banker's acceptances and time deposits,
and may include ECDs, Yankee CDs and ETDs; (4) commercial paper of U.S and
foreign companies; (5) corporate obligations; (6) mortgage-related securities
backed by U.S. Government agencies or instrumentalities; (7) variable amount
master demand notes; (8) floating rate notes; and (9) repurchase agreements.
The Fund also may utilize reverse repurchase agreements. (See "Other
Investment Policies and Risk Factors.")
DREYFUS U.S. TREASURY RESERVES
INVESTMENT OBJECTIVE AND POLICIES
Dreyfus U.S. Treasury Reserves seeks a high level of current income
consistent with stability of principal by investing in direct obligations of
the U.S. Treasury and repurchase agreements secured by such obligations.
There can be no assurance that Dreyfus U.S. Treasury Reserves will meet its
stated investment objective. See "Other Investment Policies and Risk Factors"
below for a detailed description of risks and other Fund investment policies.
Dreyfus U.S. Treasury Reserves invests only in direct obligations of
the U.S. Treasury, such as Treasury bills, notes and bonds, with remaining
maturities of 397 days or less, and in repurchase agreements of duration of
397 days or less secured by direct obligations of the U.S. Treasury.
Page [12]
Each Fund expects to maintain, but does not guarantee, a net asset
value of $1.00 per share. To do so, each Fund uses the amortized cost method
of valuing its securities pursuant to Rule 2a-7 under the Investment Company
Act of 1940, as amended (the "1940 Act") which Rule includes various maturity,
quality and diversification requirements, certain of which are summarized as
follows. In accordance with Rule 2a-7, each Fund must maintain a
dollar-weighted average portfolio maturity of 90 days or less and invest only
in U.S. dollar-denominated securities with remaining maturities of 397 days or
less and which are determined to be of high quality with minimal credit risk
in accordance with procedures adopted by the Board of Directors. In
determining whether a security is of high quality with minimal credit risk,
Dreyfus must consider whether the security is rated in one of the two highest
short-term rating categories by nationally recognized statistical rating
organizations ("NRSROs") or determined to be of comparable quality by Dreyfus
in accordance with requirements of these procedures. (See the SAI for a
description of NRSROs.) These procedures are reasonably designed to assure
that the prices determined by the amortized cost valuation will approximate
the current market value of each Fund's securities.
OTHER INVESTMENT POLICIES AND RISK FACTORS
BORROWING. Each Fund is authorized, within specified limits, to
borrow money for temporary administrative purposes and to pledge its assets
in connection with such borrowings.
COMMERCIAL PAPER. Dreyfus Money Market Reserves and Dreyfus Municipal
Reserves may invest in commercial paper. These instruments are short-term
obligations issued by banks and corporations that have maturities ranging
from 2 to 270 days. Each instrument may be backed only by the credit of the
issuer or may be backed by some form of credit enhancement, typically in the
form of a guarantee by a commercial bank. Commercial paper backed by
guarantees of foreign banks may involve additional risk due to the difficulty
of obtaining and enforcing judgments against such banks and the generally
less restrictive regulations to which such banks are subject. A Fund will
only invest in commercial paper of U.S. and foreign companies rated at the
time of purchase at least A-1 by Standard & Poor's, a division of The
McGraw-Hill Companies, Inc. ("Standard & Poors"), Prime-1 by Moody's
Investors Service, Inc. ("Moody's"), F-1 by Fitch's Investors Service, Inc.,
Duff 1 by Duff & Phelps, Inc. or A1 by IBCA, Inc.
ECDS, ETDS AND YANKEE CDS. Dreyfus Money Market Reserves and Dreyfus
Municipal Reserves may invest in ECDs, ETDs and Yankee CDs. ECDs are U.S.
dollar-denominated certificates of deposit issued by foreign branches of
domestic banks. ETDs are U.S. dollar-denominated time deposits in a foreign
branch of a U.S. bank or a foreign bank. Yankee CDs are certificates of
deposit issued by a U.S. branch of a foreign bank denominated in U.S. dollars
and held in the United States. ECDs, ETDs and Yankee CDs are subject to
somewhat different risks than are the obligations of domestic banks. (See
"Foreign Securities.")
EURODOLLAR BONDS AND NOTES. Dreyfus Money Market Reserves may invest
in Eurodollar bonds and notes. Eurodollar bonds and notes are obligations
which pay principal and interest in U.S. dollars held in banks outside the
United States, primarily in Europe. Investments in Eurodollar bonds and notes
involve risks that differ from investments in securities of domestic issuers.
(See "Foreign Securities.")
FLOATING RATE SECURITIES. Dreyfus Money Market Reserves and Dreyfus
Municipal Reserves may invest in floating rate securities. A floating rate
security provides for the automatic adjustment of its interest rate whenever
a specified interest rate changes. Interest rates on these securities are
ordinarily tied to, and are a percentage of, a widely recognized interest
rate, such as the yield on 90-day U.S. Treasury bills or the prime rate of a
specified bank. These rates may change as often as twice daily. Generally,
changes in interest rates will have a smaller effect on the market value of
floating rate securities than on the market value of comparable fixed income
obligations. Thus, investing in variable and floating rate securities
generally allows less opportunity for capital appreciation and depreciation
than investing in comparable fixed income securities.
Page [13]
FOREIGN SECURITIES. Dreyfus Money Market Reserves and Dreyfus
Municipal Reserves may purchase securities of foreign issuers and may invest
in obligations of foreign branches of domestic banks and domestic branches of
foreign banks. Investment in foreign securities presents certain risks,
including those resulting from fluctuations in currency exchange rates,
revaluation of currencies, future political and economic developments and the
possible imposition of currency exchange blockages or other foreign
governmental laws or restrictions, reduced availability of public information
concerning issuers, and the fact that foreign issuers are not generally
subject to uniform accounting, auditing and financial reporting standards or
to other regulatory practices and requirements comparable to those applicable
to domestic issuers. Moreover, securities of many foreign issuers may be less
liquid and their prices more volatile than those of comparable domestic
issuers. In addition, with respect to certain foreign countries, there is the
possibility of expropriation, confiscatory taxation and limitations on the use
or removal of funds or other assets of a Fund, including withholding of
dividends. Foreign securities may be subject to foreign government taxes that
would reduce the yield on such securities.
ILLIQUID SECURITIES. No Fund will knowingly invest more than 10% of
the value of its net assets in illiquid securities, including time deposits
and repurchase agreements having maturities longer than seven days.
Securities that have readily available market quotations are not deemed
illiquid for purposes of this limitation (irrespective of any legal or
contractual restrictions on resale). A Fund may invest in commercial
obligations issued in reliance on the so-called "private placement" exemption
from registration afforded by Section 4(2) of the Securities Act of 1933, as
amended ("Section 4(2) paper"). A Fund may also purchase securities that are
not registered under the Securities Act of 1933, as amended, but which can be
sold to qualified institutional buyers in accordance with Rule 144A under
that Act ("Rule 144A securities"). Liquidity determinations with respect to
Section 4(2) paper and Rule 144A Securities will be made by the Board of
Directors as required. The Board will consider availability of reliable price
information and other relevant information in making such determinations.
Section 4(2) paper is restricted as to disposition under the federal
securities laws, and generally is sold to institutional investors such as the
Fund that agree that they are purchasing the paper for investment and not
with a view to public distribution. Any resale by the purchaser must be in an
exempt transaction. Section 4(2) paper normally is resold to other
institutional investors like the Fund through or with the assistance of the
issuer or investment dealers who make a market in the Section 4(2) paper,
thus providing liquidity. Rule 144A securities generally must be sold to
other qualified institutional buyers. If a particular investment in Section
4(2) paper or Rule 144A securities is not determined to be liquid, that
investment will be included within the percentage limitation on investment in
illiquid securities. The ability to sell Rule 144A securities to qualified
institutional buyers is a recent development and it is not possible to
predict how this market will mature. Investing in Rule 144A securities could
have the effect of increasing the level of Fund illiquidity to the extent
that qualified institutional buyers become, for a time, uninterested in
purchasing these securities.
MUNICIPAL LEASES. Dreyfus Municipal Reserves may invest in municipal
leases. Municipal leases frequently have special risks not normally
associated with general obligation or revenue bonds. Leases and installment
purchase or conditional sale contracts (which normally provide for title to
the leased asset to pass eventually to the government issuer) have evolved as
a means for governmental issuers to acquire property and equipment without
meeting the constitutional and statutory requirements for the issuance of
debt. The debt-issuance limitations of many state constitutions and statutes
are deemed to be inapplicable because of the inclusion in many leases or
contracts of "non-appropriation" clauses that provide that the governmental
issuer has no obligation to make future payments under the lease or contract
unless money is appropriated for such purpose by the appropriate legislative
body on a yearly or other periodic basis. To reduce these risks, Dreyfus
Municipal Reserves will only purchase municipal leases subject to a
non-appropriation clause when the payment of principal and accrued interest
is backed by an unconditional irrevocable letter of credit or guarantee of a
bank.
Page [14]
Dreyfus Municipal Reserves proposes to purchase municipal lease
obligations principally from banks, equipment vendors or other parties that
have entered into an agreement with Dreyfus Municipal Reserves providing that
such party will remarket the municipal lease obligations on certain conditions
(described below) within seven days after demand by Dreyfus Municipal
Reserves. (Such agreements are referred to as "remarketing agreements" and the
party that agrees to remarket or repurchase a municipal lease obligation is
referred to as a "remarketing party.") The agreement will provide for a
remarketing price equal to the principal balance on the obligation as
determined pursuant to the terms of the remarketing agreement as of the
repurchase date (plus accrued interest). The Funds' investment manager,
Dreyfus, anticipates that, in most cases, the remarketing agreement will also
provide for the seller of the municipal lease obligation or the remarketing
party to service it for a servicing fee. The conditions to Dreyfus Municipal
Reserves right to require the remarketing party to purchase or remarket the
obligation are that Dreyfus Municipal Reserves must certify at the time of
remarketing that (1) payments of principal and interest under
the municipal lease obligation are current and Dreyfus Municipal Reserves has
no knowledge of any default thereunder by the governmental issuer, (2) such
remarketing is necessary in the sole opinion of a designated officer of
Dreyfus Municipal Reserves to meet the Fund's liquidity needs, and (3) the
governmental issuer has not notified Dreyfus Municipal Reserves of
termination of the underlying lease.
The remarketing agreement described above requires the remarketing
party to purchase (or market to a third party) municipal lease obligations of
Dreyfus Municipal Reserves under certain conditions to provide liquidity if
share redemptions of Dreyfus Municipal Reserves exceed purchases of Dreyfus
Municipal Reserves shares. Dreyfus Municipal Reserves will only enter into
remarketing agreements with banks, equipment vendors or other responsible
parties (such as insurance companies, broker-dealers and other financial
institutions) that in Dreyfus' opinion are capable of meeting their
obligations to the Fund. Dreyfus will regularly monitor the ability of
remarketing parties to meet their obligation to Dreyfus Municipal Reserves.
Dreyfus Municipal Reserves will enter into remarketing agreements covering at
least 75% of the principal amount of the municipal lease obligations in its
portfolio. Dreyfus Municipal Reserves will not enter into remarketing
agreements with any one remarketing party in excess of 5% of its total
assets. Remarketing agreements with broker-dealers may require an exemptive
order under the 1940 Act. Dreyfus Municipal Reserves will not enter into such
agreements with broker-dealers prior to the issuance of such an order or
interpretation of the SEC that such an order is not required. There can be no
assurance that such an order or interpretation will be granted.
The "remarketing" feature of the agreement entitles the remarketing
party to attempt to resell the municipal lease obligation within seven days
after demand from the Fund; however, the remarketing party will be obligated
to repurchase the obligation for its own account at the end of the seven-day
period if such obligation has not been resold. The remarketing agreement will
often be entered into with the party who has sold a municipal lease
obligation to Dreyfus Municipal Reserves, but remarketing agreements may
also be entered into with a separate remarketing party of the same type that
meets the credit and other criteria listed above. Up to 25% of Dreyfus
Municipal Reserves municipal lease obligations may not be covered by
remarketing agreements. Dreyfus Municipal Reserves, however, will not invest
in municipal lease obligations that are not subject to remarketing agreements
if, as a result of such investment, more than 10% of its total assets would
be invested in illiquid securities such as (1) municipal lease obligations
not subject to remarketing agreements and not deemed by Dreyfus at the time
of purchase to be at least of comparable quality to rated municipal debt
obligations, or (2) other illiquid assets such as securities restricted as to
resale under federal or state securities laws. For purposes of the preceding
sentence, a municipal lease obligation that is backed by an irrevocable bank
letter of credit or an insurance policy, issued by a bank or issuer deemed by
Dreyfus to be of high quality and minimal credit risk, will not be deemed to
be "illiquid" solely because the underlying municipal lease obligation is
Page [15]
unrated, if Dreyfus determines that such municipal lease obligation is
readily marketable because it is backed by such letter of credit or insurance
policy.
As used within this section, high quality means that the municipal
lease obligation meets all of the following criteria: (1) the underlying
equipment is for an essential governmental function; (2) the municipality has
a documented history of stable financial operations and timely payments of
principal and interest on its municipal debt or lease obligation; (3) the
lease/purchase agreement contains proper terms and conditions to protect
against non-appropriation, substitution of equipment and other more general
risks associated with the purchase of securities; (4) the equipment
underlying the lease was leased in a proper and legal manner; and (5) the
equipment underlying the lease was leased from a reputable equipment vendor.
A letter of credit or insurance policy would generally provide that the
issuer of the letter of credit or insurance policy would pay the outstanding
principal balance of the municipal lease obligations plus any accrued but
unpaid interest upon non-appropriation or default by the governmental lessee.
However, the terms of each letter of credit or insurance policy may vary
significantly and would affect the degree to which such protections increase
the liquidity of a particular municipal lease obligation.
OTHER INVESTMENT COMPANIES. Each Fund may invest in securities issued
by other investment companies to the extent that such investments are
consistent with the Fund's investment objective and policies and permissible
under the 1940 Act. As a shareholder of another investment company, a Fund
would bear, along with other shareholders, its pro rata portion of the other
investment company's expenses, including advisory fees. These expenses would
be in addition to the advisory and other expenses that the Fund bears
directly in connection with its own operations.
REPURCHASE AGREEMENTS. Each Fund may enter into repurchase
agreements. A repurchase agreement involves the purchase of a security by a
Fund and a simultaneous agreement (generally with a bank or broker-dealer) to
repurchase that security from such Fund at a specified price and date or upon
demand. This technique offers a method of earning income on idle cash. A risk
associated with repurchase agreements is the failure of the seller to
repurchase the securities as agreed, which may cause a Fund to suffer a loss
if the market value of such securities declines before they can be liquidated
on the open market. Repurchase agreements with a duration of more than seven
days are considered illiquid securities and are subject to the limit stated
above.
REVERSE REPURCHASE AGREEMENTS. Dreyfus Money Market Reserves and
Dreyfus Municipal Reserves may enter into reverse repurchase agreements to
meet redemption requests where the liquidation of Fund securities is deemed
by Dreyfus to be disadvantageous. Under a reverse repurchase agreement, a
Fund: (1) 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 (2) 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 portfolio securities,
Dreyfus Money Market Reserves and Dreyfus Municipal Reserves may lend
securities to broker-dealers and other institutional investors pursuant to
agreements requiring that the loans be continuously secured by collateral
equal at all times in value to at least the market value of the securities
loaned. There may be risks of delay in receiving additional collateral or in
recovering the securities loaned or even a loss of rights to the collateral
should the borrower of the securities fail financially. However, loans are
made only to borrowers deemed by Dreyfus to be of good standing and when, in
its judgment, the income to be earned from the loan justifies the attendant
risks.
STAND-BY COMMITMENTS. Dreyfus Municipal Reserves investments may
include "stand-by commitments," which are rights to resell municipal
securities at specified periods prior to their maturity dates to the seller
or to some third party at an agreed-upon price or yield. Stand-by commitments
may involve certain expenses and risks, including the inability of the issuer
of the commitment to pay for the
Page [16]
securities at the time the commitment is exercised, non-marketability of the
commitment, and differences between the maturity of the commitment.
U.S. GOVERNMENT SECURITIES. Dreyfus Money Market Reserves and Dreyfus
Municipal Reserves may invest in obligations issued or guaranteed as to both
principal and interest by the U.S. Government or backed by the full faith and
credit of the United States. In addition to direct obligations of the U.S.
Treasury, these include securities issued or guaranteed by the Federal
Housing Administration, Farmers Home Administration, Export-Import Bank of
the United States, Small Business Administration, General Services
Administration and Maritime Administration. Investments may also be made in
U.S. Government obligations that do not carry the full faith and credit
guarantee, such as those issued by the Federal National Mortgage Association,
the Federal Home Loan Mortgage Corporation, or other instrumentalities.
VARIABLE AMOUNT MASTER DEMAND NOTES. Dreyfus Money Market Reserves
may invest in variable amount master demand notes, which 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 considers creditworthy.
VARIABLE RATE OBLIGATIONS. Dreyfus Money Market Reserves and Dreyfus
Municipal Reserves may invest in variable rate obligations whose interest
rates are adjusted either at predesignated periodic intervals or whenever
there is a change in the market rate to which the security's interest rate is
tied. The adjustments minimize changes in the market value of the obligation
and, accordingly, enhance the ability of the Funds to maintain a stable net
asset value per share ("NAV"). Dreyfus Money Market Reserves and Dreyfus
Municipal Reserves may also purchase participation interests in variable rate
securities such as industrial development bonds.
WHEN-ISSUED SECURITIES AND DELAYED DELIVERY TRANSACTIONS. To secure
advantageous prices or yields, each Fund may purchase U.S. Government
securities on a when-issued basis or may purchase or sell securities for
delayed delivery. In such transactions, delivery of the securities occurs
beyond the normal settlement periods, but no payment or delivery is made by a
Fund prior to the actual delivery or payment by the other party to the
transaction. The purchase of securities on a when-issued or delayed delivery
basis involves the risk that, as a result of an increase in yields available
in the market place, the value of the securities purchased will decline prior
to the settlement date. The sale of securities for delayed delivery involves
the risk that the prices available in the market on the delivery date may be
greater than those obtained in the sale transactions. Each Fund will
establish a segregated account consisting of cash, U.S. Government securities
or other high-grade debt obligations in an amount equal to the amounts of its
when-issued and delayed delivery commitments.
CREDIT ENHANCEMENTS. Certain instruments in which Dreyfus Money
Market Reserves and Dreyfus Municipal Reserves may invest, including floating
rate securities, variable amount master demand notes and variable rate
obligations, may be backed by letters of credit or insured or guaranteed by
financial institutions, such as banks, or insurance companies, whose credit
quality ratings are judged by Dreyfus to be comparable in quality to the two
highest quality ratings of Moody's or Standard & Poor's. Changes in the
credit quality of banks and other financial institutions that provide such
credit or liquidity enhancements to a Fund's portfolio securities could cause
losses to the Fund and affect its share price.
Page [17]
LIMITING INVESTMENT RISKS. Each Fund is subject to a number of
investment limitations. Certain limitations are matters of fundamental policy
and may not be changed with respect to a Fund without the affirmative vote of
the holders of a majority of that Fund's outstanding shares. The SAI describes
each of the Fund's fundamental and non-fundamental restrictions.
The investment objective, policies, restrictions, practices and
procedures of a Fund, unless otherwise specified, may be changed without
shareholder approval. If a Fund's investment objective, policies,
restrictions, practices or procedures change, shareholders should consider
whether the Fund remains an appropriate investment in light of their then
current position and needs.
MANAGEMENT OF THE FUNDS
INVESTMENT MANAGER _ Dreyfus, located at 200 Park Avenue, New York,
New York 10166, was formed in 1947. Dreyfus is a wholly-owned subsidiary of
Mellon Bank, which is a wholly-owned subsidiary of Mellon Bank Corporation
("Mellon"). As of January 31, 1998, Dreyfus managed or administered
approximately $96 billion in assets for approximately 1.7 million investor
accounts nationwide.
Dreyfus serves as the Funds' investment manager. Dreyfus supervises
and assists in the overall management of the Funds' affairs under an
Investment Management Agreement with the Funds, subject to the overall
authority of the Company's Board of Directors in accordance with Maryland
law. Pursuant to the Investment Management Agreement, Dreyfus provides, or
arranges for one or more third parties to provide, investment advisory,
administrative, custody, fund accounting and transfer agency services to the
Funds. As the Funds' investment manager, Dreyfus manages the Funds by making
investment decisions based on the Funds' investment objectives, policies and
restrictions.
Mellon is a publicly-owned multibank holding company incorporated
under Pennsylvania law in 1971 and registered under the Bank Holding Company
Act of 1956, as amended. Mellon provides a comprehensive range of financial
products and services in domestic and selected international markets. Mellon
is among the twenty-five largest bank holding companies in the United States
based on total assets. Mellon's principal wholly-owned subsidiaries are
Mellon Bank, Mellon Bank (DE) National Association, Mellon Bank (MD), The
Boston Company, Inc., AFCO Credit Corporation and a number of companies known
as Mellon Financial Services Corporations. Through its subsidiaries,
including Dreyfus, Mellon managed more than $305 billion in assets as of
December 31, 1997, including approximately $104 billion in mutual fund
assets. As of December 31, 1997, Mellon, through various subsidiaries,
provided non-investment services, such as custodial or administration
services, for more than $1.532 trillion in assets, including approximately
$60 billion in mutual fund assets.
Under the Investment Management Agreement, each Fund pays Dreyfus a
fee computed daily and paid monthly at the annual rate of 0.50% of the Fund's
average daily net assets. Dreyfus pays all of the expenses of each Fund
except brokerage fees, taxes, interest, fees and expenses of the
non-interested Directors (including counsel fees), Rule 12b-1 fees (if
applicable) and extraordinary expenses. In order to compensate Dreyfus for
paying virtually all of a Fund's expenses, each Fund's investment management
fee is higher than the investment advisory fees paid by most investment
companies. Most, if not all, such companies also pay for additional
non-investment advisory expenses that are not paid by such companies'
investment advisers. Although Dreyfus does not pay the fees and expenses of
the non-interested Directors (including counsel fees), Dreyfus is
contractually required to reduce its investment management fee by an amount
equal to each 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 a Fund. For the fiscal year ended October 31, 1997, each Fund
paid Dreyfus 0.50% of its average daily net assets in investment management
fees, less fees and expenses of the non-interested Directors (including
counsel fees).
For the fiscal year ended October 31, 1997, total operating expenses
(excluding Rule 12b-1 fees) were 0.50% of the average daily net assets of
shares for both the Investor and Class R shares of Dreyfus
Page [18]
Money Market Reserves and Dreyfus U.S. Treasury Reserves. For the fiscal year
ended October 31, 1997, total operating expenses (excluding Rule 12b-1 fees)
were 0.52% of the average daily net assets of shares for both the Investor
and Class R shares of Dreyfus Municipal Reserves.
In addition, Investor shares may be subject to certain distribution
and shareholder servicing fees. See "Distribution Plan (Investor Shares
Only)."
Dreyfus may pay the Distributor for shareholder services from
Dreyfus' own assets, including past profits but not including the management
fee paid by the Funds. The Distributor may use part or all of such payments
to pay Agents in respect of these services.
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 Funds or other funds
managed, advised or administered by Dreyfus as factors in the selection of
broker-dealers to execute portfolio transactions for the Funds. 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 Funds, if Dreyfus
believes that the quality of the transaction and the commission are
comparable to what they would be with other qualified brokerage firms. From
time to time, to the extent consistent with its investment objective, policies
and restrictions, a Fund may invest in securities of companies with which
Mellon Bank has a lending relationship.
DISTRIBUTOR. The Funds' 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, One Mellon Bank Center, Pittsburgh,
Pennsylvania 15258 is the Funds' custodian. Dreyfus Transfer, Inc., a
wholly-owned subsidiary of Dreyfus, P.O. Box 9671, Providence, Rhode Island
02440-9671, is the Funds' transfer and dividend disbursing agent (the
"Transfer Agent"). Premier Mutual Fund Services, Inc. serves as the Funds'
sub-administrator and, pursuant to a Sub-Administration Agreement with
Dreyfus, provides various administrative and corporate secretarial services
to the Funds.
HOW TO BUY FUND SHARES
GENERAL. Investor shares are sold primarily to investors maintaining
related securities, brokerage, commodities trading or similar accounts with
Agents that have entered into Agreements with the Funds' distributor.
Additionally, holders of Investor shares of a Fund who have held their shares
since August 31, 1995, may continue to purchase Investor shares of the Fund
whether or not they otherwise would be eligible to do so.
Class R shares are sold primarily to Banks acting on behalf of
customers having a qualified trust or investment account or relationship at
such institution, or to customers who have received and hold shares of a Fund
distributed to them by virtue of such an account or relationship. A
"Retirement Plan" is a qualified or non-qualified employee benefit plan or
other program, including pension, profit-sharing and other deferred
compensation plans, whether established by corporations, partnerships,
non-profit entities or state and local governments. Class R shares may be
purchased for a Retirement Plan only by a custodian, trustee, investment
manager or other entity authorized to act on behalf of such Plan. It is not
recommended that Dreyfus Municipal Reserves be used as a vehicle for
Retirement Plans, Keogh plans or Individual Retirement Accounts.
Stock certificates are issued only upon your written request. No
certificates are issued for fractional shares. The Funds reserve the right to
reject any purchase order. Agents effecting transactions in Fund
Page [19]
shares for the accounts of their clients may charge their clients direct fees
in connection with such transactions.
The minimum initial investment is $100,000. Each Fund may waive its
minimum initial investment requirement for new Fund accounts opened through
an Agent whenever Dreyfus Institutional Services Division ("DISD") has
determined for the initial account opened through such Agent which is below
the Fund's minimum initial investment requirement that the existing accounts
in the Fund opened through that Agent have an average account size, or the
Agent has adequate intent and access to funds to result in maintenance of
accounts in the Fund opened through that Agent with an average account size,
in an amount equal to or in excess of $100,000. DISD is required to
periodically review the average size of the accounts opened through each
Agent and, if necessary, reevaluate the Agent's intent and access to funds.
DISD will discontinue the waiver as to new accounts to be opened through an
Agent if DISD determines that the average size of accounts opened through
that Agent is less than $100,000 and the Agent does not have the requisite
intent and access to funds. The Funds reserve the right to offer their shares
without regard to minimum purchase requirements to employees participating in
certain qualified and non-qualified employee benefit plans or other programs
where contributions or account information can be transmitted in a manner and
form acceptable to the Funds. There is no minimum for subsequent purchases.
The initial investment must be accompanied by the Funds' Account Application.
The Internal Revenue Code of 1986, as amended (the "Code"), imposes
various limitations on the amount that may be contributed to Retirement
Plans. These limitations apply with respect to participants at the plan level
and, therefore, do not directly affect the amount that may be invested in a
Fund by a Retirement Plan. Participants and plan sponsors should consult
their tax advisers for details.
You may purchase shares of a Fund by check or wire, or through the
Dreyfus TELETRANSFER Privilege described below. Checks should be made payable
to "The Dreyfus Family of Funds" or, if for Dreyfus retirement plan accounts,
to "The Dreyfus Trust Company, Custodian." Payments to open new accounts
which are mailed should be sent to The Dreyfus Family of Funds, P.O. Box
9387, Providence, Rhode Island 02940-9387, together with your Account
Application indicating which Fund and Class of shares is being purchased. For
subsequent investments, your Fund account number should appear on the check
and an investment slip should be enclosed and sent to The Dreyfus Family of
Funds, P.O. Box 105, Newark, New Jersey 07101-0105. For Dreyfus retirement
plan accounts, both initial and subsequent investments should be sent to The
Dreyfus Trust Company, Custodian, P.O. Box 6427, Providence, Rhode Island
02940-6427. Neither initial nor subsequent investments should be made by
third party check. Purchase orders may be delivered in person only to a
Dreyfus Financial Center. THESE ORDERS WILL BE FORWARDED TO THE FUNDS 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 DDA# 043435/Dreyfus Money Market Reserves, Dreyfus Municipal Reserves or
Dreyfus U.S.Treasury Reserves and applicable Class for purchase of Fund
shares in your name. The wire must indicate which Fund and Class of shares
are 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 completing your wire payment in order to obtain your Fund account
number. Please 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
Page [20]
any check used for investment in your account does not clear. The Funds make
available to certain large institutions the ability to issue purchase
instructions through compatible computer facilities.
Subsequent investments also may be made by electronic transfer of
funds from an account maintained in a bank or other domestic financial
institution that is an Automated Clearing House ("ACH") member. You must
direct the institution to transmit immediately available funds through the
ACH System to Boston Safe Deposit and Trust Company with instructions to
credit your Fund account. The instructions must specify your Fund account
registration and Fund account number PRECEDED BY THE DIGITS:
"4790" Dreyfus Money Market Reserves/Investor shares;
"4800" Dreyfus Money Market Reserves/Class R shares;
"4860" Dreyfus Municipal Reserves/Investor shares;
"4850" Dreyfus Municipal Reserves/Class R shares;
"4900" Dreyfus U.S. Treasury Reserves/Investor shares;
"4890" Dreyfus U.S. Treasury Reserves/Class R shares.
The Distributor may pay dealers a fee of up to 0.5% of the amount
invested through such dealers in Fund shares by employees participating in
qualified or non-qualified employee benefit plans or other programs where (i)
the employers or affiliated employers maintaining such plans or programs have
a minimum of 250 employees eligible for participation in such plans or
programs or (ii) such plan's or program's aggregate investment in The Dreyfus
Family of Funds or certain other products made available by the Distributor
to such plans or programs exceeds one million dollars ("Eligible Benefit
Plans"). 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 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 Account Application for further information concerning this
requirement. Failure to furnish a certified TIN to the Funds could subject
you to a $50 penalty imposed by the Internal Revenue Service (the "IRS").
NET ASSET VALUE PER SHARE ("NAV"). The price of a Fund's shares,
which are offered on a continuous basis, is their NAV. NAV is determined on
each day that the New York Stock Exchange ("NYSE") is open (a "business
day"). The NAV of each Fund is calculated two times each business day, at 12
noon and 4 p.m., Eastern time. Orders received in proper form by the Transfer
Agent or other entity authorized to receive orders on behalf of the Fund
before 4 p.m., Eastern time, are effective on, and will receive the price
next determined on, that business day. Orders received after 4 p.m., Eastern
time, are effective at 12 noon on, and receive the first share price
determined on, the next business day.
An investment portfolio's NAV refers to the worth of one share. The
NAV for Investor and Class R shares, both of which are offered on a
continuous basis, of a Fund is calculated on the basis of amortized cost,
which involves initially valuing a portfolio instrument at its cost and
thereafter assuming a constant amortization to maturity of any discount or
premium, regardless of the impact of fluctuating interest rates on the market
value of the instrument. Each Fund intends to maintain a constant NAV of
$1.00, although there is no assurance that this can be done on a continuing
basis.
DREYFUS TELETRANSFER PRIVILEGE. You may purchase shares of a Fund
(minimum $500 and maximum $150,000 per day) by telephone if you have checked
the appropriate box and supplied the necessary information on the Account
Application or have filed a Shareholder Services Form with the Transfer
Agent. The proceeds will be transferred between the bank account designated
in one of these documents and your Fund account. Only a bank account
maintained in a domestic financial institution which is an ACH member may be
so designated. The Funds may modify or terminate
Page [21]
this Privilege at any time or charge a service fee upon notice to
shareholders. No such fee currently is contemplated.
If you have selected the Dreyfus TELETRANSFER Privilege, you may
request a Dreyfus TELETRANSFER purchase of Fund shares by calling
1-800-645-6561 or, if calling from overseas, 516-794-5452.
SHAREHOLDER SERVICES
The services and privileges described under this heading may not be
available to clients of certain Agents and some Agents may impose certain
conditions on their clients which are different from those described in this
Prospectus. You should consult your Agent in this regard.
FUND EXCHANGES
You may purchase, in exchange for shares of a Class, shares of
certain other eligible funds managed or administered by Dreyfus, to the
extent such shares are offered for sale in your state of residence. These
funds have different investment objectives which may be of interest to you.
If you desire to use this service, please call 1-800-645-6561 to determine if
it is available and whether any conditions are imposed on its use. WITH
RESPECT TO CLASS R SHARES HELD BY RETIREMENT PLANS, EXCHANGES MAY BE MADE
ONLY BETWEEN A SHAREHOLDER'S RETIREMENT PLAN ACCOUNT IN ONE FUND AND SUCH
SHAREHOLDER'S RETIREMENT PLAN ACCOUNT IN ANOTHER FUND.
To request an exchange, you or your Agent acting on your behalf must
give exchange instructions to the Transfer Agent in writing or by telephone.
Before any exchange, you must obtain and should review a copy of the current
prospectus of the fund into which the exchange is being made. Prospectuses
may be obtained by calling 1-800-645-6561. Except in the case of personal
retirement plans, the shares being exchanged must have a current value of at
least $500; furthermore, when establishing a new account by exchange, the
shares being exchanged must have a value of at least the minimum initial
investment required for the fund into which the exchange is being made. The
ability to issue exchange instructions by telephone is given to all Fund
shareholders automatically, unless you check the relevant "No" box on the
Account Application, indicating that you specifically refuse this Privilege.
The Telephone Exchange Privilege may be established for an existing account
by written request signed by all shareholders on the account, 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
TouchRegistration Mark automated telephone system) by calling 1-800-645-6561.
If calling from overseas, call 516-794-5452. See "How to Redeem Fund
Shares_Procedures." Upon an exchange 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, Check Redemption Privilege, Wire Redemption
Privilege, Telephone Redemption Privilege, Dreyfus TELETRANSFER Privilege and
the dividends and other distributions payment option (except for Dreyfus
Dividend Sweep) selected by the investor.
Shares will be exchanged at the next determined NAV; however, a sales
load may be charged with respect to exchanges of Investor shares into funds
sold with a sales load. If you are exchanging Investor shares into a fund
that charges a sales load, you may qualify for share prices which do not
include the sales load or which reflect a reduced sales load, if the shares
of the fund from which you are exchanging were: (a) purchased with a sales
load, (b) acquired by a previous exchange from shares purchased with a sales
load, or (c) acquired through reinvestment of dividends or other
distributions paid with respect to the foregoing categories of shares. To
qualify, at the time of the exchange you must notify the Transfer Agent or
your Agent must notify the Distributor. Any such qualification is subject to
confirmation of your holdings through a check of appropriate records. See
"Shareholder Services" in the SAI. No fees currently are charged shareholders
directly in connection with exchanges, although the Fund reserves the right,
upon not
Page [22]
less than 60 days' written notice, to charge shareholders a nominal fee in
accordance with rules promulgated by the SEC. The Funds reserve the right to
reject any exchange request in whole or in part. The availability of Fund
exchanges may be modified or terminated at any time upon notice to
shareholders. The exchange of shares of one fund for shares of another is
treated for Federal income tax purposes as a sale of the shares given in
exchange by the shareholder and, therefore, an exchanging shareholder may
realize, or an exchange on behalf of a Retirement Plan which is not tax
exempt may result in, a taxable gain or loss.
DREYFUS AUTO-EXCHANGE PRIVILEGE
Dreyfus Auto-Exchange Privilege enables you to invest regularly (on a
semi-monthly, monthly, quarterly or annual basis), in exchange for shares of
a Fund, in shares of certain other eligible funds in the Dreyfus Family of
Funds of which you are currently an investor. WITH RESPECT TO CLASS R SHARES
HELD BY RETIREMENT PLANS, EXCHANGES PURSUANT TO THE DREYFUS AUTO-EXCHANGE
PRIVILEGE MAY BE MADE ONLY BETWEEN A SHAREHOLDER'S RETIREMENT PLAN ACCOUNT IN
ONE FUND AND SUCH SHAREHOLDER'S RETIREMENT PLAN ACCOUNT IN ANOTHER FUND. The
amount you designate, which can be expressed either in terms of a specific
dollar or share amount ($100 minimum), will be exchanged automatically on the
first and/or fifteenth day of the month according to the schedule you have
selected. Shares will be exchanged at the then-current NAV; however a sales
load may be charged with respect to exchanges of Investor shares into funds
sold with a sales load. The right to exercise this Privilege may be modified
or canceled by the Funds or the Transfer Agent. You may modify or cancel your
exercise of this Privilege at any time by mailing written notification to The
Dreyfus Family of Funds, P.O. Box 9671, Providence, Rhode Island 02940-9671.
The Funds may charge a service fee for the use of this Privilege. No such fee
currently is contemplated. For more information concerning this Privilege and
the funds in the Dreyfus Family of Funds eligible to participate in this
Privilege, or to obtain a Dreyfus Auto-Exchange Authorization Form, please
call toll free 1-800-645-6561.
DREYFUS-AUTOMATIC ASSET BUILDERRegistration Mark
Dreyfus-AUTOMATIC Asset Builder permits you to purchase shares of a
Fund (minimum of $100 and maximum of $150,000 per transaction) at regular
intervals selected by you. Shares of a Fund are purchased by transferring
funds from the bank account designated by you. At your option, the bank
account designated by you will be debited in the specified amount, and Fund
shares will be purchased, once a month, on either the first or fifteenth day,
or twice a month, on both days. Only an account maintained at a domestic
financial institution which is an ACH member may be so designated. To
establish a Dreyfus-AUTOMATIC Asset Builder account, you must file an
authorization form with the Transfer Agent. You may obtain the necessary
authorization by calling 1-800-645-6561. You may cancel your participation in
this Privilege or change the amount of purchase at any time by mailing
written notification to The Dreyfus Family of Funds, P.O. Box 9671,
Providence, Rhode Island 02940-9671, or, if to Dreyfus retirement plan
accounts to The Dreyfus Trust Company, Custodian, P.O. Box 6427, Providence,
Rhode Island 02940-6427, and the notification will be effective three
business days following receipt. The Funds may modify or terminate this
Privilege at any time or charge a service fee. No such fee currently is
contemplated.
DREYFUS DIVIDEND OPTIONS
Dreyfus Dividend Sweep enables you to invest automatically dividends
or dividends and other distributions, if any, paid by a 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 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 a Fund to a designated bank
Page [23]
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 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 Funds may modify or
terminate these Privileges at any time or charge a service fee. No such fee
currently is contemplated. Shares held under Keogh Plans, IRAs and retirement
plans are not eligible for Dreyfus Dividend Sweep.
DREYFUS GOVERNMENT DIRECT DEPOSIT PRIVILEGE
Dreyfus Government Direct Deposit Privilege enables you to purchase
shares of a Fund (minimum of $100 and maximum of $50,000 per transaction) by
having Federal salary, Social Security, or certain veterans', military or
other payments from the Federal government automatically deposited into your
Fund account. You may deposit as much of such payments as you elect. To
enroll in Dreyfus Government Direct Deposit, you must file with the Transfer
Agent a completed Direct Deposit Sign-Up Form for each type of payment that
you desire to include in this Privilege. The appropriate form may be obtained
by calling 1-800-645-6561. Death or legal incapacity will terminate your
participation in this Privilege. You may elect at any time to terminate your
participation by notifying in writing the appropriate Federal agency.
Further, the Funds may terminate your participation upon 30 days' notice to
you.
DREYFUS PAYROLL SAVINGS PLAN
Dreyfus Payroll Savings Plan permits you to purchase shares of a Fund
(minimum of $100 per transaction) automatically on a regular basis. Depending
upon 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 Funds, the Transfer Agent or any other person, to
arrange for transactions under the Dreyfus Payroll Savings Plan. The Funds
may modify or terminate this Privilege at any time or charge a service fee.
No such fee currently is contemplated.
AUTOMATIC WITHDRAWAL PLAN
The Automatic Withdrawal Plan permits you to request withdrawal of a
specified dollar amount (minimum of $50) on either a monthly or quarterly
basis if you have a $5,000 minimum account. 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, a Fund or the Transfer Agent. Shares
for which certificates have been issued may not be redeemed through the
Automatic Withdrawal Plan.
Page [24]
RETIREMENT PLANS
Dreyfus Money Market Reserves and Dreyfus U.S. Treasury Reserves
offer a variety of pension and profit-sharing plans, including Keogh Plans,
IRAs (including regular IRAs, spousal IRAs for a non-working spouse, Roth
IRAs, SEP-IRAs, and rollover 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 a 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 Funds impose 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 a Fund's
then-current NAV.
The Funds ordinarily will make payment for all shares redeemed within
seven days after receipt by the Transfer Agent of a redemption request in
proper form, except as provided by the rules of the SEC. HOWEVER, IF YOU HAVE
PURCHASED FUND SHARES BY CHECK, BY THE DREYFUS TELETRANSFER PRIVILEGE OR
THROUGH DREYFUS-AUTOMATIC ASSET BUILDERRegistration Mark AND SUBSEQUENTLY
SUBMIT A WRITTEN REDEMPTION REQUEST TO THE TRANSFER AGENT, THE REDEMPTION
PROCEEDS WILL BE TRANSMITTED TO YOU PROMPTLY UPON BANK CLEARANCE OF YOUR
PURCHASE CHECK, DREYFUS TELETRANSFER PURCHASE OR DREYFUS-AUTOMATIC ASSET
BUILDER ORDER, WHICH MAY TAKE UP TO EIGHT BUSINESS DAYS OR MORE. IN ADDITION,
THE FUNDS WILL NOT HONOR REDEMPTION CHECKS UNDER THE CHECK REDEMPTION
PRIVILEGE AND WILL REJECT REQUESTS TO REDEEM SHARES BY WIRE OR TELEPHONE OR
PURSUANT TO THE DREYFUS TELETRANSFER PRIVILEGE FOR A PERIOD OF EIGHT BUSINESS
DAYS AFTER RECEIPT BY THE TRANSFER AGENT OF THE PURCHASE CHECK, THE DREYFUS
TELETRANSFER PURCHASE OR THE DREYFUS-AUTOMATIC ASSET BUILDER ORDER AGAINST
WHICH SUCH REDEMPTION IS REQUESTED. THESE PROCEDURES WILL NOT APPLY IF YOUR
SHARES WERE PURCHASED BY WIRE PAYMENT, OR IF YOU OTHERWISE HAVE A SUFFICIENT
COLLECTED BALANCE IN YOUR ACCOUNT TO COVER THE REDEMPTION REQUEST. PRIOR TO
THE TIME ANY REDEMPTION IS EFFECTIVE, DIVIDENDS ON SUCH SHARES WILL ACCRUE
AND BE PAYABLE, AND YOU WILL BE ENTITLED TO EXERCISE ALL OTHER RIGHTS OF
BENEFICIAL OWNERSHIP. Fund shares will not be redeemed until the Transfer
Agent has received your Account Application.
Each Fund reserves the right to redeem a shareholder's account at its
option upon not less than 45 days' written notice if the net asset value of
such account is $10,000 or less ($500 or less in the case of holders of
shares of a Fund since August 31, 1995) and remains at or below such amount
during the notice period.
PROCEDURES _ You may redeem shares of a Fund by using the regular redemption
procedure through the Transfer Agent, or through the Telephone Redemption
Privilege or the Check Redemption Privilege, which are granted automatically
unless you specifically refuse them by checking the applicable "No" box on
the Account Application. The Telephone Redemption Privilege and the Check
Redemption Privilege may be established for an existing account by a separate
signed Shareholder
Page [25]
Services Form or, with respect to the Telephone Redemption Privilege, by oral
request from any of the authorized signatories on the account by calling
1-800-645-6561. You also may 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 Funds make available to certain large
institutions the ability to issue redemption instructions through compatible
computer facilities. The Funds reserve the right to refuse any request made
by telephone, including requests made shortly after a change of address, and
may limit the amount involved or the number of such requests. The Funds may
modify or terminate 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 Check
Redemption, Wire Redemption, Telephone Redemption or Dreyfus TELETRANSFER
Privilege.
The Telephone Redemption Privilege or Telephone Exchange Privilege
authorizes the Transfer Agent to act on telephone instructions (including
over The Dreyfus TouchRegistration Mark automated telephone system) from any
person representing himself or herself to be you, or a representative of your
Agent, and reasonably believed by the Transfer Agent to be genuine. The Funds
will require the Transfer Agent to employ reasonable procedures, such as
requiring a form of personal identification, to confirm that instructions are
genuine and, if it does not follow such procedures, the Funds or the Transfer
Agent may be liable for any losses due to unauthorized or fraudulent
instructions. Neither the Funds nor the Transfer Agent will be liable for
following telephone instructions reasonably believed to be genuine.
During times of drastic economic or market conditions, you may
experience difficulty in contacting the Transfer Agent by telephone to
request a redemption or an exchange of Fund shares. In such cases, you should
consider using the other redemption procedures described herein. Use of these
other redemption procedures may result in your redemption request being
processed at a later time than it would have been if telephone redemption had
been used.
REGULAR REDEMPTION. Under the regular redemption procedure, you may
redeem your shares by written request mailed to The Dreyfus Family of Funds,
P.O. Box 9671, Providence, Rhode Island 02940-9671, or, if for Dreyfus
retirement plan accounts, to The Dreyfus Trust Company, Custodian, P.O. Box
6427, Providence, Rhode Island 02940-6427. Redemption requests may be
delivered in person only to a Dreyfus Financial Center. THESE REQUESTS WILL
BE FORWARDED TO THE FUNDS AND WILL BE PROCESSED ONLY UPON RECEIPT THEREBY. For
the location of the nearest financial center, please call the telephone
number listed under "General Information." Redemption requests must be signed
by each shareholder, including each owner of a joint account, and each
signature must be guaranteed. The Transfer Agent has adopted standards and
procedures pursuant to which signature-guarantees in proper form generally
will be accepted from domestic banks, brokers, dealers, credit unions,
national securities exchanges, registered securities associations, clearing
agencies and savings associations, as well as from participants in the New
York Stock Exchange Medallion Signature Program, the Securities Transfer
Agents Medallion Program ("STAMP"), and the Stock Exchanges Medallion
Program. For more information with respect to signature-guarantees, please
call the telephone number listed under "General Information."
Redemption proceeds of at least $1,000 will be wired to any member
bank of the Federal Reserve System in accordance with a written
signature-guaranteed request.
CHECK REDEMPTION PRIVILEGE _ You may write Redemption Checks drawn on
your Fund account. Redemption Checks may be made payable to the order of any
person in the amount of $500 or more. Redemption Checks should not be used to
close your account. Redemption Checks are free, but
Page [26]
the Transfer Agent will impose a fee for stopping payment of a Redemption
Check upon your request or if the Transfer Agent cannot honor a Redemption
Check because of insufficient funds or other valid reason. You should date
your Redemption Checks with the current date when you write them. Please do
not postdate your Redemption Checks. If you do, the Transfer Agent will
honor, upon presentment, even if presented before the date of the check, all
postdated Redemption Checks which are dated within six months of presentment
for payment, if they are otherwise in good order. The Check Redemption
Privilege is granted automatically unless you refuse it.
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.
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 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.
DISTRIBUTION PLAN (INVESTOR SHARES ONLY)
The Investor shares of each Fund are subject to a Distribution Plan
("Plan'') adopted pursuant to Rule 12b-1 under the 1940 Act ("Rule 12b-1'').
The Investor shares of the Funds bear some of the cost of selling those
shares under the Plan. The Plan allows each Fund to spend annually up to
0.25% of the average daily net assets attributable to Investor shares to
compensate Dreyfus Service Corporation, an affiliate of Dreyfus, for
shareholder servicing activities and the Distributor for shareholder
servicing activities and for activities or expenses primarily intended to
result in the sale of Investor shares of the Fund. The Plan allows the
Distributor to make payments from the Rule 12b-1 fees it collects from a Fund
to compensate
Agents that have entered into Agreements with the Distributor. Under the
Agreements, the Agents are obligated to provide distribution related services
with regard to the Funds and/or shareholder services to the Agent's clients
that own Investor shares of a Fund.
The Funds and the Distributor may suspend or reduce payments under
the Plan at any time, and payments are subject to the continuation of a
Fund's Plan and the Agreements described above. From time to time, the
Agents, the Distributor and the Funds may agree to voluntarily reduce the
maximum fees payable under the Plan. See the SAI for more details on the
Plan.
Potential investors should read this Prospectus in light of the terms
governing Agreements with their Agents. An Agent entitled to receive
compensation for selling and servicing a Fund's shares may receive different
compensation with respect to one Class of shares over another.
Page [27]
PERFORMANCE INFORMATION
From time to time, each Fund may advertise the yield on a class of
shares. Dreyfus Municipal Reserves may advertise tax-equivalent yields. YIELD
AND THE TAX EQUIVALENT YIELD FIGURES ARE BASED ON HISTORICAL EARNINGS AND ARE
NOT INTENDED TO INDICATE FUTURE PERFORMANCE.
The "yield'' of a Class of shares of a Fund refers to the income
generated by an investment in such Class over a seven-day period identified
in the advertisement. This income is then "annualized.'' That is, the amount
of income generated by the investment during that week is assumed to be
generated each week over a 52-week period and is shown as a percentage of the
investment. The "effective yield'' is calculated similarly, but, when
annualized, the income earned by an investment in a Class of shares of a Fund
is assumed to be reinvested. The "effective yield'' will be slightly higher
than the "yield'' because of the compounding effect of this assumed
reinvestment. The tax-equivalent yield of Dreyfus Municipal Reserves shows
the level of taxable yield needed to produce an after-tax equivalent to such
Fund's tax-free yield. This is done by increasing a Class's yield by the
amount necessary to reflect the payment of federal income tax (and state
income tax, if applicable) at a stated tax rate. Because yields fluctuate,
yield data cannot necessarily be used to compare an investment in a Class of
shares with bank deposits, savings accounts, and similar investment
alternatives which often provide an agreed-upon or guaranteed fixed yield for
a stated period of time.
Yield quotations will be computed separately for each Class of a
Fund's shares. Because of the difference in the fees and expenses borne by
Class R and Investor shares of each Fund, the yield on Class R shares will
generally be higher than the yield on Investor shares. Any fees charged by a
Bank or Agent directly to its customers' account in connection with
investments in the Fund will not be included in calculations of yield. Each
Fund's annual report contains additional performance information and is
available upon request without charge from the Fund's Distributor or your
Bank or Agent.
A Fund may compare the performance of its Investor and Class R shares
with various industry standards of performance including Lipper Analytical
Services, Inc. ratings, and the Consumer Price Index. Performance rankings as
reported in CHANGING TIMES, BUSINESS WEEK, INSTITUTIONAL INVESTOR, THE WALL
STREET JOURNAL, IBC/DONOGHUE'S MONEY FUND REPORT, MUTUAL FUND FORECASTER, NO
LOAD INVESTOR, MONEY MAGAZINE, MORNINGSTAR MUTUAL FUND VALUES, U.S. NEWS AND
WORLD REPORT, FORBES, FORTUNE, BARRON'S, FINANCIAL PLANNING, FINANCIAL
PLANNING ON WALL STREET, CERTIFIED FINANCIAL PLANNER TODAY, INVESTMENT
ADVISOR, KIPLINGER'S, SMART MONEY, and similar publications may also be used
in comparing the Fund's performance. Furthermore, a Fund may quote its
Investor and Class R shares' yields in advertisements or in shareholder
reports. A Fund may advertise a quotation of yield or other similar quotation
demonstrating the income earned or distributions made by the Fund.
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
Each Fund ordinarily declares dividends from net investment income on
each day the NYSE is open for business. A Fund's earnings for Saturdays,
Sundays and holidays are declared as dividends on the preceding business day.
Dividends usually are paid on the last calendar day of each month and are
automatically reinvested in additional Fund shares at net asset value or, at
your option, paid in cash. If you redeem all shares in your account at any
time during the month, all dividends to which you are entitled will be paid
to you along with the proceeds of the redemption. If you are an omnibus
accountholder and indicate in a partial redemption request that a portion of
any accrued dividends to which such account is entitled belongs to an
underlying accountholder who has redeemed all shares in his or her account,
such portion of the accrued dividends will be paid to you along with the
proceeds of the redemption. Distributions from net realized securities gains,
if any, generally are declared and paid once a year, but a Fund 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. A Fund will not make distributions from net
realized securities gains unless capital loss carryovers, if any, have been
utilized or have expired. You may choose whether
Page [28]
to receive distributions in cash or to reinvest in additional Fund shares at
net asset value. All expenses are accrued daily and deducted before
declaration of dividends to investors.
Distributions paid by a Fund with respect to one class of shares may
be greater or less per share than those paid with respect to another class of
shares due to the different expenses of the different classes. Except as
provided below, shares purchased on a day on which a Fund calculates its NAV
will not begin to accrue dividends until the following business day and
redemption orders effected on any particular day will receive all dividends
declared through the day of redemption. However, if immediately available
funds are received by the Transfer Agent prior to 12:00 noon, Eastern time,
you may receive the dividend declared on the day of purchase. You will not
receive the dividends declared on the day of redemption if a wire redemption
order is placed prior to 12:00 noon, Eastern time.
Each Fund intends to continue to qualify for treatment as a regulated
investment company under the Code so that it will be relieved of federal
income tax on that part of its investment company taxable income (consisting
generally of taxable net investment income and net short-term capital gain)
that is distributed to its shareholders. In addition, Dreyfus Municipal
Reserves intends to continue to qualify to pay "exempt-interest'' dividends,
which requires, among other things, that at the close of each quarter of its
taxable year at least 50% of the value of its total assets must consist of
municipal securities.
Dividends from a Fund's investment company taxable income are taxable
to you as ordinary income, to the extent of the Fund's earnings and profits.
Distributions by Dreyfus Municipal Reserves that are designated by it as
"exempt-interest dividends'' generally may be excluded by you from your gross
income. Distributions by a Fund (including Dreyfus Municipal Reserves) of net
capital gain, when designated as such, are taxable to you as long-term
capital gains, regardless of the length of time you have owned your shares.
The Funds are not expected to realize long-term capital gains.
Interest on indebtedness incurred or continued to purchase or carry
shares of Dreyfus Municipal Reserves will not be deductible for federal
income tax purposes to the extent that Fund's distributions consist of
exempt-interest dividends. Dreyfus Municipal Reserves may invest in "private
activity bonds,'' the interest on which is treated as a tax preference item
for shareholders in determining their liability for the alternative minimum
tax. Proposals have been and may be introduced before Congress that would
restrict or eliminate the federal income tax exemption for interest on
municipal securities. If such a proposal were enacted, the availability of
such securities for investment by Dreyfus Municipal Reserves and the value of
its portfolio would be affected. In such event, that Fund would reevaluate
its investment objective and policies.
Dividends and other distributions are taxable to you regardless of
whether they are received in cash or reinvested in additional Fund shares,
even if the value of your shares is below your cost. None of the dividends
paid by any of the Funds will be eligible for the dividends-received
deductions allowed to corporations.
Dividends and other distributions paid by a Fund to qualified
Retirement Plans ordinarily will not be subject to taxation until the
proceeds are distributed from the Retirement Plans. A Fund will not report to
the IRS distributions paid to such plans. Generally, distributions from
qualified retirement plans, except those representing returns of
non-deductible contributions thereto, will be taxable as ordinary income and,
if made prior to the time the participant reaches age 591\2, generally will
be subject to an additional tax equal to 10% of the taxable portion of the
distribution. If the distribution from such a retirement plan (other than
certain governmental or church plans) for any taxable year following the year
in which the participant reaches age 701\2 is less than the "minimum required
distribution'' for that taxable year, an excise tax equal to 50% of the
deficiency may be imposed by the IRS. The administrator, trustee or custodian
of such a retirement plan will be responsible for reporting such
distributions 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
Page [29]
qualified Retirement Plan does not elect to have the eligible rollover
distribution paid directly from the plan to an eligible retirement plan in a
"direct rollover," the eligible rollover distribution is subject to a 20%
income withholding tax.
In January of each year, your Fund will send you a Form 1099-DIV
notifying you of the status for federal income tax purposes of your
distributions for the preceding year. Dreyfus Municipal Reserves also will
advise shareholders of the percentage, if any, of the dividends paid that are
exempt from federal income tax and the portion, if any, of those dividends
that is a tax preference item for purposes of the alternative minimum tax.
You must furnish the Funds with your TIN and state whether you are
subject to backup withholding for prior under-reporting, certified under
penalties of perjury as prescribed by the Code and the regulations
thereunder. Unless previously furnished, investments received without such a
certification will be returned. Each Fund is required to withhold 31% of all
dividends payable to any individuals and certain other non-corporate
shareholders who do not provide the Fund with a correct TIN or who otherwise
are subject to backup withholding.
Each Fund may be subject to a 4% nondeductible excise tax to the
extent it fails to distribute by the end of any calendar year substantially
all of its taxable ordinary income for that year and capital gain net income
for the one-year period ending on October 31 of that year, plus certain other
amounts. Each Fund expects to make such distributions as are necessary to
avoid the imposition of this tax.
The foregoing is only a summary of some of the important tax
considerations generally affecting each Fund and its shareholders; see the
SAI for a further discussion. There may be other federal, state or local tax
considerations applicable to a particular investor; for example, Dreyfus
Municipal Reserves' dividends may be wholly or partly taxable under state
and/or local laws. You therefore are urged to consult your own tax adviser.
GENERAL INFORMATION
The Company was incorporated in Maryland on August 6, 1987 under the
name The Laurel Funds, Inc., and changed its name to The Dreyfus/Laurel
Funds, Inc. on October 17, 1994. The Company is registered with the SEC under
the 1940 Act as an open-end management investment company. The Company has an
authorized capitalization of 25 billion shares of $0.001 par value stock with
equal voting rights. The Articles of Incorporation permit the Board of
Directors to create an unlimited number of investment portfolios (each a
"fund'') without shareholder approval. Each of the Funds offered by this
Prospectus currently issues two Classes of shares, designated "Investor'' and
"Class R'' shares. The Company may in the future seek to achieve a 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 a 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 that affects the interests of one or more
particular funds or classes, in which case only the shareholders of the
affected fund or class are entitled to vote, each as a separate class. Only
holders of Investor shares will be entitled to vote on matters submitted to
shareholders pertaining to the Distribution Plan relating to that class.
Unless otherwise required by the 1940 Act, ordinarily it will not be
necessary for the Funds to hold annual meetings of shareholders. As a result,
Fund shareholders may not consider each year the election of Directors or the
appointment of auditors. However, the holders of at least 10% of the shares
outstanding and entitled to vote may require the Company to hold a special
meeting of shareholders for purposes of removing a Director from office and
for any other proper purpose. Company shareholders
Page [30]
may remove a Director by the affirmative vote of a majority of the Company's
voting shares. In addition, the Board of Directors will call a meeting of
shareholders for the purpose of electing Directors if, at any time, less than
a majority of the Directors then holding office have been elected by
shareholders.
The Transfer Agent maintains a record of your ownership and will send
you confirmations and statements of account.
Shareholder inquiries may be made by writing to the Funds at 144 Glenn
Curtiss Boulevard, Uniondale, New York 11556-0144, or by calling toll free
1-800-645-6561.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND IN THE
FUNDS' OFFICIAL SALES LITERATURE IN CONNECTION WITH THE OFFER OF THE FUNDS'
SHARES, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUNDS. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER IN ANY STATE IN WHICH, OR TO ANY PERSON TO WHOM,
SUCH OFFERING MAY NOT LAWFULLY BE MADE.
Page [31]
Dreyfus Money Market Reserves
Dreyfus Municipal Reserves
Dreyfus U.S. Treasury Reserves
Prospectus
Copy Rights 1998 Dreyfus Service Corporation
LMMKTp0398
____________________________________________________________________
DREYFUS PREMIER LIMITED TERM INCOME FUND
CLASS A, CLASS B, CLASS C AND CLASS R SHARES
DREYFUS PREMIER BALANCED FUND
CLASS A, CLASS B, CLASS C AND CLASS R SHARES
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
March 1, 1998
____________________________________________________________________
This Statement of Additional Information ("SAI"), which is not a
prospectus, supplements and should be read in conjunction with the current
Prospectus of the Dreyfus Premier Limited Term Income Fund (formerly, the
Premier Limited Term Income Fund) dated March 1, 1998 and the current
Prospectus of the Dreyfus Premier Balanced Fund (formerly, the Premier
Balanced Fund) (collectively, the "Funds") dated March 1, 1998, as they may
be revised from time to time. The Funds are separate, diversified
portfolios of The Dreyfus/Laurel Funds, Inc. (formerly, The Laurel Funds,
Inc.), an open-end management investment company (the "Company"), known as a
mutual fund. To obtain a copy of a Fund's Prospectus, please write to the
Fund at 144 Glenn Curtiss Boulevard, Uniondale, New York 11556-0144, or
call one of the following numbers:
Call Toll Free 1-800-554-4611
In New York City -- Call 1-718-895-1206
Outside the U.S. and Canada -- Call 516-794-5452
The Dreyfus Corporation ("Dreyfus") serves as the Funds' investment
manager.
Premier Mutual Fund Services, Inc. (the "Distributor") is the
distributor of the Funds' shares.
TABLE OF CONTENTS
Page
Investment Objectives and Management Policies B-2
Management of the Funds B-14
Management Arrangements B-21
Purchase of Fund Shares B-22
Distribution and Service Plans B-24
Redemption of Fund Shares B-26
Shareholder Services B-27
Determination of Net Asset Value B-31
Dividends, Other Distributions and Taxes B-31
Portfolio Transactions B-35
Performance Information B-37
Information About the Funds B-40
Transfer and Dividend Disbursing Agent, Custodian, Counsel
and Independent Auditors B-40
Financial Statements B-41
Appendix B-42
INVESTMENT OBJECTIVES AND MANAGEMENT POLICIES
The following information supplements and should be read in conjunction
with the section in each Fund's Prospectus entitled "Description of the
Fund."
Portfolio Securities
Floating Rate Securities. A floating rate security is one whose terms
provide for the automatic adjustment of interest rates whenever a specified
interest rate changes. The interest on floating rate securities is
ordinarily tied to and is a percentage of the prime rate of a specified bank
or some similar objective standard such as the 90-day U.S. Treasury bill
rate and may change daily. Generally, changes in interest rates on floating
rate securities will produce changes in the security's market value from the
original purchase price resulting in the potential for capital appreciation
or capital market depreciation being less than for fixed income obligations
with a fixed interest rate.
ECDs, ETDs, and Yankee CDs. The Funds may purchase Eurodollar
certificates of deposit ("ECDs"), which are U.S. dollar-denominated
certificates of deposit issued by foreign branches of domestic banks,
Eurodollar time deposits ("ETDs"), which are U.S. dollar denominated
deposits in a foreign branch of a domestic bank or foreign bank, and Yankee-
Dollar certificates of deposit ("Yankee CDs") which are certificates of
deposit issued by a domestic branch of a foreign bank denominated in U.S.
dollars and held in the United States. ECDs, ETDs, and Yankee CDs are
subject to somewhat different risks than domestic obligations of domestic
banks. These risks are discussed in each Fund's Prospectus.
Government Obligations. Each Fund may invest in a variety of U.S.
Treasury obligations, which differ only in their interest rates, maturities
and times of issuance: (a) U.S. Treasury bills have a maturity of one year
or less, (b) U.S. Treasury notes have maturities of one to ten years, and
(c) U.S. Treasury bonds generally have maturities of greater than ten years.
In addition to U.S. Treasury obligations, each Fund may invest in
obligations issued or guaranteed by U.S. Government agencies and
instrumentalities which are supported by any of the following: (a) the full
faith and credit of the U.S. Treasury (such as Government National Mortgage
Association ("GNMA") participation certificates), (b) the right of the
issuer to borrow an amount limited to a specific line of credit from the
U.S. Treasury, (c) the discretionary authority of the U.S. Government agency
or instrumentality, or (d) the credit of the instrumentality. (Examples of
agencies and instrumentalities are: Federal Land Banks, Federal Housing
Administration, Farmers Home Administration, Export-Import Bank of the
United States, Central Bank for Cooperatives, Federal Intermediate Credit
Banks, Federal Home Loan Banks, General Services Administration, Maritime
Administration, Tennessee Valley Authority, District of Columbia Armory
Board, Inter-American Development Bank, Asian-American Development Bank,
Student Loan Marketing Association, International Bank for Reconstruction
and Development and Federal National Mortgage Association ("FNMA"). No
assurance can be given that the U.S. Government will provide financial
support to such U.S. Government agencies or instrumentalities described in
(b), (c) and (d) in the future, other than as set forth above, since it is
not obligated to do so by law.
Repurchase Agreements. The Funds may enter into repurchase agreements
with U.S. Government securities dealers recognized by the Federal Reserve
Board, with member banks of the Federal Reserve System, or with such other
brokers or dealers that meet the credit guidelines of the Board of
Directors. In a repurchase agreement, the Fund buys a security from a seller
that has agreed to repurchase the same security at a mutually agreed upon
date and price. A Fund's resale price will be in excess of the purchase
price, reflecting an agreed upon interest rate. This interest rate is
effective for the period of time the Fund is invested in the agreement and
is not related to the coupon rate on the underlying security. Repurchase
agreements may also be viewed as a fully collateralized loan of money by the
Fund to the seller. The period of these repurchase agreements will usually
be short, from overnight to one week, and at no time will a Fund invest in
repurchase agreements for more than one year. A Fund will always receive as
collateral securities whose market value including accrued interest is, and
during the entire term of the agreement remains, at least equal to 100% of
the dollar amount invested by the Fund in each agreement, and the Fund will
make payment for such securities only upon physical delivery or upon
evidence of book entry transfer to the account of the Custodian. If the
seller defaults, the Fund might incur a loss if the value of the collateral
securing the repurchase agreement declines and might incur disposition costs
in connection with liquidating the collateral. In addition, if bankruptcy
proceedings are commenced with respect to the seller of a security which is
the subject of a repurchase agreement, realization upon the collateral by
the Fund may be delayed or limited. Dreyfus seeks to minimize the risk of
loss through repurchase agreements by analyzing the creditworthiness of the
obligors under repurchase agreements, in accordance with the credit
guidelines of the Company's Board of Directors.
When-Issued Securities. New issues of U.S. Treasury and Government
securities are often offered on a when-issued basis. This means that
delivery and payment for the securities normally will take place
approximately 7 to 45 days after the date the buyer commits to purchase
them. The payment obligation and the interest rate that will be received on
securities purchased on a when-issued basis are each fixed at the time the
buyer enters into the commitment. Each Fund will make commitments to
purchase such securities only with the intention of actually acquiring the
securities, but the Fund may sell these securities or dispose of the
commitment before the settlement date if it is deemed advisable as a matter
of investment strategy. Cash or marketable high-grade debt securities equal
to the amount of the above commitments will be segregated on each Fund's
records. For the purpose of determining the adequacy of these securities the
segregated securities will be valued at market. If the market value of such
securities declines, additional cash or securities will be segregated on the
Fund's records on a daily basis so that the market value of the account will
equal the amount of such commitments by the Fund.
Securities purchased on a when-issued basis and the securities held by
each Fund are subject to changes in market value based upon the public's
perception of changes in the level of interest rates. Generally, the value
of such securities will fluctuate inversely to changes in interest rates --
i.e., they will appreciate in value when interest rates decline and decrease
in value when interest rates rise. Therefore, if in order to achieve higher
interest income each Fund remains substantially fully invested at the same
time that it has purchased securities on a "when-issued" basis, there will
be a greater possibility of fluctuation in the Fund's net asset value.
When payment for when-issued securities is due, each Fund will meet its
obligations from then-available cash flow, the sale of segregated
securities, the sale of other securities or, and although it would not
normally expect to do so, from the sale of the when-issued securities
themselves (which may have a market value greater or less than the Fund's
payment obligation). The sale of securities to meet such obligations carries
with it a greater potential for the realization of capital gains, which are
subject to federal income taxes.
Commercial Paper. The Funds may invest in commercial paper issued in
reliance on the so-called "private placement" exemption from registration
afforded by Section 4(2) of the Securities Act of 1933 ("Section 4(2)
paper"). Section 4(2) paper is restricted as to disposition under the
federal securities laws and generally is sold to investors who agree that
they are purchasing the paper for an investment and not with a view to
public distribution. Any resale by the purchaser must be in an exempt
transaction. Section 4(2) paper is normally resold to other investors
through or with the assistance of the issuer or investment dealers who make
a market in Section 4(2) paper, thus providing liquidity. Pursuant to
guidelines established by the Company's Board of Directors, Dreyfus may
determine that Section 4(2) paper is liquid for the purposes of complying
with the Fund's investment restriction relating to investments in illiquid
securities.
Management Policies
The Funds engage, except as noted, in the following practices in
furtherance of their investment objectives.
Loans of Fund Securities. Each Fund has authority to lend its portfolio
securities provided (1) the loan is secured continuously by collateral
consisting of U.S. Government securities or cash or cash equivalents
adjusted daily to make a market value at least equal to the current market
value of these securities loaned; (2) the Fund may at any time call the loan
and regain the securities loaned; (3) the Fund will receive any interest or
dividends paid on the loaned securities; and (4) the aggregate market value
of securities loaned will not at any time exceed one-third of the total
assets of the Fund. In addition, it is anticipated that a Fund may share
with the borrower some of the income received on the collateral for the loan
or that it will be paid a premium for the loan. In determining whether to
lend securities, Dreyfus considers all relevant factors and circumstances
including the creditworthiness of the borrower.
Reverse Repurchase Agreements. A Fund may enter into reverse repurchase
agreements to meet redemption requests where the liquidation of portfolio
securities is deemed by Dreyfus to be inconvenient or disadvantageous. A
reverse repurchase agreement is a transaction whereby a Fund transfers
possession of a portfolio security to a bank or broker-dealer in return for
a percentage of the portfolio security's market value. The Fund retains
record ownership of the security involved including the right to receive
interest and principal payments. At an agreed upon future date, the Fund
repurchases the security by paying an agreed upon purchase price plus
interest. Cash or liquid high-grade debt obligations of the Fund equal in
value to the repurchase price including any accrued interest will be
maintained in a segregated account while a reverse repurchase agreement is
in effect.
Derivative Instruments (Balanced Fund Only). The Fund may purchase and
sell various financial instruments ("Derivative Instruments"), such as
financial futures contracts (including interest rate and index futures
contracts) and options (including options on securities, indices, and
futures contracts). The index Derivative Instruments each Fund may use may
be based on indices of U.S. or foreign equity or debt securities. These
Derivative Instruments may be used, for example, to preserve a return or
spread, to lock in unrealized market value gains or losses, to facilitate or
substitute for the sale or purchase of securities, or to alter the exposure
of a particular investment or portion of a Fund's portfolio to fluctuations
in interest rates.
Hedging strategies can be broadly categorized as "short hedges" and
"long hedges." A short hedge is a purchase or sale of a Derivative
Instrument intended partially or fully to offset potential declines in the
value of one or more investments held in a Fund's portfolio. Thus, in a
short hedge a Fund takes a position in a Derivative Instrument whose price
is expected to move in the opposite direction of the price of the investment
being hedged.
Conversely, a long hedge is a purchase or sale of a Derivative
Instrument intended partially or fully to offset potential increases in the
acquisition cost of one or more investments that a Fund intends to acquire.
Thus, in a long hedge a Fund takes a position in a Derivative Instrument
whose price is expected to move in the same direction as the price of the
prospective investment being hedged. A long hedge is sometimes referred to
as an anticipatory hedge. In an anticipatory hedge transaction, a Fund does
not own a corresponding security and, therefore, the transaction does not
relate to a security the Fund owns. Rather, it relates to a security that
the Fund intends to acquire. If the Fund does not complete the hedge by
purchasing the security it anticipated purchasing, the effect on the Fund's
portfolio is the same as if the transaction were entered into for
speculative purposes.
Derivative Instruments on securities generally are used to hedge
against price movements in one or more particular securities positions that
a Fund owns or intends to acquire. Derivative Instruments on indices, in
contrast, generally are used to attempt to hedge against price movements in
market sectors in which a Fund has invested or expects to invest.
Derivative Instruments on debt securities may be used to hedge either
individual securities or broad debt market sectors.
The use of Derivative Instruments is subject to applicable regulations
of the Securities and Exchange Commission ("SEC"), the several options and
futures exchanges upon which they are traded, the Commodity Futures Trading
Commission ("CFTC") and various state regulatory authorities. In addition,
the ability to use Derivative Instruments will be affected by tax
considerations. See "Dividends, Other Distributions and Taxes."
In addition to the instruments, strategies and risks described below
and in the Prospectus, Dreyfus expects to discover additional opportunities
in connection with other Derivative Instruments. These new opportunities
may become available as Dreyfus develops new techniques, as regulatory
authorities broaden the range of permitted transactions and as new
techniques are developed. Dreyfus may utilize these opportunities to the
extent that they are consistent with the Fund's investment objective, and
permitted by the Fund's investment policies and applicable regulatory
authorities.
Special Risks. The use of Derivative Instruments involves special
considerations and risks, certain of which are described below. Risks
pertaining to particular Derivative Instruments are described in the
sections that follow.
(1) Successful use of most Derivative Instruments depends upon
Dreyfus' ability to predict movements of the overall securities, currency
and interest rate markets, which requires different skills than predicting
changes in the prices of individual securities. There can be no assurance
that any particular strategy will succeed.
(2) There might be imperfect correlation, or even no correlation,
between price movements of a Derivative Instrument and price movements of
the investments being hedged. For example, if the value of a Derivative
Instrument used in a short hedge increased by less than the decline in value
of the hedged investment, the hedge would not be fully successful. Such a
lack of correlation might occur due to factors unrelated to the value of the
investments being hedged, such as speculative or other pressures on the
markets in which Derivative Instruments are traded. The effectiveness of
hedges using Derivative Instruments on indices will depend on the degree of
correlation between price movements in the index and price movements in the
securities being hedged.
Because there are a limited number of types of exchange-traded options
and futures contracts, it is likely that the standardized contracts
available will not match the Fund's current or anticipated investments
exactly. The Fund may invest in options and futures contracts based on
securities with different issuers, maturities, or other characteristics from
the securities in which it typically invests, which involves a risk that the
options or futures position will not track the performance of the Fund's
other investments.
Options and futures prices can also diverge from the prices of their
underlying instruments, even if the underlying instruments match the Fund's
investments well. Options and futures prices are affected by such factors
as current and anticipated short-term interest rates, changes in volatility
of the underlying instrument, and the time remaining until expiration of the
contract, which may not affect security prices the same way. Imperfect
correlation may also result from differing levels of demand in the options
and futures markets and the securities markets, from structural differences
in how options and futures and securities are traded, or from imposition of
daily price fluctuation limits or trading halts. The Fund may purchase or
sell options and futures contracts with a greater or lesser value than the
securities it wishes to hedge or intends to purchase in order to attempt to
compensate for differences in volatility between the contract and the
securities, although this may not be successful in all cases. If price
changes in the Fund's options or futures positions are poorly correlated
with its other investments, the positions may fail to produce anticipated
gains or result in losses that are not offset by gains in other investments.
(3) If successful, the above-discussed strategies can reduce risk of
loss by wholly or partially offsetting the negative effect of unfavorable
price movements. However, such strategies can also reduce opportunity for
gain by offsetting the positive effect of favorable price movements. For
example, if the Fund entered into a short hedge because Dreyfus projected a
decline in the price of a security in the Fund's portfolio, and the price of
that security increased instead, the gain from that increase might be wholly
or partially offset by a decline in the price of the Derivative Instrument.
Moreover, if the price of the Derivative Instrument declined by more than
the increase in the price of the security, the Fund could suffer a loss. In
either such case, the Fund would have been in a better position had it not
attempted to hedge at all.
(4) As described below, the Fund might be required to maintain assets
as "cover," maintain segregated accounts or make margin payments when it
takes positions in Derivative Instruments involving obligations to third
parties (i.e., Derivative Instruments other than purchased options). If the
Fund were unable to close out its positions in such Derivative Instruments,
it might be required to continue to maintain such assets or accounts or make
such payments until the position expired or matured. These requirements
might impair a Fund's ability to sell a portfolio security or make an
investment at a time when it would otherwise be favorable to do so, or
require that the Fund sell a portfolio security at a disadvantageous time.
The Fund's ability to close out a position in a Derivative Instrument prior
to expiration or maturity depends on the existence of a liquid secondary
market or, in the absence of such a market, the ability and willingness of
the other party to the transaction ("counterparty") to enter into a
transaction closing out the position. Therefore, there is no assurance that
any position can be closed out at a time and price that is favorable to the
Fund.
Cover for Derivative Instruments. Transactions using Derivative
Instruments may expose the Fund to an obligation to another party. The Fund
will not enter into any such transactions unless it owns either (1) an
offsetting ("covered") position in securities, futures, or options or (2)
cash and short-term liquid debt securities with a value sufficient at all
times to cover its potential obligations to the extent not covered as
provided in (1) above. The Fund will comply with SEC guidelines regarding
cover for Derivative Instruments and will, if the guidelines so require, set
aside cash, U.S. Government securities or other liquid, high-grade debt
securities in a segregated account with its custodian in the prescribed
amount.
Assets used as cover or held in a segregated account cannot be sold
while the position in the corresponding Derivative Instrument is open,
unless they are replaced with other appropriate assets. As a result, the
commitment of a large portion of the Fund's assets to cover or segregated
accounts could impede portfolio management or the Fund's ability to meet
redemption requests or other current obligations.
Options. A call option gives the purchaser the right to buy, and
obligates the writer to sell, the underlying investment at the agreed upon
exercise price during the option period. A put option gives the purchaser
the right to sell, and obligates the writer to buy, the underlying
investment at the agreed upon exercise price during the option period. A
purchaser of an option pays an amount, known as the premium, to the option
writer in exchange for rights under the option contract.
Options on indices are similar to options on securities or currencies
except that all settlements are in cash and gain or loss depends on changes
in the index in question rather than on price movements in individual
securities or currencies.
The purchase of call options can serve as a long hedge, and the
purchase of put options can serve as a short hedge. Writing put or call
options can enable a Fund to enhance income or yield by reason of the
premiums paid by the purchasers of such options. However, if the market
price of the security or other instrument underlying a put option declines
to less than the exercise price on the option, minus the premium received,
the Fund would expect to suffer a loss.
Writing call options can also serve as a limited short hedge because
declines in the value of the hedged investment would be offset to the extent
of the premium received for writing the option. However, if the investment
appreciates to a price higher than the exercise price of the call option, it
can be expected that the option will be exercised and the Fund will be
obligated to sell the investment at less than its market value.
Writing put options can serve as a limited long hedge because increases
in the value of the hedged investment would be offset to the extent of the
premium received for writing the option. However, if the investment
depreciates to a price lower than the exercise price of the put option, it
can be expected that the put option will be exercised and the Fund will be
obligated to purchase the investment at more than its market value.
The value of an option position will reflect, among other things, the
current market value of the underlying investment, the time remaining until
expiration, the relationship of the exercise price to the market price of
the underlying investment, the historical price volatility of the underlying
investment and general market conditions. Options that expire unexercised
have no value.
The Fund may effectively terminate its right or obligation under an
option by entering into a closing transaction. For example, the Fund may
terminate its obligation under a call or put option that it had written by
purchasing an identical call or put option; this is known as a closing
purchase transaction. Conversely, the Fund may terminate a position in a
put or call option it had purchased by writing an identical put or call
option; this is known as a closing sale transaction. Closing transactions
permit a Fund to realize profits or limit losses on an option position prior
to its exercise or expiration.
The Fund may purchase and sell both exchange-traded and over-the-
counter ("OTC") options. Exchange-traded options in the United States are
issued by a clearing organization that, in effect, guarantees completion of
every exchange-traded option transaction. In contrast, OTC options are
contracts between a Fund and its counterparty (usually a securities dealer
or a bank) with no clearing organization guarantee. Thus, when the Fund
purchases an OTC option, it relies on the counterparty from whom it
purchased the option to make or take delivery of the underlying investment
upon exercise of the option. Failure by the counterparty to do so would
result in the loss of any premium paid by a Fund as well as the loss of any
expected benefit of the transaction. The Fund will enter into only those
option contracts that are listed on a national securities or commodities
exchange or traded in the OTC market for which there appears to be a liquid
secondary market.
The Fund will not purchase or write OTC options if, as a result of such
transaction, the sum of (i) the market value of outstanding OTC options
purchased by the Fund, (ii) the market value of the underlying securities
covered by outstanding OTC call options written by the Fund, and (iii) the
market value of all other assets of the Fund that are illiquid or are not
otherwise readily marketable, would exceed 15% of the net assets of the
Fund, taken at market value. However, if an OTC option is sold by a Fund to
a primary U.S. Government securities dealer recognized by the Federal
Reserve Bank of New York and the Fund has the unconditional contractual
right to repurchase such OTC option from the dealer at a predetermined
price, then the Fund will treat as illiquid such amount of the underlying
securities as is equal to the repurchase price less the amount by which the
option is "in-the-money" (the difference between the current market value of
the underlying securities and the option's strike price). The repurchase
price with primary dealers is typically a formula price that is generally
based on a multiple of the premium received for the option plus the amount
by which the option is "in-the-money."
The Fund's ability to establish and close out positions in exchange-
listed options depends on the existence of a liquid market. However, there
can be no assurance that such a market will exist at any particular time.
Closing transactions can be made for OTC options only by negotiating
directly with the counterparty, or by a transaction in the secondary market
if any such market exists. Although the Fund will enter into OTC options
only with major dealers in unlisted options, there is no assurance that the
Fund will in fact be able to close out an OTC option position at a favorable
price prior to expiration. In the event of insolvency of the counterparty,
the Fund might be unable to close out an OTC option position at any time
prior to its expiration.
If the Fund were unable to effect a closing transaction for an option
it had purchased, it would have to exercise the option to realize any
profit. The inability to enter into a closing purchase transaction for a
covered call option written by the Fund could cause material losses because
the Fund would be unable to sell the investment used as cover for the
written option until the option expires or is exercised.
The Fund may write only covered call options on securities. A call
option is covered if a Fund owns the underlying security or a call option on
the same security with a lower strike price.
Futures Contracts and Options on Futures Contracts. When the Fund
purchases a futures contract, it incurs an obligation to take delivery of a
specified amount of the obligation underlying the futures contract at a
specified time in the future for a specified price. When the Fund sells a
futures contract, it incurs an obligation to deliver a specified amount of
the obligation underlying the futures contract at a specified time in the
future for an agreed upon price. With respect to index futures, no physical
transfer of the securities underlying the index is made. Rather, the
parties settle by exchanging in cash an amount based on the difference
between the contract price and the closing value of the index on the
settlement date.
When the Fund writes an option on a futures contract, it becomes
obligated, in return for the premium paid, to assume a position in a futures
contract at a specified exercise price at any time during the term of the
option. If the Fund has written a call, it assumes a short futures
position. If the Fund has written a put, it assumes a long futures
position. When the Fund purchases an option on a futures contract, it
acquires the right, in return for the premium it pays, to assume a position
in a futures contract (a long position if the option is a call and a short
position if the option is a put).
The purchase of futures or call options on futures can serve as a long
hedge, and the sale of futures or the purchase of put options on futures can
serve as a short hedge. Writing call options on futures contracts can serve
as a limited short hedge, using a strategy similar to that used for writing
call options on securities or indices. Similarly, writing put options on
futures contracts can serve as a limited long hedge.
Futures strategies also can be used to manage the average duration of
the Fund's fixed-income portfolio. If Dreyfus wishes to shorten the average
duration of a Fund's fixed-income portfolio, the Fund may sell an interest
rate futures contract or a call option thereon, or purchase a put option on
that futures contract. If Dreyfus wishes to lengthen the average duration
of the Fund's fixed-income portfolio, the Fund may buy an interest rate
futures contract or a call option thereon, or sell a put option thereon.
No price is paid upon entering into a futures contract. Instead, at
the inception of a futures contract a Fund is required to deposit "initial
margin" consisting of cash or U.S. Government securities in an amount
generally equal to 10% or less of the contract value. Margin must also be
deposited when writing a call or put option on a futures contract, in
accordance with applicable exchange rules. Unlike margin in securities
transactions, initial margin on futures contracts does not represent a
borrowing, but rather is in the nature of a performance bond or good-faith
deposit that is returned to the Fund at the termination of the transaction
if all contractual obligations have been satisfied. Under certain
circumstances, such as periods of high volatility, the Fund may be required
by an exchange to increase the level of its initial margin payment.
Subsequent "variation margin" payments are made to and from the futures
broker daily as the value of the futures position varies, a process known as
"marking-to-market." Variation margin does not involve borrowing, but
rather represents a daily settlement of a Fund's obligations to or from a
futures broker. When the Fund purchases an option on a future, the premium
paid plus transaction costs is all that is at risk. In contrast, when the
Fund purchases or sells a futures contract or writes a call or put option
thereon, it is subject to daily variation margin calls that could be
substantial in the event of adverse price movements. If the Fund has
insufficient cash to meet daily variation margin requirements, it might need
to sell securities at a time when such sales are disadvantageous.
Purchasers and sellers of futures contracts and options on futures can
enter into offsetting closing transactions, similar to closing transactions
on options, by selling or purchasing, respectively, an instrument identical
to the instrument purchased or sold. Positions in futures and options on
futures may be closed only on an exchange or board of trade that provides a
secondary market. Although each Fund intends to enter into futures and
options on futures only on exchanges or boards of trade where there appears
to be a liquid secondary market, there can be no assurance that such a
market will exist for a particular contract at a particular time. In such
event, it may not be possible to close a futures contract or options
position.
Under certain circumstances, futures exchanges may establish daily
limits on the amount that the price of a futures or an option on a futures
contract can vary from the previous day's settlement price; once that limit
is reached, no trades may be made that day at a price beyond the limit.
Daily price limits do not limit potential losses because prices could move
to the daily limit for several consecutive days with little or no trading,
thereby preventing liquidation of unfavorable positions.
If the Fund were unable to liquidate a futures or options on futures
position due to the absence of a liquid secondary market or the imposition
of price limits, it could incur substantial losses. The Fund would continue
to be subject to market risk with respect to the position. In addition,
except in the case of purchased options, the Fund would continue to be
required to make daily variation margin payments and might be required to
maintain the position being hedged by the future or option or to maintain
cash or securities in a segregated account.
To the extent that the Fund enters into futures contracts or options on
futures contracts on an exchange regulated by the CFTC, in each case other
than for bona fide hedging purposes (as defined by the CFTC), the aggregate
initial margin and premiums required to establish those positions (excluding
the amount by which options are "in-the-money" at the time of purchase) will
not exceed 5% of the liquidation value of the Fund's portfolio, after taking
into account unrealized profits and unrealized losses on any contracts the
Fund has entered into. This policy does not limit to 5% the percentage of
the Fund's assets that are at risk in futures contracts and options on
futures contracts.
Master/Feeder Option. The Company may in the future seek to achieve a
Fund's investment objective by investing all of the Fund's net investable
assets in another investment company having the same objective and
substantially the same investment policies and restrictions as those
applicable to the Fund. Shareholders of a Fund will be given at least 30
days' prior notice of any such investment. Such investment would be made
only if the Company's Board of Directors determines it to be in the best
interest of a Fund and its shareholders. In making that determination, the
Company's Board of Directors will consider, among other things, the benefits
to shareholders and/or the opportunity to reduce costs and achieve
operational efficiencies. Although the Funds believe that the Directors
will not approve an arrangement that is likely to result in higher costs, no
assurance is given that costs will be materially reduced if this option is
implemented.
Investment Restrictions
The following limitations have been adopted by each Fund. A Fund may
not change any of these fundamental investment limitations without the
consent of: (a) 67% or more of the shares present at a meeting of
shareholders duly called if the holders of more than 50% of the outstanding
shares of a Fund are present or represented by proxy; or (b) more than 50%
of the outstanding shares of a Fund, whichever is less. Each Fund may not:
1. Purchase any securities which would cause more than 25% of the
value of a Fund's total assets at the time of such purchase to be invested
in the securities of one or more issuers conducting their principal
activities in the same industry. (For purposes of this limitation, U.S.
Government securities, and state or municipal governments and their
political subdivisions are not considered members of any industry. In
addition, this limitation does not apply to investments in domestic banks,
including U.S. branches of foreign banks and foreign branches of U.S.
banks).
2. Borrow money or issue senior securities as defined in the
Investment Company Act of 1940, as amended (the "1940 Act") except that (a)
a Fund may borrow money in an amount not exceeding one-third of the Fund's
total assets at the time of such borrowings, and (b) a Fund may issue
multiple classes of shares. The purchase or sale of futures contracts and
related options shall not be considered to involve the borrowing of money or
issuance of securities.
3. Purchase with respect to 75% of a Fund's total assets securities
of any one issuer (other than securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities) if, as a result, (a) more
than 5% of a Fund's total assets would be invested in the securities of that
issuer, or (b) a Fund would hold more than 10% of the outstanding voting
securities of that issuer.
4. Make loans or lend securities, if as a result thereof more than
one-third of the Fund's total assets would be subject to all such loans. For
purposes of this limitation debt instruments and repurchase agreements shall
not be treated as loans.
5. Purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent a
Fund from investing in securities or other instruments backed by real
estate, including mortgage loans, or securities of companies that engage in
real estate business or invest or deal in real estate or interests therein).
6. Underwrite securities issued by any other person, except to the
extent that the purchase of securities and later disposition of such
securities in accordance with the Fund's investment program may be deemed an
underwriting.
7. Purchase or sell commodities except that each Fund may enter into
futures contracts and related options, forward currency contacts and other
similar instruments.
Each Fund may, notwithstanding any other fundamental investment policy
or limitation, invest all of its investable assets in securities of a single
open-end management investment company with substantially the same
investment objective, policies and limitations as the Fund.
Each Fund has adopted the following additional non-fundamental
restrictions. These non-fundamental restrictions may be changed without
shareholder approval, in compliance with applicable law and regulatory
policy.
1. No Fund shall sell securities short, unless it owns or has the
right to obtain securities equivalent in kind and amounts to the securities
sold short, and provided that transactions in futures contracts and options
are not deemed to constitute selling short.
2. No Fund shall purchase securities on margin, except that a Fund
may obtain such short-term credits as are necessary for the clearance of
transactions, and provided that margin payments in connection with futures
contracts and options shall not constitute purchasing securities on margin.
3. No Fund shall purchase oil, gas or mineral leases.
4. Each Fund will not purchase or retain the securities of any issuer
if the officers or Directors of the Fund, its advisers, or managers, owning
beneficially more than one half of one percent of the securities of such
issuer, together own beneficially more than 5% of such securities.
5. No Fund will purchase securities of issuers (other than securities
issued or guaranteed by domestic or foreign governments or political
subdivisions thereof), including their predecessors, that have been in
operation for less than three years, if by reason thereof, the value of such
Fund's investment in securities would exceed 5% of such Fund's total assets.
For purposes of this limitation, sponsors, general partners, guarantors and
originators of underlying assets may be treated as the issuer of a security.
6. No Fund will invest more than 15% of the value of its net assets
in illiquid securities, including repurchase agreements with remaining
maturities in excess of seven days, time deposits with maturities in excess
of seven days and other securities which are not readily marketable. For
purposes of this limitation, illiquid securities shall not include Section
4(2) Paper and securities which may be resold under Rule 144A under the
Securities Act of 1933, provided that the Board of Directors, or its
delegate, determines that such securities are liquid based upon the trading
markets for the specific security.
7. No Fund may invest in securities of other investment companies,
except as they may be acquired as part of a merger, consolidation or
acquisition of assets and except to the extent otherwise permitted by the
1940 Act.
8. No Fund shall purchase any security while borrowings representing
more than 5% of the Fund's total assets are outstanding.
9. No Fund will purchase warrants if at the time of such purchase:
(a) more than 5% of the value of such Fund's assets would be invested in
warrants, or (b) more than 2% of the value of the Fund's assets would be
invested in warrants that are not listed on the New York or American Stock
Exchange (for purposes of this undertaking, warrants acquired by a Fund in
units or attached to securities will be deemed to have no value).
10. No Fund will purchase puts, calls, straddles, spreads and any
combination thereof if by reason thereof the value of its aggregate
investment in such classes of securities would exceed 5% of its total assets
except that: (a) this limitation shall not apply to standby commitments, and
(b) this limitation shall not apply to a Fund's transactions in futures
contracts and related options.
As an operating policy, each Fund will not invest more than 25% of the
value of its total assets, at the time of such purchase in domestic banks,
including U.S. branches of foreign banks and foreign branches of U.S. banks.
The Company's Board of Directors may change this policy without shareholder
approval. Notice will be given to shareholders if this policy is changed by
the Board of Directors.
MANAGEMENT OF THE FUNDS
PRINCIPAL SHAREHOLDERS
There were no shareholder(s) who owned 5% or more of the outstanding
Class A shares of Dreyfus Premier Balanced Fund at February 9, 1998.
The following shareholder(s) owned 5% or more of the outstanding Class
B Shares of Dreyfus Premier Balanced Fund at February 9, 1998: MLPF&S for
the Sole Benefit of its Customers, Attn., Fund Administrator, 4800 Deer Lake
Drive E. FL 3, Jacksonville FL 32246-6944: 10% record.
The following shareholder(s) owned 5% or more of the outstanding Class
C shares of Dreyfus Premier Balanced Fund at February, 9, 1998: MLPF&S for
the Sole Benefit of its Customers, Attn., Fund Administrator, 4800 Deer Lake
Dr. E. FL 3, Jacksonville, FL
33246-6944; Dreyfus Trust Co. Trust, William L. Hagan, under IRA Rollover
Plan, 17493 Oak Canyon Place, Castro Valley, CA 94546-1369: 15% record and;
Donaldson Lufkin Jenrette, Securities Corporation Inc., P.O. Box 2052,
Jersey City, NJ 07303-9998: 6% record.
The following Shareholder(s) owned 5% or more of the outstanding Class
R Shares of Dreyfus Premier Balanced Fund at February 9, 1998:
MLPF&S for the Sole Benefit of its Customers, Attn., Fund
Administrator, 4800 Deer Lake Dr. E. FL 3, Jacksonville, FL 33246-6944: 10%
record.
The following shareholder(s) owned 5% or more of the outstanding Class
A shares of Dreyfus Premier Limited Term Income Fund at February 9, 1998:
Painewebber for the Benefit of Amone Family Limited Partnership, 125
Stillwater Court, Marco Island, FL 34145-4221, 27% record; Painwebber for
the Benefit of Joseph M. Amore, Revocable Trust, Joseph M. Amore, Trustee,
125 Stillwater Court, Marco Island, FL 34145-4221; 23% record.
The following shareholder(s) owned 5% or more of the outstanding Class
B shares of Dreyfus Premier Limited Term Income Fund at February 9, 1998:
MLPF&S for the sole Benefit of its customers, Attention: Fund
Administrator, 4800 Deer Lake Drive E., FL. 3 Jacksonville FL. 32245-6484:
12% record; Dain Rauscher Incorporated PO Box 1308, Yakema, MA 98907; 7%
record and; BMC Securities, Inc. One Commerce Square, 2005 Market Street
Suite 1200, Philadelphia, PA 19103: 7% record.
The following shareholder(s) owned 5% or more of the outstanding Class
C shares of Dreyfus Premier Limited Term Income Fund at February 9, 1998:
BMC Securities, Inc. One Commerce Square, 2005 Market Street, Suite 1200,
Philadelphia, PA. 19103: 66% record; Nick Vizzarri & Nella Vizzani JTORS
2518 Bryn Mawr Avenue Ardmore, PA 1903-2608; 8% record; MLPF & 3 for the
Sole Benefit of its Customers, 4800 Deer Lake Drive E. FL. 3 Jacksonville,
FL. 32246-64848: 5% record and; Painwebber for the Benefit of Kenneth U.
Bigvfe, 1611 Oakmont Circle, Niceville, FL. 32578-4321: 5% record.
The following shareholder(s) owned 5% or more of the outstanding Class
R shares of Dreyfus Premier Limited Term Income Fund at February 9, 1998:
Mac & Co. Mutual Funds Operations, PO Box 3198, Pittsburgh, PA 15230-3198:
34% record; Corestates Bank, FBO The Buckeye Pipeline Company PO Box 7829,
Philadelphia PA 19101-7829: 19% record and; Boston Safe Deposit & Trust Co.
as Agent - Omnibus Account, 1 Cabot Road, Medford, MA. 02155-5141: 5%
record.
FEDERAL LAW AFFECTING MELLON BANK
The Glass-Steagall Act of 1933 prohibits national banks from engaging
in the business of underwriting, selling or distributing securities and
prohibits a member bank of the Federal Reserve System from having certain
affiliations with an entity engaged principally in that business. The
activities of Mellon Bank, N.A. ("Mellon Bank") in informing its customers
of, and performing, investment and redemption services in connection with
the Funds, and in providing services to the Funds as custodian, as well as
Dreyfus' investment advisory activities, may raise issues under these
provisions. Mellon Bank has been advised by counsel that the activities
contemplated under the arrangements are consistent with its statutory and
regulatory obligations.
Changes in either federal or state statutes and regulations relating to
the permissible activities of banks and their subsidiaries or affiliates, as
well as further judicial or administrative decisions or interpretations of
such future statutes and regulations, could prevent Mellon Bank or Dreyfus
from continuing to perform all or a part of the above services for its
customers and/or a Fund. If Mellon Bank or Dreyfus were prohibited from
serving a Fund in any of its present capacities, the Board of Directors
would seek an alternative provider(s) of such services.
DIRECTORS AND OFFICERS
The Company has a Board composed of eleven Directors which supervises
the Company's investment activities and reviews contractual arrangements
with companies that provide the Funds with services. The following lists
the Directors and officers and their positions with the Company and their
present and principal occupations during the past five years. Each Director
who is an "interested person" of the Company (as defined in the 1940 Act) is
indicated by an asterisk. Each of the Directors also serves as a Trustee of
The Dreyfus/Laurel Funds Trust and The Dreyfus/Laurel Tax-Free Municipal
Funds (collectively, with the Company, the "Dreyfus/Laurel Funds").
Directors of the Company
o+RUTH MARIE ADAMS. Director of the Company; Professor of English and Vice
President Emeritus, Dartmouth College; Senator, United Chapters of Phi
Beta Kappa; Trustee, Woods Hole Oceanographic Institution; from
November 1995 to January 1997, Director, Access Capital Strategic
Community Investment Fund, Inc. - Institutional Investment Portfolio.
Age: 83 years old. Address: 1026 Kendal Lyme Road, Hanover, New
Hampshire 03755.
o+FRANCIS P. BRENNAN. Chairman of the Board of Directors and Assistant
Treasurer of the Company; Director and Chairman, Massachusetts Business
Development Corp.; and from November 1995 to January 1997, Director,
Access Capital Strategic Community Investment Fund, Inc. - Bank
Portfolio. Age: 80 years old. Address: Massachusetts Business
Development Corp., 50 Milk Street, Boston, Massachusetts 02109.
o+JOSEPH S. DIMARTINO, Director of the Company since February 1995. Since
January 1995, Mr. DiMartino has served as Chairman of the Board for
various funds in the Dreyfus Family of Funds. He is also Chairman of
the Board of Staffing Resources, Inc., a temporary placement agency.
Mr. DiMartino also serves as a Director of the Muscular Dystrophy
Association, HealthPlan Services Corporation, a provider of marketing,
administrative and risk management services to health and other benefit
programs, Noel Group, Inc., a venture capital company, Carlyle
Industries, Inc. (formerly Belding Heminway Company, Inc.), a button
packager and distributor, and Curtis Industries, Inc., a national
distributor of security products, chemicals, and automotive and other
hardware. Mr. DiMartino is also a Board member of 152 other funds in
the Dreyfus Family of Funds. From November 1995 to January 1997,
Director, Access Capital Strategic Community Investment Fund, Inc. -
Institutional Investment Portfolio and Bank Portfolio. For more than
five years prior to January 1995, he was President, a director and,
until August 24, 1994, Chief Operating Officer of Dreyfus and Executive
Vice President and a director of Dreyfus Service Corporation, a wholly-
owned subsidiary of Dreyfus. From August 1994 to December 31, 1994, he
was a director of Mellon Bank Corporation. Age: 54 years old.
Address: 200 Park Avenue, New York, New York 10166.
o+JAMES M. FITZGIBBONS. Director of the Company; Chairman, Howes Leather
Company, Inc.; Director, Fiduciary Trust Company; Chairman, CEO and
Director, Fieldcrest-Cannon Inc.; Director, Lumber Mutual Insurance
Company; Director, Barrett Resources, Inc.; from November 1995 to
January 1997, Director, Access Capital Strategic Community Investment
Fund, Inc. - Bank Portfolio. Age: 63 years old. Address: 40 Norfolk
Road, Brookline, Massachusetts 02167.
o*J. TOMLINSON FORT. Director of the Company; Partner, Reed, Smith, Shaw &
McClay (law firm). From November 1995 to January 1997, Director,
Access Capital Strategic Community Investment Fund, Inc. - Bank
Portfolio. Age: 69 years old. Address: 204 Woodcock Drive,
Pittsburgh, Pennsylvania 15215.
o+ARTHUR L. GOESCHEL. Director of the Company; Director, Calgon Carbon
Corporation; Director, Cerex Corporation; Director, National Picture
Frame Corporation; former Chairman of the Board and Director, Rexene
Corporation; Chairman of the Board and Director, Tetra Corporation 1991-
1993; Director, Medalist Corporation 1992-1993. From November 1995 to
January 1997, Director, Access Capital Strategic Community Investment
Fund, Inc. - Institutional Investment Portfolio. Age: 76 years old.
Address: Way Hallow Road and Woodland Road, Sewickley, Pennsylvania
15143.
o+KENNETH A. HIMMEL. Director of the Company; former Director, The Boston
Company, Inc. ("TBC") and Boston Safe Deposit and Trust Company;
President and Chief Executive Officer, Himmel & Co., Inc.; Vice
Chairman, Sutton Place Gourmet, Inc.; Managing Partner, Franklin
Federal Partners. From November 1995 to January 1997, Director, Access
Capital Strategic Community Investment Fund, Inc. - Bank Portfolio.
Age: 51 years old. Address: Himmel and Company, Inc., 625 Madison
Avenue, New York, New York 10022.
o*ARCH S. JEFFERY. Director of the Company; Financial Consultant. From
November 1995 to January 1997, Director, Access Capital Strategic
Community Investment Fund, Inc. - Institutional Investment Portfolio.
Age: 80 years old. Address: 1817 Foxcroft Lane, Unit 306, Allison
Park, Pennsylvania 15101.
o+STEPHEN J. LOCKWOOD. Director of the Company; President and CEO, LDG
Management Company Inc.; CEO, LDG Reinsurance Underwriters, SRRF
Management Inc. and Medical Reinsurance Underwriters Inc.; from
November 1995 to January 1997, Director, Access Capital Strategic
Community Investment Fund, Inc. - Institutional Investment Portfolio.
Age: 50 years old. Address: 401 Edgewater Place, Wakefield,
Massachusetts 01880.
o+JOHN J. SCIULLO. Director of the Company; Dean Emeritus and Professor of
Law, Duquesne University Law School; Director, Urban Redevelopment
Authority of Pittsburgh; from November 1995 to January 1997, Director,
Access Capital Strategic Community Investment Fund, Inc. -
Institutional Investment Portfolio. Age: 66 years old. Address: 321
Gross Street, Pittsburgh, Pennsylvania 15224.
o+ROSLYN M. WATSON. Director of the Company; Principal, Watson Ventures,
Inc., Director, American Express Centurion Bank; Director,
Harvard/Pilgrim Community Health Plan, Inc.; from November 1995 to
January 1997, Director, Access Capital Strategic Community Investment
Fund, Inc. - Bank Portfolio; Director, Massachusetts Electric Company;
Director, the Hymans Foundation, Inc., prior to February, 1993; Real
Estate Development Project Manager and Vice President, The Gunwyn
Company. Age: 48 years old. Address: 25 Braddock Park, Boston,
Massachusetts 02116-5816.
________________________________
* "Interested person" of the Company, as defined in the 1940 Act.
o Member of the Audit Committee.
+ Member of the Nominating Committee.
Officers of the Company
#MARIE E. CONNOLLY. President and Treasurer of the Company. President,
Chief Executive Officer, Chief Compliance Officer and a director of the
Distributor and Funds Distributor, Inc., the ultimate parent of which
is Boston Institutional Group, Inc. Age: 40 years old.
#DOUGLAS C. CONROY. Vice President and Assistant Secretary of the Company.
Assistant Vice President of Funds Distributor, Inc. From April 1993 to
January 1995, he was a Senior Fund Accountant for Investors Bank &
Trust Company. From December 1991 to March 1993, he was employed as a
fund accountant at TBC. Age: 28 years old.
#RICHARD W. INGRAM. Vice President and Assistant Treasurer of the Company.
Executive Vice President of the Distributor and Funds Distributor, Inc.
From March 1994 to November 1995, he was Vice President and Division
Manager for First Data Investor Services Group. From 1989 to 1994, he
was Vice President, Assistant Treasurer and Tax Director - Mutual Funds
of TBC. Age: 42 years old.
#CHRISTOPHER J. KELLEY. Vice President and Assistant Secretary of the
Company. Vice President and Senior Associate General Counsel of Funds
Distributor, Inc. and the Distributor, and an officer of certain
investment companies advised or administered by Harris Trust and
Savings Bank, Waterhouse Asset Management, Inc., J.P. Morgan & Co.
Incorporated and Montgomery Asset Management, L.P., or their respective
affiliates. From April 1994 to July 1996, Mr. Kelley was Assistant
Counsel at Forum Financial Group. From October 1992 to March 1994, Mr.
Kelley was employed by Putnam Investments in legal and compliance
capacities. Age: 33 years old.
#KATHLEEN K. MORRISEY. Vice President and Assistant Secretary of the
Company. Vice President and Assistant Secretary of Funds Distributor,
Inc. Manager of Treasury Services Administration and an officer of
certain investment companies advised or administered by J.P. Morgan &
Co. Incorporated, Montgomery Asset Management, L.P., and Dresdner RCM
Global Investors, Inc., or their respective affiliates. From July 1994
to November 1995, she was a Fund Accountant II for Investors Bank &
Trust Company. Prior to that she was a Finance student at Stonehill
College in North Easton, MA. Age: 25 years old.
#MARY A. NELSON. Vice President and Assistant Treasurer of the Company.
Vice President of the Distributor and Funds Distributor, Inc. From
September 1989 to July 1994, she was an Assistant Vice President and
Client Manager for TBC. Age: 33 years old.
#MICHAEL S. PETRUCELLI. Vice President, Assistant Treasurer and Assistant
Secretary of the Company. Senior Vice President and director of
Strategic Client Initiatives of Funds Distributor, Inc. and an officer
of certain investment companies advised or administered by J.P. Morgan
& Co. Incorporated. From December 1989 through November, 1996, he was
employed by GE Investments where he held various financial, business
development and compliance positions. He also served as Treasurer of
the GE Funds and as Director of GE Investment Services. Age: 36 years
old.
#JOSEPH F. TOWER, III. Vice President and Assistant Treasurer of the
Company. Senior Vice President, Treasurer and Chief Financial Officer
of the Distributor and Funds Distributor, Inc. From 1988 to August
1994, he was employed by TBC where he held various management positions
in the Corporate Finance and Treasury areas. Age: 35 years old.
#ELBA VASQUEZ. Vice President and Assistant Secretary of the Company.
Assistant Vice President of Funds Distributor, Inc. She has been an
employee since May 1996 as a Sales Associate in the distribution of
World Equity Benchmark Shares ("WEBS"). From March 1990 to May 1996,
she was employed by U.S. Trust Company of New York. As an officer of
U.S. Trust, she held various positions in the sales and marketing of
their proprietary family of mutual funds. Age: 36 years old.
The address of each Officer of the Company is 200 Park Avenue, New
York, New York 10166.
________________________________
# Officer also serves as an officer for other investment companies advised
by Dreyfus, including The Dreyfus/Laurel Trust and The Dreyfus/Laurel Tax-
Free Municipal Funds.
The address of each officer of the Fund is 200 Park Avenue, New York,
New York 10166.
The officers and Directors of the Company as a group owned beneficially
less than 1% of each Fund's total shares outstanding as of February 9, 1998.
No officer or employee of the Distributor (or of any parent,
subsidiary or affiliate thereof) receives any compensation from the Company
for serving as an officer or Director of the Company. In addition, no
officer or employee of Dreyfus (or of any parent, subsidiary or affiliate
thereof) serves as an officer or Director of the Company. The
Dreyfus/Laurel Funds pay each Director/Trustee who is not an "interested
person" of the Company (as defined in the 1940 Act), $27,000 per annum (and
an additional $25,000 for the Chairman of the Board of Directors/Trustees of
the Dreyfus/Laurel Funds). In addition, the Dreyfus/Laurel Funds pay each
Director/Trustee who is not an "interested person" of the Company (as
defined in the 1940 Act), $1,000 per joint Dreyfus/Laurel Funds Board
meeting attended, plus $750 per joint Dreyfus/Laurel Funds Audit Committee
meeting attended, and reimburse each
Director/Trustee who is not an "interested person" of the Company (as
defined in the 1940 Act), for travel and out-of-pocket expenses.
For the fiscal year ended October 31, 1997, the aggregate amount of
fees and expenses received by each current Director from the Company and all
other funds in the Dreyfus Family of Funds for which such person is a Board
member were as follows:
Total Compensation From the
Aggregate Compensation Company and Fund Complex
Name of Board Member From the Company # Paid to Board Member****
- ------------------- ---------------------- ---------------------------
Ruth M. Adams $10,000 $31,500
Francis P. Brennan* $19,833 $63,750
Joseph S. DiMartino** None $517,075***
James M. Fitzgibbons $10,583 $31,500
J. Tomlinson Fort** None None
Arthur L. Goeschel $11,500 $37,500
Kenneth A. Himmel $10,167 $32,500
Arch S. Jeffery** None None
Stephen J. Lockwood $11,167 $33,250
John J. Sciullo $11,167 $32,500
Roslyn M. Watson $11,167 $32,500
# Amounts required to be paid by the Company directly to the non-
interested Directors, that would be applied to offset a portion of
the management fee payable to Dreyfus, are in fact paid directly by
Dreyfus to the non-interested Directors. Amount does not include
reimbursed expenses for attending Board meetings, which amounted to
$14,973 for the Company.
* Compensation of Francis Brennan includes $25,000 paid by the
Dreyfus/Laurel Funds to be Chairman of the Board.
** Joseph S. DiMartino, J. Tomlinson Fort and Arch S. Jeffery are paid
directly by Dreyfus for serving as Board members of the Company and
the funds in the Dreyfus/Laurel Funds. For the fiscal year ended
October 31, 1997, the aggregate amount of fees and expenses received
by Joseph DiMartino, J. Tomlinson Fort and Arch S. Jeffery from
Dreyfus for serving as a Board member of the Company were $11,833,
$11,833 and $11,500, respectively, and for serving as a Board member
of all funds in the Dreyfus/Laurel Funds (including the Company) were
$35,500, $35,500 and $34,500, respectively. In addition, Dreyfus
reimbursed Messrs. DiMartino, Fort and Jeffery a total of $4,494 for
expenses attributable to the Company's Board meetings which is not
included in the $14,973 amount in note # above.
***Actual amount for the year ending December 31, 1997.
****The Dreyfus Family of Funds consists of 152 mutual funds.
MANAGEMENT ARRANGEMENTS
The following information supplements and should be read in conjunction
with the section in each Fund's Prospectus entitled "Management of the
Fund."
Management Agreement. Dreyfus serves as the investment manager for the
Funds pursuant to an Investment Management Agreement with the Company dated
April 4, 1994 (the "Management Agreement"), transferred to Dreyfus as of
October 17, 1994. Pursuant to the Management Agreement, Dreyfus provides, or
arranges for one or more third parties to provide, investment advisory,
administrative, custody, fund accounting and transfer agency services to
each Fund. As investment manager, Dreyfus manages the Funds by making
investment decisions based on each Fund's investment objective, policies and
restrictions. The Management Agreement is subject to review and approval at
least annually by the Board of Directors.
The Management Agreement will continue from year to year provided that
a majority of the Directors who are not interested persons of the Company or
Dreyfus and either a majority of all Directors or a majority of the
shareholders of the respective Fund approve its continuance. The Management
Agreement was last approved by the Board of Directors on January 28, 1998 to
continue until April 4, 1999. The Company may terminate the Management
Agreement upon the vote of a majority of the Board of Directors or upon the
vote of a majority of the respective Fund's outstanding voting securities on
sixty days' written notice to Dreyfus. Dreyfus may terminate the Management
Agreement upon sixty (60) days' written notice to the Company. The
Management Agreement will terminate immediately and automatically upon its
assignment.
The following persons are officers and/or directors of directors of
Dreyfus: W. Keith Smith, Chairman of the Board; Christopher M. Condron,
President, Chief Executive Officer, Chief Operating Officer and a director;
Stephen E. Canter, Vice Chairman, Chief Investment Officer and a director;
Lawrence S. Kash, Vice Chairman-Distribution and a director; William T.
Sandalls, Jr., Senior Vice President and Chief Financial Officer; Mark N.
Jacobs, Vice President, General Counsel and Secretary; Patrice M. Kozlowski,
Vice President-Corporate Communications; Mary Beth Leibig, Vice President-
Human Resources; Jeffrey N. Nachman, Vice President-Mutual Fund Accounting;
Andrew S. Wasser, Vice President-Information Systems; William V. Healey,
Assistant Secretary; and Mandell L. Berman, Burton C. Borgelt, Frank V.
Cahouet and Richard F. Syron, directors.
For the last three fiscal years, each Fund paid the following
management fees:
For the Fiscal Years Ended October 31,
--------------------------------------------------
1997 1996 1995
_____ ____ ____
Limited Term Income Fund
- -------------------------------
Management fees $ 301,794 $ 351,360 $446,781
Balanced Fund
- -------------------
Management fees $1,690,361 $1,888,750 $874,166
PURCHASE OF FUND SHARES
The following information supplements and should be read in conjunction
with the section in each Fund's Prospectus entitled "How to Buy Fund
Shares."
The Distributor. The Distributor serves as the Funds' distributor
pursuant to an agreement which is renewable annually. The Distributor also
acts as distributor for the other funds in the Dreyfus Premier Family of
Funds, for funds in the Dreyfus Family of Funds and for certain other
investment companies.
Sales Loads--Class A. The scale of sales loads applies to purchases of
Class A shares made by any "purchaser," which term includes an individual
and/or spouse purchasing securities for his, her or their own account or for
the account of any minor children, or a trustee or other fiduciary
purchasing securities for a single trust estate or a single fiduciary
account (including a pension, profit-sharing or other employee benefit trust
created pursuant to a plan qualified under Section 401 of the Internal
Revenue Code of 1986, as amended (the "Code")), although more than one
beneficiary is involved; or a group of accounts established by or on behalf
of the employees of an employer or affiliated employers pursuant to an
employee benefit plan or other program (including accounts established
pursuant to Sections 403(b), 408(k), and 457 of the Code); or an organized
group which has been in existence for more than six months, provided that it
is not organized for the purpose of buying redeemable securities of a
registered investment company and provided that the purchases are made
through a central administration or a single dealer, or by other means which
result in economy of sales effort or expense.
Set forth below is an example of the method of computing the offering
price of the Class A shares for each Fund. The example assumes a purchase
of Class A shares for each Fund aggregating less than $50,000 with respect
to Dreyfus Premier Balanced Fund and less than $100,000 with respect to
Dreyfus Premier Limited Term Income Fund subject to the schedule of sales
charges set forth in each Prospectus at a price based upon the net asset
value of the Class A shares for each Fund at the close of business on
October 31, 1997.
For Dreyfus Premier Balanced Fund:
Net Asset Value per Share $13.71
Per Share Sales Charge - 5.75%*
of offering price (6.10% of
net asset value per share) $ 0.84
Per Share Offering Price to
the Public $14.55
__________________
* Class A shares purchased by shareholders beneficially owning Class A
shares on November 30, 1996, but who opened their accounts after
December 19, 1994, are subject to a different sales load schedule as
described under "How to Buy Fund Shares - Class A shares" in the Fund's
Prospectus.
For Dreyfus Premier Limited Term Income Fund:
Net Asset Value per Share $10.78
Per Share Sales Charge - 3.0%
of offering price (3.1% of
net asset value per share) $0.33
Per Share Offering Price to
the Public $11.11
TeleTransfer Privilege. TeleTransfer purchase orders may be made at
any time. Purchase orders received by 4:00 P.M., New York time, on any
business day that Dreyfus Transfer, Inc., each Fund's transfer and dividend
disbursing agent (the "Transfer Agent"), and the New York Stock Exchange
("NYSE") are open for business will be credited to the shareholder's Fund
account on the next bank business day following such purchase order.
Purchase orders made after 4:00 P.M., New York time, on any business day the
Transfer Agent and the NYSE are open for business, or orders made on
Saturday, Sunday or any Fund holiday (e.g., when the NYSE is not open for
business), will be credited to the shareholder's Fund account on the second
bank business day following such purchase order. To qualify to use the
TeleTransfer Privilege, the initial payment for purchase of Fund shares must
be drawn on, and redemption proceeds paid to, the same bank and account as
are designated on the Account Application or Shareholder Services Form on
file. If the proceeds of a particular redemption are to be wired to an
account at any other bank, the request must be in writing and signature
guaranteed. See "Redemption of Fund Shares-TeleTransfer Privilege."
Reopening an Account. An investor may reopen an account with a minimum
investment of $100 without filing a new Account Application during the
calendar year the account is closed or during the following calendar year,
provided the information on the old Account Application is still applicable.
In-Kind Purchases. If the following conditions are satisfied, a Fund
may at its discretion, permit the purchase of shares through an "in-kind"
exchange of securities. Any securities exchanged must meet the investment
objective, policies and limitations of a Fund, must have a readily
ascertainable market value, must be liquid and must not be subject to
restrictions on resale. The market value of any securities exchanged, plus
any cash, must be at least equal to $25,000. Shares purchased in exchange
for securities generally cannot be redeemed for fifteen days following the
exchange in order to allow time for the transfer to settle.
The basis of the exchange will depend upon the relative net asset value
of the shares purchased and securities exchanged. Securities accepted by a
Fund will be valued in the same manner as the Fund values its assets. Any
interest earned on the securities following their delivery to a Fund and
prior to the exchange will be considered in valuing the securities. All
interest, dividends, subscription or other rights attached to the securities
become the property of the Fund, along with the securities. For further
information about "in-kind" purchases, call 1-800-554-4611.
DISTRIBUTION AND SERVICE PLANS
The following information supplements and should be read in conjunction
with the section in each Fund's Prospectus entitled "Distribution Plans
(Class A Plan and Class B and C Plans)."
Class A, B and C shares are subject to annual fees for distribution and
shareholder services.
Distribution Plan--Class A Shares. The SEC has adopted Rule 12b-1
under the 1940 Act ("Rule") regulating the circumstances under which
investment companies such as the Company may, directly or indirectly, bear
the expenses of distributing their shares. The Rule defines distribution
expenses to include expenditures for "any activity which is primarily
intended to result in the sale of fund shares." The Rule, among other
things, provides that an investment company may bear such expenses only
pursuant to a plan adopted in accordance with the Rule. With respect to the
Class A shares of each Fund, the Company has adopted a Distribution Plan
("Class A Plan"), and may enter into Agreements with Agents pursuant to the
Class A Plan.
Under the Class A Plan, Class A shares of a Fund may spend annually up
to 0.25% of the average of its net assets for costs and expenses incurred in
connection with the distribution of, and shareholder servicing with respect
to, Class A shares.
The Class A Plan provides that a report of the amounts expended under
the Class A Plan, and the purposes for which such expenditures were
incurred, must be made to the Company's Directors for their review at least
quarterly. In addition, the Class A Plan provides that it may not be
amended to increase materially the costs which a Fund may bear for
distribution pursuant to the Class A Plan without approval of a Fund's
shareholders, and that other material amendments of the Class A Plan must be
approved by the vote of a majority of the Directors and of the Directors who
are not "interested persons" of the Funds or Dreyfus (as defined in the 1940
Act) and who do not have any direct or indirect financial interest in the
operation of the Class A Plan, cast in person at a meeting called for the
purpose of considering such amendments. The Class A Plan is subject to
annual approval by the entire Board of Directors and by the Directors who
are neither interested persons nor have any direct or indirect financial
interest in the operation of the Class A Plan, by vote cast in person at a
meeting called for the purpose of voting on the Plan. Each Fund's Class A
Plan was so approved by the Directors at a meeting held on January 28, 1998.
The Class A Plan is terminable, as to a Fund's Class A shares, at any time
by vote of a majority of the Directors who are not interested persons and
have no direct or indirect financial interest in the operation of the Plan
or by vote of the holders of a majority of the outstanding shares of such
class of the Fund.
Distribution and Service Plans -- Class B and C Shares. In addition to
the above described Class A Plan for Class A shares, the Company's Board of
Directors has adopted a Service Plan (the "Service Plan") under the Rule
for Class B and Class C shares, pursuant to which each Fund pays the
Distributor and Dreyfus Service Corporation, an affiliate of Dreyfus, for
the provision of certain services to the holders of Class B and Class C
shares. The Company's Board of Directors has also adopted a Distribution
Plan pursuant to the Rule with respect to Class B and Class C shares (the
"Distribution Plan"). The Company's Board of Directors believes that there
is a reasonable likelihood that the Distribution and Service Plans (the
"Plans") will benefit the Funds and the holders of Class B and Class C
shares.
A quarterly report of the amounts expended under each Plan, and the
purposes for which such expenditures were incurred, must be made to the
Directors for their review. In addition, each Plan provides that it may not
be amended to increase materially the cost which holders of Class B or C
shares may bear pursuant to the Plan without the approval of the holders of
such Classes and that other material amendments of the Plan must be approved
by the Board of Directors and by the Directors who are not interested
persons of the Funds and have no direct or indirect financial interest in
the operation of the Plan or in any agreements entered into in connection
with the Plan, by vote cast in person at a meeting called for the purpose of
considering such amendments. Each Plan is subject to annual approval by
such vote of the Directors cast in person at a meeting called for the
purpose of voting on the Plan. Each Plan was so approved by the Directors
at a meeting held on January 28, 1998. Each Plan may be terminated at any
time by vote of a majority of the Directors who are not interested persons
and have no direct or indirect financial interest in the operation of the
Plan or in any agreements entered into in connection with the Plan or by
vote of the holders of a majority of Class B and C shares.
For the fiscal year ended October 31, 1997, the distribution and
service fees paid by the Funds were as follows:
Class A Class B Class C
Balanced Fund:
Distribution Plan Fee $26,135 $129,187 $7,788
Service Plan Fee -- $43,062 $2,596
Limited Term Income
Fund:
Distribution Plan Fee $2,681 $1,275 $1,074
Service Plan Fee -- $ 638 $ 537
Class R shares bear no distribution or service fees.
REDEMPTION OF FUND SHARES
The following information supplements and should be read in conjunction
with the section in each Fund's Prospectus entitled "How to Redeem Fund
Shares."
Stock Certificates; Signatures. Any certificates representing Fund
shares to be redeemed must be submitted with the redemption request.
Written redemption requests must be signed by each shareholder, including
each holder of a joint account, and each signature must be guaranteed.
Signatures on endorsed certificates submitted for redemption also must be
guaranteed. The Transfer Agent has adopted standards and procedures
pursuant to which signature-guarantees in proper form generally will be
accepted from domestic banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies
and savings associations as well as from participants in the NYSE Medallion
Signature Program, the Securities Transfer Agents Medallion Program
("STAMP") and the Stock Exchanges Medallion Program. Guarantees must be
signed by an authorized signatory of the guarantor and "Signature-
Guaranteed" must appear with the signature. The Transfer Agent may request
additional documentation from corporations, executors, administrators,
trustees or guardians, and may accept other suitable verification
arrangements from foreign investors, such as consular verification. For
more information with respect to signature-guarantees, please call one of
the telephone numbers listed on the cover.
TeleTransfer Privilege. Investors should be aware that if they have
selected the TeleTransfer Privilege, any request for a wire redemption will
be effected as a TeleTransfer transaction through the Automated Clearing
House system unless more prompt transmittal specifically is requested.
Redemption proceeds will be on deposit in the investor's account at an ACH
member bank ordinarily two business days after receipt of the redemption
request. See "Purchase of Fund Shares--TeleTransfer Privilege."
Redemption Commitment. Each Fund has committed itself to pay in cash
all redemption requests by any shareholder of record of the Fund, limited in
amount during any 90-day period to the lesser of $250,000 or 1% of the value
of the Fund's net assets at the beginning of such period. Such commitment
is irrevocable without the prior approval of the SEC. In the case of
requests for redemptions in excess of such amount, the Board of Directors
reserves the right to make payments in whole or in part in securities or
other assets in case of an emergency or any time a cash distribution would
impair the liquidity of the Fund to the detriment of the existing
shareholders. In this event, the securities would be valued in the same
manner as each Fund's portfolio is valued. If the recipient sold such
securities, brokerage charges would be incurred.
Suspension of Redemptions. The right of redemption may be suspended or
the date of payment postponed (a) during any period when the NYSE is closed
(other than customary weekend and holiday closings), (b) when trading in the
markets a Fund ordinarily utilizes is restricted, or when an emergency
exists as determined by the SEC so that disposal of a Fund's investments or
determination of its net asset value is not reasonably practicable, or (c)
for such other periods as the SEC by order may permit to protect a Fund's
shareholders.
SHAREHOLDER SERVICES
The following information supplements and should be read in conjunction
with the section in each Fund's Prospectus entitled "Shareholder Services."
Fund Exchanges. Shares of any Class of a Fund may be exchanged for
shares of the respective Class of certain other funds advised or
administered by Dreyfus. Shares of the same Class of such funds purchased
by exchange will be purchased on the basis of relative net asset value per
share as follows:
A. Exchanges for shares of funds that are offered without a
sales load will be made without a sales load.
B. Shares of funds purchased without a sales load may be
exchanged for shares of other funds sold with a sales load, and
the applicable sales load will be deducted.
C. Shares of funds purchased with a sales load may be exchanged
without a sales load for shares of other funds sold without a
sales load.
D. Shares of funds purchased with a sales load, shares of funds
acquired by a previous exchange from shares purchased with a sales
load and additional shares acquired through reinvestment of
dividends or other distributions of any such funds (collectively
referred to herein as "Purchased Shares") may be exchanged for
shares of other funds sold with a sales load (referred to herein
as "Offered Shares"), provided that, if the sales load applicable
to the Offered Shares exceeds the maximum sales load that could
have been imposed in connection with the Purchased Shares (at the
time the Purchased Shares were acquired), without giving effect to
any reduced loads, the difference will be deducted.
E. Shares of funds subject to a contingent deferred sales charge
("CDSC") that are exchanged for shares of another fund will be
subject to the higher applicable CDSC of the two funds, and for
purposes of calculating CDSC rates and conversion periods, if any,
will be deemed to have been held since the date the shares being
exchanged were initially purchased.
To accomplish an exchange under item D above, shareholders must notify
the Transfer Agent of their prior ownership of fund shares and their account
number.
To request an exchange, an investor, or an investor's Agent acting on
the investor's behalf, must give exchange instructions to the Transfer Agent
in writing or by telephone. The ability to issue exchange instructions by
telephone is given to all Fund shareholders automatically, unless the
investor checks the applicable "No" box on the Account Application,
indicating that the investor specifically refuses this Privilege. By using
the Telephone Exchange Privilege, the investor authorizes the Transfer Agent
to act on telephonic instructions (including over The Dreyfus Touch
automated telephone system) from any person representing himself or herself
to be the investor, or a representative of the investor's Agent, and
reasonably believed by the Transfer Agent to be genuine. Telephone
exchanges may be subject to limitations as to the amount involved or the
number of telephone exchanges permitted. Shares issued in certificate form
are not eligible for telephone exchange.
Exchanges of Class R shares held by a Retirement Plan may be made only
between the investor's Retirement Plan account in one fund and such
investor's Retirement Plan account in another fund.
To establish a personal retirement plan by exchange, shares of the fund
being exchanged must have a value of at least the minimum initial investment
required for shares of the fund into which the exchange is being made. The
minimum initial investment is generally $750 for Dreyfus-sponsored Keogh
Plans, IRAs (including regular IRAs, spousal IRAs for a non-working spouse,
Roth IRAs, IRAs set up under a Simplified Employee Pension Plan ("SEP-
IRAs"), and rollover IRAs), and 403(b)(7) Plans with only one participant,
and $500 for Dreyfus-sponsored Education IRAs. (Different minimum initial
investment requirements apply with respect to the Fund's BASIC shares. See
"How to Buy Fund Shares - General", the Fund's Prospectus.) To exchange
shares held in corporate plans, 403(b)(7) Plans and SEP-IRAs with more than
one participant, the minimum initial investment is generally $100 if the
plan has at least $2,500 invested among the funds in the Dreyfus Family of
Funds. To exchange shares held in a personal retirement plan account, the
shares exchanged must have a current value of at least $100.
Auto-Exchange Privilege. The Dreyfus Auto-Exchange Privilege permits
an investor to purchase, in exchange for shares of a Fund, shares of the
same Class of another fund in the Dreyfus Premier Family of Funds or the
Dreyfus Family of Funds. This privilege is available only for existing
accounts. With respect to Class R shares held by a Retirement Plan,
exchanges may be made only between the investor's Retirement Plan account in
one fund and such investor's Retirement Plan account in another fund.
Shares will be exchanged on the basis of relative net asset value as
described above under "Fund Exchanges." Enrollment in or modification or
cancellation of this privilege is effective three business days following
notification by the investor. An investor will be notified if the
investor's account falls below the amount designated to be exchanged under
this privilege. In this case, an investor's account will fall to zero
unless additional investments are made in excess of the designated amount
prior to the next Auto-Exchange transaction. Shares held under IRA and
other retirement plans are eligible for this privilege. Exchanges of IRA
shares may be made between IRA accounts and from regular accounts to IRA
accounts, but not from IRA accounts to regular accounts. With respect to
all other retirement accounts, exchanges may be made only among those
accounts.
Fund Exchanges and Dreyfus Auto-Exchange Privilege are available to
shareholders resident in any state in which shares of the fund being
acquired may legally be sold. Shares may be exchanged only between accounts
having identical names and other identifying designations.
Shareholder Services Forms and prospectuses of the other funds may be
obtained by calling 1-800-554-4611. The Funds reserve the right to reject
any exchange request in whole or in part. The Fund Exchange service or
Dreyfus Auto-Exchange Privilege may be modified or terminated at any time
upon notice to shareholders.
Automatic Withdrawal Plan. The Automatic Withdrawal Plan permits an
investor with a $5,000 minimum account to request withdrawal of a specified
dollar amount (minimum of $50) on either a monthly or quarterly basis.
Withdrawal payments are the proceeds from sales of Fund shares, not the
yield on the shares. If withdrawal payments exceed reinvested dividends and
distributions, the investor's shares will be reduced and eventually may be
depleted. Automatic Withdrawal may be terminated at any time by the
investor, a Fund or the Transfer Agent. Shares for which certificates have
been issued may not be redeemed through the Automatic Withdrawal Plan.
Dividend Sweep. Dividend Sweep allows investors to invest
automatically their dividends or dividends and capital gain distributions,
if any, from a Fund in shares of the same Class of another fund in the
Dreyfus Premier Family of Funds or the Dreyfus Family of Funds of which the
investor is a shareholder. Shares of the same Class of other funds
purchased pursuant to this privilege will be purchased on the basis of
relative net asset value per share as follows:
A. Dividends and other distributions paid by a fund may be
invested without imposition of a sales load in shares of other
funds that are offered without a sales load.
B. Dividends and other distributions paid by a fund which does
not charge a sales load may be invested in shares of other funds
sold with a sales load, and the applicable sales load will be
deducted.
C. Dividends and other distributions paid by a fund which
charges a sales load may be invested in shares of other funds sold
with a sales load (referred to herein as "Offered Shares"),
provided that, if the sales load applicable to the Offered Shares
exceeds the maximum sales load charged by the fund from which
dividends or distributions are being swept, without giving effect
to any reduced loads, the difference will be deducted.
D. Dividends and other distributions paid by a fund may be
invested in shares of other funds that impose a CDSC and the
applicable CDSC, if any, will be imposed upon redemption of such
shares.
Corporate Pension/Profit-Sharing and Retirement Plans. Each Fund makes
available to corporations a variety of prototype pension and profit-sharing
plans including a 401(k) Salary Reduction Plan. In addition, each Fund
makes available Keogh Plans, IRAs, (including regular IRAs, Spousal IRAs for
a non-working spouse, Roth IRAs, SEP-IRs and rollover IRAs)and 403(b)(7)
Plans. Plan support services also are available.
Investors who wish to purchase Fund shares in conjunction with a Keogh
Plan, a 403(b)(7) Plan or an IRA, including an SEP-IRA, may request from the
Distributor forms for adoption of such plans.
The entity acting as custodian for Keogh Plans, 403(b)(7) Plans or IRAs
may charge a fee, payment of which could require the liquidation of shares.
All fees charged are described in the appropriate form.
Shares may be purchased in connection with these plans only by direct
remittance to the entity acting as custodian. Purchases for these plans may
not be made in advance of receipt of funds.
The minimum initial investment for corporate plans, Salary Reduction
Plans, 403(b)(7) Plans, and SEP-IRAs, with more than one participant, is
$1,000, with no minimum on subsequent purchases. The minimum initial
investment is $750 for 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 and $500
for Dreyfus-sponsored Education IRAs, with no minimum on subsequent
purchases.
The investor should read the Prototype Retirement Plan and the
appropriate form of Custodial Agreement for further details on eligibility,
service fees and tax implications, and should consult a tax adviser.
DETERMINATION OF NET ASSET VALUE
The following information supplements and should be read in conjunction
with the section in each Fund's Prospectus entitled "How to Buy Fund
Shares."
Restricted securities, as well as securities or other assets for which
market quotations are not readily available, or which are not valued by a
pricing service approved by the Board, are valued at fair value as
determined in good faith by the Board. The Board will review the method of
valuation on a current basis. In making their good faith valuation of
restricted securities, the Board generally will take the following factors
into consideration: restricted securities which are, or are convertible
into, securities of the same class of securities for which a public market
exists usually will be valued at market value less the same percentage
discount at which purchased. This discount will be revised periodically by
the Board if it believes that the discount no longer reflects the value of
the restricted securities. Restricted securities not of the same class as
securities for which a public market exists usually will be valued initially
at cost. Any subsequent adjustment from cost will be based upon
considerations deemed relevant by the Board.
New York Stock Exchange Closings. The holidays (as observed) on which
the NYSE is currently scheduled to be closed are: New Year's Day, Martin
Luther King, Jr., Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
The following information supplements and should be read in conjunction
with the section in each Fund's Prospectus entitled "Dividends, Other
Distributions and Taxes."
The term "regulated investment company" does not imply the supervision
of management or investment practices or policies by any government agency.
General. To qualify for treatment as a regulated investment company
("RIC") under the Code, each Fund--which is treated as a separate
corporation for federal tax purposes-- (1) must distribute to its
shareholders each year at least 90% of its investment company taxable income
(generally consisting of net investment income, net short-term capital gains
and net gains from certain foreign currency transactions) ("Distribution
Requirement"), (2) must derive at least 90% of its annual gross income from
specified sources ("Income Requirement"), and (3) must meet certain asset
diversification and other requirements.
Any dividend or other distribution paid shortly after an investor's
purchase may have the effect of reducing the net asset value of the shares
below the cost of his investment. Such a dividend or other distribution
would be a return on investment in an economic sense, although taxable as
stated in the Funds' Prospectus. In addition, if a shareholder sells shares
of the Fund held for six months or less and has received a capital gain
distribution with respect to those shares, any loss incurred on the sale of
those shares will be treated as a long-term capital loss to the extent of
the capital gain distribution received.
Dividends and other distributions declared by a Fund in October,
November or December of any year and payable to shareholders of record on a
date in any of those months are deemed to have been paid by a Fund and
received by the shareholders on December 31 of that year if the
distributions are paid by a Fund during the following January. Accordingly,
those distributions will be taxed to shareholders for the year in which that
December 31 falls.
A portion of the dividends paid by a Fund, whether received in cash or
reinvested in additional Fund shares, may be eligible for the dividends-
received deduction allowed to corporations. The eligible portion may not
exceed the aggregate dividends received by a Fund from U.S. corporations.
However, dividends received by a corporate shareholder and deducted by it
pursuant to the dividends-received deduction are subject indirectly to the
alternative minimum tax.
Foreign Taxes. Dividends and interest received by the Fund, and gains
realized thereby, may be subject to income, withholding or other taxes
imposed by foreign countries and U.S. possessions ("foreign taxes") that
would reduce the yield and/or return on its securities. Tax conventions
between certain countries and the United States may reduce or eliminate
these foreign taxes, however, and many foreign countries do not impose taxes
on capital gains in respect of investments by foreign investors. If more
than 50% of the value of the Fund's total assets at the close of its taxable
year consists of securities of foreign corporations, it will be eligible to,
and may, file an election ("Election") with the Internal Revenue Service
that will enable its shareholders, in effect, to receive the benefit of the
foreign tax credit with respect to any foreign or U.S. possessions' income
taxes paid by it. Pursuant to the Election, the Fund would treat those
taxes as dividends paid to its shareholders and each shareholder would be
required to (1) include in gross income, and treat as paid by him or her,
his or her proportionate share of those taxes, (2) treat his or her share of
those taxes and of any dividend paid by the Fund that represents income from
foreign or U.S. possession sources as his or her own income from those
sources and (3) either deduct the taxes deemed paid by him or her in
computing his or her taxable income or, alternatively, use the foregoing
information in calculating the foreign tax credit against his or her federal
income tax. No deduction for foreign taxes may be claimed by a shareholder
who does not itemize deductions. Generally, a credit for foreign taxes may
not exceed the shareholder's federal income tax attributable to his total
foreign source taxable income. The Fund will report to its shareholders
shortly after each taxable year their respective shares of the income from
sources within, and taxes paid to, foreign countries and U.S. possessions if
it makes the Election.
Foreign Currency, Futures, Fowards and Hedging Transactions. Gains from
the sale or other disposition of foreign currencies (except certain gains
therefrom that may be excluded by future regulations), and gain from
options, futures and forward contracts derived by the Fund with respect to
its business of investing in securities or foreign currencies, will qualify
as permissible income under the Income Requirement. However, income from
the disposition of options and futures contracts (other than those on
foreign currencies) will be subject to the Short-Short Limitation if they
are held for less than three months. Income from the disposition of foreign
currencies, and options, futures and forward contracts thereon, that are not
directly related to a Fund's principal business of investing in securities
(or options and futures with respect to securities) also will be subject to
the Short-Short Limitation if they are held for less than three months.
If a Fund satisfies certain requirements, any increase in value of a
position that is part of a "designated hedge" will be offset by any decrease
in value (whether realized or not) of the offsetting hedging position during
the period of the hedge for purposes of determining whether a Fund satisfies
the Short-Short Limitation. Thus, only the net gain (if any) from the
designated hedge will be included in gross income for purposes of that limi
tation. Each Fund will consider whether it should seek to qualify for this
treatment for its hedging transactions. To the extent a Fund does not so
qualify, it may be forced to defer the closing out of certain options,
futures, forward contracts and foreign currency positions beyond the time
when it otherwise would be advantageous to do so, in order for such Fund to
qualify as a RIC.
Ordinarily, gains and losses realized from portfolio transactions will
be treated as capital gain and loss. However, a portion of the gain or loss
from the disposition of foreign currencies and certain foreign currency
denominated instruments (including debt instruments and certain financial
forward, futures and option contracts) may be treated as ordinary income or
loss under Section 988 of the Code. In addition, all or a portion of any
gain realized from the sale or other disposition of certain market discount
bonds will be treated as ordinary income. Moreover, all or a portion of the
gain realized from engaging in "conversion transactions that otherwise would
be treated as capital gain" may be treated as ordinary income under Section
1258 of the Code. "Conversion transactions" are defined to include certain
forward, futures, option and straddle transactions, transactions marketed or
sold as producing capital gains, and transactions described in Treasury
regulations to be issued in the future.
Under Section 1256 of the Code, any gain or loss realized by a Fund
from certain futures, forward contracts and options transactions will be
treated as 60% long-term capital gain or loss and 40% short-term capital
gain or loss. Gain or loss will arise upon exercise or lapse of such
contracts and options as well as from closing transactions. In addition,
any such contracts or options remaining unexercised at the end of a Fund's
taxable year will be treated as sold for their then fair market value (a
process known as "marking-to-market"), resulting in additional gain or loss
to the Fund characterized in the manner described above.
Offsetting positions held by a Fund involving certain contracts or
options may constitute "straddles," which are defined to include "offsetting
positions" in actively traded personal property. The tax treatment of
straddles is governed by Sections 1092 and, to the extent noted above, 1258
of the Code, which in certain circumstances override or modify Sections 1256
and 988. As a result, all or a portion of any capital gain from certain
straddle transactions may be recharacterized to ordinary income. If the
Fund were treated as entering into straddles by reason of its engaging in
certain forward contracts or options transactions, such straddles would be
characterized as "mixed straddles" if the forward contracts or options
transactions comprising a part of such straddles were governed by Section
1256. Each Fund may make one or more elections with respect to mixed
straddles. Depending on which election is made, if any, the results to a
Fund may differ. If no election is made, then to the extent the straddle
and conversion transactions rules apply to positions established by a Fund,
losses realized by a Fund will be deferred to the extent of unrealized gain
in the offsetting position. Moreover, as a result of the straddle rules,
short-term capital loss on straddle positions may be recharacterized as
long-term capital loss, and long-term capital gains may be treated as
short-term capital gains or ordinary income.
Passive Foreign Investment Companies. Each Fund may invest in the
stock of "passive foreign investment companies" ("PFIC"). A PIFC is a
foreign corporation that, in general, meets either of the following tests:
(1) at least 75% of its gross income is passive or (2) an average of at
least 50% of its assets produce, or are held for the production of, passive
income. Under certain circumstances, a Fund will be subject to federal
income tax on a portion of any "excess distribution" received on the stock
of a PFIC or of any gain on disposition of the stock (collectively "PFIC
income"), plus interest thereon, even if the Fund distributes the PFIC
income as a taxable dividend to its shareholders. The balance of the PFIC
income will be included in a Fund's investment company taxable income and,
accordingly, will not be taxable to it to the extent that income is
distributed to its shareholders. If a Fund invests in a PFIC and elects to
treat the PFIC as "qualified electing fund," then in lieu of the foregoing
tax and interest obligation, the Fund would be required to include in income
each year its pro rate share of the qualified electing fund's annual
ordinary earnings and net capital gain (the excess of net long-term capital
gain over net short-term capital loss) -- which probably would have to be
distributed to satisfy the Distribution Requirement and avoid imposition of
the 4% excise tax referred to in the Fund's Prospectus under "Dividends,
Other Distributions and Taxes" -- even if those earnings and gain were not
received by the Fund.
Pursuant to proposed regulations, open-end RICs, such as the Funds,
would be entitled to elect to "mark-to-market" their stock in certain PFICs.
"Marking-to-market," in this context, means recognizing as gain for each
taxable year the excess, as of the end of that year, of the fair market
value of each such PFIC's stock over the adjusted basis in that stock
(including mark-to-market gain for each prior year for which an election was
in effect).
Foreign Currency Gains and Losses. Gain and losses attributable to
fluctuations in foreign currency exchange rates that occur between the time
each Fund accrues dividends, interest or other receivables, or expenses or
other liabilities, denominated in a foreign currency and the time the Fund
actually collects the receivables or pays the liabilities generally are
treated as ordinary income or ordinary loss. Similarly, on the disposition
of a debt security denominated in a foreign currency, or of an option or
forward contract on a foreign currency, gains or losses attributable to
fluctuations in the value of the foreign currency between the date of
acquisition of the security, option or contract and the date of disposition
also are treated as ordinary income or loss. These gains or losses may
increase or decrease the amount of a Fund's investment company taxable
income to be distributed to its shareholders.
State and Local Taxes. Depending upon the extent of a Fund's activities
in states and localities in which it is deemed to be conducting business,
the Fund may be subject to the tax laws thereof. Shareholders are advised
to consult their tax advisers concerning the application of state and local
taxes.
Foreign Shareholders - U.S. Federal Income Taxation. U.S. federal
income taxation of a shareholder who, as to the United States, is a
non-resident alien individual, a foreign trust or estate, a foreign
corporation or a foreign partnership (a "foreign shareholder"), depends on
whether the income from a Fund is "effectively connected" with a U.S. trade
or business carried on by the shareholder, as discussed generally below.
Special U.S. federal income tax rules that differ from those described below
may apply to certain foreign persons who invest in the Fund, such as a
foreign shareholder entitled to claim the benefits of an applicable tax
treaty. Foreign shareholders are advised to consult their own tax advisers
with respect to the particular tax consequences to them of an investment in
a Fund.
Foreign Shareholders - Income Not Effectively Connected. Dividends
distributed to a foreign shareholder whose ownership of Fund shares is not
effectively connected with a U.S. trade or business carried on by the
foreign shareholder generally will be subject to a U.S. federal withholding
tax of 30% (or lower treaty rate). Capital gains realized by foreign
shareholders on the sale of Fund shares and distributions to them of net
capital gain (the excess of net long-term capital gain over net short-term
capital loss) generally will not be subject to U.S. federal income tax
unless the foreign shareholder is a non-resident alien individual and is
physically present in the United States for more than 182 days during the
taxable year. In the case of certain foreign shareholders, the Fund may be
required to withhold U.S. federal income tax at a rate of 31% of capital
gain distributions and of the gross proceeds from a redemption of Fund
shares unless the shareholder furnishes the Fund with a certificate
regarding the shareholder's foreign status.
Foreign Shareholders - Effectively Connected Income. If a foreign
shareholder's ownership of Fund shares is effectively connected with a U.S.
trade or business carried on by a foreign shareholder, then all
distributions to that shareholder and any gains realized by that shareholder
on the disposition of the Fund shares will be subject to U.S. federal income
tax at the graduated rates applicable to U.S. citizens and domestic
corporations, as the case may be. Foreign shareholders also may be subject
to the branch profits tax.
Foreign Shareholders - Estate Tax. Foreign individuals generally are
subject to U.S. federal estate tax on their U.S. situs property, such as
shares of a Fund, that they own at the time of their death. Certain credits
against that tax and relief under applicable tax treaties may be available.
PORTFOLIO TRANSACTIONS
All portfolio transactions of each Fund are placed on behalf of each
Fund by Dreyfus. Debt securities purchased and sold by each Fund are
generally traded on a net basis (i.e., without commission) through dealers
acting for their own account and not as brokers, or otherwise involve
transactions directly with the issuer of the instrument. This means that a
dealer (the securities firm or bank dealing with a Fund) makes a market for
securities by offering to buy at one price and sell at a slightly higher
price. The difference between the prices is known as a spread. Other
portfolio transactions may be executed through brokers acting as agent. Each
Fund will pay a spread or commissions in connection with such transactions.
Dreyfus uses its best efforts to obtain execution of portfolio transactions
at prices which are advantageous to each Fund and at spreads and commission
rates, if any, which are reasonable in relation to the benefits received.
Dreyfus also places transactions for other accounts that it provides with
investment advice.
Brokers and dealers involved in the execution of portfolio transactions
on behalf of a Fund are selected on the basis of their professional
capability and the value and quality of their services. In selecting brokers
or dealers, Dreyfus will consider various relevant factors, including, but
not limited to, the size and type of the transaction; the nature and
character of the markets for the security to be purchased or sold; the
execution efficiency, settlement capability, and financial condition of the
broker-dealer; the broker-dealer's execution services rendered on a
continuing basis; and the reasonableness of any spreads (or commissions, if
any). Any spread, commission, fee or other remuneration paid to an
affiliated broker-dealer is paid pursuant to the Company's procedures
adopted in accordance with Rule 17e-1 of the 1940 Act.
Brokers or dealers may be selected who provide brokerage and/or
research services to a Fund and/or other accounts over which Dreyfus or its
affiliates exercise investment discretion. Such services may include advice
concerning the value of securities; the advisability of investing in,
purchasing or selling securities; the availability of securities or the
purchasers or sellers of securities; furnishing analyses and reports
concerning issuers, industries, securities, economic factors and trends,
portfolio strategy and performance of accounts; and effecting securities
transactions and performing functions incidental thereto (such as clearance
and settlement).
The receipt of research services from broker-dealers may be useful to
Dreyfus in rendering investment management services to a Fund and/or its
other clients; and, conversely, such information provided by brokers or
dealers who have executed transaction orders on behalf of other clients of
Dreyfus may be useful to these organizations in carrying out their
obligation to the Fund. The receipt of such research services does not
reduce these organizations' normal independent research activities; however,
it enables these organizations to avoid the additional expenses which might
otherwise be incurred if these organizations were to attempt to develop
comparable information through their own staffs.
Although Dreyfus manages other accounts in addition to the Funds,
investment decisions for the Funds are made independently from decisions
made for these other accounts. It sometimes happens that the same security
is held by more than one of the accounts managed by Dreyfus. Simultaneous
transactions may occur when several accounts are managed by the same
investment manager, particularly when the same investment instrument is
suitable for the investment objective of more than one account.
When more than one account is simultaneously engaged in the purchase or
sale of the same investment instrument, the prices and amounts are allocated
in accordance with a formula considered by Dreyfus to be equitable to each
account. In some cases this system could have a detrimental effect on the
price or volume of the investment instrument as far as a particular Fund is
concerned. In other cases, however, the ability of a Fund to participate in
volume transactions will produce better executions for the Fund. While the
Directors will continue to review simultaneous transactions, it is their
present opinion that the desirability of retaining Dreyfus as investment
manager to a Fund outweighs any disadvantages that may be said to exist from
exposure to simultaneous transactions.
For the fiscal year ended October 31, 1995, Dreyfus Premier Limited
Term Income Fund paid $5,763, in brokerage commissions. For the fiscal
years ended October 31,1996 and 1997, the Fund did not pay any brokerage
commissions. Dreyfus Premier Limited Term Income Fund typically does not
pay a stated brokerage fee on transactions.
For the fiscal years ended October 31, 1997, 1996 and 1995, Dreyfus
Premier Balanced Fund paid brokerage commissions amounting to $171,266,
$152,452 and $89,957, respectively. For the fiscal years ended October 31,
1997 and October 31, 1996, Dreyfus Premier Balanced Fund paid brokerage
concessions amounting $32,249 and to $113,445, respectively.
Portfolio Turnover. The portfolio turnover rate for each Fund is
calculated by dividing the lesser of the Fund's annual sales or purchases of
portfolio securities (exclusive of purchases and sales of securities whose
maturities at the time of acquisition were one year or less) by the monthly
average value of securities in the Fund during the year.
The portfolio turnover rates for the last two years of each Fund were:
Fiscal Year Ended October 31,
____________________________
1997 1996
____ ____
Dreyfus Premier Limited Term Income Fund 129.94% 153.63%
Dreyfus Premier Balanced Fund 99.88% 85.21%
The aggregate amount of transactions during the last fiscal year in
securities effected on an agency basis through a broker in consideration of,
among other things, research services provided was $5,500,000 in par value,
and the commissions related to such transactions were $742.19
PERFORMANCE INFORMATION
The following information supplements and should be read in conjunction
with the section in each Fund's Prospectus entitled "Performance
Information."
Dreyfus Premier Balanced Fund's average annual total return for Class A
for the 1 and 3.55 year periods ended October 31, 1997 was 18.01% and
17.60%, respectively. Dreyfus Premier Balanced Fund's average annual total
return for Class R for the 1 and 4.13 year periods ended October 31, 1997
was 25.56% and 16.21%, respectively. Dreyfus Premier Balanced Fund's
average annual total return for Class B for the 1 and 2.87 year periods
ended October 31, 1997 was 20.27%, and 22.08%, respectively. Dreyfus
Premier Balanced Fund's average annual total return for Class C for the 1
and 2.87 year periods ended October 31, 1997 was 23.41% and 22.90%.
Dreyfus Premier Limited Term Income Fund's average annual total return
for Class A for the 1 and 3.57 year periods ended October 31, 1997 was 4.60%
and 5.92%, respectively. Dreyfus Premier Limited Term Income Fund's average
annual total return for Class R for the 1, 5 and 6.31 year periods ended
October 31, 1997 was 8.09%, 6.32% and 7.34%, respectively. Dreyfus Premier
Limited Term Income Fund's average annual total return for Class B for the 1
and 2.87 year periods ended October 31, 1997 was 4.56% and 7.45%,
respectively. Dreyfus Premier Limited Term Income Fund's average annual
total return for Class C for the 1 and 2.87 year periods ended October 31,
1997 was 5.74% and 7.50%, respectively.
Average annual total return is calculated by determining the ending
redeemable value of an investment purchased at net asset value (maximum
offering price in the case of Class A) per share with a hypothetical $1,000
payment made at the beginning of the period (assuming the reinvestment of
dividends and other distributions), dividing by the amount of the initial
investment, taking the "n"th root of the quotient (where "n" is the number
of years in the period) and subtracting 1 from the result. A Class average
annual total return figures calculated in accordance with such formula
assume that in the case of Class A the maximum sales load has been deducted
from the hypothetical initial investment at the time of purchase or in the
case of Class B or Class C the maximum applicable CDSC has been paid upon
redemption at the end of the period.
Dreyfus Premier Balanced Fund's total return for the period September
15, 1993 (commencement of operations) to October 31, 1997 for Class R was
85.99%. Dreyfus Premier Balanced Fund's total return for Class A for the
period April 14, 1994 (inception date of Class A) to October 31, 1997 was
77.80%. Based on net asset value per share, the total return for Class A
was 88.58% for this period. Dreyfus Premier Balanced Fund's total return
for Class B and Class C for the period from December 19, 1994 (inception
date of Class B and Class C) through October 31, 1997 was 77.28% and 80.74%,
respectively. Without giving effect to the applicable CDSC, total return
for Class B and Class C was 80.28% and 80.74%, respectively. Dreyfus
Premier Limited Term Income Fund's total return for the period July 11, 1991
(commencement of operations) to October 31, 1997 for Class R was 56.35%.
The Dreyfus Premier Limited Term Income Fund's total return for Class A for
the period April 7, 1994 (inception date of Class A) to October 31, 1997 was
22.79%. Based on net asset value per share, the total return for Class A
was 26.54% for this period. Dreyfus Premier Limited Term Income Fund's total
return for Class B and Class C for the period from December 19, 1994
(inception date of Class B and Class C) through October 31, 1997 was 22.91%
and 23.08%, respectively. Without giving effect to the applicable CDSC,
total return for Class B and Class C was 24.91% and 23.08%, respectively.
Total return is calculated by subtracting the amount of a Fund's net
asset value (maximum offering price in the case of Class A) per share at the
beginning of a stated period from the net asset value (maximum offering
price in the case of Class A) per share at the end of the period (after
giving effect to the reinvestment of dividends and other distributions
during the period and any applicable CDSC), and dividing the result by the
net asset value (maximum offering price in the case of Class A) per share at
the beginning of the period. Total return also may be calculated based on
the net asset value per share at the beginning of the period instead of the
maximum offering price per share at the beginning of the period for Class A
shares or without giving effect to any applicable CDSC at the end of the
period for Class B or C shares. In such cases, the calculation would not
reflect the deduction of the sales load with respect to Class A shares or
any applicable CDSC with respect to Class B or C shares, which, if reflected
would reduce the performance quoted.
Dreyfus Premier Limited Term Income Fund's current yield for the 30-day
period ended October 31, 1997 was 5.53%, 5.17%, 5.21% and 5.96% for its
Class A, Class B, Class C and Class R shares, respectively. Current yield
is computed pursuant to a formula which operates, with respect to each
Class, as follows: the amount of the Fund's expenses with respect to such
Class accrued for the 30-day period (net of reimbursements) is subtracted
from the amount of the dividends and interest earned (computed in accordance
with regulatory requirements) by the Fund with respect to such Class during
the period. That result is then divided by the product of: (a) the average
daily number of shares outstanding during the period that were entitled to
receive dividends, and (b) the maximum offering price per share in the case
of Class A or the net asset value per share in the case of Class B, Class C
and Class R on the last day of the period less any undistributed earned
income per share reasonably expected to be declared as a dividend shortly
thereafter. The quotient is then added to 1, and that sum is raised to the
6th power, after which 1 is subtracted. The current yield is then arrived
at by multiplying the result by 2.
Performance information for the Funds may be compared, in reports and
promotional literature, to indexes including, but not limited to: (i) the
Morgan Stanley European Index; (ii) the Standard & Poor's 500 Composite
Stock Price Index, the Dow Jones Industrial Average, or other appropriate
unmanaged domestic or foreign indices of performance of various types of
investments so that investors may compare the Fund's results with those of
indices widely regarded by investors as representative of the securities
markets in general; (iii) other groups of mutual funds tracked by Lipper
Analytical Services, a widely used independent research firm which ranks
mutual funds by overall performance, investment objectives and assets, or
tracked by other services, companies, publications, or persons who rank
mutual funds on overall performance or other criteria; (iv) the Consumer
Price Index (a measure of inflation) to assess the real rate of return from
an investment in the Fund; and (v) products managed by a universe of money
managers with similar country allocation and performance objectives.
Unmanaged indices may assume the reinvestment of dividends but generally do
not reflect deductions or administrative and management costs and expenses.
From time to time, Fund advertisements may include statistical data or
general discussions about the growth and development of Dreyfus Retirement
Services (in terms of new customers, assets under management, market shares,
etc.) and its presence in the defined contribution plan market.
From time to time, advertising material for the Fund may include
biographical information relating to its portfolio manager and may refer to,
or include commentary by the portfolio manager relating to investment
strategy, asset growth, current or past business, political, economic or
financial conditions and other matters of general interest to investors.
INFORMATION ABOUT THE FUNDS
The following information supplements and should be read in conjunction
with the section in each Fund's Prospectus entitled "General Information."
Each Fund share has one vote and, when issued and paid for in
accordance with the terms of the offering, is fully paid and non-assessable.
Fund shares have no preemptive or subscription rights and are freely
transferable. The Funds are one of eighteen portfolios of the Company.
Each Fund will send annual and semi-annual financial statements to all
its shareholders.
TRANSFER AND DIVIDEND DISBURSING AGENT CUSTODIAN, COUNSEL
AND INDEPENDENT AUDITORS
Dreyfus Transfer, Inc., a wholly-owned subsidiary of Dreyfus, P.O. Box
9671, Providence, Rhode Island 02940-9671, is the Company's transfer and
dividend disbursing agent. Under a transfer agency agreement with the
Company, Dreyfus Transfer, Inc. arranges for the maintenance of shareholder
account records for the Fund, the handling of certain communications between
shareholders and the Fund and the payment of dividends and distributions
payable by the Fund. For these services, Dreyfus Transfer, Inc. receives a
monthly fee computed on the basis of the number of shareholder accounts it
maintains for the Company during the month, and is reimbursed for certain
out-of-pocket expenses.
Mellon Bank, the parent of Dreyfus, located at One Mellon Bank Center,
Pittsburgh, Pennsylvania 15258, acts as custodian of the Fund's investments.
Under a custody agreement with the Company, Mellon Bank holds the Fund's
portfolio securities and keeps all necessary accounts and records. Dreyfus
Transfer, Inc. and Mellon Bank, as custodian, have no part in determining
the investment policies of the Fund or which securities are to be purchased
or sold by the Fund.
Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue, N.W., Second
Floor, Washington, D.C. 20036, has passed upon the legality of the shares
offered by the Prospectuses and this Statement of Additional Information.
KPMG Peat Marwick LLP, 345 Park Avenue, New York, NY 10154 was
appointed by the Directors to serve as the Funds' independent auditors for
the year ending October 31, 1998, providing audit services including (1)
examination of the annual financial statements, (2) assistance, review and
consultation in connection with SEC filings and (3) review of the annual
federal income tax return filed on behalf of each Fund.
FINANCIAL STATEMENTS
The financial statements for the fiscal year ended October 31, 1997,
including notes to the financial statements and financial highlights and the
Independent Auditors' Report are included in each Fund's Annual Report to
shareholders. A copy of each Fund's Annual Report accompanies this SAI.
The financial statements included in each Fund's Annual Report, and the
Independent Auditors' Report thereon contained therein, and related notes,
are incorporated herein by reference.
APPENDIX
DESCRIPTION OF SECURITIES RATINGS
Bond, Note and Commercial Paper Ratings
Standard & Poor's ("S&P")
Bond Ratings
AAA An obligation rated `AAA' has the highest rating assigned by
S&P. The obligor's capacity to meet its financial commitment on
the obligation is extremely strong.
AA An obligation rated `AA' differs from the highest rated
issues only in small degree. The obligors capacity to meet its
financial commitment on the obligation is very strong.
A An obligation rated `A' is somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions than obligations in higher rated categories. However,
the obligor's capacity to meet its financial commitment on the
obligation is still strong.
BBB An obligation rated `BBB' exhibits adequate protection
parameters. However, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity of
the obligor to meet its financial commitment on the obligation.
Obligations rated `BB', `B', `CCC', `CC', and `C' are regarded as
having significant speculative characteristics. `BB' indicates the
least degree of speculation and `C' the highest. While such
obligations will likely have some quality and protective
characteristics, these may be outweighed by large uncertainties or
major exposures to adverse conditions.
BB An obligation rated `B' is less vulnerable to nonpayment than
other speculative issues. However, it faces major ongoing
uncertainties or exposure to adverse business, financial, or
economic conditions, which could lead to the obligor's inadequate
capacity to meet its financial commitment on the obligation.
B An obligation rated `B' is more vulnerable to nonpayment than
obligations rated `BB', but the obligor currently has the capacity
to meet its financial commitment on the obligation. Adverse
business, financial, or economic conditions will likely impair the
obligor's capacity or willingness to meet its financial commitment
on the obligation.
CCC An obligation rated `CCC' is currently vulnerable to
nonpayment and is dependent upon favorable business, financial and
economic conditions for the obligor to meet its financial
commitment on the obligation. In the event of adverse business,
financial, or economic conditions, the obligor is not likely to
have the capacity to meet its financial commitment on the
obligation.
CC An obligation rated `CC' is currently highly vulnerable to
nonpayment.
C The `C' rating may be used to cover a situation where a
bankruptcy petition has been filed or similar action has been
taken, but payments on this obligation are being continued.
D An obligation rated `D' is in payment default. The `D'
rating category is used when payments on a obligation are not made
on the date due even if the applicable grace period has not
expired, unless S&P believes that such payments will be made
during such grace period. The `D' rating also will be used upon
the filing of a bankruptcy petition or the taking of a similar
action if payments on an obligation are jeopardized.
The ratings from `AA' to `CCC' may be modified by the addition of a
plus (+) or a minus (-) sign to show relative standing within the major
rating categories
Note Ratings
SP-1 Strong capacity to pay principal and interest. An issue
determined to possess a very strong capacity to pay debt service
is given a plus (+) designation.
SP-2 Satisfactory capacity to pay principal and interest, with
some vulnerability to adverse finance and economic changes over
the term of the notes.
SP-3 Speculative capacity to pay principal and interest.
Commercial Paper Ratings
An S&P commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more
than 365 days.
A-1 This designation indicates that the degree of safety
regarding timely payment is strong. Those issues determined to
possess extremely strong safety characteristics are denoted with a
plus sign (+) designation.
A-2 Capacity for timely payment on issues with this designation
is satisfactory. However, the relative degree of safety is not as
high as for issuers designated `A-1.'
A-3 Issues carrying this designation have an adequate capacity
for timely payment. They are, however, more vulnerable to the
adverse effects of changes in circumstances than obligations
carrying the higher designations.
B Issues rated `B' are regarded as having only speculative
capacity for timely payment.
C This rating is assigned to short-term debt obligations with a
doubtful capacity for payment.
D Debt rated `D' is in payment default. The `D' rating
category is used when interest payments of principal payments are
not made on the date due, even if the applicable grace period has
not expired, unless S&P believes such payments will be made during
such grace period.
Moody's
Bond Ratings
Aaa Bonds which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk and
generally are referred to as "gilt edge." Interest payments are
protected by a large or by an exceptionally stable margin and
principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such
issues.
Aa Bonds which are rated Aa are judged to be of high quality by
all standards. Together with the Aaa group they comprise what
generally are known as high-grade bonds. They are rated lower
than the best bonds because margins of protection may not be as
large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa
securities.
A Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper-medium-grade
obligations. Factors giving security to principal and interest
are considered adequate, but elements may be present which suggest
a susceptibility to impairment some time in the future.
Baa Bonds which are rated Baa are considered as medium grade
obligations (i.e., they are neither highly protected nor poorly
secured). Interest payments and principal security appear
adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment charac
teristics and in fact have speculative characteristics as well.
Ba Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as well-assured.
Often the protection of interest and principal payments may be
very moderate, and thereby not well safeguarded during both good
and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal
payments or of maintenance of other terms of the contract over any
long period of time may be small.
Caa Bonds which are rated Caa are of poor standing. Such issues
may be in default or there may be present elements of danger with
respect to principal or interest.
Ca Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or
have other marked short-comings.
C Bonds which are rated C are the lowest rated class of bonds,
and issues so rated can be regarded as having extremely poor
prospects of ever attaining any real investment standing.
Moody's applies the numerical modifiers 1, 2 and 3 to show relative
standing within each generic rating classification from Aa through B.
The modifier 1 indicates a ranking for the security in the higher end
of a rating category; the modifier 2 indicates a mid-range ranking; and
the modifier 3 indicates a ranking in the lower end of a rating
category.
Notes and other Short-Term Obligations
There are four rating categories for short-term obligations that define
an investment grade situation. These are designated Moody's Investment
Grade as MIG 1 (best quality) through MIG 4 (adequate quality). Short-term
obligations of speculative quality are designated SG.
In the case of variable rate demand obligations (VRDOs), a two
component rating is assigned. The first element represents an evaluation of
the degree of risk associated with scheduled principal and interest
payments, and the other represents an evaluation of the degree of risk
associated with the demand feature. The short-term rating assigned to the
demand feature of VRDOs is designated as VMIG. When either the long- or
short-term aspect of a VRDO is not rated, that piece is designated NR, e.g.,
Aaa/NR or NR/VMIG 1.
MIG 1/
VMIG 1 This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support
or demonstrated broad-based access to the market for refinancing.
MIG-2/
MIG 2 This designation denotes high quality. Margins of protection
are ample although not so large as in the preceding group.
MIG 3/
VMIG 3 This designation denotes favorable quality. All security elements
are accounted for but there is lacking the undeniable strength of
the preceding grades. Liquidity and cash flow protection may be
narrow and market access for refinancing is likely to be less well
established.
MIG 4/
VMIG 4 This designation denotes adequate quality. Protection commonly
regarded as required of an investment security is present and
although not distinctly or predominantly speculative, there is
specific risk.
Commercial Paper Rating
Moody's employs the following three designations, all judged to be
investment grade, to indicate the relative repayment ability of rated
issuers:
Prime-1 Issuers rated Prime-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations.
Prime-1 repayment ability will often be evidenced by many of the
following characteristics:
- Leading market positions in well-established industries.
- High rates of return on funds employed.
- Conservative capitalization structure with moderate
reliance on debt and ample asset protection.
- Broad margins in earnings coverage of fixed financial
charges and high internal cash generation.
- Well-established access to a range of financial markets
and assured sources of alternate liquidity.
Prime-2 Issuers rated Prime-2 (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations. This
will normally be evidenced by many of the characteristics cited
above but to a lesser agree. Earnings trends and coverage ratios,
while sound, may be more subject to variation. Capitalization
characteristics, while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is maintained.
Prime-3 Issuers rated Prime-3 (or supporting institutions) have an
acceptable ability for repayment of senior short-term
obligations. The effect of industry characteristics and market
compositions may be more pronounced. Variability in earnings and
profitability may result in changes in the level of debt
protection measurements and may require relatively high financial
leverage. Adequate alternative liquidity is maintained.
Fitch Investor Services, Inc. ("Fitch")
Bond Ratings
AAA Bonds considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong ability
to pay interest and repay principal, which is unlikely to be
affected by reasonably forseeable events.
AA Bonds considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and repay
principal is very strong, although not quite as strong as bonds
rated `AAA'. Because bonds rated in the `AAA' and `AA' categories
are not significantly vulnerable to foreseeable future
developments, short-term debt of these issuers is generally rated
`F-1+'.
A Bonds considered to be investment grade and of high credit
quality, The obligor's ability to pay interest an repay principal
is considered to be strong, but may be more vulnerable to adverse
changes in economic conditions and circumstances than bonds with
higher ratings.
BBB Bonds considered to be investment grade and satisfactory
credit quality. The obligor's ability to pay interest and repay
principal is considered to be adequate. Adverse changes in
economic conditions and circumstances, however, are more likely to
have adverse impact on these bonds and, therefore, impair timely
payment. The likelihood that the ratings of these bonds will fall
below investment grade is higher than for bonds with higher
ratings
BB Bonds are considered speculative. The obligor's ability to
pay interest and repay principal may be affected over time by
adverse economic changes. However, business and financial
alternatives can be identified, which could assist the obligor in
satisfying its debt service requirements.
B Bonds are considered highly speculative. While bonds in this
class are currently meeting debt service requirements, the
probability of continued timely payment of principal and interest
reflects the obligor's limited margin of safety and the need for
reasonable business and economic activity throughout the life of
the issue.
CCC Bonds have certain identifiable characteristics that, if not
remedied, may lead to default. The ability to meet obligations
requires an advantageous business and economic environment.
CC Bonds are minimally protected. Default in payment of
interest and/or principal seems probable over time.
C Bonds are in imminent default in payment of interest or
principal.
DDD, DD
and D Bonds are in default on interest and/or principal payments.
Such bonds are extremely speculative and should be valued on the
basis of their ultimate recovery value in liquidation or
reorganization of the obligor. `DDD' represents the highest
potential for recovery on these bonds, and `D' represents the
lowest potential for recovery.
+/- Plus and minus signs are used with a rating symbol to
indicate the relative position of a credit within the rating
category. Plus and minus signs, however, are not used in the
`DDD', `DD', or `D' categories.
Short-Term and Commercial Paper Ratings
Fitch's short-term ratings apply to debt obligations that are payable
on demand or have original maturities of up to three years, including
commercial paper, certificates of deposit, medium-term notes, and municipal
and investment notes.
Although the credit analysis is similar to Fitch's bond rating
analysis, the short-term rating places greater emphasis than bond ratings on
the existence of liquidity necessary to meet the issuer's obligations in a
timely manner.
F-1+ Exceptionally Strong Credit Quality. Issues assigned this
rating are regarded as having the strongest degree of assurance
for timely payment.
F-1 Very Strong Credit Quality. Issues assigned this rating
reflect an assurance of timely payment only slightly less in
degree than issues rated `F-1+'.
F-2 Good Credit Quality. Issues assigned this rating have a
satisfactory degree of assurance for timely payment, but the
margin of safety is not as great as for issues assigned `F-1+' and
`F-1' ratings.
F-3 Fair Credit Quality. Issues assigned this rating have
characteristics suggesting that the degree of assurance for timely
payment is adequate; however, near-term adverse changes could
cause these securities to be rated below investment grade.
D Default. Issues assigned this rating are in actual or
imminent payment default.
Duff & Phelps Inc. ("Duff & Phelps")
Long-Term Ratings
AAA Highest credit quality. The risks factors are negligible, being
only slightly more than for risk-free U.S. Treasury debt.
AA+ High credit quality. Protection factors are strong. Risk is
modest but
AA may vary slightly from time to time because of economic
conditions.
AA-
A+ Protections factors are average but adequate. However, risk
factors are
A more variable and greater in periods of economic stress.
A-
BBB+ Below-average protection factors but still considered sufficient
for prudent
BBB investment. Considerable variability in risk during economic
cycles.
BBB-
BB+ Below investments grade but deemed likely to meet obligations when
due.
BB Present or prospective financial protection factors fluctuate
according to
BB- industry conditions or company fortunes. Overall quality may move
up or down frequently within this category.
B+ Below investment grade and possessing risk that obligations will
not be met
B when due. Financial protection factors will fluctuate widely
according to
B- economic cycles, industry conditions and/or company fortunes.
Potential exists for frequent changes in the rating within this
category or into a higher or lower rating grade.
CCC Well below investment-grade securities. Considerable uncertainty
exists as to timely payment of principal, interest or preferred
dividends.
Protection factors are narrow and risk can be substantial with
unfavorable
economic/industry conditions, and/or with unfavorable company
developments.
DD Defaulted debt obligations. Issuer failed to meet scheduled
principal and/or
interest payments.
Short-Term and Commercial Paper Ratings
D-1+ Highest certainty of timely payment. Short-term liquidity,
including internal operating factors and/or access to alternative
sources of funds, is outstanding, and safety is just below risk-
free U.S. Treasury short-term obligations.
D-1 Very high certainty of timely payment. Liquidity factors are
excellent and supported by good fundamental protection factors.
Risk factors are minor.
D-1- High certainly of timely payment. Liquidity factors are
strong and supported by good fundamental protection factors. Risk
factors are very small.
D-2 Good certainty of timely payment. Liquidity factors and
company fundamentals are sound. Although ongoing funding needs
may enlarge total financial requirements, access to capital
markets is good. Risk factors are small.
D-3 Satisfactory liquidity and other protection factors qualify
issues as to investment grade. Risk factors are larger and
subject to more variation. Nevertheless, timely payment is
expected.
D-4 Speculative investment characteristics. Liquidity is not
sufficient to insure against disruption in debt service.
Operating factors and market access may be subject to a high
degree of variation.
D-5 Issuer failed to meet scheduled principal and/or interest
payments.
IBCA Limited/IBCA Inc. ("IBCA")
Commercial Paper Ratings.
Short-term obligations, including commercial paper, rated A1+ by IBCA
are obligations supported by the highest capacity for timely repayment.
Obligations rated A1 have a very strong capacity for timely repayment.
Obligations rated A2 have a strong capacity for repayment, although such
capacity may be susceptible to adverse changes in business, economic or
financial conditions. Obligations rated B1 have adequate capacity for
timely repayment, but such capacity is more susceptible to adverse changes
in business, economic, or financial conditions than for obligations in
higher categories. Obligations rated B2 have a capacity for repayment that
is susceptible to adverse changes in business, economic, or financial
conditions. Obligations rated C1 have an inadequate capacity to ensure
timely repayment. Obligations rated D1 have a high risk of default or are
currently in default.
DREYFUS BOND MARKET INDEX FUND
INVESTOR SHARES AND BASIC SHARES
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
MARCH 1, 1998
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus of
the Dreyfus Bond Market Index Fund (formerly, the Laurel Bond Market Index
Fund) (the "Fund"), dated March 1, 1998, as it may be revised from time to
time. The Fund is a separate, diversified portfolio of The Dreyfus/Laurel
Funds, Inc. (formerly, The Laurel Funds, Inc.), an open-end management
investment company (the "Company"), known as a mutual fund. To obtain a
copy of the Fund's Prospectus, please write to the Fund at 144 Glenn Curtiss
Boulevard, Uniondale, New York 11556-0144, or call one of the following
numbers:
Call Toll Free 1-800-645-6561
In New York City -- Call 1-718-895-1206
Outside the U.S. and Canada -- Call 516-794-5452
The Dreyfus Corporation ("Dreyfus") serves as the Fund's investment
manager.
Premier Mutual Fund Services, Inc. (the "Distributor") is the
distributor of the Fund's shares.
TABLE OF CONTENTS
Page
Investment Objective and Management Policies B-2
Management of the Fund B-9
Management Arrangements B-15
Purchase of Fund Shares B-16
Distribution Plan B-17
Redemption of Fund Shares B-18
Shareholder Services B-20
Determination of Net Asset Value B-23
Dividends, Other Distributions and Taxes B-23
Portfolio Transactions B-25
Performance Information B-27
Information About the Fund B-29
Transfer and Dividend Disbursing
Agent, Custodian, Counsel and Independent Auditors B-29
Financial Statements B-30
Appendix B-31
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Description of the
Fund."
Portfolio Securities
Floating Rate Securities. A floating rate security is one whose terms
provide for the automatic adjustment of interest rates whenever a specified
interest rate changes. The interest on floating rate securities is
ordinarily tied to and is a percentage of the prime rate of a specified bank
or some similar objective standard such as the 90-day U.S. Treasury bill
rate and may change daily. Generally, changes in interest rates on floating
rate securities will reduce changes in the security's market value from the
original purchase price resulting in the potential for capital appreciation
or capital depreciation being less than for fixed income obligations with a
fixed interest rate.
Government Obligations. The Fund may invest in a variety of U.S.
Treasury obligations, which differ only in their interest rates, maturities
and times of issuance: (a) U.S. Treasury bills have a maturity of one year
or less, (b) U.S. Treasury notes have maturities of one to ten years, and
(c) U.S. Treasury bonds generally have maturities of greater than ten years.
In addition to U.S. Treasury obligations, the Fund may invest in
obligations issued or guaranteed by U.S. Government agencies and
instrumentalities which are supported by any of the following: (a) the full
faith and credit of the U.S. Treasury (b) the right of the issuer to borrow
an amount limited to a specific line of credit from the U.S. Treasury, (c)
the discretionary authority of the U.S. Government agency or
instrumentality, or (d) the credit of the instrumentality. (Examples of
agencies and instrumentalities are: Federal Land Banks, Federal Housing
Administration, Farmers Home Administration, Export-Import Bank of the
United States, Central Bank for Cooperatives, Federal Intermediate Credit
Banks, Federal Home Loan Banks, General Services Administration, Maritime
Administration, Tennessee Valley Authority, District of Columbia Armory
Board, Inter-American Development Bank, Asian-American Development Bank,
Student Loan Marketing Association, International Bank for Reconstruction
and Development, Federal Home Loan Mortgage Corporation ("FHLMC") and
Federal National Mortgage Association ("FNMA".)) No assurance can be given
that the U.S. Government will provide financial support to such U.S.
Government agencies or instrumentalities described in (b), (c) and (d) in
the future, other than as set forth above, since it is not obligated to do
so by law.
Repurchase Agreements. The Fund may enter into repurchase agreements
with U.S. Government securities dealers recognized by the Federal Reserve
Board, with member banks of the Federal Reserve System, or with such other
brokers or dealers that meet the credit guidelines of the Board of
Directors. In a repurchase agreement, the Fund buys a security from a seller
that has agreed to repurchase the same security at a mutually agreed upon
date and price. The Fund's resale price will be in excess of the purchase
price, reflecting an agreed upon interest rate. This interest rate is
effective for the period of time the Fund is invested in the agreement and
is not related to the coupon rate on the underlying security. Repurchase
agreements may also be viewed as a fully collateralized loan of money by the
Fund to the seller. The period of these repurchase agreements will usually
be short, from overnight to one week, and at no time will the Fund invest in
repurchase agreements for more than one year. The Fund will always receive
as collateral securities whose market value including accrued interest is,
and during the entire term of the agreement remains, at least equal to 100%
of the dollar amount invested by the Fund in each agreement, and the Fund
will make payment for such securities only upon physical delivery or upon
evidence of book entry transfer to the account of the Custodian. If the
seller defaults, the Fund might incur a loss if the value of the collateral
securing the repurchase agreement declines and might incur disposition costs
in connection with liquidating the collateral. In addition, if bankruptcy
proceedings are commenced with respect to the seller of a security which is
the subject of a repurchase agreement, realization upon the collateral by
the Fund may be delayed or limited. The Fund seeks to minimize the risk of
loss through repurchase agreements by analyzing the creditworthiness of the
obligors under repurchase agreements, in accordance with the credit
guidelines of the Company's Board of Directors.
When-Issued Securities. New issues of U.S. Treasury and Government
securities are often offered on a when-issued basis. This means that
delivery and payment for the securities normally will take place
approximately 7 to 45 days after the date the buyer commits to purchase
them. The payment obligation and the interest rate that will be received on
securities purchased on a when-issued basis are each fixed at the time the
buyer enters into the commitment. The Fund will make commitments to purchase
such securities only with the intention of actually acquiring the
securities, but the Fund may sell these securities or dispose of the
commitment before the settlement date if it is deemed advisable as a matter
of investment strategy. Cash or marketable high-grade debt securities equal
to the amount of the above commitments will be segregated on the Fund's
records. For the purpose of determining the adequacy of these securities the
segregated securities will be valued at market. If the market value of such
securities declines, additional cash or securities will be segregated on the
Fund's records on a daily basis so that the market value of the account will
equal the amount of such commitments by the Fund.
Securities purchased on a when-issued basis and the securities held by
the Fund are subject to changes in market value based upon the public's
perception of changes in the level of interest rates. Generally, the value
of such securities will fluctuate inversely to changes in interest rates --
i.e., they will appreciate in value when interest rates decline and decrease
in value when interest rates rise. Therefore, if in order to achieve higher
interest income the Fund remains substantially fully invested at the same
time that it has purchased securities on a "when-issued" basis, there will
be a greater possibility of fluctuation in the Fund's net asset value.
When payment for when-issued securities is due, the Fund will meet its
obligations from then-available cash flow, the sale of segregated
securities, the sale of other securities and/or, although it would not
normally expect to do so, from the sale of the when-issued securities
themselves (which may have a market value greater or less than the Fund's
payment obligation). The sale of securities to meet such obligations carries
with it a greater potential for the realization of capital gains, which are
subject to federal income taxes.
Illiquid Securities. The Fund will not knowingly invest more than 15%
of the value of its net assets in illiquid securities, including time
deposits and repurchase agreements having maturities longer than seven days.
Securities that have readily available market quotations are not deemed
illiquid for purposes of this limitation (irrespective of any legal or
contractual restrictions on resale.) The Fund may invest in commercial
obligations issued in reliance on the so-called "private placement"
exemption from registration afforded by Section 4(2) of the Securities Act
of 1933, as amended ("Section 4(2) paper"). Section 4(2) paper is
restricted as to disposition under the federal securities laws and generally
is sold to investors who agree that they are purchasing the paper for an
investment and not with a view to public distribution. Any resale by the
purchaser must be pursuant to registration or exemption therefrom. Section
4(2) paper is normally resold to other investors through or with the
assistance of the issuer or investment dealers who make a market in Section
4(2) paper, thus providing liquidity.
The Fund may also purchase securities that are not registered under the
Securities Act of 1933, as amended, but that can be sold to qualified
institutional buyers in accordance with Rule 144A under that Act ("Rule 144A
securities"). Liquidity determinations with respect to Section 4(2) paper
and Rule 144A securities will be made by the Board of Directors or by
Dreyfus pursuant to guidelines established by the Board of Directors. The
Board or Dreyfus will consider availability of reliable price information
and other relevant information in making such determinations. Section 4(2)
paper is restricted as to disposition under the federal securities laws, and
generally is sold to institutional investors, such as the Fund, that agree
that they are purchasing the paper for investment and not with a view to
public distribution. Any resale by the purchaser must be pursuant to
registration or an exemption therefrom. Section 4(2) paper normally is
resold to other institutional investors like the Fund through or with the
assistance of the issuer or investment dealers who make a market in the
Section 4(2) paper, thus providing liquidity. Rule 144A securities
generally must be sold to other qualified institutional buyers. If a
particular investment in Section 4(2) paper or Rule 144A securities is not
determined to be liquid, that investment will be included within the
percentage limitation on investment in illiquid securities. The ability to
sell Rule 144A securities to qualified institutional buyers is a recent
development and it is not possible to predict how this market will mature.
Investing in Rule 144A securities could have the effect of increasing the
level of Fund illiquidity to the extent that qualified institutional buyers
become, for a time, uninterested in purchasing these securities from the
Fund or other holder.
Mortgage Pass-Through Certificates. Mortgage pass-through certificates
are issued by governmental, government-related and private entities and are
backed by pools of mortgages (including those on residential properties and
commercial real estate). The mortgage loans are made by savings and loan
institutions, mortgage bankers, commercial banks and other lenders. The
securities are "pass-through" securities because they provide investors with
monthly payments of principal and interest which, in effect, are a
"pass-through" of the monthly payments made by the individual borrowers on
the underlying mortgages, net of any fees paid to the issuer or guarantor of
the pass-through certificates. The principal governmental issuer of such
securities is Government National Mortgage Association ("GNMA"), which is a
wholly-owned U.S. Government corporation within the Department of Housing
and Urban Development. Government-related issuers include Freddie Mac and
Fannie Mae, both government sponsored corporations owned entirely by private
stockholders. Commercial banks, savings and loan institutions, private
mortgage insurance companies, mortgage bankers and other secondary market
issuers also create pass-through pools of conventional residential and
commercial mortgage loans. Such issuers may be the originators of the
underlying mortgage loans as well as the guarantors of the mortgage-related
securities.
(1) GNMA Mortgage Pass-Through Certificates ("Ginnie Maes"). Ginnie
Maes represent an undivided interest in a pool of mortgages that are insured
by the Federal Housing Administration or the Farmers Home Administration or
guaranteed by the Veterans Administration. Ginnie Maes entitle the holder to
receive all payments (including prepayments) of principal and interest owed
by the individual mortgagors, net of fees paid to GNMA and to the issuer
which assembles the mortgage pool and passes through the monthly mortgage
payments to the certificate holders (typically, a mortgage banking firm),
regardless of whether the individual mortgagor actually makes the payment.
Because payments are made to certificate holders regardless of whether
payments are actually received on the underlying mortgages, Ginnie Maes are
of the "modified pass-through" mortgage certificate type. The GNMA is
authorized to guarantee the timely payment of principal and interest on the
Ginnie Maes as securities backed by an eligible pool of mortgages. The GNMA
guarantee is backed by the full faith and credit of the United States, and
the GNMA has unlimited authority to borrow funds from the U.S. Treasury to
make payments under the guarantee. The market for Ginnie Maes is highly
liquid because of the size of the market and the active participation in the
secondary market of securities dealers and a variety of investors.
(2) Mortgage Participation Certificates guaranteed by FHLMC. Freddie
Macs represent interests in groups of specified first lien residential
conventional mortgages underwritten and owned by FHLMC. Freddie Mac entitle
the holder to timely payment of interest, which is guaranteed by FHLMC.
FHLMC guarantees either ultimate collection or timely payment of all
principal payments on the underlying mortgage loans. In cases where FHLMC
has not guaranteed timely payment of principal, FHLMC may remit the amount
due on account of its guarantee of ultimate payment of principal at any time
after default on an underlying mortgage, but in no event later than one year
after it becomes payable. Freddie Macs are not guaranteed by the United
States or by any of the Federal Home Loan Banks and do not constitute a debt
or obligation of the United States or of any Federal Home Loan Bank. The
secondary market for Freddie Macs is highly liquid because of the size of
the market and the active participation in the secondary market of Freddie
Macs, securities dealers and a variety of investors.
(3) Guaranteed Mortgage Pass-Through Certificates guaranteed by FNMA
("Fannie Maes"). Fannie Maes represent an undivided interest in a pool of
conventional mortgage loans secured by first mortgages or deeds of trust, on
one family, or two to four family, residential properties. FNMA is
obligated to distribute scheduled monthly installments of principal and
interest on the mortgages in the pool, whether or not received, plus full
principal of any foreclosed or otherwise liquidated mortgages. The
obligation of FNMA under its guaranty is solely the obligation of FNMA and
is not backed by, nor entitled to, the full faith and credit of the United
States.
(4) Private issuer mortgage certificates are pass-through securities
structured in a similar fashion to Ginnie Maes, Fannie Maes and Freddie
Macs. Private issuer mortgage certificates are generally backed by
conventional single family, multi-family and commercial mortgages. Private
issuer mortgage certificates typically are not guaranteed by the U.S.
Government, its agencies or instrumentalities, but generally have some form
of credit support in the form of over-collateralization, pool insurance or
other form of credit enhancement.
The market value of mortgage-related securities depends on, among other
things, the level of interest rates, the certificates' coupon rates and the
payment history of the mortgagors of the underlying mortgages.
Management Policies
The Fund engages, except as noted, in the following practices in
furtherance of its investment objective.
Loans of Fund Securities. The Fund has authority to lend its portfolio
securities provided (1) the loan is secured continuously by collateral
consisting of U.S. Government securities or cash or cash equivalents
adjusted daily to make a market value at least equal to the current market
value of these securities loaned; (2) the Fund may at any time call the loan
and regain the securities loaned; (3) the Fund will receive any interest or
dividends paid on the loaned securities; and (4) the aggregate market value
of securities loaned will not at any time exceed one-third of the total
assets of the Fund. In addition, it is anticipated that the Fund may share
with the borrower some of the income received on the collateral for the loan
or that it will be paid a premium for the loan. In determining whether to
lend securities, the Fund considers all relevant factors and circumstances
including the creditworthiness of the borrower.
Reverse Repurchase Agreements. The Fund may enter into reverse
repurchase agreements to meet redemption requests where the liquidation of
portfolio securities is deemed by the Fund to be inconvenient or
disadvantageous. A reverse repurchase agreement is a transaction whereby the
Fund transfers possession of a portfolio security to a bank or broker-dealer
in return for a percentage of the portfolio security's market value. The
Fund retains record ownership of the security involved including the right
to receive interest and principal payments. At an agreed upon future date,
the Fund repurchases the security by paying an agreed upon purchase price
plus interest. Cash or liquid high-grade debt obligations of the Fund equal
in value to the repurchase price including any accrued interest will be
maintained in a segregated account while a reverse repurchase agreement is
in effect.
Master/Feeder Option. The Company may in the future seek to achieve
the Fund's investment objective by investing all of the Fund's net
investable assets in another investment company having the same investment
objective and substantially the same investment policies and restrictions as
those applicable to the Fund. Shareholders of the Fund will be given at
least 30 days' prior notice of any such investment. Such investment would
be made only if the Company's Board of Directors determines it to be in the
best interest of the Fund and its shareholders. In making that
determination, the Company's Board of Directors will consider, among other
things, the benefits to shareholders and/or the opportunity to reduce costs
and achieve operational efficiency. Although the Fund believes that the
Company's Board of Directors will not approve an arrangement that is likely
to result in higher costs, no assurance is given that costs will be
materially reduced if this option is implemented.
Investment Restrictions
The following limitations have been adopted by the Fund. The Fund may
not change any of these fundamental investment limitations without the
consent of: (a) 67% or more of the shares present at a meeting of
shareholders duly called if the holders of more than 50% of the outstanding
shares of the Fund are present or represented by proxy; or (b) more than 50%
of the outstanding shares of the Fund, whichever is less. The Fund may not:
1. Purchase any securities which would cause more than 25% of the
value of the Fund's total assets at the time of such purchase to be invested
in the securities of one or more issuers conducting their principal
activities in the same industry. (For purposes of this limitation, U.S.
Government securities, and state or municipal governments and their
political subdivisions are not considered members of any industry. In
addition, this limitation does not apply to investments in domestic banks,
including U.S. branches of foreign banks and foreign branches of U.S.
banks.)
2. Borrow money or issue senior securities as defined in the
Investment Company Act of 1940, as amended (the "1940 Act"), except that (a)
the Fund may borrow money in an amount not exceeding one-third of the Fund's
total assets at the time of such borrowings, and (b) the Fund may issue
multiple classes of shares. The purchase or sale of futures contracts and
related options shall not be considered to involve the borrowing of money or
issuance of senior securities.
3. Purchase with respect to 75% of the Fund's total assets securities
of any one issuer (other than securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities) if, as a result, (a) more
than 5% of the Fund's total assets would be invested in the securities of
that issuer, or (b) the Fund would hold more than 10% of the outstanding
voting securities of that issuer.
4. Make loans or lend securities, if as a result thereof more than
one-third of the Fund's total assets would be subject to all such loans. For
purposes of this limitation debt instruments and repurchase agreements shall
not be treated as loans.
5. Purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent the
Fund from investing in securities or other instruments backed by real
estate, including mortgage loans, or securities of companies that engage in
real estate business or invest or deal in real estate or interests therein).
6. Underwrite securities issued by any other person, except to the
extent that the purchase of securities and later disposition of such
securities in accordance with the Fund's investment program may be deemed an
underwriting.
7. Purchase or sell commodities except that the Fund may enter into
futures contracts and related options, forward currency contracts and other
similar instruments.
The Fund may, notwithstanding any other fundamental investment policy or
limitation, invest all of its investable assets in securities of a single
open-end management investment company with substantially the same
investment objective, policies and limitations as the Fund.
The Fund has adopted the following additional non-fundamental
restrictions. These non-fundamental restrictions may be changed without
shareholder approval, in compliance with applicable law and regulatory
policy.
1. The Fund shall not sell securities short, unless it owns or has
the right to obtain securities equivalent in kind and amount to the
securities sold short, and provided that transactions in futures contracts
and options are not deemed to constitute selling short.
2. The Fund shall not purchase securities on margin, except that the
Fund may obtain such short-term credits as are necessary for the clearance
of transactions, and provided that margin payments in connection with
futures contracts and options shall not constitute purchasing securities on
margin.
3. The Fund shall not purchase oil, gas or mineral leases.
4. The Fund will not purchase or retain the securities of any issuer
if the officers or Directors of the Fund, its advisers, or managers, owning
beneficially more than one half of one percent of the securities of such
issuer, together own beneficially more than 5% of such securities.
5. The Fund will not purchase securities of issuers (other than
securities issued or guaranteed by domestic or foreign governments or
political subdivisions thereof), including their predecessors, that have
been in operation for less than three years, if by reason thereof, the value
of the Fund's investment in securities would exceed 5% of the Fund's total
assets. For purposes of this limitation, sponsors, general partners,
guarantors and originators of underlying assets may be treated as the issuer
of a security.
6. The Fund will invest no more than 15% of the value of its net
assets in illiquid securities, including repurchase agreements with
remaining maturities in excess of seven days, time deposits with maturities
in excess of seven days and other securities which are not readily
marketable. For purposes of this limitation, illiquid securities shall not
include Section 4(2) paper and securities which may be resold under Rule
144A under the Securities Act of 1933, provided that the Board of Directors,
or its delegate, determines that such securities are liquid based upon the
trading markets for the specific security.
7. The Fund may not invest in securities of other investment
companies, except as they may be acquired as part of a merger, consolidation
or acquisition of assets and except to the extent otherwise permitted by the
1940 Act.
8. The Fund shall not purchase any security while borrowings
representing more than 5% of the Fund's total assets are outstanding.
9. The Fund will not purchase warrants if at the time of such
purchase: (a) more than 5% of the value of the Fund's assets would be
invested in warrants, or (b) more than 2% of the value of the Fund's assets
would be invested in warrants that are not listed on the New York or
American Stock Exchange (for purposes of this limitation, warrants acquired
by the Fund in units or attached to securities will be deemed to have no
value).
10. The Fund will not purchase puts, calls, straddles, spreads and any
combination thereof if by reason thereof the value of its aggregate
investment in such classes of securities would exceed 5% of its total assets
except that: this limitation shall not apply to standby commitments, and
this limitation shall not apply to the Fund's transactions in futures
contracts and options.
As an operating policy, the Fund will not invest more than 25% of the
value of its total assets, at the time of such purchase in domestic banks,
including U.S. branches of foreign banks and foreign branches of U.S. banks.
The Company's Board of Directors may change this policy without shareholder
approval. Notice will be given to shareholders if this policy is changed by
the Board.
MANAGEMENT OF THE FUND
PRINCIPAL SHAREHOLDERS
The following shareholder(s) owned of record 5% or more of the
outstanding Investor shares of the Fund at February 9, 1998: Mac & Co.
Mutual Fund Operations, PO Box 3198, Pittsburgh, PA. 15230-3198: 78%
record; Donaldson Lufkin Jenrette Securities Corporation Inc., PO Box 2052,
Jersey City, NJ 07303-9998: 9% record.
The following shareholder(s) owned of record 5% or more of the
outstanding Investor shares of the Fund at February 9, 1998: Mac & Co.
Mutul Funds Operations, PO Box 3198, Pittsburgh, PA. 15230-3198: 64%
record; Boston Safe Deposit & Trust Co., 1 Cabot Road, Hedfored, MA 02155-
5141: 19% record.
FEDERAL LAW AFFECTING MELLON BANK
The Glass-Steagall Act of 1933 prohibits national banks from engaging
in the business of underwriting, selling or distributing securities and
prohibits a member bank of the Federal Reserve System from having certain
affiliations with an entity engaged principally in that business. The
activities of Mellon Bank, N.A. ("Mellon Bank") in informing its customers
of, and performing, investment and redemption services in connection with
the Fund, and in providing services to the Fund as custodian, as well as
Dreyfus' investment advisory activities, may raise issues under these
provisions. Mellon Bank has been advised by counsel that the activities
contemplated under these arrangements are consistent with its statutory and
regulatory obligations.
Changes in either federal or state statutes and regulations relating to
the permissible activities of banks and their subsidiaries or affiliates, as
well as further judicial or administrative decisions or interpretations of
such future statutes and regulations, could prevent Mellon Bank or Dreyfus
from continuing to perform all or a part of the above services for its
customers and/or the Fund. If Mellon Bank or Dreyfus were prohibited from
serving the Fund in any of its present capacities, the Board of Directors
would seek an alternative provider(s) of such services.
DIRECTORS AND OFFICERS
The Company has a Board composed of eleven Directors which supervises
the Fund's investment activities and reviews contractual arrangements with
companies that provide the Fund with services. The following lists the
Directors and officers and their positions with the Company and their
present and principal occupations during the past five years. Each Director
who is an "interested person" of the Company (as defined in the 1940 Act) is
indicated by an asterisk (*). Each of the Directors also serves as a
Trustee of The Dreyfus/Laurel Funds Trust and The Dreyfus/Laurel Tax-Free
Municipal Funds (collectively, with the Company, the "Dreyfus/Laurel
Funds").
Directors of the Company
o+RUTH MARIE ADAMS. Director of the Company; Professor of English and Vice
President Emeritus, Dartmouth College; Senator, United Chapters of Phi
Beta Kappa; Trustee, Woods Hole Oceanographic Institution; from
November 1995 to January 1997, Director, Access Capital Strategic
Community Investment Fund, Inc. - Institutional Investment Portfolio.
Age: 83 years old. Address: 1026 Kendal Lyme Road, Hanover, New
Hampshire 03755.
o+FRANCIS P. BRENNAN. Chairman of the Board of Directors and Assistant
Treasurer of the Company; Director and Chairman, Massachusetts Business
Development Corp.; and from November 1995 to January 1997, Director,
Access Capital Strategic Community Investment Fund, Inc. - Bank
Portfolio. Age: 80 years old. Address: Massachusetts Business
Development Corp., 50 Milk Street, Boston, Massachusetts 02109.
o+JOSEPH S. DIMARTINO, Director of the Company since February 1995. Since
January 1995, Mr. DiMartino has served as Chairman of the Board for
various funds in the Dreyfus Family of Funds. He is also Chairman of
the Board of Staffing Resources, Inc., a temporary placement agency.
Mr. DiMartino also serves as a Director of the Muscular Dystrophy
Association, HealthPlan Services Corporation, a provider of marketing,
administrative and risk management services to health and other benefit
programs, Noel Group, Inc., a venture capital company, Carlyle
Industries, Inc. (formerly Belding Heminway Company, Inc.), a button
packager and distributor, and Curtis Industries, Inc., a national
distributor of security products, chemicals, and automotive and other
hardware. Mr. DiMartino is also a Board member of 152 other funds in
the Dreyfus Family of Funds. From November 1995 to January 1997,
Director, Access Capital Strategic Community Investment Fund, Inc. -
Institutional Investment Portfolio and Bank Portfolio. For more than
five years prior to January 1995, he was President, a director and,
until August 24, 1994, Chief Operating Officer of Dreyfus and Executive
Vice President and a director of Dreyfus Service Corporation, a wholly-
owned subsidiary of Dreyfus. From August 1994 to December 31, 1994, he
was a director of Mellon Bank Corporation. Age: 54 years old.
Address: 200 Park Avenue, New York, New York 10166.
o+JAMES M. FITZGIBBONS. Director of the Company; Chairman, Howes Leather
Company, Inc.; Director, Fiduciary Trust Company; Chairman, CEO and
Director, Fieldcrest-Cannon Inc.; Director, Lumber Mutual Insurance
Company; Director, Barrett Resources, Inc.; from November 1995 to
January 1997, Director, Access Capital Strategic Community Investment
Fund, Inc. - Bank Portfolio. Age: 63 years old. Address: 40 Norfolk
Road, Brookline, Massachusetts 02167.
o*J. TOMLINSON FORT. Director of the Company; Partner, Reed, Smith, Shaw &
McClay (law firm). From November 1995 to January 1997, Director,
Access Capital Strategic Community Investment Fund, Inc. - Bank
Portfolio. Age: 69 years old. Address: 204 Woodcock Drive,
Pittsburgh, Pennsylvania 15215.
o+ARTHUR L. GOESCHEL. Director of the Company; Director, Calgon Carbon
Corporation; Director, Cerex Corporation; Director, National Picture
Frame Corporation; former Chairman of the Board and Director, Rexene
Corporation; Chairman of the Board and Director, Tetra Corporation 1991-
1993; Director, Medalist Corporation 1992-1993. From November 1995 to
January 1997, Director, Access Capital Strategic Community Investment
Fund, Inc. - Institutional Investment Portfolio. Age: 76 years old.
Address: Way Hallow Road and Woodland Road, Sewickley, Pennsylvania
15143.
o+KENNETH A. HIMMEL. Director of the Company; former Director, The Boston
Company, Inc. ("TBC") and Boston Safe Deposit and Trust Company;
President and Chief Executive Officer, Himmel & Co., Inc.; Vice
Chairman, Sutton Place Gourmet, Inc.; Managing Partner, Franklin
Federal Partners. From November 1995 to January 1997, Director, Access
Capital Strategic Community Investment Fund, Inc. - Bank Portfolio.
Age: 51 years old. Address: The Palladium Co., 625 Madison Avenue,
9th Floor, New York, New York 10022.
o*ARCH S. JEFFERY. Director of the Company; Financial Consultant. From
November 1995 to January 1997, Director, Access Capital Strategic
Community Investment Fund, Inc. - Institutional Investment Portfolio.
Age: 80 years old. Address: 1817 Foxcroft Lane, Unit 306, Allison
Park, Pennsylvania 15101.
o+STEPHEN J. LOCKWOOD. Director of the Company; President and CEO, LDG
Management Company Inc.; CEO, LDG Reinsurance Underwriters, SRRF
Management Inc. and Medical Reinsurance Underwriters Inc.; from
November 1995 to January 1997, Director, Access Capital Strategic
Community Investment Fund, Inc. - Institutional Investment Portfolio.
Age: 50 years old. Address: 401 Edgewater Place, Wakefield,
Massachusetts 01880.
o+JOHN J. SCIULLO. Director of the Company; Dean Emeritus and Professor of
Law, Duquesne University Law School; Director, Urban Redevelopment
Authority of Pittsburgh; from November 1995 to January 1997, Director,
Access Capital Strategic Community Investment Fund, Inc. -
Institutional Investment Portfolio. Age: 66 years old. Address: 321
Gross Street, Pittsburgh, Pennsylvania 15224.
o+ROSLYN M. WATSON. Director of the Company; Principal, Watson Ventures,
Inc., Director, American Express Centurion Bank; Director,
Harvard/Pilgrim Community Health Plan, Inc.; from November 1995 to
January 1997, Director, Access Capital Strategic Community Investment
Fund, Inc. - Bank Portfolio; Director, Massachusetts Electric Company;
Director, the Hymans Foundation, Inc., prior to February, 1993; Real
Estate Development Project Manager and Vice President, The Gunwyn
Company. Age: 48 years old. Address: 25 Braddock Park, Boston,
Massachusetts 02116-5816.
________________________________
* "Interested person" of the Company, as defined in the 1940 Act.
o Member of the Audit Committee.
+ Member of the Nominating Committee.
Officers of the Company
#MARIE E. CONNOLLY. President and Treasurer of the Company. President,
Chief Executive Officer, Chief Compliance Officer and a director of the
Distributor and Funds Distributor, Inc., the ultimate parent of which
is Boston Institutional Group, Inc. Age: 40 years old.
#DOUGLAS C. CONROY. Vice President and Assistant Secretary of the Company.
Assistant Vice President of Funds Distributor, Inc. From April 1993 to
January 1995, he was a Senior Fund Accountant for Investors Bank &
Trust Company. From December 1991 to March 1993, he was employed as a
fund accountant at TBC. Age: 28 years old.
#RICHARD W. INGRAM. Vice President and Assistant Treasurer of the Company.
Executive Vice President of the Distributor and Funds Distributor, Inc.
From March 1994 to November 1995, he was Vice President and Division
Manager for First Data Investor Services Group. From 1989 to 1994, he
was Vice President, Assistant Treasurer and Tax Director - Mutual Funds
of TBC. Age: 42 years old.
#CHRISTOPHER J. KELLEY. Vice President and Assistant Secretary of the
Company. Vice President and Senior Associate General Counsel of Funds
Distributor, Inc. and the Distributor, and an officer of certain
investment companies advised or administered by Harris Trust and
Savings Bank, Waterhouse Asset Management, Inc., J.P. Morgan & Co.
Incorporated and Montgomery Asset Management, L.P., or their respective
affiliates. From April 1994 to July 1996, Mr. Kelley was Assistant
Counsel at Forum Financial Group. From October 1992 to March 1994, Mr.
Kelley was employed by Putnam Investments in legal and compliance
capacities. Age: 33 years old.
#KATHLEEN K. MORRISEY. Vice President and Assistant Secretary of the
Company. Vice President and Assistant Secretary of Funds Distributor,
Inc. Manager of Treasury Services Administration and an officer of
certain investment companies advised or administered by J.P. Morgan &
Co. Incorporated, Montgomery Asset Management, L.P., and Dresdner RCM
Global Investors, Inc., or their respective affiliates. From July 1994
to November 1995, she was a Fund Accountant II for Investors Bank &
Trust Company. Prior to that she was a Finance student at Stonehill
College in North Easton, MA. Age: 25 years old.
#MARY A. NELSON. Vice President and Assistant Treasurer of the Company.
Vice President of the Distributor and Funds Distributor, Inc. From
September 1989 to July 1994, she was an Assistant Vice President and
Client Manager for TBC. Age: 33 years old.
#MICHAEL S. PETRUCELLI. Vice President, Assistant Treasurer and Assistant
Secretary of the Company. Senior Vice President and director of
Strategic Client Initiatives of Funds Distributor, Inc. and an officer
of certain investment companies advised or administered by J.P. Morgan
& Co. Incorporated. From December 1989 through November, 1996, he was
employed by GE Investments where he held various financial, business
development and compliance positions. He also served as Treasurer of
the GE Funds and as Director of GE Investment Services. Age: 36 years
old.
#JOSEPH F. TOWER, III. Vice President and Assistant Treasurer of the
Company. Senior Vice President, Treasurer and Chief Financial Officer
of the Distributor and Funds Distributor, Inc. From 1988 to August
1994, he was employed by TBC where he held various management positions
in the Corporate Finance and Treasury areas. Age: 35 years old.
#ELBA VASQUEZ. Vice President and Assistant Secretary of the Company.
Assistant Vice President of Funds Distributor, Inc. She has been an
employee since May 1996 as a Sales Associate in the distribution of
World Equity Benchmark Shares ("WEBS"). From March 1990 to May 1996,
she was employed by U.S. Trust Company of New York. As an officer of
U.S. Trust, she held various positions in the sales and marketing of
their proprietary family of mutual funds. Age: 36 years old.
The address of each Officer of the Company is 200 Park Avenue, New
York, New York 10166.
________________
# Officer also serves as an officer for other investment companies advised
by Dreyfus, including The Dreyfus/Laurel Trust and The Dreyfus/Laurel Tax-
Free Municipal Funds.
The officers and Directors of the Company as a group owned beneficially
less than 1% of the total shares of the Fund outstanding as of February 9,
1998.
No officer or employee of the Distributor (or of any parent, subsidiary
or affiliate thereof) receives any compensation from the Company for serving
as an officer or Director of the Company. In addition, no officer or
employee of Dreyfus (or of any parent, subsidiary or affiliate thereof)
serves as an officer or Director of the Company. The Dreyfus/Laurel Funds
pay each Director/Trustee who is not an "interested person" of the Company
(as defined in the 1940 Act), $27,000 per annum (and an additional $25,000
for the Chairman of the Board of Directors/Trustees of the Dreyfus/Laurel
Funds). In addition, the Dreyfus/Laurel Funds pay each Director/Trustee who
is not an "interested person" of the Company (as defined in the 1940 Act),
$1,000 per joint Dreyfus/Laurel Funds Board meeting attended, plus $750 per
joint Dreyfus/Laurel Funds Audit Committee meeting attended, and reimburse
each Director/Trustee who is not an "interested person" of the Company (as
defined in the 1940 Act), for travel and out-of-pocket expenses.
For the fiscal year ended October 31, 1997, the aggregate amount of
fees and expenses received by each current Director from the Company and all
other funds in the Dreyfus Family of Funds for which such person is a Board
member were as follows:
Total Compensation From the
Aggregate Compensation Company and Fund Complex
Name of Board Member From the Company # Paid to Board
Member****
Ruth M. Adams $10,000 $ 31,500
Francis P. Brennan* $19,833 $ 63,750
Joseph S. DiMartino** None $517,075***
James M. Fitzgibbons $10,583 $ 31,500
J. Tomlinson Fort** None None
Arthur L. Goeschel $11,500 $ 37,500
Kenneth A. Himmel $10,167 $ 32,500
Arch S. Jeffery** None None
Stephen J. Lockwood $11,167 $ 33,250
John J. Sciullo $11,167 $ 32,500
Roslyn M. Watson $11,167 $ 32,500
# Amounts required to be paid by the Company directly to the non-
interested Directors, that would be applied to offset a portion of
the management fee payable to Dreyfus, are in fact paid directly by
Dreyfus to the non-interested Directors. Amount does not include
reimbursed expenses for attending Board meetings, which amounted to
$14,973 for the Company.
* Compensation of Francis Brennan includes $25,000 paid by the
Dreyfus/Laurel Funds to be Chairman of the Board.
** Joseph S. DiMartino, J. Tomlinson Fort and Arch S. Jeffery are paid
directly by Dreyfus for serving as Board members of the Company and
the funds in the Dreyfus/Laurel Funds. For the fiscal year ended
October 31, 1997, the aggregate amount of fees and expenses received
by Joseph DiMartino, J. Tomlinson Fort and Arch S. Jeffery from
Dreyfus for serving as a Board member of the Company were $11,833,
$11,833 and $11,500, respectively, and for serving as a Board member
of all funds in the Dreyfus/Laurel Funds (including the Company) were
$35,500, $35,500 and $34,500, respectively. In addition, Dreyfus
reimbursed Messrs. DiMartino, Fort and Jeffery a total of $4,494 for
expenses attributable to the Company's Board meetings which is not
included in the $14,973 amount in note # above.
***Actual amount for the year ending December 31, 1997.
****The Dreyfus Family of Funds consists of 152 mutual funds.
MANAGEMENT ARRANGEMENTS
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Management of the Fund."
Management Agreement. Dreyfus serves as the investment manager for the
Fund pursuant to an Investment Management Agreement with the Company dated
April 4, 1994, transferred to Dreyfus as of October 17, 1994 (the
"Management Agreement"). Pursuant to the Management Agreement, Dreyfus
provides, or arranges for one or more third parties to provide, investment
advisory, administrative, custody, fund accounting and transfer agency
services to the Fund. As investment manager, Dreyfus manages the Fund by
making investment decisions based on the Fund's investment objective,
policies and restrictions. The Management Agreement is subject to review
and approval at least annually by the Board of Directors.
The Management Agreement will continue from year to year provided that
a majority of the Directors who are not "interested persons" of the Company
and either a majority of all Directors or a majority (as defined in the 1940
Act) of the shareholders of the Fund approve its continuance. The
Management Agreement was last approved by the Board of Directors on January
28, 1998, to continue until April 4, 1999. The Company may terminate the
Management Agreement upon the vote of a majority of the Board of Directors
or upon the vote of a majority of the Fund's outstanding voting securities
on sixty (60) days' written notice to Dreyfus. Dreyfus may terminate the
Management Agreement upon sixty (60) days' written notice to the Company.
The Management Agreement will terminate immediately and automatically upon
its assignment.
The following persons are officers and/or directors of Dreyfus: W.
Keith Smith, Chairman of the Board; Christopher M. Condron, President, Chief
Executive Officer, Chief Operating Officer and a director; Stephen E.
Canter, Vice Chairman, Chief Investment Officer and a director; Lawrence S.
Kash, Vice Chairman-Distribution and a director; William T. Sandalls, Jr.,
Senior Vice President and Chief Financial Officer; Mark N. Jacobs, Vice
President, General Counsel and Secretary; Patrice M. Kozlowski, Vice
President-Corporate Communications; Mary Beth Leibig, Vice President-Human
Resources; Jeffrey N. Nachman, Vice President-Mutual Fund Accounting; Andrew
S. Wasser, Vice President-Information Systems; William V. Healey, Assistant
Secretary; and Burton C. Borgelt, Mandell L. Berman, Frank V. Cahouet and
Richard F. Syron, directors.
For the last three fiscal years, the Fund has had the following
expenses:
For the Fiscal Years Ended October 31,
1997 1996 1995
Management fees $114,334 $69,108 $25,294
Effective August 15, 1997, the Management Agreement was amended to
reflect a reduction in the annual management fee payable by the Fund to
Dreyfus from .40 of 1% to .15 of 1% of the value of the Fund's average daily
net assets.
PURCHASE OF FUND SHARES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "How to Buy Fund Shares."
The Distributor. The Distributor serves as the Fund's distributor
pursuant to an agreement which is renewable annually. The Distributor also
acts as distributor for the other funds in the Dreyfus Family of Funds and
for certain other investment companies.
Dreyfus TeleTransfer Privilege. Dreyfus TeleTransfer purchase orders
may be made at any time. Purchase orders received by 4:00 p.m., New York
time, on any business day that Dreyfus Transfer, Inc., the Fund's transfer
and dividend disbursing agent (the "Transfer Agent"), and the New York Stock
Exchange ("NYSE") are open for business will be credited to the
shareholder's Fund account on the next bank business day following such
purchase order. Purchase orders made after 4:00 p.m., New York time, on any
business day the Transfer Agent and the NYSE are open for business, or
orders made on Saturday, Sunday or any Fund holiday (e.g., when the NYSE is
not open for business), will be credited to the shareholder's Fund account
on the second bank business day following such purchase order. To qualify
to use the Dreyfus TeleTransfer Privilege, the initial payment for purchase
of Fund shares must be drawn on, and redemption proceeds paid to, the same
bank and account as are designated on the Account Application or Shareholder
Services Form on file. If the proceeds of a particular redemption are to be
in writing and signature guaranteed. See "Redemption of Fund Shares--
Dreyfus TeleTransfer Privilege.
Reopening an Account. An investor may reopen an account with a minimum
investment of $100 without filing a new Account Application during the
calendar year in which the account is closed or during the following
calendar year, provided the information on the old Account Application is
still applicable.
In-Kind Purchases. If the following conditions are satisfied, the Fund
may at its discretion, permit the purchase of shares through an "in-kind"
exchange of securities. Any securities exchanged must meet the investment
objective, policies and limitations of the Fund, must have a readily
ascertainable market value, must be liquid and must not be subject to
restrictions on resale. The market value of any securities exchanged, plus
any cash, must be at least equal to $25,000. Shares purchased in exchange
for securities generally cannot be redeemed for fifteen days following the
exchange in order to allow time for the transfer to settle.
The basis of the exchange will depend upon the relative net asset value
of the shares purchased and securities exchanged. Securities accepted by
the Fund will be valued in the same manner as the Fund values its assets.
Any interest earned on the securities following their delivery to the Fund
and prior to the exchange will be considered in valuing the securities. All
interest, dividends, subscription or other rights attached to the securities
become the property of the Fund, along with the securities. For further
information about "in-kind" purchases, call 1-800-645-6561.
DISTRIBUTION PLAN
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Distribution Plan
(Investor Shares Only)."
Investor shares are subject to fees for distribution and shareholder
services.
Distribution Plan--Investor Shares. The Securities and Exchange
Commission (the "SEC") has adopted Rule 12b-1 under the 1940 Act (the
"Rule") regulating the circumstances under which investment companies such
as the Company may, directly or indirectly, bear the expenses of
distributing their shares. The Rule defines distribution expenses to
include expenditures for "any activity which is primarily intended to result
in the sale of fund shares." The Rule, among other things, provides that an
investment company may bear such expenses only pursuant to a plan adopted in
accordance with the Rule. With respect to the Investor shares of the Fund,
the Company has adopted a Distribution Plan (the "Plan"), and may enter into
Agreements with Agents pursuant to its Plan.
Under the Plan, the Fund may spend annually up to 0.25% of its average
daily net assets attributable to Investor shares for costs and expenses
incurred in connection with the distribution of, and shareholder servicing
with respect to, the Fund's Investor shares.
The Plan provides that a report of the amounts expended under the Plan,
and the purposes for which such expenditures were incurred, must be made to
the Company's Directors for their review at least quarterly. In addition,
the Plan provides that it may not be amended to increase materially the
costs which the Fund may bear for distribution pursuant to the Plan without
approval of the Fund's shareholders, and that other material amendments of
the Plan must be approved by the vote of a majority of the Directors and of
the Directors who are not "interested persons" of the Company (as defined in
the 1940 Act) and who do not have any direct or indirect financial interest
in the operation of the Plan, cast in person at a meeting called for the
purpose of considering such amendments. The Plan is subject to annual
approval by the entire Board of Directors and by the Directors who are
neither interested persons nor have any direct or indirect financial
interest in the operation of the Plan, by vote cast in person at a meeting
called for the purpose of voting on the Plan. The Plan was so approved by
the Directors at a meeting held on January 28, 1998. The Plan is
terminable, as to the Fund's Investor shares, at any time by vote of a
majority of the Directors who are not interested persons and have no direct
or indirect financial interest in the operation of the Plan or by vote of
the holders of a majority of the outstanding Investor shares of the Fund.
For the fiscal year ended October 31, 1997, the Fund paid the
Distributor and Dreyfus Service Corporation $156 and $34, respectively,
pursuant to the Plan with respect to Investor shares.
REDEMPTION OF FUND SHARES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "How to Redeem Fund
Shares."
Wire Redemption Privilege. By using this Privilege, the investor
authorizes the Transfer Agent to act on wire, telephone or letter redemption
instructions from any person representing himself or herself to be the
investor, or a representative of the investor's Agent, and reasonably
believed by the Transfer Agent to be genuine. Ordinarily, the Fund will
initiate payment for shares redeemed pursuant to this Privilege on the next
business day after receipt if the Transfer Agent receives the redemption
request in proper form. Redemption proceeds will be transferred by Federal
Reserve wire only to the commercial bank account specified by the investor
on the Account Application or Shareholder Services Form. Redemption
proceeds, if wired, must be in the amount of $1,000 or more and will be
wired to the investor's account at the bank of record designated in the
investor's file at the Transfer Agent, if the investor's bank is a member of
the Federal Reserve System, or to a correspondent bank if the investor's
bank is not a member. Fees ordinarily are imposed by such bank and usually
are borne by the investor. Immediate notification by the correspondent bank
to the investor's bank is necessary to avoid a delay in crediting the funds
to the investor's bank account.
Investors with access to telegraphic equipment may wire redemption
requests to the Transfer Agent by employing the following transmittal code
which may be used for domestic or overseas transmissions:
Transfer Agent's
Transmittal Code Answer Back Sign
144295 144295 TSSG PREP
Investors who do not have direct access to telegraphic equipment may
have the wire transmitted by contacting a TRT Cables operator at 1-800-654-
7171, toll free. Investors should advise the operator that the above
transmittal code must be used and should also inform the operator of the
Transfer Agent's answer back sign.
To change the commercial bank or account designated to receive
redemption proceeds, a written request must be sent to the Transfer Agent.
This request must be signed by each shareholder, with each signature
guaranteed as described below under "Stock Certificates; Signatures."
Stock Certificates; Signatures. Any certificates representing Fund
shares to be redeemed must be submitted with the redemption request.
Written redemption requests must be signed by each shareholder, including
each holder of a joint account, and each signature must be guaranteed.
Signatures on endorsed certificates submitted for redemption also must be
guaranteed. The Transfer Agent has adopted standards and procedures
pursuant to which signature-guarantees in proper form generally will be
accepted from domestic banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies
and savings associations as well as from participants in the New York Stock
Exchange Medallion Signature Program, the Securities Transfer Agents
Medallion Program ("STAMP") and the Stock Exchanges Medallion Program.
Guarantees must be signed by an authorized signatory of the guarantor and
"Signature-Guaranteed" must appear with the signature. The Transfer Agent
may request additional documentation from corporations, executors,
administrators, trustees or guardians, and may accept other suitable
verification arrangements from foreign investors, such as consular
verification. For more information with respect to signature-guarantees,
please call one of the telephone numbers listed on the cover.
Dreyfus TeleTransfer Privilege. Investors should be aware that if they
have selected the Dreyfus TeleTransfer Privilege, any request for a wire
redemption will be effected as a Dreyfus TeleTransfer transaction through
the ACH system unless more prompt transmittal specifically is requested.
Redemption proceeds will be on deposit in the investor's account at an ACH
member bank ordinarily two business days after receipt of the redemption
request. See "Purchase of Fund Shares--Dreyfus TeleTransfer Privilege."
Redemption Commitment. The Fund has committed itself to pay in cash
all redemption requests by any shareholder of record, limited in amount
during any 90-day period to the lesser of $250,000 or 1% of the value of the
Fund's net assets at the beginning of such period. Such commitment is
irrevocable without the prior approval of the SEC. In the case of requests
for redemptions in excess of such amount, the Company's Board reserves the
right to make payments in whole or in part in securities or other assets in
case of an emergency or any time a cash distribution would impair the
liquidity of the Fund to the detriment of the existing shareholders. In
such event, the securities would be valued in the same manner as the Fund's
portfolio is valued. If the recipient sold such securities, brokerage
charges might be incurred.
Suspension of Redemptions. The right of redemption may be suspended or
the date of payment postponed (a) during any period when the NYSE is closed
(other than customary weekend and holiday closings), (b) when trading in the
markets the Fund ordinarily utilizes is restricted, or when an emergency
exists as determined by the SEC so that disposal of the Fund's investments
or determination of its net asset value is not reasonably practicable, or
(c) for such other periods as the SEC by order may permit to protect the
Fund's shareholders.
SHAREHOLDER SERVICES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Shareholder Services."
Fund Exchanges. Shares of any Class of the Fund may be exchanged for
shares of certain other funds advised or administered by Dreyfus. Shares of
the funds purchased by exchange will be purchased on the basis of relative
net asset value per share as follows:
A. Exchanges for shares of funds that are offered without a
sales load will be made without a sales load.
B. Shares of funds purchased without a sales load may be
exchanged for shares of other funds sold with a sales load, and
the applicable sales load will be deducted.
C. Shares of funds purchased with a sales load may be exchanged
without a sales load for shares of other funds sold without a
sales load.
D. Shares of funds purchased with a sales load, shares of funds
acquired by a previous exchange from shares purchased with a sales
load and additional shares acquired through reinvestment of
dividends or other distributions of any such funds (collectively
referred to herein as "Purchased Shares") may be exchanged for
shares of other funds sold with a sales load (referred to herein
as "Offered Shares"), provided that, if the sales load applicable
to the Offered Shares exceeds the maximum sales load that could
have been imposed in connection with the Purchased Shares (at the
time the Purchased Shares were acquired), without giving effect to
any reduced loads, the difference will be deducted.
To accomplish an exchange under item D above, shareholders must notify
the Transfer Agent of their prior ownership of fund shares and their account
number.
To request an exchange, an investor, or an investor's Agent acting on
the investor's behalf, must give exchange instructions to the Transfer Agent
in writing or by telephone. The ability to issue exchange instructions by
telephone is given to all Fund shareholders automatically, unless the
investor checks the applicable "No" box on the Account Application,
indicating that the investor specifically refuses this Privilege. By using
the Telephone Exchange Privilege, the investor authorizes the Transfer Agent
to act on telephonic instructions (including over The Dreyfus Touchr
automated telephone system) from any person representing himself or herself
to be the investor, or a representative of the investor's Agent, and
reasonably believed by the Transfer Agent to be genuine. Telephone
exchanges may be subject to limitations as to the amount involved or the
number of telephone exchanges permitted. Shares issued in certificate form
are not eligible for telephone exchange.
Exchanges of Fund shares held by a Retirement Plan may be made only
between the investor's Retirement Plan account in one fund and such
investor's Retirement Plan account in another fund.
To establish a personal retirement plan by exchange, shares of the fund
being exchanged must have a value of at least the minimum initial investment
required for shares of the fund into which the exchange is being made. The
minimum initial investment is generally $750 for Dreyfus-sponsored Keogh
Plans, IRAs (including regular IRAs, spousal IRAs for a non-working spouse,
Roth IRAs, IRAs set up under a Simplified Employee Pension Plan ("SEP-IRAs"
and rollover IRAs), and 403(b)(7) Plans with only one participant, and $500
for Dreyfus-sponsored Education IRAs. (Different minimum initial investment
requirements apply with respect to the Fund's BASIC shares. See "How to Buy
Fund Shares - General" in the Fund's Prospectus.) To exchange shares held
in corporate plans, 403(b)(7) Plans and SEP-IRAs with more than one
participant, the minimum initial investment is generally $100 if the plan
has at least $2,500 invested among the funds in the Dreyfus Family of Funds.
To exchange shares held in a personal retirement plan, the shares exchanged
must have a current value of at least $100.
Dreyfus Auto-Exchange Privilege. The Dreyfus Auto-Exchange Privilege
permits an investor to purchase, in exchange for shares of the Fund, shares
of certain other eligible funds in the Dreyfus Family of Funds. This
Privilege is available only for existing accounts. With respect to Fund
shares held by a Retirement Plan, exchanges may be made only between the
investor's Retirement Plan account in one fund and such investor's
Retirement Plan account in another fund. Shares will be exchanged on the
basis of relative net asset value as described above under "Fund Exchanges."
Enrollment in or modification or cancellation of this Privilege is effective
three business days following notification by the investor. An investor
will be notified if the investor's account falls below the amount designated
to be exchanged under this Privilege. In this case, an investor's account
will fall to zero unless additional investments are made in excess of the
designated amount prior to the next Dreyfus Auto-Exchange transaction.
Shares held under IRA and other retirement plans are eligible for this
Privilege. Exchanges of IRA shares may be made between IRA accounts and
from regular accounts to IRA accounts, but not from IRA accounts to regular
accounts. With respect to all other retirement accounts, exchanges may be
made only among those accounts.
Fund Exchanges and Dreyfus Auto-Exchange Privilege are available to
shareholders resident in any state in which shares of the fund being
acquired may legally be sold. Shares may be exchanged only between accounts
having identical names and other identifying designations.
Shareholder Services Forms and prospectuses of the other funds may be
obtained by calling 1-800-645-6561. The Fund reserves the right to reject
any exchange request in whole or in part. The Fund Exchange service or
Dreyfus Auto-Exchange Privilege may be modified or terminated at any time
upon notice to shareholders.
Automatic Withdrawal Plan. The Automatic Withdrawal Plan permits an
investor with a $5,000 minimum account to request withdrawal of a specified
dollar amount (minimum of $50) on either a monthly or quarterly basis.
Withdrawal payments are the proceeds from sales of Fund shares, not the
yield on the shares. If withdrawal payments exceed reinvested dividends and
distributions, the investor's shares will be reduced and eventually may be
depleted. Automatic Withdrawal may be terminated at any time by the
investor, the Fund or the Transfer Agent. Shares for which certificates
have been issued may not be redeemed through the Automatic Withdrawal Plan.
Dreyfus Dividend Sweep. Dreyfus Dividend Sweep allows investors to
invest automatically their dividends or dividends and capital gain
distributions, if any, from the Fund in shares of certain other funds in the
Dreyfus Family of Funds of which the investor is a shareholder. Shares of
other funds purchased pursuant to this Privilege will be purchased on the
basis of relative net asset value per share as follows:
A. Dividends and other distributions paid by a fund may be
invested without imposition of a sales load in shares of other
funds that are offered without a sales load.
B. Dividends and other distributions paid by a fund which does
not charge a sales load may be invested in shares of other funds
sold with a sales load, and the applicable sales load will be
deducted.
C. Dividends and other distributions paid by a fund which
charges a sales load may be invested in shares of other funds sold
with a sales load (referred to herein as "Offered Shares"),
provided that, if the sales load applicable to the Offered Shares
exceeds the maximum sales load charged by the fund from which
dividends or distributions are being swept, without giving effect
to any reduced loads, the difference will be deducted.
D. Dividends and other distributions paid by a fund may be
invested in shares of other funds that impose a contingent
deferred sales charge ("CDSC") and the applicable CDSC, if any,
will be imposed upon redemption of such shares.
Corporate Pension/Profit-Sharing and Retirement Plans. The Fund makes
available to corporations a variety of prototype pension and profit-sharing
plans including a 401(k) Salary Reduction Plan. In addition, the Fund makes
available Keogh Plans, IRAs, (including regular IRAs, spousal IRAs for a non-
working spouse, Roth IRAs, SEP-IRAs, IRA rollover accounts, and with respect
to Investor shares, Education IRAs) and 403(b)(7) Plans. Plan support
services also are available.
Investors who wish to purchase Fund shares in conjunction with a Keogh
Plan, a 403(b)(7) Plan or an IRA, including an SEP-IRA, may request from the
Distributor forms for adoption of such plans.
The entity acting as custodian for Keogh Plans, 403(b)(7) Plans or IRAs
may charge a fee, payment of which could require the liquidation of shares.
All fees charged are described in the appropriate form.
Shares may be purchased in connection with these plans only by direct
remittance to the entity acting as custodian. Purchases for these plans may
not be made in advance of receipt of funds.
The minimum initial investment for corporate plans, Salary Reduction
Plans, 403(b)(7) Plans and SEP-IRAs with more than one participant, is
$2,500 with no minimum on subsequent purchases. The minimum initial
investment is $750 for 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 and $500 for
Dreyfus-sponsored Education IRAs (with respect to Investor shares), with no
minimum on subsequent purchases.
The investor should read the Prototype Retirement Plan and the
appropriate form of Custodial Agreement for further details on eligibility,
service fees and tax implications, and should consult a tax adviser.
DETERMINATION OF NET ASSET VALUE
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "How to Buy Fund Shares."
Restricted securities, as well as securities or other assets for which
market quotations are not readily available, or which are not valued by a
pricing service approved by the Board of Directors, are valued at fair value
as determined in good faith by the Board of Directors. The Board of
Directors will review the method of valuation on a current basis. In making
their good faith valuation of restricted securities, the Board generally
will take the following factors into consideration: restricted securities
which are, or are convertible into, securities of the same class of
securities for which a public market exists usually will be valued at market
value less the same percentage discount at which purchased. This discount
will be revised periodically by the Board if it believes that the discount
it no longer reflects the value of the restricted securities. Restricted
securities not of the same class as securities for which a public market
exists usually will be valued initially at cost. Any subsequent adjustment
from cost will be based upon considerations deemed relevant by the Board.
New York Stock Exchange Closings. The holidays (as observed) on which
the NYSE is currently scheduled to be closed are: New Year's Day, Martin
Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Dividends, Other
Distributions and Taxes."
The term "regulated investment company" does not imply the supervision
of management or investment practices or policies by any government agency.
General. To qualify for treatment as a regulated investment company
("RIC") under the Internal Revenue Code of 1986, as amended (the "Code"),
the Fund--which is treated as a separate corporation for federal tax
purposes--(1) must distribute to its shareholders each taxable year at least
90% of its investment company taxable income (generally consisting of net
investment income, net short-term capital gains and net gains from certain
foreign currency transactions) ("Distribution Requirement"), (2) must derive
at least 90% of its annual gross income from specified sources ("Income
Requirement") and (3) must meet certain asset diversification and other
requirements.
Any dividend or other distribution paid shortly after an investor's
purchase may have the effect of reducing the net asset value of the shares
below the cost of his investment. Such a dividend or other distribution
would be a return on investment in an economic sense, although taxable as
stated in the Fund's Prospectus. In addition, if a shareholder holds shares
of the Fund for six months or less and has received a capital gain
distribution with respect to those shares, any loss incurred on the sale of
those shares will be treated as a long-term capital loss to the extent of
the capital gain distribution received.
Dividends and other distributions declared by the Fund in October,
November or December of any year and payable to shareholders of record on a
date in any of those months are deemed to have been paid by the Fund and
received by the shareholders on December 31 of that year if the
distributions are paid by the Fund during the following January.
Accordingly, those distributions will be taxed to shareholders for the year
in which that December 31 falls.
A portion of the dividends paid by the Fund, whether received in cash
or reinvested in additional Fund shares, may be eligible for the dividends-
received deduction allowed to corporations. The eligible portion may not
exceed the aggregate dividends received by the Fund from U.S. corporations.
However, dividends received by a corporate shareholder and deducted by it
pursuant to the dividends-received deduction are subject indirectly to the
alternative minimum tax.
Foreign Taxes. Dividends and interest received by the Fund, and gains
realized thereby, may be subject to income, withholding or other taxes
imposed by foreign countries and U.S. possessions ("foreign taxes") that
would reduce the yield and/or its return on its securities. Tax conventions
between certain countries and the United States may reduce or eliminate
these foreign taxes, however, and many foreign countries do not impose taxes
on capital gains in respect of investments by foreign investors.
State and Local Taxes. Depending upon the extent of the Fund's
activities in states and localities in which it is deemed to be conducting
business, the Fund may be subject to the tax laws thereof. Shareholders are
advised to consult their tax advisers concerning the application of state
and local taxes.
Foreign Shareholders - U.S. Federal Income Taxation. U.S. federal
income taxation of a shareholder who, as to the United States, is a
non-resident alien individual, a foreign trust or estate, a foreign
corporation or a foreign partnership (a "foreign shareholder"), depends on
whether the income from the Fund is "effectively connected" with a U.S.
trade or business carried on by the shareholder, as discussed generally
below. Special U.S. federal income tax rules that differ from those
described below may apply to certain foreign persons who invest in the Fund,
such as a foreign shareholder entitled to claim the benefits of an
applicable tax treaty. Foreign shareholders are advised to consult their
own tax advisers with respect to the particular tax consequences to them of
an investment in the Fund.
Foreign Shareholders - Income Not Effectively Connected. Dividends
distributed to a foreign shareholder whose ownership of Fund shares is not
effectively connected with a U.S. trade or business carried on by the
foreign shareholder generally will be subject to a U.S. federal withholding
tax of 30% (or lower treaty rate). Capital gains realized by foreign
shareholders on the sale of Fund shares and distributions to them of net
capital gain, (the excess of net long-term capital gain over net short-term
capital loss), generally will not be subject to U.S. federal income tax
unless the foreign shareholder is a non-resident alien individual and is
physically present in the United States for more than 182 days during the
taxable year. In the case of certain foreign shareholders, the Fund may be
required to withhold U.S. Federal income tax at a rate of 31% of capital
gain distributions and of the gross proceeds from a redemption of Fund
shares unless the shareholder furnishes the Fund with a certificate
regarding the shareholder's foreign status.
Foreign Shareholders - Effectively Connected Income. If a foreign
shareholder's ownership of Fund shares is effectively connected with a U.S.
trade or business carried on by a foreign shareholder, then all
distributions to that shareholder and any gains realized by that shareholder
on the disposition of the Fund shares will be subject to U.S. federal income
tax at the graduated rates applicable to U.S. citizens and domestic
corporations, as the case may be. Foreign shareholders also may be subject
to the branch profits tax.
Foreign Shareholders - Estate Tax. Foreign individuals generally are
subject to U.S. federal estate tax on their U.S. situs property, such as
shares of the Fund, that they own at the time of their death. Certain
credits against that tax and relief under applicable tax treaties may be
available.
PORTFOLIO TRANSACTIONS
All portfolio transactions of the Fund are placed on behalf of the Fund
by Dreyfus. Debt securities purchased and sold by the Fund are generally
traded on a net basis (i.e., without commission) through dealers acting for
their own account and not as brokers, or otherwise involve transactions
directly with the issuer of the instrument. This means that a dealer (the
securities firm or bank dealing with the Fund) makes a market for securities
by offering to buy at one price and sell at a slightly higher price. The
difference between the prices is known as a spread. Other portfolio
transactions may be executed through brokers acting as agent. The Fund will
pay a spread or commissions in connection with such transactions. Dreyfus
uses its best efforts to obtain execution of portfolio transactions at
prices which are advantageous to the Fund and at spreads and commission
rates, if any, which are reasonable in relation to the benefits received.
Dreyfus also places transactions for other accounts that it provides with
investment advice.
Brokers and dealers involved in the execution of portfolio transactions
on behalf of the Fund are selected on the basis of their professional
capability and the value and quality of their services. In selecting brokers
or dealers, Dreyfus will consider various relevant factors, including, but
not limited to, the size and type of the transaction; the nature and
character of the markets for the security to be purchased or sold; the
execution efficiency, settlement capability, and financial condition of the
broker-dealer; the broker-dealer's execution services rendered on a
continuing basis; and the reasonableness of any spreads (or commissions, if
any). Any spread, commission, fee or other remuneration paid to an
affiliated broker-dealer is paid pursuant to the Company's procedures
adopted in accordance with Rule 17e-1 under the 1940 Act.
Brokers or dealers may be selected who provide brokerage and/or
research services to the Fund and/or other accounts over which Dreyfus or
its affiliates exercise investment discretion. Such services may include
advice concerning the value of securities; the advisability of investing in,
purchasing or selling securities; the availability of securities or the
purchasers or sellers of securities; furnishing analyses and reports
concerning issuers, industries, securities, economic factors and trends,
portfolio strategy and performance of accounts; and effecting securities
transactions and performing functions incidental thereto (such as clearance
and settlement).
The receipt of research services from broker-dealers may be useful to
Dreyfus in rendering investment management services to the Fund and/or its
other clients; and, conversely, such information provided by brokers or
dealers who have executed transaction orders on behalf of other clients of
Dreyfus may be useful to these organizations in carrying out their
obligations to the Fund. The receipt of such research services does not
reduce these organizations' normal independent research activities; however,
it enables these organizations to avoid the additional expenses which might
otherwise be incurred if these organizations were to attempt to develop
comparable information through their own staffs.
Although Dreyfus manages other accounts in addition to the Fund,
investment decisions for the Fund are made independently from decisions made
for these other accounts. It sometimes happens that the same security is
held by more than one of the accounts managed by Dreyfus. Simultaneous
transactions may occur when several accounts are managed by the same
investment manager, particularly when the same investment instrument is
suitable for the investment objective of more than one account.
When more than one account is simultaneously engaged in the purchase or
sale of the same investment instrument, the prices and amounts are allocated
in accordance with a formula considered by Dreyfus to be equitable to each
account. In some cases this system could have a detrimental effect on the
price or volume of the investment instrument as far as the Fund is
concerned. In other cases, however, the ability of the Fund to participate
in volume transactions will produce better executions for the Fund. While
the Directors will continue to review simultaneous transactions, it is their
present opinion that the desirability of retaining Dreyfus as investment
manager to the Fund outweighs any disadvantages that may be said to exist
from exposure to simultaneous transactions.
During the fiscal year ended October 31, 1997, the Fund did not pay any
brokerage commissions on portfolio transactions. During the fiscal year
ended October 31, 1996, the Fund paid no brokerage commissions on portfolio
transactions. During the fiscal year ended October 31, 1995, the Fund paid
brokerage commissions of $148 on portfolio transactions.
Portfolio Turnover. The portfolio turnover rate for the Fund is
calculated by dividing the lesser of the Fund's annual sales or purchases of
portfolio securities (exclusive of purchases and sales of securities whose
maturities at the time of acquisition were one year or less) by the monthly
average value of securities in the Fund during the year. The portfolio
turnover rates for the Fund for the fiscal years ended October 31, 1996 and
October 31, 1997 were 42.65% and 48.86%, respectively.
PERFORMANCE INFORMATION
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Performance
Information."
Average annual total return is calculated by determining the ending
redeemable value of an investment purchased with a hypothetical $1,000
payment made at the beginning of the period (assuming the reinvestment of
dividends and other distributions), dividing by the amount of the initial
investment, taking the "n"th root of the quotient (where "n" is the number
of years in the period) and subtracting 1 from the result.
The Fund's total return for Investor shares for the period April 28,
1994 to October 31, 1997 was 29.38%. The Fund's total return for BASIC
shares for the period November 30, 1993 to October 31, 1997 was 26.23%.
Total return is calculated by subtracting the amount of the Fund's net asset
value per share at the beginning of a stated period from the net asset value
per share at the end of the period (after giving effect to the reinvestment
of dividends and other distributions during the period), and dividing the
result by the net asset value per share at the beginning of the period.
Average annual total return (expressed as a percentage) for the
Investor shares of the Fund for each of the periods noted was:
Average Annual Total Return for the
Periods Ended October 31, 1997
1 Year 5 Years 10 Years Inception
Investor Shares 8.29% -- -- 7.62%
(4/28/94)
Inception date appears in parentheses following the average annual total
return since inception.
Average annual total return (expressed as a percentage) for the BASIC
shares of the Fund for each of the periods noted was:
Average Annual Total Return for the
Periods Ended October 31, 1997
1 Year 5 Years 10 Years Inception
BASIC Shares 8.46% -- -- 6.12%
(11/30/93)
Inception date appears in parentheses following the average annual total
return since inception.
The Fund may also advertise yield from time to time. Yields are
computed by using standardized methods of calculation required by the SEC.
Yields are calculated by dividing the net investment income per share earned
during a 30-day (or one month) period by the maximum offering price per
share on the last day of the period, according to the following formula:
YIELD = 2 [(a-b +1)6 -1]
cd
Where: a = dividends and interest earned
during the period;
b = expenses accrued for the period
(net of reimbursements);
c = average daily number of shares
outstanding during the period that were entitled to
receive dividends; and
d = the maximum offering price per
share on the last day of the period.
The 30-day yield for each class of the Fund for the period ended
October 31, 1997 was:
Investor Shares 5.83%
BASIC Shares 6.09%
Performance information for the Fund may be compared, in reports and
promotional literature, to indexes including, but not limited to: (i) the
Lehman Brothers Aggregate Bond Index and the Lehman Brothers Government
Corporate Bond Index; (ii) the Standard & Poor's 500 Composite Stock Price
Index, the Dow Jones Industrial Average, or other appropriate unmanaged
domestic or foreign indices of performance of various types of investments
so that investors may compare the Fund's results with those of indices
widely regarded by investors as representative of the securities markets in
general; (iii) other groups of mutual funds tracked by Lipper Analytical
Services, a widely used independent research firm which ranks mutual funds
by overall performance, investment objectives and assets, or tracked by
other services, companies, publications, or persons who rank mutual funds on
overall performance or other criteria; (iv) the Consumer Price Index (a
measure of inflation) to assess the real rate of return from an investment
in the Fund; and (v) products managed by a universe of money managers with
similar country allocation and performance objectives. Unmanaged indices
may assume the reinvestment of dividends but generally do not reflect
deductions or administrative and management costs and expenses.
From time to time, Fund advertisements may include statistical data or
general discussions about the growth and development of Dreyfus Retirement
Services (in terms of new customers, assets under management, market share,
etc.) and its presence in the defined contribution plan market.
From time to time, advertising material for the Fund may include
biographical information relating to its portfolio manager and may refer to,
or include commentary by the portfolio manager relating to investment
strategy, asset growth, current or past business, political, economic or
financial conditions and other matters of general interest to investors.
INFORMATION ABOUT THE FUND
The following information supplements and should be read in conjunction with
the section in the Fund's Prospectus entitled "General Information."
Each Fund share has one vote and, when issued and paid for in
accordance with the terms of the offering, is fully paid and non-assessable.
The Fund is one of eighteen portfolios of the Company. Fund shares have no
preemptive or subscription rights and are freely transferable.
The Fund will send annual and semi-annual financial statements to all
of its shareholders.
TRANSFER AND DIVIDEND DISBURSING AGENT, CUSTODIAN, COUNSEL
AND INDEPENDENT AUDITORS
Dreyfus Transfer, Inc., a wholly-owned subsidiary of Dreyfus, P.O. Box
9671, Providence, Rhode Island 02940-9671, is the Company's transfer and
dividend disbursing agent. Under a transfer agency agreement with the
Company, Dreyfus Transfer, Inc. arranges for the maintenance of shareholder
account records for the Fund, the handling of certain communications between
shareholders and the Fund and the payment of dividends and distributions
payable by the Fund. For these services, Dreyfus Transfer, Inc. receives a
monthly fee computed on the basis of the number of shareholder accounts it
maintains for the Company during the month, and is reimbursed for certain
out-of-pocket expenses.
Mellon Bank, the parent of Dreyfus, located at One Mellon Bank Center,
Pittsburgh, Pennsylvania 15258, acts as custodian of the Fund's investments.
Under a custody agreement with the Company, Mellon Bank holds the Fund's
portfolio securities and keeps all necessary accounts and records. Dreyfus
Transfer, Inc. and Mellon Bank, as custodian, have no part in determining
the investment policies of the Fund or which securities are to be purchased
or sold by the Fund.
Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue, N.W., Second
Floor, Washington, D.C. 20036-1800, has passed upon the legality of the
shares offered by the Prospectus and this Statement of Additional
Information.
KPMG Peat Marwick LLP was appointed by the Directors to serve as the
Fund's independent auditors for the year ending October 31, 1998, providing
audit services including (1) examination of the annual financial statements,
(2) assistance, review and consultation in connection with SEC filings and
(3) review of the annual federal income tax return filed on behalf of the
Fund.
FINANCIAL STATEMENTS
The financial statements for the fiscal year ended October 31, 1997,
including notes to the financial statements and financial highlights and the
Independent Auditors' Report, are included in the Annual Report to
shareholders. A copy of the Annual Report accompanies this Statement of
Additional Information. The financial statements included in the Annual
Report, and the Independent Auditors' Report thereon contained therein, and
related notes, are incorporated herein by reference.
APPENDIX
DESCRIPTION OF RATINGS
Bond, Note and Commercial Paper Ratings
Standard & Poor's ("S&P")
Bond Ratings
AAA An obligation rated `AAA' has the highest rating assigned by S&P.
The obligor's capacity to meet its financial commitment on the
obligation is extremely strong.
AA An obligation rated `AA' differs from the highest rated issues
only in small degree. The obligors capacity to meet its financial
commitment on the obligation is very strong.
A An obligation rated `A' is somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions than obligations in higher rated categories. However,
the obligor's capacity to meet its financial commitment on the
obligation is still strong.
BBB An obligation rated `BBB' exhibits adequate protection parameters.
However, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity of the obligor to meet
its financial commitment on the obligation.
Obligations rated `BB', `B', `CCC', `CC', and `C' are regarded as
having significant speculative characteristics. `BB' indicates the
least degree of speculation and `C' the highest. While such
obligations will likely have some quality and protective
characteristics, these may be outweighed by large uncertainties or
major exposures to adverse conditions.
BB An obligation rated `B' is less vulnerable to nonpayment than
other speculative issues. However, it faces major ongoing
uncertainties or exposure to adverse business, financial, or
economic conditions, which could lead to the obligor's inadequate
capacity to meet its financial commitment on the obligation.
B An obligation rated `B' is more vulnerable to nonpayment than
obligations rated `BB', but the obligor currently has the capacity
to meet its financial commitment on the obligation. Adverse
business, financial, or economic conditions will likely impair the
obligor's capacity or willingness to meet its financial commitment
on the obligation.
CCC An obligation rated `CCC' is currently vulnerable to nonpayment
and is dependent upon favorable business, financial and economic
conditions for the obligor to meet its financial commitment on the
obligation. In the event of adverse business, financial, or
economic conditions, the obligor is not likely to have the
capacity to meet its financial commitment on the obligation.
CC An obligation rated `CC' is currently highly vulnerable to
nonpayment.
C The `C' rating may be used to cover a situation where a bankruptcy
petition has been filed or similar action has been taken, but
payments on this obligation are being continued.
D An obligation rated `D' is in payment default. The `D' rating
category is used when payments on a obligation are not made on the
date due even if the applicable grace period has not expired,
unless S&P believes that such payments will be made during such
grace period. The `D' rating also will be used upon the filing of
a bankruptcy petition or the taking of a similar action if
payments on an obligation are jeopardized.
The ratings from `AA' to `CCC' may be modified by the addition of a
plus (+) or a minus (-) sign to show relative standing within the major
rating categories
Note Ratings
SP-1 Strong capacity to pay principal and interest. An issue
determined to possess a very strong capacity to pay debt service
is given a plus (+) designation.
SP-2 Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse finance and economic changes over the
term of the notes.
SP-3 Speculative capacity to pay principal and interest.
Commercial Paper Ratings
An S&P commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more
than 365 days.
A-1 This designation indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess
extremely strong safety characteristics are denoted with a plus
sign (+) designation.
A-2 Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as
high as for issuers designated `A-1.'
A-3 Issues carrying this designation have an adequate capacity for
timely payment. They are, however, more vulnerable to the adverse
effects of changes in circumstances than obligations carrying the
higher designations.
B Issues rated `B' are regarded as having only speculative capacity
for timely payment.
C This rating is assigned to short-term debt obligations with a
doubtful capacity for payment.
D Debt rated `D' is in payment default. The `D' rating category is
used when interest payments of principal payments are not made on
the date due, even if the applicable grace period has not expired,
unless S&P believes such payments will be made during such grace
period.
Moody's
Bond Ratings
Aaa Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and generally
are referred to as "gilt edge." Interest payments are protected
by a large or by an exceptionally stable margin and principal is
secure. While the various protective elements are likely to
change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what
generally are known as high-grade bonds. They are rated lower
than the best bonds because margins of protection may not be as
large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa
securities.
A Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper-medium-grade
obligations. Factors giving security to principal and interest
are considered adequate, but elements may be present which suggest
a susceptibility to impairment some time in the future.
Baa Bonds which are rated Baa are considered as medium grade
obligations (i.e., they are neither highly protected nor poorly
secured). Interest payments and principal security appear
adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment charac
teristics and in fact have speculative characteristics as well.
Ba Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well-assured. Often the
protection of interest and principal payments may be very
moderate, and thereby not well safeguarded during both good and
bad times over the future. Uncertainty of position characterizes
bonds in this class.
B Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal
payments or of maintenance of other terms of the contract over any
long period of time may be small.
Caa Bonds which are rated Caa are of poor standing. Such issues may
be in default or there may be present elements of danger with
respect to principal or interest.
Ca Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or
have other marked short-comings.
C Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects
of ever attaining any real investment standing.
Moody's applies the numerical modifiers 1, 2 and 3 to show relative
standing within each generic rating classification from Aa through B.
The modifier 1 indicates a ranking for the security in the higher end
of a rating category; the modifier 2 indicates a mid-range ranking; and
the modifier 3 indicates a ranking in the lower end of a rating
category.
Notes and other Short-Term Obligations
There are four rating categories for short-term obligations that define
an investment grade situation. These are designated Moody's Investment
Grade as MIG 1 (best quality) through MIG 4 (adequate quality). Short-term
obligations of speculative quality are designated SG.
In the case of variable rate demand obligations (VRDOs), a two
component rating is assigned. The first element represents an evaluation of
the degree of risk associated with scheduled principal and interest
payments, and the other represents an evaluation of the degree of risk
associated with the demand feature. The short-term rating assigned to the
demand feature of VRDOs is designated as VMIG. When either the long- or
short-term aspect of a VRDO is not rated, that piece is designated NR, e.g.,
Aaa/NR or NR/VMIG 1.
MIG 1/
VMIG 1 This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support
or demonstrated broad-based access to the market for refinancing.
MIG-2/
MIG 2 This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.
MIG 3/
VMIG 3 This designation denotes favorable quality. All security elements
are accounted for but there is lacking the undeniable strength of
the preceding grades. Liquidity and cash flow protection may be
narrow and market access for refinancing is likely to be less well
established.
MIG 4/
VMIG 4 This designation denotes adequate quality. Protection commonly
regarded as required of an investment security is present and
although not distinctly or predominantly speculative, there is
specific risk.
Commercial Paper Rating
Moody's employs the following three designations, all judged to be
investment grade, to indicate the relative repayment ability of rated
issuers:
Prime-1 Issuers rated Prime-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations.
Prime-1 repayment ability will often be evidenced by many of the
following characteristics:
- Leading market positions in well-established industries.
- High rates of return on funds employed.
- Conservative capitalization structure with moderate
reliance on debt and ample asset protection.
- Broad margins in earnings coverage of fixed financial
charges and high internal cash generation.
- Well-established access to a range of financial markets
and assured sources of alternate liquidity.
Prime-2 Issuers rated Prime-2 (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations. This
will normally be evidenced by many of the characteristics cited
above but to a lesser agree. Earnings trends and coverage ratios,
while sound, may be more subject to variation. Capitalization
characteristics, while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is maintained.
Prime-3 Issuers rated Prime-3 (or supporting institutions) have an
acceptable ability for repayment of senior short-term
obligations. The effect of industry characteristics and market
compositions may be more pronounced. Variability in earnings and
profitability may result in changes in the level of debt
protection measurements and may require relatively high financial
leverage. Adequate alternative liquidity is maintained.
Fitch Investor Services, Inc. ("Fitch")
Bond Ratings
AAA Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by
reasonably forseeable events.
AA Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay
principal is very strong, although not quite as strong as bonds
rated `AAA'. Because bonds rated in the `AAA' and `AA' categories
are not significantly vulnerable to foreseeable future
developments, short-term debt of these issuers is generally rated
`F-1+'.
A Bonds considered to be investment grade and of high credit
quality, The obligor's ability to pay interest an repay principal
is considered to be strong, but may be more vulnerable to adverse
changes in economic conditions and circumstances than bonds with
higher ratings.
BBB Bonds considered to be investment grade and satisfactory credit
quality. The obligor's ability to pay interest and repay
principal is considered to be adequate. Adverse changes in
economic conditions and circumstances, however, are more likely to
have adverse impact on these bonds and, therefore, impair timely
payment. The likelihood that the ratings of these bonds will fall
below investment grade is higher than for bonds with higher
ratings
BB Bonds are considered speculative. The obligor's ability to pay
interest and repay principal may be affected over time by adverse
economic changes. However, business and financial alternatives
can be identified, which could assist the obligor in satisfying
its debt service requirements.
B Bonds are considered highly speculative. While bonds in this
class are currently meeting debt service requirements, the
probability of continued timely payment of principal and interest
reflects the obligor's limited margin of safety and the need for
reasonable business and economic activity throughout the life of
the issue.
CCC Bonds have certain identifiable characteristics that, if not
remedied, may lead to default. The ability to meet obligations
requires an advantageous business and economic environment.
CC Bonds are minimally protected. Default in payment of interest
and/or principal seems probable over time.
C Bonds are in imminent default in payment of interest or principal.
DDD, DD
and D Bonds are in default on interest and/or principal payments. Such
bonds are extremely speculative and should be valued on the basis
of their ultimate recovery value in liquidation or reorganization
of the obligor. `DDD' represents the highest potential for
recovery on these bonds, and `D' represents the lowest potential
for recovery.
+/- Plus and minus signs are used with a rating symbol to indicate the
relative position of a credit within the rating category. Plus
and minus signs, however, are not used in the `DDD', `DD', or `D'
categories.
Short-Term and Commercial Paper Ratings
Fitch's short-term ratings apply to debt obligations that are payable
on demand or have original maturities of up to three years, including
commercial paper, certificates of deposit, medium-term notes, and municipal
and investment notes.
Although the credit analysis is similar to Fitch's bond rating
analysis, the short-term rating places greater emphasis than bond ratings on
the existence of liquidity necessary to meet the issuer's obligations in a
timely manner.
F-1+ Exceptionally Strong Credit Quality. Issues assigned this rating
are regarded as having the strongest degree of assurance for
timely payment.
F-1 Very Strong Credit Quality. Issues assigned this rating reflect
an assurance of timely payment only slightly less in degree than
issues rated `F-1+'.
F-2 Good Credit Quality. Issues assigned this rating have a
satisfactory degree of assurance for timely payment, but the
margin of safety is not as great as for issues assigned `F-1+' and
`F-1' ratings.
F-3 Fair Credit Quality. Issues assigned this rating have
characteristics suggesting that the degree of assurance for timely
payment is adequate; however, near-term adverse changes could
cause these securities to be rated below investment grade.
D Default. Issues assigned this rating are in actual or imminent
payment default.
Duff & Phelps Inc. ("Duff & Phelps")
Long-Term Ratings
AAA Highest credit quality. The risks factors are negligible, being
only slightly more than for risk-free U.S. Treasury debt.
AA+ High credit quality. Protection factors are strong. Risk is
modest but
AA may vary slightly from time to time because of economic
conditions.
AA-
A+ Protections factors are average but adequate. However, risk
factors are
A more variable and greater in periods of economic stress.
A-
BBB+ Below-average protection factors but still considered sufficient
for prudent
BBB investment. Considerable variability in risk during economic
cycles.
BBB-
BB+ Below investments grade but deemed likely to meet obligations when
due.
BB Present or prospective financial protection factors fluctuate
according to
BB- industry conditions or company fortunes. Overall quality may move
up or down frequently within this category.
B+ Below investment grade and possessing risk that obligations will
not be met
B when due. Financial protection factors will fluctuate widely
according to
B- economic cycles, industry conditions and/or company fortunes.
Potential exists for frequent changes in the rating within this
category or into a higher or lower rating grade.
CCC Well below investment-grade securities. Considerable uncertainty
exists as to timely payment of principal, interest or preferred
dividends.
Protection factors are narrow and risk can be substantial with
unfavorable
economic/industry conditions, and/or with unfavorable company
developments.
DD Defaulted debt obligations. Issuer failed to meet scheduled
principal and/or
interest payments.
Short-Term and Commercial Paper Ratings
D-1+ Highest certainty of timely payment. Short-term liquidity,
including internal operating factors and/or access to alternative
sources of funds, is outstanding, and safety is just below risk-
free U.S. Treasury short-term obligations.
D-1 Very high certainty of timely payment. Liquidity factors are
excellent and supported by good fundamental protection factors.
Risk factors are minor.
D-1- High certainly of timely payment. Liquidity factors are strong
and supported by good fundamental protection factors. Risk
factors are very small.
D-2 Good certainty of timely payment. Liquidity factors and company
fundamentals are sound. Although ongoing funding needs may
enlarge total financial requirements, access to capital markets is
good. Risk factors are small.
D-3 Satisfactory liquidity and other protection factors qualify issues
as to investment grade. Risk factors are larger and subject to
more variation. Nevertheless, timely payment is expected.
D-4 Speculative investment characteristics. Liquidity is not
sufficient to insure against disruption in debt service.
Operating factors and market access may be subject to a high
degree of variation.
D-5 Issuer failed to meet scheduled principal and/or interest
payments.
IBCA Limited/IBCA Inc. ("IBCA")
Commercial Paper Ratings.
Short-term obligations, including commercial paper, rated A1+ by IBCA
are obligations supported by the highest capacity for timely repayment.
Obligations rated A1 have a very strong capacity for timely repayment.
Obligations rated A2 have a strong capacity for repayment, although such
capacity may be susceptible to adverse changes in business, economic or
financial conditions. Obligations rated B1 have adequate capacity for
timely repayment, but such capacity is more susceptible to adverse changes
in business, economic, or financial conditions than for obligations in
higher categories. Obligations rated B2 have a capacity for repayment that
is susceptible to adverse changes in business, economic, or financial
conditions. Obligations rated C1 have an inadequate capacity to ensure
timely repayment. Obligations rated D1 have a high risk of default or are
currently in default.
____________________________________________________________________________
DREYFUS DISCIPLINED STOCK FUND
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
MARCH 1, 1998
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus of
the Dreyfus Disciplined Stock Fund (formerly, the Laurel Stock Fund) (the
"Fund"), dated March 1, 1998, as it may be revised from time to time. The
Fund is a separate, diversified portfolio of The Dreyfus/Laurel Funds, Inc.
(formerly, The Laurel Funds, Inc.), an open-end management investment
company (the "Company"), known as a mutual fund. To obtain a copy of the
Fund's Prospectus, please write to the Fund at 144 Glenn Curtiss Boulevard,
Uniondale, New York 11556-0144, or call one of the following numbers:
Call Toll Free 1-800-645-6561
In New York City -- Call 1-718-895-1206
Outside the U.S. and Canada -- Call 516-794-5452
The Dreyfus Corporation ("Dreyfus") serves as the Fund's investment
manager.
Premier Mutual Fund Services, Inc. (the "Distributor") is the
distributor of the Fund's shares.
TABLE OF CONTENTS
Page
Investment Objective and Management Policies B-2
Management of the Fund B-13
Management Arrangements B-19
Purchase of Fund Shares B-20
Distribution Plan B-21
Redemption of Fund Shares B-22
Shareholder Services B-24
Determination of Net Asset Value B-27
Dividends, Other Distributions and Taxes B-28
Portfolio Transactions B-31
Performance Information B-33
Information About the Fund B-35
Transfer and Dividend Disbursing Agent, Custodian
Counsel and Independent Auditors B-35
Financial Statements B-36
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Description of the
Fund."
Portfolio Securities
Government Obligations. The Fund may invest in a variety of U.S.
Treasury obligations, which differ only in their interest rates, maturities
and times of issuance: (a) U.S. Treasury bills have a maturity of one year
or less, (b) U.S. Treasury notes have maturities of one to ten years, and
(c) U.S. Treasury bonds generally have maturities of greater than ten years.
In addition to U.S. Treasury obligations, the Fund may invest in
obligations issued or guaranteed by U.S. Government agencies and
instrumentalities which are supported by any of the following: (a) the full
faith and credit of the U.S. Treasury, (b) the right of the issuer to borrow
an amount limited to a specific line of credit from the U.S. Treasury, (c)
the discretionary authority of the U.S. Government agency or
instrumentality, or (d) the credit of the instrumentality. (Examples of
agencies and instrumentalities are: Federal Land Banks, Federal Housing
Administration, Farmers Home Administration, Export-Import Bank of the
United States, Central Bank for Cooperatives, Federal Intermediate Credit
Banks, Federal Home Loan Banks, General Services Administration, Maritime
Administration, Tennessee Valley Authority, District of Columbia Armory
Board, Inter-American Development Bank, Asian-American Development Bank,
Student Loan Marketing Association, International Bank for Reconstruction
and Development and Fannie Mae). No assurance can be given that the U.S.
Government will provide financial support to such U.S. Government agencies
or instrumentalities described in (b), (c) and (d) in the future, other than
as set forth above, since it is not obligated to do so by law.
Repurchase Agreements. The Fund may enter into repurchase agreements
with U.S. Government securities dealers recognized by the Federal Reserve
Board, with member banks of the Federal Reserve System, or with such other
brokers or dealers that meet the credit guidelines of the Board of
Directors. In a repurchase agreement, the Fund buys a security from a seller
that has agreed to repurchase the same security at a mutually agreed upon
date and price. The Fund's resale price will be in excess of the purchase
price, reflecting an agreed upon interest rate. This interest rate is
effective for the period of time the Fund is invested in the agreement and
is not related to the coupon rate on the underlying security. Repurchase
agreements may also be viewed as a fully collateralized loan of money by the
Fund to the seller. The period of these repurchase agreements will usually
be short, from overnight to one week, and at no time will the Fund invest in
repurchase agreements for more than one year. The Fund will always receive
as collateral securities whose market value including accrued interest is,
and during the entire term of the agreement remains, at least equal to 100%
of the dollar amount invested by the Fund in each agreement, and the Fund
will make payment for such securities only upon physical delivery or upon
evidence of book entry transfer to the account of the Custodian. If the
seller defaults, the Fund might incur a loss if the value of the collateral
securing the repurchase agreement declines and might incur disposition costs
in connection with liquidating the collateral. In addition, if bankruptcy
proceedings are commenced with respect to the seller of a security which is
the subject of a repurchase agreement, realization upon the collateral by
the Fund may be delayed or limited. The Fund seeks to minimize the risk of
loss through repurchase agreements by analyzing the creditworthiness of the
obligors under repurchase agreements, in accordance with the credit
guidelines of the Company's Board of Directors.
When-Issued Securities. New issues of U.S. Treasury and Government
securities are often offered on a when-issued basis. This means that
delivery and payment for the securities normally will take place
approximately 7 to 45 days after the date the buyer commits to purchase
them. The payment obligation and the interest rate that will be received on
securities purchased on a when-issued basis are each fixed at the time the
buyer enters into the commitment. The Fund will make commitments to purchase
such securities only with the intention of actually acquiring the
securities, but the Fund may sell these securities or dispose of the
commitment before the settlement date if it is deemed advisable as a matter
of investment strategy. Cash or marketable high-grade debt securities equal
to the amount of the above commitments will be segregated on the Fund's
records. For the purpose of determining the adequacy of these securities the
segregated securities will be valued at market. If the market value of such
securities declines, additional cash or securities will be segregated on the
Fund's records on a daily basis so that the market value of the account will
equal the amount of such commitments by the Fund.
Securities purchased on a when-issued basis and the securities held by
the Fund are subject to changes in market value based upon the public's
perception of changes in the level of interest rates. Generally, the value
of such securities will fluctuate inversely to changes in interest rates --
i.e., they will appreciate in value when interest rates decline and decrease
in value when interest rates rise. Therefore, if in order to achieve higher
interest income the Fund remains substantially fully invested at the same
time that it has purchased securities on a "when-issued" basis, there will
be a greater possibility of fluctuation in the Fund's net asset value.
When payment for when-issued securities is due, the Fund will meet its
obligations from then-available cash flow, the sale of segregated
securities, the sale of other securities, and/or although it would not
normally expect to do so, from the sale of the when-issued securities
themselves (which may have a market value greater or less than the Fund's
payment obligation). The sale of securities to meet such obligations carries
with it a greater potential for the realization of capital gains, which are
subject to federal income taxes.
Commercial Paper. The Fund may invest in commercial paper issued in
reliance on the so-called "private placement" exemption from registration
afforded by Section 4(2) of the Securities Act of 1933 ("Section 4(2)
paper"). Section 4(2) paper is restricted as to disposition under the
federal securities laws and generally is sold to investors who agree that
they are purchasing the paper for an investment and not with a view to
public distribution. Any resale by the purchaser must be pursuant to
registration or exemption therefrom. Section 4(2) paper is normally resold
to other investors through or with the assistance of the issuer or
investment dealers who make a market in Section 4(2) paper, thus providing
liquidity. Pursuant to guidelines established by the Company's Board of
Directors, Dreyfus may determine that Section 4(2) paper is liquid for the
purposes of complying with the Fund's investment restriction relating to
investments in illiquid securities.
Management Policies
The Fund engages, in the following practices in furtherance of its
investment objective.
Loans of Fund Securities. The Fund has authority to lend its portfolio
securities provided (1) the loan is secured continuously by collateral
consisting of U.S. Government securities or cash or cash equivalents
adjusted daily to make a market value at least equal to the current market
value of these securities loaned; (2) the Fund may at any time call the loan
and regain the securities loaned; (3) the Fund will receive any interest or
dividends paid on the loaned securities; and (4) the aggregate market value
of securities loaned will not at any time exceed one-third of the total
assets of the Fund. In addition, it is anticipated that the Fund may share
with the borrower some of the income received on the collateral for the loan
or that it will be paid a premium for the loan. In determining whether to
lend securities, the Fund considers all relevant factors and circumstances
including the creditworthiness of the
borrower.
Reverse Repurchase Agreements. The Fund may enter into reverse
repurchase agreements to meet redemption requests where the liquidation of
portfolio securities is deemed by the Fund to be inconvenient or
disadvantageous. A reverse repurchase agreement is a transaction whereby the
Fund transfers possession of a portfolio security to a bank or broker-dealer
in return for a percentage of the portfolio security's market value. The
Fund retains record ownership of the security involved including the right
to receive interest and principal payments. At an agreed upon future date,
the Fund repurchases the security by paying an agreed upon purchase price
plus interest. Cash or liquid high-grade debt obligations of the Fund equal
in value to the repurchase price including any accrued interest will be
maintained in a segregated account while a reverse repurchase agreement is
in effect.
Derivative Instruments. The Fund may purchase and sell various
financial instruments ("Derivative Instruments"), such as financial futures
contracts (such as index futures contracts), options (such as options on
U.S. and foreign securities or indices of such securities). The index
Derivative Instruments the Fund may use may be based on indices of U.S. or
foreign equity securities. These Derivative Instruments may be used, for
example, to preserve a return or spread or to facilitate or substitute for
the sale or purchase of securities.
Hedging strategies can be broadly categorized as "short hedges" and
"long hedges." A short hedge is a purchase or sale of a Derivative
Instrument intended partially or fully to offset potential declines in the
value of one or more investments held in the Fund's portfolio. Thus, in a
short hedge the Fund takes a position in a Derivative Instrument whose price
is expected to move in the opposite direction of the price of the investment
being hedged.
Conversely, a long hedge is a purchase or sale of a Derivative
Instrument intended partially or fully to offset potential increases in the
acquisition cost of one or more investments that the Fund intends to
acquire. Thus, in a long hedge the Fund takes a position in a Derivative
Instrument whose price is expected to move in the same direction as the
price of the prospective investment being hedged. A long hedge is sometimes
referred to as an anticipatory hedge. In an anticipatory hedge transaction,
the Fund does not own a corresponding security and, therefore, the
transaction does not relate to a security the Fund owns. Rather, it relates
to a security that the Fund intends to acquire. If the Fund does not
complete the hedge by purchasing the security it anticipated purchasing, the
effect on the Fund's portfolio is the same as if the transaction were
entered into for speculative purposes.
Derivative Instruments on securities generally are used to hedge
against price movements in one or more particular securities positions that
the Fund owns or intends to acquire. Derivative Instruments on indices, in
contrast, generally are used to attempt to hedge against price movements in
market sectors in which the Fund has invested or expects to invest.
The use of Derivative Instruments is subject to applicable regulations
of the Securities and Exchange Commission ("SEC"), the several options and
futures exchanges upon which they are traded, the Commodity Futures Trading
Commission ("CFTC") and various state regulatory authorities. In addition,
the Fund's ability to use Derivative Instruments will be limited by tax
considerations. See "Dividends, Other Distributions and Taxes."
In addition to the instruments, strategies and risks described below
and in the Prospectus, Dreyfus expects to discover additional opportunities
in connection with other Derivative Instruments. These new opportunities
may become available as Dreyfus develops new techniques, as regulatory
authorities broaden the range of permitted transactions and as new
techniques are developed. Dreyfus may utilize these opportunities to the
extent that they are consistent with the Fund's investment objective, and
permitted by the Fund's investment policies and applicable regulatory
authorities.
Special Risks. The use of Derivative Instruments involves special
considerations and risks, certain of which are described below. Risks
pertaining to particular Derivative Instruments are described in the
sections that follow.
(1) Successful use of most Derivative Instruments depends upon
Dreyfus' ability to predict movements of the overall securities and interest
rate markets, which requires different skills than predicting changes in the
prices of individual securities. There can be no assurance that any
particular strategy will succeed.
(2) There might be imperfect correlation, or even no correlation,
between price movements of a Derivative Instrument and price movements of
the investments being hedged. For example, if the value of a Derivative
Instrument used in a short hedge increased by less than the decline in value
of the hedged investment, the hedge would not be fully successful. Such a
lack of correlation might occur due to factors unrelated to the value of the
investments being hedged, such as speculative or other pressures on the
markets in which Derivative Instruments are traded. The effectiveness of
hedges using Derivative Instruments on indices will depend on the degree of
correlation between price movements in the index and price movements in the
securities being hedged.
Because there are a limited number of types of exchange-traded options
and futures contracts, it is likely that the standardized contracts
available will not match the Fund's current or anticipated investments
exactly. The Fund may invest in options and futures contracts based on
securities with different issuers, maturities, or other characteristics from
the securities in which it typically invests, which involves a risk that the
options or futures position will not track the performance of the Fund's
other investments.
Options and futures prices can also diverge from the prices of their
underlying instruments, even if the underlying instruments match the Fund's
investments well. Options and futures prices are affected by such factors
as current and anticipated short-term interest rates, changes in volatility
of the underlying instrument, and the time remaining until expiration of the
contract, which may not affect security prices the same way. Imperfect
correlation may also result from differing levels of demand in the options
and futures markets and the securities markets, from structural differences
in how options and futures and securities are traded, or from imposition of
daily price fluctuation limits or trading halts. The Fund may purchase or
sell options and futures contracts with a greater or lesser value than the
securities it wishes to hedge or intends to purchase in order to attempt to
compensate for differences in volatility between the contract and the
securities, although this may not be successful in all cases. If price
changes in the Fund's options or futures positions are poorly correlated
with its other investments, the positions may fail to produce anticipated
gains or result in losses that are not offset by gains in other investments.
(3) If successful, the above-discussed strategies can reduce risk of
loss by wholly or partially offsetting the negative effect of unfavorable
price movements. However, such strategies can also reduce opportunity for
gain by offsetting the positive effect of favorable price movements. For
example, if the Fund entered into a short hedge because Dreyfus projected a
decline in the price of a security in the Fund's portfolio, and the price of
that security increased instead, the gain from that increase might be wholly
or partially offset by a decline in the price of the Derivative Instrument.
Moreover, if the price of the Derivative Instrument declined by more than
the increase in the price of the security, the Fund could suffer a loss. In
either such case, the Fund would have been in a better position had it not
attempted to hedge at all.
(4) As described below, the Fund might be required to maintain assets
as "cover," maintain segregated accounts or make margin payments when it
takes positions in Derivative Instruments involving obligations to third
parties (i.e., Derivative Instruments other than purchased options). If the
Fund were unable to close out its positions in such Derivative Instruments,
it might be required to continue to maintain such assets or accounts or make
such payments until the position expired or matured. These requirements
might impair the Fund's ability to sell a portfolio security or make an
investment at a time when it would otherwise be favorable to do so, or
require that the Fund sell a portfolio security at a disadvantageous time.
The Fund's ability to close out a position in a Derivative Instrument prior
to expiration or maturity depends on the existence of a liquid secondary
market or, in the absence of such a market, the ability and willingness of
the other party to the transaction ("counterparty") to enter into a
transaction closing out the position. Therefore, there is no assurance that
any position can be closed out at a time and price that is favorable to the
Fund.
Cover for Derivative Instruments. Transactions using Derivative
Instruments may expose the Fund to an obligation to another party. The Fund
will not enter into any such transactions unless it owns either (1) an
offsetting ("covered") position in securities, futures or options, or (2)
cash and short-term liquid debt securities with a value sufficient at all
times to cover its potential obligations to the extent not covered as
provided in (1) above. The Fund will comply with SEC guidelines regarding
cover for Derivative Instruments and will, if the guidelines so require, set
aside cash, U.S. Government securities or other liquid, high-grade debt
securities in a segregated account with its custodian in the prescribed
amount.
Assets used as cover or held in a segregated account cannot be sold
while the position in the corresponding Derivative Instrument is open,
unless they are replaced with other appropriate assets. As a result, the
commitment of a large portion of the Fund's assets to cover or segregated
accounts could impede portfolio management or the Fund's ability to meet
redemption requests or other current obligations.
Options. A call option gives the purchaser the right to buy, and
obligates the writer to sell, the underlying investment at the agreed upon
exercise price during the option period. A put option gives the purchaser
the right to sell, and obligates the writer to buy, the underlying
investment at the agreed upon exercise price during the option period. A
purchaser of an option pays an amount, known as the premium, to the option
writer in exchange for rights under the option contract.
Options on indices are similar to options on securities except that all
settlements are in cash and gain or loss depends on changes in the index in
question rather than on price movements in individual securities.
The purchase of call options can serve as a long hedge, and the
purchase of put options can serve as a short hedge. Writing put or call
options can enable the Fund to enhance income or yield by reason of the
premiums paid by the purchasers of such options. However, if the market
price of the security or other instrument underlying a put option declines
to less than the exercise price on the option, minus the premium received,
the Fund would expect to suffer a loss.
Writing call options can also serve as a limited short hedge because
declines in the value of the hedged investment would be offset to the extent
of the premium received for writing the option. However, if the investment
appreciates to a price higher than the exercise price of the call option, it
can be expected that the option will be exercised and the Fund will be
obligated to sell the investment at less than its market value.
Writing put options can serve as a limited long hedge because increases
in the value of the hedged investment would be offset to the extent of the
premium received for writing the option. However, if the investment
depreciates to a price lower than the exercise price of the put option, it
can be expected that the put option will be exercised and the Fund will be
obligated to purchase the investment at more than its market value.
The value of an option position will reflect, among other things, the
current market value of the underlying investment, the time remaining until
expiration, the relationship of the exercise price to the market price of
the underlying investment, the historical price volatility of the underlying
investment and general market conditions. Options that expire unexercised
have no value.
The Fund may effectively terminate its right or obligation under an
option by entering into a closing transaction. For example, the Fund may
terminate its obligation under a call or put option that it had written by
purchasing an identical call or put option; this is known as a closing
purchase transaction. Conversely, the Fund may terminate a position in a
put or call option it had purchased by writing an identical put or call
option; this is known as a closing sale transaction. Closing transactions
permit the Fund to realize profits or limit losses on an option position
prior to its exercise or expiration.
The Fund may purchase and sell both exchange-traded and over-the-
counter ("OTC") options. Exchange-traded options in the United States are
issued by a clearing organization that, in effect, guarantees completion of
every exchange-traded option transaction. In contrast, OTC options are
contracts between the Fund and its counterparty (usually a securities dealer
or a bank) with no clearing organization guarantee. Thus, when the Fund
purchases an OTC option, it relies on the counterparty from whom it
purchased the option to make or take delivery of the underlying investment
upon exercise of the option. Failure by the counterparty to do so would
result in the loss of any premium paid by the Fund as well as the loss of
any expected benefit of the transaction. The Fund will enter into only
those option contracts that are listed on a national securities or
commodities exchange or traded in the OTC market for which there appears to
be a liquid secondary market.
The Fund will not purchase or write OTC options if, as a result of such
transaction, the sum of (i) the market value of outstanding OTC options
purchased by the Fund, (ii) the market value of the underlying securities
covered by outstanding OTC call options written by the Fund, and (iii) the
market value of all other assets of the Fund that are illiquid or are not
otherwise readily marketable, would exceed 15% of the net assets of the
Fund, taken at market value. However, if an OTC option is sold by the Fund
to a primary U.S. Government securities dealer recognized by the Federal
Reserve Bank of New York and the Fund has the unconditional contractual
right to repurchase such OTC option from the dealer at a predetermined
price, then the Fund will treat as illiquid such amount of the underlying
securities as is equal to the repurchase price less the amount by which the
option is "in-the-money" (the difference between the current market value of
the underlying securities and the option's strike price). The repurchase
price with primary dealers is typically a formula price that is generally
based on a multiple of the premium received for the option plus the amount
by which the option is "in-the-money."
The Fund's ability to establish and close out positions in exchange-
listed options depends on the existence of a liquid market. However, there
can be no assurance that such a market will exist at any particular time.
Closing transactions can be made for OTC options only by negotiating
directly with the counterparty, or by a transaction in the secondary market
if any such market exists. Although the Fund will enter into OTC options
only with major dealers in unlisted options, there is no assurance that the
Fund will in fact be able to close out an OTC option position at a favorable
price prior to expiration. In the event of insolvency of the counterparty,
the Fund might be unable to close out an OTC option position at any time
prior to its expiration.
If the Fund were unable to effect a closing transaction for an option
it had purchased, it would have to exercise the option to realize any
profit. The inability to enter into a closing purchase transaction for a
covered call option written by the Fund could cause material losses because
the Fund would be unable to sell the investment used as cover for the
written option until the option expires or is exercised.
The Fund may write only covered call options on securities. A call
option is covered if the Fund owns the underlying security or a call option
on the same security with a lower strike price.
Futures Contracts and Options on Futures Contracts. When the Fund
purchases a futures contract, it incurs an obligation to take delivery of a
specified amount of the obligation underlying the futures contract at a
specified time in the future for a specified price. When the Fund sells a
futures contract, it incurs an obligation to deliver a specified amount of
the obligation underlying the futures contract at a specified time in the
future for an agreed upon price. With respect to index futures, no physical
transfer of the securities underlying the index is made. Rather, the
parties settle by exchanging in cash an amount based on the difference
between the contract price and the closing value of the index on the
settlement date.
When the Fund writes an option on a futures contract, it becomes
obligated, in return for the premium paid, to assume a position in a futures
contract at a specified exercise price at any time during the term of the
option. If the Fund has written a call, it assumes a short futures
position. If the Fund has written a put, it assumes a long futures
position. When the Fund purchases an option on a futures contract, it
acquires the right, in return for the premium it pays, to assume a position
in a futures contract (a long position if the option is a call and a short
position if the option is a put).
The purchase of futures or call options on futures can serve as a long
hedge, and the sale of futures or the purchase of put options on futures can
serve as a short hedge. Writing call options on futures contracts can serve
as a limited short hedge, using a strategy similar to that used for writing
call options on securities or indices. Similarly, writing put options on
futures contracts can serve as a limited long hedge.
No price is paid upon entering into a futures contract. Instead, at
the inception of a futures contract the Fund is required to deposit "initial
margin" consisting of cash or U.S. Government securities in an amount
generally equal to 10% or less of the contract value. Margin must also be
deposited when writing a call or put option on a futures contract, in
accordance with applicable exchange rules. Unlike margin in securities
transactions, initial margin on futures contracts does not represent a
borrowing, but rather is in the nature of a performance bond or good-faith
deposit that is returned to the Fund at the termination of the transaction
if all contractual obligations have been satisfied. Under certain
circumstances, such as periods of high volatility, the Fund may be required
by an exchange to increase the level of its initial margin payment.
Subsequent "variation margin" payments are made to and from the futures
broker daily as the value of the futures position varies, a process known as
"marking-to-market." Variation margin does not involve borrowing, but
rather represents a daily settlement of the Fund's obligations to or from a
futures broker. When the Fund purchases an option on a future, the premium
paid plus transaction costs is all that is at risk. In contrast, when the
Fund purchases or sells a futures contract or writes a call or put option
thereon, it is subject to daily variation margin calls that could be
substantial in the event of adverse price movements. If the Fund has
insufficient cash to meet daily variation margin requirements, it might need
to sell securities at a time when such sales are disadvantageous.
Purchasers and sellers of futures contracts and options on futures can
enter into offsetting closing transactions, similar to closing transactions
on options, by selling or purchasing, respectively, an instrument identical
to the instrument purchased or sold. Positions in futures and options on
futures may be closed only on an exchange or board of trade that provides a
secondary market. Although the Fund intends to enter into futures and
options on futures only on exchanges or boards of trade where there appears
to be a liquid secondary market, there can be no assurance that such a
market will exist for a particular contract at a particular time. In such
event, it may not be possible to close a futures contract or options
position.
Under certain circumstances, futures exchanges may establish daily
limits on the amount that the price of a futures or an option on a futures
contract can vary from the previous day's settlement price; once that limit
is reached, no trades may be made that day at a price beyond the limit.
Daily price limits do not limit potential losses because prices could move
to the daily limit for several consecutive days with little or no trading,
thereby preventing liquidation of unfavorable positions.
If the Fund were unable to liquidate a futures or options on futures
position due to the absence of a liquid secondary market or the imposition
of price limits, it could incur substantial losses. The Fund would continue
to be subject to market risk with respect to the position. In addition,
except in the case of purchased options, the Fund would continue to be
required to make daily variation margin payments and might be required to
maintain the position being hedged by the future or option or to maintain
cash or securities in a segregated account.
To the extent that the Fund enters into futures contracts, options on
futures contracts, or options on foreign currencies traded on an exchange
regulated by the CFTC, in each case other than for bona fide hedging
purposes (as defined by the CFTC), the aggregate initial margin and premiums
required to establish those positions (excluding the amount by which options
are "in-the-money" at the time of purchase) will not exceed 5% of the
liquidation value of the Fund's portfolio, after taking into account
unrealized profits and unrealized losses on any contracts the Fund has
entered into. This policy does not limit to 5% the percentage of the Fund's
assets that are at risk in futures contracts and options on futures
contracts.
Master/Feeder Option. The Company may in the future seek to achieve
the Fund's investment objective by investing all of the Fund's net
investable assets in another investment company having the same investment
objective and substantially the same investment policies and restrictions as
those applicable to the Fund. Shareholders of the Fund will be given at
least 30 days' prior notice of any such investment. Such investment would
be made only if the Company's Board of Directors determines it to be in the
best interest of the Fund and its shareholders. In making that
determination, the Company's Board of Directors will consider, among other
things, the benefits to shareholders and/or the opportunity to reduce costs
and achieve operational efficiency. Although the Fund believes that the
Company's Board of Directors will not approve an arrangement that is likely
to result in higher costs, no assurance is given that costs will be
materially reduced if this option is implemented.
Investment Restrictions
The following limitations have been adopted by the Fund. The Fund may
not change any of these fundamental investment limitations without the
consent of: (a) 67% or more of the shares present at a meeting of
shareholders duly called if the holders of more than 50% of the outstanding
shares of the Fund are present or represented by proxy; or (b) more than 50%
of the outstanding shares of the Fund, whichever is less. The Fund may not:
1. Purchase any securities which would cause more than 25% of the
value of the Fund's total assets at the time of such purchase to be invested
in the securities of one or more issuers conducting their principal
activities in the same industry. (For purposes of this limitation, U.S.
Government securities, and state or municipal governments and their
political subdivisions are not considered members of any industry. In
addition, this limitation does not apply to investments in domestic banks,
including U.S. branches of foreign banks and foreign branches of U.S. bank).
2. Borrow money or issue senior securities as defined in the
Investment Company Act of 1940 as amended (the "Act") except that (a) the
Fund may borrow money in an amount not exceeding one-third of the Fund's
total assets at the time of such borrowings, and (b) the Fund may issue
multiple classes of shares. The purchase or sale of futures contracts and
related options shall not be considered to involve the borrowing of money or
shares of senior securities.
3. Purchase with respect to 75% of the Fund's total assets securities
of any one issuer (other than securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities) if, as a result, (a) more
than 5% of the Fund's total assets would be invested in the securities of
that issuer, or (b) the Fund would hold more than 10% of the outstanding
voting securities of that issuer.
4. Make loans or lend securities, if as a result thereof more than
one-third of the Fund's total assets would be subject to all such loans. For
purposes of this limitation debt instruments and repurchase agreements shall
not be treated as loans.
5. Purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent the
Fund from investing in securities or other instruments backed by real
estate, including mortgage loans, or securities of companies that engage in
real estate business or invest or deal in real estate or interests therein).
6. Underwrite securities issued by any other person, except to the
extent that the purchase of securities and later disposition of such
securities in accordance with the Fund's investment program may be deemed an
underwriting.
7. Purchase or sell commodities except that the Fund may enter into
future contracts and related options, forward investing contracts and other
similar instruments.
The Fund may, notwithstanding any other fundamental investment policy
or limitation, invest all of its investable assets in securities of a single
open-end management investment company with substantially the same
investment objective, policies and limitations as the Fund.
The Fund has adopted the following additional non-fundamental
restrictions. These non-fundamental restrictions may be changed without
shareholder approval, in compliance with applicable law and regulatory
policy.
1. The Fund shall not sell securities short, unless it owns or has
the right to obtain securities equivalent in kind and amount to the
securities sold short, and provided that transactions in futures contracts
and options are not deemed to constitute selling short.
2. The Fund shall not purchase securities on margin, except that the
Fund may obtain such short-term credits as are necessary for the clearance
of transactions and provided that margin payments in connection with futures
contracts and options shall not constitute purchasing securities on margin.
3. The Fund shall not purchase oil, gas or mineral leases.
4. The Fund will not purchase or retain the securities of any issuer
if the officers or Directors of the Fund, its advisers, or managers, owning
beneficially more than one half of one percent of the securities of such
issuer, together own beneficially more than 5% of such securities.
5. The Fund will not purchase securities of issuers (other than
securities issued or guaranteed by domestic or foreign governments or
political subdivisions thereof), including their predecessors, that have
been in operation for less than three years, if by reason thereof, the value
of the Fund's investment in securities would exceed 5% of the Fund's total
assets. For purposes of this limitation, sponsors, general partners,
guarantors and originators of underlying assets may be treated as the issuer
of a security.
6. The Fund will invest no more than 15% of the value of its net
assets in illiquid securities, including repurchase agreements with
remaining maturities in excess of seven days, time deposits with maturities
in excess of seven days and other securities which are not readily
marketable. For purposes of this limitation, illiquid securities shall not
include Section 4(2) paper and securities which may be resold under Rule
144A under the Securities Act of 1933, provided that the Board of Directors,
or its delegate, determines that such securities are liquid based upon the
trading markets for the specific security.
7. The Fund may not invest in securities of other investment
companies, except as they may be acquired as part of a merger, consolidation
or acquisition of assets and except to the extent otherwise permitted by the
1940 Act.
8. The Fund shall not purchase any security while borrowings
representing more than 5% of the Fund's total assets are outstanding.
9. The Fund will not purchase warrants if at the time of such
purchase: (a) more than 5% of the value of the Fund's assets would be
invested in warrants, or (b) more than 2% of the value of the Fund's assets
would be invested in warrants that are not listed on the New York or
American Stock Exchange (for purposes of this limitation, warrants acquired
by the Fund in units or attached to securities will be deemed to have no
value).
10. The Fund will not purchase puts, calls, straddles, spreads and any
combination thereof if by reason thereof the value of its aggregate
investment in such classes of securities would exceed 5% of its total assets
except that (a) this limitation shall not apply to standby commitments and
(b) this limitation shall not apply to the Fund's transactions in futures
contracts and options.
As an operating policy, the Fund will not invest more than 25% of the
value of its total assets, at the time of such purchase in domestic banks,
including U.S. branches of foreign banks and foreign branches of U.S. banks.
The Company's Board of Directors may change this policy without shareholder
approval. Notice will be given to shareholders if this policy is changed by
the Board of Directors.
MANAGEMENT OF THE FUND
As of February 9, 1998, the following shareholder(s) owned of record 5%
or more of Fund shares: Boston Safe Deposit & Trust Co. as Agent-Omnibus
Account, 1 Cabot Road, Medford, MA 02155-5141: 9% record.
FEDERAL LAW AFFECTING MELLON BANK
The Glass-Steagall Act of 1933 prohibits national banks from engaging
in the business of underwriting, selling or distributing securities and
prohibits a member bank of the Federal Reserve System from having certain
affiliations with an entity engaged principally in that business. The
activities of Mellon Bank, N.A. ("Mellon Bank") in informing its customers
of, and performing, investment and redemption services in connection with
the Fund, and in providing services to the Fund as custodian, as well as
Dreyfus' investment advisory activities, may raise issues under these
provisions. Mellon Bank has been advised by counsel that the activities
contemplated under these arrangements are consistent with its statutory and
regulatory obligations.
Changes in either federal or state statutes and regulations relating to
the permissible activities of banks and their subsidiaries or affiliates, as
well as further judicial or administrative decisions or interpretations of
such future statutes and regulations, could prevent Mellon Bank or Dreyfus
from continuing to perform all or a part of the above services for its
customers and/or the Fund. If Mellon Bank or Dreyfus were prohibited from
serving the Fund in any of its present capacities, the Board of Directors
would seek an alternative provider(s) of such services.
DIRECTORS AND OFFICERS
The Company has a Board composed of eleven Directors which supervises
the Fund's investment activities and reviews contractual arrangements with
companies that provide the Fund with services. The following lists the
Directors and officers and their positions with the Company and their
present and principal occupations during the past five years. Each Director
who is an "interested person" of the Company (as defined in the 1940 Act) is
indicated by an asterisk(*). Each of the Directors also serves as a Trustee
of The Dreyfus/Laurel Funds Trust and The Dreyfus/Laurel Tax-Free Municipal
Funds (collectively, with the Company, the "Dreyfus/Laurel Funds").
Directors of the Company
o+RUTH MARIE ADAMS. Director of the Company; Professor of English and Vice
President Emeritus, Dartmouth College; Senator, United Chapters of Phi
Beta Kappa; Trustee, Woods Hole Oceanographic Institution; from
November 1995 to January 1997, Director, Access Capital Strategic
Community Investment Fund, Inc. - Institutional Investment Portfolio.
Age: 83 years old. Address: 1026 Kendal Lyme Road, Hanover, New
Hampshire 03755.
o+FRANCIS P. BRENNAN. Chairman of the Board of Directors and Assistant
Treasurer of the Company; Director and Chairman, Massachusetts Business
Development Corp.; and from November 1995 to January 1997, Director,
Access Capital Strategic Community Investment Fund, Inc. - Bank
Portfolio. Age: 80 years old. Address: Massachusetts Business
Development Corp., 50 Milk Street, Boston, Massachusetts 02109.
o+JOSEPH S. DIMARTINO, Director of the Company since February 1995. Since
January 1995, Mr. DiMartino has served as Chairman of the Board for
various funds in the Dreyfus Family of Funds. He is also Chairman of
the Board of Staffing Resources, Inc., a temporary placement agency.
Mr. DiMartino also serves as a Director of the Muscular Dystrophy
Association, HealthPlan Services Corporation, a provider of marketing,
administrative and risk management services to health and other benefit
programs, Noel Group, Inc., a venture capital company, Carlyle
Industries, Inc. (formerly Belding Heminway Company, Inc.), a button
packager and distributor, and Curtis Industries, Inc., a national
distributor of security products, chemicals, and automotive and other
hardware. Mr. DiMartino is also a Board member of 152 other funds in
the Dreyfus Family of Funds. From November 1995 to January 1997,
Director, Access Capital Strategic Community Investment Fund, Inc. -
Institutional Investment Portfolio and Bank Portfolio. For more than
five years prior to January 1995, he was President, a director and,
until August 24, 1994, Chief Operating Officer of Dreyfus and Executive
Vice President and a director of Dreyfus Service Corporation, a wholly-
owned subsidiary of Dreyfus. From August 1994 to December 31, 1994, he
was a director of Mellon Bank Corporation. Age: 54 years old.
Address: 200 Park Avenue, New York, New York 10166.
o+JAMES M. FITZGIBBONS. Director of the Company; Chairman, Howes Leather
Company, Inc.; Director, Fiduciary Trust Company; Chairman, CEO and
Director, Fieldcrest-Cannon Inc.; Director, Lumber Mutual Insurance
Company; Director, Barrett Resources, Inc.; from November 1995 to
January 1997, Director, Access Capital Strategic Community Investment
Fund, Inc. - Bank Portfolio. Age: 63 years old. Address: 40 Norfolk
Road, Brookline, Massachusetts 02167.
o*J. TOMLINSON FORT. Director of the Company; Partner, Reed, Smith, Shaw &
McClay (law firm). From November 1995 to January 1997, Director,
Access Capital Strategic Community Investment Fund, Inc. - Bank
Portfolio. Age: 69 years old. Address: 204 Woodcock Drive,
Pittsburgh, Pennsylvania 15215.
o+ARTHUR L. GOESCHEL. Director of the Company; Director, Calgon Carbon
Corporation; Director, Cerex Corporation; Director, National Picture
Frame Corporation; former Chairman of the Board and Director, Rexene
Corporation; Chairman of the Board and Director, Tetra Corporation 1991-
1993; Director, Medalist Corporation 1992-1993. From November 1995 to
January 1997, Director, Access Capital Strategic Community Investment
Fund, Inc. - Institutional Investment Portfolio. Age: 76 years old.
Address: Way Hallow Road and Woodland Road, Sewickley, Pennsylvania
15143.
o+KENNETH A. HIMMEL. Director of the Company; former Director, The Boston
Company, Inc. ("TBC") and Boston Safe Deposit and Trust Company;
President and Chief Executive Officer, Himmel & Co., Inc.; Vice
Chairman, Sutton Place Gourmet, Inc.; Managing Partner, Franklin
Federal Partners. From November 1995 to January 1997, Director, Access
Capital Strategic Community Investment Fund, Inc. - Bank Portfolio.
Age: 51 years old. Address: 625 Madison Avenue, 9th Floor, New York,
NY 10022.
o*ARCH S. JEFFERY. Director of the Company; Financial Consultant. From
November 1995 to January 1997, Director, Access Capital Strategic
Community Investment Fund, Inc. - Institutional Investment Portfolio.
Age: 80 years old. Address: 1817 Foxcroft Lane, Unit 306, Allison
Park, Pennsylvania 15101.
o+STEPHEN J. LOCKWOOD. Director of the Company; President and CEO, LDG
Management Company Inc.; CEO, LDG Reinsurance Underwriters, SRRF
Management Inc. and Medical Reinsurance Underwriters Inc.; from
November 1995 to January 1997, Director, Access Capital Strategic
Community Investment Fund, Inc. - Institutional Investment Portfolio.
Age: 50 years old. Address: 401 Edgewater Place, Wakefield,
Massachusetts 01880.
o+JOHN J. SCIULLO. Director of the Company; Dean Emeritus and Professor of
Law, Duquesne University Law School; Director, Urban Redevelopment
Authority of Pittsburgh; from November 1995 to January 1997, Director,
Access Capital Strategic Community Investment Fund, Inc. -
Institutional Investment Portfolio. Age: 66 years old. Address: 321
Gross Street, Pittsburgh, Pennsylvania 15224.
o+ROSLYN M. WATSON. Director of the Company; Principal, Watson Ventures,
Inc., Director, American Express Centurion Bank; Director,
Harvard/Pilgrim Community Health Plan, Inc.; from November 1995 to
January 1997, Director, Access Capital Strategic Community Investment
Fund, Inc. - Bank Portfolio; Director, Massachusetts Electric Company;
Director, the Hymans Foundation, Inc., prior to February, 1993; Real
Estate Development Project Manager and Vice President, The Gunwyn
Company. Age: 48 years old. Address: 25 Braddock Park, Boston,
Massachusetts 02116-5816.
________________________________
* "Interested person" of the Company, as defined in the 1940 Act.
o Member of the Audit Committee.
+ Member of the Nominating Committee.
Officers of the Company
#MARIE E. CONNOLLY. President and Treasurer of the Company. President,
Chief Executive Officer, Chief Compliance Officer and a director of the
Distributor and Funds Distributor, Inc., the ultimate parent of which
is Boston Institutional Group, Inc. Age: 40 years old.
#DOUGLAS C. CONROY. Vice President and Assistant Secretary of the Company.
Assistant Vice President of Funds Distributor, Inc. From April 1993 to
January 1995, he was a Senior Fund Accountant for Investors Bank &
Trust Company. From December 1991 to March 1993, he was employed as a
fund accountant at TBC. Age: 28 years old.
#RICHARD W. INGRAM. Vice President and Assistant Treasurer of the Company.
Executive Vice President of the Distributor and Funds Distributor, Inc.
From March 1994 to November 1995, he was Vice President and Division
Manager for First Data Investor Services Group. From 1989 to 1994, he
was Vice President, Assistant Treasurer and Tax Director - Mutual Funds
of TBC. Age: 42 years old.
#CHRISTOPHER J. KELLEY. Vice President and Assistant Secretary of the
Company. Vice President and Senior Associate General Counsel of Funds
Distributor, Inc. and the Distributor, and an officer of certain
investment companies advised or administered by Harris Trust and
Savings Bank, Waterhouse Asset Management, Inc., J.P. Morgan & Co.
Incorporated and Montgomery Asset Management, L.P., or their respective
affiliates. From April 1994 to July 1996, Mr. Kelley was Assistant
Counsel at Forum Financial Group. From October 1992 to March 1994, Mr.
Kelley was employed by Putnam Investments in legal and compliance
capacities. Age: 33 years old.
#KATHLEEN K. MORRISEY. Vice President and Assistant Secretary of the
Company. Vice President and Assistant Secretary of Funds Distributor,
Inc. Manager of Treasury Services Administration and an officer of
certain investment companies advised or administered by J.P. Morgan &
Co. Incorporated, Montgomery Asset Management, L.P., and Dresdner RCM
Global Investors, Inc., or their respective affiliates. From July 1994
to November 1995, she was a Fund Accountant II for Investors Bank
&Trust Company. Prior to that she was a Finance student at Stonehill
College in North Easton, MA. Age: 25 years old.
#MARY A. NELSON. Vice President and Assistant Treasurer of the Company.
Vice President of the Distributor and Funds Distributor, Inc. From
September 1989 to July 1994, she was an Assistant Vice President and
Client Manager for TBC. Age: 33 years old.
#MICHAEL S. PETRUCELLI. Vice President, Assistant Treasurer and Assistant
Secretary of the Company. Senior Vice President and director of
Strategic Client Initiatives of Funds Distributor, Inc. and an officer
of certain investment companies advised or administered by J.P. Morgan
& Co. Incorporated. From December 1989 through November, 1996, he was
employed by GE Investments where he held various financial, business
development and compliance positions. He also served as Treasurer of
the GE Funds and as Director of GE Investment Services. Age: 36 years
old.
#JOSEPH F. TOWER, III. Vice President and Assistant Treasurer of the
Company. Senior Vice President, Treasurer and Chief Financial Officer
of the Distributor and Funds Distributor, Inc. From 1988 to August
1994, he was employed by TBC where he held various management positions
in the Corporate Finance and Treasury areas. Age: 35 years old.
#ELBA VASQUEZ. Vice President and Assistant Secretary of the Company.
Assistant Vice President of Funds Distributor, Inc. She has been an
employee since May 1996 as a Sales Associate in the distribution of World
Equity Benchmark Shares ("WEBS"). From March 1990 to May 1996, she was
employed by U.S. Trust Company of New York. As an officer of U.S. Trust,
she held various positions in the sales and marketing of their proprietary
family of mutual funds. Age: 36 years old.
_________________________
# Officer also serves as an officer for other investment companies advised
by Dreyfus, including The Dreyfus/Laurel Funds Trust and The
Dreyfus/Laurel Tax-Free Municipal Funds.
The officers and Directors of the Company as a group owned beneficially
less than 1% of the Fund's total shares outstanding as of February 9, 1998.
No officer or employee of the Distributor (or of any parent, subsidiary
or affiliate thereof) receives any compensation from the Company for serving
as an officer or Director of the Company. In addition, no officer or
employee of Dreyfus (or of any parent, subsidiary or affiliate thereof)
serves as an officer or Director of the Company. The Dreyfus/Laurel Funds
pay each Director/Trustee who is not an "interested person" of the Company
(as defined in the 1940 Act), $27,000 per annum (and an additional $25,000
for the Chairman of the Board of Directors/Trustees of the Dreyfus/Laurel
Funds). In addition, the Dreyfus/Laurel Funds pay each Director/Trustee who
is not an "interested person" of the Company (as defined in the 1940 Act),
$1,000 per joint Dreyfus/Laurel Funds Board meeting attended, plus $750 per
joint Dreyfus/Laurel Funds Audit Committee meeting attended, and reimburse
each Director/Trustee who is not an "interested person" of the Company (as
defined in the 1940 Act), for travel and out-of-pocket expenses.
For the fiscal year ended October 31, 1997, the aggregate amount of
fees and expenses received by each current Director from the Company and all
other funds in the Dreyfus Family of Funds for which such person is a Board
member were as follows:
Total Compensation From the
Aggregate Compensation Company and Fund Complex
Name of Board Member From the Company # Paid to Board Member****
Ruth M. Adams $10,000 $31,500
Francis P. Brennan* $19,833 $63,750
Joseph S. DiMartino** None $517,075***
James M. Fitzgibbons $10,583 $31,500
J. Tomlinson Fort** None None
Arthur L. Goeschel $11,500 $37,500
Kenneth A. Himmel $10,167 $32,500
Arch S. Jeffery** None None
Stephen J. Lockwood $11,167 $33,250
John J. Sciullo $11,167 $32,500
Roslyn M. Watson $11,167 $32,500
# Amounts required to be paid by the Company directly to the non-
interested Directors, that would be applied to offset a portion of
the management fee payable to Dreyfus, are in fact paid directly by
Dreyfus to the non-interested Directors. Amount does not include
reimbursed expenses for attending Board meetings, which amounted to
$14,973 for the Company.
* Compensation of Francis Brennan includes $25,000 paid by the
Dreyfus/Laurel Funds to be Chairman of the Board.
** Joseph S. DiMartino, J. Tomlinson Fort and Arch S. Jeffery are paid
directly by Dreyfus for serving as Board members of the Company and
the funds in the Dreyfus/Laurel Funds. For the fiscal year ended
October 31, 1997, the aggregate amount of fees and expenses received
by Joseph DiMartino, J. Tomlinson Fort and Arch S. Jeffery from
Dreyfus for serving as a Board member of the Company were $11,833,
$11,833 and $11,500, respectively, and for serving as a Board member
of all funds in the Dreyfus/Laurel Funds (including the Company) were
$35,500, $35,500 and $34,500, respectively. In addition, Dreyfus
reimbursed Messrs. DiMartino, Fort and Jeffery a total of $4,494 for
expenses attributable to the Company's Board meetings which is not
included in the $14,973 amount noted in # above.
***Actual amount for the year ending December 31, 1997.
****The Dreyfus Family of Funds consists of 152 mutual funds.
MANAGEMENT ARRANGEMENTS
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Management of the Fund."
Management Agreement. Dreyfus serves as the investment manager for the
Fund pursuant to an Investment Management Agreement with the Company dated
April 4, 1994, transferred to Dreyfus as of October 17, 1994 (the
"Management Agreement"). Pursuant to the Management Agreement, Dreyfus
provides, or arranges for one or more third parties to provide, investment
advisory, administrative, custody, fund accounting and transfer agency
services to the Fund. As investment manager, Dreyfus manages the Fund by
making investment decisions based on the Fund's investment objective,
policies and restrictions. The Management Agreement is subject to review
and approval at least annually by the Board of Directors.
The Management Agreement will continue from year to year provided that
a majority of the Directors who are not interested persons (as defined in
the 1940 Act) of the Company or Dreyfus and either a majority of all
Directors or a majority (as defined in the 1940 Act) of the shareholders of
the Fund approve its continuance. The Management Agreement was last
approved by the Board of Directors on January 28, 1998 to continue until
April 4, 1999. The Company may terminate the Management Agreement upon the
vote of a majority of the Board of Directors or upon the vote of a majority
of the Fund's outstanding voting securities on sixty days' written notice to
Dreyfus. Dreyfus may terminate the Management Agreement upon sixty (60)
days' written notice to the Company. The Management Agreement will
terminate immediately and automatically upon its assignment.
The following persons are officers and/or directors of Dreyfus: W.
Keith Smith, Chairman of the Board; Christopher M. Condron, President, Chief
Executive Officer, Chief Operating Officer and a director; Stephen E.
Canter, Vice Chairman, Chief Investment Officer and a director; Lawrence S.
Kash, Vice Chairman-Distribution and a director; William T. Sandalls, Jr.,
Senior Vice President and Chief Financial Officer; Mark N. Jacobs, Vice
President, General Counsel and Secretary; Patrice M. Kozlowski, Vice
President-Corporate Communications; Mary Beth Leibig, Vice President-Human
Resources; Jeffrey N. Nachman, Vice President-Mutual Fund Accounting; Andrew
S. Wasser, Vice President-Information Systems; William V. Healey, Assistant
Secretary; and Mandell L. Berman, Burton C. Borgelt, Frank V. Cahouet and
Richard F. Syron, directors.
For the last three fiscal years, the Fund has had the following
expenses:
For the Fiscal Years Ended October 31,
1997 1996 1995
Management fees $10,968,122 $5,407,843 $2,739,876
PURCHASE OF FUND SHARES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "How to Buy Fund Shares."
The Distributor. The Distributor serves as the Fund's distributor
pursuant to an agreement which is renewable annually. The Distributor also
acts as distributor for the other funds in the Dreyfus Family of Funds and
for certain other investment companies.
Dreyfus TeleTransfer Privilege. Dreyfus TeleTransfer purchase orders
may be made at any time. Purchase orders received by 4:00 p.m. New York
time, on any business day that Dreyfus Transfer, Inc., the Fund's transfer
and dividend disbursing agent (the "Transfer Agent"), and the New York Stock
Exchange (the "NYSE") are open for business will be credited to the
shareholder's Fund account on the next bank business day following such
purchase order. Purchase orders made after 4:00 p.m. New York time, on any
business day the Transfer Agent and the NYSE are open for business, or
orders made on Saturday, Sunday or any Fund holiday (e.g., when the NYSE is
not open for business), will be credited to the shareholder's Fund account
on the second bank business day following such purchase order. To qualify
to use the Dreyfus TeleTransfer Privilege, the initial payment for purchase
of Fund shares must be drawn on, and redemption proceeds paid to, the same
bank and account as are designated on the Account Application or Shareholder
Services Form on file. If the proceeds of a particular redemption are to be
wired to an account at any other bank, the request must be in writing and
signature-guaranteed. See "Redemption of Fund Shares - Dreyfus TeleTransfer
Privilege."
Reopening an Account. An investor may reopen an account with a minimum
investment of $100 without filing a new Account Application during the
calendar year the account is closed or during the following calendar year,
provided the information on the old Account Application is still applicable.
In-Kind Purchases. If the following conditions are satisfied, the Fund
may at its discretion, permit the purchase of shares through an "in-kind"
exchange of securities. Any securities exchanged must meet the investment
objective, policies and limitations of the Fund, must have a readily
ascertainable market value, must be liquid and must not be subject to
restrictions on resale. The market value of any securities exchanged, plus
any cash, must be at least equal to $25,000. Shares purchased in exchange
for securities generally cannot be redeemed for fifteen days following the
exchange in order to allow time for the transfer to settle.
The basis of the exchange will depend upon the relative net asset value
of the shares purchased and securities exchanged. Securities accepted by
the Fund will be valued in the same manner as the Fund values its assets.
Any interest earned on the securities following their delivery to the Fund
and prior to the exchange will be considered in valuing the securities. All
interest, dividends, subscription or other rights attached to the securities
become the property of the Fund, along with the securities. For further
information about "in-kind" purchases, call 1-800-645-6561.
DISTRIBUTION PLAN
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Distribution Plan."
Fund shares are subject to fees for distribution and shareholder
services.
The Securities and Exchange Commission (the "SEC") has adopted Rule
12b-1 under the 1940 Act (the "Rule") regulating the circumstances under
which investment companies such as the Company may, directly or indirectly,
bear the expenses of distributing their shares. The Rule defines
distribution expenses to include expenditures for "any activity which is
primarily intended to result in the sale of fund shares." The Rule, among
other things, provides that an investment company may bear such expenses
only pursuant to a plan adopted in accordance with the Rule.
Current Distribution Plan. Effective December 15, 1997, Fund shares
are subject to a Distribution Plan (the "Current Plan") adopted pursuant to
the Rule. The Current Plan allows the Fund to spend annually up to 0.10% of
its average daily net assets to compensate Mellon Bank and its affiliates
(including but not limited to Dreyfus and Dreyfus Service Corporation) for
shareholder servicing activities and the Distributor for shareholder
servicing activities and expenses primarily intended to result in the sale
of Fund shares. The Current 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 for distribution related
services and/or shareholder services.
The Current Plan provides that a report of the amounts expended under
the Current Plan, and the purposes for which such expenditures were
incurred, must be made to the Company's Directors for their review at least
quarterly. In addition, the Current Plan provides that it may not be
amended to increase materially the costs which the Fund may bear for
distribution pursuant to the Plan without approval of the Fund's
shareholders, and that other material amendments of the Plan must be
approved by the vote of a majority of the Directors and of the Directors who
are not "interested persons" of the Company or Dreyfus (as defined in the
1940 Act) and who do not have any direct or indirect financial interest in
the operation of the Current Plan, cast in person at a meeting called for
the purpose of considering such amendments. The Current Plan is subject to
annual approval by the entire Board of Directors and by the Directors who
are neither interested persons nor have any direct or indirect financial
interest in the operation of the Current Plan, by vote cast in person at a
meeting called for the purpose of voting on the Current Plan. The Current
Plan was so approved by the Directors at a meeting held on January 28, 1998.
The Current Plan is terminable at any time by vote of a majority of the
Directors who are not interested persons and have no direct or indirect
financial interest in the operation of the Current Plan or by vote of the
holders of a majority (as defined in the 1940 Act) of the outstanding shares
of the Fund.
Prior Plan. Prior to December 15, 1997, the Fund consisted of "Retail"
and "Institutional" classes of shares and Institutional shares were subject
to a distribution plan adopted pursuant to the Rule (the "Prior Plan").
Under the Prior Plan, the Fund was authorized to spend up to 0.25% of its
average daily net assets attributable to Institutional shares to compensate
Dreyfus Service Corporation for shareholder servicing activities and the
Distributor for shareholder servicing activities and expenses primarily
intended to result in the sale of Institutional shares. On December 2,
1997, shareholders of the Fund's Retail Class voted to approve the Current
Plan. Effective December 15, 1997, the Prior Plan was terminated, the
Fund's "Institutional" and "Retail" designations were eliminated, and the
Fund became a single class fund without any separate class designation,
subject to the Current Plan.
For the fiscal year ended October 31, 1997, the Fund paid the
Distributor and Dreyfus Service Corporation $14,348 and $42,752,
respectively, pursuant to the Prior Plan with respect to the Fund's then-
existing Institutional shares.
REDEMPTION OF FUND SHARES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "How to Redeem Fund
Shares."
Wire Redemption Privilege. By using this Privilege, the investor
authorizes the Transfer Agent to act on wire, telephone or letter redemption
instructions from any person representing himself or herself to be the
investor, or a representative of the investor's Agent, and reasonably
believed by the Transfer Agent to be genuine. Ordinarily, the Fund will
initiate payment for shares redeemed pursuant to this Privilege on the next
business day after receipt if the Transfer Agent receives the redemption
request in proper form. Redemption proceeds will be transferred by Federal
Reserve wire only to the commercial bank account specified by the investor
on the Account Application or Shareholder Services Form. Redemption
proceeds, if wired, must be in the amount of $1,000 or more and will be
wired to the investor's account at the bank of record designated in the
investor's file at the Transfer Agent, if the investor's bank is a member of
the Federal Reserve System, or to a correspondent bank if the investor's
bank is not a member. Fees ordinarily are imposed by such bank and usually
are borne by the investor. Immediate notification by the correspondent bank
to the investor's bank is necessary to avoid a delay in crediting the funds
to the investor's bank account.
Investors with access to telegraphic equipment may wire redemption
requests to the Transfer Agent by employing the following transmittal code
which may be used for domestic or overseas transmissions:
Transfer Agent's
Transmittal Code Answer Back Sign
144295 144295 TSSG PREP
Investors who do not have direct access to telegraphic equipment may
have the wire transmitted by contracting a TRT Cables operator at 1-800-654-
7171, toll free. Investors should advise the operator that the above
transmittal code must be used and should also inform the operator of the
Transfer Agent's answer back sign.
To change the commercial bank or account designated to receive
redemption proceeds, a written request must be sent to the Transfer Agent.
This request must be signed by each shareholder, with each signature
guaranteed as described below under "Stock Certificates; Signatures."
Stock Certificates; Signatures. Any certificates representing Fund
shares to be redeemed must be submitted with the redemption request.
Written redemption requests must be signed by each shareholder, including
each holder of a joint account, and each signature must be guaranteed.
Signatures on endorsed certificates submitted for redemption also must be
guaranteed. The Transfer Agent has adopted standards and procedures
pursuant to which signature-guarantees in proper form generally will be
accepted from domestic banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies
and savings associations as well as from participants in the New York Stock
Exchange Medallion Signature Program, the Securities Transfer Agents
Medallion Program ("STAMP") and the Stock Exchanges Medallion Program.
Guarantees must be signed by an authorized signatory of the guarantor and
"Signature-Guaranteed" must appear with the signature. The Transfer Agent
may request additional documentation from corporations, executors,
administrators, trustees or guardians, and may accept other suitable
verification arrangements from foreign investors, such as consular
verification. For more information with respect to signature-guarantees,
please call one of the telephone numbers listed on the cover.
Dreyfus TeleTransfer Privilege. Investors should be aware that if they
have selected the Dreyfus TeleTransfer Privilege, any request for a wire
redemption will be effected as a Dreyfus TeleTransfer transaction through
the ACH system unless more prompt transmittal specifically is requested.
Redemption proceeds will be on deposit in the investor's account at an ACH
member bank ordinarily two business days after receipt of the redemption
request. See "Purchase of Fund Shares-- Dreyfus TeleTransfer Privilege."
Redemption Commitment. The Fund has committed itself to pay in cash
all redemption requests by any shareholder of record, limited in amount
during any 90-day period to the lesser of $250,000 or 1% of the value of the
Fund's net assets at the beginning of such period. Such commitment is
irrevocable without the prior approval of the SEC. In the case of requests
for redemptions in excess of such amount, the Company's Board reserves the
right to make payments in whole or in part in securities or other assets in
case of an emergency or any time a cash distribution would impair the
liquidity of the Fund to the detriment of the existing shareholders. In
such event, the securities would be valued in the same manner as the Fund's
portfolio is valued. If the recipient sold such securities, brokerage
charges might be incurred.
Suspension of Redemptions. The right of redemption may be suspended or
the date of payment postponed (a) during any period when the NYSE is closed
(other than customary weekend and holiday closings), (b) when trading in the
markets the Fund ordinarily utilizes is restricted, or when an emergency
exists as determined by the SEC so that disposal of the Fund's investments
or determination of its net asset value is not reasonably practicable, or
(c) for such other periods as the SEC by order may permit to protect the
Fund's shareholders.
SHAREHOLDER SERVICES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Shareholder Services."
Fund Exchanges. Fund shares may be exchanged for shares of certain
other funds advised or administered by Dreyfus. Shares of such other funds
purchased by exchange will be purchased on the basis of relative net asset
value per share as follows:
A. Exchanges for shares of funds that are offered without a
sales load will be made without a sales load.
B. Shares of funds purchased without a sales load may be
exchanged for shares of other funds sold with a sales load, and
the applicable sales load will be deducted.
C. Shares of funds purchased with a sales load may be exchanged
without a sales load for shares of other funds sold without a
sales load.
D. Shares of funds purchased with a sales load, shares of funds
acquired by a previous exchange from shares purchased with a sales
load and additional shares acquired through reinvestment of
dividends or other distributions of any such funds (collectively
referred to herein as "Purchased Shares") may be exchanged for
shares of other funds sold with a sales load (referred to herein
as "Offered Shares"), provided that, if the sales load applicable
to the Offered Shares exceeds the maximum sales load that could
have been imposed in connection with the Purchased Shares (at the
time the Purchased Shares were acquired), without giving effect to
any reduced loads, the difference will be deducted.
To accomplish an exchange under item D above, shareholders must notify
the Transfer Agent of their prior ownership of fund shares and their account
number.
To request an exchange, an investor, or an investor's Agent acting on
the investor's behalf, must give exchange instructions to the Transfer Agent
in writing or by telephone. The ability to issue exchange instructions by
telephone is given to all Fund shareholders automatically, unless the
investor checks the applicable "No" box on the Account Application,
indicating that the investor specifically refuses this Privilege. By using
the Telephone Exchange Privilege, the investor authorizes the Transfer Agent
to act on telephonic instructions (including over The Dreyfus Touchr
automated telephone system) from any person representing himself or herself
to be the investor, or a representative of the investor's Agent, and
reasonably believed by the Transfer Agent to be genuine. Telephone
exchanges may be subject to limitations as to the amount involved or the
number of telephone exchanges permitted. Shares issued in certificate form
are not eligible for telephone exchange.
Exchanges of Fund shares held by a Retirement Plan may be made only
between the investor's Retirement Plan account in one fund and such
investor's Retirement Plan account in another fund.
To establish a personal retirement plan by exchange, shares of the fund
being exchanged must have a value of at least the minimum initial investment
required for the fund into which the exchange is being made. The minimum
initial investment is generally $750 for Dreyfus-sponsored Keogh Plans, IRAs
(including regular IRAs, spousal IRAs for a non-working spouse, Roth IRAs,
IRAs set up under a Simplified Employee Pension Plan ("SEP-IRAs"), and
rollover IRAs), and 403(b)(7) Plans with only one participant, and $500 for
Dreyfus-sponsored Education IRAs. To exchange shares held in corporate
plans, 403(b)(7) Plans and SEP-IRAs with more than one participant, the
minimum initial investment is generally $100 if the plan has at least $2,500
invested among the funds in the Dreyfus Family of Funds. To exchange shares
held in a personal retirement plans, the shares exchanged must have a
current value of at least $100.
Dreyfus Auto-Exchange Privilege. The Dreyfus Auto-Exchange Privilege
permits an investor to purchase, in exchange for shares of the Fund, shares
of another fund in the Dreyfus Family of Funds. This Privilege is available
only for existing accounts. With respect to Fund shares held by a
Retirement Plan, exchanges may be made only between the investor's
Retirement Plan account in one fund and such investor's Retirement Plan
account in another fund. Shares will be exchanged on the basis of relative
net asset value as described above under "Fund Exchanges." Enrollment in or
modification or cancellation of this Privilege is effective three business
days following notification by the investor. An investor will be notified
if the investor's account falls below the amount designated to be exchanged
under this Privilege. In this case, an investor's account will fall to zero
unless additional investments are made in excess of the designated amount
prior to the next Dreyfus Auto-Exchange transaction. Shares held under IRA
and other retirement plans are eligible for this Privilege. Exchanges of
IRA shares may be made between IRA accounts and from regular accounts to IRA
accounts, but not from IRA accounts to regular accounts. With respect to
all other retirement accounts, exchanges may be made only among those
accounts.
Fund Exchanges and Dreyfus Auto-Exchange Privilege are available to
shareholders resident in any state in which shares of the fund being
acquired may legally be sold. Shares may be exchanged only between accounts
having identical names and other identifying designations.
Shareholder Services Forms and prospectuses of the other funds may be
obtained by calling 1-800-645-6561. The Fund reserves the right to reject
any exchange request in whole or in part. The Fund Exchange service or
Dreyfus Auto-Exchange Privilege may be modified or terminated at any time
upon notice to shareholders.
Automatic Withdrawal Plan. The Automatic Withdrawal Plan permits an
investor with a $5,000 minimum account to request withdrawal of a specified
dollar amount (minimum of $50) on either a monthly or quarterly basis.
Withdrawal payments are the proceeds from sales of Fund shares, not the
yield on the shares. If withdrawal payments exceed reinvested dividends and
distributions, the investor's shares will be reduced and eventually may be
depleted. Automatic Withdrawal may be terminated at any time by the
investor, the Fund or the Transfer Agent. Shares for which certificates
have been issued may not be redeemed through the Automatic Withdrawal Plan.
Dreyfus Dividend Sweep. Dreyfus Dividend Sweep allows investors to
invest automatically their dividends or dividends and capital gain
distributions, if any, from the Fund in shares of certain other funds in the
Dreyfus Family of Funds of which the investor is a shareholder. Shares of
the other funds purchased pursuant to this Privilege will be purchased on
the basis of relative net asset value per share as follows:
A. Dividends and other distributions paid by a fund may be
invested without imposition of a sales load in shares of other
funds that are offered without a sales load.
B. Dividends and other distributions paid by a fund which does
not charge a sales load may be invested in shares of other funds
sold with a sales load, and the applicable sales load will be
deducted.
C. Dividends and other distributions paid by a fund which
charges a sales load may be invested in shares of other funds sold
with a sales load (referred to herein as "Offered Shares"),
provided that, if the sales load applicable to the Offered Shares
exceeds the maximum sales load charged by the fund from which
dividends or distributions are being swept, without giving effect
to any reduced loads, the difference will be deducted.
D. Dividends and other distributions paid by a fund may be
invested in shares of other funds that impose a contingent
deferred sales charge ("CDSC") and the applicable CDSC, if any,
will be imposed upon redemption of such shares.
Corporate Pension/Profit-Sharing and Retirement Plans. The Fund makes
available to corporations a variety of prototype pension and profit-sharing
plans including a 401(k) Salary Reduction Plan. In addition, the Fund makes
available Keogh Plans, IRAs, (including regular IRAs, spousal IRAs for a non-
working spouse, Roth IRAs, SEP-IRAs, Education IRAs, and IRA "Rollover
Accounts"), and 403(b)(7) Plans. Plan support services also are available.
Investors who wish to purchase Fund shares in conjunction with a Keogh
Plan, a 403(b)(7) Plan or an IRA, including an SEP-IRA, may request from the
Distributor forms for adoption of such plans.
The entity acting as custodian for Keogh Plans, 403(b)(7) Plans or IRAs
may charge a fee, payment of which could require the liquidation of shares.
All fees charged are described in the appropriate form.
Shares may be purchased in connection with these plans only by direct
remittance to the entity acting as custodian. Purchases for these plans may
not be made in advance of receipt of funds.
The minimum initial investment for corporate plans, 401(K) Salary
Reduction Plans, 403(b)(7) Plans and SEP-IRAs with more than one
participant, is $2,500 with no minimum for subsequent purchases. The
minimum initial investment is generally $750 for 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 and $500 for Dreyfus-sponsored Education IRAs, with no minimum
for subsequent purchases.
Each investor should read the prototype retirement plan and the
appropriate form of custodial agreement for further details on eligibility,
service fees and tax implications, and should consult a tax adviser.
DETERMINATION OF NET ASSET VALUE
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "How to Buy Fund Shares."
Restricted securities, as well as securities or other assets for which
market quotations are not readily available, or which are not valued by a
pricing service approved by the Board of Directors, are valued at fair value
as determined in good faith by the Board of Directors. The Board of
Directors will review the method of valuation on a current basis. In making
their good faith valuation of restricted securities, the Board Members
generally will take the following factors into consideration: restricted
securities which are, or are convertible into, securities of the same class
of securities for which a public market exists usually will be valued at
market value less the same percentage discount at which purchased. This
discount will be revised periodically by the Board if it believes that the
discount no longer reflects the value of the restricted securities.
Restricted securities not of the same class as securities for which a public
market exists usually will be valued initially at cost. Any subsequent
adjustment from cost will be based upon considerations deemed relevant by
the Board.
New York Stock Exchange Closings. The holidays (as observed) on which
the NYSE is currently scheduled to be closed are: New Year's Day, Dr.
Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Dividends, Other
Distributions and Taxes."
The term "regulated investment company" does not imply the supervision
of management or investment practices or policies by any government agency.
General. To qualify for treatment as a regulated investment company
("RIC"), under the Internal Revenue Code of 1986, as amended (the "Code")
the Fund--which is treated as a separate corporation for federal tax
purposes--(1) must distribute to its shareholders each year at least 90% of
its investment company taxable income (generally consisting of net
investment income, net short-term capital gains and net gains from certain
foreign currency transactions) ("Distribution Requirements"), (2) must
derive at least 90% of its annual gross income from specified sources
("Income Requirement") and (3) must meet certain asset diversification and
other requirements.
Any dividend or other distribution paid shortly after an investor's
purchase of shares may have the effect of reducing the net asset value of
the shares below the cost of his or her investment. Such a dividend or
other distribution would be a return on investment in an economic sense,
although taxable as stated in the Fund's Prospectus. In addition, if a
shareholder sells shares of the Fund held for six months or less and
receives a capital gain distribution with respect to those shares, any loss
incurred on the sale of those shares will be treated as a long-term capital
loss to the extent of the capital gain distribution received.
Dividends and other distributions declared by the Fund in October,
November or December of any year and payable to shareholders of record on a
date in any of those months are deemed to have been paid by the Fund and
received by the shareholders on December 31 of that year if the
distributions are paid by the Fund during the following January.
Accordingly, those distributions will be taxed to shareholders for the year
in which that December 31 falls.
A portion of the dividends paid by the Fund, whether received in cash
or reinvested in additional Fund shares, may be eligible for the dividends-
received deduction allowed to corporations. The eligible portion may not
exceed the aggregate dividends received by the Fund from U.S. corporations.
However, dividends received by a corporate shareholder and deducted by it
pursuant to the dividends-received deduction are subject indirectly to the
alternative minimum tax.
Foreign Taxes. Dividends and interest received by the Fund, and gains
realized thereby, may be subject to income, withholding or other taxes
imposed by foreign countries and U.S. possessions ("foreign taxes") that
would reduce the yield and/or return on its securities. Tax conventions
between certain countries and the United States may reduce or eliminate
these foreign taxes, however, and many foreign countries do not impose taxes
on capital gains in respect of investments by foreign investors.
Foreign Currency, Futures, Forwards and Hedging Transactions. Gains
from the sale or other disposition of foreign currencies (except certain
gains therefrom that may be excluded by future regulations), and gains from
options, futures and forward contracts derived by the Fund with respect to
its business of investing in securities or foreign currencies, will qualify
as permissible income under the Income Requirement.
Ordinarily, gains and losses realized from portfolio transactions will
be treated as capital gain and loss. However, a portion of the gains and
losses from the disposition of foreign currencies and certain foreign
currency denominated instruments (including debt instruments and financial
forward and futures and option) may be treated as ordinary income or loss
under Section 988 of the Code. In addition, all or a portion of any gain
realized from the disposition of certain market discount bonds and from
engaging in "conversion transactions" that would otherwise be treated as
capital gain may be treated as ordinary income. "Conversion transactions"
are defined to include certain forward, futures, option and straddle
investments.
Under Section 1256 of the Code, any gain or loss realized by the Fund
on the exercise or lapse of, or closing transactions respecting, certain
options, futures and forward contracts ("Section 1256 Contracts") may be
treated as 60% long-term capital gain or loss and 40% short-term capital
gain or loss. In addition, any Section 1256 Contracts remaining unexercised
at the end of the Fund's taxable year will be treated as sold for their then
fair market value ( a process known as "marking-to-market"), resulting in
additional gain or loss to the Fund characterized in the manner described
above. It is not entirely clear, as of the date of this SAI, whether the
60% portion of that is treated as long-term capital gain will qualify for
the reduced maximum tax rates on net capital gain enacted by the Tax Act -
20% (10% for taxpayers in the 15% marginal tax bracket) on capital assets
held for more than 18 months - instead of the 28% maximum rate in effect
before that legislation, which now applies to gain on capital assets held
for more than on year but not more than 18 months, although technical
corrections legislation passed by the House of Representatives would treat
such 60% portion as qualifying therefor.
Offsetting positions held by the Fund involving certain options,
futures or forward contracts may constitute "straddles, which are defined to
include "offsetting positions" in actively traded personal property. The
tax treatment of straddles is governed by Sections 1092, and to the extent
noted above, 1258 of the Code, which in certain circumstances override or
modify Sections 1256 and 988. As a result, all or a portion of any capital
gain from certain straddle transactions may be recharacterized as ordinary
income. If the Fund were treated as entering into straddles by reason of
its engaging in certain options, futures or forward contracts transactions,
such straddles would be characterized as "mixed straddles" if the options,
futures or transactions comprising a part of such straddles were governed by
Section 1256. The Fund may make one or more elections with respect to mixed
straddles; depending on which election is made, if any, the results to the
Fund may differ. If no election is made, then to the extent the straddle
and conversion transactions rules apply to positions established by the
Fund, losses realized by the Fund will be deferred to the extent of
unrealized gain in the offsetting position. Moreover, as a result of the
straddle rules, short-term capital loss on straddle positions may be
recharacterized as long-term capital loss, and long-term capital gains may
be treated as short-term capital gains or ordinary income.
Investment by the Fund in securities issued or acquired at a discount
(for example, zero coupon securities) could, under special tax rules, affect
the amount and timing of distributions to shareholders by causing the Fund
to recognize income prior to the receipt of cash payments. For example, the
Fund could be required to take into gross income annually a portion of the
discount (or deemed discount) at which the securities were issued and could
need to distribute such income to satisfy the Distribution Requirement and
to avoid the excise tax ("Excise Tax"). In such case, the Fund may have to
dispose of securities it might otherwise have continued to hold in order to
generate cash to satisfy these requirements.
Passive Foreign Investment Companies The Fund may invest in the stock
of "passive foreign investment companies" ("PFICs"). A PFIC is a foreign
corporation -- other than a "controlled foreign corporation" (i.e., a
foreign corporation which, on any day during its taxable year, more than 50%
of the total voting power of all voting stock therein or the total value of
all stock therein is owned, directly, indirectly, or constructively, by
"U.S. shareholders", defined as U.S. persons that individually own,
directly, indirectly, or constructively, at least 10% of that voting power)
as to which the Fund is a U.S. shareholder -- that, in general, meets either
of the following tests: (1) at least 75% of its gross income is passive or
(2) an average of at least 50% of its assets produce, or are held for the
production of, passive income. Under certain circumstances, the Fund will
be subject to federal income tax on a portion of any "excess distribution"
received on the stock of a PFIC or of any gain on disposition of the stock
(collectively "PFIC income"), plus interest thereon, even if the Fund
distributes the PFIC income as a dividend to its shareholders. The balance
of the PFIC income will be included in the Fund's investment company taxable
income and, accordingly, will not be taxable to it to the extent that income
is distributed to its shareholders.
If the Fund invests in a PFIC and elects to treat the PFIC as a
"qualified electing fund" ("QEF"), then in lieu of the foregoing tax and
interest obligation, the Fund would be required to include in income each
year its pro rata share of the QEF's annual ordinary earnings and net
capital gain (the excess of net long-term capital gain over net short-term
capital loss) -- which likely would have to be distributed by the Fund to
satisfy the Distribution Requirement and avoid imposition of the 4% excise
tax mentioned in the Prospectus under "Dividends, Other Distributions and
Taxes" -- even if those earnings and gain were not received by the Fund from
the QEF. In most instances it will be very difficult, if not impossible, to
make this election because of certain requirements thereof.
The Fund may elect to "mark to market" its stock in any PFIC. "Marking-
to-market," in this context, means including in ordinary income each taxable
year the excess, if any, of the fair market value of a PFIC's stock over the
Fund's adjusted basis therein as of the end of that year. Pursuant to the
election, the Fund also would be allowed to deduct (as an ordinary, not
capital, loss) the excess, if any, of its adjusted basis in PFIC stock over
the fair market value thereof as of the taxable year-end, but only to the
extent of any net mark-to-market gains with respect to that stock included
by the Fund for prior taxable years. The Fund's adjusted basis in each
PFIC's stock with respect to which it makes this election will be adjusted
to reflect the amounts of income included and deductions taken under the
election. Regulations proposed in 1992 would provide a similar election
with respect to the stock of certain PFICs.
State and Local Taxes. Depending upon the extent of the Fund's
activities in states and localities in which it is deemed to be conducting
business, the Fund may be subject to the tax laws thereof. Shareholders are
also advised to consult their tax advisers concerning the application of
state and local taxes to them.
Foreign Shareholders. U.S. Federal Income Taxation. U.S. federal
income taxation of a shareholder who, as to the United States, is a
non-resident alien individual, a foreign trust or estate, a foreign
corporation or a foreign partnership (a "foreign shareholder"), depends on
whether the income from the Fund is "effectively connected" with a U.S.
trade or business carried on by the shareholder, as discussed generally
below. Special U.S. federal income tax rules that differ from those
described below may apply to certain foreign persons who invest in the Fund,
such as a foreign shareholder entitled to claim the benefits of an
applicable tax treaty. Foreign shareholders are advised to consult their
own tax advisers with respect to the particular tax consequences to them of
an investment in the Fund.
Foreign Shareholders - Income Not Effectively Connected. Dividends
distributed to a foreign shareholder whose ownership of Fund shares is not
effectively connected with a U.S. trade or business carried on by the
foreign shareholder generally will be subject to U.S. federal withholding
tax of 30% (or lower treaty rate). Capital gains realized by foreign
shareholders on the sale of Fund shares and distributions to them of net
capital gain generally will not be subject to U.S. federal income tax unless
the foreign shareholder is a non-resident alien individual and is physically
present in the United States for more than 182 days during the taxable year.
In the case of certain foreign shareholders, the Fund may be required to
withhold U.S. Federal income tax at a rate of 31% of capital gain
distributions and of the gross proceeds from a redemption of Fund shares
unless the shareholder furnishes the Fund with a certificate regarding the
shareholder's foreign status.
Foreign Shareholders - Effectively Connected Income. If a foreign
shareholder's ownership of Fund shares is effectively connected with a U.S.
trade or business carried on by the foreign shareholder, then all
distributions to that shareholder and any gains realized by that shareholder
on the disposition of the Fund shares will be subject to U.S. federal income
tax at the graduated rates applicable to U.S. citizens and domestic
corporations, as the case may be. Foreign shareholders also may be subject
to the branch profits tax.
Foreign Shareholders - Estate Tax. Foreign individuals generally are
subject to federal estate tax on their U.S. situs property, such as shares
of the Fund, that they own at the time of their death. Certain credits
against that tax and relief under applicable tax treaties may be available.
PORTFOLIO TRANSACTIONS
All portfolio transactions of the Fund are placed on behalf of the Fund
by Dreyfus. Debt securities purchased and sold by the Fund are generally
traded on a net basis (i.e., without commission) through dealers acting for
their own account and not as brokers, or otherwise involve transactions
directly with the issuer of the instrument. This means that a dealer (the
securities firm or bank dealing with the Fund) makes a market for securities
by offering to buy at one price and sell at a slightly higher price. The
difference between the prices is known as a spread. Other portfolio
transactions may be executed through brokers acting as agent. The Fund will
pay a spread or commissions in connection with such transactions. Dreyfus
uses its best efforts to obtain execution of portfolio transactions at
prices which are advantageous to the Fund and at spreads and commission
rates, if any, which are reasonable in relation to the benefits received.
Dreyfus also places transactions for other accounts that it provides with
investment advice.
Brokers and dealers involved in the execution of portfolio transactions
on behalf of the Fund are selected on the basis of their professional
capability and the value and quality of their services. In selecting brokers
or dealers, Dreyfus will consider various relevant factors, including, but
not limited to, the size and type of the transaction; the nature and
character of the markets for the security to be purchased or sold; the
execution efficiency, settlement capability, and financial condition of the
broker-dealer; the broker-dealer's execution services rendered on a
continuing basis; and the reasonableness of any spreads (or commissions, if
any). Any spread, commission, fee or other remuneration paid to an
affiliated broker-dealer is paid pursuant to the Company's procedures
adopted in accordance with Rule 17e-1 under the 1940 Act.
Brokers or dealers may be selected who provide brokerage and/or
research services to the Fund and/or other accounts over which Dreyfus or
its affiliates exercise investment discretion. Such services may include
advice concerning the value of securities; the advisability of investing in,
purchasing or selling securities; the availability of securities or the
purchasers or sellers of securities; furnishing analyses and reports
concerning issuers, industries, securities, economic factors and trends,
portfolio strategy and performance of accounts; and effecting securities
transactions and performing functions incidental thereto (such as clearance
and settlement).
The receipt of research services from broker-dealers may be useful to
Dreyfus in rendering investment management services to the Fund and/or its
other clients; and, conversely, such information provided by brokers or
dealers who have executed transaction orders on behalf of other clients of
Dreyfus may be useful to these organizations in carrying out their
obligation to the Fund. The receipt of such research services does not
reduce these organizations' normal independent research activities; however,
it enables these organizations to avoid the additional expenses which might
otherwise be incurred if these organizations were to attempt to develop
comparable information through their own staffs.
Dreyfus may use research services of and place brokerage transactions
with broker-dealers affiliated with it or Mellon Bank if the commissions are
reasonable, fair and comparable to commissions charged by non-affiliated
brokerage firms for similar services. During the fiscal years ended October
31, 1995, 1996 and 1997, the Fund paid brokerage commissions of $92,515,
$200,780 and $232,780, respectively to affiliates of Dreyfus or Mellon Bank.
The amounts paid to affiliated brokerage firms during the fiscal years ended
October 31, 1995, 1996 and 1997, were approximately 16%, 18% and 12%,
respectively of the aggregate brokerage commissions paid by the Fund, for
transactions involving approximately 17.54%, 21% and 14%, respectively of
the aggregate dollar volume of transactions for which the Fund paid
brokerage commissions. The difference in these percentages was due to the
lower commissions paid to affiliates of Dreyfus.
Although Dreyfus manages other accounts in addition to the Fund,
investment decisions for the Fund are made independently from decisions made
for these other accounts. It sometimes happens that the same security is
held by more than one of the accounts managed by Dreyfus. Simultaneous
transactions may occur when several accounts are managed by the same
investment manager, particularly when the same investment instrument is
suitable for the investment objective of more than one account.
When more than one account is simultaneously engaged in the purchase or
sale of the same investment instrument, the prices and amounts are allocated
in accordance with a formula considered by Dreyfus to be equitable to each
account. In some cases this system could have a detrimental effect on the
price or volume of the investment instrument as far as the Fund is
concerned. In other cases, however, the ability of the Fund to participate
in volume transactions will produce better executions for the Fund. While
the Directors will continue to review simultaneous transactions, it is their
present opinion that the desirability of retaining Dreyfus as investment
manager to the Fund outweighs any disadvantages that may be said to exist
from exposure to simultaneous transactions.
The brokerage commissions paid by the Fund for fiscal years ended
October 31, 1997, 1996, 1995 and were $1,995,335, $1,132,421 and $572,664,
respectively. The principal reason for the increase in the Fund's brokerage
commissions for the most recent fiscal year was an increase in assets. The
Fund did not pay any brokerage concessions for the fiscal year ended October
31, 1997.
Portfolio Turnover. The portfolio turnover rate for the Fund is
calculated by dividing the lesser of the Fund's annual sales or purchases of
portfolio securities (exclusive of purchases and sales of securities whose
maturities at the time of acquisition were one year or less) by the monthly
average value of securities in the Fund during the year. The portfolio
turnover rates for the last two fiscal years were:
Fiscal Year Ended October 31,
1997 1996
68.87% 64%
PERFORMANCE INFORMATION
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Performance
Information."
Average annual total return is calculated by determining the ending
redeemable value of an investment purchased with a hypothetical $1,000
payment made at the beginning of the period (assuming the reinvestment of
dividends and other distributions), dividing by the amount of the initial
investment, taking the "n"th root of the quotient (where "n" is the number
of years in the period) and subtracting 1 from the result.
Total return is calculated by subtracting the amount of the Fund's net
asset value per share at the beginning of a stated period from the net asset
value per share at the end of the period (after giving effect to the
reinvestment of dividends and other distributions during the period), and
dividing the result by the net asset value per share at the beginning of the
period.
Average annual total return (expressed as a percentage) for shares of
the Fund for the periods noted were:
Average Annual Total Return for the
Periods Ended October 31, 1997
1 Year 5 Years 10 Years Inception
25.14% 15.64% -- 16.38%
(12/31/87)
Inception date appears in parentheses following the average annual total
return since inception.
The Fund's total return for the period from December 31, 1987 (the
Fund's inception date) to October 31, 1997 was 405.22%.
Effective December 15, 1997, the Fund's "Institutional" and "Retail"
designations were eliminated and the Fund became a single class fund without
any separate class designation. The foregoing performance data is
reflective of the performance of the Fund's Retail Class (or shares of a
predecessor class) through October 31, 1997, and does not reflect the .10%
fee under the Current Plan to which Fund shares are subject effective as of
December 15, 1997, or the .25% fee under the Prior Plan which was terminated
effective as of December 15, 1997, and which was applicable only to the
Fund's then-existing Institutional Class.
Performance information for the Fund may be compared, in reports and
promotional literature, to indexes including, but not limited to: (i) the
Morgan Stanley European Index; (ii) the Standard & Poor's 500 Composite
Stock Price Index, the Dow Jones Industrial Average, or other appropriate
unmanaged domestic or foreign indices of performance of various types of
investments so that investors may compare the Fund's results with those of
indices widely regarded by investors as representative of the securities
markets in general; (iii) other groups of mutual funds tracked by Lipper
Analytical Services, Inc., a widely used independent research firm which
ranks mutual funds by overall performance, investment objectives and assets,
or tracked by other services, companies, publications, or persons who rank
mutual funds on overall performance or other criteria; (iv) the Consumer
Price Index (a measure of inflation) to assess the real rate of return from
an investment in the Fund; and (v) products managed by a universe of money
managers with similar country allocation and performance objectives.
Unmanaged indices may assume the reinvestment of dividends but generally do
not reflect deductions or administrative and management costs and expenses.
From time to time, advertising materials for the Fund may refer to, or
include commentary by, the Fund's primary portfolio manager, Bert Mullins,
relating to his investment strategy, the asset growth of the Fund, current
or past business, political, economic or financial conditions and other
matters of general interest to investors. From time to time, advertising
materials for the Fund may refer to the Fund's quantitative disciplined
approach to stock market investing and the number of stocks analyzed by
Dreyfus.
From time to time, Fund advertisements may include statistical data or
general discussions about the growth and development of Dreyfus Retirement
Services (in terms of new customers, assets under management, market share,
etc.) and its presence in the defined contribution plan market.
From time to time, advertising material for the Fund may include
biographical information relating to its portfolio manager and may refer to,
or include commentary by the portfolio manager relating to investment
strategy, asset growth, current or past business, political, economic or
financial conditions and other matters of general interest to investors.
INFORMATION ABOUT THE FUND
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "General Information."
Each Fund share has one vote and, when issued and paid for in
accordance with the terms of the offering, is fully paid and non-assessable.
The Fund is one of eighteen portfolios of the Company. Fund shares have no
preemptive or subscription rights and are freely transferable.
The Fund will send annual and semi-annual financial statements to all
of its shareholders.
TRANSFER AND DIVIDEND DISBURSING AGENT, CUSTODIAN, COUNSEL
AND INDEPENDENT AUDITORS
Dreyfus Transfer, Inc., a wholly-owned subsidiary of Dreyfus, P.O. Box
9671, Providence, Rhode Island 02940-9671, is the Company's transfer and
dividend disbursing agent. Under a transfer agency agreement with the
Company, Dreyfus Transfer, Inc. arranges for the maintenance of shareholder
account records for the Fund, the handling of certain communications between
shareholders and the Fund and the payment of dividends and distributions
payable by the Fund. For these services, Dreyfus Transfer, Inc. receives a
monthly fee computed on the basis of the number of shareholder accounts it
maintains for the Company during the month, and is reimbursed for certain
out-of-pocket expenses.
Mellon Bank, the parent of Dreyfus, located at One Mellon Bank Center,
Pittsburgh, Pennsylvania 15258, acts as custodian of the Fund's investments.
Under a custody agreement with the Company, Mellon Bank holds the Fund's
portfolio securities and keeps all necessary accounts and records. Dreyfus
Transfer, Inc. and Mellon Bank, as custodian, have no part in determining
the investment policies of the Fund or which securities are to be purchased
or sold by the Fund.
Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue, N.W., Second
Floor, Washington, D.C. 20036-1800, has passed upon the legality of the
shares offered by the Prospectus and this SAI.
KPMG Peat Marwick LLP was appointed by the Directors to serve as the
Fund's independent auditors for the year ending October 31, 1998, providing
audit services including (1) examination of the annual financial statements,
(2) assistance, review and consultation in connection with SEC filings and
(3) review of the annual federal income tax return filed on behalf of the
Fund.
FINANCIAL STATEMENTS
The financial statements for the fiscal year ended October 31, 1997,
including notes to the financial statements and financial highlights and the
Independent Auditors Report, are included in the Annual Report to
shareholders. A copy of the Annual Report accompanies this Statement of
Additional Information. The financial statements included in the Annual
Report, and the Independent Auditors' Report thereon contained therein, and
related notes, are incorporated herein by reference.
DREYFUS DISCIPLINED INTERMEDIATE BOND FUND
INVESTOR SHARES AND RESTRICTED SHARES
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
MARCH 1, 1998
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus of
the Dreyfus Disciplined Intermediate Bond Fund (the "Fund"), dated March 1,
1998, as it may be revised from time to time. The Fund is a separate,
diversified portfolio of The Dreyfus/Laurel Funds, Inc. (formerly, The
Laurel Funds, Inc.), an open-end management investment company (the
"Company"), known as a mutual fund. To obtain a copy of the Fund's
Prospectus, please write to the Fund at 144 Glenn Curtiss Boulevard,
Uniondale, New York 11556-0144, or call one of the following numbers:
Call Toll Free 1-800-645-6561
In New York City -- Call 1-718-895-1206
Outside the U.S. and Outside of Canada -- Call 516-794-5452
The Dreyfus Corporation ("Dreyfus") serves as the Fund's investment
manager.
Premier Mutual Fund Services, Inc. (the "Distributor") is the
distributor of the Fund's shares.
TABLE OF CONTENTS
Page
Investment Objective and Management Policies ............B-2
Management of the Fund ..................................B-21
Management Arrangements .................................B-27
Purchase of Fund Shares .................................B-28
Distribution Plan .......................................B-29
Redemption of Fund Shares ...............................B-30
Shareholder Services ....................................B-32
Determination of Net Asset Value ........................B-35
Dividends, Other Distributions and Taxes ................B-36
Portfolio Transactions ..................................B-39
Performance Information .................................B-40
Information About the Fund ..............................B-42
Transfer and Dividend Disbursing Agent,
Custodian, Counsel and Independent Auditors ...........B-42
Financial Statements ....................................B-43
Appendix ................................................B-44
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Description of the
Fund."
Portfolio Securities
Government Obligations. The Fund may invest in a variety of U.S.
Treasury obligations, which differ only in their interest rates, maturities
and times of issuance: (a) U.S. Treasury bills have a maturity of one year
or less, (b) U.S. Treasury notes have maturities of one to ten years, and
(c) U.S. Treasury bonds generally have maturities of greater than ten years.
In addition to U.S. Treasury obligations, the Fund may invest in
obligations issued or guaranteed by U.S. Government agencies and
instrumentalities which are supported by any of the following: (a) the full
faith and credit of the U.S. Treasury (such as Government National Mortgage
Association ("GNMA") participation certificates), (b) the right of the
issuer to borrow an amount limited to a specific line of credit from the
U.S. Treasury, (c) the discretionary authority of the U.S. Government agency
or instrumentality, or (d) the credit of the instrumentality. (Examples of
agencies and instrumentalities are: Federal Land Banks, Federal Housing
Administration, Farmers Home Administration, Export-Import Bank of the
United States, Central Bank for Cooperatives, Federal Intermediate Credit
Banks, Federal Home Loan Banks, General Services Administration, Maritime
Administration, Tennessee Valley Authority, District of Columbia Armory
Board, Inter-American Development Bank, Asian-American Development Bank,
Student Loan Marketing Association, International Bank for Reconstruction
and Development, Federal Home Loan Mortgage Corporation ("FHLMC"), and
Federal National Mortgage Association ("FNMA.")) No assurance can be given
that the U.S. Government will provide financial support to such U.S.
Government agencies or instrumentalities described in (b), (c) and (d) in
the future, other than as set forth above, because it is not obligated to do
so by law.
Repurchase Agreements. The Fund may enter into repurchase agreements
with U.S. Government securities dealers recognized by the Federal Reserve
Board, with member banks of the Federal Reserve System, or with other
brokers or dealers that meet the credit guidelines of the Board of
Directors. In a repurchase agreement, the Fund buys a security from a seller
that has agreed to repurchase the same security at a mutually agreed upon
date and price. The Fund's resale price will be in excess of the purchase
price, reflecting an agreed upon interest rate. This interest rate is
effective for the period of time the Fund is invested in the agreement and
is not related to the coupon rate on the underlying security. Repurchase
agreements may also be viewed as a fully collateralized loan of money by the
Fund to the seller. The period of these repurchase agreements will usually
be short, from overnight to one week, and at no time will the Fund invest in
repurchase agreements for more than one year. The Fund will always receive
as collateral securities whose market value including accrued interest is,
and during the entire term of the agreement remains, at least equal to 100%
of the dollar amount invested by the Fund in each agreement, and the Fund
will make payment for such securities only upon physical delivery or upon
evidence of book entry transfer to the account of the Custodian. If the
seller defaults, the Fund might incur a loss if the value of the collateral
securing the repurchase agreement declines and might incur disposition costs
in connection with liquidating the collateral. In addition, if bankruptcy
proceedings are commenced with respect to the seller of a security which is
the subject of a repurchase agreement, realization upon the collateral by
the Fund may be delayed or limited. Dreyfus seeks to minimize the risk of
loss through repurchase agreements by analyzing the creditworthiness of the
obligors under repurchase agreements, in accordance with the credit
guidelines of the Company's Board of Directors.
When-Issued Securities. In when-issued transactions, delivery and
payment for the securities normally takes place approximately 7 to 45 days
after the date the buyer commits to purchase them (delivery and payment
could take place considerably later in the case of some mortgage-related
securities). The payment obligation and the interest rate that will be
received on securities purchased on a when-issued basis are each fixed at
the time the buyer enters into the commitment. The Fund will make
commitments to purchase such securities only with the intention of actually
acquiring the securities, but the Fund may sell these securities or dispose
of the commitment before the settlement date if Dreyfus deems it advisable
as a matter of investment strategy. Cash or marketable high-grade debt
securities equal to the amount of the above commitments will be segregated
on the Fund's records. For the purpose of determining the adequacy of these
securities the segregated securities will be valued at market. If the market
value of such securities declines, additional cash or securities will be
segregated on the Fund's records on a daily basis so that the market value
of the account will equal the amount of such commitments by the Fund.
Securities purchased on a when-issued basis and the securities held by
the Fund are subject to changes in market value based upon the public's
perception of changes in the level of interest rates. Generally, the value
of such securities will fluctuate inversely to changes in interest rates --
i.e., they will increase in value when interest rates fall and decrease in
value when interest rates rise. Therefore, if in order to achieve higher
interest income the Fund remains substantially fully invested at the same
time that it has purchased securities on a "when-issued" basis, there will
be a greater possibility of fluctuation in the Fund's net asset value.
When payment for when-issued securities is due, the Fund will meet its
obligations from then-available cash flow, the sale of segregated
securities, the sale of other securities or, and although it would not
normally expect to do so, from the sale of the when-issued securities
themselves (which may have a market value greater or less than the Fund's
payment obligation). The sale of securities to meet such obligations carries
with it a greater potential for the realization of capital gains, which are
subject to federal income taxes.
Mortgage Pass-Through Certificates. Mortgage pass-through certificates
are issued by governmental, government-related and private entities and are
backed by pools of mortgages (including those on residential properties and
commercial real estate). The mortgage loans are made by savings and loan
institutions, mortgage bankers, commercial banks and other lenders. The
securities are "pass-through" securities because they provide investors with
monthly payments of principal and interest which, in effect, are a
"pass-through" of the monthly payments made by the individual borrowers on
the underlying mortgages, net of any fees paid to the issuer or guarantor of
the pass-through certificates. The principal governmental issuer of such
securities is GNMA, which is a wholly-owned U.S. Government corporation
within the Department of Housing and Urban Development. Government-related
issuers include FHLMC and FNMA, both government sponsored corporations owned
entirely by private stockholders. Commercial banks, savings and loan
institutions, private mortgage insurance companies, mortgage bankers and
other secondary market issuers also create pass-through pools of
conventional residential and commercial mortgage loans. Such issuers may be
the originators of the underlying mortgage loans as well as the guarantors
of the mortgage-related securities.
(1) GNMA Mortgage Pass-Through Certificates ("Ginnie Maes"). Ginnie
Maes represent an undivided interest in a pool of mortgages that are insured
by the Federal Housing Administration or the Farmers Home Administration or
guaranteed by the Veterans Administration. Ginnie Maes entitle the holder to
receive all payments (including prepayments) of principal and interest owed
by the individual mortgagors, net of fees paid to GNMA and to the issuer
which assembles the mortgage pool and passes through the monthly mortgage
payments to the certificate holders (typically, a mortgage banking firm),
regardless of whether the individual mortgagor actually makes the payment.
Because payments are made to certificate holders regardless of whether
payments are actually received on the underlying mortgages, Ginnie Maes are
of the "modified pass-through" mortgage certificate type. The GNMA is
authorized to guarantee the timely payment of principal and interest on the
Ginnie Maes as securities backed by an eligible pool of mortgages. The GNMA
guarantee is backed by the full faith and credit of the United States, and
the GNMA has unlimited authority to borrow funds from the U.S. Treasury to
make payments under the guarantee. The market for Ginnie Maes is highly
liquid because of the size of the market and the active participation in the
secondary market of securities dealers and a variety of investors.
(2) FHLMC Mortgage Participation Certificates ("Freddie Macs").
Freddie Macs represent interests in groups of specified first lien
residential conventional mortgages underwritten and owned by FHLMC. Freddie
Macs entitle the holder to timely payment of interest, which is guaranteed
by FHLMC. FHLMC guarantees either ultimate collection or timely payment of
all principal payments on the underlying mortgage loans. In cases where
FHLMC has not guaranteed timely payment of principal, FHLMC may remit the
amount due on account of its guarantee of ultimate payment of principal at
any time after default on an underlying mortgage, but in no event later than
one year after it becomes payable. Freddie Macs are not guaranteed by the
United States or by any of the Federal Home Loan Banks and do not constitute
a debt or obligation of the United States or of any Federal Home Loan Bank.
The secondary market for Freddie Macs is highly liquid because of the size
of the market and the active participation in the secondary market of FHLMC,
securities dealers and a variety of investors.
(3) FNMA Guaranteed Mortgage Pass-Through Certificates ("Fannie
Maes"). Fannie Maes represent an undivided interest in a pool of
conventional mortgage loans secured by first mortgages or deeds of trust, on
one family, or two to four family, residential properties. FNMA is
obligated to distribute scheduled monthly installments of principal and
interest on the mortgages in the pool, whether or not received, plus full
principal of any foreclosed or otherwise liquidated mortgages. The
obligation of FNMA under its guaranty is solely the obligation of FNMA and
is not backed by, nor entitled to, the full faith and credit of the United
States.
(4) Private issuer mortgage certificates are pass-through securities
structured in a similar fashion to Ginnie Maes, Fannie Maes and Freddie
Macs. Private issuer mortgage certificates are generally backed by
conventional single family, multi-family and commercial mortgages. Private
issuer mortgage certificates typically are not guaranteed by the U.S.
Government, its agencies or instrumentalities, but generally have some form
of credit support in the form of over-collateralization, pool insurance or
other form of credit enhancement.
The market value of mortgage-related securities depends on, among other
things, the level of interest rates, the certificates' coupon rates and the
payment history of the mortgagors of the underlying mortgages.
Municipal Bonds and Other Municipal Obligations. The Fund limits its
investments in municipal obligations to those obligations the interest on
which is subject to federal income tax.
Municipal Bonds. Municipal bonds, which generally have a maturity of
more than one year when issued, have two principal classifications: general
obligation bonds and revenue bonds. A private activity bond is a particular
kind of revenue bond. The classification of general obligation bonds,
revenue bonds and private activity bonds are discussed below.
(1) General Obligation Bonds. The proceeds of these obligations are
used to finance a wide range of public projects, including construction or
improvement of schools, highways and roads, and water and sewer systems.
General obligation bonds are secured by the issuer's pledge of its faith,
credit and taxing power for the payment of principal and interest.
(2) Revenue Bonds. Revenue bonds are issued to finance a wide variety
of capital projects including: electric, gas, water and sewer systems;
highways, bridges and tunnels; port and airport facilities; colleges and
universities; and hospitals. The principal security for a revenue bond is
generally the net revenues derived from a particular facility, group of
facilities or, in some cases, the proceeds of a special excise or other
specific revenue source. Although the principal security behind these bonds
may vary, many provide additional security in the form of a debt service
reserve fund whose money may be used to make principal and interest payments
on the issuer's obligations. Some authorities provide further security in
the form of a state's ability (without obligation) to make up deficiencies
in the debt service reserve fund.
(3) Private Activity Bonds. Private activity bonds are issued by or
on behalf of public authorities to raise money to finance various privately
operated facilities for business and manufacturing, housing, sports and
pollution control. These bonds are also used to finance public facilities
such as airports, mass transit systems, ports and parking. The payment of
the principal and interest on such bonds is dependent solely on the ability
of the facility's user to meet its financial obligations and the pledge, if
any, of real and personal property so financed as security for such payment.
Municipal Notes. Municipal notes generally are used to provide for
short-term capital needs and generally have maturities of thirteen months or
less. Municipal notes include:
(1) Tax Anticipation Notes. Tax anticipation notes are issued to
finance working capital needs of municipalities. Generally, they are issued
in anticipation of various seasonal tax revenue, such as income, sales, use
and business taxes, and are payable from these specific future taxes.
(2) Revenue Anticipation Notes. Revenue anticipation notes are issued
in expectation of receipt of other kinds of revenue, such as Federal
revenues available under the Federal Revenue Sharing Programs.
(3) Bond Anticipation Notes. Bond anticipation notes are issued to
provide interim financing until long-term financing can be arranged. In
most cases, the long-term bonds then provide the money for the repayment of
the notes.
Municipal Commercial Paper. Issues of municipal commercial paper
typically represent short-term, unsecured, negotiable promissory notes.
These obligations are issued by agencies of state and local governments to
finance seasonal working capital needs of municipalities or to provide
interim construction financing and are paid from general revenues of
municipalities or are refinanced with long-term debt. In most cases,
municipal commercial paper is backed by letters of credit, lending
agreements, note repurchase agreements or other credit facility agreements
offered by banks or other institutions.
Convertible Securities. The Fund may purchase convertible securities,
which are fixed-income securities such as bonds or preferred stock that may
be converted into or exchanged for a specified number of shares of common
stock of the same or a different issuer within a specified period of time
and at a specified price or formula. Convertible securities are senior to
common stock in a corporation's capital structure, but may be subordinated
to non-convertible debt securities. Before conversion, convertible
securities ordinarily provide a stable stream of income with yields
generally higher than those on common stock, but lower than those on non-
convertible debt securities of similar quality. In general, the market
value of a convertible security is the higher of its "investment value"
(i.e., its value as a fixed-income security) or its "conversion value"
(i.e., the value of the underlying shares of common stock if the security is
converted). As a fixed-income security, the market value of a convertible
security generally increases when interest rates decline and generally
decreases when interest rates rise. However, the price of a convertible
security also is influenced by the market value of the security's underlying
common stock. Thus, the price of a convertible security generally increases
as the market value of the underlying stock rises, and generally decreases
as the market value of the underlying stock declines. Investments in
convertible securities generally entail less risk than investments in the
common stock of the same issuer. The Fund does not intend to exercise
conversion rights for any convertible security that it may hold and does not
intend to hold any security that has been subject to conversion.
Preferred Stock. The Fund may also purchase preferred stock, which is
a class of capital stock that typically pays dividends at a specified rate.
Preferred stock is generally senior to common stock, but subordinate to debt
securities, with respect to the payment of dividends and on liquidation of
the issuer. In general, the market value of preferred stock is its
"investment value," or its value as a fixed-income security. Accordingly,
the market value of preferred stock generally increases when interest rates
decline and decreases when interest rates rise, but, as with debt
securities, is also affected by the issuer's ability to make payments on the
preferred stock.
Zero Coupon Securities. The Fund may invest in zero coupon securities,
which are debt securities that do not entitle the holder to any periodic
payment of interest, but instead are issued or sold at a discount from their
face value. The amount of the discount varies depending on, among other
factors, prevailing interest rates, the liquidity of the security, and the
perceived creditworthiness of the issuer. Zero coupon securities may take
the form of debt securities that have been stripped of their unmatured
interest coupons, the coupons themselves and receipts or certificates
representing interests in such stripped debt obligations and coupons. The
market prices of zero coupon securities generally are more volatile than the
market prices of securities that pay interest periodically and are likely to
respond to a greater degree to changes in interest rates than non-zero
coupon securities having similar maturities and credit qualities.
Illiquid Investments. Over-the-counter ("OTC") options purchased by
the Fund will be considered illiquid for purposes of the Fund's operating
policy that provides that it may not invest more than 15% of its net assets
in illiquid investments. When the Fund sells OTC options, it will segregate
assets or cover its obligations with respect to OTC options written by it.
The assets used as cover for OTC options written by the Fund will also be
considered illiquid investments for purposes of this limitation unless the
OTC options are sold to qualified dealers who agree that the Fund may
repurchase any OTC option it writes at a maximum price to be calculated by a
formula set forth in the option agreement. The cover for an OTC option
written subject to this procedure would be considered illiquid only to the
extent that the maximum repurchase price under the formula exceeds the
intrinsic value of the option.
Under current guidelines of the staff of the SEC, IOs and POs are also
considered to be illiquid; however, IO and PO classes of fixed-rate mortgage-
related securities issued by the U.S. Government or one of its agencies or
instrumentalities will not be considered illiquid if Dreyfus determines that
they are liquid pursuant to guidelines established by or under the direction
of the Company's Board of Directors.
The Fund may invest in commercial obligations issued in reliance on the
so-called "private placement" exemption from registration afforded by
Section 4(2) of the Securities Act of 1933, as amended ("Section 4(2)
paper"). The Fund may also purchase securities that are not registered
under the Securities Act of 1933, as amended, but that can be sold to
qualified institutional buyers in accordance with Rule 144A under that Act
("Rule 144A securities"). Liquidity determinations with respect to Section
4(2) paper and Rule 144A securities will be made by the Board of Directors
or by Dreyfus pursuant to guidelines established by the Board of Directors.
The Board or Dreyfus will consider availability of reliable price
information and other relevant information in making such determinations.
Section 4(2) paper is restricted as to disposition under the federal
securities laws, and generally is sold to institutional investors, such as
the Fund, that agree that they are purchasing the paper for investment and
not with a view to public distribution. Any resale by the purchaser must be
pursuant to registration or an exemption therefrom. Section 4(2) paper
normally is resold to other institutional investors like the Fund through or
with the assistance of the issuer or investment dealers who make a market in
the Section 4(2) paper, thus providing liquidity. Rule 144A securities
generally must be sold to other qualified institutional buyers. If a
particular investment in Section 4(2) paper or Rule 144A securities is not
determined to be liquid, that investment will be included within the
percentage limitation on investment in illiquid securities. The ability to
sell Rule 144A securities to qualified institutional buyers is a recent
development and it is not possible to predict how this market will mature.
Investing in Rule 144A securities could have the effect of increasing the
level of Fund illiquidity to the extent that qualified institutional buyers
become, for a time, uninterested in purchasing these securities from a Fund
or other holder. The Fund does not currently intend to invest in Section
4(2) paper or Rule 144A securities.
Management Policies
The Fund engages, except as noted, in the following practices in
furtherance of its investment objective.
Derivative Instruments.
General. As discussed in the Prospectus, the Fund may purchase and
sell various financial instruments ("Derivative Instruments"), such as
financial futures contracts (including interest rate, index and foreign
currency futures contracts), options (including options on securities,
indices, foreign currencies and futures contracts), forward currency
contracts, and interest rate and currency swaps, caps, collars and floors.
The index Derivative Instruments the Fund may use may be based on indices of
U.S. or foreign equity or debt securities. These Derivative Instruments may
be used, for example, to preserve a return or spread, to lock in unrealized
market value gains or losses, to facilitate or substitute for the sale or
purchase of securities, to manage the duration of securities, to alter the
exposure of a particular investment or portion of the Fund's portfolio to
fluctuations in interest rates or currency rates, to uncap a capped security
or to convert a fixed rate security into a variable rate security or a
variable rate security into a fixed rate security.
Hedging strategies can be broadly categorized as "short hedges" and
"long hedges." A short hedge is a purchase or sale of a Derivative
Instrument intended partially or fully to offset potential declines in the
value of one or more investments held in the Fund's portfolio. Thus, in a
short hedge the Fund takes a position in a Derivative Instrument whose price
is expected to move in the opposite direction of the price of the investment
being hedged.
Conversely, a long hedge is a purchase or sale of a Derivative
Instrument intended partially or fully to offset potential increases in the
acquisition cost of one or more investments that the Fund intends to
acquire. Thus, in a long hedge the Fund takes a position in a Derivative
Instrument whose price is expected to move in the same direction as the
price of the prospective investment being hedged. A long hedge is sometimes
referred to as an anticipatory hedge. In an anticipatory hedge transaction,
the Fund does not own a corresponding security and, therefore, the
transaction does not relate to a security the Fund owns. Rather, it relates
to a security that the Fund intends to acquire. If the Fund does not
complete the hedge by purchasing the security it anticipated purchasing, the
effect on the Fund's portfolio is the same as if the transaction were
entered into for speculative purposes.
Derivative Instruments on securities generally are used to hedge
against price movements in one or more particular securities positions that
the Fund owns or intends to acquire. Derivative Instruments on indices, in
contrast, generally are used to attempt to hedge against price movements in
market sectors in which the Fund has invested or expects to invest.
Derivative Instruments on debt securities may be used to hedge either
individual securities or broad debt market sectors.
The use of Derivative Instruments is subject to applicable regulations
of the Securities and Exchange Commission ("SEC"), the several options and
futures exchanges upon which they are traded, the Commodity Futures Trading
Commission ("CFTC") and various state regulatory authorities. In addition,
the Fund's ability to use Derivative Instruments will be limited by tax
considerations. See "Dividends, Other Distributions and Taxes."
In addition to the instruments, strategies and risks described below
and in the Prospectus, Dreyfus expects to discover additional opportunities
in connection with other Derivative Instruments. These new opportunities
may become available as Dreyfus develops new techniques, as regulatory
authorities broaden the range of permitted transactions and as new
techniques are developed. Dreyfus may utilize these opportunities to the
extent that they are consistent with the Fund's investment objective, and
permitted by the Fund's investment policies and applicable regulatory
authorities. The Fund's Prospectus or Statement of Additional Information
will be supplemented to the extent that new products or techniques involve
materially different risks than those described below or in the Prospectus.
Special Risks. The use of Derivative Instruments involves special
considerations and risks, certain of which are described below. Risks
pertaining to particular Derivative Instruments are described in the
sections that follow.
(1) Successful use of most Derivative Instruments depends upon
Dreyfus' ability to predict movements of the overall securities, currency
and interest rate markets, which requires different skills than predicting
changes in the prices of individual securities. There can be no assurance
that any particular strategy will succeed.
(2) There might be imperfect correlation, or even no correlation,
between price movements of a Derivative Instrument and price movements of
the investments being hedged. For example, if the value of a Derivative
Instrument used in a short hedge increased by less than the decline in value
of the hedged investment, the hedge would not be fully successful. Such a
lack of correlation might occur due to factors unrelated to the value of the
investments being hedged, such as speculative or other pressures on the
markets in which Derivative Instruments are traded. The effectiveness of
hedges using Derivative Instruments on indices will depend on the degree of
correlation between price movements in the index and price movements in the
securities being hedged.
Because there are a limited number of types of exchange-traded options
and futures contracts, it is likely that the standardized contracts
available will not match the Fund's current or anticipated investments
exactly. The Fund may invest in options and futures contracts based on
securities with different issuers, maturities, or other characteristics from
the securities in which it typically invests, which involves a risk that the
options or futures position will not track the performance of the Fund's
other investments.
Options and futures prices can also diverge from the prices of their
underlying instruments, even if the underlying instruments match the Fund's
investments well. Options and futures prices are affected by such factors
as current and anticipated short-term interest rates, changes in volatility
of the underlying instrument, and the time remaining until expiration of the
contract, which may not affect security prices the same way. Imperfect
correlation may also result from differing levels of demand in the options
and futures markets and the securities markets, from structural differences
in how options and futures and securities are traded, or from imposition of
daily price fluctuation limits or trading halts. The Fund may purchase or
sell options and futures contracts with a greater or lesser value than the
securities it wishes to hedge or intends to purchase in order to attempt to
compensate for differences in volatility between the contract and the
securities, although this may not be successful in all cases. If price
changes in the Fund's options or futures positions are poorly correlated
with its other investments, the positions may fail to produce anticipated
gains or result in losses that are not offset by gains in other investments.
(3) If successful, the above-discussed strategies can reduce risk of
loss by wholly or partially offsetting the negative effect of unfavorable
price movements. However, such strategies can also reduce opportunity for
gain by offsetting the positive effect of favorable price movements. For
example, if the Fund entered into a short hedge because Dreyfus projected a
decline in the price of a security in the Fund's portfolio, and the price of
that security increased instead, the gain from that increase might be wholly
or partially offset by a decline in the price of the Derivative Instrument.
Moreover, if the price of the Derivative Instrument declined by more than
the increase in the price of the security, the Fund could suffer a loss. In
either such case, the Fund would have been in a better position had it not
attempted to hedge at all.
(4) As described below, the Fund might be required to maintain assets
as "cover," maintain segregated accounts or make margin payments when it
takes positions in Derivative Instruments involving obligations to third
parties (i.e., Derivative Instruments other than purchased options). If the
Fund were unable to close out its positions in such Derivative Instruments,
it might be required to continue to maintain such assets or accounts or make
such payments until the position expired or matured. These requirements
might impair the Fund's ability to sell a portfolio security or make an
investment at a time when it would otherwise be favorable to do so, or
require that the Fund sell a portfolio security at a disadvantageous time.
The Fund's ability to close out a position in a Derivative Instrument prior
to expiration or maturity depends on the existence of a liquid secondary
market or, in the absence of such a market, the ability and willingness of
the other party to the transaction ("contra party") to enter into a
transaction closing out the position. Therefore, there is no assurance that
any position can be closed out at a time and price that is favorable to the
Fund.
Cover for Derivative Instruments. Transactions using Derivative
Instruments may expose the Fund to an obligation to another party. The Fund
will not enter into any such transactions unless it owns either (1) an
offsetting ("covered") position in securities, futures, options, currencies
or forward contracts or (2) cash and short-term liquid debt securities with
a value sufficient at all times to cover its potential obligations to the
extent not covered as provided in (1) above. The Fund will comply with SEC
guidelines regarding cover for Derivative Instruments and will, if the
guidelines so require, set aside cash, U.S. Government securities or other
liquid, high-grade debt securities in a segregated account with its
custodian in the prescribed amount.
Assets used as cover or held in a segregated account cannot be sold
while the position in the corresponding Derivative Instrument is open,
unless they are replaced with other appropriate assets. As a result, the
commitment of a large portion of the Fund's assets to cover or segregated
accounts could impede portfolio management or the Fund's ability to meet
redemption requests or other current obligations.
Options. A call option gives the purchaser the right to buy, and
obligates the writer to sell, the underlying investment at the agreed upon
exercise price during the option period. A put option gives the purchaser
the right to sell, and obligates the writer to buy, the underlying
investment at the agreed upon exercise price during the option period. A
purchaser of an option pays an amount, known as the premium, to the option
writer in exchange for rights under the option contract.
Options on indices are similar to options on securities or currencies
except that all settlements are in cash and gain or loss depends on changes
in the index in question rather than on price movements in individual
securities or currencies.
The purchase of call options can serve as a long hedge, and the
purchase of put options can serve as a short hedge. Writing put or call
options can enable the Fund to enhance income or yield by reason of the
premiums paid by the purchasers of such options. However, if the market
price of the security or other instrument underlying a put option declines
to less than the exercise price on the option, minus the premium received,
the Fund would expect to suffer a loss.
Writing call options can also serve as a limited short hedge because
declines in the value of the hedged investment would be offset to the extent
of the premium received for writing the option. However, if the investment
appreciates to a price higher than the exercise price of the call option, it
can be expected that the option will be exercised and the Fund will be
obligated to sell the investment at less than its market value.
Writing put options can serve as a limited long hedge because increases
in the value of the hedged investment would be offset to the extent of the
premium received for writing the option. However, if the investment
depreciates to a price lower than the exercise price of the put option, it
can be expected that the put option will be exercised and the Fund will be
obligated to purchase the investment at more than its market value.
The value of an option position will reflect, among other things, the
current market value of the underlying investment, the time remaining until
expiration, the relationship of the exercise price to the market price of
the underlying investment, the historical price volatility of the underlying
investment and general market conditions. Options that expire unexercised
have no value.
The Fund may effectively terminate its right or obligation under an
option by entering into a closing transaction. For example, the Fund may
terminate its obligation under a call or put option that it had written by
purchasing an identical call or put option; this is known as a closing
purchase transaction. Conversely, the Fund may terminate a position in a
put or call option it had purchased by writing an identical put or call
option; this is known as a closing sale transaction. Closing transactions
permit the Fund to realize profits or limit losses on an option position
prior to its exercise or expiration.
The Fund may purchase and sell both exchange-traded and OTC options.
Exchange-traded options in the United States are issued by a clearing
organization that, in effect, guarantees completion of every exchange-traded
option transaction. In contrast, OTC options are contracts between the Fund
and its contra party (usually a securities dealer or a bank) with no
clearing organization guarantee. Thus, when the Fund purchases an OTC
option, it relies on the contra party from whom it purchased the option to
make or take delivery of the underlying investment upon exercise of the
option. Failure by the contra party to do so would result in the loss of
any premium paid by the Fund as well as the loss of any expected benefit of
the transaction.
The Fund will enter into only those option contracts that are listed on
a national securities or commodities exchange or traded in the OTC market
for which there appears to be a liquid secondary market.
The Fund will not purchase or write OTC options if, as a result of such
transaction, the sum of (i) the market value of outstanding OTC options
purchased by the Fund, (ii) the market value of the underlying securities
covered by outstanding OTC call options written by the Fund, and (iii) the
market value of all other assets of the Fund that are illiquid or are not
otherwise readily marketable, would exceed 15% of the net assets of the
Fund, taken at market value. However, if an OTC option is sold by the Fund
to a primary U.S. Government securities dealer recognized by the Federal
Reserve Bank of New York and the Fund has the unconditional contractual
right to repurchase such OTC option from the dealer at a predetermined
price, then the Fund will treat as illiquid such amount of the underlying
securities as is equal to the repurchase price less the amount by which the
option is "in-the-money" (the difference between the current market value
of the underlying securities and the option's strike price). The repurchase
price with primary dealers is typically a formula price that is generally
based on a multiple of the premium received for the option plus the amount
by which the option is "in-the-money."
Generally, the OTC debt and foreign currency options used by the Fund
are European-style options. This means that the option is only exercisable
immediately prior to its expiration. This is in contrast to American-style
options, which are exercisable at any time prior to the expiration date of
the option.
The Fund's ability to establish and close out positions in exchange-
listed options depends on the existence of a liquid market. However, there
can be no assurance that such a market will exist at any particular time.
Closing transactions can be made for OTC options only by negotiating
directly with the contra party, or by a transaction in the secondary market
if any such market exists. Although the Fund will enter into OTC options
only with major dealers in unlisted options, there is no assurance that the
Fund will in fact be able to close out an OTC option position at a favorable
price prior to expiration. In the event of insolvency of the contra party,
the Fund might be unable to close out an OTC option position at any time
prior to its expiration.
If the Fund were unable to effect a closing transaction for an option
it had purchased, it would have to exercise the option to realize any
profit. The inability to enter into a closing purchase transaction for a
covered call option written by the Fund could cause material losses because
the Fund would be unable to sell the investment used as cover for the
written option until the option expires or is exercised.
The Fund may write only covered call options on securities. A call
option is covered if the Fund owns the underlying security or a call option
on the same security with a lower strike price.
Futures Contracts and Options on Futures Contracts. When the Fund
purchases a futures contract, it incurs an obligation to take delivery of a
specified amount of the obligation underlying the futures contract at a
specified time in the future for a specified price. When the Fund sells a
futures contract, it incurs an obligation to deliver a specified amount of
the obligation underlying the futures contract at a specified time in the
future for an agreed upon price. With respect to index futures, no physical
transfer of the securities underlying the index is made. Rather, the
parties settle by exchanging in cash an amount based on the difference
between the contract price and the closing value of the index on the
settlement date.
When the Fund writes an option on a futures contract, it becomes
obligated, in return for the premium paid, to assume a position in a futures
contract at a specified exercise price at any time during the term of the
option. If the Fund has written a call, it assumes a short futures
position. If the Fund has written a put, it assumes a long futures
position. When the Fund purchases an option on a futures contract, it
acquires the right, in return for the premium it pays, to assume a position
in a futures contract (a long position if the option is a call and a short
position if the option is a put).
The purchase of futures or call options on futures can serve as a long
hedge, and the sale of futures or the purchase of put options on futures can
serve as a short hedge. Writing call options on futures contracts can serve
as a limited short hedge, using a strategy similar to that used for writing
call options on securities or indices. Similarly, writing put options on
futures contracts can serve as a limited long hedge.
Futures strategies also can be used to manage the average duration of
the Fund's fixed-income portfolio. If Dreyfus wishes to shorten the average
duration of the Fund's fixed-income portfolio, the Fund may sell an interest
rate futures contract or a call option thereon, or purchase a put option on
that futures contract. If Dreyfus wishes to lengthen the average duration
of the Fund's fixed-income portfolio, the Fund may buy an interest rate
futures contract or a call option thereon, or sell a put option thereon.
No price is paid upon entering into a futures contract. Instead, at
the inception of a futures contract the Fund is required to deposit "initial
margin" consisting of cash or U.S. Government securities in an amount
generally equal to 10% or less of the contract value. Margin must also be
deposited when writing a call or put option on a futures contract, in
accordance with applicable exchange rules. Unlike margin in securities
transactions, initial margin on futures contracts does not represent a
borrowing, but rather is in the nature of a performance bond or good-faith
deposit that is returned to the Fund at the termination of the transaction
if all contractual obligations have been satisfied. Under certain
circumstances, such as periods of high volatility, the Fund may be required
by an exchange to increase the level of its initial margin payment.
Subsequent "variation margin" payments are made to and from the futures
broker daily as the value of the futures position varies, a process known as
"marking-to-market." Variation margin does not involve borrowing, but
rather represents a daily settlement of the Fund's obligations to or from a
futures broker. When the Fund purchases an option on a future, the premium
paid plus transaction costs is all that is at risk. In contrast, when the
Fund purchases or sells a futures contract or writes a call or put option
thereon, it is subject to daily variation margin calls that could be
substantial in the event of adverse price movements. If the Fund has
insufficient cash to meet daily variation margin requirements, it might need
to sell securities at a time when such sales are disadvantageous.
Purchasers and sellers of futures contracts and options on futures can
enter into offsetting closing transactions, similar to closing transactions
on options, by selling or purchasing, respectively, an instrument identical
to the instrument purchased or sold. Positions in futures and options on
futures may be closed only on an exchange or board of trade that provides a
secondary market. Although the Fund intends to enter into futures and
options on futures only on exchanges or boards of trade where there appears
to be a liquid secondary market, there can be no assurance that such a
market will exist for a particular contract at a particular time. In such
event, it may not be possible to close a futures contract or options
position.
Under certain circumstances, futures exchanges may establish daily
limits on the amount that the price of a futures or an option on a futures
contract can vary from the previous day's settlement price; once that limit
is reached, no trades may be made that day at a price beyond the limit.
Daily price limits do not limit potential losses because prices could move
to the daily limit for several consecutive days with little or no trading,
thereby preventing liquidation of unfavorable positions.
If the Fund were unable to liquidate a futures or options on futures
position due to the absence of a liquid secondary market or the imposition
of price limits, it could incur substantial losses. The Fund would continue
to be subject to market risk with respect to the position. In addition,
except in the case of purchased options, the Fund would continue to be
required to make daily variation margin payments and might be required to
maintain the position being hedged by the future or option or to maintain
cash or securities in a segregated account.
To the extent that the Fund enters into futures contracts, options on
futures contracts, or options on foreign currencies traded on an exchange
regulated by the CFTC, in each case other than for bona fide hedging
purposes (as defined by the CFTC), the aggregate initial margin and premiums
required to establish those positions (excluding the amount by which options
are "in-the-money" at the time of purchase) will not exceed 5% of the
liquidation value of the Fund's portfolio, after taking into account
unrealized profits and unrealized losses on any contracts the Fund has
entered into. This policy does not limit to 5% the percentage of the Fund's
assets that are at risk in futures contracts and options on futures
contracts.
Foreign Currency Strategies - Special Considerations. The Fund may use
Derivative Instruments on foreign currencies to hedge against movements in
the values of the foreign currencies in which the Fund's securities are
denominated. Such currency hedges can protect against price movements in a
security that the Fund owns or intends to acquire that are attributable to
changes in the value of the currency in which it is denominated. Such
hedges do not, however, protect against price movements in the securities
that are attributable to other causes.
The Fund might seek to hedge against changes in the value of particular
currency when no Derivative Instruments on that currency are available or
such Derivative Instruments are more expensive than certain other Derivative
Instruments. In such cases, the Fund may hedge against price movements in
that currency by entering into transactions using Derivative Instruments on
another currency or a basket of currencies, the values of which Dreyfus
believes will have a high degree of positive correlation to the value of the
currency being hedged. The risk that movements in the price of the
Derivative Instrument will not correlate perfectly with movements in the
price of the currency being hedged is magnified when this strategy is used.
The value of Derivative Instruments on foreign currencies depends on
the value of the underlying currency relative to the U.S. dollar. Because
foreign currency transactions occurring in the interbank market might
involve substantially larger amounts than those involved in the use of
foreign currency Derivative Instruments, the Fund could be disadvantaged by
having to deal in the odd lot market (generally consisting of transactions
of less than $1 million) for the underlying foreign currencies at prices
that are less favorable than for round lots.
There is no systematic reporting of last sale information for foreign
currencies or any regulatory requirement that quotations available through
dealers or other market sources be firm or revised on a timely basis.
Quotation information generally is representative of very large transactions
in the interbank market and thus might not reflect odd-lot transactions
where rates might be less favorable. The interbank market in foreign
currencies is a global, round-the-clock market.
Settlement of transactions involving foreign currencies might be
required to take place within the country issuing the underlying currency.
Thus, the Fund might be required to accept or make delivery of the
underlying foreign currency in accordance with any U.S. or foreign
regulations regarding the maintenance of foreign banking arrangements by
U.S. residents and might be required to pay any fees, taxes and charges
associated with such delivery assessed in the issuing country.
Forward Contracts. A forward foreign currency exchange contract
("forward contract") is a contract to purchase or sell a currency at a
future date. The two parties to the contract set the number of days and the
price. Forward contracts are used as a hedge against future movements in
foreign exchange rates. The Fund may enter into forward contracts to
purchase or sell foreign currencies for a fixed amount of U.S. dollars or
other foreign currency.
Forward contracts may serve as long hedges -- for example, the Fund may
purchase a forward contract to lock in the U.S. dollar price of a security
denominated in a foreign currency that the Fund intends to acquire. Forward
contracts may also serve as short hedges -- for example, the Fund may sell a
forward contract to lock in the U.S. dollar equivalent of the proceeds from
the anticipated sale of a security denominated in a foreign currency or from
anticipated dividend or interest payments denominated in a foreign currency.
Dreyfus may seek to hedge against changes in the value of a particular
currency by using forward contracts on another foreign currency or basket of
currencies, the value of which Dreyfus believes will bear a positive
correlation to the value of the currency being hedged.
The cost to the Fund of engaging in forward contracts varies with
factors such as the currency involved, the length of the contract period and
the market conditions then prevailing. Because forward contracts are usually
entered into a principal basis, no fees or commissions are involved. When
the Fund enters into a forward contract, it relies on the contra party to
make or take delivery of the underlying currency at the maturity of the
contract. Failure by the contra party to do so would result in the loss of
any expected benefit of the transaction.
Buyers and sellers of forward contracts can enter into offsetting
closing transactions by selling or purchasing, respectively, an instrument
identical to the instrument purchased or sold. Secondary markets generally
do not exist for forward contracts, with the result that closing
transactions generally can be made for forward contracts only by negotiating
directly with the contra party. Thus, there can be no assurance that the
Fund will in fact be able to close out a forward contract at a favorable
price prior to maturity. In addition, in the event of insolvency of the
contra party, the Fund might be unable to close out a forward contract at
any time prior to maturity. In either event, the Fund would continue to be
subject to market risk with respect to the position, and would continue to
be required to maintain a position in the securities or currencies that are
the subject of the hedge or to maintain cash or securities in a segregated
account.
The precise matching of forward currency contract amounts and the value
of the securities involved generally will not be possible because the value
of such securities measured in the foreign currency will change after the
forward contract has been established. Thus, the Fund might need to
purchase or sell foreign currencies in the spot (cash) market to the extent
such foreign currencies are not covered by forward contracts. The
projection of short-term currency market movements is extremely difficult,
and the successful execution of a short-term hedging strategy is highly
uncertain.
Swaps, Caps, Collars and Floors. Swap agreements, including interest
rate and currency swaps, caps, collars and floors, may be individually
negotiated and structured to include exposure to a variety of different
types of investments or market factors. Swaps involve two parties
exchanging a series of cash flows at specified intervals. In the case of an
interest rate swap, the parties exchange interest payments based on an
agreed upon principal amount (referred to as the "notional principal
amount"). Under the most basic scenario, Party A would pay a fixed rate on
the notional principal amount to Party B, which would pay a floating rate on
the same notional principal amount to Party A. Depending on their
structure, swap agreements may increase or decrease the Fund's exposure to
long or short-term interest rates (in the U.S. or abroad), foreign currency
values, mortgage securities, corporate borrowing rates, or other factors.
Swap agreements can take many different forms and are known by a variety of
names.
In a typical cap or floor agreement, one party agrees to make payments
only under specified circumstances, usually in return for payment of a fee
by the other party. For example, the buyer of an interest rate cap obtains
the right to receive payments to the extent that a specified interest rate
exceeds an agreed-upon level, while the seller of an interest rate floor is
obligated to make payments to the extent that a specified interest rate
falls below an agreed-upon level. An interest rate collar combines elements
of buying a cap and selling a floor.
The Fund will set aside cash or appropriate liquid assets to cover its
current obligations under swap transactions. If the Fund enters into a swap
agreement on a net basis (that is, the two payment streams are netted out,
with the Fund receiving or paying, as the case may be, only the net amount
of the two payments), the Fund will maintain cash or liquid assets with a
daily value at least equal to the excess, if any, of the Fund's accrued
obligations under the swap agreement over the accrued amount the Fund is
entitled to receive under the agreement. If the Fund enters into a swap
agreement on other than a net basis or writes a cap, collar or floor, it
will maintain cash or liquid assets with a value equal to the full amount of
the Fund's accrued obligations under the agreement.
The most important factor in the performance of swap agreements is the
change in the specific interest rate, currency or other factor(s) that
determine the amounts of payments due to and from the Fund. If a swap
agreement calls for payments by the Fund, the Fund must be prepared to make
such payments when due. In addition, if the contra party's creditworthiness
declines, the value of a swap agreement would likely decline, potentially
resulting in losses.
The Fund will enter into swaps, caps, collars and floors only with
banks and recognized securities dealers believed by Dreyfus to present
minimal credit risks in accordance with guidelines established by the Board.
If there is a default by the other party to such a transaction, the Fund
will have to rely on its contractual remedies (which may be limited by
bankruptcy, insolvency or similar laws) pursuant to the agreement relating
to the transaction.
The Fund understands that it is the position of the staff of the SEC
that assets involved in swap transactions are illiquid and, therefore, are
subject to the limitations on illiquid investments. See "Illiquid
Investments."
Master/Feeder Option. The Company may in the future seek to achieve
the Fund's investment objective by investing all of the Fund's net
investable assets in another investment company having the same investment
objective and substantially the same investment policies and restrictions as
those applicable to the Fund. Shareholders of the Fund will be given at
least 30 days' prior notice of any such investment. Such investment would
be made only if the Company's Board of Directors determines it to be in the
best interest of the Fund and its shareholders. In making that
determination, the Company's Board of Directors will consider, among other
things, the benefits to shareholders and/or the opportunity to reduce costs
and achieve operational efficiency. Although the Fund believes that the
Board of Directors will not approve an arrangement that is likely to result
in higher costs, no assurance is given that costs will be materially reduced
if this option is implemented.
Investment Restrictions
The following limitations have been adopted by the Fund. The Fund may
not change any of these fundamental investment limitations without the
consent of: (a) 67% or more of the shares present at a meeting of
shareholders duly called if the holders of more than 50% of the outstanding
shares of the Fund are present or represented by proxy, or (b) more than 50%
of the outstanding shares of the Fund, whichever is less. The Fund may not:
1. Purchase any securities which would cause more than 25% of the
value of the Fund's total assets at the time of such purchase to be invested
in the securities of one or more issuers conducting their principal
activities in the same industry. (For purposes of this limitation, U.S.
Government securities, and state or municipal governments and their
political subdivisions are not considered members of any industry.)
2. Borrow money or issue senior securities as defined in the
Investment Company Act of 1940, as amended ("1940 Act"), except that (a) the
Fund may borrow money in an amount not exceeding one-third of the Fund's
total assets at the time of such borrowings, and (b) the Fund may issue
multiple classes of shares. The purchase or sale of futures contracts,
options, forward contracts, swaps, caps, collars and floors shall not be
considered to involve the borrowing of money or issuance of senior
securities.
3. Purchase with respect to 75% of the Fund's total assets securities
of any one issuer (other than securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities) if, as a result, (a) more
than 5% of the Fund's total assets would be invested in the securities of
that issuer, or (b) the Fund would hold more than 10% of the outstanding
voting securities of that issuer.
4. Make loans or lend securities, if as a result thereof more than
one-third of the Fund's total assets would be subject to all such loans. For
purposes of this limitation debt instruments, swaps, caps, collars, floors,
and repurchase agreements shall not be treated as loans.
5. Purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent the
Fund from investing in securities or other instruments backed by real
estate, including mortgage loans, or securities of companies that engage in
real estate business or invest or deal in real estate or interests therein).
6. Underwrite securities issued by any other person, except to the
extent that the purchase of securities and later disposition of such
securities in accordance with the Fund's investment program may be deemed an
underwriting.
7. Purchase or sell commodities, except that the Fund may purchase
and sell foreign currency, futures contracts, options, forward currency
contracts, swaps, caps, collars and floors, and other similar instruments.
The Fund may, notwithstanding any other fundamental investment policy
or limitation, invest all of its investable assets in securities of a single
open-end management investment company with substantially the same
investment objective, policies and limitations as the Fund.
The Fund has adopted the following additional non-fundamental
restrictions. These non-fundamental restrictions may be changed without
shareholder approval, in compliance with applicable law and regulatory
policy.
1. The Fund shall not sell securities short, unless it owns or has
the right to obtain securities equivalent in kind and amounts to the
securities sold short, and provided that transactions in futures contracts,
options, forward contracts, swaps, caps, collars, floors, and other similar
financial instruments are not deemed to constitute selling short.
2. The Fund shall not purchase securities on margin, except that the
Fund may obtain such short-term credits as are necessary for the clearance
of transactions, and provided that margin payments in connection with
futures contracts, options, forward contracts, swaps, caps, collars, floors,
and other similar financial instruments shall not constitute purchasing
securities on margin.
3. The Fund shall not purchase oil, gas or mineral leases.
4. The Fund will not purchase or retain the securities of any issuer
if the officers, Directors of the Fund, its advisers, or managers, owning
beneficially more than one half of 1% of the securities of such issuer,
together own beneficially more than 5% of such securities.
5. The Fund will not purchase securities of issuers (other than
securities issued or guaranteed by domestic or foreign governments or
political subdivisions thereof), including their predecessors, that have
been in operation for less than three years, if by reason thereof, the value
of the Fund's investment in securities would exceed 5% of the Fund's total
assets. For purposes of this limitation, sponsors, general partners,
guarantors and originators of underlying assets may be treated as the issuer
of a security.
6. The Fund will not invest more than 15% of the value of its net
assets in illiquid securities, including repurchase agreements with
remaining maturities in excess of seven days, time deposits with maturities
in excess of seven days and other securities which are not readily
marketable. For purposes of this limitation, illiquid securities shall not
include interest-only (IO) and principal-only (PO) classes of fixed-rate
mortgage-related securities issued by the U.S. Government or one of its
agencies or instrumentalities; provided, that the Board of Directors, or its
delegate, determines that such securities are liquid pursuant to guidelines
established by or under the direction of the Board of Directors. Also, for
purposes of this limitation, illiquid securities shall not include Section
4(2) paper, or securities that may be resold under Rule 144A under the
Securities Act of 1933; provided, that the Board of Directors, or its
delegate, determines that such securities are liquid based upon the trading
markets for the specific security.
7. The Fund may not invest in securities of other investment
companies, except as they may be acquired as part of a merger, consolidation
or acquisition of assets and except to the extent otherwise permitted by the
1940 Act.
8. The Fund shall not purchase any security while borrowings
representing more than 5% of the Fund's total assets are outstanding.
9. The Fund will not purchase warrants if at the time of such
purchase: (a) more than 5% of the value of the Fund's assets would be
invested in warrants, or (b) more than 2% of the value of the Fund's assets
would be invested in warrants that are not listed on the New York or
American Stock Exchange (for purposes of this limitation, warrants acquired
by the Fund in units or attached to securities will be deemed to have no
value).
10. The Fund will not purchase puts, calls, straddles, spreads and any
combination thereof if, as a result of such purchase, the value of its
aggregate investment in such securities will exceed 5% of its total assets,
except that: (a) this limitation shall not apply to standby commitments, and
(b) this limitation shall not apply to the Fund's transactions in futures
contracts and options on futures contracts.
To the extent that the Fund enters into futures contracts, options on
futures contracts, or options on foreign currencies traded on an exchange
regulated by the CFTC, in each case other than for bona fide hedging
purposes (as defined by the CFTC), the aggregate initial margin and premiums
required to establish those positions (excluding the amount by which options
are "in-the-money" at the time of purchase) will not exceed 5% of the
liquidation value of the Fund's portfolio, after taking into account
unrealized profits and unrealized losses on any contracts the Fund has
entered into. This policy does not limit to 5% the percentage of the Fund's
assets that are at risk in futures contracts and options on futures
contracts.
MANAGEMENT OF THE FUND
PRINCIPAL SHAREHOLDERS
The following shareholder(s) owned of record 5% or more of the Investor
shares of the Fund at February 9, 1998: Donaldson Lufkin Jenrette
Securities Corporation, Inc. P.O. Box 2052, Jersey City, NJ. 07303-9998, 58;
David A. Mersky, Profit Sharing Plan, 37 Cedar Street, Newtown Centre, MA
02159-1143, 8%; Southwest Securities, Inc. Chieko Okinaga P.O. Box 509002,
Dallas, TX 75250; 6% record.
The following shareholders(s) owned of record 5% or more of the
Restricted shares of the Fund at February 9, 1998: % record. Mac & Co.
Mutual Funds Operations, P.O. Box 3198, Pittsburgh, PA 15230-3198: 11%
record; Boston & Co., P.O. Box 3198 Pittsburgh, PA 15230-3198: 6% record.
FEDERAL LAW AFFECTING MELLON BANK
The Glass-Steagall Act of 1933 prohibits national banks from engaging
in the business of underwriting, selling or distributing securities and
prohibits a member bank of the Federal Reserve System from having certain
affiliations with an entity engaged principally in that business. The
activities of Mellon Bank, N.A. ("Mellon Bank") in informing its customers
of, and performing, investment and redemption services in connection with
the Fund, and in providing services to the Fund as custodian, as well as
Dreyfus' investment advisory activities, may raise issues under these
provisions. Mellon Bank has been advised by counsel that the activities
contemplated under these arrangements are consistent with its statutory and
regulatory obligations.
Changes in either federal or state statutes and regulations relating to
the permissible activities of banks and their subsidiaries or affiliates, as
well as further judicial or administrative decisions or interpretations of
such future statutes and regulations, could prevent Mellon Bank or Dreyfus
from continuing to perform all or a part of the above services for its
customers and/or the Fund. If Mellon Bank or Dreyfus was prohibited from
serving the Fund in any of its present capacities, the Board of Directors
would seek an alternative provider(s) of such services.
DIRECTORS AND OFFICERS
The Company has a Board composed of eleven Directors which supervises
the Fund's investment activities and reviews contractual arrangements with
companies that provide the Fund with services. The following lists the
Directors and officers and their positions with the Company and their
present and principal occupations during the past five years. Each Director
who is an "interested person" of the Company (as defined in the 1940 Act) is
indicated by an asterisk(*). Each of the Directors also serves as a Trustee
of The Dreyfus/Laurel Funds Trust and The Dreyfus/Laurel Tax-Free Municipal
Funds (collectively, with the Company, the "Dreyfus/Laurel Funds").
Directors of the Company
o+RUTH MARIE ADAMS. Director of the Company; Professor of English and Vice
President Emeritus, Dartmouth College; Senator, United Chapters of Phi
Beta Kappa; Trustee, Woods Hole Oceanographic Institution; from
November 1995 to January 1997, Director, Access Capital Strategic
Community Investment Fund, Inc. - Institutional Investment Portfolio.
Age: 83 years old. Address: 1026 Kendal Lyme Road, Hanover, New
Hampshire 03755.
o+FRANCIS P. BRENNAN. Chairman of the Board of Directors and Assistant
Treasurer of the Company; Director and Chairman, Massachusetts Business
Development Corp.; and from November 1995 to January 1997, Director,
Access Capital Strategic Community Investment Fund, Inc. - Bank
Portfolio. Age: 80 years old. Address: Massachusetts Business
Development Corp., 50 Milk Street, Boston, Massachusetts 02109.
o+JOSEPH S. DiMARTINO, Director of the Company since February 1995. Since
January 1995, Mr. DiMartino served as Chairman of the Board for various
funds in the Dreyfus Family of Funds. He is also Chairman of the Board
of Staffing Resources, Inc., a temporary placement agency. Mr.
DiMartino also serves as a Director of The Muscular Dystrophy
Association, HealthPlan Services Corporation, a provider of marketing,
administrative and risk management services to health and other
benefit programs; Noel Group, Inc., a venture capital company and
Carlyle Industries, Inc. (formerly, Belding Heminway Company, Inc.), a
button packager and distributor; and Curtis Industries, Inc., a
national distributor of security products, chemicals, and automotive
and other hardware. Mr. DiMartino is also a Board member of 152 other
funds in the Dreyfus Family of Funds. From November 1995 to January
1997, Director, Access Capital Strategic Community Investment Fund,
Inc. - Institutional Investment Portfolio and Bank Portfolio. For more
than five years prior to January 1995, he was President, a director
and, until August 1994, Chief Operating Officer of Dreyfus and
Executive Vice President and a director of Dreyfus Service Corporation,
a wholly-owned subsidiary of Dreyfus. From August 1994 until December
31, 1994, he was a director of Mellon Bank Corporation. Age: 54 years
old. Address: 200 Park Avenue, New York, New York 10166.
o+JAMES M. FITZGIBBONS. Director of the Company; Chairman, Howes Leather
Company, Inc.; Director, Fiduciary Trust Company; Chairman, CEO and
Director, Fieldcrest-Cannon Inc.; Director, Lumber Mutual Insurance
Company; Director, Barrett Resources, Inc.; from November 1995 to
January 1997, Director, Access Capital Strategic Community Investment
Fund, Inc. - Bank Portfolio. Age: 63 years old. Address: 40 Norfolk
Road, Brookline, Massachusetts 02167.
o*J. TOMLINSON FORT. Director of the Company; Partner, Reed, Smith, Shaw &
McClay (law firm); from November 1995 to January 1997, Director, Access
Capital Strategic Community Investment Fund, Inc. - Bank Portfolio.
Age: 69 years old. Address: 204 Woodcock Drive, Pittsburgh,
Pennsylvania 15215.
o+ARTHUR L. GOESCHEL. Director of the Company; Director, Calgon Carbon
Corporation; Director, Cerex Corporation; Director, National Picture
Frame Corporation; former Chairman of the Board and Director, Rexene
Corporation; Chairman of the Board and Director, Tetra Corporation 1991-
1993; Director, Medalist Corporation 1992-1993; from November 1995 to
January 1997, Director, Access Capital Strategic Community Investment
Fund, Inc. - Institutional Investment Portfolio. Age: 76 years old.
Address: Way Hollow Road and Woodland Road, Sewickley, Pennsylvania
15143.
o+KENNETH A. HIMMEL. Director of the Company; former Director, The Boston
Company, Inc. ("TBC") and Boston Safe Deposit and Trust Company;
President and Chief Executive Officer, Himmel & Co., Inc.; Vice
Chairman, Sutton Place Gourmet, Inc.; Managing Partner, Franklin
Federal Partners. From November 1995 to January 1997, Director, Access
Capital Strategic Community Investment Fund, Inc. - Bank Portfolio;
Age: 51 years old. Address: 625 Madison Avenue, New York, New York
10022.
o*ARCH S. JEFFERY. Director of the Company; Financial Consultant; from
November 1995 to January 1997, Director, Access Capital Strategic
Community Investment Fund, Inc. - Institutional Investment Portfolio.
Age: 80 years old. Address: 1817 Foxcroft Lane, Unit 306, Allison
Park, Pennsylvania 15101.
o+STEPHEN J. LOCKWOOD. Director of the Company; President and CEO, LDG
Management Company Inc.; CEO, LDG Reinsurance Underwriters, SRRF
Management Inc. and Medical Reinsurance Underwriters Inc.; from
November 1995 to January 1997, Director, Access Capital Strategic
Community Investment Fund, Inc. - Institutional Investment Portfolio.
Age: 50 years old. Address: 401 Edgewater Place, Wakefield,
Massachusetts 01880.
o+JOHN J. SCIULLO. Director of the Company; Dean Emeritus and Professor of
Law, Duquesne University Law School; Director, Urban Redevelopment
Authority of Pittsburgh; from November 1995 to January 1997, Director,
Access Capital Strategic Community Investment Fund, Inc. -
Institutional Investment Portfolio. Age: 66 years old. Address: 321
Gross Street, Pittsburgh, Pennsylvania 15224
o+ROSLYN M. WATSON. Director of the Company; Principal, Watson Ventures;
Director, American Express Centurion Bank; Director, Harvard/Pilgrim
Community Health Plan, Inc.; from November 1995 to January 1997,
Director, Access Capital Strategic Community Investment Fund, Inc. -
Bank Portfolio; Director, Massachusetts Electric Company; Director, The
Hymans Foundation, Inc., prior to February, 1993; Real Estate
Development Project Manager and Vice President, The Gunwyn Company.
Age: 48 years old. Address: 25 Braddock Park, Boston, Massachusetts
02116-5816.
_______________________
* "Interested person" of the Company, as defined in the 1940 Act.
o Member of the Audit Committee.
+ Member of the Nominating Committee.
Officers of the Company
#MARIE E. CONNOLLY. President and Treasurer of the Company. President,
Chief Executive Officer, Chief Compliance Officer and a director of the
Distributor and Funds Distributor, Inc., the ultimate parent of which
is Boston Institutional Group, Inc. Age: 40 years old.
#DOUGLAS C. CONROY. Vice President and Assistant Secretary of the Company.
Assistant Vice President of Funds Distributor, Inc. From April 1993 to
January 1995, he was a Senior Fund Accountant for Investors Bank &
Trust Company. From December 1991 to March 1993, he was employed as a
fund accountant at TBC. Age: 28 years old.
#RICHARD W. INGRAM. Vice President and Assistant Treasurer of the Company.
Executive Vice President of the Distributor and Funds Distributor, Inc.
From March 1994 to November 1995, he was Vice President and Division
Manager for First Data Investor Services Group. From 1989 to 1994, he
was Vice President, Assistant Treasurer and Tax Director - Mutual Funds
of TBC. Age: 42 years old.
#CHRISTOPHER J. KELLEY. Vice President and Assistant Secretary of the
Company. Vice President and Senior Associate General Counsel of Funds
Distributor, Inc. and the Distributor, and an officer of certain
investment companies advised or administered by Harris Trust and
Savings Bank, Waterhouse Asset Management, Inc., J.P. Morgan & Co.
Incorporated and Montgomery Asset Management, L.P., or their respective
affiliates. From April 1994 to July 1996, Mr. Kelley was Assistant
Counsel at Forum Financial Group. From October 1992 to March 1994, Mr.
Kelley was employed by Putnam Investments in legal and compliance
capacities. Age: 33 years old.
#KATHLEEN K. MORRISEY. Vice President and Assistant Secretary of the
Company. Vice President and Assistant Secretary of Funds Distributor,
Inc. Manager of Treasury Services Administration and an officer of
certain investment companies advised or administered by J.P. Morgan &
Co. Incorporated, Montgomery Asset Management, L.P., and Dresdner RCM
Global Investors, Inc., or their respective affiliates. From July 1994
to November 1995, she was a Fund Accountant II for Investors Bank &
Trust Company. Prior to that she was a Finance student at Stonehill
College in North Easton, MA. Age: 25 years old.
#MARY A. NELSON. Vice President and Assistant Treasurer of the Company.
Vice President of the Distributor and Funds Distributor, Inc. From
September 1989 to July 1994, she was an Assistant Vice President and
Client Manager for TBC. Age: 33 years old.
#MICHAEL S. PETRUCELLI. Vice President, Assistant Treasurer and Assistant
Secretary of the Company. Senior Vice President and director of
Strategic Client Initiatives of Funds Distributor, Inc. and an officer
of certain investment companies advised or administered by J.P. Morgan
& Co. Incorporated. From December 1989 through November, 1996, he was
employed by GE Investments where he held various financial, business
development and compliance positions. He also served as Treasurer of
the GE Funds and as Director of GE Investment Services. Age: 36 years
old.
#JOSEPH F. TOWER, III. Vice President and Assistant Treasurer of the
Company. Senior Vice President, Treasurer and Chief Financial Officer
of the Distributor and Funds Distributor, Inc. From 1988 to August
1994, he was employed by TBC where he held various management positions
in the Corporate Finance and Treasury areas. Age: 35 years old.
#ELBA VASQUEZ. Vice President and Assistant Secretary of the Company.
Assistant Vice President of Funds Distributor, Inc. She has been an
employee since May 1996 as a Sales Associate in the distribution of
World Equity Benchmark Shares ("WEBS"). From March 1990 to May 1996,
she was employed by U.S. Trust Company of New York. As an officer of
U.S. Trust, she held various positions in the sales and marketing of
their proprietary family of mutual funds. Age: 36 years old.
The address of each Officer of the Company is 200 Park Avenue, New
York, New York 10166.
________________
# Officer also serves as an officer for other investment companies advised
by Dreyfus, including The Dreyfus/Laurel Trust and The Dreyfus/Laurel Tax-
Free Municipal Funds.
The address of each officer of the Company is 200 Park Avenue, New
York, NY 10166.
The officers and Directors of the Company as a group owned beneficially
less than 1% of the total shares of the Fund outstanding as of February 9,
1998.
No officer or employee of the Distributor (or of any parent, subsidiary
or affiliate thereof) receives any compensation from the Company for serving
as an officer or Director of the Company. In addition, no officer or
employee of Dreyfus (or of any parent, subsidiary or affiliate thereof)
serves as an officer or Director of the Company. The Dreyfus/Laurel Funds
pay each Director/Trustee who is not an "interested person" of the Company
(as defined in the 1940 Act), $27,000 per annum (and an additional $25,000
for the Chairman of the Board of Directors/Trustees of the Dreyfus/Laurel
Funds). In addition, the Dreyfus/Laurel Funds pay each Director/Trustee who
is not an "interested person" of the Company (as defined in the 1940 Act),
$1,000 per joint Dreyfus/Laurel Funds Board meeting attended, plus $750 per
joint Dreyfus/Laurel Funds Audit Committee meeting attended, and reimburse
each Director/Trustee who is not an "interested person" of the Company (as
defined in the 1940 Act), for travel and out-of-pocket expenses.
For the fiscal year ended October 31, 1997, the aggregate amount of
fees and expenses received by each current Director from the Company and all
other funds in the Dreyfus Family of Funds for which such person is a Board
member were as follows:
Total Compensation
From the Company
Aggregate and Fund Complex
Name of Board Compensation Paid to Board
Member From the Company# Member****
Ruth Marie Adams $10,000 $31,500
Francis P. Brennan* $19,833 $63,750
Joseph S. DiMartino** None $517,075***
James M. Fitzgibbons $10,583 $31,500
J. Tomlinson Fort** None None
Arthur L. Goeschel $11,500 $37,500
Kenneth A. Himmel $10,167 $32,500
Arch S. Jeffery** None None
Stephen J. Lockwood $11,167 $33,250
John J. Sciullo $11,167 $32,500
Roslyn M. Watson $11,167 $32,500
# Amounts required to be paid by the Company directly to the non-
interested Directors, that would be applied to offset a portion of
the management fee payable to Dreyfus, are in fact paid directly by
Dreyfus to the non-interested Directors. Amount does not include
reimbursed expenses for attending Board meetings, which amounted to
$14,973 for the Company.
* Compensation of Francis Brennan includes $25,000 paid by the
Dreyfus/Laurel Funds to be Chairman of the Board.
** Joseph S. DiMartino, J. Tomlinson Fort and Arch S. Jeffery are paid
directly by Dreyfus for serving as Board members of the Company and
the funds in the Dreyfus/Laurel Funds. For the fiscal year ended
October 31, 1997, the aggregate amount of fees and expenses received
by Joseph DiMartino, J. Tomlinson Fort and Arch S. Jeffery from
Dreyfus for serving as a Board member of the Company were $11,833,
$11,833 and $11,500, respectively, and for serving as a Board member
of all funds in the Dreyfus/Laurel Funds (including the Company) were
$35,500, $35,500 and $34,500, respectively. In addition, Dreyfus
reimbursed Messrs. DiMartino, Fort and Jeffery a total of $4,494 for
expenses attributable to the Company's Board meetings, which is not
included in the $14,973 in note # above.
***Actual amounts for the year ending December 31, 1997.
****The Dreyfus Family of Funds consists of 152 mutual funds.
MANAGEMENT ARRANGEMENTS
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Management of the Fund."
Management Agreement. Dreyfus serves as the investment manager for the
Fund pursuant to an Investment Management Agreement with the Company dated
April 4, 1994 (the "Management Agreement"), transferred to Dreyfus as of
October 17, 1994. Pursuant to the Management Agreement, Dreyfus provides, or
arranges for one or more third parties to provide, investment advisory,
administrative, custody, fund accounting and transfer agency services to the
Fund. As investment manager, Dreyfus manages the Fund by making investment
decisions based on the Fund's investment objective, policies and
restrictions. The Management Agreement is subject to review and approval at
least annually by the Board of Directors.
The Management Agreement will continue from year to year provided that
a majority of the Directors who are not interested persons of the Company
and either a majority of all Directors or a majority of the shareholders of
the Fund approve its continuance. The Management Agreement was last
approved by the Board of Directors on January 28, 1998 to continue until
April 4, 1999. The Company may terminate the Management Agreement, upon
the vote of a majority of the Board of Directors or upon the vote of a
majority of the Fund's outstanding voting securities on sixty days' written
notice to Dreyfus. Dreyfus may terminate the Management Agreement upon
sixty (60) days' written notice to the Company. The Management Agreement
will terminate immediately and automatically upon its assignment.
The following persons are officers and/or directors of Dreyfus: W.
Keith Smith, Chairman of the Board; Christopher M. Condron, President, Chief
Executive Officer, Chief Operating Officer and a director; Stephen E.
Canter, Vice Chairman, Chief Investment Officer and a director; Lawrence S.
Kash, Vice Chairman-Distribution and a director; William T. Sandalls, Jr.,
Senior Vice President and Chief Financial Officer; Mark N. Jacobs, Vice
President, General Counsel and Secretary; Patrice M. Kozlowski, Vice
President-Corporate Communications; Mary Beth Leibig, Vice President-Human
Resources; Jeffrey N. Nachman, Vice President-Mutual Fund Accounting; Andrew
S. Wasser, Vice President-Information Systems; William V. Healey, Assistant
Secretary; and Mandell L. Berman, Burton C. Borgelt, Frank V. Cahouet and
Richard F. Syron, directors.
For the fiscal years ended October 31,1996 and 1997, the management
fees paid by the Fund to Dreyfus were $169,710 and $426,110, respectively.
PURCHASE OF FUND SHARES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "How to Buy Fund Shares."
The Distributor. The Distributor serves as the Fund's distributor
pursuant to an agreement which is renewable annually. The Distributor also
acts as distributor for the other funds in the Dreyfus Family of Funds and
for certain other investment companies.
Dreyfus TeleTransfer Privilege. Dreyfus TeleTransfer purchase orders
may be made at any time. Purchase orders received by 4:00 p.m., New York
time, on any business day that Dreyfus Transfer, Inc. Fund's transfer and
dividend disbursing agent (the "Transfer Agent"), and the New York Stock
Exchange ("NYSE") are open for business will be credited to the
shareholders' Fund account on the next bank business day following such
purchase order. Purchase orders made after 4:00 P.M., New York time, on any
business day the Transfer Agent and the NYSE are open for business or orders
made on Saturday, Sunday or any Federal holiday (e.g., when the NYSE is not
open for business) will be credited to the shareholders' Fund account the
second bank business day following such purchase order. To qualify to use
the TeleTransfer Privilege, the initial payment for purchase of Fund shares
must be drawn on, and redemption proceeds paid to, the same bank and account
as are designated on the Account Application or Shareholder Services Form on
file. If the proceeds of a particular redemption are to be wired to an
account at any other bank, the request must be in writing and signature-
guaranteed. See "Redemption of Fund Shares - TeleTransfter Privilege."
Reopening an Account. An investor may reopen an account with a minimum
investment of $100 without filing a new Account Application during the
calendar year in which the account is closed or during the following
calendar year, provided the information on the old Account Application is
still applicable.
In-Kind Purchases. If the following conditions are satisfied, the Fund
may at its discretion, permit the purchase of shares through an "in-kind"
exchange of securities. Any securities exchanged must meet the investment
objective, policies and limitations of the Fund, must have a readily
ascertainable market value, must be liquid and must not be subject to
restrictions on resale. The market value of any securities exchanged, plus
any cash, must be at least equal to $25,000. Shares purchased in exchange
for securities generally cannot be redeemed for fifteen days following the
exchange in order to allow time for the transfer to settle.
The basis of the exchange will depend upon the relative NAV of the
shares purchased and securities exchanged. Securities accepted by the Fund
will be valued in the same manner as the Fund values its assets. Any
interest earned on the securities following their delivery to the Fund and
prior to the exchange will be considered in valuing the securities. All
interest, dividends, subscription or other rights attached to the securities
become the property of the Fund, along with the securities. For further
information about "in-kind" purchases, call 1-800-645-6561.
DISTRIBUTION PLAN
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Distribution Plan
(Investor Shares Only)."
Investor shares are subject to fees for distribution and shareholder
services.
Distribution Plan--Investor Shares. The SEC has adopted Rule 12b-1
under the 1940 Act ("Rule") regulating the circumstances under which
investment companies such as the Company may, directly or indirectly, bear
the expenses of distributing their shares. The Rule defines distribution
expenses to include expenditures for "any activity which is primarily
intended to result in the sale of fund shares." The Rule, among other
things, provides that an investment company may bear such expenses only
pursuant to a plan adopted in accordance with the Rule. With respect to the
Investor shares of the Fund, the Company has adopted a Distribution Plan
("Plan") and may enter into Agreements with Agents pursuant to the Plan.
Under the Plan, the Fund may spend annually up to 0.25% of its average
daily net assets attributable to Investor shares for costs and expenses
incurred in connection with the distribution of, and shareholder servicing
with respect to, the Investor shares.
The Plan provides that a report of the amounts expended under the Plan,
and the purposes for which such expenditures were incurred, must be made to
the Company's Directors for their review at least quarterly. In addition,
the Plan provides that it may not be amended to increase materially the
costs which the Fund may bear for distribution pursuant to the Plan without
approval of the Fund's shareholders, and that other material amendments of
the Plan must be approved by the vote of a majority of the Directors and of
the Directors who are not "interested persons" of the Company (as defined in
the 1940 Act) and who do not have any direct or indirect financial interest
in the operation of the Plan, cast in person at a meeting called for the
purpose of considering such amendments. The Plan is subject to annual
approval by the entire Board of Directors and by the Directors who are
neither interested persons nor have any direct or indirect financial
interest in the operation of the Plan, by vote cast in person at a meeting
called for the purpose of voting on the Plan. The Plan was so approved by
the Directors at a meeting held on January 28, 1998. The Plan is
terminable, as to the Fund's Investor shares, at any time by vote of a
majority of the Directors who are not interested persons and have no direct
or indirect financial interest in the operation of the Plan or by vote of
the holders of a majority of the outstanding Investor shares of the Fund.
For the fiscal year ended October 31, 1997, the Fund paid $307 to
Dreyfus Service Corporation and $30 to the Distributor, pursuant to the Plan
with respect to Investor shares.
REDEMPTION OF FUND SHARES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "How to Redeem Fund
Shares."
Check Redemption Privilege. The Fund provides Redemption Checks
("Checks") automatically upon opening an account, unless the investor
specifically refuses the Check Redemption Privilege by checking the
applicable "No" box on the Account Application. Checks will be sent only to
the registered owner(s) of the account and only to the address of record.
The Check Redemption Privilege may be established for an existing account by
a separate signed Shareholder Services Form. The Account Application or
Shareholder Services Form must be manually signed by the registered
owner(s). Checks are drawn on the investor's Fund account and may be made
payable to the order of any person in an amount of $500 or more. When a
Check is presented to the Transfer Agent for payment, the Transfer Agent, as
the investor's agent, will cause the Fund to redeem a sufficient number of
full or fractional shares in the investor's account to cover the amount of
the Check. Dividends are earned until the Check clears. After clearance, a
copy of the Check will be returned to the investor. Investors generally
will be subject to the same rules and regulations that apply to checking
accounts, although the election of this Privilege creates only a
shareholder-transfer agent relationship with the Transfer Agent.
If the amount of the Check is greater than the value of the shares in
an investor's account, the Check will be returned marked insufficient funds.
Checks should not be used to close an account.
Wire Redemption Privilege. By using this Privilege, the investor
authorizes the Transfer Agent to act on wire, telephone or letter redemption
instructions from any person representing himself or herself to be the
investor, or a representative of the investor's Agent, and reasonably
believed by the Transfer Agent to be genuine. Ordinarily, the Fund will
initiate payment for shares redeemed pursuant to this Privilege on the next
business day after receipt if the Transfer Agent receives the redemption
request in proper form. Redemption proceeds will be transferred by Federal
Reserve wire only to the commercial bank account specified by the investor
on the Account Application or Shareholder Services Form. Redemption
proceeds, if wired, must be in the amount of $1,000 or more and will be
wired to the investor's account at the bank of record designated in the
investor's file at the Transfer Agent, if the investor's bank is a member of
the Federal Reserve System, or to a correspondent bank if the investor's
bank is not a member. Fees ordinarily are imposed by such bank and usually
are borne by the investor. Immediate notification by the correspondent bank
to the investor's bank is necessary to avoid a delay in crediting the funds
to the investor's bank account.
Investors with access to telegraphic equipment may wire redemption
requests to the Transfer Agent by employing the following transmittal code,
which may be used for domestic or overseas transmissions:
Transfer Agent's
Transmittal Code Answer Back Sign
144295 144295 TSSG PREP
Investors who do not have direct access to telegraphic equipment may
have the wire transmitted by contacting a TRT Cables operator at 1-800-654-
7171, toll free. Investors should advise the operator that the above
transmittal code must be used and should also inform the operator of the
Transfer Agent's answer back sign.
To change the commercial bank or account designated to receive
redemption proceeds, a written request must be sent to the Transfer Agent.
This request must be signed by each shareholder, with each signature
guaranteed as described below under "Stock Certificates; Signatures."
Stock Certificates; Signatures. Any certificates representing Fund
shares to be redeemed must be submitted with the redemption request.
Written redemption requests must be signed by each shareholder, including
each holder of a joint account, and each signature must be guaranteed.
Signatures on endorsed certificates submitted for redemption also must be
guaranteed. The Transfer Agent has adopted standards and procedures
pursuant to which signature-guarantees in proper form generally will be
accepted from domestic banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies
and savings associations as well as from participants in the NYSE Medallion
Signature Program, the Securities Transfer Agents Medallion Program
("STAMP") and the Stock Exchanges Medallion Program. Guarantees must be
signed by an authorized signatory of the guarantor and "Signature-
Guaranteed" must appear with the signature. The Transfer Agent may request
additional documentation from corporations, executors, administrators,
trustees or guardians, and may accept other suitable verification
arrangements from foreign investors, such as consular verification. For
more information with respect to signature-guarantees, please call one of
the telephone numbers listed on the cover.
Dreyfus TeleTransfer Privilege. Investors should be aware that if they
have selected the Dreyfus TeleTransfer Privilege, any request for a wire
redemption will be effected as a Dreyfus TeleTransfer transaction through
the ACH system unless more prompt transmittal specifically is requested.
Redemption proceeds will be on deposit in the investor's account at an ACH
member bank ordinarily two business days after receipt of the redemption
request. See "Purchase of Fund Shares--Dreyfus TeleTransfer Privilege."
Redemption Commitment. The Fund has committed itself to pay in cash
all redemption requests by any shareholder of record of the Fund, limited in
amount during any 90-day period to the lesser of $250,000 or 1% of the value
of the Fund's net assets at the beginning of such period. Such commitment
is irrevocable without the prior approval of the SEC. In the case of
requests for redemptions in excess of such amount, the Board of Directors
reserves the right to make payments in whole or in part in securities or
other assets in case of an emergency or any time a cash distribution would
impair the liquidity of the Fund to the detriment of the existing
shareholders. In this event, the securities would be valued in the same
manner as the Fund's portfolio is valued. If the recipient sold such
securities, brokerage charges might be incurred.
Suspension of Redemptions. The right of redemption may be suspended or
the date of payment postponed (a) during any period when the NYSE is closed
(other than customary weekend and holiday closings), (b) when trading in the
markets the Fund ordinarily utilizes is restricted, or when an emergency
exists as determined by the SEC so that disposal of the Fund's investments
or determination of its net asset value is not reasonably practicable, or
(c) for such other periods as the SEC by order may permit to protect the
Fund's shareholders.
SHAREHOLDER SERVICES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Shareholder Services."
Fund Exchanges. Shares of any Class of the Fund may be exchanged for
shares of certain other funds advised or administered by Dreyfus. Shares of
the funds purchased by exchange will be purchased on the basis of relative
net asset value per share as follows:
A. Exchanges for shares of funds that are offered without a
sales load will be made without a sales load.
B. Shares of funds purchased without a sales load may be
exchanged for shares of other funds sold with a sales load, and
the applicable sales load will be deducted.
C. Shares of funds purchased with a sales load may be exchanged
without a sales load for shares of other funds sold without a
sales load.
D. Shares of funds purchased with a sales load, shares of funds
acquired by a previous exchange from shares purchased with a sales
load and additional shares acquired through reinvestment of
dividends or other distributions of any such funds (collectively
referred to herein as "Purchased Shares") may be exchanged for
shares of other funds sold with a sales load (referred to herein
as "Offered Shares"), provided that, if the sales load applicable
to the Offered Shares exceeds the maximum sales load that could
have been imposed in connection with the Purchased Shares (at the
time the Purchased Shares were acquired), without giving effect to
any reduced loads, the difference will be deducted.
To accomplish an exchange under item D above, shareholders must notify
the Transfer Agent of their prior ownership of Fund shares and their account
number.
To request an exchange, an investor, or an investor's Agent acting on
the investor's behalf, must give exchange instructions to the Transfer Agent
in writing or by telephone. The ability to issue exchange instructions by
telephone is given to all Fund shareholders automatically, unless the
investor checks the applicable "No" box on the Account Application,
indicating that the investor specifically refuses this Privilege. By using
the Telephone Exchange Privilege, the investor authorizes the Transfer Agent
to act on telephonic instructions (including over The Dreyfus Touchr
automated telephone system) from any person representing himself or herself
to be the investor, or a representative of the investor's Agent, and
reasonably believed by the Transfer Agent to be genuine. Telephone
exchanges may be subject to limitations as to the amount involved or the
number of telephone exchanges permitted. Shares issued in certificate form
are not eligible for telephone exchange.
Exchanges of Fund shares held by a Retirement Plan may be made only
between the investor's Retirement Plan account in one fund and such
investor's Retirement Plan account in another fund.
To establish a personal retirement plan by exchange, shares of the fund
being exchanged must have a value of at least the minimum initial investment
required for shares of the fund into which the exchange is being made. The
minimum initial investment is generally $750 for Dreyfus-sponsored Keogh
Plans, IRAs (including regular IRAs, spousal IRAs for a non-working spouse,
Roth IRAs, IRAs set up under a Simplified Employee Pension Plan ("SEP-
IRAs"), and rollover IRAs), and 403(b)(7) Plans with only one participant,
and $500 for Dreyfus-sponsored Education IRAs. To exchange shares held in
corporate plans, 403(b)(7) Plans and SEP-IRAs with more than one
participant, the minimum initial investment is generally $100 if the plan
has at least $2,500 invested among shares of the same Class of the funds in
the Dreyfus Family of Funds. To exchange shares held in a personal
retirement plan account, the shares exchanged must have a current value of
at least $100.
Dreyfus Auto-Exchange Privilege. The Dreyfus Auto-Exchange Privilege
permits an investor to purchase, in exchange for shares of the Fund, shares
of certain other eligible funds in the Dreyfus Family of Funds. This
Privilege is available only for existing accounts. With respect to Fund
shares held by a Retirement Plan, exchanges may be made only between the
investor's Retirement Plan account in one fund and such investor's
Retirement Plan account in another fund. Shares will be exchanged on the
basis of relative net asset value as described above under "Fund Exchanges."
Enrollment in or modification or cancellation of this Privilege is effective
three business days following notification by the investor. An investor
will be notified if the investor's account falls below the amount designated
to be exchanged under this Privilege. In this case, an investor's account
will fall to zero unless additional investments are made in excess of the
designated amount prior to the next Dreyfus Auto-Exchange transaction.
Shares held under IRA and other retirement plans are eligible for this
Privilege. Exchanges of IRA shares may be made between IRA accounts and
from regular accounts to IRA accounts, but not from IRA accounts to regular
accounts. With respect to all other retirement accounts, exchanges may be
made only among those accounts.
Fund exchanges and Dreyfus Auto-Exchange Privilege are available to
shareholders resident in any state in which shares of the fund being
acquired may legally be sold. Shares may be exchanged only between accounts
having identical names and other identifying designations.
Shareholder Services Forms and prospectuses of the other funds may be
obtained by calling 1-800-645-6561. The Fund reserves the right to reject
any exchange request in whole or in part. The Fund exchange service or
Dreyfus Auto-Exchange Privilege may be modified or terminated at any time
upon notice to shareholders.
Automatic Withdrawal Plan. The Automatic Withdrawal Plan permits an
investor with a $5,000 minimum account to request withdrawal of a specified
dollar amount (minimum of $50) on either a monthly or quarterly basis.
Withdrawal payments are the proceeds from sales of Fund shares, not the
yield on the shares. If withdrawal payments exceed reinvested dividends and
other distributions, the investor's shares will be reduced and eventually
may be depleted. Automatic Withdrawal may be terminated at any time by the
investor, the Fund or the Transfer Agent. Shares for which certificates
have been issued may not be redeemed through the Automatic Withdrawal Plan.
Dreyfus Dividend Sweep. Dreyfus Dividend Sweep allows investors to
invest automatically their dividends or dividends and capital gain
distributions, if any, from the Fund in shares of certain other eligible
funds in the Dreyfus Family of Funds of which the investor is a shareholder.
Shares of the other funds purchased pursuant to this Privilege will be
purchased on the basis of relative net asset value per share as follows:
A. Dividends and other distributions paid by a fund may be
invested without imposition of a sales load in shares of other
funds that are offered without a sales load.
B. Dividends and other distributions paid by a fund which does
not charge a sales load may be invested in shares of other funds
sold with a sales load, and the applicable sales load will be
deducted.
C. Dividends and other distributions paid by a fund which
charges a sales load may be invested in shares of other funds sold
with a sales load (referred to herein as "Offered Shares"),
provided that, if the sales load applicable to the Offered Shares
exceeds the maximum sales load charged by the fund from which
dividends or other distributions are being swept, without giving
effect to any reduced loads, the difference will be deducted.
D. Dividends and other distributions paid by a fund may be
invested in shares of other funds that impose a CDSC and the
applicable CDSC, if any, will be imposed upon redemption of such
shares.
Corporate Pension/Profit-Sharing and Retirement Plans. The Fund makes
available to corporations a variety of prototype pension and profit-sharing
plans including a 401(k) Salary Reduction Plan. In addition, the Fund makes
available Keogh Plans, IRAs (including regular IRAs, Spousal IRAs for a non-
working spouse, Roth IRAs, SEP-IRAs and rollover IRAs) and 403(b)(7) Plans.
Plan support services also are available.
Investors who wish to purchase Fund shares in conjunction with a Keogh
Plan, a 403(b)(7) Plan or an IRA, including an SEP-IRA, may request from the
Distributor forms for adoption of such plans.
The entity acting as custodian for Keogh Plans, 403(b)(7) Plans or IRAs
may charge a fee, payment of which could require the liquidation of shares.
All fees charged are described in the appropriate form.
Shares may be purchased in connection with these plans only by direct
remittance to the entity acting as custodian. Purchases for these plans may
not be made in advance of receipt of funds.
The minimum initial investment for corporate plans, Salary
Reduction Plans, 403(b)(7) Plans, and SEP-IRAs, with more than one
participant, is $1,000, with no minimum on subsequent purchases. The
minimum initial investment is $750 for 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
and $500 for Dreyfus-sponsored Education IRAs, with no minimum on subsequent
purchases.
The investor should read the Prototype Retirement Plan and the
appropriate form of Custodial Agreement for further details on eligibility,
service fees and tax implications, and should consult a tax adviser.
DETERMINATION OF NET ASSET VALUE
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "How to Buy Fund Shares."
Restricted securities, as well as securities or other assets for which
market quotations are not readily available, or which are not valued by a
pricing service approved by the Board of Directors, are valued at fair value
as determined in good faith by the Board. The Board will review the method
of valuation on a current basis. In making their good faith valuation of
restricted securities, the Directors generally will take the following
factors into consideration: restricted securities which are, or are
convertible into, securities of the same class of securities for which a
public market exists usually will be valued at market value less the same
percentage discount at which purchased. This discount will be reviewed
periodically by the Board if it believes that the discount no longer
reflects the value of the restricted securities. Restricted securities not
of the same class as securities for which a public market exists usually
will be valued initially at cost. Any subsequent adjustment from cost will
be based upon considerations deemed relevant by the Board.
New York Stock Exchange Closings. The holidays (as observed) on which
the NYSE is currently scheduled to be closed are: New Year's Day, Martin
Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Dividends, Other
Distributions and Taxes."
The term "regulated investment company" does not imply the supervision
of management or investment practices or policies by any government agency.
General. To qualify for treatment as a regulated investment company ("RIC")
under the Internal Revenue Code of 1986, as amended (the "Code"), the Fund--
which is treated as a separate corporation for federal tax purposes--(1)
must distribute to its shareholders each taxable year at least 90% of its
investment company taxable income (generally consisting of net investment
income, net short-term capital gains and net gains from certain foreign
currency transactions) ("Distribution Requirement"), (2) must derive at
least 90% of its annual gross income from specified sources ("Income
Requirement"), and (3) must meet certain asset diversification and other
requirements.
Any dividend or other distribution paid shortly after an investor's
purchase of shares may have the effect of reducing the net asset value of
the shares below the cost of his or her investment. Such a dividend or
other distribution would be a return on investment in an economic sense,
although taxable as stated in the Fund's Prospectus. In addition, if a
shareholder sells shares of the Fund held for six months or less and
receives a capital gain distribution with respect to those shares, any loss
incurred on the sale of those shares will be treated as a long-term capital
loss to the extent of the capital gain distribution received.
Dividends and other distributions declared by the Fund in October,
November or December of any year and payable to shareholders of record on a
date in any of those months are deemed to have been paid by the Fund and
received by the shareholders on December 31 of that year if the
distributions are paid by the Fund during the following January.
Accordingly, those distributions will be taxed to shareholders for the year
in which that December 31 falls.
Interest received by the Fund may be subject to income, withholding or
other taxes imposed by foreign countries and U.S. possessions that would
reduce the yield on its securities. Tax conventions between certain
countries and the United States may reduce or eliminate these foreign taxes,
however, and many foreign countries do not impose taxes on capital gains in
respect of investments by foreign investors.
Gains from the sale or other disposition of foreign currencies (except
certain gains that may be excluded by future regulations), and gains from
options, futures and forward contracts derived by the Fund with respect to
its business of investing in securities or foreign currencies, will qualify
as permissible income under the Income Requirement.
Ordinarily, gains and losses realized from portfolio transactions will
be treated as capital gain and loss. However, a portion of the gains or
losses from the disposition of foreign currencies and certain foreign-
currency-denominated instruments (including debt instruments and financial
forward, futures and option contracts) may be treated as ordinary income or
loss under Section 988 of the Code. In addition, all or a portion of any
gain realized from the sale or other disposition of certain market discount
bonds will be treated as ordinary income. Moreover, all or a portion of the
gain realized from engaging in "conversion transactions" that otherwise
would be treated as capital gain may be treated as ordinary income under
Section 1258 of the Code. "Conversion transactions" are defined to include
certain straddle transactions, transactions marketed or sold as producing
capital gains and other transactions described in Treasury regulations to be
issued in the future.
Under Section 1256 of the Code, any gain or loss realized by the Fund
from certain futures, forward contracts and options transactions will be
treated as 60% long-term capital gain or loss and 40% short-term capital
gain or loss. Gain or loss will arise upon exercise or lapse of such
contracts and options as well as from closing transactions. In addition,
any such contracts or options remaining unexercised at the end of the Fund's
taxable year will be treated as sold for their then fair market value (a
process known as "marking-to-market"), resulting in additional gain or loss
to the Fund characterized in the manner described above.
Offsetting positions held by the Fund involving certain contracts or
options may constitute "straddles", which are defined to include "offsetting
positions" in actively traded personal property. The tax treatment of
straddles is governed by Sections 1092 and, to the extent noted above, 1258
of the Code, which in certain circumstances override or modify Sections 1256
and 988. As a result, all or a portion of any capital gain from certain
straddle transactions may be recharacterized as ordinary income. If the
Fund were treated as entering into straddles by reason of its engaging in
certain forward contracts or options transactions, such straddles would be
characterized as "mixed straddles" if the forward contracts or options
transactions comprising a part of such straddles were governed by Section
1256. The Fund may make one or more elections with respect to mixed
straddles; depending on which election is made, if any, the results to the
Fund may differ. If no election is made, then to the extent the straddle
and conversion transactions rules apply to positions established by the
Fund, losses realized by the Fund will be deferred to the extent of
unrealized gain in the offsetting position. Moreover, as a result of the
straddle rules, short-term capital loss on straddle positions may be
recharacterized as long-term capital loss, and long-term capital gains may
be treated as short-term capital gains or ordinary income.
Investment by the Fund in securities issued or acquired at a discount
(for example, zero coupon securities) could affect the amount and timing of
distributions to shareholders by causing the Fund to recognize income prior
to the receipt of cash payments. For example, the Fund would be required to
take into gross income annually a portion of the discount (or deemed
discount) at which the securities were issued and could need to distribute
such income to satisfy the Distribution Requirement and to avoid imposition
of the 4% excise tax referred to in the Fund's Prospectus under "Dividends,
Other Distributions and Taxes." In such case, the Fund may have to dispose
of securities it might otherwise have continued to hold in order to generate
cash to satisfy these requirements.
State and Local Taxes. Depending upon the extent of the Fund's
activities in states and localities in which it is deemed to be conducting
business, it may be subject to the tax laws thereof. Shareholders are
advised to consult their tax advisers concerning the application of state
and local taxes.
Foreign Shareholders - U.S. Federal Income Taxation. U.S. federal
income taxation of a shareholder who, as to the United States, is a
non-resident alien individual, a foreign trust or estate, a foreign
corporation or a foreign partnership (a "foreign shareholder") depends on
whether the income from the Fund is "effectively connected" with a U.S.
trade or business carried on by the shareholder, as discussed generally
below. Special U.S. federal income tax rules that differ from those
described below may apply to certain foreign persons who invest in the Fund,
such as a foreign shareholder entitled to claim the benefits of an
applicable tax treaty. Foreign shareholders are advised to consult their own
tax advisers with respect to the particular tax consequences to them of an
investment in the Fund.
Foreign Shareholders - Income Not Effectively Connected. Dividends
(other than exempt-interest dividends) distributed to a foreign shareholder
whose ownership of Fund shares is not effectively connected with a U.S.
trade or business carried on by the foreign shareholder ("effectively
connected") generally will be subject to U.S. federal withholding tax of 30%
(or lower treaty rate). Capital gains realized by foreign shareholders on
the sale of Fund shares and distributions to them of net capital gain (the
excess of net long-term capital gain over net short-term capital loss)
generally will not be subject to U.S. federal income tax unless the foreign
shareholder is a non-resident alien individual and is physically present in
the United States for more than 182 days during the taxable year. In the
case of certain foreign shareholders, the Fund may be required to withhold
U.S. Federal income tax at a rate of 31% of capital gain distributions and
of the gross proceeds from a redemption of Fund shares unless the
shareholder furnishes the Fund with a certificate regarding the
shareholder's foreign status.
If a foreign shareholder's ownership of Fund shares is effectively
connected, however, with a U.S. trade or business carried on by then all
distributions to that shareholder and any gains realized by that shareholder
on the disposition of Fund shares will not be subject to withholding and
instead will be subject to U.S. federal income tax at the graduated rates
applicable to U.S. citizens and domestic corporations, as the case may be.
Foreign shareholders also may be subject to the branch profits tax.
Foreign Shareholders - Estate Tax. Foreign individuals generally are
subject to U.S. federal estate tax on their U.S. property, such as shares of
the Fund, that they own at the time of their death. Certain credits against
that tax and relief under applicable tax treaties may be available.
PORTFOLIO TRANSACTIONS
All portfolio transactions of the Fund are placed on behalf of the Fund
by Dreyfus. Debt securities purchased and sold by the Fund are generally
traded on a net basis (i.e., without commission) through dealers acting for
their own account and not as brokers, or otherwise involve transactions
directly with the issuer of the instrument. This means that a dealer (the
securities firm or bank dealing with the Fund) makes a market for securities
by offering to buy at one price and sell at a slightly higher price. The
difference between the prices is known as a spread. Other portfolio
transactions may be executed through brokers acting as agent. The Fund will
pay a spread or commissions in connection with such transactions. Dreyfus
uses its best efforts to obtain execution of portfolio transactions at
prices which are advantageous to the Fund and at spreads and commission
rates, if any, which are reasonable in relation to the benefits received.
Dreyfus also places transactions for other accounts that it provides with
investment advice.
Brokers and dealers involved in the execution of portfolio transactions
on behalf of the Fund are selected on the basis of their professional
capability and the value and quality of their services. In selecting brokers
or dealers, Dreyfus will consider various relevant factors, including, but
not limited to, the size and type of the transaction; the nature and
character of the markets for the security to be purchased or sold; the
execution efficiency, settlement capability, and financial condition of the
broker-dealer; the broker-dealer's execution services rendered on a
continuing basis; and the reasonableness of any spreads (or commissions, if
any). Any spread, commission, fee or other remuneration paid to an
affiliated broker-dealer is paid pursuant to the Company's procedures
adopted in accordance with Rule 17e-1 of the 1940 Act.
Brokers or dealers may be selected who provide brokerage and/or
research services to the Fund and/or other accounts over which Dreyfus or
its affiliates exercise investment discretion. Such services may include
advice concerning the value of securities; the advisability of investing in,
purchasing or selling securities; the availability of securities or the
purchasers or sellers of securities; furnishing analyses and reports
concerning issuers, industries, securities, economic factors and trends,
portfolio strategy and performance of accounts; and effecting securities
transactions and performing functions incidental thereto (such as clearance
and settlement).
The receipt of research services from broker-dealers may be useful to
Dreyfus in rendering investment management services to the Fund and/or its
other clients; and, conversely, such information provided by brokers or
dealers who have executed transaction orders on behalf of other clients of
Dreyfus may be useful to these organizations in carrying out their
obligations to the Fund. The receipt of such research services does not
reduce these organizations' normal independent research activities; however,
it enables these organizations to avoid the additional expenses which might
otherwise be incurred if these organizations were to attempt to develop
comparable information through their own staffs.
Although Dreyfus manages other accounts in addition to the Fund,
investment decisions for the Fund are made independently from decisions made
for these other accounts. It sometimes happens that the same security is
held by more than one of the accounts managed by Dreyfus. Simultaneous
transactions may occur when several accounts are managed by the same
investment manager, particularly when the same investment instrument is
suitable for the investment objective of more than one account.
When more than one account is simultaneously engaged in the purchase or
sale of the same investment instrument, the prices and amounts are allocated
in accordance with a formula considered by Dreyfus to be equitable to each
account. In some cases this system could have a detrimental effect on the
price or volume of the investment instrument as far as the Fund is
concerned. In other cases, however, the ability of the Fund to participate
in volume transactions will produce better executions for the Fund. While
the Directors will continue to review simultaneous transactions, it is their
present opinion that the desirability of retaining Dreyfus as investment
manager to the Fund outweighs any disadvantages that may be said to exist
from exposure to simultaneous transactions.
Portfolio Turnover. The portfolio turnover rate for the Fund is
calculated by dividing the lesser of the Fund's annual sales or purchases of
portfolio securities (exclusive of purchases and sales of securities whose
maturities at the time of acquisition were one year or less) by the monthly
average value of securities in the Fund during the year.
The portfolio turnover rates for the fiscal years ended October 31,
1996 and 1997 for the Fund were 198.16% and 143.91%, respectively.
PERFORMANCE INFORMATION
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Performance
Information."
The average annual total return for the period November 1, 1995
(commencement of operations) and the 1 year period through October 31, 1997
were 6.18% and 8.21% for Investor shares and 6.45% and 8.49%, respectively
for Restricted shares. Average annual total return is calculated by
determining the ending redeemable value of an investment purchased with a
hypothetical $1,000 payment made at the beginning of the period (assuming
the reinvestment of dividends and other distributions), dividing by the
amount of the initial investment, taking the "n"th root of the quotient
(where "n" is the number of years in the period) and subtracting 1 from the
result.
The total return for the period November 1, 1995 (commencement of
operations) through October 31, 1997 for Investor shares was 12.73% and for
Restricted shares was 13.31%. Total return is calculated by subtracting the
amount of the Fund's net asset value per share at the beginning of a stated
period from the net asset value per share at the end of the period (after
giving effect to the reinvestment of dividends and other distributions
during the period), and dividing the result by the net asset value per share
at the beginning of the period.
The current yield for the 30-day period ended October 31, 1997 was
5.75% for Investor shares and 6.00% for Restricted shares. Yields are
computed by using standardized methods of calculation required by the SEC.
Yields are calculated by dividing the net investment income per share earned
during a 30-day (or one-month) period by the maximum offering price per
share on the last day of the period, according to the following formula:
YIELD = 2[(a-b + 1)6-1]
cd
Where: a = dividends and interest earned during the
period;
b = expenses accrued for the period (net of reimbursements);
c = average daily number of shares
outstanding during the period that were entitled to
receive dividends; and
d = maximum offering price per share on the
last day of the period.
Performance information for the Fund may be compared, in reports and
promotional literature, to indexes including, but not limited to: (i) the
Lehman Brothers Aggregate Bond Index; (ii) other Lehman Brothers indices,
the Dow Jones Industrial Average, or other appropriate unmanaged domestic or
foreign indices of performance of various types of investments so that
investors may compare the Fund's results with those of indices widely
regarded by investors as representative of the securities markets in
general; (iii) other groups of mutual funds tracked by Lipper Analytical
Services, a widely used independent research firm which ranks mutual funds
by overall performance, investment objectives and assets, or tracked by
other services, companies, publications, or persons who rank mutual funds on
overall performance or other criteria; (iv) the Consumer Price Index (a
measure of inflation) to assess the real rate of return from an investment
in the Fund; and (v) products managed by a universe of money managers with
similar country allocation and performance objectives. Unmanaged indices
may assume the reinvestment of dividends but generally do not reflect
deductions or administrative and management costs and expenses.
From time to time, Fund advertisements may include statistical data or
general discussions about the growth and development of Dreyfus Retirement
Services (in terms of new customers, assets under management, market share,
etc.) and its presence in the defined contribution plan market.
From time to time, advertising material for the Fund may include
biographical information relating to its portfolio manager and may refer to
or include commentary by the portfolio manager relating to investment
strategy, asset growth, current or past business, political, economic or
financial conditions and other matters of general interest to investors.
INFORMATION ABOUT THE FUND
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "General Information."
Each Fund share has one vote and, when issued and paid for in
accordance with the terms of the offering, is fully paid and non-assessable.
Fund shares have no preemptive or subscription rights and are freely
transferable. The Fund is one of eighteen portfolios of the Company.
The Fund will send annual and semi-annual financial statements to all
its shareholders.
TRANSFER AND DIVIDEND DISBURSING AGENT, CUSTODIAN, COUNSEL
AND INDEPENDENT AUDITORS
Dreyfus Transfer, Inc., a wholly-owned subsidiary of Dreyfus, P.O. Box
9671, Providence, Rhode Island 02940-9671, is the Company's transfer and
dividend disbursing agent. Under a transfer agency agreement with the
Company, Dreyfus Transfer, Inc. arranges for the maintenance of shareholder
account records for the Fund, the handling of certain communications between
shareholders and the Fund and the payment of dividends and distributions
payable by the Fund. For these services, Dreyfus Transfer, Inc. receives a
monthly fee computed on the basis of the number of shareholder accounts it
maintains for the Company during the month, and is reimbursed for certain
out-of-pocket expenses.
Mellon Bank, the parent of Dreyfus, located at One Mellon Bank Center,
Pittsburgh, Pennsylvania 15258, acts as custodian of the Fund's investments.
Under a custody agreement with the Company, Mellon Bank holds the Fund's
portfolio securities and keeps all necessary accounts and records. Dreyfus
Transfer, Inc. and Mellon Bank, as custodian, have no part in determining
the investment policies of the Fund or which securities are to be purchased
or sold by the Fund.
Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue, N.W., Second
Floor, Washington, D.C. 20036, has passed upon the legality of the shares
offered by the Prospectus and this Statement of Additional Information.
KPMG Peat Marwick LLP, 345 Park Avenue, New York, New York 10154, was
appointed by the Directors to serve as the Fund's independent auditors for
the year ending October 31, 1998, providing audit services including (1)
examination of the annual financial statements, (2) assistance, review and
consultation in connection with SEC filings, and (3) review of the annual
federal income tax return filed on behalf of the Fund.
FINANCIAL STATEMENTS
The financial statements for the fiscal year ended October 31, 1997,
including notes to the financial statements and financial highlights and the
Independent Auditors' Report, are included in the Annual Report to
shareholders. A copy of the Annual Report accompanies this Statement of
Additional Information. The financial statements contained in the Annual
Report and the Independent Auditor's Report thereon contained therein and
related notes are incorporated herein by reference.
APPENDIX
DESCRIPTION OF RATINGS
Bond, Note and Commercial Paper Ratings
Standard & Poor's ("S&P")
Bond Ratings
AAA An obligation rated `AAA' has the highest rating assigned by S&P.
The obligor's capacity to meet its financial commitment on the
obligation is extremely strong.
AA An obligation rated `AA' differs from the highest rated issues
only in small degree. The obligors capacity to meet its financial
commitment on the obligation is very strong.
A An obligation rated `A' is somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions than obligations in higher rated categories. However,
the obligor's capacity to meet its financial commitment on the
obligation is still strong.
BBB An obligation rated `BBB' exhibits adequate protection parameters.
However, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity of the obligor to meet
its financial commitment on the obligation.
Obligations rated `BB', `B', `CCC', `CC', and `C' are regarded as
having significant speculative characteristics. `BB' indicates the
least degree of speculation and `C' the highest. While such
obligations will likely have some quality and protective
characteristics, these may be outweighed by large uncertainties or
major exposures to adverse conditions.
BB An obligation rated `B' is less vulnerable to nonpayment than
other speculative issues. However, it faces major ongoing
uncertainties or exposure to adverse business, financial, or
economic conditions, which could lead to the obligor's inadequate
capacity to meet its financial commitment on the obligation.
B An obligation rated `B' is more vulnerable to nonpayment than
obligations rated `BB', but the obligor currently has the capacity
to meet its financial commitment on the obligation. Adverse
business, financial, or economic conditions will likely impair the
obligor's capacity or willingness to meet its financial commitment
on the obligation.
CCC An obligation rated `CCC' is currently vulnerable to nonpayment
and is dependent upon favorable business, financial and economic
conditions for the obligor to meet its financial commitment on the
obligation. In the event of adverse business, financial, or
economic conditions, the obligor is not likely to have the
capacity to meet its financial commitment on the obligation.
CC An obligation rated `CC' is currently highly vulnerable to
nonpayment.
C The `C' rating may be used to cover a situation where a bankruptcy
petition has been filed or similar action has been taken, but
payments on this obligation are being continued.
D An obligation rated `D' is in payment default. The `D' rating
category is used when payments on a obligation are not made on the
date due even if the applicable grace period has not expired,
unless S&P believes that such payments will be made during such
grace period. The `D' rating also will be used upon the filing of
a bankruptcy petition or the taking of a similar action if
payments on an obligation are jeopardized.
The ratings from `AA' to `CCC' may be modified by the addition of a
plus (+) or a minus (-) sign to show relative standing within the major
rating categories
Note Ratings
SP-1 Strong capacity to pay principal and interest. An issue
determined to possess a very strong capacity to pay debt service
is given a plus (+) designation.
SP-2 Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse finance and economic changes over the
term of the notes.
SP-3 Speculative capacity to pay principal and interest.
Commercial Paper Ratings
An S&P commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more
than 365 days.
A-1 This designation indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess
extremely strong safety characteristics are denoted with a plus
sign (+) designation.
A-2 Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as
high as for issuers designated `A-1.'
A-3 Issues carrying this designation have an adequate capacity for
timely payment. They are, however, more vulnerable to the adverse
effects of changes in circumstances than obligations carrying the
higher designations.
B Issues rated `B' are regarded as having only speculative capacity
for timely payment.
C This rating is assigned to short-term debt obligations with a
doubtful capacity for payment.
D Debt rated `D' is in payment default. The `D' rating category is
used when interest payments of principal payments are not made on
the date due, even if the applicable grace period has not expired,
unless S&P believes such payments will be made during such grace
period.
Moody's
Bond Ratings
Aaa Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and generally
are referred to as "gilt edge." Interest payments are protected
by a large or by an exceptionally stable margin and principal is
secure. While the various protective elements are likely to
change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what
generally are known as high-grade bonds. They are rated lower
than the best bonds because margins of protection may not be as
large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa
securities.
A Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper-medium-grade
obligations. Factors giving security to principal and interest
are considered adequate, but elements may be present which suggest
a susceptibility to impairment some time in the future.
Baa Bonds which are rated Baa are considered as medium grade
obligations (i.e., they are neither highly protected nor poorly
secured). Interest payments and principal security appear
adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment charac
teristics and in fact have speculative characteristics as well.
Ba Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well-assured. Often the
protection of interest and principal payments may be very
moderate, and thereby not well safeguarded during both good and
bad times over the future. Uncertainty of position characterizes
bonds in this class.
B Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal
payments or of maintenance of other terms of the contract over any
long period of time may be small.
Caa Bonds which are rated Caa are of poor standing. Such issues may
be in default or there may be present elements of danger with
respect to principal or interest.
Ca Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or
have other marked short-comings.
C Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects
of ever attaining any real investment standing.
Moody's applies the numerical modifiers 1, 2 and 3 to show relative
standing within each generic rating classification from Aa through B.
The modifier 1 indicates a ranking for the security in the higher end
of a rating category; the modifier 2 indicates a mid-range ranking; and
the modifier 3 indicates a ranking in the lower end of a rating
category.
Notes and other Short-Term Obligations
There are four rating categories for short-term obligations that define
an investment grade situation. These are designated Moody's Investment
Grade as MIG 1 (best quality) through MIG 4 (adequate quality). Short-term
obligations of speculative quality are designated SG.
In the case of variable rate demand obligations (VRDOs), a two
component rating is assigned. The first element represents an evaluation of
the degree of risk associated with scheduled principal and interest
payments, and the other represents an evaluation of the degree of risk
associated with the demand feature. The short-term rating assigned to the
demand feature of VRDOs is designated as VMIG. When either the long- or
short-term aspect of a VRDO is not rated, that piece is designated NR, e.g.,
Aaa/NR or NR/VMIG 1.
MIG 1/
VMIG 1 This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support
or demonstrated broad-based access to the market for refinancing.
MIG-2/
MIG 2 This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.
MIG 3/
VMIG 3 This designation denotes favorable quality. All security elements
are accounted for but there is lacking the undeniable strength of
the preceding grades. Liquidity and cash flow protection may be
narrow and market access for refinancing is likely to be less well
established.
MIG 4/
VMIG 4 This designation denotes adequate quality. Protection commonly
regarded as required of an investment security is present and
although not distinctly or predominantly speculative, there is
specific risk.
Commercial Paper Rating
Moody's employs the following three designations, all judged to be
investment grade, to indicate the relative repayment ability of rated
issuers:
Prime-1 Issuers rated Prime-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations.
Prime-1 repayment ability will often be evidenced by many of the
following characteristics:
- Leading market positions in well-established industries.
- High rates of return on funds employed.
- Conservative capitalization structure with moderate
reliance on debt and ample asset protection.
- Broad margins in earnings coverage of fixed financial
charges and high internal cash generation.
- Well-established access to a range of financial markets
and assured sources of alternate liquidity.
Prime-2 Issuers rated Prime-2 (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations. This
will normally be evidenced by many of the characteristics cited
above but to a lesser agree. Earnings trends and coverage ratios,
while sound, may be more subject to variation. Capitalization
characteristics, while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is maintained.
Prime-3 Issuers rated Prime-3 (or supporting institutions) have an
acceptable ability for repayment of senior short-term
obligations. The effect of industry characteristics and market
compositions may be more pronounced. Variability in earnings and
profitability may result in changes in the level of debt
protection measurements and may require relatively high financial
leverage. Adequate alternative liquidity is maintained.
Fitch Investor Services, Inc. ("Fitch")
Bond Ratings
AAA Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by
reasonably forseeable events.
AA Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay
principal is very strong, although not quite as strong as bonds
rated `AAA'. Because bonds rated in the `AAA' and `AA' categories
are not significantly vulnerable to foreseeable future
developments, short-term debt of these issuers is generally rated
`F-1+'.
A Bonds considered to be investment grade and of high credit
quality, The obligor's ability to pay interest an repay principal
is considered to be strong, but may be more vulnerable to adverse
changes in economic conditions and circumstances than bonds with
higher ratings.
BBB Bonds considered to be investment grade and satisfactory credit
quality. The obligor's ability to pay interest and repay
principal is considered to be adequate. Adverse changes in
economic conditions and circumstances, however, are more likely to
have adverse impact on these bonds and, therefore, impair timely
payment. The likelihood that the ratings of these bonds will fall
below investment grade is higher than for bonds with higher
ratings
BB Bonds are considered speculative. The obligor's ability to pay
interest and repay principal may be affected over time by adverse
economic changes. However, business and financial alternatives
can be identified, which could assist the obligor in satisfying
its debt service requirements.
B Bonds are considered highly speculative. While bonds in this
class are currently meeting debt service requirements, the
probability of continued timely payment of principal and interest
reflects the obligor's limited margin of safety and the need for
reasonable business and economic activity throughout the life of
the issue.
CCC Bonds have certain identifiable characteristics that, if not
remedied, may lead to default. The ability to meet obligations
requires an advantageous business and economic environment.
CC Bonds are minimally protected. Default in payment of interest
and/or principal seems probable over time.
C Bonds are in imminent default in payment of interest or principal.
DDD, DD
and D Bonds are in default on interest and/or principal payments. Such
bonds are extremely speculative and should be valued on the basis
of their ultimate recovery value in liquidation or reorganization
of the obligor. `DDD' represents the highest potential for
recovery on these bonds, and `D' represents the lowest potential
for recovery.
+/- Plus and minus signs are used with a rating symbol to indicate the
relative position of a credit within the rating category. Plus
and minus signs, however, are not used in the `DDD', `DD', or `D'
categories.
Short-Term and Commercial Paper Ratings
Fitch's short-term ratings apply to debt obligations that are payable
on demand or have original maturities of up to three years, including
commercial paper, certificates of deposit, medium-term notes, and municipal
and investment notes.
Although the credit analysis is similar to Fitch's bond rating
analysis, the short-term rating places greater emphasis than bond ratings on
the existence of liquidity necessary to meet the issuer's obligations in a
timely manner.
F-1+ Exceptionally Strong Credit Quality. Issues assigned this rating
are regarded as having the strongest degree of assurance for
timely payment.
F-1 Very Strong Credit Quality. Issues assigned this rating reflect
an assurance of timely payment only slightly less in degree than
issues rated `F-1+'.
F-2 Good Credit Quality. Issues assigned this rating have a
satisfactory degree of assurance for timely payment, but the
margin of safety is not as great as for issues assigned `F-1+' and
`F-1' ratings.
F-3 Fair Credit Quality. Issues assigned this rating have
characteristics suggesting that the degree of assurance for timely
payment is adequate; however, near-term adverse changes could
cause these securities to be rated below investment grade.
D Default. Issues assigned this rating are in actual or imminent
payment default.
Duff & Phelps Inc. ("Duff & Phelps")
Long-Term Ratings
AAA Highest credit quality. The risks factors are negligible, being
only slightly more than for risk-free U.S. Treasury debt.
AA+ High credit quality. Protection factors are strong. Risk is
modest but
AA may vary slightly from time to time because of economic
conditions.
AA-
A+ Protections factors are average but adequate. However, risk
factors are
A more variable and greater in periods of economic stress.
A-
BBB+ Below-average protection factors but still considered sufficient
for prudent
BBB investment. Considerable variability in risk during economic
cycles.
BBB-
BB+ Below investments grade but deemed likely to meet obligations when
due.
BB Present or prospective financial protection factors fluctuate
according to
BB- industry conditions or company fortunes. Overall quality may move
up or down frequently within this category.
B+ Below investment grade and possessing risk that obligations will
not be met
B when due. Financial protection factors will fluctuate widely
according to
B- economic cycles, industry conditions and/or company fortunes.
Potential exists for frequent changes in the rating within this
category or into a higher or lower rating grade.
CCC Well below investment-grade securities. Considerable uncertainty
exists as to timely payment of principal, interest or preferred
dividends.
Protection factors are narrow and risk can be substantial with
unfavorable
economic/industry conditions, and/or with unfavorable company
developments.
DD Defaulted debt obligations. Issuer failed to meet scheduled
principal and/or
interest payments.
Short-Term and Commercial Paper Ratings
D-1+ Highest certainty of timely payment. Short-term liquidity,
including internal operating factors and/or access to alternative
sources of funds, is outstanding, and safety is just below risk-
free U.S. Treasury short-term obligations.
D-1 Very high certainty of timely payment. Liquidity factors are
excellent and supported by good fundamental protection factors.
Risk factors are minor.
D-1- High certainly of timely payment. Liquidity factors are strong
and supported by good fundamental protection factors. Risk
factors are very small.
D-2 Good certainty of timely payment. Liquidity factors and company
fundamentals are sound. Although ongoing funding needs may
enlarge total financial requirements, access to capital markets is
good. Risk factors are small.
D-3 Satisfactory liquidity and other protection factors qualify issues
as to investment grade. Risk factors are larger and subject to
more variation. Nevertheless, timely payment is expected.
D-4 Speculative investment characteristics. Liquidity is not
sufficient to insure against disruption in debt service.
Operating factors and market access may be subject to a high
degree of variation.
D-5 Issuer failed to meet scheduled principal and/or interest
payments.
IBCA Limited/IBCA Inc. ("IBCA")
Commercial Paper Ratings.
Short-term obligations, including commercial paper, rated A1+ by IBCA
are obligations supported by the highest capacity for timely repayment.
Obligations rated A1 have a very strong capacity for timely repayment.
Obligations rated A2 have a strong capacity for repayment, although such
capacity may be susceptible to adverse changes in business, economic or
financial conditions. Obligations rated B1 have adequate capacity for
timely repayment, but such capacity is more susceptible to adverse changes
in business, economic, or financial conditions than for obligations in
higher categories. Obligations rated B2 have a capacity for repayment that
is susceptible to adverse changes in business, economic, or financial
conditions. Obligations rated C1 have an inadequate capacity to ensure
timely repayment. Obligations rated D1 have a high risk of default or are
currently in default.
DREYFUS BASIC S&P 500 STOCK INDEX FUND
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
MARCH 1, 1998
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus of
the Dreyfus BASIC S&P 500 Stock Index Fund (formerly, the Dreyfus
Institutional S&P 500 Stock Index Fund) (the "Fund"), dated March 1, 1998,
as it may be revised from time to time. The Fund is a separate, diversified
portfolio of The Dreyfus/Laurel Funds, Inc. (formerly, The Laurel Funds,
Inc.), an open-end management investment company (the "Company"), known as a
mutual fund. To obtain a copy of the Fund's Prospectus, please write to the
Fund at 144 Glenn Curtiss Boulevard, Uniondale, New York 11556-0144, or
call one of the following numbers:
Call Toll Free 1-800-645-6561
In New York City -- Call 1-718-895-1206
Outside the U.S. and Outside of Canada -- Call 516-794-5452
The Dreyfus Corporation ("Dreyfus") serves as the Fund's investment
manager.
Premier Mutual Fund Services, Inc. (the "Distributor") is the
distributor of the Fund's shares.
TABLE OF CONTENTS
Page
Investment Objective and Management Policies ............B-2
Management of the Fund ..................................B-14
Management Arrangements .................................B-20
Purchase of Fund Shares .................................B-22
Redemption of Fund Shares ...............................B-23
Shareholder Services ....................................B-24
Determination of Net Asset Value ........................B-27
Dividends, Other Distributions and Taxes ................B-28
Portfolio Transactions ..................................B-31
Performance Information .................................B-33
Information About the Fund ..............................B-34
Transfer and Dividend Disbursing Agent,
Custodian, Counsel and Independent Auditors ...........B-34
Financial Statements ....................................B-35
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Description of the
Fund."
Portfolio Securities
Government Obligations. The Fund may invest in a variety of U.S.
Treasury obligations, which differ only in their interest rates, maturities
and times of issuance: (a) U.S. Treasury bills have a maturity of one year
or less, (b) U.S. Treasury notes have maturities of one to ten years, and
(c) U.S. Treasury bonds generally have maturities of greater than ten years.
In addition to U.S. Treasury obligations, the Fund may invest in
obligations issued or guaranteed by U.S. Government agencies and
instrumentalities which are supported by any of the following: (a) the full
faith and credit of the U.S. Treasury (such as Government National Mortgage
Association ("GNMA") participation certificates), (b) the right of the
issuer to borrow an amount limited to a specific line of credit from the
U.S. Treasury, (c) the discretionary authority of the U.S. Government agency
or instrumentality, or (d) the credit of the instrumentality. (Examples of
agencies and instrumentalities are: Federal Land Banks, Federal Housing
Administration, Farmers Home Administration, Export-Import Bank of the
United States, Central Bank for Cooperatives, Federal Intermediate Credit
Banks, Federal Home Loan Banks, General Services Administration, Maritime
Administration, Tennessee Valley Authority, District of Columbia Armory
Board, Inter-American Development Bank, Asian-American Development Bank,
Student Loan Marketing Association, International Bank for Reconstruction
and Development and Federal National Mortgage Association ("FNMA"). No
assurance can be given that the U.S. Government will provide financial
support to such U.S. Government agencies or instrumentalities described in
(b), (c) and (d) in the future, other than as set forth above, since it is
not obligated to do so by law.
Repurchase Agreements. The Fund may enter into repurchase agreements
with U.S. Government securities dealers recognized by the Federal Reserve
Board, with member banks of the Federal Reserve System, or with such other
brokers or dealers that meet the credit guidelines of the Board of
Directors. In a repurchase agreement, the Fund buys a security from a seller
that has agreed to repurchase the same security at a mutually agreed upon
date and price. The Fund's resale price will be in excess of the purchase
price, reflecting an agreed upon interest rate. This interest rate is
effective for the period of time the Fund is invested in the agreement and
is not related to the coupon rate on the underlying security. Repurchase
agreements may also be viewed as a fully collateralized loan of money by the
Fund to the seller. The period of these repurchase agreements will usually
be short, from overnight to one week, and at no time will the Fund invest in
repurchase agreements for more than one year. The Fund will always receive
as collateral securities whose market value including accrued interest is,
and during the entire term of the agreement remains, at least equal to 100%
of the dollar amount invested by the Fund in each agreement, and the Fund
will make payment for such securities only upon physical delivery or upon
evidence of book entry transfer to the account of the Custodian. If the
seller defaults, the Fund might incur a loss if the value of the collateral
securing the repurchase agreement declines and might incur disposition costs
in connection with liquidating the collateral. In addition, if bankruptcy
proceedings are commenced with respect to the seller of a security which is
the subject of a repurchase agreement, realization upon the collateral by
the Fund may be delayed or limited. The Fund seeks to minimize the risk of
loss through repurchase agreements by analyzing the creditworthiness of the
obligors under repurchase agreements, in accordance with the credit
guidelines of the Company's Board of Directors.
When-Issued Securities. New issues of U.S. Treasury and Government
securities are often offered on a when-issued basis. This means that
delivery and payment for the securities normally will take place
approximately 7 to 45 days after the date the buyer commits to purchase
them. The payment obligation and the interest rate that will be received on
securities purchased on a when-issued basis are each fixed at the time the
buyer enters into the commitment. The Fund will make commitments to purchase
such securities only with the intention of actually acquiring the
securities, but the Fund may sell these securities or dispose of the
commitment before the settlement date if it is deemed advisable as a matter
of investment strategy. Cash or marketable high-grade debt securities equal
to the amount of the above commitments will be segregated on the Fund's
records. For the purpose of determining the adequacy of these securities the
segregated securities will be valued at market. If the market value of such
securities declines, additional cash or securities will be segregated on the
Fund's records on a daily basis so that the market value of the account will
equal the amount of such commitments by the Fund.
Securities purchased on a when-issued basis and the securities held by
the Fund are subject to changes in market value based upon the public's
perception of changes in the level of interest rates. Generally, the value
of such securities will fluctuate inversely to changes in interest rates -
i.e., they will appreciate in value when interest rates decline and decrease
in value when interest rates rise. Therefore, if in order to achieve higher
interest income the Fund remains substantially fully invested at the same
time that it has purchased securities on a "when-issued" basis, there will
be a greater possibility of fluctuation in the Fund's net asset value.
When payment for when-issued securities is due, the Fund will meet its
obligations from then-available cash flow, the sale of segregated
securities, the sale of other securities and/or, although it would not
normally expect to do so, from the sale of the when-issued securities
themselves (which may have a market value greater or less than the Fund's
payment obligation). The sale of securities to meet such obligations carries
with it a greater potential for the realization of capital gains, which are
subject to federal income taxes.
Commercial Paper. The Fund may invest in commercial paper issued in
reliance on the so-called "private placement" exemption from registration
afforded by Section 4(2) of the Securities Act of 1933 ("Section 4(2)
paper"). Section 4(2) paper is restricted as to disposition under the
federal securities laws and generally is sold to investors who agree that
they are purchasing the paper for an investment and not with a view to
public distribution. Any resale by the purchaser must be pursuant to
registration or exemption therefrom. Section 4(2) paper is normally resold
to other investors through or with the assistance of the issuer or
investment dealers who make a market in Section 4(2) paper, thus providing
liquidity. Pursuant to guidelines established by the Company's Board of
Directors, Dreyfus may determine that Section 4(2) paper is liquid for the
purposes of complying with the Fund's investment restriction relating to
investments in illiquid securities.
Illiquid Securities. The Fund will not knowingly invest more than 15%
of the value of its net assets in illiquid securities, including time
deposits and repurchase agreements having maturities longer than seven days.
Securities that have been readily available market quotations are not deemed
illiquid for purposes of this limitation (irrespective of any legal or
contractual restrictions on resale.) The Fund may invest in commercial
obligations issued in reliance on the so-called "private placement"
exemption from registration afforded by Section 4(2) of the Securities Act
of 1933, as amended ("Section 4(2) paper"). The Fund may also purchase
securities that are not registered under the Securities Act of 1933, as
amended, but that can be sold to qualified institutional buyers in
accordance with Rule 144A under that Act ("Rule 144A securities").
Liquidity determinations with respect to Section 4(2) paper and Rule 144A
securities will be made by the Board of Directors or by Dreyfus pursuant to
guidelines established by the Board of Directors. The Board or Dreyfus will
consider availability of reliable price information and other relevant
information in making such determinations. Section 4(2) paper is restricted
as to disposition under the federal securities laws, and generally is sold
to institutional investors, such as the Fund, that agree that they are
purchasing the paper for investment and not with a view to public
distribution. Any resale by the purchaser must be pursuant to registration
or an exemption therefrom. Section 4(2) paper normally is resold to other
institutional investors like the Fund through or with the assistance of the
issuer or investment dealers who make a market in the Section 4(2) paper,
thus providing liquidity. Rule 144A securities generally must be sold to
other qualified institutional buyers. If a particular investment in Section
4(2) paper or Rule 144A securities is not determined to be liquid, that
investment will be included within the percentage limitation or investment
in illiquid securities. The ability to sell Rule 144A securities to
qualified institutional buyers is a recent development and it is not
possible to predict how this market will mature. Investing in Rule 144A
securities could have the effect of increasing the level of Fund illiquidity
to the extent that qualified institutional buyers become, for a time,
uninterested in purchasing these securities from the Fund or other holder.
Management Policies
The Fund engages, except as noted, in the following practices in
furtherance of its investment objective.
Loans of Fund Securities. The Fund has authority to lend its portfolio
securities provided (1) the loan is secured continuously by collateral
consisting of U.S. Government securities or cash or cash equivalents
adjusted daily to make a market value at least equal to the current market
value of these securities loaned; (2) the Fund may at any time call the loan
and regain the securities loaned; (3) the Fund will receive any interest or
dividends paid on the loaned securities; and (4) the aggregate market value
of securities loaned will not at any time exceed one-third of the total
assets of the Fund. In addition, it is anticipated that the Fund may share
with the borrower some of the income received on the collateral for the loan
or that it will be paid a premium for the loan. In determining whether to
lend securities, the Fund considers all relevant factors and circumstances
including the creditworthiness of the borrower.
Reverse Repurchase Agreements. The Fund may enter into reverse
repurchase agreements to meet redemption requests where the liquidation of
portfolio securities is deemed by the Fund to be inconvenient or
disadvantageous. A reverse repurchase agreement is a transaction whereby the
Fund transfers possession of a portfolio security to a bank or broker-dealer
in return for a percentage of the portfolio security's market value. The
Fund retains record ownership of the security involved including the right
to receive interest and principal payments. At an agreed upon future date,
the Fund repurchases the security by paying an agreed upon purchase price
plus interest. Cash or liquid high-grade debt obligations of the Fund equal
in value to the repurchase price including any accrued interest will be
maintained in a segregated account while a reverse repurchase agreement is
in effect.
Derivative Instruments. The Fund may purchase and sell various
financial instruments ("Derivative Instruments"), such as financial futures
contracts (such as index futures contracts), options (such as options on
U.S. and foreign securities or indices of such securities). The index
Derivative Instruments the Fund may use may be based on indices of U.S. or
foreign equity securities. These Derivative Instruments may be used, for
example, to preserve a return or spread or to facilitate or substitute for
the sale or purchase of securities.
Hedging strategies can be broadly categorized as "short hedges" and
"long hedges." A short hedge is a purchase or sale of a Derivative
Instrument intended partially or fully to offset potential declines in the
value of one or more investments held in the Fund's portfolio. Thus, in a
short hedge the Fund takes a position in a Derivative Instrument whose price
is expected to move in the opposite direction of the price of the investment
being hedged.
Conversely, a long hedge is a purchase or sale of a Derivative
Instrument intended partially or fully to offset potential increases in the
acquisition cost of one or more investments that the Fund intends to
acquire. Thus, in a long hedge the Fund takes a position in a Derivative
Instrument whose price is expected to move in the same direction as the
price of the prospective investment being hedged. A long hedge is sometimes
referred to as an anticipatory hedge. In an anticipatory hedge transaction,
the Fund does not own a corresponding security and, therefore, the
transaction does not relate to a security the Fund owns. Rather, it relates
to a security that the Fund intends to acquire. If the Fund does not
complete the hedge by purchasing the security it anticipated purchasing, the
effect on the Fund's portfolio is the same as if the transaction were
entered into for speculative purposes.
Derivative Instruments on securities generally are used to hedge
against price movements in one or more particular securities positions that
the Fund owns or intends to acquire. Derivative Instruments on indices, in
contrast, generally are used to attempt to hedge against price movements in
market sectors in which the Fund has invested or expects to invest.
The use of Derivative Instruments is subject to applicable regulations
of the Securities and Exchange Commission ("SEC"), the several options and
futures exchanges upon which they are traded, the Commodity Futures Trading
Commission ("CFTC") and various state regulatory authorities. In addition,
the Fund's ability to use Derivative Instruments will be limited by tax
considerations. See "Dividends, Other Distributions and Taxes."
In addition to the instruments, strategies and risks described below
and in the Prospectus, Dreyfus expects to discover additional opportunities
in connection with other Derivative Instruments. These new opportunities
may become available as Dreyfus develops new techniques, as regulatory
authorities broaden the range of permitted transactions and as new
techniques are developed. Dreyfus may utilize these opportunities to the
extent that they are consistent with the Fund's investment objective, and
permitted by the Fund's investment policies and applicable regulatory
authorities.
Special Risks. The use of Derivative Instruments involves special
considerations and risks, certain of which are described below. Risks
pertaining to particular Derivative Instruments are described in the
sections that follow.
(1) Successful use of most Derivative Instruments depends upon
Dreyfus' ability to predict movements of the overall securities and interest
rate markets, which requires different skills than predicting changes in the
prices of individual securities. There can be no assurance that any
particular strategy will succeed.
(2) There might be imperfect correlation, or even no correlation,
between price movements of a Derivative Instrument and price movements of
the investments being hedged. For example, if the value of a Derivative
Instrument used in a short hedge increased by less than the decline in value
of the hedged investment, the hedge would not be fully successful. Such a
lack of correlation might occur due to factors unrelated to the value of the
investments being hedged, such as speculative or other pressures on the
markets in which Derivative Instruments are traded. The effectiveness of
hedges using Derivative Instruments on indices will depend on the degree of
correlation between price movements in the index and price movements in the
securities being hedged.
Because there are a limited number of types of exchange-traded options
and futures contracts, it is likely that the standardized contracts
available will not match the Fund's current or anticipated investments
exactly. The Fund may invest in options and futures contracts based on
securities with different issuers, maturities, or other characteristics from
the securities in which it typically invests, which involves a risk that the
options or futures position will not track the performance of the Fund's
other investments.
Options and futures prices can also diverge from the prices of their
underlying instruments, even if the underlying instruments match the Fund's
investments well. Options and futures prices are affected by such factors
as current and anticipated short-term interest rates, changes in volatility
of the underlying instrument, and the time remaining until expiration of the
contract, which may not affect security prices the same way. Imperfect
correlation may also result from differing levels of demand in the options
and futures markets and the securities markets, from structural differences
in how options and futures and securities are traded, or from imposition of
daily price fluctuation limits or trading halts. The Fund may purchase or
sell options and futures contracts with a greater or lesser value than the
securities it wishes to hedge or intends to purchase in order to attempt to
compensate for differences in volatility between the contract and the
securities, although this may not be successful in all cases. If price
changes in the Fund's options or futures positions are poorly correlated
with its other investments, the positions may fail to produce anticipated
gains or result in losses that are not offset by gains in other investments.
(3) If successful, the above-discussed strategies can reduce risk of
loss by wholly or partially offsetting the negative effect of unfavorable
price movements. However, such strategies can also reduce opportunity for
gain by offsetting the positive effect of favorable price movements. For
example, if the Fund entered into a short hedge because Dreyfus projected a
decline in the price of a security in the Fund's portfolio, and the price of
that security increased instead, the gain from that increase might be wholly
or partially offset by a decline in the price of the Derivative Instrument.
Moreover, if the price of the Derivative Instrument declined by more than
the increase in the price of the security, the Fund could suffer a loss. In
either such case, the Fund would have been in a better position had it not
attempted to hedge at all.
(4) As described below, the Fund might be required to maintain assets
as "cover," maintain segregated accounts or make margin payments when it
takes positions in Derivative Instruments involving obligations to third
parties (i.e., Derivative Instruments other than purchased options). If the
Fund were unable to close out its positions in such Derivative Instruments,
it might be required to continue to maintain such assets or accounts or make
such payments until the position expired or matured. These requirements
might impair the Fund's ability to sell a portfolio security or make an
investment at a time when it would otherwise be favorable to do so, or
require that the Fund sell a portfolio security at a disadvantageous time.
The Fund's ability to close out a position in a Derivative Instrument prior
to expiration or maturity depends on the existence of a liquid secondary
market or, in the absence of such a market, the ability and willingness of
the other party to the transaction ("counterparty") to enter into a
transaction closing out the position. Therefore, there is no assurance that
any position can be closed out at a time and price that is favorable to the
Fund.
Cover for Derivative Instruments. Transactions using Derivative
Instruments may expose the Fund to an obligation to another party. The Fund
will not enter into any such transactions unless it owns either (1) an
offsetting ("covered") position in securities, futures or options, or (2)
cash and short-term liquid debt securities with a value sufficient at all
times to cover its potential obligations to the extent not covered as
provided in (1) above. The Fund will comply with SEC guidelines regarding
cover for Derivative Instruments and will, if the guidelines so require, set
aside cash, U.S. Government securities or other liquid, high-grade debt
securities in a segregated account with its custodian in the prescribed
amount.
Assets used as cover or held in a segregated account cannot be sold
while the position in the corresponding Derivative Instrument is open,
unless they are replaced with other appropriate assets. As a result, the
commitment of a large portion of the Fund's assets to cover or segregated
accounts could impede portfolio management or the Fund's ability to meet
redemption requests or other current obligations.
Options. A call option gives the purchaser the right to buy, and
obligates the writer to sell, the underlying investment at the agreed upon
exercise price during the option period. A put option gives the purchaser
the right to sell, and obligates the writer to buy, the underlying
investment at the agreed upon exercise price during the option period. A
purchaser of an option pays an amount, known as the premium, to the option
writer in exchange for rights under the option contract.
Options on indices are similar to options on securities except that all
settlements are in cash and gain or loss depends on changes in the index in
question rather than on price movements in individual securities.
The purchase of call options can serve as a long hedge, and the
purchase of put options can serve as a short hedge. Writing put or call
options can enable the Fund to enhance income or yield by reason of the
premiums paid by the purchasers of such options. However, if the market
price of the security or other instrument underlying a put option declines
to less than the exercise price on the option, minus the premium received,
the Fund would expect to suffer a loss.
Writing call options can also serve as a limited short hedge because
declines in the value of the hedged investment would be offset to the extent
of the premium received for writing the option. However, if the investment
appreciates to a price higher than the exercise price of the call option, it
can be expected that the option will be exercised and the Fund will be
obligated to sell the investment at less than its market value.
Writing put options can serve as a limited long hedge because increases
in the value of the hedged investment would be offset to the extent of the
premium received for writing the option. However, if the investment
depreciates to a price lower than the exercise price of the put option, it
can be expected that the put option will be exercised and the Fund will be
obligated to purchase the investment at more than its market value.
The value of an option position will reflect, among other things, the
current market value of the underlying investment, the time remaining until
expiration, the relationship of the exercise price to the market price of
the underlying investment, the historical price volatility of the underlying
investment and general market conditions. Options that expire unexercised
have no value.
The Fund may effectively terminate its right or obligation under an
option by entering into a closing transaction. For example, the Fund may
terminate its obligation under a call or put option that it had written by
purchasing an identical call or put option; this is known as a closing
purchase transaction. Conversely, the Fund may terminate a position in a
put or call option it had purchased by writing an identical put or call
option; this is known as a closing sale transaction. Closing transactions
permit the Fund to realize profits or limit losses on an option position
prior to its exercise or expiration.
The Fund may purchase and sell both exchange-traded and over-the-
counter ("OTC") options. Exchange-traded options in the United States are
issued by a clearing organization that, in effect, guarantees completion of
every exchange-traded option transaction. In contrast, OTC options are
contracts between the Fund and its counterparty (usually a securities dealer
or a bank) with no clearing organization guarantee. Thus, when the Fund
purchases an OTC option, it relies on the counterparty from whom it
purchased the option to make or take delivery of the underlying investment
upon exercise of the option. Failure by the counterparty to do so would
result in the loss of any premium paid by the Fund as well as the loss of
any expected benefit of the transaction. The Fund will enter into only
those option contracts that are listed on a national securities or
commodities exchange or traded in the OTC market for which there appears to
be a liquid secondary market.
The Fund will not purchase or write OTC options if, as a result of such
transaction, the sum of (i) the market value of outstanding OTC options
purchased by the Fund, (ii) the market value of the underlying securities
covered by outstanding OTC call options written by the Fund, and (iii) the
market value of all other assets of the Fund that are illiquid or are not
otherwise readily marketable, would exceed 15% of the net assets of the
Fund, taken at market value. However, if an OTC option is sold by the Fund
to a primary U.S. Government securities dealer recognized by the Federal
Reserve Bank of New York and the Fund has the unconditional contractual
right to repurchase such OTC option from the dealer at a predetermined
price, then the Fund will treat as illiquid such amount of the underlying
securities as is equal to the repurchase price less the amount by which the
option is "in-the-money" (the difference between the current market value of
the underlying securities and the option's strike price). The repurchase
price with primary dealers is typically a formula price that is generally
based on a multiple of the premium received for the option plus the amount
by which the option is "in-the-money."
The Fund's ability to establish and close out positions in exchange-
listed options depends on the existence of a liquid market. However, there
can be no assurance that such a market will exist at any particular time.
Closing transactions can be made for OTC options only by negotiating
directly with the counterparty, or by a transaction in the secondary market
if any such market exists. Although the Fund will enter into OTC options
only with major dealers in unlisted options, there is no assurance that the
Fund will in fact be able to close out an OTC option position at a favorable
price prior to expiration. In the event of insolvency of the counterparty,
the Fund might be unable to close out an OTC option position at any time
prior to its expiration.
If the Fund were unable to effect a closing transaction for an option
it had purchased, it would have to exercise the option to realize any
profit. The inability to enter into a closing purchase transaction for a
covered call option written by the Fund could cause material losses because
the Fund would be unable to sell the investment used as cover for the
written option until the option expires or is exercised.
The Fund may write only covered call options on securities. A call
option is covered if the Fund owns the underlying security or a call option
on the same security with a lower strike price.
Futures Contracts and Options on Futures Contracts. When the Fund
purchases a futures contract, it incurs an obligation to take delivery of a
specified amount of the obligation underlying the futures contract at a
specified time in the future for a specified price. When the Fund sells a
futures contract, it incurs an obligation to deliver a specified amount of
the obligation underlying the futures contract at a specified time in the
future for an agreed upon price. With respect to index futures, no physical
transfer of the securities underlying the index is made. Rather, the
parties settle by exchanging in cash an amount based on the difference
between the contract price and the closing value of the index on the
settlement date.
When the Fund writes an option on a futures contract, it becomes
obligated, in return for the premium paid, to assume a position in a futures
contract at a specified exercise price at any time during the term of the
option. If the Fund has written a call, it assumes a short futures
position. If the Fund has written a put, it assumes a long futures
position. When the Fund purchases an option on a futures contract, it
acquires the right, in return for the premium it pays, to assume a position
in a futures contract (a long position if the option is a call and a short
position if the option is a put).
The purchase of futures or call options on futures can serve as a long
hedge, and the sale of futures or the purchase of put options on futures can
serve as a short hedge. Writing call options on futures contracts can serve
as a limited short hedge, using a strategy similar to that used for writing
call options on securities or indices. Similarly, writing put options on
futures contracts can serve as a limited long hedge.
No price is paid upon entering into a futures contract. Instead, at
the inception of a futures contract the Fund is required to deposit "initial
margin" consisting of cash or U.S. Government securities in an amount
generally equal to 10% or less of the contract value. Margin must also be
deposited when writing a call or put option on a futures contract, in
accordance with applicable exchange rules. Unlike margin in securities
transactions, initial margin on futures contracts does not represent a
borrowing, but rather is in the nature of a performance bond or good-faith
deposit that is returned to the Fund at the termination of the transaction
if all contractual obligations have been satisfied. Under certain
circumstances, such as periods of high volatility, the Fund may be required
by an exchange to increase the level of its initial margin payment.
Subsequent "variation margin" payments are made to and from the futures
broker daily as the value of the futures position varies, a process known as
"marking-to-market." Variation margin does not involve borrowing, but
rather represents a daily settlement of the Fund's obligations to or from a
futures broker. When the Fund purchases an option on a future, the premium
paid plus transaction costs is all that is at risk. In contrast, when the
Fund purchases or sells a futures contract or writes a call or put option
thereon, it is subject to daily variation margin calls that could be
substantial in the event of adverse price movements. If the Fund has
insufficient cash to meet daily variation margin requirements, it might need
to sell securities at a time when such sales are disadvantageous.
Purchasers and sellers of futures contracts and options on futures can
enter into offsetting closing transactions, similar to closing transactions
on options, by selling or purchasing, respectively, an instrument identical
to the instrument purchased or sold. Positions in futures and options on
futures may be closed only on an exchange or board of trade that provides a
secondary market. Although the Fund intends to enter into futures and
options on futures only on exchanges or boards of trade where there appears
to be a liquid secondary market, there can be no assurance that such a
market will exist for a particular contract at a particular time. In such
event, it may not be possible to close a futures contract or options
position.
Under certain circumstances, futures exchanges may establish daily
limits on the amount that the price of a futures or an option on a futures
contract can vary from the previous day's settlement price; once that limit
is reached, no trades may be made that day at a price beyond the limit.
Daily price limits do not limit potential losses because prices could move
to the daily limit for several consecutive days with little or no trading,
thereby preventing liquidation of unfavorable positions.
If the Fund were unable to liquidate a futures or options on futures
position due to the absence of a liquid secondary market or the imposition
of price limits, it could incur substantial losses. The Fund would continue
to be subject to market risk with respect to the position. In addition,
except in the case of purchased options, the Fund would continue to be
required to make daily variation margin payments and might be required to
maintain the position being hedged by the future or option or to maintain
cash or securities in a segregated account.
To the extent that the Fund enters into futures contracts, options on
futures contracts, or options on foreign currencies traded on an exchange
regulated by the CFTC, in each case other than for bona fide hedging
purposes (as defined by the CFTC), the aggregate initial margin and premiums
required to establish those positions (excluding the amount by which options
are "in-the-money" at the time of purchase) will not exceed 5% of the
liquidation value of the Fund's portfolio, after taking into account
unrealized profits and unrealized losses on any contracts the Fund has
entered into. This policy does not limit to 5% the percentage of the Fund's
assets that are at risk in futures contracts and options on futures
contracts.
The Fund will not enter into futures contracts to the extent that its
outstanding obligations under these contracts would exceed 25% of the Fund's
total assets.
Master/Feeder Option. The Company may in the future seek to achieve
the Fund's investment objective by investing all of the Fund's net
investable assets in another investment company having the same investment
objective and substantially the same investment policies and restrictions as
those applicable to the Fund. Shareholders of the Fund will be given at
least 30 days' prior notice of any such investment. Such investment would
be made only if the Company's Board of Directors determines it to be in the
best interest of the Fund and its shareholders. In making that
determination, the Company's Board of Directors will consider, among other
things, the benefits to shareholders and/or the opportunity to reduce costs
and achieve operational efficiency. Although the Fund believes that the
Company's Board of Directors will not approve an arrangement that is likely
to result in higher costs, no assurance is given that costs will be
materially reduced if this option is implemented.
Investment Restrictions
The following limitations have been adopted by the Fund. The Fund may
not change any of these fundamental investment limitations without the
consent of: (a) 67% or more of the shares present at a meeting of
shareholders duly called if the holders of more than 50% of the outstanding
shares of the Fund are present or represented by proxy; or (b) more than 50%
of the outstanding shares of the Fund, whichever is less. The Fund may not:
1. Purchase any securities which would cause more than 25% of the
value of the Fund's total assets at the time of such purchase to be invested
in the securities of one or more issuers conducting their principal
activities in the same industry. (For purposes of this limitation, U.S.
Government securities, and state or municipal governments and their
political subdivisions are not considered members of any industry. In
addition, this limitation does not apply to investments in domestic banks,
including U.S. branches of foreign banks and foreign branches of U.S.
banks).
2. Borrow money or issue senior securities as defined in the 1940 Act
except that (a) the Fund may borrow money in an amount not exceeding
one-third of the Fund's total assets at the time of such borrowings, and (b)
the Fund may issue multiple classes of shares. The purchase or sale of
futures contracts and related options shall not be considered to involve the
borrowing of money or issuance of senior securities.
3. Purchase with respect to 75% of the Fund's total assets securities
of any one issuer (other than securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities) if, as a result, (a) more
than 5% of the Fund's total assets would be invested in the securities of
that issuer, or (b) the Fund would hold more than 10% of the outstanding
voting securities of that issuer.
4. Make loans or lend securities, if as a result thereof more than
one-third of the Fund's total assets would be subject to all such loans. For
purposes of this limitation debt instruments and repurchase agreements shall
not be treated as loans.
5. Purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent the
Fund from investing in securities or other instruments backed by real
estate, including mortgage loans, or securities of companies that engage in
real estate business or invest or deal in real estate or interests therein).
6. Underwrite securities issued by any other person, except to the
extent that the purchase of securities and later disposition of such
securities in accordance with the Fund's investment program may be deemed an
underwriting.
7. Purchase or sell commodities except that the Fund may enter into
futures contracts and related options, forward currency contracts and other
similar instruments.
The Fund may, notwithstanding any other fundamental investment policy
or limitation, invest all of its investable assets in securities of a single
open-end management investment company with substantially the same
investment objective, policies and limitations as the Fund.
The Fund has adopted the following additional non-fundamental
restrictions. These non-fundamental restrictions may be changed without
shareholder approval, in compliance with applicable law and regulatory
policy.
1. The Fund shall not sell securities short, unless it owns or has
the right to obtain securities equivalent in kind and amount to the
securities sold short, and provided that transactions in futures contracts
and options are not deemed to constitute selling short.
2. The Fund shall not purchase securities on margin, except that the
Fund may obtain such short-term credits as are necessary for the clearance
of transactions, and provided that margin payments in connection with
futures contracts and options shall not constitute purchasing securities on
margin.
3. The Fund shall not purchase oil, gas or mineral leases.
4. The Fund will not purchase or retain the securities of any issuer
if the officers or Directors of the Fund, its advisers, or managers, owning
beneficially more than one half of one percent of the securities of such
issuer, together own beneficially more than 5% of such securities.
5. The Fund will not purchase securities of issuers (other than
securities issued or guaranteed by domestic or foreign governments or
political subdivisions thereof), including their predecessors, that have
been in operation for less than three years, if by reason thereof, the value
of the Fund's investment in securities would exceed 5% of the Fund's total
assets. For purposes of this limitation, sponsors, general partners,
guarantors and originators of underlying assets may be treated as the issuer
of a security.
6. The Fund will invest no more than 15% of the value of its net
assets in illiquid securities, including repurchase agreements with
remaining maturities in excess of seven days, time deposits with maturities
in excess of seven days and other securities which are not readily
marketable. For purposes of this limitation, illiquid securities shall not
include commercial obligation issued in reliance on the so-called "priority
placement" exception from registration afforded by Section 4(2) of the
Securities Act of 1933 as amended and securities which may be resold under
Rule 144A under the 1933 Act, provided that the Board of Directors, or its
delegate, determines that such securities are liquid based upon the trading
markets for the specific security.
7. The Fund may not invest in securities of other investment
companies, except as they may be acquired as part of a merger, consolidation
or acquisition of assets and except to the extent otherwise permitted by the
1940 Act.
8. The Fund shall not purchase any security while borrowings
representing more than 5% of the Fund's total assets are outstanding.
9. The Fund will not purchase warrants if at the time of such
purchase: (a) more than 5% of the value of the Fund's assets would be
invested in warrants, or (b) more than 2% of the value of the Fund's assets
would be invested in warrants that are not listed on the New York or
American Stock Exchange (for purposes of this limitation, warrants acquired
by the Fund in units or attached to securities will be deemed to have no
value).
10. The Fund will not purchase puts, calls, straddles, spreads and any
combination thereof if by reason thereof the value of its aggregate
investment in such classes of securities would exceed 5% of its total assets
except that: (a) this limitation shall not apply to standby commitments, and
(b) this limitation shall not apply to the Fund's transactions in futures
contracts and related options.
As an operating policy, the Fund will not invest more than 25% of the
value of its total assets, at the time of such purchase in domestic banks,
including U.S. branches of foreign banks and foreign branches of U.S. banks.
The Company's Board of Directors may change this policy without shareholder
approval. Notice will be given to shareholders if this policy is changed by
the Board.
MANAGEMENT OF THE FUND
Principal Shareholders
The following shareholder(s) owned 5% or more of the outstanding voting
shares of the Fund at February 9, 1998: Boston Safe Deposit & Trust Co., 1
Cabot Road, Medford MA 02155-5141: 17% of record; and Mac & Co. A/C Mellon
Bank, NA Mutual Fund Operations PO Box 3198: 47% record.
Federal Law Affecting Mellon Bank
The Glass-Steagall Act of 1933 prohibits national banks from engaging
in the business of underwriting, selling or distributing securities and
prohibits a member bank of the Federal Reserve System from having certain
affiliations with an entity engaged principally in that business. The
activities of Mellon Bank, N.A. ("Mellon Bank") in informing its customers
of, and performing, investment and redemption services in connection with
the Fund, and in providing services to the Fund as custodian, as well as
Dreyfus' investment advisory activities, may raise issues under these
provisions. Mellon Bank has been advised by counsel that the activities
contemplated under these arrangements are consistent with its statutory and
regulatory obligations.
Changes in either federal or state statutes and regulations relating to
the permissible activities of banks and their subsidiaries or affiliates, as
well as further judicial or administrative decisions or interpretations of
such future statutes and regulations, could prevent Mellon Bank or Dreyfus
from continuing to perform all or a part of the above services for its
customers and/or the Fund. If Mellon Bank or Dreyfus were prohibited from
serving the Fund in any of its present capacities, the Board of Directors
would seek an alternative provider(s) of such services.
Directors And Officers
The Company has a Board composed of eleven Directors which supervises
the Fund's investment activities and reviews contractual arrangements with
companies that provide the Fund with services. The following lists the
Directors and officers and their positions with the Company and their
present and principal occupations during the past five years. Each Director
who is an "interested person" of the Company (as defined in the 1940 Act) is
indicated by an asterisk(*). Each of the Directors also serves as a Trustee
of The Dreyfus/Laurel Funds Trust and The Dreyfus/Laurel Tax-Free Municipal
Funds (collectively, with the Company, the "Dreyfus/Laurel Funds").
Directors of the Company
o+RUTH MARIE ADAMS. Director of the Company; Professor of English and Vice
President Emeritus, Dartmouth College; Senator, United Chapters of Phi
Beta Kappa; Trustee, Woods Hole Oceanographic Institution; from
November 1995 to January 1997, Director, Access Capital Strategic
Community Investment Fund, Inc. - Institutional Investment Portfolio.
Age: 83 years old. Address: 1026 Kendal Lyme Road, Hanover, New
Hampshire 03755.
o+FRANCIS P. BRENNAN. Chairman of the Board of Directors and Assistant
Treasurer of the Company; Director and Chairman, Massachusetts Business
Development Corp.; and from November 1995 to January 1997, Director,
Access Capital Strategic Community Investment Fund, Inc. - Bank
Portfolio. Age: 80 years old. Address: Massachusetts Business
Development Corp., 50 Milk Street, Boston, Massachusetts 02109.
o+JOSEPH S. DiMARTINO, Director of the Company since February 1995. Since
January 1995, Mr. DiMartino served as Chairman of the Board for various
funds in the Dreyfus Family of Funds. He is also Chairman of the Board
of Staffing Resources, Inc., a temporary placement agency. Mr.
DiMartino also serves as a Director of The Muscular Dystrophy
Association, HealthPlan Services Corporation, a provider of marketing,
administrative and risk management services to health and other
benefit programs; Noel Group, Inc., a venture capital company and
Carlyle Industries, Inc. (formerly, Belding Heminway Company, Inc.), a
button packager and distributor; and Curtis Industries, Inc., a
national distributor of security products, chemicals, and automotive
and other hardware. Mr. DiMartino is also a Board member of 152 other
funds in the Dreyfus Family of Funds. From November 1995 to January
1997, Director, Access Capital Strategic Community Investment Fund,
Inc. - Institutional Investment Portfolio and Bank Portfolio. For more
than five years prior to January 1995, he was President, a director
and, until August 1994, Chief Operating Officer of Dreyfus and
Executive Vice President and a director of Dreyfus Service Corporation,
a wholly-owned subsidiary of Dreyfus. From August 1994 until December
31, 1994, he was a director of Mellon Bank Corporation. Age: 54 years
old. Address: 200 Park Avenue, New York, New York 10166.
o+JAMES M. FITZGIBBONS. Director of the Company; Chairman, Howes Leather
Company, Inc.; Director, Fiduciary Trust Company; Chairman, CEO and
Director, Fieldcrest-Cannon Inc.; Director, Lumber Mutual Insurance
Company; Director, Barrett Resources, Inc.; from November 1995 to
January 1997, Director, Access Capital Strategic Community Investment
Fund, Inc. - Bank Portfolio. Age: 63 years old. Address: 40 Norfolk
Road, Brookline, Massachusetts 02167.
o*J. TOMLINSON FORT. Director of the Company; Partner, Reed, Smith, Shaw &
McClay (law firm); from November 1995 to January 1997, Director, Access
Capital Strategic Community Investment Fund, Inc. - Bank Portfolio.
Age: 69 years old. Address: 204 Woodcock Drive, Pittsburgh,
Pennsylvania 15215.
o+ARTHUR L. GOESCHEL. Director of the Company; Director, Calgon Carbon
Corporation; Director, Cerex Corporation; Director, National Picture
Frame Corporation; former Chairman of the Board and Director, Rexene
Corporation; Chairman of the Board and Director, Tetra Corporation 1991-
1993; Director, Medalist Corporation 1992-1993; from November 1995 to
January 1997, Director, Access Capital Strategic Community Investment
Fund, Inc. - Institutional Investment Portfolio. Age: 76 years old.
Address: Way Hollow Road and Woodland Road, Sewickley, Pennsylvania
15143.
o+KENNETH A. HIMMEL. Director of the Company; former Director, The Boston
Company, Inc. ("TBC") and Boston Safe Deposit and Trust Company;
President and Chief Executive Officer, Himmel & Co., Inc.; Vice
Chairman, Sutton Place Gourmet, Inc.; Managing Partner, Franklin
Federal Partners. From November 1995 to January 1997, Director, Access
Capital Strategic Community Investment Fund, Inc. - Bank Portfolio;
Age: 51 years old. Address: 625 Madison Avenue, New York, New York
10022.
o*ARCH S. JEFFERY. Director of the Company; Financial Consultant; from
November 1995 to January 1997, Director, Access Capital Strategic
Community Investment Fund, Inc. - Institutional Investment Portfolio.
Age: 80 years old. Address: 1817 Foxcroft Lane, Unit 306, Allison
Park, Pennsylvania 15101.
o+STEPHEN J. LOCKWOOD. Director of the Company; President and CEO, LDG
Management Company Inc.; CEO, LDG Reinsurance Underwriters, SRRF
Management Inc. and Medical Reinsurance Underwriters Inc.; from
November 1995 to January 1997, Director, Access Capital Strategic
Community Investment Fund, Inc. - Institutional Investment Portfolio.
Age: 50 years old. Address: 401 Edgewater Place, Wakefield,
Massachusetts 01880.
o+JOHN J. SCIULLO. Director of the Company; Dean Emeritus and Professor of
Law, Duquesne University Law School; Director, Urban Redevelopment
Authority of Pittsburgh; from November 1995 to January 1997, Director,
Access Capital Strategic Community Investment Fund, Inc. -
Institutional Investment Portfolio. Age: 66 years old. Address: 321
Gross Street, Pittsburgh, Pennsylvania 15224
o+ROSLYN M. WATSON. Director of the Company; Principal, Watson Ventures;
Director, American Express Centurion Bank; Director, Harvard/Pilgrim
Community Health Plan, Inc.; from November 1995 to January 1997,
Director, Access Capital Strategic Community Investment Fund, Inc. -
Bank Portfolio; Director, Massachusetts Electric Company; Director, The
Hymans Foundation, Inc., prior to February, 1993; Real Estate
Development Project Manager and Vice President, The Gunwyn Company.
Age: 48 years old. Address: 25 Braddock Park, Boston, Massachusetts
02116-5816.
_______________________
* Interested person" of the Company, as defined in the 1940 Act.
o Member of the Audit Committee.
+ Member of the Nominating Committee.
Officers of the Company
#MARIE E. CONNOLLY. President and Treasurer of the Company. President,
Chief Executive Officer, Chief Compliance Officer and a director of the
Distributor and Funds Distributor, Inc., the ultimate parent of which
is Boston Institutional Group, Inc. Age: 40 years old.
#DOUGLAS C. CONROY. Vice President and Assistant Secretary of the Company.
Assistant Vice President of Funds Distributor, Inc. From April 1993 to
January 1995, he was a Senior Fund Accountant for Investors Bank &
Trust Company. From December 1991 to March 1993, he was employed as a
fund accountant at TBC. Age: 28 years old.
#RICHARD W. INGRAM. Vice President and Assistant Treasurer of the Company.
Executive Vice President of the Distributor and Funds Distributor, Inc.
From March 1994 to November 1995, he was Vice President and Division
Manager for First Data Investor Services Group. From 1989 to 1994, he
was Vice President, Assistant Treasurer and Tax Director - Mutual Funds
of TBC. Age: 42 years old.
#CHRISTOPHER J. KELLEY. Vice President and Assistant Secretary of the
Company. Vice President and Senior Associate General Counsel of Funds
Distributor, Inc. and the Distributor, and an officer of certain
investment companies advised or administered by Harris Trust and
Savings Bank, Waterhouse Asset Management, Inc., J.P. Morgan & Co.
Incorporated and Montgomery Asset Management, L.P., or their respective
affiliates. From April 1994 to July 1996, Mr. Kelley was Assistant
Counsel at Forum Financial Group. From October 1992 to March 1994, Mr.
Kelley was employed by Putnam Investments in legal and compliance
capacities. Age: 33 years old.
#KATHLEEN K. MORRISEY. Vice President and Assistant Secretary of the
Company. Vice President and Assistant Secretary of Funds Distributor,
Inc. Manager of Treasury Services Administration and an officer of
certain investment companies advised or administered by J.P. Morgan &
Co. Incorporated, Montgomery Asset Management, L.P., and Dresdner RCM
Global Investors, Inc., or their respective affiliates. From July 1994
to November 1995, she was a Fund Accountant II for Investors Bank &
Trust Company. Prior to that she was a Finance student at Stonehill
College in North Easton, MA. Age: 25 years old.
#MARY A. NELSON. Vice President and Assistant Treasurer of the Company.
Vice President of the Distributor and Funds Distributor, Inc. From
September 1989 to July 1994, she was an Assistant Vice President and
Client Manager for TBC. Age: 33 years old.
#MICHAEL S. PETRUCELLI. Vice President, Assistant Treasurer and Assistant
Secretary of the Company. Senior Vice President and director of
Strategic Client Initiatives of Funds Distributor, Inc. and an officer
of certain investment companies advised or administered by J.P. Morgan
& Co. Incorporated. From December 1989 through November, 1996, he was
employed by GE Investments where he held various financial, business
development and compliance positions. He also served as Treasurer of
the GE Funds and as Director of GE Investment Services. Age: 36 years
old.
#JOSEPH F. TOWER, III. Vice President and Assistant Treasurer of the
Company. Senior Vice President, Treasurer and Chief Financial Officer
of the Distributor and Funds Distributor, Inc. From 1988 to August
1994, he was employed by TBC where he held various management positions
in the Corporate Finance and Treasury areas. Age: 35 years old.
#ELBA VASQUEZ. Vice President and Assistant Secretary of the Company.
Assistant Vice President of Funds Distributor, Inc. She has been an
employee since May 1996 as a Sales Associate in the distribution of
World Equity Benchmark Shares ("WEBS"). From March 1990 to May 1996,
she was employed by U.S. Trust Company of New York. As an officer of
U.S. Trust, she held various positions in the sales and marketing of
their proprietary family of mutual funds. Age: 36 years old.
The address of each Officer of the Company is 200 Park Avenue, New
York, New York 10166.
________________
# Officer also serves as an officer for other investment companies advised
by Dreyfus, including The Dreyfus/Laurel Trust and The Dreyfus/Laurel Tax-
Free Municipal Funds.
The officers and Directors of the Company as a group owned beneficially
less than 1% of the Fund's total shares outstanding as of February 9, 1998.
No officer or employee of the Distributor (or of any parent, subsidiary
or affiliate thereof) receives any compensation from the Company for serving
as an officer or Director of the Company. In addition, no officer or
employee of Dreyfus (or of any parent, subsidiary or affiliate thereof)
serves as an officer or Director of the Company. The Dreyfus/Laurel Funds
pay each Director/Trustee who is not an "interested person" of the Company
(as defined in the 1940 Act), $27,000 per annum (and an additional $25,000
for the Chairman of the Board of Directors/Trustees of the Dreyfus/Laurel
Funds). In addition, the Dreyfus/Laurel Funds pay each Director/Trustee who
is not an "interested person" of the Company (as defined in the 1940 Act),
$1,000 per joint Dreyfus/Laurel Funds Board meeting attended, plus $750 per
joint Dreyfus/Laurel Funds Audit Committee meeting attended, and reimburse
each Director/Trustee who is not an "interested person" of the Company (as
defined in the 1940 Act), for travel and out-of-pocket expenses.
For the fiscal year ended October 31, 1997, the aggregate amount of
fees and expenses received by each current Director from the Company and all
other funds in the Dreyfus Family of Funds for which such person is a Board
member were as follows:
Total Compensation From the
Aggregate Compensation Company and Fund Complex
Name of Board Member From the Company # Paid to Board Member****
Ruth M. Adams $10,000 $31,500
Francis P. Brennan* $19,833 $63,750
Joseph S. DiMartino** None $517,075***
James M. Fitzgibbons $10,583 $31,500
J. Tomlinson Fort** None None
Arthur L. Goeschel $11,500 $37,500
Kenneth A. Himmel $10,167 $32,500
Arch S. Jeffery** None None
Stephen J. Lockwood $11,167 $33,250
John J. Sciullo $11,167 $32,500
Roslyn M. Watson $11,167 $32,500
# Amounts required to be paid by the Company directly to the non-
interested Directors, that would be applied to offset a portion of
the management fee payable to Dreyfus, are in fact paid directly by
Dreyfus to the non-interested Directors. Amount does not include
reimbursed expenses for attending Board meetings, which amounted to
$14,973 for the Company.
* Compensation of Francis Brennan includes $25,000 paid by the
Dreyfus/Laurel Funds to be Chairman of the Board.
** Joseph S. DiMartino, J. Tomlinson Fort and Arch S. Jeffery are paid
directly by Dreyfus for serving as Board members of the Company and
the funds in the Dreyfus/Laurel Funds. For the fiscal year ended
October 31, 1997, the aggregate amount of fees and expenses received
by Joseph DiMartino, J. Tomlinson Fort and Arch S. Jeffery from
Dreyfus for serving as a Board member of the Company were $11,833,
$11,833 and $11,500, respectively, and for serving as a Board member
of all funds in the Dreyfus/Laurel Funds (including the Company) were
$35,500, $35,500 and $34,500, respectively. In addition, Dreyfus
reimbursed Messrs. DiMartino, Fort and Jeffery a total of $4,494 for
expenses attributable to the Company's Board meetings which is not
included in the $14,973 amount in note # above.
***Actual amount for the year ending December 31, 1997.
****The Dreyfus Family of Funds consists of 152 mutual funds.
MANAGEMENT ARRANGEMENTS
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Management of the Fund."
Management Agreement. Dreyfus serves as the investment manager for the
Fund pursuant to an Investment Management Agreement with the Company dated
April 4, 1994 (the "Management Agreement"), transferred to Dreyfus as of
October 17, 1994. Pursuant to the Management Agreement, Dreyfus provides, or
arranges for one or more third parties to provide, investment advisory,
administrative, custody, fund accounting and transfer agency services to the
Fund. As investment manager, Dreyfus manages the Fund by making investment
decisions based on the Fund's investment objective, policies and
restrictions. The Management Agreement is subject to review and approval at
least annually by the Board of Directors.
The Management Agreement will continue from year to year provided that
a majority of the Directors who are not "interested persons" of the Company
and either a majority of all Directors or a majority of the shareholders of
the Fund approve its continuance. The Management Agreement was last
approved by the Board of Directors on January 28, 1998 to continue until
April 4, 1999. The Company may terminate the Management Agreement upon the
vote of a majority of the Board of Directors or upon the vote of a majority
of the Fund's outstanding voting securities on sixty days' written notice to
Dreyfus. Dreyfus may terminate the Management Agreement upon sixty (60)
days' written notice to the Company. The Management Agreement will
terminate immediately and automatically upon its assignment.
The following persons are officers and/or directors of Dreyfus: W.
Keith Smith, Chairman of the Board; Christopher M. Condron, President, Chief
Executive Officer, Chief Operating Officer and a director; Stephen E.
Canter, Vice Chairman, Chief Investment Officer and a director; Lawrence S.
Kash, Vice Chairman-Distribution and a director; William T. Sandalls, Jr.,
Senior Vice President and Chief Financial Officer; Mark N. Jacobs, Vice
President, General Counsel and Secretary; Patrice M. Kozlowski, Vice
President-Corporate Communications; Mary Beth Leibig, Vice President-Human
Resources; Jeffrey N. Nachman, Vice President-Mutual Fund Accounting; Andrew
S. Wasser, Vice President-Information Systems; William V. Healey, Assistant
Secretary; and Mandell L. Berman, Burton C. Borgelt, Frank V. Cahouet and
Richard F. Syron, directors.
Effective September 15, 1995, the Management Agreement was amended to
reflect a reduction in the annual management fee payable by the Fund to
Dreyfus from .40 of 1% to .20 of 1% of the value of the Fund's average daily
net assets.
For the last three fiscal years, the Fund has had the following
expenses:
For the Fiscal Year Ended October 31,
1997 1996 1995
Management fees (gross
of waiver) $1,246,259 $631,728 $551,025
Expense Reimbursement from -- -- --
investment manager
In addition, under a Distribution Plan (the "Plan") adopted pursuant to
Rule 12b-1 under the 1940 Act, and terminated effective August 2, 1995, the
Fund was permitted to spend annually up to 0.25% of its average daily net
assets attributable to the Fund's Investor shares to compensate Dreyfus
Service Corporation, an affiliate of Dreyfus, for shareholder servicing
activities and the Distributor for shareholder servicing activities and
expenses primarily intended to result in the sale of Investor shares of the
Fund. The Plan allowed the Distributor to make payments from the Rule 12b-1
fees it collected from the Fund to compensate Agents that had entered into
Selling Agreements with the Distributor. Effective September 15, 1995, the
Fund's "Investor" and "Class R" designations were eliminated and the Fund
became a single class fund without any separate class designation.
For the period from November 1, 1994 to August 2, 1995, the Fund was
charged $6,832 by the Distributor pursuant to the Plan. As noted above, the
Plan was terminated on August 2, 1995 and was not in effect during the
Fund's fiscal year ended October 31, 1996. Accordingly, the Fund made no
payments pursuant to a distribution plan during the fiscal years ended
October 31, 1996 and 1997.
PURCHASE OF FUND SHARES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "How to Buy Fund Shares."
The Distributor. The Distributor serves as the Fund's distributor
pursuant to an agreement which is renewable annually. The Distributor also
acts as distributor for the other funds in the Dreyfus Family of Funds and
for certain other investment companies.
Dreyfus TeleTransfer Privilege. Dreyfus TeleTransfer purchase orders
may be made at any time. Purchase orders received by 4:00 P.M., New York
time, on any business day that Dreyfus Transfer, Inc., the Fund's transfer
and dividend disbursing agent (the "Transfer Agent"), and the New York Stock
Exchange (the "NYSE") are open for business will be credited to the
shareholder's Fund account on the next bank business day following such
purchase order. Purchase orders made after 4:00 P.M., New York time, on any
business day the Transfer Agent and the NYSE are open for business, or
orders made on Saturday, Sunday or any Fund holiday (e.g., when the NYSE is
not open for business), will be credited to the shareholder's Fund account
on the second bank business day following such purchase order. To qualify to
use the TeleTransfer Privilege, the initial payment for purchase of Fund
shares must be drawn on, and redemption proceeds paid to, the same bank and
account as are designated on the Account Application or Shareholder Services
Form on file. If the proceeds of a particular redemption are to be wired to
an account at any other bank, the request must be in writing and signature-
guaranteed. See "Redemption of Fund Shares-TeleTransfer Privilege."
Reopening an Account. An investor may reopen an account with a minimum
investment of $100 without filing a new Account Application during the
calendar year in which the account is closed or during the following
calendar year, provided the information on the old Account Application is
still applicable.
In-Kind Purchases. If the following conditions are satisfied, the Fund
may at its discretion, permit the purchase of shares through an "in-kind"
exchange of securities. Any securities exchanged must meet the investment
objective, policies and limitations of the Fund, must have a readily
ascertainable market value, must be liquid and must not be subject to
restrictions on resale. The market value of any securities exchanged, plus
any cash, must be at least equal to $25,000. Shares purchased in exchange
for securities generally cannot be redeemed for fifteen days following the
exchange in order to allow time for the transfer to settle.
The basis of the exchange will depend upon the relative net asset value
of the shares purchased and securities exchanged. Securities accepted by
the Fund will be valued in the same manner as the Fund values its assets.
Any interest earned on the securities following their delivery to the Fund
and prior to the exchange will be considered in valuing the securities. All
interest, dividends, subscription or other rights attached to the securities
become the property of the Fund, along with the securities. For further
information about "in-kind" purchases, call 1-800-645-6561.
REDEMPTION OF FUND SHARES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "How to Redeem Fund
Shares."
Wire Redemption Privilege. By using this Privilege, the investor
authorizes the Transfer Agent to act on wire, telephone or letter redemption
instructions from any person representing himself or herself to be the
investor, or a representative of the investor's Agent, and reasonably
believed by the Transfer Agent to be genuine. Ordinarily, the Fund will
initiate payment for shares redeemed pursuant to this Privilege on the next
business day after receipt if the Transfer Agent receives the redemption
request in proper form. Redemption proceeds will be transferred by Federal
Reserve wire only to the commercial bank account specified by the investor
on the Account Application or Shareholder Services Form. Redemption
proceeds, if wired, must be in the amount of $1,000 or more and will be
wired to the investor's account at the bank of record designated in the
investor's file at the Transfer Agent, if the investor's bank is a member of
the Federal Reserve System, or to a correspondent bank if the investor's
bank is not a member. Fees ordinarily are imposed by such bank and usually
are borne by the investor. Immediate notification by the correspondent bank
to the investor's bank is necessary to avoid a delay in crediting the funds
to the investor's bank account.
Investors with access to telegraphic equipment may wire redemption
requests to the Transfer Agent by employing the following transmittal code
which may be used for domestic or overseas transmissions:
Transfer Agent's
Transmittal Code Answer Back Sign
144295 144295 TSSG PREP
Investors who do not have direct access to telegraphic equipment may
have the wire transmitted by contacting a TRT Cables operator at 1-800-654-
7171, toll free. Investors should advise the operator that the above
transmittal code must be used and should also inform the operator of the
Transfer Agent's answer back sign.
To change the commercial bank or account designated to receive
redemption proceeds, a written request must be sent to the Transfer Agent.
This request must be signed by each shareholder, with each signature
guaranteed as a described below under "Stock Certificates; Signatures."
Stock Certificates; Signatures. Any certificates representing Fund
shares to be redeemed must be submitted with the redemption request.
Written redemption requests must be signed by each shareholder, including
each holder of a joint account, and each signature must be guaranteed.
Signatures on endorsed certificates submitted for redemption also must be
guaranteed. The Transfer Agent has adopted standards and procedures
pursuant to which signature-guarantees in proper form generally will be
accepted from domestic banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies
and savings associations as well as from participants in the NYSE Medallion
Signature Program, the Securities Transfer Agents Medallion Program
("STAMP") and the Stock Exchanges Medallion Program. Guarantees must be
signed by an authorized signatory of the guarantor and "Signature-
Guaranteed" must appear with the signature. The Transfer Agent may request
additional documentation from corporations, executors, administrators,
trustees or guardians, and may accept other suitable verification
arrangements from foreign investors, such as consular verification. For
more information with respect to signature-guarantees, please call one of
the telephone numbers listed on the cover.
Dreyfus TeleTransfer Privilege. Investors should be aware that if they
have selected the Dreyfus TeleTransfer Privilege, any request for a wire
redemption will be effected as a Dreyfus TeleTransfer transaction through
the ACH system unless more prompt transmittal specifically is requested.
Redemption proceeds will be on deposit in the investor's account at an ACH
member bank ordinarily two business days after receipt of the redemption
request. See "Purchase of Fund Shares--Dreyfus TeleTransfer Privilege."
Redemption Commitment. The Fund has committed itself to pay in cash
all redemption requests by any shareholder of record of the Fund, limited in
amount during any 90-day period to the lesser of $250,000 or 1% of the value
of the Fund's net assets at the beginning of such period. Such commitment
is irrevocable without the prior approval of the SEC. In the case of
requests for redemption in excess of such amount, the Board of Directors
reserves the right to make payments in whole or in part in securities or
other assets in case of an emergency or any time a cash distribution would
impair the liquidity of the Fund to the detriment of the existing
shareholders. In this event, the securities would be valued in the same
manner as the Fund's portfolio is valued. If the recipient sold such
securities, brokerage charges would be incurred.
Suspension of Redemptions. The right of redemption may be suspended or
the date of payment postponed (a) during any period when the NYSE is closed
(other than customary weekend and holiday closings), (b) when trading in the
markets the Fund ordinarily utilizes is restricted, or when an emergency
exists as determined by the SEC so that disposal of the Fund's investments
or determination of its net asset value is not reasonably practicable, or
(c) for such other periods as the SEC by order may permit to protect the
Fund's shareholders.
SHAREHOLDER SERVICES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Shareholder Services."
Fund Exchanges. Fund shares may be exchanged for shares of certain
other funds advised or administered by Dreyfus. Shares of other funds
purchased by exchange will be purchased on the basis of relative net asset
value per share as follows:
A. Exchanges for shares of funds that are offered without a
sales load will be made without a sales load.
B. Shares of funds purchased without a sales load may be exchanged for
shares of other funds sold with a sales load, and
the applicable sales load will be deducted.
C. Shares of funds purchased with a sales load may be exchanged
without a sales load for shares of other funds sold without a
sales load.
D. Shares of funds purchased with a sales load, shares of funds
acquired by a previous exchange from shares purchased with a sales
load and additional shares acquired through reinvestment of
dividends or other distributions of any such funds (collectively
referred to herein as "Purchased Shares") may be exchanged for
shares of other funds sold with a sales load (referred to herein
as "Offered Shares"), provided that, if the sales load applicable
to the Offered Shares exceeds the maximum sales load that could
have been imposed in connection with the Purchased Shares (at the
time the Purchased Shares were acquired), without giving effect to
any reduced loads, the difference will be deducted.
To accomplish an exchange under item D above, shareholders must notify
the Transfer Agent of their prior ownership of fund shares and their account
number.
To request an exchange, an investor, or an investor's Agent acting on
the investor's behalf, must give exchange instructions to the Transfer Agent
in writing or by telephone. The ability to issue exchange instructions by
telephone is given to all Fund shareholders automatically, unless the
investor checks the applicable "No" box on the Account Application,
indicating that the investor specifically refuses this Privilege. By using
the Telephone Exchange Privilege, the investor authorizes the Transfer Agent
to act on telephonic instructions (including over The Dreyfus Touchr
automated telephone system) from any person representing himself or herself
to be the investor, or a representative of the investor's Agent, and
reasonably believed by the Transfer Agent to be genuine. Telephone
exchanges may be subject to limitations as to the amount involved or the
number of telephone exchanges permitted. Shares issued in certificate form
are not eligible for telephone exchange.
To establish a personal retirement plan by exchange, shares of the fund
being exchanged must have a value of at least the minimum initial investment
required for shares of the fund into which the exchange is being made. The
minimum initial investment is generally $750 for Dreyfus-sponsored Keogh
Plans, IRAs (including regular IRAs, spousal IRAs for a non-working spouse,
Roth IRAs, IRAs set up under a Simplified Employee Pension Plan ("SEP-
IRAs"), and rollover IRAs), and 403(b)(7) Plans with only one participant,
and $500 for Dreyfus-sponsored Education IRAs. (Different minimum initial
investment requirements apply with respect to the Fund. See "How to Buy
Fund Shares-General" in the Fund's Prospectus.) To exchange shares held in
corporate plans, 403(b)(7) Plans and SEP-IRAs with more than one
participant, the minimum initial investment is generally $100 if the plan
has at least $2,500 invested among shares of the same Class of the funds in
the Dreyfus Premier Family of Funds or the Dreyfus Family of Funds. To
exchange shares held in a personal retirement plan account, the shares
exchanged must have a current value of at least $100.
Dreyfus Auto-Exchange Privilege. The Dreyfus Auto-Exchange Privilege
permits an investor to purchase, in exchange for shares of the Fund, shares
of certain other eligible funds in the Dreyfus Family of Funds. This
Privilege is available only for existing accounts. Shares will be exchanged
on the basis of relative net asset value as described above under "Fund
Exchanges." Enrollment in or modification or cancellation of this Privilege
is effective three business days following notification by the investor. An
investor will be notified if the investor's account falls below the amount
designated to be exchanged under this Privilege. In this case, an
investor's account will fall to zero unless additional investments are made
in excess of the designated amount prior to the next Dreyfus Auto-Exchange
transaction. Shares held under IRA and other retirement plans are eligible
for this Privilege. Exchanges of IRA shares may be made between IRA
accounts and from regular accounts to IRA accounts, but not from IRA
accounts to regular accounts. With respect to all other retirement
accounts, exchanges may be made only among those accounts.
Fund Exchanges and Dreyfus Auto-Exchange Privilege are available to
shareholders resident in any state in which shares of the fund being
acquired may legally be sold. Shares may be exchanged only between accounts
having identical names and other identifying designations.
Shareholder Services Forms and prospectuses of the other funds may be
obtained by calling 1-800-645-6561. The Fund reserves the right to reject
any exchange request in whole or in part. The Fund Exchange service or
Dreyfus Auto-Exchange Privilege may be modified or terminated at any time
upon notice to shareholders.
Automatic Withdrawal. The Automatic Withdrawal Plan permits an
investor with a $5,000 minimum account to request withdrawal of a specified
dollar amount (minimum of $50) on either a monthly or quarterly basis.
Withdrawal payments are the proceeds from sales of Fund shares, not the
yield on the shares. If withdrawal payments exceed reinvested dividends and
distributions, the investor's shares will be reduced and eventually may be
depleted. There is a service charge of $.50 for each withdrawal check.
Automatic Withdrawal may be terminated at any time by the investor, the Fund
or the Transfer Agent. Shares for which certificates have been issued may
not be redeemed through the Automatic Withdrawal Plan.
Dreyfus Dividend Sweep. Dreyfus Dividend Sweep allows investors to
invest automatically their dividends or dividends and capital gain
distributions, if any, from the Fund in shares of certain other funds in the
Dreyfus Family of Funds of which the investor is currently a shareholder.
Shares of other funds purchased pursuant to this Privilege will be purchased
on the basis of relative net asset value per share as follows:
A. Dividends and other distributions paid by a fund may be invested
without imposition of a sales load in shares of other funds that
are offered without a sales load.
B. Dividends and other distributions paid by a fund which does not
charge a sales load may be invested in shares of other funds sold
with a sales load, and the applicable sales load will be deducted.
C. Dividends and other distributions paid by a fund which
charges a sales load may be invested in shares of other funds sold
with a sales load (referred to herein as "Offered Shares"),
provided that, if the sales load applicable to the Offered Shares
exceeds the maximum sales load charged by the fund from which
dividends or distributions are being swept, without giving effect
to any reduced loads, the difference will be deducted.
D. Dividends and other distributions paid by a fund may be invested in
shares of other funds that impose a contingent
deferred sales charge ("CDSC") and the applicable CDSC, if any,
will be imposed upon redemption of such shares.
DETERMINATION OF NET ASSET VALUE
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "How to Buy Fund Shares."
Restricted securities, as well as securities or other assets for which
market quotations are not readily available, or which are not valued by a
pricing service approved by the Board of Directors, are valued at fair value
as determined in good faith by the Board of Directors. The Board of
Directors will review the method of valuation on a current basis. In making
their good faith valuation of restricted securities, the Board generally
will take the following factors into consideration: restricted securities
which are, or are convertible into, securities of the same class of
securities for which a public market exists usually will be valued at market
value less the same percentage discount at which purchased. This discount
will be revised periodically by the Board if it believes that the discount
no longer reflects the value of the restricted securities. Restricted
securities not of the same class as securities for which a public market
exists usually will be valued initially at cost. Any subsequent adjustment
from cost will be based upon considerations deemed relevant by the Board.
New York Stock Exchange Closings. The holidays (as observed) on which
the NYSE is currently scheduled to be closed are: New Year's Day, Martin
Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Dividends, Other
Distributions and Taxes."
The term "regulated investment company" does not imply the supervision
of management or investment practices or policies by any government agency.
General. To qualify for treatment as a regulated investment company
("RIC") under the Internal Revenue Code of 1986, as amended (the "Code"),
the Fund--which is treated as a separate corporation for federal tax
purposes--(1) must distribute to its shareholders each year at least 90% of
its investment company taxable income (generally consisting of net
investment income, net short-term capital gains and net gains from certain
foreign currency transactions), (2) must derive at least 90% of its annual
gross income from specified sources ("Income Requirement") and (3) must meet
certain asset diversification and other requirements.
Any dividend or other distribution paid shortly after an investor's
purchase may have the effect of reducing the net asset value of the shares
below the cost of his investment. Such a dividend or other distribution
would be a return on investment in an economic sense, although taxable as
stated in the Fund's Prospectus. In addition, if a shareholder holds shares
of the Fund for six months or less and has received a capital gain
distribution with respect to those shares, any loss incurred on the sale of
those shares will be treated as a long-term capital loss to the extent of
the capital gain distribution received.
Dividends and other distributions declared by the Fund in October,
November or December of any year and payable to shareholders of record on a
date in that month any of those months are deemed to have been paid by the
Fund and received by the shareholders on December 31 of that year if the
distributions are paid by the Fund during the following January.
Accordingly, those distributions will be taxed to shareholders for the year
in which that December 31 falls.
A portion of the dividends paid by the Fund, whether received in cash
or reinvested in additional Fund shares, may be eligible for the dividends-
received deduction allowed to corporations. The eligible portion may not
exceed the aggregate dividends received by the Fund from U.S. corporations.
However, dividends received by a corporate shareholder and deducted by it
pursuant to the dividends-received deduction are subject indirectly to the
alternative minimum tax.
Foreign Taxes. Dividends and interest received by the Fund, and gains
realized thereby, may be subject to income, withholding or other taxes
imposed by foreign countries and U.S. possessions ("foreign taxes") that
would reduce the yield and/or its return on its securities. Tax conventions
between certain countries and the United States may reduce or eliminate
these foreign taxes, however, and many foreign countries do not impose taxes
on capital gains in respect of investments by foreign investors.
Futures, Foreign Currency, Forwards and Hedging Transactions. Gain
from the sale or other disposition of foreign currencies (except certain
gains therefrom that may be excluded by future regulations), and from
options, futures and forward contracts derived by the Fund with respect to
its business of investing in securities or foreign currencies, will qualify
as permissible income under the Income Requirement. However, income from
the disposition of options and futures contracts (other than those on
foreign currencies) will be subject to the Short-Short Limitation if they
are held for less than three months. Income from the disposition of foreign
currencies, and options, futures and forward contracts thereon, that are not
directly related to the Fund's principal business of investing in securities
(or options and futures with respect to securities) also will be subject to
the Short-Short Limitation if they are held for less than three months.
If the Fund satisfies certain requirements, any increase in value of a
position that is part of a "designated hedge" will be offset by any decrease
in value (whether realized or not) of the offsetting hedging position during
the period of the hedge for purposes of determining whether the Fund
satisfies the Short-Short Limitation. Thus, only the net gain (if any) from
the designated hedge will be included in gross income for purposes of that
limitation. The Fund will consider whether it should seek to qualify for
this treatment for its hedging transactions. To the extent the Fund does
not so qualify, it may be forced to defer the closing out of certain
options, futures, forward contracts and foreign currency positions beyond
the time when it otherwise would be advantageous to do so, in order for the
Fund to qualify as a RIC.
Ordinarily, gains and losses realized from portfolio transactions will
be treated as capital gain and loss. However, a portion of the gain or loss
from the disposition of foreign currencies and certain foreign-currency-
denominated instruments (including debt instruments and financial forward,
futures and option contracts) may be treated as ordinary income or loss
under Section 988 of the Code. In addition, all or a portion of any gain
realized from the sale or other disposition of certain market discount bonds
will be treated as ordinary income. Moreover, all or a portion of the gain
realized from engaging in "conversion transactions that otherwise would be
treated as capital gain" may be treated as ordinary income under Section
1258 of the Code. "Conversion transactions" are defined to include certain
forward, futures, option and straddle transactions, transactions marketed or
sold as producing capital gains or transactions described in Treasury
regulations to be issued in the future.
Under Section 1256 of the Code, any gain or loss realized by the Fund
from certain futures, forward contracts and options transactions will be
treated as 60% long-term capital gain or loss and 40% short-term capital
gain or loss. Gain or loss will arise upon exercise or lapse of such
contracts and options as well as from closing transactions. In addition,
any such contracts or options remaining unexercised at the end of the Fund's
taxable year will be treated as sold for their then fair market value (a
process known as "marking-to-market"), resulting in additional gain or loss
to the Fund characterized in the manner described above.
Offsetting positions held by the Fund involving certain contracts or
options may constitute "straddles," which are defined to include "offsetting
positions" in actively traded personal property. The tax treatment of
straddles is governed by Sections 1092 and, to the extent noted above, 1258
of the Code which in certain circumstances override or modify Sections 1256
and 988. As a result, all or a portion of any short-term or long-term
capital gain from certain straddle transactions may be recharacterized to
ordinary income. If the Fund were treated as entering into straddles by
reason of its engaging in certain forward contracts or options transactions,
such straddles would be characterized as "mixed straddles" if the forward
contracts or options transactions comprising a part of such straddles were
governed by Section 1256. The Fund may make one or more elections with
respect to mixed straddles. Depending on which election is made, if any,
the results to the Fund may differ. If no election is made, then to the
extent the straddle and conversion transactions rules apply to positions
established by the Fund, losses realized by the Fund will be deferred to the
extent of unrealized gain in the offsetting position. Moreover, as a result
of the straddle rules, short-term capital loss on straddle positions may be
recharacterized as long-term capital loss, and long-term capital gains may
be treated as short-term capital gains or ordinary income.
Pursuant to proposed regulations, open-end RICs, such as the Fund,
would be entitled to elect to "mark-to-market" their stock in certain PFICs.
"Marking-to-market," in this context, means recognizing as gain for each
taxable year the excess, as of the end of that year, of the fair market
value of each such PFIC's stock over the adjusted basis in that stock
(including mark-to-market gain for each prior year for which an election was
in effect).
State and Local Taxes. Depending upon the extent of the Fund's
activities in states and localities in which it is deemed to be conducting
business, the Fund may be subject to the tax laws thereof. Shareholders are
advised to consult their tax advisers concerning the application of state
and local taxes.
Foreign Shareholders - U.S. Federal Income Taxation. U.S. federal
income taxation of a shareholder who, as to the United States, is a
non-resident alien individual, a foreign trust or estate, a foreign
corporation or a foreign partnership (a "foreign shareholder"), depends on
whether the income from the Fund is "effectively connected" with a U.S.
trade or business carried on by the shareholder, as discussed generally
below. Special U.S. federal income tax rules that differ from those
described below may apply to certain foreign persons who invest in the Fund,
such as a foreign shareholder entitled to claim the benefits of an
applicable tax treaty. Foreign shareholders are advised to consult their
own tax advisers with respect to the particular tax consequences to them of
an investment in the Fund.
Foreign Shareholders - Income Not Effectively Connected. Dividends
distributed to a foreign shareholder whose ownership of Fund shares is not
effectively connected with a U.S. trade or business carried on by the
foreign shareholder generally will be subject to a U.S. federal withholding
tax of 30% (or lower treaty rate). Capital gains realized by foreign
shareholders on the sale of Fund shares and distributions to them of net
capital gain, (the excess of net long-term gain over net short-term capital
loss) generally will not be subject to U.S. federal income tax unless the
foreign shareholder is a non-resident alien individual and is physically
present in the United States for more than 182 days during the taxable year.
In the case of certain foreign shareholders, the Fund may be required to
withhold U.S. federal income tax at a rate of 31% of capital gain
distributions and of the gross proceeds from a redemption of Fund shares
unless the shareholder furnishes the Fund with a certificate regarding the
shareholder's foreign status.
Foreign Shareholders - Effectively Connected Income. If a foreign
shareholder's ownership of Fund shares is effectively connected with a U.S.
trade or business carried on by a foreign shareholder, then all
distributions to that shareholder and any gains realized by that shareholder
on the disposition of the Fund shares will be subject to U.S. federal income
tax at the graduated rates applicable to U.S. citizens and domestic
corporations, as the case may be. Foreign shareholders also may be subject
to the branch profits tax.
Foreign Shareholders - Estate Tax. Foreign individuals generally are
subject to U.S. federal estate tax on their U.S. situs property, such as
shares of the Fund, that they own at the time of their death. Certain
credits against that tax and relief under applicable tax treaties may be
available.
PORTFOLIO TRANSACTIONS
All portfolio transactions of the Fund are placed on behalf of the Fund
by Dreyfus. Debt securities purchased and sold by the Fund are generally
traded on a net basis (i.e., without commission) through dealers acting for
their own account and not as brokers, or otherwise involve transactions
directly with the issuer of the instrument. This means that a dealer (the
securities firm or bank dealing with the Fund) makes a market for securities
by offering to buy at one price and sell at a slightly higher price. The
difference between the prices is known as a spread. Other portfolio
transactions may be executed through brokers acting as agent. The Fund will
pay a spread or commissions in connection with such transactions. Dreyfus
uses its best efforts to obtain execution of portfolio transactions at
prices which are advantageous to the Fund and at spreads and commission
rates, if any, which are reasonable in relation to the benefits received.
Dreyfus also places transactions for other accounts that it provides with
investment advice.
Brokers and dealers involved in the execution of portfolio transactions
on behalf of the Fund are selected on the basis of their professional
capability and the value and quality of their services. In selecting brokers
or dealers, Dreyfus will consider various relevant factors, including, but
not limited to, the size and type of the transaction; the nature and
character of the markets for the security to be purchased or sold; the
execution efficiency, settlement capability, and financial condition of the
broker-dealer; the broker-dealer's execution services rendered on a
continuing basis; and the reasonableness of any spreads (or commissions, if
any). Any spread, commission, fee or other remuneration paid to an
affiliated broker-dealer is paid pursuant to the Company's procedures
adopted in accordance with Rule 17e-1 of the 1940 Act.
Brokers or dealers may be selected who provide brokerage and/or
research services to the Fund and/or other accounts over which Dreyfus or
its affiliates exercise investment discretion. Such services may include
advice concerning the value of securities; the advisability of investing in,
purchasing or selling securities; the availability of securities or the
purchasers or sellers of securities; furnishing analyses and reports
concerning issuers, industries, securities, economic factors and trends,
portfolio strategy and performance of accounts; and effecting securities
transactions and performing functions incidental thereto (such as clearance
and settlement).
The receipt of research services from broker-dealers may be useful to
Dreyfus in rendering investment management services to the Fund and/or its
other clients; and, conversely, such information provided by brokers or
dealers who have executed transaction orders on behalf of other clients of
Dreyfus may be useful to these organizations in carrying out their
obligations to the Fund. The receipt of such research services does not
reduce these organizations' normal independent research activities; however,
it enables these organizations to avoid the additional expenses which might
otherwise be incurred if these organizations were to attempt to develop
comparable information through their own staffs.
Although Dreyfus manages other accounts in addition to the Fund,
investment decisions for the Fund are made independently from decisions made
for these other accounts. It sometimes happens that the same security is
held by more than one of the accounts managed by Dreyfus. Simultaneous
transactions may occur when several accounts are managed by the same
investment manager, particularly when the same investment instrument is
suitable for the investment objective of more than one account.
When more than one account is simultaneously engaged in the purchase or
sale of the same investment instrument, the prices and amounts are allocated
in accordance with a formula considered by Dreyfus to be equitable to each
account. In some cases this system could have a detrimental effect on the
price or volume of the investment instrument as far as the Fund is
concerned. In other cases, however, the ability of the Fund to participate
in volume transactions will produce better executions for the Fund. While
the Directors will continue to review simultaneous transactions, it is their
present opinion that the desirability of retaining Dreyfus as investment
manager to the Fund outweighs any disadvantages that may be said to exist
from exposure to simultaneous transactions.
For fiscal years ended October 31, 1995, 1996 and 1997 the Fund paid
brokerage commissions of $50,384, $44,814 and $44,307, respectively.
Portfolio Turnover. The portfolio turnover rate for the Fund is
calculated by dividing the lesser of the Fund's annual sales or purchases of
portfolio securities (exclusive of purchases and sales of securities whose
maturities at the time of acquisition were one year or less) by the monthly
average value of securities in the Fund during the year. The portfolio
turnover rates for the fiscal years ended October 31, 1996 and 1997 were
4.75% and 3.75%, respectively.
PERFORMANCE INFORMATION
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Performance
Information."
Average annual total return is calculated by determining the ending
redeemable value of an investment purchased with a hypothetical $1,000
payment made at the beginning of the period (assuming the reinvestment of
dividends and other distributions), dividing by the amount of the initial
investment, taking the "n"th root of the quotient (where "n" is the number
of years in the period) and subtracting 1 from the result.
The Fund's total return for the period September 30, 1993 to October
31, 1997 was 117.32%. Total return is calculated by subtracting the amount
of the Fund's net asset value per share at the beginning of a stated period
from the net asset value per share at the end of the period (after giving
effect to the reinvestment of dividends and other distributions during the
period), and dividing the result by the net asset value per share at the
beginning of the period.
Average annual total return (expressed as a percentage) for Fund shares
for the periods noted were:
Average Annual Total Return for the
Periods Ended October 31, 1997
1 Year 5 Years 10 Years Inception
BASIC S&P 500 Fund 31.87% -- -- 20.90%
(9/30/93)
Inception date appears in parentheses following the average annual total
return since inception.
Performance information for the Fund may be compared, in reports and
promotional literature, to indexes including, but not limited to: (i) the
Morgan Stanley European Index; (ii) the Standard & Poor's 500 Composite
Stock Price Index, the Dow Jones Industrial Average, or other appropriate
unmanaged domestic or foreign indices of performance of various types of
investments so that investors may compare the Fund's results with those of
indices widely regarded by investors as representative of the securities
markets in general; (iii) other groups of mutual funds tracked by Lipper
Analytical Services, a widely used independent research firm which ranks
mutual funds by overall performance, investment objectives and assets, or
tracked by other services, companies, publications, or persons who rank
mutual funds on overall performance or other criteria; (iv) the Consumer
Price Index (a measure of inflation) to assess the real rate of return from
an investment in the Fund; and (v) products managed by a universe of money
managers with similar country allocation and performance objectives.
Unmanaged indices may assume the reinvestment of dividends but generally do
not reflect deductions or administrative and management costs and expenses.
From time to time, Fund advertisements may include statistical data or
general discussions about the growth and development of Dreyfus Retirement
Services (in terms of new customers, assets under management, market share,
etc.) and its presence in the defined contribution plan market.
From time to time, advertising material for the Fund may include
biographical information relating to its portfolio manager and may refer to,
or include commentary by the portfolio manager relating to investment
strategy, asset growth, current or past business, political, economic or
financial conditions and other matters of general interest to investors.
INFORMATION ABOUT THE FUND
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "General Information."
Each Fund share has one vote and, when issued and paid for in
accordance with the terms of the offering, is fully paid and non-assessable.
Fund shares have no preemptive or subscription rights and are freely
transferable. The Fund is one of eighteen investment portfolios authorized
by the Company's Board of Directors.
The Fund will send annual and semi-annual financial statements to all
its shareholders.
TRANSFER AND DIVIDEND DISBURSING AGENT, CUSTODIAN, COUNSEL
AND INDEPENDENT AUDITORS
Dreyfus Transfer, Inc., a wholly-owned subsidiary of Dreyfus, P.O. Box
9671, Providence, Rhode Island 02940-9671, is the Company's transfer and
dividend disbursing agent. Under a transfer agency agreement with the
Company, Dreyfus Transfer, Inc. arranges for the maintenance of shareholder
account records for the Fund, the handling of certain communications between
shareholders and the Fund and the payment of dividends and distributions
payable by the Fund. For these services, Dreyfus Transfer, Inc. receives a
monthly fee computed on the basis of the number of shareholder accounts it
maintains for the Company during the month, and is reimbursed for certain
out-of-pocket expenses.
Mellon Bank, the parent of Dreyfus, located at One Mellon Bank Center,
Pittsburgh, Pennsylvania 15258, acts as custodian of the Fund's investments.
Under a custody agreement with the Company, Mellon Bank holds the Fund's
portfolio securities and keeps all necessary accounts and records. Dreyfus
Transfer, Inc. and Mellon Bank, as custodian, have no part in determining
the investment policies of the Fund or which securities are to be purchased
or sold by the Fund.
Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue N.W. Second
Floor, Washington, D.C. 20036-1800, has passed upon the legality of the
shares offered by the Prospectus and this Statement of Additional
Information.
KPMG Peat Marwick LLP was appointed by the Directors to serve as the
Fund's independent auditors for the year ending October 31, 1998, providing
audit services including (1) examination of the annual financial statements,
(2) assistance, review and consultation in connection with SEC filings and
(3) review of the annual federal income tax return filed on behalf of the
Fund.
FINANCIAL STATEMENTS
The financial statements for the fiscal year ended October 31, 1997,
including notes to the financial statements and financial highlights and the
Independent Auditors' Report, are included in the Annual Report to
shareholders. A copy of the Annual Report accompanies this Statement of
Additional Information. The financial statements included in the Annual
Report, and the Independent Auditors' Report thereon contained therein, and
related notes, are incorporated herein by reference.
____________________________________________________________________________
DREYFUS PREMIER SMALL COMPANY STOCK FUND
CLASS A, CLASS B, CLASS C AND CLASS R SHARES
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
March 1, 1998
____________________________________________________________________________
This Statement of Additional Information ("SAI"), which is not a
prospectus, supplements and should be read in conjunction with the current
Prospectus of the Dreyfus Premier Small Company Stock Fund (formerly, the
Premier Small Company Stock Fund) (the "Fund"), dated March 1, 1998, as it
may be revised from time to time. The Fund is a separate, diversified
portfolio of The Dreyfus/Laurel Funds, Inc. (formerly, The Laurel Funds,
Inc.), an open-end management investment company (the "Company"), known as a
mutual fund. To obtain a copy of the Fund's Prospectus, please write to the
Fund at 144 Glenn Curtiss Boulevard, Uniondale, New York 11556-0144, or call
one of the following numbers:
Call Toll Free 1-800-554-4611
In New York City -- Call 1-718-895-1206
Outside the U.S. and Canada -- Call 516-794-5452
The Dreyfus Corporation ("Dreyfus") serves as the Fund's investment
manager.
Premier Mutual Fund Services, Inc. (the "Distributor") is the
distributor of the Fund's shares.
TABLE OF CONTENTS
Page
Investment Objective and Management Policies ..........B-2
Management of the Fund ................................B-17
Management Arrangements ...............................B-23
Purchase of Fund Shares ...............................B-24
Distribution and Service Plans ........................B-26
Redemption of Fund Shares .............................B-27
Shareholder Services ..................................B-28
Determination of Net Asset Value ......................B-32
Dividends, Other Distributions and Taxes ..............B-32
Portfolio Transactions ................................B-37
Performance Information ...............................B-38
Information About the Fund ............................B-40
Transfer and Dividend Disbursing Agent, Custodian, Counsel
and Independent Auditors ............................B-40
Financial Statements ..................................B-41
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Description of the
Fund."
Portfolio Securities
Government Obligations. The Fund may invest in a variety of U.S.
Treasury obligations, which differ only in their interest rates, maturities
and times of issuance: (a) U.S. Treasury bills have a maturity of one year
or less, (b) U.S. Treasury notes have maturities of one to ten years, and
(c) U.S. Treasury bonds generally have maturities of greater than ten years.
In addition to U.S. Treasury obligations, the Fund may invest in
obligations issued or guaranteed by U.S. Government agencies and
instrumentalities which are supported by any of the following: (a) the full
faith and credit of the U.S. Treasury (such as Government National Mortgage
Association ("GNMA") participation certificates), (b) the right of the
issuer to borrow an amount limited to a specific line of credit from the
U.S. Treasury, (c) the discretionary authority of the U.S. Government agency
or instrumentality, or (d) the credit of the instrumentality. (Examples of
agencies and instrumentalities are: Federal Land Banks, Federal Housing
Administration, Farmers Home Administration, Export-Import Bank of the
United States, Central Bank for Cooperatives, Federal Intermediate Credit
Banks, Federal Home Loan Banks, General Services Administration, Maritime
Administration, Tennessee Valley Authority, District of Columbia Armory
Board, Inter-American Development Bank, Asian-American Development Bank,
Student Loan Marketing Association, International Bank for Reconstruction
and Development and Federal National Mortgage Association ("FNMA"). No
assurance can be given that the U.S. Government will provide financial
support to such U.S. Government agencies or instrumentalities described in
(b), (c) and (d) in the future, other than as set forth above, since it is
not obligated to do so by law.
Repurchase Agreements. The Fund may enter into repurchase agreements
with U.S. Government securities dealers recognized by the Federal Reserve
Board, with member banks of the Federal Reserve System, or with such other
brokers or dealers that meet the credit guidelines of the Board of
Directors. In a repurchase agreement, the Fund buys a security from a seller
that has agreed to repurchase the same security at a mutually agreed upon
date and price. The Fund's resale price will be in excess of the purchase
price, reflecting an agreed upon interest rate. This interest rate is
effective for the period of time the Fund is invested in the agreement and
is not related to the coupon rate on the underlying security. Repurchase
agreements may also be viewed as a fully collateralized loan of money by the
Fund to the seller. The period of these repurchase agreements will usually
be short, from overnight to one week, and at no time will the Fund invest in
repurchase agreements for more than one year. The Fund will always receive
as collateral securities whose market value including accrued interest is,
and during the entire term of the agreement remains, at least equal to 100%
of the dollar amount invested by the Fund in each agreement, and the Fund
will make payment for such securities only upon physical delivery or upon
evidence of book entry transfer to the account of the Custodian. If the
seller defaults, the Fund might incur a loss if the value of the collateral
securing the repurchase agreement declines and might incur disposition costs
in connection with liquidating the collateral. In addition, if bankruptcy
proceedings are commenced with respect to the seller of a security which is
the subject of a repurchase agreement, realization upon the collateral by
the Fund may be delayed or limited. The Fund seeks to minimize the risk of
loss through repurchase agreements by analyzing the creditworthiness of the
obligors under repurchase agreements, in accordance with the credit
guidelines of the Company's Board of Directors.
When-Issued Securities. New issues of U.S. Treasury and Government
securities are often offered on a when-issued basis. This means that
delivery and payment for the securities normally will take place
approximately 7 to 45 days after the date the buyer commits to purchase
them. The payment obligation and the interest rate that will be received on
securities purchased on a when-issued basis are each fixed at the time the
buyer enters into the commitment. The Fund will make commitments to purchase
such securities only with the intention of actually acquiring the
securities, but the Fund may sell these securities or dispose of the
commitment before the settlement date if it is deemed advisable as a matter
of investment strategy. Cash or marketable high-grade debt securities equal
to the amount of the above commitments will be segregated on the Fund's
records. For the purpose of determining the adequacy of these securities the
segregated securities will be valued at market. If the market value of such
securities declines, additional cash or securities will be segregated on the
Fund's records on a daily basis so that the market value of the account will
equal the amount of such commitments by the Fund.
Securities purchased on a when-issued basis and the securities held by
the Fund are subject to changes in market value based upon the public's
perception of changes in the level of interest rates. Generally, the value
of such securities will fluctuate inversely to changes in interest rates --
i.e., they will appreciate in value when interest rates decline and decrease
in value when interest rates rise. Therefore, if in order to achieve higher
interest income the Fund remains substantially fully invested at the same
time that it has purchased securities on a "when-issued" basis, there will
be a greater possibility of fluctuation in the Fund's net asset value.
When payment for when-issued securities is due, the Fund will meet its
obligations from then-available cash flow, the sale of segregated
securities, the sale of other securities or, and although it would not
normally expect to do so, from the sale of the when-issued securities
themselves (which may have a market value greater or less than the Fund's
payment obligation). The sale of securities to meet such obligations carries
with it a greater potential for the realization of capital gains, which are
subject to federal income taxes.
Commercial Paper. The Fund may invest in commercial paper issued in
reliance on the so-called "private placement" exemption from registration
afforded by Section 4(2) of the Securities Act of 1933 ("Section 4(2)
paper"). Section 4(2) paper is restricted as to disposition under the
federal securities laws and generally is sold to investors who agree that
they are purchasing the paper for an investment and not with a view to
public distribution. Any resale by the purchaser must be in an exempt
transaction. Section 4(2) paper is normally resold to other investors
through or with the assistance of the issuer or investment dealers who make
a market in Section 4(2) paper, thus providing liquidity. Pursuant to
guidelines established by the Company's Board of Directors, Dreyfus may
determine that Section 4(2) paper is liquid for the purposes of complying
with the Fund's investment restriction relating to investments in illiquid
securities.
Management Policies
The Fund engages, except as noted, in the following practices in
furtherance of its investment objective.
Loans of Fund Securities. The Fund has authority to lend its portfolio
securities provided (1) the loan is secured continuously by collateral
consisting of U.S. Government securities or cash or cash equivalents
adjusted daily to make a market value at least equal to the current market
value of these securities loaned; (2) the Fund may at any time call the loan
and regain the securities loaned; (3) the Fund will receive any interest or
dividends paid on the loaned securities; and (4) the aggregate market value
of securities loaned will not at any time exceed one-third of the total
assets of the Fund. In addition, it is anticipated that the Fund may share
with the borrower some of the income received on the collateral for the loan
or that it will be paid a premium for the loan. In determining whether to
lend securities, the Fund considers all relevant factors and circumstances
including the creditworthiness of the borrower.
Reverse Repurchase Agreements. The Fund may enter into reverse
repurchase agreements to meet redemption requests where the liquidation of
portfolio securities is deemed by the Fund to be inconvenient or
disadvantageous. A reverse repurchase agreement is a transaction whereby the
Fund transfers possession of a portfolio security to a bank or broker-dealer
in return for a percentage of the portfolio security's market value. The
Fund retains record ownership of the security involved including the right
to receive interest and principal payments. At an agreed upon future date,
the Fund repurchases the security by paying an agreed upon purchase price
plus interest. Cash or liquid high-grade debt obligations of the Fund equal
in value to the repurchase price including any accrued interest will be
maintained in a segregated account while a reverse repurchase agreement is
in effect.
Derivative Instruments. The Fund may purchase and sell various
financial instruments ("Derivative Instruments"), such as financial futures
contracts (such as interest rate, index and foreign currency futures
contracts), options (such as options on securities, indices, foreign
currencies and futures contracts), forward currency contracts and interest
rate, equity index and currency swaps, caps, collars and floors. The index
Derivative Instruments the Fund may use may be based on indices of U.S. or
foreign equity or debt securities. These Derivative Instruments may be
used, for example, to preserve a return or spread, to lock in unrealized
market value gains or losses, to facilitate or substitute for the sale or
purchase of securities, to manage the duration of securities, to alter the
exposure of a particular investment or portion of the Fund's portfolio to
fluctuations in interest rates or currency rates, to uncap a capped security
or to convert a fixed rate security into a variable rate security or a
variable rate security into a fixed rate security.
Hedging strategies can be broadly categorized as "short hedges" and
"long hedges." A short hedge is a purchase or sale of a Derivative
Instrument intended partially or fully to offset potential declines in the
value of one or more investments held in the Fund's portfolio. Thus, in a
short hedge the Fund takes a position in a Derivative Instrument whose price
is expected to move in the opposite direction of the price of the investment
being hedged.
Conversely, a long hedge is a purchase or sale of a Derivative
Instrument intended partially or fully to offset potential increases in the
acquisition cost of one or more investments that the Fund intends to
acquire. Thus, in a long hedge the Fund takes a position in a Derivative
Instrument whose price is expected to move in the same direction as the
price of the prospective investment being hedged. A long hedge is sometimes
referred to as an anticipatory hedge. In an anticipatory hedge transaction,
the Fund does not own a corresponding security and, therefore, the
transaction does not relate to a security the Fund owns. Rather, it relates
to a security that the Fund intends to acquire. If the Fund does not
complete the hedge by purchasing the security it anticipated purchasing, the
effect on the Fund's portfolio is the same as if the transaction were
entered into for speculative purposes.
Derivative Instruments on securities generally are used to hedge
against price movements in one or more particular securities positions that
the Fund owns or intends to acquire. Derivative Instruments on indices, in
contrast, generally are used to attempt to hedge against price movements in
market sectors in which the Fund has invested or expects to invest.
Derivative Instruments on debt securities may be used to hedge either
individual securities or broad debt market sectors.
The use of Derivative Instruments is subject to applicable regulations
of the Securities and Exchange Commission ("SEC"), the several options and
futures exchanges upon which they are traded, the Commodity Futures Trading
Commission ("CFTC") and various state regulatory authorities. In addition,
the Fund's ability to use Derivative Instruments will be limited by tax
considerations. See "Dividends, Other Distributions and Taxes."
In addition to the instruments, strategies and risks described below
and in the Prospectus, Dreyfus expects to discover additional opportunities
in connection with other Derivative Instruments. These new opportunities
may become available as Dreyfus develops new techniques, as regulatory
authorities broaden the range of permitted transactions and as new
techniques are developed. Dreyfus may utilize these opportunities to the
extent that they are consistent with the Fund's investment objective, and
permitted by the Fund's investment policies and applicable regulatory
authorities.
Special Risks. The use of Derivative Instruments involves special
considerations and risks, certain of which are described below. Risks
pertaining to particular Derivative Instruments are described in the
sections that follow.
(1) Successful use of most Derivative Instruments depends upon
Dreyfus' ability to predict movements of the overall securities, currency
and interest rate markets, which requires different skills than predicting
changes in the prices of individual securities. There can be no assurance
that any particular strategy will succeed.
(2) There might be imperfect correlation, or even no correlation,
between price movements of a Derivative Instrument and price movements of
the investments being hedged. For example, if the value of a Derivative
Instrument used in a short hedge increased by less than the decline in value
of the hedged investment, the hedge would not be fully successful. Such a
lack of correlation might occur due to factors unrelated to the value of the
investments being hedged, such as speculative or other pressures on the
markets in which Derivative Instruments are traded. The effectiveness of
hedges using Derivative Instruments on indices will depend on the degree of
correlation between price movements in the index and price movements in the
securities being hedged.
Because there are a limited number of types of exchange-traded options
and futures contracts, it is likely that the standardized contracts
available will not match the Fund's current or anticipated investments
exactly. The Fund may invest in options and futures contracts based on
securities with different issuers, maturities, or other characteristics from
the securities in which it typically invests, which involves a risk that the
options or futures position will not track the performance of the Fund's
other investments.
Options and futures prices can also diverge from the prices of their
underlying instruments, even if the underlying instruments match the Fund's
investments well. Options and futures prices are affected by such factors
as current and anticipated short-term interest rates, changes in volatility
of the underlying instrument, and the time remaining until expiration of the
contract, which may not affect security prices the same way. Imperfect
correlation may also result from differing levels of demand in the options
and futures markets and the securities markets, from structural differences
in how options and futures and securities are traded, or from imposition of
daily price fluctuation limits or trading halts. The Fund may purchase or
sell options and futures contracts with a greater or lesser value than the
securities it wishes to hedge or intends to purchase in order to attempt to
compensate for differences in volatility between the contract and the
securities, although this may not be successful in all cases. If price
changes in the Fund's options or futures positions are poorly correlated
with its other investments, the positions may fail to produce anticipated
gains or result in losses that are not offset by gains in other investments.
(3) If successful, the above-discussed strategies can reduce risk of
loss by wholly or partially offsetting the negative effect of unfavorable
price movements. However, such strategies can also reduce opportunity for
gain by offsetting the positive effect of favorable price movements. For
example, if the Fund entered into a short hedge because Dreyfus projected a
decline in the price of a security in the Fund's portfolio, and the price of
that security increased instead, the gain from that increase might be wholly
or partially offset by a decline in the price of the Derivative Instrument.
Moreover, if the price of the Derivative Instrument declined by more than
the increase in the price of the security, the Fund could suffer a loss. In
either such case, the Fund would have been in a better position had it not
attempted to hedge at all.
(4) As described below, the Fund might be required to maintain assets
as "cover," maintain segregated accounts or make margin payments when it
takes positions in Derivative Instruments involving obligations to third
parties (i.e., Derivative Instruments other than purchased options). If the
Fund were unable to close out its positions in such Derivative Instruments,
it might be required to continue to maintain such assets or accounts or make
such payments until the position expired or matured. These requirements
might impair the Fund's ability to sell a portfolio security or make an
investment at a time when it would otherwise be favorable to do so, or
require that the Fund sell a portfolio security at a disadvantageous time.
The Fund's ability to close out a position in a Derivative Instrument prior
to expiration or maturity depends on the existence of a liquid secondary
market or, in the absence of such a market, the ability and willingness of
the other party to the transaction ("counterparty") to enter into a
transaction closing out the position. Therefore, there is no assurance that
any position can be closed out at a time and price that is favorable to the
Fund.
Cover for Derivative Instruments. Transactions using Derivative
Instruments may expose the Fund to an obligation to another party. The Fund
will not enter into any such transactions unless it owns either (1) an
offsetting ("covered") position in securities, futures, options, currencies
or forward contracts or (2) cash and short-term liquid debt securities with
a value sufficient at all times to cover its potential obligations to the
extent not covered as provided in (1) above. The Fund will comply with SEC
guidelines regarding cover for Derivative Instruments and will, if the
guidelines so require, set aside cash, U.S. Government securities or other
liquid, high-grade debt securities in a segregated account with its
custodian in the prescribed amount.
Assets used as cover or held in a segregated account cannot be sold
while the position in the corresponding Derivative Instrument is open,
unless they are replaced with other appropriate assets. As a result, the
commitment of a large portion of the Fund's assets to cover or segregated
accounts could impede portfolio management or the Fund's ability to meet
redemption requests or other current obligations.
Options. A call option gives the purchaser the right to buy, and
obligates the writer to sell, the underlying investment at the agreed upon
exercise price during the option period. A put option gives the purchaser
the right to sell, and obligates the writer to buy, the underlying
investment at the agreed upon exercise price during the option period. A
purchaser of an option pays an amount, known as the premium, to the option
writer in exchange for rights under the option contract.
Options on indices are similar to options on securities or currencies
except that all settlements are in cash and gain or loss depends on changes
in the index in question rather than on price movements in individual
securities or currencies.
The purchase of call options can serve as a long hedge, and the
purchase of put options can serve as a short hedge. Writing put or call
options can enable the Fund to enhance income or yield by reason of the
premiums paid by the purchasers of such options. However, if the market
price of the security or other instrument underlying a put option declines
to less than the exercise price on the option, minus the premium received,
the Fund would expect to suffer a loss.
Writing call options can also serve as a limited short hedge because
declines in the value of the hedged investment would be offset to the extent
of the premium received for writing the option. However, if the investment
appreciates to a price higher than the exercise price of the call option, it
can be expected that the option will be exercised and the Fund will be
obligated to sell the investment at less than its market value.
Writing put options can serve as a limited long hedge because increases
in the value of the hedged investment would be offset to the extent of the
premium received for writing the option. However, if the investment
depreciates to a price lower than the exercise price of the put option, it
can be expected that the put option will be exercised and the Fund will be
obligated to purchase the investment at more than its market value.
The value of an option position will reflect, among other things, the
current market value of the underlying investment, the time remaining until
expiration, the relationship of the exercise price to the market price of
the underlying investment, the historical price volatility of the underlying
investment and general market conditions. Options that expire unexercised
have no value.
The Fund may effectively terminate its right or obligation under an
option by entering into a closing transaction. For example, the Fund may
terminate its obligation under a call or put option that it had written by
purchasing an identical call or put option; this is known as a closing
purchase transaction. Conversely, the Fund may terminate a position in a
put or call option it had purchased by writing an identical put or call
option; this is known as a closing sale transaction. Closing transactions
permit the Fund to realize profits or limit losses on an option position
prior to its exercise or expiration.
The Fund may purchase and sell both exchange-traded and over-the-
counter ("OTC") options. Exchange-traded options in the United States are
issued by a clearing organization that, in effect, guarantees completion of
every exchange-traded option transaction. In contrast, OTC options are
contracts between the Fund and its counterparty (usually a securities dealer
or a bank) with no clearing organization guarantee. Thus, when the Fund
purchases an OTC option, it relies on the counterparty from whom it
purchased the option to make or take delivery of the underlying investment
upon exercise of the option. Failure by the counterparty to do so would
result in the loss of any premium paid by the Fund as well as the loss of
any expected benefit of the transaction. The Fund will enter into only
those option contracts that are listed on a national securities or
commodities exchange or traded in the OTC market for which there appears to
be a liquid secondary market.
The Fund will not purchase or write OTC options if, as a result of such
transaction, the sum of (i) the market value of outstanding OTC options
purchased by the Fund, (ii) the market value of the underlying securities
covered by outstanding OTC call options written by the Fund, and (iii) the
market value of all other assets of the Fund that are illiquid or are not
otherwise readily marketable, would exceed 15% of the net assets of the
Fund, taken at market value. However, if an OTC option is sold by the Fund
to a primary U.S. Government securities dealer recognized by the Federal
Reserve Bank of New York and the Fund has the unconditional contractual
right to repurchase such OTC option from the dealer at a predetermined
price, then the Fund will treat as illiquid such amount of the underlying
securities as is equal to the repurchase price less the amount by which the
option is "in-the-money" (the difference between the current market value of
the underlying securities and the option's strike price). The repurchase
price with primary dealers is typically a formula price that is generally
based on a multiple of the premium received for the option plus the amount
by which the option is "in-the-money."
Generally, the OTC debt and foreign currency options used by the Fund
are European-style options. This means that the option is only exercisable
immediately prior to its expiration. This is in contrast to American-style
options, which are exercisable at any time prior to the expiration date of
the option.
The Fund's ability to establish and close out positions in exchange-
listed options depends on the existence of a liquid market. However, there
can be no assurance that such a market will exist at any particular time.
Closing transactions can be made for OTC options only by negotiating
directly with the counterparty, or by a transaction in the secondary market
if any such market exists. Although the Fund will enter into OTC options
only with major dealers in unlisted options, there is no assurance that the
Fund will in fact be able to close out an OTC option position at a favorable
price prior to expiration. In the event of insolvency of the counterparty,
the Fund might be unable to close out an OTC option position at any time
prior to its expiration.
If the Fund were unable to effect a closing transaction for an option
it had purchased, it would have to exercise the option to realize any
profit. The inability to enter into a closing purchase transaction for a
covered call option written by the Fund could cause material losses because
the Fund would be unable to sell the investment used as cover for the
written option until the option expires or is exercised.
The Fund may write only covered call options on securities. A call
option is covered if the Fund owns the underlying security or a call option
on the same security with a lower strike price.
Futures Contracts and Options on Futures Contracts. When the Fund
purchases a futures contract, it incurs an obligation to take delivery of a
specified amount of the obligation underlying the futures contract at a
specified time in the future for a specified price. When the Fund sells a
futures contract, it incurs an obligation to deliver a specified amount of
the obligation underlying the futures contract at a specified time in the
future for an agreed upon price. With respect to index futures, no physical
transfer of the securities underlying the index is made. Rather, the
parties settle by exchanging in cash an amount based on the difference
between the contract price and the closing value of the index on the
settlement date.
When the Fund writes an option on a futures contract, it becomes
obligated, in return for the premium paid, to assume a position in a futures
contract at a specified exercise price at any time during the term of the
option. If the Fund has written a call, it assumes a short futures
position. If the Fund has written a put, it assumes a long futures
position. When the Fund purchases an option on a futures contract, it
acquires the right, in return for the premium it pays, to assume a position
in a futures contract (a long position if the option is a call and a short
position if the option is a put).
The purchase of futures or call options on futures can serve as a long
hedge, and the sale of futures or the purchase of put options on futures can
serve as a short hedge. Writing call options on futures contracts can serve
as a limited short hedge, using a strategy similar to that used for writing
call options on securities or indices. Similarly, writing put options on
futures contracts can serve as a limited long hedge.
Futures strategies also can be used to manage the average duration of
the Fund's fixed-income portfolio. If Dreyfus wishes to shorten the average
duration of the Fund's fixed-income portfolio, the Fund may sell an interest
rate futures contract or a call option thereon, or purchase a put option on
that futures contract. If Dreyfus wishes to lengthen the average duration
of the Fund's fixed-income portfolio, the Fund may buy an interest rate
futures contract or a call option thereon, or sell a put option thereon.
No price is paid upon entering into a futures contract. Instead, at
the inception of a futures contract the Fund is required to deposit "initial
margin" consisting of cash or U.S. Government securities in an amount
generally equal to 10% or less of the contract value. Margin must also be
deposited when writing a call or put option on a futures contract, in
accordance with applicable exchange rules. Unlike margin in securities
transactions, initial margin on futures contracts does not represent a
borrowing, but rather is in the nature of a performance bond or good-faith
deposit that is returned to the Fund at the termination of the transaction
if all contractual obligations have been satisfied. Under certain
circumstances, such as periods of high volatility, the Fund may be required
by an exchange to increase the level of its initial margin payment.
Subsequent "variation margin" payments are made to and from the futures
broker daily as the value of the futures position varies, a process known as
"marking-to-market." Variation margin does not involve borrowing, but
rather represents a daily settlement of the Fund's obligations to or from a
futures broker. When the Fund purchases an option on a future, the premium
paid plus transaction costs is all that is at risk. In contrast, when the
Fund purchases or sells a futures contract or writes a call or put option
thereon, it is subject to daily variation margin calls that could be
substantial in the event of adverse price movements. If the Fund has
insufficient cash to meet daily variation margin requirements, it might need
to sell securities at a time when such sales are disadvantageous.
Purchasers and sellers of futures contracts and options on futures can
enter into offsetting closing transactions, similar to closing transactions
on options, by selling or purchasing, respectively, an instrument identical
to the instrument purchased or sold. Positions in futures and options on
futures may be closed only on an exchange or board of trade that provides a
secondary market. Although the Fund intends to enter into futures and
options on futures only on exchanges or boards of trade where there appears
to be a liquid secondary market, there can be no assurance that such a
market will exist for a particular contract at a particular time. In such
event, it may not be possible to close a futures contract or options
position.
Under certain circumstances, futures exchanges may establish daily
limits on the amount that the price of a futures or an option on a futures
contract can vary from the previous day's settlement price; once that limit
is reached, no trades may be made that day at a price beyond the limit.
Daily price limits do not limit potential losses because prices could move
to the daily limit for several consecutive days with little or no trading,
thereby preventing liquidation of unfavorable positions.
If the Fund were unable to liquidate a futures or options on futures
position due to the absence of a liquid secondary market or the imposition
of price limits, it could incur substantial losses. The Fund would continue
to be subject to market risk with respect to the position. In addition,
except in the case of purchased options, the Fund would continue to be
required to make daily variation margin payments and might be required to
maintain the position being hedged by the future or option or to maintain
cash or securities in a segregated account.
To the extent that the Fund enters into futures contracts, options on
futures contracts, or options on foreign currencies traded on an exchange
regulated by the CFTC, in each case other than for bona fide hedging
purposes (as defined by the CFTC), the aggregate initial margin and premiums
required to establish those positions (excluding the amount by which options
are "in-the-money" at the time of purchase) will not exceed 5% of the
liquidation value of the Fund's portfolio, after taking into account
unrealized profits and unrealized losses on any contracts the Fund has
entered into. This policy does not limit to 5% the percentage of the Fund's
assets that are at risk in futures contracts and options on futures
contracts.
Foreign Currency Strategies - Special Considerations. The Fund may use
Derivative Instruments on foreign currencies to hedge against movements in
the values of the foreign currencies in which the Fund's securities are
denominated. Such currency hedges can protect against price movements in a
security that the Fund owns or intends to acquire that are attributable to
changes in the value of the currency in which it is denominated. Such
hedges do not, however, protect against price movements in the securities
that are attributable to other causes.
The Fund might seek to hedge against changes in the value of particular
currency when no Derivative Instruments on that currency are available or
such Derivative Instruments are more expensive than certain other Derivative
Instruments. In such cases, the Fund may hedge against price movements in
that currency by entering into transactions using Derivative Instruments on
another currency or a basket of currencies, the values of which Dreyfus
believes will have a high degree of positive correlation to the value of the
currency being hedged. The risk that movements in the price of the
Derivative Instrument will not correlate perfectly with movements in the
price of the currency being hedged is magnified when this strategy is used.
The value of Derivative Instruments on foreign currencies depends on
the value of the underlying currency relative to the U.S. dollar. Because
foreign currency transactions occurring in the interbank market might
involve substantially larger amounts than those involved in the use of
foreign currency Derivative Instruments, the Fund could be disadvantaged by
having to deal in the odd lot market (generally consisting of transactions
of less than $1 million) for the underlying foreign currencies at prices
that are less favorable than for round lots.
There is no systematic reporting of last sale information for foreign
currencies or any regulatory requirement that quotations available through
dealers or other market sources be firm or revised on a timely basis.
Quotation information generally is representative of very large transactions
in the interbank market and thus might not reflect odd-lot transactions
where rates might be less favorable. The interbank market in foreign
currencies is a global, round-the-clock market.
Settlement of transactions involving foreign currencies might be
required to take place within the country issuing the underlying currency.
Thus, the Fund might be required to accept or make delivery of the
underlying foreign currency in accordance with any U.S. or foreign
regulations regarding the maintenance of foreign banking arrangements by
U.S. residents and might be required to pay any fees, taxes and charges
associated with such delivery assessed in the issuing country.
Forward Contracts. A forward foreign currency exchange contract
("forward contract") is a contract to purchase or sell a currency at a
future date. The two parties to the contract set the number of days and the
price. Forward contracts are used as a hedge against future movements in
foreign exchange rates. The Fund may enter into forward contracts to
purchase or sell foreign currencies for a fixed amount of U.S. dollars or
other foreign currency.
Forward contracts may serve as long hedges -- for example, the Fund may
purchase a forward contract to lock in the U.S. dollar price of a security
denominated in a foreign currency that the Fund intends to acquire. Forward
contracts may also serve as short hedges -- for example, the Fund may sell a
forward contract to lock in the U.S. dollar equivalent of the proceeds from
the anticipated sale of a security denominated in a foreign currency or from
anticipated dividend or interest payments denominated in a foreign currency.
Dreyfus may seek to hedge against changes in the value of a particular
currency by using forward contracts on another foreign currency or basket of
currencies, the value of which Dreyfus believes will bear a positive
correlation to the value of the currency being hedged.
The cost to the Fund of engaging in forward contracts varies with
factors such as the currency involved, the length of the contract period and
the market conditions then prevailing. Because forward contracts are
usually entered into a principal basis, no fees or commissions are involved.
When the Fund enters into a forward contract, it relies on the counterparty
to make or take delivery of the underlying currency at the maturity of the
contract. Failure by the counterparty to do so would result in the loss of
any expected benefit of the transaction.
Buyers and sellers of forward contracts can enter into offsetting
closing transactions by selling or purchasing, respectively, an instrument
identical to the instrument purchased or sold. Secondary markets generally
do not exist for forward contracts, with the result that closing
transactions generally can be made for forward contracts only by negotiating
directly with the counterparty. Thus, there can be no assurance that the
Fund will in fact be able to close out a forward contract at a favorable
price prior to maturity. In addition, in the event of insolvency of the
counterparty, the Fund might be unable to close out a forward contract at
any time prior to maturity. In either event, the Fund would continue to be
subject to market risk with respect to the position, and would continue to
be required to maintain a position in the securities or currencies that are
the subject of the hedge or to maintain cash or securities in a segregated
account.
The precise matching of forward currency contract amounts and the value
of the securities involved generally will not be possible because the value
of such securities measured in the foreign currency will change after the
forward contract has been established. Thus, the Fund might need to
purchase or sell foreign currencies in the spot (cash) market to the extent
such foreign currencies are not covered by forward contracts. The
projection of short-term currency market movements is extremely difficult,
and the successful execution of a short-term hedging strategy is highly
uncertain.
Swaps, Caps, Collars and Floors. Swap agreements, including interest
rate, equity index and currency swaps, caps, collars and floors, may be
individually negotiated and structured to include exposure to a variety of
different types of investments or market factors. Swaps involve two parties
exchanging a series of cash flows at specified intervals. In the case of an
interest rate swap, the parties exchange interest payments based on an
agreed upon principal amount (referred to as the "notional principal
amount"). Under the most basic scenario, Party A would pay a fixed rate on
the notional principal amount to Party B, which would pay a floating rate on
the same notional principal amount to Party A. Depending on their
structure, swap agreements may increase or decrease the Fund's exposure to
long or short-term interest rates (in the U.S. or abroad), foreign currency
values, mortgage securities, corporate borrowing rates, or other factors.
Swap agreements can take many different forms and are known by a variety of
names.
In a typical cap or floor agreement, one party agrees to make payments
only under specified circumstances, usually in return for payment of a fee
by the other party. For example, the buyer of an interest rate cap obtains
the right to receive payments to the extent that a specified interest rate
exceeds an agreed-upon level, while the seller of an interest rate floor is
obligated to make payments to the extent that a specified interest rate
falls below an agreed-upon level. An interest rate collar combines elements
of buying a cap and selling a floor.
The Fund will set aside cash or appropriate liquid assets to cover its
current obligations under swap transactions. If the Fund enters into a swap
agreement on a net basis (that is, the two payment streams are netted out,
with the Fund receiving or paying, as the case may be, only the net amount
of the two payments), the Fund will maintain cash or liquid assets with a
daily value at least equal to the excess, if any, of the Fund's accrued
obligations under the swap agreement over the accrued amount the Fund is
entitled to receive under the agreement. If the Fund enters into a swap
agreement on other than a net basis or writes a cap, collar or floor, it
will maintain cash or liquid assets with a value equal to the full amount of
the Fund's accrued obligations under the agreement.
The most important factor in the performance of swap agreements is the
change in the specific interest rate, currency or other factor(s) that
determine the amounts of payments due to and from the Fund. If a swap
agreement calls for payments by the Fund, the Fund must be prepared to make
such payments when due. In addition, if the counterparty's creditworthiness
declines, the value of a swap agreement would likely decline, potentially
resulting in losses.
The Fund will enter into swaps, caps, collars and floors only with
banks and recognized securities dealers believed by Dreyfus to present
minimal credit risks in accordance with guidelines established by the Board.
If there is a default by the other party to such a transaction, the Fund
will have to rely on its contractual remedies (which may be limited by
bankruptcy, insolvency or similar laws) pursuant to the agreement relating
to the transaction.
The Fund understands that it is the position of the staff of the SEC
that assets involved in swap transactions are illiquid and, therefore, are
subject to the limitations on illiquid investments.
Master/Feeder Option. The Company may in the future seek to achieve
the Fund's investment objective by investing all of the Fund's net
investable assets in another investment company having the same investment
objective and substantially the same investment policies and restrictions as
those applicable to the Fund. Shareholders of the Fund will be given at
least 30 days' prior notice of any such investment. Such investment would
be made only if the Company's Board of Directors determines it to be in the
best interest of the Fund and its shareholders. In making that
determination, the Company's Board of Directors will consider, among other
things, the benefits to shareholders and/or the opportunity to reduce costs
and achieve operational efficiencies. Although the Fund believes that the
Directors will not approve an arrangement that is likely to result in higher
costs, no assurance is given that costs will be materially reduced if this
option is implemented.
Investment Restrictions
The following limitations have been adopted by the Fund. The Fund may
not change any of these fundamental investment limitations without the
consent of: (a) 67% or more of the shares present at a meeting of
shareholders duly called if the holders of more than 50% of the outstanding
shares of the Fund are present or represented by proxy; or (b) more than 50%
of the outstanding shares of the Fund, whichever is less. The Fund may not:
1. Purchase any securities which would cause more than 25% of the
value of the Fund's total assets at the time of such purchase to be invested
in the securities of one or more issuers conducting their principal
activities in the same industry. (For purposes of this limitation, U.S.
Government securities, and state or municipal governments and their
political subdivisions are not considered members of any industry. In
addition, this limitation does not apply to investments in domestic banks,
including U.S. branches of foreign banks and foreign branches of U.S.
banks).
2. Borrow money or issue senior securities as defined in the
Investment Company Act of 1940, as amended (the "1940 Act") except that (a)
the Fund may borrow money in an amount not exceeding one-third of the Fund's
total assets at the time of such borrowings, and (b) the Fund may issue
multiple classes of shares. The purchase or sale of futures contracts and
related options shall not be considered to involve the borrowing of money or
issuance of senior securities.
3. Purchase with respect to 75% of the Fund's total assets securities
of any one issuer (other than securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities) if, as a result, (a) more
than 5% of the Fund's total assets would be invested in the securities of
that issuer, or (b) the Fund would hold more than 10% of the outstanding
voting securities of that issuer.
4. Make loans or lend securities, if as a result thereof more than
one-third of the Fund's total assets would be subject to all such loans. For
purposes of this limitation debt instruments and repurchase agreements shall
not be treated as loans.
5. Purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent the
Fund from investing in securities or other instruments backed by real
estate, including mortgage loans, or securities of companies that engage in
real estate business or invest or deal in real estate or interests therein).
6. Underwrite securities issued by any other person, except to the
extent that the purchase of securities and later disposition of such
securities in accordance with the Fund's investment program may be deemed an
underwriting.
7. Purchase or sell commodities except that the Fund may enter into
futures contracts and related options, forward currency contacts and other
similar instruments.
The Fund may, notwithstanding any other fundamental investment policy
or limitation, invest all of its investable assets in securities of a single
open-end management investment company with substantially the same
investment objective, policies and limitations as the Fund.
The Fund has adopted the following additional non-fundamental
restrictions. These non-fundamental restrictions may be changed without
shareholder approval, in compliance with applicable law and regulatory
policy.
1. The Fund shall not sell securities short, unless it owns or has
the right to obtain securities equivalent in kind and amounts to the
securities sold short, and provided that transactions in futures contracts
and options are not deemed to constitute selling short.
2. The Fund shall not purchase securities on margin, except that the
Fund may obtain such short-term credits as are necessary for the clearance
of transactions, and provided that margin payments in connection with
futures contracts and options shall not constitute purchasing securities on
margin.
3. The Fund shall not purchase oil, gas or mineral leases.
4. The Fund will not purchase or retain the securities of any issuer
if the officers or, Directors of the Fund, its advisers, or managers, owning
beneficially more than one half of one percent of the securities of such
issuer, together own beneficially more than 5% of such securities.
5. The Fund will not purchase securities of issuers (other than
securities issued or guaranteed by domestic or foreign governments or
political subdivisions thereof), including their predecessors, that have
been in operation for less than three years, if by reason thereof, the value
of the Fund's investment in securities would exceed 5% of the Fund's total
assets. For purposes of this limitation, sponsors, general partners,
guarantors and originators of underlying assets may be treated as the issuer
of a security.
6. The Fund will invest no more than 15% of the value of its net
assets in illiquid securities, including repurchase agreements with
remaining maturities in excess of seven days, time deposits with maturities
in excess of seven days and other securities which are not readily
marketable. For purposes of this limitation, illiquid securities shall not
include Section 4(2) Paper and securities which may be resold under Rule
144A under the Securities Act of 1933, provided that the Board of Directors,
or its delegate, determines that such securities are liquid based upon the
trading markets for the specific security.
7. The Fund may not invest in securities of other investment
companies, except as they may be acquired as part of a merger, consolidation
or acquisition of assets and except to the extent otherwise permitted by the
1940 Act.
8. The Fund shall not purchase any security while borrowings
representing more than 5% of the Fund's total assets are outstanding.
9. The Fund will not purchase warrants if at the time of such
purchase: (a) more than 5% of the value of the Fund's assets would be
invested in warrants, or (b) more than 2% of the value of the Fund's assets
would be invested in warrants that are not listed on the New York or
American Stock Exchange (for purposes of this limitation, warrants acquired
by the Fund in units or attached to securities will be deemed to have no
value).
10. The Fund will not purchase puts, calls, straddles, spreads and any
combination thereof if by reason thereof the value of its aggregate
investment in such classes of securities will exceed 5% of its total assets
except that: (a) this limitation shall not apply to standby commitments, and
(b) this limitation shall not apply to the Fund's transactions in futures
contracts and related options.
As an operating policy, the Fund will not invest more than 25% of the value
of its total assets, at the time of such purchase in domestic banks,
including U.S. branches of foreign banks and foreign branches of U.S. banks.
The Company's Board of Directors may change this policy without shareholder
approval. Notice will be given to shareholders if this policy is changed by
the Board.
MANAGEMENT OF THE FUND
PRINCIPAL SHAREHOLDERS
There were no shareholder(s) who owned 5% or more of Class A shares of
the Fund at February 9, 1998.
The following shareholder(s) owned 5% or more of Class B shares of the
Fund at February 9,1998: MLPF & S for the Sole Benefits of Its Customers,
4800 Deer Lake Drive E , Fl.3, Jacksonville, FL 32246-6484: 13% record.
The following shareholder(s) owned 5% or more of Class C shares of the
Fund at February 9,1998: MLPF & S for the Sole Benefits of Its Customers,
4800 Deer Lake Drive E, Fl.3, Jacksonville, FL 32246-6484: 49% record.
The following shareholder(s) owned 5% or more of Class R shares of the
Fund at February 9, 1998: Mac & Co. Mutual Funds Operations, PO Box 3198,
Pittsburgh, PA 15230-3198: 9% record.
FEDERAL LAW AFFECTING MELLON BANK
The Glass-Steagall Act of 1933 prohibits national banks from engaging
in the business of underwriting, selling or distributing securities and
prohibits a member bank of the Federal Reserve System from having certain
affiliations with an entity engaged principally in that business. The
activities of Mellon Bank, N.A. ("Mellon Bank") in informing its customers
of, and performing, investment and redemption services in connection with
the Fund, and in providing services to the Fund as custodian, as well as
Dreyfus' investment advisory activities, may raise issues under these
provisions. Mellon Bank has been advised by its counsel that the activities
contemplated under these arrangements are consistent with its statutory and
regulatory obligations.
Changes in either federal or state statutes and regulations relating to
the permissible activities of banks and their subsidiaries or affiliates, as
well as further judicial or administrative decisions or interpretations of
such future statutes and regulations, could prevent Mellon Bank or Dreyfus
from continuing to perform all or a part of the above services for its
customers and/or the Fund. If Mellon Bank or Dreyfus were prohibited from
serving the Fund in any of its present capacities, the Board of Directors
would seek an alternative provider(s) of such services.
DIRECTORS AND OFFICERS
The Company has a Board composed of eleven Directors which supervises
the Company's investment activities and reviews contractual arrangements
with companies that provide the Fund with services. The following lists the
Directors and officers and their positions with the Company and their
present and principal occupations during the past five years. Each Director
who is an "interested person" of the Company (as defined in the 1940 Act) is
indicated by an asterisk. Each of the Directors also serves as a Trustee of
The Dreyfus/Laurel Funds Trust and The Dreyfus/Laurel Tax-Free Municipal
Funds (collectively, with the Company, the "Dreyfus/Laurel Funds").
Directors of the Company
o+RUTH MARIE ADAMS. Director of the Company; Professor of English and Vice
President Emeritus, Dartmouth College; Senator, United Chapters of Phi
Beta Kappa; Trustee, Woods Hole Oceanographic Institution; from
November 1995 to January 1997, Director, Access Capital Strategic
Community Investment Fund, Inc. - Institutional Investment Portfolio.
Age: 83 years old. Address: 1026 Kendal Lyme Road, Hanover, New
Hampshire 03755.
o+FRANCIS P. BRENNAN. Chairman of the Board of Directors and Assistant
Treasurer of the Company; Director and Chairman, Massachusetts Business
Development Corp.; and from November 1995 to January 1997, Director,
Access Capital Strategic Community Investment Fund, Inc. - Bank
Portfolio. Age: 80 years old. Address: Massachusetts Business
Development Corp., 50 Milk Street, Boston, Massachusetts 02109.
o+JOSEPH S. DIMARTINO, Director of the Company since February 1995. Since
January 1995, Mr. DiMartino has served as Chairman of the Board for
various funds in the Dreyfus Family of Funds. He is also Chairman of
the Board of Staffing Resources, Inc., a temporary placement agency.
Mr. DiMartino also serves as a Director of the Muscular Dystrophy
Association, HealthPlan Services Corporation, a provider of marketing,
administrative and risk management services to health and other benefit
programs; The Noel Group, Inc., a venture capital company and Carlyle
Industries, Inc. (formerly Belding Heminway Company, Inc.), a button
packager and distributor; and Curtis Industries, Inc., a national
distributor of security products, chemicals, and automotive and other
hardware. Mr. DiMartino is also a Board member of 152 other funds in
the Dreyfus Family of Funds. From November 1995 to January 1997,
Director, Access Capital Strategic Community Investment Fund, Inc. -
Institutional Investment Portfolio and Bank Portfolio. For more than
five years prior to January 1995, he was President, a director and,
until August 24, 1994, Chief Operating Officer of Dreyfus and Executive
Vice President and a director of Dreyfus Service Corporation, a wholly-
owned subsidiary of Dreyfus. From August 1994 to December 31, 1994, he
was a director of Mellon Bank Corporation. Age: 54 years old.
Address: 200 Park Avenue, New York, New York 10166.
o+JAMES M. FITZGIBBONS. Director of the Company; Chairman, Howes Leather
Company, Inc.; Director, Fiduciary Trust Company; Chairman, CEO and
Director, Fieldcrest-Cannon Inc.; Director, Lumber Mutual Insurance
Company; Director, Barrett Resources, Inc.; from November 1995 to
January 1997, Director, Access Capital Strategic Community Investment
Fund, Inc. - Bank Portfolio. Age: 63 years old. Address: 40 Norfolk
Road, Brookline, Massachusetts 02167.
o*J. TOMLINSON FORT. Director of the Company; Partner, Reed, Smith, Shaw &
McClay (law firm). From November 1995 to January 1997, Director,
Access Capital Strategic Community Investment Fund, Inc. - Bank
Portfolio. Age: 69 years old. Address: 204 Woodcock Drive,
Pittsburgh, Pennsylvania 15215.
o+ARTHUR L. GOESCHEL. Director of the Company; Director, Calgon Carbon
Corporation; Director, Cerex Corporation; Director, National Picture
Frame Corporation; former Chairman of the Board and Director, Rexene
Corporation; Chairman of the Board and Director, Tetra Corporation 1991-
1993; Director, Medalist Corporation 1992-1993. From November 1995 to
January 1997, Director, Access Capital Strategic Community Investment
Fund, Inc. - Institutional Investment Portfolio. Age: 76 years old.
Address: Way Hallow Road and Woodland Road, Sewickley, Pennsylvania
15143.
o+KENNETH A. HIMMEL. Director of the Company; Former Director, The Boston
Company, Inc. ("TBC") and Boston Safe Deposit and Trust Company;
President and Chief Executive Officer, Himmel & Co., Inc.; Vice
Chairman, Sutton Place Gourmet, Inc.; Managing Partner, Franklin
Federal Partners. From November 1995 to January 1997, Director, Access
Capital Strategic Community Investment Fund, Inc. - Bank Portfolio.
Age: 51 years old. Address: 625 Madison Avenue, New York, New York
10022.
o*ARCH S. JEFFERY. Director of the Company; Financial Consultant. From
November 1995 to January 1997, Director, Access Capital Strategic
Community Investment Fund, Inc. - Institutional Investment Portfolio.
Age: 80 years old. Address: 1817 Foxcroft Lane, Unit 306, Allison
Park, Pennsylvania 15101.
o+STEPHEN J. LOCKWOOD. Director of the Company; President and CEO, LDG
Management Company Inc.; CEO, LDG Reinsurance Underwriters, SRRF
Management Inc. and Medical Reinsurance Underwriters Inc.; from
November 1995 to January 1997, Director, Access Capital Strategic
Community Investment Fund, Inc. - Institutional Investment Portfolio.
Age: 50 years old. Address: 401 Edgewater Place, Wakefield,
Massachusetts 01880.
o+JOHN J. SCIULLO. Director of the Company; Dean Emeritus and Professor of
Law, Duquesne University Law School; Director, Urban Redevelopment
Authority of Pittsburgh; from November 1995 to January 1997, Director,
Access Capital Strategic Community Investment Fund, Inc. -
Institutional Investment Portfolio. Age: 66 years old. Address: 321
Gross Street, Pittsburgh, Pennsylvania 15224.
o+ROSLYN M. WATSON. Director of the Company; Principal, Watson Ventures,
Inc., Director, American Express Centurion Bank; Director,
Harvard/Pilgrim Community Health Plan, Inc.; from November 1995 to
January 1997, Director, Access Capital Strategic Community Investment
Fund, Inc. - Bank Portfolio; Director, Massachusetts Electric Company;
Director, the Hymans Foundation, Inc., prior to February, 1993; Real
Estate Development Project Manager and Vice President, The Gunwyn
Company. Age: 48 years old. Address: 25 Braddock Park, Boston,
Massachusetts 02116-5816.
________________________________
* "Interested person" of the Company, as defined in the 1940 Act.
o Member of the Audit Committee.
+ Member of the Nominating Committee.
Officers of the Company
#MARIE E. CONNOLLY. President and Treasurer of the Company. President,
Chief Executive Officer, Chief Compliance Officer and a director of the
Distributor and Funds Distributor, Inc., the ultimate parent of which
is Boston Institutional Group, Inc. Age: 40 years old.
#DOUGLAS C. CONROY. Vice President and Assistant Secretary of the Company.
Assistant Vice President of Funds Distributor, Inc. From April 1993 to
January 1995, he was a Senior Fund Accountant for Investors Bank &
Trust Company. From December 1991 to March 1993, he was employed as a
fund accountant at TBC. Age: 28 years old.
#RICHARD W. INGRAM. Vice President and Assistant Treasurer of the Company.
Executive Vice President of the Distributor and Funds Distributor, Inc.
From March 1994 to November 1995, he was Vice President and Division
Manager for First Data Investor Services Group. From 1989 to 1994, he
was Vice President, Assistant Treasurer and Tax Director - Mutual Funds
of TBC. Age: 42 years old.
#CHRISTOPHER J. KELLEY. Vice President and Assistant Secretary of the
Company. Vice President and Senior Associate General Counsel of Funds
Distributor, Inc. and the Distributor, and an officer of certain
investment companies advised or administered by Harris Trust and
Savings Bank, Waterhouse Asset Management, Inc., J.P. Morgan & Co.
Incorporated and Montgomery Asset Management, L.P., or their respective
affiliates. From April 1994 to July 1996, Mr. Kelley was Assistant
Counsel at Forum Financial Group. From October 1992 to March 1994, Mr.
Kelley was employed by Putnam Investments in legal and compliance
capacities. Age: 33 years old.
#KATHLEEN K. MORRISEY. Vice President and Assistant Secretary of the
Company. Vice President and Assistant Secretary of Funds Distributor,
Inc. Manager of Treasury Services Administration and an officer of
certain investment companies advised or administered by J.P. Morgan &
Co. Incorporated, Montgomery Asset Management, L.P., and Dresdner RCM
Global Investors, Inc., or their respective affiliates. From July 1994
to November 1995, she was a Fund Accountant II for Investors Bank &
Trust Company. Prior to that she was a Finance student at Stonehill
College in North Easton, M.A. Age: 25 years old.
#MARY A. NELSON. Vice President and Assistant Treasurer of the Company.
Vice President of the Distributor and Funds Distributor, Inc. From
September 1989 to July 1994, she was an Assistant Vice President and
Client Manager for TBC. Age: 33 years old.
#MICHAEL S. PETRUCELLI. Vice President, Assistant Treasurer and Assistant
Secretary of the Company. Senior Vice President and director of
Strategic Client Initiatives of Funds Distributor, Inc. and an officer
of certain investment companies advised or administered by J.P. Morgan
& Co. Incorporated. From December 1989 through November, 1996, he was
employed by GE Investments where he held various financial, business
development and compliance positions. He also served as Treasurer of
the GE Funds and as Director of GE Investment Services. Age: 36 years
old.
#JOSEPH F. TOWER, III. Vice President and Assistant Treasurer of the
Company. Senior Vice President, Treasurer and Chief Financial Officer
of the Distributor and Funds Distributor, Inc. From 1988 to August
1994, he was employed by TBC where he held various management positions
in the Corporate Finance and Treasury areas. Age: 35 years old.
#ELBA VASQUEZ. Vice President and Assistant Secretary of the Company.
Assistant Vice President of Funds Distributor, Inc. She has been an
employee since May 1996 as a Sales Associate in the distribution of
World Equity Benchmark Shares ("WEBS"). From March 1990 to May 1996,
she was employed by U.S. Trust Company of New York. As an officer of
U.S. Trust, she held various positions in the sales and marketing of
their proprietary family of mutual funds. Age: 36 years old.
The address of each Officer of the Company is 200 Park Avenue, New
York, New York 10166.
________________
# Officer also serves as an officer for other investment companies advised
by Dreyfus, including The Dreyfus/Laurel Funds Trust and The
Dreyfus/Laurel Tax-Free Municipal Funds.
The officers and Directors of the Company as a group owned beneficially
less than 1% of the total shares of the Fund outstanding as of February 9,
1998.
No officer or employee of the Distributor (or of any parent, subsidiary
or affiliate thereof) receives any compensation from the Company for serving
as an officer or Director of the Company. In addition, no officer or
employee of Dreyfus (or of any parent, subsidiary or affiliate thereof)
serves as an officer or Director of the Company. The Dreyfus/Laurel Funds
pay each Director/Trustee who is not an "interested person" of the Company
(as defined in the 1940 Act), $27,000 per annum (and an additional $25,000
for the Chairman of the Board of Directors/Trustees of the Dreyfus/Laurel
Funds). In addition, the Dreyfus/Laurel Funds pay each Director/Trustee who
is not an "interested person" of the Company (as defined in the 1940 Act),
$1,000 per joint Dreyfus/Laurel Funds Board meeting attended, plus $750 per
joint Dreyfus/Laurel Funds Audit Committee meeting attended, and reimburse
each Director/Trustee who is not an "interested person" of the Company (as
defined in the 1940 Act), for travel and out-of-pocket expenses.
For the fiscal year ended October 31, 1997, the aggregate amount of
fees and expenses received by each current Director from the Company and all
other funds in the Dreyfus Family of Funds for which such person is a Board
member were as follows:
Total Compensation
from the Company
Aggregate and Fund Complex
Name of Board Compensation Paid to Board
Member From the Company# Member****
Ruth Marie Adams $10,000 $31,500
Francis P. Brennan* $19,833 $63,750
Joseph S. DiMartino** None $517,075***
James M. Fitzgibbons $10,583 $31,500
J. Tomlinson Fort** None None
Arthur L. Goeschel $11,500 $37,500
Kenneth A. Himmel $10,167 $32,500
Arch S. Jeffery** None None
Stephen J. Lockwood $11,167 $33,250
John J. Sciullo $11,167 $32,500
Roslyn M. Watson $11,167 $32,500
# Amounts required to be paid by the Company directly to the non-
interested Directors, that would be applied to offset a portion of
the management fee payable to Dreyfus, are in fact paid directly by
Dreyfus to the non-interested Directors. Amount does not include
reimbursed expenses for attending Board meetings, which amounted to
$14,973 for the Company.
* Compensation of Francis Brennan includes $25,000 paid by the
Dreyfus/Laurel Funds to be Chairman of the Board.
** Joseph S. DiMartino, J. Tomlinson Fort and Arch S. Jeffery are paid
directly by Dreyfus for serving as Board members of the Company and
the funds in the Dreyfus/Laurel Funds. For the fiscal year ended
October 31, 1997, the aggregate amount of fees and expenses received
by Joseph DiMartino, J. Tomlinson Fort and Arch S. Jeffery from
Dreyfus for serving as a Board member of the Company were $11,833,
$11,833 and $11,500, respectively, and for serving as a Board member
of all funds in the Dreyfus/Laurel Funds (including the Company) were
$35,500, $35,500 and $34,500, respectively. In addition, Dreyfus
reimbursed Messrs. DiMartino, Fort and Jeffery a total of $4,494 for
expenses attributable to the Company's Board meetings, which is not
included in the $14,973 amount in note # above.
***Actual amount for the year ending December 31, 1997.
****The Dreyfus Family of Funds consists of 152 mutual funds.
MANAGEMENT ARRANGEMENTS
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Management of the Fund."
Management Agreement. Dreyfus serves as the investment manager for the
Fund pursuant to an Investment Management Agreement with the Company dated
April 4, 1994 (the "Management Agreement"), transferred to Dreyfus as of
October 17, 1994. Pursuant to the Management Agreement, Dreyfus provides, or
arranges for one or more third parties to provide, investment advisory,
administrative, custody, fund accounting and transfer agency services to the
Fund. As investment manager, Dreyfus manages the Fund by making investment
decisions based on the Fund's investment objective, policies and
restrictions. The Management Agreement is subject to review and approval at
least annually by the Board of Directors.
The Fund paid management fees of $278,375, $1,035,858 and $2,337,782
for the fiscal years ended October 31, 1995, October 31, 1996 and October
31, 1997, respectively.
The Management Agreement will continue from year to year provided that
a majority of the Directors who are not interested persons of the Company
and either a majority of all Directors or a majority of the shareholders of
the Fund approve its continuance. The Management Agreement was last
approved by the Board of Directors on January 28, 1998 to continue until
April 4, 1999. The Company may terminate the Management Agreement, without
prior notice to Dreyfus, upon the vote of a majority of the Board of
Directors or upon the vote of a majority of the Fund's outstanding voting
securities on sixty days' written notice to Dreyfus. Dreyfus may terminate
the Management Agreement upon sixty (60) days' written notice to the
Company. The Management Agreement will terminate immediately and
automatically upon its assignment.
The following persons are officers and/or directors of Dreyfus: W.
Keith Smith, Chairman of the Board; Christopher M. Condron, President, Chief
Executive Officer, Chief Operating Officer and a director; Stephen E.
Canter, Vice Chairman, Chief Investment Officer and a director; Lawrence S.
Kash, Vice Chairman-Distribution and a director; William T. Sandalls, Jr.,
Senior Vice President and Chief Financial Officer; Mark N. Jacobs, Vice
President, General Counsel and Secretary; Patrice M. Kozlowski, Vice
President-Corporate Communications; Mary Beth Leibig, Vice President-Human
Resources; Jeffrey N. Nachman, Vice President-Mutual Fund Accounting; Andrew
S. Wasser, Vice President-Information Systems; William V. Healey, Assistant
Secretary; and Mandell L. Berman, Burton C. Borgelt and Frank V. Cahouet and
Richard Syron, directors.
PURCHASE OF FUND SHARES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "How to Buy Fund Shares."
The Distributor. The Distributor serves as the Fund's distributor
pursuant to an agreement which is renewable annually. The Distributor also
acts as distributor for the other funds in the Dreyfus Premier Family of
Funds, for funds in the Dreyfus Family of Funds and for certain other
investment companies.
Sales Loads--Class A. The scale of sales loads applies to purchases of
Class A shares made by any "purchaser," which term includes an individual
and/or spouse purchasing securities for his, her or their own account or for
the account of any minor children, or a trustee or other fiduciary
purchasing securities for a single trust estate or a single fiduciary
account (including a pension, profit-sharing or other employee benefit trust
created pursuant to a plan qualified under Section 401 of the Internal
Revenue Code of 1986, as amended the ("the Code") although more than one
beneficiary is involved; or a group of accounts established by or on behalf
of the employees of an employer or affiliated employers pursuant to an
employee benefit plan or other program (including accounts established
pursuant to Sections 403(b), 408(k), and 457 of the Code); or an organized
group which has been in existence for more than six months, provided that it
is not organized for the purpose of buying redeemable securities of a
registered investment company and provided that the purchases are made
through a central administration or a single dealer, or by other means which
result in economy of sales effort or expense.
Set forth below is an example of the method of computing the offering
price of the Fund's Class A shares. The example assumes a purchase of Class
A shares of the Fund aggregating less than $50,000 subject to the schedule
of sales charges set forth in the Fund's Prospectus at a price based upon
the net asset value of the Fund's Class A shares at the close of business on
October 31, 1997.
Net Asset Value per Share $18.89
Per Share Sales Charge - 5.75%*
of offering price (6.10% of
net asset value per share) $ 1.15
Per Share Offering Price to
the Public $20.04
* Class A shares purchased by shareholders beneficially owning Class A
shares on November 30, 1996, but who opened their accounts after
December 19, 1994, are subject to a different sales load schedule as
described under "How to Buy Fund Shares - Class A Shares" in the Fund's
Prospectus.
TeleTransfer Privilege. TeleTransfer purchase orders may be made at
any time. Purchase orders received by 4:00 P.M., New York time, on any
business day that Dreyfus Transfer, Inc., the Fund's transfer and dividend
disbursing agent (the "Transfer Agent"), and the New York Stock Exchange
("NYSE") are open for business will be credited to the shareholder's Fund
account on the next bank business day following such purchase order.
Purchase orders made after 4:00 P.M., New York time, on any business day the
Transfer Agent and the NYSE are open for business, or orders made on
Saturday, Sunday or any Fund holiday (e.g., when the NYSE is not open for
business), will be credited to the shareholder's Fund account on the second
bank business day following such purchase order. To qualify to use the
TeleTransfer Privilege, the initial payment for purchase of Fund shares must
be drawn on, and redemption proceeds paid to, the same bank and account as
are designated on the Account Application or Shareholder Services Form on
file. If the proceeds of a particular redemption are to be wired to an
account at any other bank, the request must be in writing and signature-
guaranteed. See "Redemption of Shares - TeleTransfer Privilege."
Reopening an Account. An investor may reopen an account with a minimum
investment of $100 without filing a new Account Application during the
calendar year the account is closed or during the following calendar year,
provided the information on the old Account Application is still applicable.
In-Kind Purchases. If the following conditions are satisfied, the Fund
may at its discretion, permit the purchase of shares through an "in-kind"
exchange of securities. Any securities exchanged must meet the investment
objective, policies and limitations of the Fund, must have a readily
ascertainable market value, must be liquid and must not be subject to
restrictions on resale. The market value of any securities exchanged, plus
any cash, must be at least equal to $25,000. Shares purchased in exchange
for securities generally cannot be redeemed for fifteen days following the
exchange in order to allow time for the transfer to settle.
The basis of the exchange will depend upon the relative net asset value
of the shares purchased and securities exchanged. Securities accepted by
the Fund will be valued in the same manner as the Fund values its assets.
Any interest earned on the securities following their delivery to the Fund
and prior to the exchange will be considered in valuing the securities. All
interest, dividends, subscription or other rights attached to the securities
become the property of the Fund, along with the securities. For further
information about "in-kind" purchases, call 1-800-645-6561.
DISTRIBUTION AND SERVICE PLANS
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Distribution Plans
(Class A Plan and Class B and C Plans)."
Class A, B and C shares are subject to annual fees for distribution and
shareholder services.
Distribution Plan--Class A Shares. The Securities and Exchange
Commission ("SEC") has adopted Rule 12b-1 under the 1940 Act ("Rule")
regulating the circumstances under which investment companies such as the
Company may, directly or indirectly, bear the expenses of distributing their
shares. The Rule defines distribution expenses to include expenditures for
"any activity which is primarily intended to result in the sale of fund
shares." The Rule, among other things, provides that an investment company
may bear such expenses only pursuant to a plan adopted in accordance with
the Rule. With respect to the Class A shares of the Fund, the Company has
adopted a Distribution Plan ("Class A Plan"), and may enter into Agreements
with Agents pursuant to the Class A Plan.
Under the Class A Plan, Class A shares of the Fund may spend annually
up to 0.25% of the average of its daily net assets for costs and expenses
incurred in connection with the distribution of, and shareholder servicing
with respect to, Fund shares.
The Class A Plan provides that a report of the amounts expended under
the Class A Plan, and the purposes for which such expenditures were
incurred, must be made to the Company's Directors for their review at least
quarterly. In addition, the Class A Plan provides that it may not be
amended to increase materially the costs which the Fund may bear for
distribution pursuant to the Class A Plan without approval of the Fund's
shareholders, and that other material amendments of the Class A Plan must be
approved by the vote of a majority of the Directors and of the Directors who
are not "interested persons" of the Company (as defined in the 1940 Act) and
who do not have any direct or indirect financial interest in the operation
of the Class A Plan, cast in person at a meeting called for the purpose of
considering such amendments. The Class A Plan is subject to annual approval
by the entire Board of Directors and by the Directors who are neither
interested persons nor have any direct or indirect financial interest in the
operation of the Class A Plan, by vote cast in person at a meeting called
for the purpose of voting on the Class A Plan. The Class A Plan was so
approved by the Directors at a meeting held on January 28, 1998. The Class
A Plan is terminable, as to the Fund's Class A shares, at any time by vote
of a majority of the Directors who are not interested persons and have no
direct or indirect financial interest in the operation of the Class A Plan
or by vote of the holders of a majority of the outstanding shares of such
class of the Fund.
Distribution and Service Plans -- Class B and C Shares. In addition to
the above described Plan for Class A shares, the Company's Board of
Directors has adopted a Service Plan (the "Service Plan") under the Rule for
Class B and Class C shares, pursuant to which the Fund pays the Distributor
and Dreyfus Service Corporation for the provision of certain services to the
holders of Class B and C shares. The Company's Board of Directors has also
adopted a Distribution Plan pursuant to the Rule with respect to Class B and
C shares (the "Distribution Plan"). The Company's Board of Directors
believes that there is a reasonable likelihood that the Distribution and
Service Plans (the "Plans") will benefit the Fund and the holders of Class B
and C shares.
For the year ended October 31, 1997, the distribution and service fees
paid by the Fund were as follows:
Class A Class B Class C
Dreyfus Premier Small
Company Stock Fund:
Distribution Plan Fee $16,771 $75,346 $10,299
Service Plan Fee N/A $25,116 $ 3,433
Class R shares bear no distribution or service fees.
A quarterly report of the amounts expended under each Plan, and the
purposes for which such expenditures were incurred, must be made to the
Directors for their review. In addition, each Plan provides that it may not
be amended to increase materially the cost which holders of Class B or C
shares may bear pursuant to the Plan without the approval of the holders of
such Classes and that other material amendments of the Plan must be approved
by the Board of Directors and by the Directors who are not interested
persons of the Fund and have no direct or indirect financial interest in the
operation of the Plan or in any agreements entered into in connection with
the Plan, by vote cast in person at a meeting called for the purpose of
considering such amendments. Each Plan is subject to annual approval by
such vote of the Directors cast in person at a meeting called for the
purpose of voting on the Plan. Each Plan was so approved by the Directors
at a meeting held on January 28, 1998. Each Plan may be terminated at any
time by vote of a majority of the Directors who are not interested persons
and have no direct or indirect financial interest in the operation of the
Plan or in any agreements entered into in connection with the Plan or by
vote of the holders of a majority of Class B and C shares.
REDEMPTION OF FUND SHARES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "How to Redeem Fund
Shares."
Stock Certificates; Signatures. Any certificates representing Fund
shares to be redeemed must be submitted with the redemption request.
Written redemption requests must be signed by each shareholder, including
each holder of a joint account, and each signature must be guaranteed.
Signatures on endorsed certificates submitted for redemption also must be
guaranteed. The Transfer Agent has adopted standards and procedures
pursuant to which signature-guarantees in proper form generally will be
accepted from domestic banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies
and savings associations as well as from participants in the NYSE Medallion
Signature Program, the Securities Transfer Agents Medallion Program
("STAMP") and the Stock Exchanges Medallion Program. Guarantees must be
signed by an authorized signatory of the guarantor and "Signature-
Guaranteed" must appear with the signature. The Transfer Agent may request
additional documentation from corporations, executors, administrators,
trustees or guardians, and may accept other suitable verification
arrangements from foreign investors, such as consular verification. For
more information with respect to signature-guarantees, please call one of
the telephone numbers listed on the cover.
Dreyfus TeleTransfer Privilege. Investors should be aware that if they
have selected the Dreyfus TeleTransfer Privilege, any request for a wire
redemption will be effected as a Dreyfus TeleTransfer transaction through
the Automated Clearing House system unless more prompt transmittal
specifically is requested. Redemption proceeds will be on deposit in the
investor's account at an ACH member bank ordinarily two business days after
receipt of the redemption request. See "Purchase of Fund Shares--Dreyfus
TeleTransfer Privilege."
Redemption Commitment. The Fund has committed itself to pay in cash
all redemption requests by any shareholder of record of the Fund, limited in
amount during any 90-day period to the lesser of $250,000 or 1% of the value
of the Fund's net assets at the beginning of such period. Such commitment
is irrevocable without the prior approval of the SEC. In the case of
requests for redemptions in excess of such amount, the Board of Directors
reserves the right to make payments in whole or in part in securities or
other assets in case of an emergency or any time a cash distribution would
impair the liquidity of the Fund to the detriment of the existing
shareholders. In this event, the securities would be valued in the same
manner as the Fund's portfolio is valued. If the recipient sold such
securities, brokerage charges would be incurred.
Suspension of Redemptions. The right of redemption may be suspended or
the date of payment postponed (a) during any period when the NYSE is closed
(other than customary weekend and holiday closings), (b) when trading in the
markets the Fund ordinarily utilizes is restricted, or when an emergency
exists as determined by the SEC so that disposal of the Fund's investments
or determination of its net asset value is not reasonably practicable, or
(c) for such other periods as the SEC by order may permit to protect the
Fund's shareholders.
SHAREHOLDER SERVICES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Shareholder Services."
Fund Exchanges. Shares of any Class of the Fund may be exchanged for
shares of the respective Class of certain other funds advised or
administered by Dreyfus. Shares of the same Class of such funds purchased
by exchange will be purchased on the basis of relative net asset value per
share as follows:
A. Exchanges for shares of funds that are offered without a
sales load will be made without a sales load.
B. Shares of funds purchased without a sales load may be exchanged for
shares of other funds sold with a sales load, and
the applicable sales load will be deducted.
C. Shares of funds purchased with a sales load may be exchanged
without a sales load for shares of other funds sold without a
sales load.
D. Shares of funds purchased with a sales load, shares of funds
acquired by a previous exchange from shares purchased with a sales
load and additional shares acquired through reinvestment of
dividends or other distributions of any such funds (collectively
referred to herein as "Purchased Shares") may be exchanged for
shares of other funds sold with a sales load (referred to herein
as "Offered Shares"), provided that, if the sales load applicable
to the Offered Shares exceeds the maximum sales load that could
have been imposed in connection with the Purchased Shares (at the
time the Purchased Shares were acquired), without giving effect to
any reduced loads, the difference will be deducted.
E. Shares of funds subject to a contingent deferred sales charge
("CDSC") that are exchanged for shares of another fund will be
subject to the higher applicable CDSC of the two funds, and for
purposes of calculating CDSC rates and conversion periods, if any,
will be deemed to have been held since the date shares being
exchanged were initially purchased.
To accomplish an exchange under item D above, shareholders must notify
the Transfer Agent of their prior ownership of fund shares and their account
number.
Exchanges of Class R shares held by a Retirement Plan may be made only
between the investor's Retirement Plan account in one fund and such
investor's Retirement Plan account in another fund.
To request an exchange, an investor or an investor's Agent acting on
the investor's behalf, must give exchange instructions to the Transfer Agent
in writing or by telephone. The ability to issue exchange instructions by
telephone is given to all Fund shareholders automatically, unless the
investor checks the applicable "No" box on the Account Application,
indicating that the investor specifically refuses this Privilege. By using
the Telephone Exchange Privilege, the investor authorizes the Transfer Agent
to act on telephonic instructions (including over The Dreyfus Touchr
automated telephone system) from any person representing himself or herself
to be the investor, or a representative of the investor's Agent, and
reasonably believed by the Transfer Agent to be genuine. Telephone
exchanges may be subject to limitations as to the amount involved or the
number of telephone exchanges permitted. Shares issued in certificate form
are not eligible for telephone exchange.
To establish a personal retirement plan by exchange, shares of the fund
being exchanged must have a value of at least the minimum initial investment
required for shares of the fund into which the exchange is being made. The
minimum initial investment is generally $750 for Dreyfus-sponsored Keogh
Plans, IRAs (including regular IRAs, spousal IRAs for a non-working spouse,
Roth IRAs, IRAs set up under a Simplified Employee Pension Plan ("SEP-
IRAs"), and rollover IRAs), and 403(b)(7) Plans with only one participant,
and $500 for Dreyfus-sponsored Education IRAs. To exchange shares held in
corporate plans, 403(b)(7) Plans and SEP-IRAs with more than one
participant, the minimum initial investment is generally $100 if the plan
has at least $2,500 invested among shares of the same Class of the funds in
the Dreyfus Premier Family of Funds or the Dreyfus Family of Funds. To
exchange shares held in a personal retirement plan account, the shares
exchanged must have a current value of at least $100.
Dreyfus Auto-Exchange Privilege. The Dreyfus Auto-Exchange Privilege
permits an investor to purchase, in exchange for shares of the Fund, shares
of the same Class of another fund in the Dreyfus Premier Family of Funds or
the Dreyfus Family of Funds. This privilege is available only for existing
accounts. With respect to Class R shares held by a Retirement Plan,
exchanges may be made only between the investor's Retirement Plan account in
one fund and such investor's Retirement Plan account in another fund.
Shares will be exchanged on the basis of relative net asset value as
described above under "Fund Exchanges." Enrollment in or modification or
cancellation of this privilege is effective three business days following
notification by the investor. An investor will be notified if the
investor's account falls below the amount designated to be exchanged under
this privilege. In this case, an investor's account will fall to zero
unless additional investments are made in excess of the designated amount
prior to the next Auto-Exchange transaction. Shares held under IRA and
other retirement plans are eligible for this privilege. Exchanges of IRA
shares may be made between IRA accounts and from regular accounts to IRA
accounts, but not from IRA accounts to regular accounts. With respect to
all other retirement accounts, exchanges may be made only among those
accounts.
Fund Exchanges and Dreyfus Auto-Exchange Privilege are available to
shareholders resident in any state in which shares of the fund being
acquired may legally be sold. Shares may be exchanged only between accounts
having identical names and other identifying designations.
Shareholder Services Forms and prospectuses of the other funds may be
obtained by calling 1-800-554-4611. The Fund reserves the right to reject
any exchange request in whole or in part. The Fund Exchange service or
Dreyfus Auto-Exchange Privilege may be modified or terminated at any time
upon notice to shareholders.
Automatic Withdrawal Plan. The Automatic Withdrawal Plan permits an
investor with a $5,000 minimum account to request withdrawal of a specified
dollar amount (minimum of $50) on either a monthly or quarterly basis.
Withdrawal payments are the proceeds from sales of Fund shares, not the
yield on the shares. If withdrawal payments exceed reinvested dividends and
distributions, the investor's shares will be reduced and eventually may be
depleted. Automatic Withdrawal may be terminated at any time by the
investor, the Fund or the Transfer Agent. Shares for which certificates
have been issued may not be redeemed through the Automatic Withdrawal Plan.
Dividend Sweep. Dividend Sweep allows investors to invest
automatically their dividends or dividends and capital gain distributions,
if any, from the Fund in shares of the same Class of another fund in the
Dreyfus Premier Family of Funds or the Dreyfus Family of Funds of which the
investor is a shareholder. Shares of the same Class of other funds
purchased pursuant to this privilege will be purchased on the basis of
relative net asset value per share as follows:
A. Dividends and other distributions paid by a fund may be
invested without imposition of a sales load in shares of other
funds that are offered without a sales load.
B. Dividends and other distributions paid by a fund which does
not charge a sales load may be invested in shares of other funds
sold with a sales load, and the applicable sales load will be
deducted.
C. Dividends and other distributions paid by a fund which
charges a sales load may be invested in shares of other funds sold
with a sales load (referred to herein as "Offered Shares"),
provided that, if the sales load applicable to the Offered Shares
exceeds the maximum sales load charged by the fund from which
dividends or distributions are being swept, without giving effect
to any reduced loads, the difference will be deducted.
D. Dividends and other distributions paid by a fund may be
invested in shares of other funds that impose a contingent
deferred sales charge ("CDSC") and the applicable CDSC, if any,
will be imposed upon redemption of such shares.
Corporate Pension/Profit-Sharing and Retirement Plans. The Fund makes
available to corporations a variety of prototype pension and profit-sharing
plans including a 401(k) Salary Reduction Plan. In addition, the Fund makes
available Keogh Plans, IRAs (including regular IRAs), spousal IRAs for a non-
working spouse, Roth IRAs, SEP-IRAs, Education IRAs and IRA, "Rollover
Accounts", and 403(b)(7) Plans. Plan support services also are available.
Investors who wish to purchase Fund shares in conjunction with a Keogh
Plan, a 403(b)(7) Plan or an IRA, including an SEP-IRA, may request from the
Distributor forms for adoption of such plans.
The entity acting as custodian for Keogh Plans, 403(b)(7) Plans or IRAs
may charge a fee, payment of which could require the liquidation of shares.
All fees charged are described in the appropriate form.
Shares may be purchased in connection with these plans only by direct
remittance to the entity acting as custodian. Purchases for these plans may
not be made in advance of receipt of funds.
The minimum initial investment for corporate plans, Salary
Reduction Plans, 403(b)(7) Plans, and SEP-IRAs with more than one
participant, is $1,000, with no minimum on subsequent purchases. The
minimum initial investment is $750 for 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
and $500 for Dreyfus-sponsored Education IRAs, with no minimum on subsequent
purchases.
The investor should read the Prototype Retirement Plan and the
appropriate form of Custodial Agreement for further details on eligibility,
service fees and tax implications, and should consult a tax adviser.
DETERMINATION OF NET ASSET VALUE
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "How to Buy Fund Shares."
Restricted securities, as well as securities or other assets for which
market quotations are not readily available, or which are not valued by a
pricing service approved by the Board of Directors, are valued at fair value
as determined in good faith by the Board of Directors. The Board of
Directors will review the method of valuation on a current basis. In making
their good faith valuation of restricted securities, the Board generally
will take the following factors into consideration: restricted securities
which are, or are convertible into, securities of the same class of
securities for which a public market exists usually will be valued at market
value less the same percentage discount at which purchased. This discount
will be revised periodically by the Board if it believes that the discount
no longer reflects the value of the restricted securities. Restricted
securities not of the same class as securities for which a public market
exists usually will be valued initially at cost. Any subsequent adjustment
from cost will be based upon considerations deemed relevant by the Board.
New York Stock Exchange Closings. The holidays (as observed) on which
the NYSE is currently scheduled to be closed are: New Year's Day, Martin
Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Dividends, Other
Distributions and Taxes."
The term "regulated investment company" does not imply the supervision
of management or investment practices or policies by any government agency.
General. To qualify for treatment as a regulated investment company
("RIC") under the Code, the Fund -- which is treated as a separate
corporation for federal tax purposes - (1) must distribute to its
shareholders each year at least 90% of its investment company taxable income
(generally consisting of net investment income, net short-term capital gains
and net gains from certain foreign currency transactions) ("Distribution
Requirement"), (2) must derive at least 90% of its annual gross income from
specified sources ("Income Requirement") and (3) must meet certain asset
diversification and other requirements.
Any dividend or other distribution paid shortly after an investor's
purchase may have the effect of reducing the net asset value of the shares
below the cost of his investment. Such a dividend or other distribution
would be a return on investment in an economic sense, although taxable as
stated in the Fund's Prospectus. In addition, if a shareholder holds shares
of the Fund for six months or less and has received a capital gain
distribution with respect to those shares, any loss incurred on the sale of
those shares will be treated as a long-term capital loss to the extent of
the capital gain distribution received.
Dividends and other distributions declared by the Fund in October,
November or December of any year and payable to shareholders of record on a
date in any of those months are deemed to have been paid by the Fund and
received by the shareholders on December 31 of that year if the
distributions are paid by the Fund during the following January.
Accordingly, those distributions will be taxed to shareholders for the year
in which that December 31 falls.
A portion of the dividends paid by the Fund, whether received in cash
or reinvested in additional Fund shares, may be eligible for the dividends-
received deduction allowed to corporations. The eligible portion may not
exceed the aggregate dividends received by the Fund from U.S. corporations.
However, dividends received by a corporate shareholder and deducted by it
pursuant to the dividends-received deduction are subject indirectly to the
alternative minimum tax.
Foreign Taxes. Dividends and interest received by the Fund may be
subject to income, withholding or other taxes imposed by foreign countries
and U.S. possessions that would reduce the yield on its securities. Tax
conventions between certain countries and the United States may reduce or
eliminate these foreign taxes, however, and many foreign countries do not
impose taxes on capital gains in respect of investments by foreign
investors. If more than 50% of the value of the Fund's total assets at the
close of its taxable year consists of securities of foreign corporations, it
will be eligible to, and may, file an election ("Election") with the
Internal Revenue Service that will enable its shareholders, in effect, to
receive the benefit of the foreign tax credit with respect to any foreign or
U.S. possessions' income taxes paid by it. Pursuant to the Election, the
Fund would treat those taxes as dividends paid to its shareholders and each
shareholder would be required to (1) include in gross income, and treat as
paid by him or her, his or her proportionate share of those taxes, (2) treat
his or her share of those taxes and of any dividend paid by the Fund that
represents income from foreign or U.S. possession sources as his or her own
income from those sources and (3) either deduct the taxes deemed paid by him
or her in computing his or her taxable income or, alternatively, use the
foregoing information in calculating the foreign tax credit against his or
her federal income tax. No deduction for foreign taxes may be claimed by a
shareholder who does not itemize deductions. Generally, a credit for
foreign taxes may not exceed the shareholder's federal income tax
attributable to his total foreign source taxable income. The Fund will
report to its shareholders shortly after each taxable year their respective
shares of the income from sources within, and taxes paid to, foreign
countries and U.S. possessions if it makes the Election.
Foreign Currency, Futures, Forward and Hedging Transactions. Gains
from the sale or other disposition of foreign currencies (except certain
gains therefrom that may be excluded by future regulations), and gains from
options, futures and forward contracts derived by the Fund with respect to
its business of investing in securities or foreign currencies, will qualify
as permissible income under the Income Requirement. However, income from
the disposition of options and futures contracts (other than those on
foreign currencies) will be subject to the Short-Short Limitation if they
are held for less than three months. Income from the disposition of foreign
currencies, and options, futures and forward contracts thereon, that are not
directly related to the Fund's principal business of investing in securities
(or options and futures with respect to securities) also will be subject to
the Short-Short Limitation if they are held for less than three months.
If the Fund satisfies certain requirements, any increase in value of a
position that is part of a "designated hedge" will be offset by any decrease
in value (whether realized or not) of the offsetting hedging position during
the period of the hedge for purposes of determining whether the Fund
satisfies the Short-Short Limitation. Thus, only the net gain (if any) from
the designated hedge will be included in gross income for purposes of that
limitation. The Fund will consider whether it should seek to qualify for
this treatment for its hedging transactions. To the extent the Fund does
not so qualify, it may be forced to defer the closing out of certain
options, futures, forward contracts and foreign currency positions beyond
the time when it otherwise would be advantageous to do so, in order for the
Fund to qualify as a RIC.
Ordinarily, gains and losses realized from portfolio transactions will
be treated as capital gain and loss. However, a portion of the gain or loss
from the disposition of foreign currencies and certain foreign-currency-
denominated instruments (including debt instruments and financial forward,
futures and option contracts) may be treated as ordinary income or loss
under Section 988 of the Code. In addition, all or a portion of any gain
realized from the sale or other disposition of certain market discount bonds
will be treated as ordinary income. Moreover, all or a portion of the gain
realized from engaging in "conversion transactions" that otherwise would be
valued as capital gain may be treated as ordinary income under Section 1258
of the Code. "Conversion transactions" are defined to include certain
forward, futures, option and straddle transactions, transactions marketed or
sold as producing capital gains and transactions described in Treasury
regulations to be issued in the future.
Under Section 1256 of the Code, any gain or loss realized by the Fund
from certain futures, forward contracts and options transactions will be
treated as 60% long-term capital gain or loss and 40% short-term capital
gain or loss. Gain or loss will arise upon exercise or lapse of such
contracts and options as well as from closing transactions. In addition,
any such contracts or options remaining unexercised at the end of the Fund's
taxable year will be treated as sold for their then fair market value (a
process known as "marking-to-market"), resulting in additional gain or loss
to the Fund characterized in the manner described above.
Offsetting positions held by the Fund involving certain contracts or
options may constitute "straddles," which are defined to include "offsetting
positions" in actively traded personal property. The tax treatment of
straddles is governed by Sections 1092 and, to the extent noted above, 1258
of the Code which in certain circumstances override or modify Sections 1256
and 988. As a result, all or a portion of any capital gain from certain
straddle transactions may be recharacterized to ordinary income. If the
Fund were treated as entering into straddles by reason of its engaging in
certain forward contracts or options transactions, such straddles would be
characterized as "mixed straddles" if the forward contracts or options
transactions comprising a part of such straddles were governed by Section
1256. The Fund may make one or more elections with respect to mixed
straddles. Depending on which election is made, if any, the results to the
Fund may differ. If no election is made, then to the extent the straddle
and conversion transactions rules apply to positions established by the
Fund, losses realized by the Fund will be deferred to the extent of
unrealized gain in the offsetting position. Moreover, as a result of the
straddle rules, short-term capital loss on straddle positions may be
recharacterized as long-term capital loss, and long-term capital gains may
be treated as short-term capital gains or ordinary income.
Passive Foreign Investment Companies. The Fund may invest in the stock
of "passive foreign investment companies" ("PFICs"). A PFIC is a foreign
corporation that, in general, meets either of the following tests: (1) at
least 75% of its gross income is passive or (2) an average of at least 50%
of its assets produce, or are held for the production of, passive income.
Under certain circumstances, the Fund will be subject to federal income tax
on a portion of any "excess distribution" received on the stock of a PFIC or
of any gain on disposition of the stock (collectively "PFIC income"), plus
interest thereon, even if the Fund distributes the PFIC income as a taxable
dividend to its shareholders. The balance of the PFIC income will be
included in the Fund's investment company taxable income and, accordingly,
will not be taxable to it to the extent that income is distributed to its
shareholders. If the Fund invests in a PFIC and elects to treat the PFIC as
"qualified electing fund," then in lieu of the foregoing tax and interest
obligation, the Fund would be required to include in income each year its
pro rata share of the qualified electing fund's annual ordinary earnings and
net capital gain (the excess of net long-term capital gain over net short-
term capital loss) -- which probably would have to be distributed to satisfy
the Distribution Requirement and avoid imposition of the 4% excise tax
referred to in the Fund's Prospectus under "Dividends, Other Distributions
and Taxes" -- even if those earnings and gain were not received by the Fund.
Pursuant to proposed regulations, open-end RICs, such as the Fund,
would be entitled to elect to "mark-to-market" their stock in certain PFICs.
"Marking-to-market," in this context, means recognizing as gain for each
taxable year the excess, as of the end of that year, of the fair market
value of each such PFIC's stock over the adjusted basis in that stock
(including mark-to-market gain for each prior year for which an election was
in effect).
Foreign Currency Gains and Losses. Gains and losses attributable to
fluctuations in foreign currency exchange rates that occur between the time
the Fund accrues dividends, interest or other receivables, or expenses or
other liabilities, denominated in a foreign currency and the time the Fund
actually collects the receivables or pays the liabilities generally are
treated as ordinary income or ordinary loss. Similarly, on the disposition
of a debt security denominated in a foreign currency, or of an option or
forward contract on a foreign currency, gains or losses attributable to
fluctuations in the value of the foreign currency between the date of
acquisition of the security, option or contract and the date of disposition
also are treated as ordinary income or loss. These gains or losses may
increase or decrease the amount of the Fund's investment company taxable
income to be distributed to its shareholders.
State and Local Taxes. Depending upon the extent of the Fund's
activities in states and localities in which it is deemed to be conducting
business, the Fund may be subject to the tax laws thereof. Shareholders are
advised to consult their tax advisers concerning the application of state
and local taxes.
Foreign Shareholders - U.S. Federal Income Taxation. U.S. federal
income taxation of a shareholder who, as to the United States, is a
non-resident alien individual, a foreign trust or estate, a foreign
corporation or a foreign partnership (a "foreign shareholder"), depends on
whether the income from the Fund is "effectively connected" with a U.S.
trade or business carried on by the shareholder, as discussed generally
below. Special U.S. federal income tax rules that differ from those
described below may apply to certain foreign persons who invest in the Fund,
such as a foreign shareholder entitled to claim the benefits of an
applicable tax treaty. Foreign shareholders are advised to consult their
own tax advisers with respect to the particular tax consequences to them of
an investment in the Fund.
Foreign Shareholders - Income Not Effectively Connected. Dividends
distributed to a foreign shareholder whose ownership of Fund shares is not
effectively connected with a U.S. trade or business carried on by the
foreign shareholder generally will be subject to a U.S. federal withholding
tax of 30% (or lower treaty rate). Capital gains realized by foreign
shareholders on the sale of Fund shares and distributions to them of net
capital gain (the excess of net long-term capital gain over net short-term
capital loss) generally will not be subject to U.S. federal income tax
unless the foreign shareholder is a non-resident alien individual and is
physically present in the United States for more than 182 days during the
taxable year. In the case of certain foreign shareholders, the Fund may be
required to withhold U.S. federal income tax at a rate of 31% of capital
gain distributions and of the gross proceeds from a redemption of Fund
shares unless the shareholder furnishes the Fund with a certificate
regarding the shareholder's foreign status.
Foreign Shareholders - Effectively Connected Income. If a foreign
shareholder's ownership of Fund shares is effectively connected with a U.S.
trade or business carried on by a foreign shareholder, then all
distributions to that shareholder and any gains realized by that shareholder
on the disposition of the Fund shares will be subject to U.S. federal income
tax at the graduated rates applicable to U.S. citizens and domestic
corporations, as the case may be. Foreign shareholders also may be subject
to the branch profits tax.
Foreign Shareholders - Estate Tax. Foreign individuals generally are
subject to U.S. federal estate tax on their U.S. situs property, such as
shares of the Fund, that they own at the time of their death. Certain
credits against that tax and relief under applicable tax treaties may be
available.
PORTFOLIO TRANSACTIONS
All portfolio transactions of the Fund are placed on behalf of the Fund
by Dreyfus. Debt securities purchased and sold by the Fund are generally
traded on a net basis (i.e., without commission) through dealers acting for
their own account and not as brokers, or otherwise involve transactions
directly with the issuer of the instrument. This means that a dealer (the
securities firm or bank dealing with the Fund) makes a market for securities
by offering to buy at one price and sell at a slightly higher price. The
difference between the prices is known as a spread. Other portfolio
transactions may be executed through brokers acting as agent. The Fund will
pay a spread or commissions in connection with such transactions. Dreyfus
uses its best efforts to obtain execution of portfolio transactions at
prices which are advantageous to the Fund and at spreads and commission
rates, if any, which are reasonable in relation to the benefits received.
Dreyfus also places transactions for other accounts that it provides with
investment advice.
Brokers and dealers involved in the execution of portfolio transactions
on behalf of the Fund are selected on the basis of their professional
capability and the value and quality of their services. In selecting brokers
or dealers, Dreyfus will consider various relevant factors, including, but
not limited to, the size and type of the transaction; the nature and
character of the markets for the security to be purchased or sold; the
execution efficiency, settlement capability, and financial condition of the
broker-dealer; the broker-dealer's execution services rendered on a
continuing basis; and the reasonableness of any spreads (or commissions, if
any). Any spread, commission, fee or other remuneration paid to an
affiliated broker-dealer is paid pursuant to the Company's procedures
adopted in accordance with Rule 17e-1 of the 1940 Act.
Brokers or dealers may be selected who provide brokerage and/or
research services to the Fund and/or other accounts over which Dreyfus or
its affiliates exercise investment discretion. Such services may include
advice concerning the value of securities; the advisability of investing in,
purchasing or selling securities; the availability of securities or the
purchasers or sellers of securities; furnishing analyses and reports
concerning issuers, industries, securities, economic factors and trends,
portfolio strategy and performance of accounts; and effecting securities
transactions and performing functions incidental thereto (such as clearance
and settlement).
The receipt of research services from broker-dealers may be useful to
Dreyfus in rendering investment management services to the Fund and/or its
other clients; and, conversely, such information provided by brokers or
dealers who have executed transaction orders on behalf of other clients of
Dreyfus may be useful to these organizations in carrying out their
obligation to the Fund. The receipt of such research services does not
reduce these organizations' normal independent research activities; however,
it enables these organizations to avoid the additional expenses which might
otherwise be incurred if these organizations were to attempt to develop
comparable information through their own staffs.
Although Dreyfus manages other accounts in addition to the Fund,
investment decisions for the Fund are made independently from decisions made
for these other accounts. It sometimes happens that the same security is
held by more than one of the accounts managed by Dreyfus. Simultaneous
transactions may occur when several accounts are managed by the same
investment manager, particularly when the same investment instrument is
suitable for the investment objective of more than one account.
When more than one account is simultaneously engaged in the purchase or
sale of the same investment instrument, the prices and amounts are allocated
in accordance with a formula considered by Dreyfus to be equitable to each
account. In some cases this system could have a detrimental effect on the
price or volume of the investment instrument as far as the Fund is
concerned. In other cases, however, the ability of the Fund to participate
in volume transactions will produce better executions for the Fund. While
the Directors will continue to review simultaneous transactions, it is their
present opinion that the desirability of retaining Dreyfus as investment
manager to the Fund outweighs any disadvantages that may be said to exist
from exposure to simultaneous transactions.
For the fiscal year ended October 31, 1995, October 31, 1996 and
October 31, 1997, the Fund paid brokerage fees of $65,341, $179,990 and
$347,777, respectively. For the fiscal year ended October 31, 1996 and
October 31, 1997, the Fund paid brokerage concessions of $79,479 and
$20,451, respectively.
Portfolio Turnover. The portfolio turnover rate for the Fund is
calculated by dividing the lesser of the Fund's annual sales or purchases of
portfolio securities (exclusive of purchases and sales of securities whose
maturities at the time of acquisition were one year or less) by the monthly
average value of securities in the Fund during the year.
The portfolio turnover rates for the fiscal year ended October 31, 1996
and October 31, 1997 were 49.03% and 39.18%, respectively.
PERFORMANCE INFORMATION
The following information supplements and should be read in conjunction
with the section in each Fund's Prospectus entitled "Performance
Information."
The Fund's average annual total return for the 1 and 3.164 year periods
ended October 31, 1997 for Class A was 23.24% and 23.08%, respectively. The
Fund's average annual total return for Class R for the 1 and 3.164 year
periods ended October 31, 1997 was 31.04% and 25.69%, respectively. The
Fund's average annual total return for the 1 and 2.87 year periods ended
October 31, 1997 for Class B was 25.72% and 29.03%, respectively. The
Fund's average annual total return for the 1 and 2.87 year periods ended
October 31, 1997 for Class C was 28.79% and 29.70%, respectively.
Average annual total return is calculated by determining the ending
redeemable value of an investment purchased at net asset value (maximum
offering price in the case of Class A) per share with a hypothetical $1,000
payment made at the beginning of the period (assuming the reinvestment of
dividends and other distributions), dividing by the amount of the initial
investment, taking the "n"th root of the quotient (where "n" is the number
of years in the period) and subtracting 1 from the result. A Class average
annual total return figures calculated in accordance with such formula
assume that in the case of Class A the maximum sales load has been deducted
from the hypothetical initial investment at the time of purchase or in the
case of Class B or Class C the maximum applicable CDSC has been paid upon
redemption at the end of the period.
The Fund's total return for the period September 2, 1994 (commencement
of operations) to October 31, 1997 for Class R was 105.96%. The Fund's
total return for Class A for the period September 2, 1994 (commencement of
operations) to October 31, 1997 was 92.75%. Based on net asset value per
share, the total return for Class A was 104.51% for this period. The Fund's
total return for Class B and Class C for the period from December 19, 1994
(inception date of Class B and Class C) through October 31, 1997 was 107.80%
and 110.92%, respectively. Without giving effect to the applicable CDSC,
total return for Class B and Class C was 110.80% and 110.92%, respectively.
Total return is calculated by subtracting the amount of a Fund's net
asset value (maximum offering price in the case of Class A) per share at the
beginning of a stated period from the net asset value (maximum offering
price in the case of Class A) per share at the end of the period (after
giving effect to the reinvestment of dividends and other distributions
during the period and any applicable CDSC), and dividing the result by the
net asset value (maximum offering price in the case of Class A) per share at
the beginning of the period. Total return also may be calculated based on
the net asset value per share at the beginning of the period instead of the
maximum offering price per share at the beginning of the period for Class A
shares or without giving effect to any applicable CDSC at the end of the
period for Class B or C shares. In such cases, the calculation would not
reflect the deduction of the sales load with respect to Class A shares or
any applicable CDSC with respect to Class B or C shares, which, if reflected
would reduce the performance quoted.
From time to time, Fund advertisements may include statistical data or
general discussions about the growth and development of Dreyfus Retirement
Services (in terms of new customers, assets under management, market share,
etc.) and its presence in the defined contribution plan market.
From time to time, advertising material for the Fund may include
biographical information relating to its portfolio manager and may refer to,
or include commentary by the portfolio manager relating to investment
strategy, asset growth, current or past business, political, economic or
financial conditions and other matters of general interest to investors.
INFORMATION ABOUT THE FUND
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "General Information."
Each Fund share has one vote and, when issued and paid for in
accordance with the terms of the offering, is fully paid and non-assessable.
Fund shares have no preemptive or subscription rights and are freely
transferable. The Fund is one of eighteen investment portfolios authorized
by the Company's Board of Directors.
The Fund will send annual and semi-annual financial statements to all
its shareholders.
TRANSFER AND DIVIDEND DISBURSING AGENT, CUSTODIAN, COUNSEL
AND INDEPENDENT AUDITORS
Dreyfus Transfer, Inc., a wholly-owned subsidiary of Dreyfus, P.O. Box
9671, Providence, Rhode Island 02940-9671, is the Company's transfer and
dividend disbursing agent. Under a transfer agency agreement with the
Company, Dreyfus Transfer, Inc. arranges for the maintenance of shareholder
account records for the Fund, the handling of certain communications between
shareholders and the Fund and the payment of dividends and distributions
payable by the Fund. For these services, Dreyfus Transfer, Inc. receives a
monthly fee computed on the basis of the number of shareholder accounts it
maintains for the Company during the month, and is reimbursed for certain
out-of-pocket expenses.
Mellon Bank, the parent of Dreyfus, located at One Mellon Bank Center,
Pittsburgh, Pennsylvania 15258, acts as custodian of the Fund's investments.
Under a custody agreement with the Company, Mellon Bank holds the Fund's
portfolio securities and keeps all necessary accounts and records. Dreyfus
Transfer, Inc. and Mellon Bank, as custodian, have no part in determining
the investment policies of the Fund or which securities are to be purchased
or sold by the Fund.
Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue, N.W., Second
Floor, Washington, D.C. 20036, has passed upon the legality of the shares
offered by the Prospectus and this Statement of Additional Information.
KPMG Peat Marwick LLP, 345 Park Avenue, New York, NY 10154, was
appointed by the Directors to serve as the Fund's independent auditors for
the year ending October 31, 1998, providing audit services including (1)
examination of the annual financial statements (2) assistance, review and
consultation in connection with SEC filings and (3) review of the annual
federal income tax return filed on behalf of the Fund.
FINANCIAL STATEMENTS
The financial statements for the fiscal year ended October 31, 1997,
including notes to the financial statements and financial highlights and the
Independent Auditors' Report are included in the Annual Report to
shareholders. A copy of the Annual Report accompanies this SAI. The
financial statements included in the Annual Report, and the Independent
Auditors' Report thereon contained therein, and related notes, are
incorporated herein by reference.
DREYFUS INTERNATIONAL EQUITY ALLOCATION FUND
INVESTOR AND RESTRICTED SHARES
PART B
STATEMENT OF ADDITIONAL INFORMATION
MARCH 1, 1998
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus of
the Dreyfus International Equity Allocation Fund (formerly, the Laurel
International Equity Allocation Fund) (the "Fund"), dated March 1, 1998, as
it may be revised from time to time. The Fund is a separate, diversified
portfolio of The Dreyfus/Laurel Funds, Inc. (formerly, the Laurel Funds,
Inc.), an open-end management investment company (the "Company"), known as a
mutual fund. To obtain a copy of the Fund's Prospectus, please write to the
Fund at 144 Glenn Curtiss Boulevard, Uniondale, New York 11556-0144, or call
one of the following numbers:
Call Toll Free 1-800-645-6561
In New York City -- Call 1-718-895-1206
Outside the U.S. and Outside of Canada -- Call 516-794-5452
The Dreyfus Corporation ("Dreyfus") serves as the Fund's investment
manager.
Premier Mutual Fund Services, Inc. ("Premier") is the distributor of
the Fund's shares.
TABLE OF CONTENTS
Page
Investment Objective and Management Policies B-2
Management of the Fund B-16
Management Arrangements B-21
Purchase of Fund Shares B-22
Distribution Plan B-23
Redemption of Fund Shares B-24
Shareholder Services B-26
Determination of Net Asset Value B-29
Dividends, Other Distributions and Taxes B-29
Portfolio Transactions B-33
Performance Information B-35
Information about the Fund B-36
Transfer and Dividend Disbursing Agent, Custodian, Counsel
and Independent Auditors B-37
Financial Statements B-37
Appendix. B-38
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Description of the
Fund."
Government Obligations. The Fund may invest in a variety of U.S.
Treasury obligations, which differ only in their interest rates, maturities
and times of issuance: (a) U.S. Treasury bills have a maturity of one year
or less, (b) U.S. Treasury notes have maturities of one to ten years, and
(c) U.S. Treasury bonds generally have maturities of greater than ten years.
In addition to U.S. Treasury obligations, the Fund may invest in
obligations issued or guaranteed by U.S. Government agencies and
instrumentalities which are supported by any of the following: (a) the full
faith and credit of the U.S. Treasury (such as Government National Mortgage
Association ("GNMA") participation certificates), (b) the right of the
issuer to borrow an amount limited to a specific line of credit from the
U.S. Treasury, (c) the discretionary authority of the U.S. Government agency
or instrumentality, or (d) the credit of the instrumentality. (Examples of
agencies and instrumentalities are: Federal Land Banks, Federal Housing
Administration, Farmers Home Administration, Export-Import Bank of the
United States, Central Bank for Cooperatives, Federal Intermediate Credit
Banks, Federal Home Loan Banks, General Services Administration, Maritime
Administration, Tennessee Valley Authority, District of Columbia Armory
Board, Inter-American Development Bank, Asian-American Development Bank,
Student Loan Marketing Association, International Bank of Reconstruction and
Development and Federal National Mortgage Association ("FNMA")). No
assurance can be given that the U.S. Government will provide financial
support to such U.S. Government agencies or instrumentalities described in
(b), (c) and (d) in the future, other than set forth above, since it is not
obligated to do so by law.
Repurchase Agreements. The Fund may enter into repurchase agreements
with U.S. Government securities dealers recognized by the Federal Reserve
Board, with member banks of the Federal Reserve System, or with such other
brokers or dealers that meet the credit guidelines of the Board of
Directors. In a repurchase agreement, the Fund buys a security from a
seller that has agreed to repurchase the same security at a mutually agreed
upon date and price. The Fund's resale price will be in excess of the
purchase price, reflecting an agreed upon interest rate. This interest rate
is effective for the period of time the Fund is invested in the agreement
and is not related to the coupon rate of the underlying security.
Repurchase agreements may also be viewed as a fully collateralized loan of
money by the Fund to the seller. The period of these repurchase agreements
will usually be short, from overnight to one week, and at no time will the
Fund invest in repurchase agreements for more than one year. The Fund will
always receive as collateral securities whose market value including accrued
interest is, and during the entire term of the agreement remains, at least
equal to 100% of the dollar amount invested by the Fund in each agreement,
and the Fund will make payment for such securities only upon physical
delivery or upon evidence of book entry transfer to the account of the
Custodian. If the seller defaults, the Fund might incur a loss if the value
of the collateral securing the repurchase agreement declines and might incur
disposition costs in connection with liquidating the collateral. In
addition, if bankruptcy proceedings are commenced with respect to the seller
of a security which is the subject of a repurchase agreement, realization
upon the collateral by the Fund may be delayed or limited. Dreyfus seeks to
minimize the risk of loss through repurchase agreements by analyzing the
creditworthiness of the obligors under repurchase agreements, in accordance
with the credit guidelines of the Board of Directors. No more than 5% of
the Fund's net assets will be invested in repurchase agreements at any one
time.
When-Issued Securities. New issues of securities are often offered on
a when-issued basis. This means that delivery and payment for the
securities normally will take place approximately 7 to 45 days after the
date the buyer commits to purchase them. The payment obligation and the
interest rate that will be received on securities purchased on a when-issued
basis are each fixed at the time the buyer enters into the commitment. The
Fund will make commitments to purchase such securities only with the
intention of actually acquiring the securities, but the Fund may sell these
securities or dispose of the commitment before the settlement date if it is
deemed advisable as a matter of investment strategy. Cash or marketable
high grade debt securities equal to the amount of the above commitments will
be segregated on the Fund's records. For the purpose of determining the
adequacy of these securities the segregated securities will be valued at
market. If the market value of such securities declines, additional cash or
securities will be segregated on the Fund's records on a daily basis so that
the market value of the account will equal the amount of such commitments by
the Fund.
Securities purchased on a when-issued basis and the securities held by
the Fund are subject to changes in market value based upon the public's
perception of changes in the level interest rates. Generally, the value of
such securities will fluctuate inversely to changes in interest rates --
i.e., they will appreciate in value when interest rates decline and decrease
in value when interest rates rise. Therefore, if in order to achieve higher
interest income the Fund remains substantially fully invested at the same
time that it has purchased securities on a "when issued" basis, there will
be a greater possibility of fluctuation in the Fund's net asset value.
When payment for when-issued securities is due, the Fund will meet its
obligation from then-available cash flow, the sale of segregated securities,
the sale of other securities, and/or, and although it would not normally
expect to do so, from the sale of the when-issued securities themselves
(which may have a market value greater or less than the Fund's payment
obligation). The sale of securities to meet such obligations carries with
it a greater potential for the realization of capital gains, which are
subject to federal income taxes.
Commercial Paper. The Fund may invest in commercial paper issued in
reliance on the so called "private placement" exemption from registration
afforded by Section 4(2) of the Securities Act of 1933 ("Section 4(2)
paper"). Section 4(2) paper is restricted as to disposition under the
federal securities laws and generally is sold to investors who agree that
they are purchasing the paper for an investment and not with a view to
public distribution. Any resale by the purchaser must be in an exempt
transaction. Section 4(2) paper is normally resold to other investors
through or with the assistance of the issuer or investment dealers who make
a market in Section 4(2) paper, thus providing liquidity. Pursuant to
guidelines established by the Company's Board of Directors, Dreyfus may
determine that Section 4(2) paper is liquid for the purposes of complying
with the Fund's investment restriction relating to investments in illiquid
securities.
Management Policies
The Fund engages, except as noted, in the following practices in
furtherance of its investment objective.
Loans of Fund Securities. The Fund has authority to lend its portfolio
securities provided (1) the loan is secured continuously by collateral
consisting of U.S. Government securities or cash or cash equivalents
adjusted daily to make a market value at least equal to the current market
value of these securities loaned; (2) the Fund may at any time call the loan
and regain the securities loaned; (3) the Fund will receive any interest or
dividends paid on the loaned securities; and (4) the aggregate market value
of securities loaned will not at any time exceed one-third of the total
assets of the Fund. In addition, it is anticipated that the Fund may share
with the borrower some of the income received on the collateral for the loan
or that it will be paid a premium for the loan. In determining whether to
lend securities, Dreyfus and the sub-adviser consider all relevant factors
and circumstances including the creditworthiness of the borrower.
Derivative Instruments. As discussed in the Prospectus, the Fund may
purchase and sell various financial instruments ("Derivative Instruments"),
such as financial futures contracts (such as interest rate, index and
foreign currency futures contracts), options (such as options on securities,
indices, foreign currencies and futures contracts), forward currency
contracts and interest rate, equity index and currency swaps, caps, collars
and floors. The index Derivative Instruments the Fund may use may be based
on indices of U.S. or foreign equity or debt securities. These Derivative
Instruments may be used, for example, to preserve a return or spread, to
lock in unrealized market value gains or losses, to facilitate or substitute
for the sale or purchase of securities, to adjust its risk exposure relative
to the Benchmark, or to alter the exposure of a particular investment or
portion of the Fund's portfolio to fluctuations in interest rates or
currency rates.
Hedging strategies can be broadly categorized as "short hedges" and
"long hedges." A short hedge is a purchase or sale of a Derivative
Instrument intended partially or fully to offset potential declines in the
value of one or more investments held in the Fund's portfolio. Thus, in a
short hedge the Fund takes a position in a Derivative Instrument whose price
is expected to move in the opposite direction of the price of the investment
being hedged.
Conversely, a long hedge is a purchase or sale of a Derivative
Instrument intended partially or fully to offset potential increases in the
acquisition cost of one or more investments that the Fund intends to
acquire. Thus, in a long hedge the Fund takes a position in a Derivative
Instrument whose price is expected to move in the same direction as the
price of the prospective investment being hedged. A long hedge is sometimes
referred to as an anticipatory hedge. In an anticipatory hedge transaction,
the Fund does not own a corresponding security and, therefore, the
transaction does not relate to a security the Fund owns. Rather, it relates
to a security that the Fund intends to acquire. If the Fund does not
complete the hedge by purchasing the security it anticipated purchasing, the
effect on the Fund's portfolio is the same as if the transaction were
entered into for speculative purposes.
Derivative Instruments on securities generally are used to hedge
against price movements in one or more particular securities positions that
the Fund owns or intends to acquire. Derivative Instruments on indices, in
contrast, generally are used to attempt to hedge against price movements in
market sectors in which the Fund has invested or expects to invest.
Derivative Instruments on debt securities may be used to hedge either
individual securities or broad debt market sectors.
The use of Derivative Instruments is subject to applicable regulations
of the Securities and Exchange Commission ("SEC"), the several options and
futures exchanges upon which they are traded, the Commodity Futures Trading
Commission ("CFTC") and various state regulatory authorities. In addition,
the Fund's ability to use Derivative Instruments will be limited by tax
considerations. See "Dividends, Other Distributions and Taxes."
In addition to the instruments, strategies and risks described below
and in the Prospectus, Dreyfus expects to discover additional opportunities
in connection with other Derivative Instruments. These new opportunities
may become available as Dreyfus develops new techniques, as regulatory
authorities broaden the range of permitted transactions and as new
techniques are developed. Dreyfus may utilize these opportunities to the
extent that they are consistent with the Fund's investment objective, and
permitted by the Fund's investment policies and applicable regulatory
authorities.
Special Risks. The use of Derivative Instruments involves special
considerations and risks, certain of which are described below. Risks
pertaining to particular Derivative Instruments are described in the
sections that follow.
(1) Successful use of most Derivative Instruments depends upon the
ability of Dreyfus to predict movements of the overall securities, currency
and other markets, which requires different skills than predicting changes
in the prices of individual securities. There can be no assurance that any
particular strategy will succeed.
(2) There might be imperfect correlation, or even no correlation,
between price movements of a Derivative Instrument and price movements of
the investments being hedged. For example, if the value of a Derivative
Instrument used in a short hedge increased by less than the decline in value
of the hedged investment, the hedge would not be fully successful. Such a
lack of correlation might occur due to factors unrelated to the value of the
investments being hedged, such as speculative or other pressures on the
markets in which Derivative Instruments are traded. The effectiveness of
hedges using Derivative Instruments on indices will depend on the degree of
correlation between price movements in the index and price movements in the
securities being hedged.
Because there are a limited number of types of exchange-traded options
and futures contracts, it is likely that the standardized contracts
available will not match the Fund's current or anticipated investments
exactly. The Fund may invest in options and futures contracts based on
securities with different issuers, maturities, or other characteristics from
the securities in which it typically invests, which involves a risk that the
options or futures position will not track the performance of the Fund's
other investments.
Options and futures prices can also diverge from the prices of their
underlying instruments, even if the underlying instruments match the Fund's
investments well. Options and futures prices are affected by such factors
as current and anticipated short-term interest rates, changes in volatility
of the underlying instrument, and the time remaining until expiration of the
contract, which may not affect security prices the same way. Imperfect
correlation may also result from differing levels of demand in the options
and futures markets and the securities markets, from structural differences
in how options and futures and securities are traded, or from imposition of
daily price fluctuation limits or trading halts. The Fund may purchase or
sell options and futures contracts with a greater or lesser value than the
securities it wishes to hedge or intends to purchase in order to attempt to
compensate for differences in volatility between the contract and the
securities, although this may not be successful in all cases. If price
changes in the Fund's options or futures positions are poorly correlated
with its other investments, the positions may fail to produce anticipated
gains or result in losses that are not offset by gains in other investments.
(3) If successful, the above-discussed strategies can reduce risk of
loss by wholly or partially offsetting the negative effect of unfavorable
price movements. However, such strategies can also reduce opportunity for
gain by offsetting the positive effect of favorable price movements. For
example, if the Fund entered into a short hedge because Dreyfus projected a
decline in the price of a security in the Fund's portfolio, and the price of
that security increased instead, the gain from that increase might be wholly
or partially offset by a decline in the price of the Derivative Instrument.
Moreover, if the price of the Derivative Instrument declined by more than
the increase in the price of the security, the Fund could suffer a loss. In
either such case, the Fund would have been in a better position had it not
attempted to hedge at all.
(4) As described below, the Fund might be required to maintain assets
as "cover," maintain segregated accounts or make margin payments when it
takes positions in Derivative Instruments involving obligations to third
parties (i.e., Derivative Instruments other than purchased options). If the
Fund were unable to close out its positions in such Derivative Instruments,
it might be required to continue to maintain such assets or accounts or make
such payments until the position expired or matured. These requirements
might impair the Fund's ability to sell a portfolio security or make an
investment at a time when it would otherwise be favorable to do so, or
require that the Fund sell a portfolio security at a disadvantageous time.
The Fund's ability to close out a position in a Derivative Instrument prior
to expiration or maturity depends on the existence of a liquid secondary
market or, in the absence of such a market, the ability and willingness of
the other party to the transaction ("counterparty") to enter into a
transaction closing out the position. Therefore, there is no assurance that
any position can be closed out at a time and price that is favorable to the
Fund.
Cover for Derivative Instruments. Transactions using Derivative
Instruments may expose the Fund to an obligation to another party. The Fund
will not enter into any such transactions unless it owns either (1) an
offsetting ("covered") position in securities, futures, options, currencies
or forward contracts or (2) cash and short-term liquid debt securities with
a value sufficient at all times to cover its potential obligations to the
extent not covered as provided in (1) above. The Fund will comply with SEC
guidelines regarding cover for Derivative Instruments and will, if the
guidelines so require, set aside cash, U.S. Government securities or other
liquid, high-grade debt securities in a segregated account with its
custodian in the prescribed amount.
Assets used as cover or held in a segregated account cannot be sold
while the position in the corresponding Derivative Instrument is open,
unless they are replaced with other appropriate assets. As a result, the
commitment of a large portion of the Fund's assets to cover or segregated
accounts could impede portfolio management or the Fund's ability to meet
redemption requests or other current obligations.
Options. A call option gives the purchaser the right to buy, and
obligates the writer to sell, the underlying investment at the agreed upon
exercise price during the option period. A put option gives the purchaser
the right to sell, and obligates the writer to buy, the underlying
investment at the agreed upon exercise price during the option period. A
purchaser of an option pays an amount, known as the premium, to the option
writer in exchange for rights under the option contract.
Options on indices are similar to options on securities or currencies
except that all settlements are in cash and gain or loss depends on changes
in the index in question rather than on price movements in individual
securities or currencies.
The purchase of call options can serve as a long hedge, and the
purchase of put options can serve as a short hedge. Writing put or call
options can enable the Fund to enhance income or yield by reason of the
premiums paid by the purchasers of such options. However, if the market
price of the security or other instrument underlying a put option declines
to less than the exercise price on the option, minus the premium received,
the Fund would expect to suffer a loss.
Writing call options can also serve as a limited short hedge because
declines in the value of the hedged investment would be offset to the extent
of the premium received for writing the option. However, if the investment
appreciates to a price higher than the exercise price of the call option, it
can be expected that the option will be exercised and the Fund will be
obligated to sell the investment at less than its market value.
Writing put options can serve as a limited long hedge because increases
in the value of the hedged investment would be offset to the extent of the
premium received for writing the option. However, if the investment
depreciates to a price lower than the exercise price of the put option, it
can be expected that the put option will be exercised and the Fund will be
obligated to purchase the investment at more than its market value.
The value of an option position will reflect, among other things, the
current market value of the underlying investment, the time remaining until
expiration, the relationship of the exercise price to the market price of
the underlying investment, the historical price volatility of the underlying
investment and general market conditions. Options that expire unexercised
have no value.
The Fund may effectively terminate its right or obligation under an
option by entering into a closing transaction. For example, the Fund may
terminate its obligation under a call or put option that it had written by
purchasing an identical call or put option; this is known as a closing
purchase transaction. Conversely, the Fund may terminate a position in a
put or call option it had purchased by writing an identical put or call
option; this is known as a closing sale transaction. Closing transactions
permit the Fund to realize profits or limit losses on an option position
prior to its exercise or expiration.
The Fund may purchase and sell both exchange-traded and over-the-
counter ("OTC") options. Exchange-traded options in the United States are
issued by a clearing organization that, in effect, guarantees completion of
every exchange-traded option transaction. In contrast, OTC options are
contracts between the Fund and its counterparty (usually a securities dealer
or a bank) with no clearing organization guarantee. Thus, when the Fund
purchases an OTC option, it relies on the counterparty from whom it
purchased the option to make or take delivery of the underlying investment
upon exercise of the option. Failure by the counterparty to do so would
result in the loss of any premium paid by the Fund as well as the loss of
any expected benefit of the transaction. The Fund will enter into only
those option contracts that are listed on a national securities or
commodities exchange or traded in the OTC market for which there appears to
be a liquid secondary market.
The Fund will not purchase or write OTC options if, as a result of such
transaction, the sum of (i) the market value of outstanding OTC options
purchased by the Fund, (ii) the market value of the underlying securities
covered by outstanding OTC call options written by the Fund, and (iii) the
market value of all other assets of the Fund that are illiquid or are not
otherwise readily marketable, would exceed 15% of the net assets of the
Fund, taken at market value. However, if an OTC option is sold by the Fund
to a primary U.S. Government securities dealer recognized by the Federal
Reserve Bank of New York and the Fund has the unconditional contractual
right to repurchase such OTC option from the dealer at a predetermined
price, then the Fund will treat as illiquid such amount of the underlying
securities as is equal to the repurchase price less the amount by which the
option is "in-the-money" (the difference between the current market value of
the underlying securities and the option's strike price). The repurchase
price with primary dealers is typically a formula price that is generally
based on a multiple of the premium received for the option plus the amount
by which the option is "in-the-money."
Generally, the OTC debt and foreign currency options used by the Fund
are European-style options. This means that the option is only exercisable
immediately prior to its expiration. This is in contrast to American-style
options, which are exercisable at any time prior to the expiration date of
the option.
The Fund's ability to establish and close out positions in exchange-
listed options depends on the existence of a liquid market. However, there
can be no assurance that such a market will exist at any particular time.
Closing transactions can be made for OTC options only by negotiating
directly with the counterparty, or by a transaction in the secondary market
if any such market exists. Although the Fund will enter into OTC options
only with major dealers in unlisted options, there is no assurance that the
Fund will in fact be able to close out an OTC option position at a favorable
price prior to expiration. In the event of insolvency of the counterparty,
the Fund might be unable to close out an OTC option position at any time
prior to its expiration.
If the Fund were unable to effect a closing transaction for an option
it had purchased, it would have to exercise the option to realize any
profit. The inability to enter into a closing purchase transaction for a
covered call option written by the Fund could cause material losses because
the Fund would be unable to sell the investment used as cover for the
written option until the option expires or is exercised.
The Fund may write only covered call options on securities. A call
option is covered if the Fund owns the underlying security or a call option
on the same security with a lower strike price.
Futures Contracts and Options on Futures Contracts. When the Fund
purchases a futures contract, it incurs an obligation to take delivery of a
specified amount of the obligation underlying the futures contract at a
specified time in the future for a specified price. When the Fund sells a
futures contract, it incurs an obligation to deliver a specified amount of
the obligation underlying the futures contract at a specified time in the
future for an agreed upon price. With respect to index futures, no physical
transfer of the securities underlying the index is made. Rather, the
parties settle by exchanging in cash an amount based on the difference
between the contract price and the closing value of the index on the
settlement date.
When the Fund writes an option on a futures contract, it becomes
obligated, in return for the premium paid, to assume a position in a futures
contract at a specified exercise price at any time during the term of the
option. If the Fund has written a call, it assumes a short futures
position. If the Fund has written a put, it assumes a long futures
position. When the Fund purchases an option on a futures contract, it
acquires the right, in return for the premium it pays, to assume a position
in a futures contract (a long position if the option is a call and a short
position if the option is a put).
The purchase of futures or call options on futures can serve as a long
hedge, and the sale of futures or the purchase of put options on futures can
serve as a short hedge. Writing call options on futures contracts can serve
as a limited short hedge, using a strategy similar to that used for writing
call options on securities or indices. Similarly, writing put options on
futures contracts can serve as a limited long hedge.
No price is paid upon entering into a futures contract. Instead, at
the inception of a futures contract the Fund is required to deposit "initial
margin" consisting of cash or U.S. Government securities in an amount
generally equal to 10% or less of the contract value. Margin must also be
deposited when writing a call or put option on a futures contract, in
accordance with applicable exchange rules. Unlike margin in securities
transactions, initial margin on futures contracts does not represent a
borrowing, but rather is in the nature of a performance bond or good-faith
deposit that is returned to the Fund at the termination of the transaction
if all contractual obligations have been satisfied. Under certain
circumstances, such as periods of high volatility, the Fund may be required
by an exchange to increase the level of its initial margin payment.
Subsequent "variation margin" payments are made to and from the futures
broker daily as the value of the futures position varies, a process known as
"marking-to-market." Variation margin does not involve borrowing, but
rather represents a daily settlement of the Fund's obligations to or from a
futures broker. When the Fund purchases an option on a future, the premium
paid plus transaction costs is all that is at risk. In contrast, when the
Fund purchases or sells a futures contract or writes a call or put option
thereon, it is subject to daily variation margin calls that could be
substantial in the event of adverse price movements. If the Fund has
insufficient cash to meet daily variation margin requirements, it might need
to sell securities at a time when such sales are disadvantageous.
Purchasers and sellers of futures contracts and options on futures can
enter into offsetting closing transactions, similar to closing transactions
on options, by selling or purchasing, respectively, an instrument identical
to the instrument purchased or sold. Positions in futures and options on
futures may be closed only on an exchange or board of trade that provides a
secondary market. Although the Fund intends to enter into futures and
options on futures only on exchanges or boards of trade where there appears
to be a liquid secondary market, there can be no assurance that such a
market will exist for a particular contract at a particular time. In such
event, it may not be possible to close a futures contract or options
position.
Under certain circumstances, futures exchanges may establish daily
limits on the amount that the price of a futures or an option on a futures
contract can vary from the previous day's settlement price; once that limit
is reached, no trades may be made that day at a price beyond the limit.
Daily price limits do not limit potential losses because prices could move
to the daily limit for several consecutive days with little or no trading,
thereby preventing liquidation of unfavorable positions.
If the Fund were unable to liquidate a futures or options on futures
position due to the absence of a liquid secondary market or the imposition
of price limits, it could incur substantial losses. The Fund would continue
to be subject to market risk with respect to the position. In addition,
except in the case of purchased options, the Fund would continue to be
required to make daily variation margin payments and might be required to
maintain the position being hedged by the future or option or to maintain
cash or securities in a segregated account.
To the extent that the Fund enters into futures contracts, options on
futures contracts, or options on foreign currencies traded on an exchange
regulated by the CFTC, in each case other than for bona fide hedging
purposes (as defined by the CFTC), the aggregate initial margin and premiums
required to establish those positions (excluding the amount by which options
are "in-the-money" at the time of purchase) will not exceed 5% of the
liquidation value of the Fund's portfolio, after taking into account
unrealized profits and unrealized losses on any contracts the Fund has
entered into. This policy does not limit to 5% the percentage of the Fund's
assets that are at risk in futures contracts and options on futures
contracts.
Foreign Currency Strategies - Special Considerations. The Fund may use
Derivative Instruments on foreign currencies to hedge against movements in
the values of the foreign currencies in which the Fund's securities are
denominated. Such currency hedges can protect against price movements in a
security that the Fund owns or intends to acquire that are attributable to
changes in the value of the currency in which it is denominated. Such
hedges do not, however, protect against price movements in the securities
that are attributable to other causes.
The Fund might seek to hedge against changes in the value of particular
currency when no Derivative Instruments on that currency are available or
such Derivative Instruments are more expensive than certain other Derivative
Instruments. In such cases, the Fund may hedge against price movements in
that currency by entering into transactions using Derivative Instruments on
another currency or a basket of currencies, the values of which Dreyfus
believes will have a high degree of positive correlation to the value of the
currency being hedged. The risk that movements in the price of the
Derivative Instrument will not correlate perfectly with movements in the
price of the currency being hedged is magnified when this strategy is used.
The value of Derivative Instruments on foreign currencies depends on
the value of the underlying currency relative to the U.S. dollar. Because
foreign currency transactions occurring in the interbank market might
involve substantially larger amounts than those involved in the use of
foreign currency Derivative Instruments, the Fund could be disadvantaged by
having to deal in the odd lot market (generally consisting of transactions
of less than $1 million) for the underlying foreign currencies at prices
that are less favorable than for round lots.
There is no systematic reporting of last sale information for foreign
currencies or any regulatory requirement that quotations available through
dealers or other market sources be firm or revised on a timely basis.
Quotation information generally is representative of very large transactions
in the interbank market and thus might not reflect odd-lot transactions
where rates might be less favorable. The interbank market in foreign
currencies is a global, round-the-clock market.
Settlement of transactions involving foreign currencies might be
required to take place within the country issuing the underlying currency.
Thus, the Fund might be required to accept or make delivery of the
underlying foreign currency in accordance with any U.S. or foreign
regulations regarding the maintenance of foreign banking arrangements by
U.S. residents and might be required to pay any fees, taxes and charges
associated with such delivery assessed in the issuing country.
Forward Contracts. A forward foreign currency exchange contract
("forward contract") is a contract to purchase or sell a currency at a
future date. The two parties to the contract set the number of days and the
price. Forward contracts are used as a hedge against future movements in
foreign exchange rates. The Fund may enter into forward contracts to
purchase or sell foreign currencies for a fixed amount of U.S. dollars or
other foreign currency.
Forward contracts may serve as long hedges -- for example, the Fund may
purchase a forward contract to lock in the U.S. dollar price of a security
denominated in a foreign currency that the Fund intends to acquire. Forward
contracts may also serve as short hedges -- for example, the Fund may sell a
forward contract to lock in the U.S. dollar equivalent of the proceeds from
the anticipated sale of a security denominated in a foreign currency or from
anticipated dividend or interest payments denominated in a foreign currency.
Dreyfus may seek to hedge against changes in the value of a particular
currency by using forward contracts on another foreign currency or basket of
currencies, the value of which Dreyfus believes will bear a positive
correlation to the value of the currency being hedged.
The cost to the Fund of engaging in forward contracts varies with
factors such as the currency involved, the length of the contract period and
the market conditions then prevailing. Because forward contracts are
usually entered into a principal basis, no fees or commissions are involved.
When the Fund enters into a forward contract, it relies on the counterparty
to make or take delivery of the underlying currency at the maturity of the
contract. Failure by the counterparty to do so would result in the loss of
any expected benefit of the transaction.
Buyers and sellers of forward contracts can enter into offsetting
closing transactions by selling or purchasing, respectively, an instrument
identical to the instrument purchased or sold. Secondary markets generally
do not exist for forward contracts, with the result that closing
transactions generally can be made for forward contracts only by negotiating
directly with the counterparty. Thus, there can be no assurance that the
Fund will in fact be able to close out a forward contract at a favorable
price prior to maturity. In addition, in the event of insolvency of the
counterparty, the Fund might be unable to close out a forward contract at
any time prior to maturity. In either event, the Fund would continue to be
subject to market risk with respect to the position, and would continue to
be required to maintain a position in the securities or currencies that are
the subject of the hedge or to maintain cash or securities in a segregated
account.
The precise matching of forward currency contract amounts and the value
of the securities involved generally will not be possible because the value
of such securities measured in the foreign currency will change after the
forward contract has been established. Thus, the Fund might need to
purchase or sell foreign currencies in the spot (cash) market to the extent
such foreign currencies are not covered by forward contracts. The
projection of short-term currency market movements is extremely difficult,
and the successful execution of a short-term hedging strategy is highly
uncertain.
Swaps, Caps, Collars and Floors. Swap agreements, including interest
rate, equity index and currency swaps, caps, collars and floors, may be
individually negotiated and structured to include exposure to a variety of
different types of investments or market factors. Swaps involve two parties
exchanging a series of cash flows at specified intervals. In the case of an
interest rate swap, the parties exchange interest payments based on an
agreed upon principal amount (referred to as the "notional principal
amount"). Under the most basic scenario, Party A would pay a fixed rate on
the notional principal amount to Party B, which would pay a floating rate on
the same notional principal amount to Party A. Depending on their
structure, swap agreements may increase or decrease the Fund's exposure to
long or short-term interest rates (in the U.S. or abroad), foreign currency
values, mortgage securities, corporate borrowing rates, or other factors.
Swap agreements can take many different forms and are known by a variety of
names.
In a typical cap or floor agreement, one party agrees to make payments
only under specified circumstances, usually in return for payment of a fee
by the other party. For example, the buyer of an interest rate cap obtains
the right to receive payments to the extent that a specified interest rate
exceeds an agreed-upon level, while the seller of an interest rate floor is
obligated to make payments to the extent that a specified interest rate
falls below an agreed-upon level. An interest rate collar combines elements
of buying a cap and selling a floor.
The Fund will set aside cash or appropriate liquid assets to cover its
current obligations under swap transactions. If the Fund enters into a swap
agreement on a net basis (that is, the two payment streams are netted out,
with the Fund receiving or paying, as the case may be, only the net amount
of the two payments), the Fund will maintain cash or liquid assets with a
daily value at least equal to the excess, if any, of the Fund's accrued
obligations under the swap agreement over the accrued amount the Fund is
entitled to receive under the agreement. If the Fund enters into a swap
agreement on other than a net basis or writes a cap, collar or floor, it
will maintain cash or liquid assets with a value equal to the full amount of
the Fund's accrued obligations under the agreement.
The most important factor in the performance of swap agreements is the
change in the specific interest rate, currency or other factor(s) that
determine the amounts of payments due to and from the Fund. If a swap
agreement calls for payments by the Fund, the Fund must be prepared to make
such payments when due. In addition, if the counterparty's creditworthiness
declines, the value of a swap agreement would likely decline, potentially
resulting in losses.
The Fund will enter into swaps, caps, collars and floors only with
banks and recognized securities dealers believed by Dreyfus to present
minimal credit risks in accordance with guidelines established by the Board.
If there is a default by the other party to such a transaction, the Fund
will have to rely on its contractual remedies (which may be limited by
bankruptcy, insolvency or similar laws) pursuant to the agreement relating
to the transaction.
The Fund understands that it is the position of the staff of the SEC
that assets involved in swap transactions are illiquid and, therefore, are
subject to the limitations on illiquid investments.
Master/Feeder Option. The Company may in the future seek to achieve
the Fund's investment objective by investing all of the Fund's net
investable assets in another investment company having the same investment
objective and substantially the same investment policies and restrictions as
those applicable to the Fund. Shareholders of the Fund will be given at
least 30 days' prior notice of any such investment. Such investment would be
made only if the Company's Board of Directors determines it to be in the
best interest of the Fund and its shareholders. In making that
determination, the Company's Board of Directors will consider, among other
things, the benefits to shareholders and/or the opportunity to reduce costs
and achieve operational efficiency. Although the Fund believes that the
Company's Board of Directors will not approve an arrangement that is likely
to result in higher costs, no assurance is given that costs will be
materially reduced if this option is implemented.
Investment Restrictions
The following limitations have been adopted by the Fund. The Fund may
not change any of these fundamental investment limitations without the
consent of: (a) 67% or more of the shares present at a meeting of
shareholders duly called if the holders of more than 50% of the outstanding
shares of the Fund are present or represented by proxy; or (b) more than 50%
of the outstanding shares of the Fund, whichever is less. The Fund may not:
1. Purchase any securities which would cause more than 25% of the
value of the Fund's total assets at the time of such purchase to be invested
in the securities of one or more issuers conducting their principal
activities in the same industry. (For purposes of this limitation, U.S.
Government securities, and state or municipal governments and their
political subdivisions are not considered members of any industry. In
addition, this limitation does not apply to investments in domestic banks,
including U.S. branches of foreign banks and foreign branches of U.S.
banks).
2. Borrow money or issue senior securities as defined in the
Investment Company Act of 1940, as amended (the "1940 Act") except that (a)
the Fund may borrow money in an amount not exceeding one-third of the Fund's
total assets at the time of such borrowings, and (b) the Fund may issue
multiple classes of shares. The purchase or sale of futures contracts and
related options shall not be considered to involve the borrowing of money or
issuance of senior securities.
3. Purchase with respect to 75% of the Fund's total assets securities
of any one issuer (other than securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities) if, as a result, (a) more
than 5% of the Fund's total assets would be invested in the securities of
that issuer, or (b) the Fund would hold more than 10% of the outstanding
voting securities of that issuer.
4. Make loans or lend securities, if as a result thereof more than
one-third of the Fund's total assets would be subject to all such loans. For
purposes of this limitation debt instruments and repurchase agreements shall
not be treated as loans.
5. Purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent the
Fund from investing in securities or other instruments backed by real
estate, including mortgage loans, or securities of companies that engage in
real estate business or invest or deal in real estate or interests therein).
6. Underwrite securities issued by any other person, except to the
extent that the purchase of securities and later disposition of such
securities in accordance with the Fund's investment program may be deemed an
underwriting.
7. Purchase or sell commodities except that the Fund may enter into
futures contracts and related options, forward currency contracts and other
similar instruments.
The Fund may, notwithstanding any other fundamental investment policy
or limitation, invest all of its investable assets in securities of a
single, open-end management investment company with substantially the same
investment objective, policies and limitations as the Fund.
The Fund has adopted the following additional non-fundamental
restrictions. These non-fundamental restrictions may be changed without
shareholder approval, in compliance with applicable law and regulatory
policy.
1. The Fund shall not sell securities short, unless it owns or has
the right to obtain securities equivalent in kind and amounts to the
securities sold short, and provided that transactions in futures contracts
and options are not deemed to constitute selling short.
2. The Fund shall not purchase securities on margin, except that the
Fund may obtain such short-term credits as are necessary for the clearance
of transactions, and provided that margin payments in connection with
futures contracts and options shall not constitute purchasing securities on
margin.
3. The Fund shall not purchase oil, gas or mineral leases.
4. The Fund will not purchase or retain the securities of any issuer
if the officers, Directors of the Fund, its advisers, or managers, owning
beneficially more than one half of one percent of the securities of such
issuer, together own beneficially more than 5% of such securities.
5. The Fund will not purchase securities of issuers (other than
securities issued or guaranteed by domestic or foreign governments or
political subdivisions thereof), including their predecessors, that have
been in operation for less than three years, if by reason thereof, the value
of the Fund's investment in securities would exceed 5% of the Fund's total
assets. For purposes of this limitation, sponsors, general partners,
guarantors and originators of underlying assets may be treated as the issuer
of a security.
6. The Fund will not invest more than 15% of the value of its net
assets in illiquid securities, including repurchase agreements with
remaining maturities in excess of seven days, time deposits with maturities
in excess of seven days and other securities which are not readily
marketable. For purposes of this limitation, illiquid securities shall not
include Section 4(2) paper and securities which may be resold under Rule
144A under the Securities Act of 1933, provided that the Board of Directors,
or its delegate, determines that such securities are liquid based upon
trading markets for the specific security.
7. The Fund may not invest in securities of other investment
companies, except as they may be acquired as part of a merger, consolidation
or acquisition of assets and except to be extent otherwise permitted by the
1940 Act.
8. The Fund shall not purchase any security while borrowings
representing more than 5% of Fund's total assets are outstanding.
9. The Fund will not purchase warrants if at the time of such
purchase: (a) more than 5% of the value of the Fund's assets would be
invested in warrants, or (b) more than 2% of the value of the Fund's assets
would be invested in warrants that are not listed on the New York Stock
Exchange ("NYSE") or American Stock Exchange (for purposes of this
limitation, warrants acquired by the Fund in units or attached to securities
will be deemed to have no value).
10. The Fund will not purchase puts, calls, straddles, spreads and any
combination thereof if by reason thereof the value of its aggregate
investment in such classes of securities will exceed 5% of its total assets
except that: (a) this limitation shall not apply to standby commitments,
and (b) this limitation shall not apply to the Fund's transactions in future
contracts and related options.
11. The Fund will not invest more than 25% of the market value of the
Fund's total assets in securities issued or guaranteed by a single Western
European government or its agencies and instrumentalities.
As an operating policy, the Fund will not invest more the 25% of the value
of the Fund's total assets, at the time of such purchase, in domestic banks,
including U.S. branches of foreign banks and foreign branches of U.S. banks.
The Board of Directors may change this operating policy without shareholder
approval. Notice will be given to shareholders if this policy is changed by
the Board of Directors.
MANAGEMENT OF THE FUND
PRINCIPAL SHAREHOLDERS
The following shareholder(s) owned 5% or more of the outstanding
Investor shares of the Fund at February 9, 1998: MBC Investments Corp.,
Attn., Michael A. Botsford, 4500 New Linden Hill Road, Wilmington, DE 19808-
2922: 42% record.
The following shareholder(s) owned 5% or more of the outstanding
Restricted shares of the Fund at February 9, 1998: MaC & Co., Mellon Bank,
N.A., Mutual Funds Operations, P.O. Box 3198, Pittsburgh, PA 15230-3198:
26% record.
FEDERAL LAW AFFECTING MELLON BANK
The Glass-Steagall Act of 1933 prohibits national banks from engaging
in the business of underwriting, selling or distributing securities and
prohibits a member bank of the Federal Reserve System from having certain
affiliations with an entity engaged principally in that business. The
activities of Mellon Bank, N.A. ("Mellon Bank") in informing its customers
of, and performing, investment and redemption services in connection with
the Fund, as well as Dreyfus' investment advisory activities, may raise
issues under these provisions. Mellon Bank has been advised by counsel that
these activities are consistent with its statutory and regulatory
obligations.
Changes in either federal or state statutes and regulations relating to
the permissible activities of banks and their subsidiaries or affiliates, as
well as further judicial or administrative decisions or interpretations of
such future statutes and regulations could prevent Mellon Bank or Dreyfus
from continuing to perform all or a part of the above services for its
customers and/or the Fund. If Mellon Bank or Dreyfus were prohibited from
serving the Fund in any of its present capacities, the Directors would seek
an alternative provider(s) of such services.
DIRECTORS AND OFFICERS
The Company has a Board composed of eleven Directors which supervises
the Fund's investment activities and reviews contractual arrangements with
companies that provide the Fund with services. The following lists the
Directors and officers and their positions with the Company and their
present and principal occupations during the past five years. Each Director
who is an "interested person" of the Company (as defined in the 1940 Act) is
indicated by an asterisk(*). Each of the Directors also serves as a Trustee
of The Dreyfus/Laurel Funds Trust and The Dreyfus/Laurel Tax-Free Municipal
Funds (collectively, with the Company, the "Dreyfus/Laurel Funds").
Directors of the Company
o+RUTH MARIE ADAMS. Director of the Company; Professor of English and Vice
President Emeritus, Dartmouth College; Senator, United Chapters of Phi
Beta Kappa; Trustee, Woods Hole Oceanographic Institution; from
November 1995 to January 1997, Director, Access Capital Strategic
Community Investment Fund, Inc. - Institutional Investment Portfolio.
Age: 83 years old. Address: 1026 Kendal Lyme Road, Hanover, New
Hampshire 03755.
o+FRANCIS P. BRENNAN. Chairman of the Board of Directors and Assistant
Treasurer of the Company; Director and Chairman, Massachusetts Business
Development Corp.; and from November 1995 to January 1997, Director,
Access Capital Strategic Community Investment Fund, Inc. - Bank
Portfolio. Age: 80 years old. Address: Massachusetts Business
Development Corp., 50 Milk Street, Boston, Massachusetts 02109.
o+JOSEPH S. DiMARTINO, Director of the Company since February 1995. Since
January 1995, Mr. DiMartino served as Chairman of the Board for various
funds in the Dreyfus Family of Funds. He is also Chairman of the Board
of Staffing Resources, Inc., a temporary placement agency. Mr.
DiMartino also serves as a Director of The Muscular Dystrophy
Association, HealthPlan Services Corporation, a provider of marketing,
administrative and risk management services to health and other benefit
programs, Noel Group, Inc., a venture capital company, Carlyle
Industries, Inc. (formerly, Belding Heminway Company, Inc.), a button
packager and distributor, and Curtis Industries, Inc., a national
distributor of security products, chemicals, and automotive and other
hardware. Mr. DiMartino is also a Board member of 152 other funds in
the Dreyfus Family of Funds. From November 1995 to January 1997,
Director, Access Capital Strategic Community Investment Fund, Inc. -
Institutional Investment Portfolio and Bank Portfolio. For more than
five years prior to January 1995, he was President, a director and,
until August 1994, Chief Operating Officer of Dreyfus and Executive
Vice President and a director of Dreyfus Service Corporation, a wholly-
owned subsidiary of Dreyfus. From August 1994 until December 31, 1994,
he was a director of Mellon Bank Corporation. Age: 54 years old.
Address: 200 Park Avenue, New York, New York 10166.
o+JAMES M. FITZGIBBONS. Director of the Company; Chairman, Howes Leather
Company, Inc.; Director, Fiduciary Trust Company; Chairman, CEO and
Director, Fieldcrest-Cannon Inc.; Director, Lumber Mutual Insurance
Company; Director, Barrett Resources, Inc.; from November 1995 to
January 1997, Director, Access Capital Strategic Community Investment
Fund, Inc. - Bank Portfolio. Age: 63 years old. Address: 40 Norfolk
Road, Brookline, Massachusetts 02167.
o*J. TOMLINSON FORT. Director of the Company; Partner, Reed, Smith, Shaw &
McClay (law firm); from November 1995 to January 1997, Director, Access
Capital Strategic Community Investment Fund, Inc. - Bank Portfolio.
Age: 69 years old. Address: 204 Woodcock Drive, Pittsburgh,
Pennsylvania 15215.
o+ARTHUR L. GOESCHEL. Director of the Company; Director, Calgon Carbon
Corporation; Director, Cerex Corporation; Director, National Picture
Frame Corporation; former Chairman of the Board and Director, Rexene
Corporation; Chairman of the Board and Director, Tetra Corporation 1991-
1993; Director, Medalist Corporation 1992-1993; from November 1995 to
January 1997, Director, Access Capital Strategic Community Investment
Fund, Inc. - Institutional Investment Portfolio. Age: 76 years old.
Address: Way Hollow Road and Woodland Road, Sewickley, Pennsylvania
15143.
o+KENNETH A. HIMMEL. Director of the Company; former Director, The Boston
Company, Inc. ("TBC") and Boston Safe Deposit and Trust Company;
President and Chief Executive Officer, Himmel & Co., Inc.; Vice
Chairman, Sutton Place Gourmet, Inc.; Managing Partner, Franklin
Federal Partners. From November 1995 to January 1997, Director, Access
Capital Strategic Community Investment Fund, Inc. - Bank Portfolio;
Age: 51 years old. Address: 625 Madison Avenue, New York, New York
10022.
o*ARCH S. JEFFERY. Director of the Company; Financial Consultant; from
November 1995 to January 1997, Director, Access Capital Strategic
Community Investment Fund, Inc. - Institutional Investment Portfolio.
Age: 80 years old. Address: 1817 Foxcroft Lane, Unit 306, Allison
Park, Pennsylvania 15101.
o+STEPHEN J. LOCKWOOD. Director of the Company; President and CEO, LDG
Management Company Inc.; CEO, LDG Reinsurance Underwriters, SRRF
Management Inc. and Medical Reinsurance Underwriters Inc.; from
November 1995 to January 1997, Director, Access Capital Strategic
Community Investment Fund, Inc. - Institutional Investment Portfolio.
Age: 50 years old. Address: 401 Edgewater Place, Wakefield,
Massachusetts 01880.
o+JOHN J. SCIULLO. Director of the Company; Dean Emeritus and Professor of
Law, Duquesne University Law School; Director, Urban Redevelopment
Authority of Pittsburgh; from November 1995 to January 1997, Director,
Access Capital Strategic Community Investment Fund, Inc. -
Institutional Investment Portfolio. Age: 66 years old. Address: 321
Gross Street, Pittsburgh, Pennsylvania 15224
o+ROSLYN M. WATSON. Director of the Company; Principal, Watson Ventures;
Director, American Express Centurion Bank; Director, Harvard/Pilgrim
Community Health Plan, Inc.; from November 1995 to January 1997,
Director, Access Capital Strategic Community Investment Fund, Inc. -
Bank Portfolio; Director, Massachusetts Electric Company; Director, The
Hymans Foundation, Inc., prior to February, 1993; Real Estate
Development Project Manager and Vice President, The Gunwyn Company.
Age: 48 years old. Address: 25 Braddock Park, Boston, Massachusetts
02116-5816.
Officers of the Company
#MARIE E. CONNOLLY. President and Treasurer of the Company. President,
Chief Executive Officer, Chief Compliance Officer and a director of the
Distributor and Funds Distributor, Inc., the ultimate parent of which
is Boston Institutional Group, Inc. Age: 40 years old.
#DOUGLAS C. CONROY. Vice President and Assistant Secretary of the Company.
Assistant Vice President of Funds Distributor, Inc. From April 1993 to
January 1995, he was a Senior Fund Accountant for Investors Bank &
Trust Company. From December 1991 to March 1993, he was employed as a
fund accountant at TBC. Age: 28 years old.
#RICHARD W. INGRAM. Vice President and Assistant Treasurer of the Company.
Executive Vice President of the Distributor and Funds Distributor, Inc.
From March 1994 to November 1995, he was Vice President and Division
Manager for First Data Investor Services Group. From 1989 to 1994, he
was Vice President, Assistant Treasurer and Tax Director - Mutual Funds
of TBC. Age: 42 years old.
#CHRISTOPHER J. KELLEY. Vice President and Assistant Secretary of the
Company. Vice President and Senior Associate General Counsel of Funds
Distributor, Inc. and the Distributor, and an officer of certain
investment companies advised or administered by Harris Trust and
Savings Bank, Waterhouse Asset Management, Inc., J.P. Morgan & Co.
Incorporated and Montgomery Asset Management, L.P., or their respective
affiliates. From April 1994 to July 1996, Mr. Kelley was Assistant
Counsel at Forum Financial Group. From October 1992 to March 1994, Mr.
Kelley was employed by Putnam Investments in legal and compliance
capacities. Age: 33 years old.
#KATHLEEN K. MORRISEY. Vice President and Assistant Secretary of the
Company. Vice President and Assistant Secretary of Funds Distributor,
Inc. Manager of Treasury Services Administration and an officer of
certain investment companies advised or administered by J.P. Morgan &
Co. Incorporated, Montgomery Asset Management, L.P., and Dresdner RCM
Global Investors, Inc., or their respective affiliates. From July 1994
to November 1995, she was a Fund Accountant II for Investors Bank &
Trust Company. Prior to that she was a Finance student at Stonehill
College in North Easton, MA. Age: 25 years old.
#MARY A. NELSON. Vice President and Assistant Treasurer of the Company.
Vice President of the Distributor and Funds Distributor, Inc. From
September 1989 to July 1994, she was an Assistant Vice President and
Client Manager for TBC. Age: 33 years old.
#MICHAEL S. PETRUCELLI. Vice President, Assistant Treasurer and Assistant
Secretary of the Company. Senior Vice President and director of
Strategic Client Initiatives of Funds Distributor, Inc. and an officer
of certain investment companies advised or administered by J.P. Morgan
& Co. Incorporated. From December 1989 through November, 1996, he was
employed by GE Investments where he held various financial, business
development and compliance positions. He also served as Treasurer of
the GE Funds and as Director of GE Investment Services. Age: 36 years
old.
#JOSEPH F. TOWER, III. Vice President and Assistant Treasurer of the
Company. Senior Vice President, Treasurer and Chief Financial Officer
of the Distributor and Funds Distributor, Inc. From 1988 to August
1994, he was employed by TBC where he held various management positions
in the Corporate Finance and Treasury areas. Age: 35 years old.
#ELBA VASQUEZ. Vice President and Assistant Secretary of the Company.
Assistant Vice President of Funds Distributor, Inc. She has been an
employee since May 1996 as a Sales Associate in the distribution of
World Equity Benchmark Shares ("WEBS"). From March 1990 to May 1996,
she was employed by U.S. Trust Company of New York. As an officer of
U.S. Trust, she held various positions in the sales and marketing of
their proprietary family of mutual funds. Age: 36 years old.
The address of each Officer of the Company is 200 Park Avenue, New
York, New York 10166.
_______________________
* Interested person" of the Company, as defined in the 1940 Act.
o Member of the Audit Committee.
+ Member of the Nominating Committee.
# Officer also serves as an officer for other investment companies advised
by Dreyfus, including The Dreyfus/Laurel Trust and The Dreyfus/Laurel
Tax-Free Municipal Funds.
The officers and Directors of the Company as a group owned beneficially
less than 1% of the Fund's total shares outstanding as of February 9, 1998.
MANAGEMENT ARRANGEMENTS
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Management of the Fund."
Management Agreement. Dreyfus serves as the investment manager for the
Fund pursuant to an Investment Management Agreement with the Company dated
April 4, 1994 (the "Management Agreement"), transferred to Dreyfus as of
October 17, 1994. Effective August 5, 1996, the 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 1.50% to 1.25% of the value of the Fund's average daily net
assets. Pursuant to the Management Agreement, Dreyfus provides, or arranges
for one or more third parties to provide, investment advisory,
administrative, custody, fund accounting and transfer agency service to the
Fund. As Manager, Dreyfus manages the fund by making investment decisions
based on the Fund's investment objective, policies and restrictions. The
Management Agreement is subject to review and approval at least annually by
the Board of Directors.
For the period from August 12, 1994 (commencement of operations)
through August 4, 1996, S.A.M. Finance, S.A. ("CCF SAM"), 115 Avenue des
Champs-Elysees, Paris, France 75008, served as investment sub-adviser for
the Fund pursuant to the former Sub-Advisory Agreement among the Company, on
behalf of the Fund, CCF SAM and Mellon Bank dated July 18, 1994 (the "Former
Sub-Advisory Agreement") transferred to Dreyfus effective as of October 17,
1994. CCF SAM is a wholly-owned subsidiary of Credit Commercial de France,
a French bank. Effective August 5, 1996, Dreyfus assumed responsibility for
providing these services pursuant to the Management Agreement.
The Management Agreement will continue from year to year provided that
a majority of the Directors who are not interested persons of the Company
and either a majority of all Directors or a majority of the shareholders of
the Fund approve the continuance. The Management Agreement was last
approved by the Board of Directors on January 28, 1998 to continue until
April 4, 1999. The Company may terminate the Management Agreement, upon the
vote of a majority of the Board of Directors or upon the vote of majority of
the outstanding voting securities on 60 days' written notice to Dreyfus.
Dreyfus may terminate the Management Agreement upon written notice to the
Company. The Management Agreement will terminate immediately and
automatically upon its assignment.
The following persons are officers and/or directors of Dreyfus: W.
Keith Smith, Chairman of the Board; Christopher M. Condron, President, Chief
Executive Officer, Chief Operating Officer and a director; Stephen E.
Canter, Vice Chairman, Chief Investment Officer and a director; Lawrence S.
Kash, Vice Chairman-Distribution and a director; William T. Sandalls, Jr.,
Senior Vice President and Chief Financial Officer; Mark N. Jacobs, Vice
President, General Counsel and Secretary; Patrice M. Kozlowski, Vice
President-Corporate Communications; Mary Beth Leibig, Vice President- Human
Resources; Jeffrey N. Nachman, Vice President-Mutual Fund Accounting; Andrew
S. Wasser, Vice President-Information Systems; William V. Healey, Assistant
Secretary; and Mandell L. Berman, Burton C. Borgelt, Frank V. Cahouet and
Richard Syron, directors.
For the fiscal years ended October 31, 1997, 1996 and 1995, the Fund
has had the following expenses:
For the Year and Period Ended October 31,
1997 1996 1995
Management fees (gross of waiver) $235,093 $273,154 $249,080
For the fiscal year ended October 31, 1997, no fees were paid by
Dreyfus to CCF SAM.
PURCHASE OF FUND SHARES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "How to Buy Fund Shares."
The Distributor. The Distributor serves as the Fund's distributor
pursuant to an agreement which is renewable annually. The Distributor also
acts as distributor for the other funds in the Dreyfus Family of Funds and
for certain other investment companies.
Dreyfus TeleTransfer Privilege. Dreyfus TeleTransfer purchase orders
may be made at any time. Purchase orders received by 4:00 P.M., New York
time, on any business day that Dreyfus Transfer, Inc., the Fund's transfer
and dividend disbursing agent (the "Transfer Agent"), and the New York Stock
Exchange (the "NYSE") are open for business will be credited to the
shareholder's Fund account on the next bank business day following such
purchase order. Purchase orders received after 4:00 P.M., New York time, on
any business day the Transfer Agent and the NYSE are open for lousiness, or
orders made on Saturday, Sunday or any Fund holiday (e.g., when the NYSE is
not open for business), will be credited to the shareholder's Fund account
on the second bank business day following such purchase order. To qualify
to use the TeleTransfer Privilege, the initial payment for purchase of Fund
shares must be drawn on, and redemption proceeds paid to, the same bank and
account as are designated on the Account Application or Shareholder Services
Form on file. If the proceeds of a particular redemption are to wired to an
account at any other bank, the request must be in writing and signature-
guaranteed. See "Redemption of Fund Shares- TeleTransfer Privilege,"
Reopening an Account. An investor may reopen an account with a minimum
investment of $100 without filing a new Account Application during the
calendar year in which the account is closed or during the following
calendar year, provided the information on the old Account Application is
still applicable.
In-Kind Purchases. If the following conditions are satisfied, the Fund
may at its discretion, permit the purchase of shares through an "in-kind"
exchange of securities. Any securities exchanged must meet the investment
objective, policies and limitations of the Fund, must have a readily
ascertainable market value, must be liquid and must not be subject to
restrictions on resale. The market value of any securities exchanged, plus
any cash, must be at least equal to $25,000. Shares purchased in exchange
for securities generally cannot be redeemed for fifteen days following the
exchange in order to allow time for the transfer to settle.
The basis of the exchange will depend upon the relative net asset value
of the shares purchased and securities exchanged. Securities accepted by
the Fund will be valued in the same manner as the Fund values its assets.
Any interest earned on the securities following their delivery to the Fund
and prior to the exchange will be considered in valuing the securities. All
interest, dividends, subscription or other rights attached to the securities
become the property of the Fund, along with the securities. For further
information about "in-kind" purchases, call 1-800-645-6561.
DISTRIBUTION PLAN
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Distribution Plan
(Investor Shares Only)."
Investor shares are subject to fees for distribution and shareholder
services.
Distribution Plan--Investor Shares. The SEC has adopted Rule 12b-l
under the 1940 Act ("Rule") regulating the circumstances under which
investment companies such as the Company may, directly or indirectly, bear
the expenses of distributing their shares. The Rule defines distribution
expenses to include expenditures for "any activity which is primarily
intended to result in the sale of fund shares." The Rule, among other
things, provides that an investment company may bear such expenses only
pursuant to a plan adopted in accordance with the Rule. With respect to the
Investor shares of the Fund, the Company has adopted a Distribution Plan
("Plan"), and may enter into Agreements with banks, security brokers or
dealers and other financial institutions ("Agent") pursuant to the Plan.
Under the Plan, the Fund may spend annually up to 0.25% of the average
daily net assets attributable to Investor shares for costs and expenses
incurred in connection with the distribution of, and shareholder servicing
with respect to, the Fund's Investor shares.
The Plan provides that a report of the amounts expended under the Plan,
and the purposes for which such expenditures were incurred, must be made to
the Company's Directors for their review at least quarterly. In addition,
the Plan provides that it may not be amended to increase materially the
costs which the Fund may bear for distribution pursuant to the Plan without
approval of the Fund's shareholders, and that other material amendments of
the Plan must be approved by the vote of a majority of the Directors and of
the Directors who are not "interested persons" of the Company or the Manager
(as defined in the 1940 Act) and who do not have any direct or indirect
financial interest in the operation the Plan, cast in person at a meeting
called for the purpose of considering such amendments. The Plan is subject
to annual approval by the entire Board of Directors and by the Directors who
are neither interested persons nor have any direct or indirect financial
interest in the operation of the Plan, by vote cast in person at a meeting
called for the purpose of voting on the Plan. The Plan was so approved by
the Board of Directors on January 28, 1998. The Plan is terminable, as to
the Fund's Investor shares, at any time by vote of a majority of the
Directors who are not interested persons and have no direct or indirect
financial interest in the operation of the Plan or by vote of the holders of
a majority of the outstanding shares of the such Class of the Fund.
For the fiscal year ended October 31, 1997, the Fund paid the
Distributor and Dreyfus Service Corporation $87 and $3,607, respectively,
pursuant to the Plan with respect to Investor shares
REDEMPTION OF FUND SHARES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "How to Redeem Fund
Shares."
Wire Redemption Privilege. By using this Privilege, the investor
authorizes the Transfer Agent to act on wire, telephone or letter redemption
instructions from any person representing himself or herself to be the
investor, or a representative of the investor's Agent, and reasonably
believed by the Transfer Agent to be genuine. Ordinarily, the Fund will
initiate payment for shares redeemed pursuant to this Privilege on the next
business day after receipt if the Transfer Agent receives the redemption
request in proper form. Redemption proceeds will be transferred by Federal
Reserve wire only to the commercial bank account specified by the investor
on the Account Application or Shareholder Services Form. Redemption
proceeds, if wired, must be in the amount of $1,000 or more and will be
wired to the investor's account at the bank of record designated in the
investor's file at the Transfer Agent, if the investor's bank is a member of
the Federal Reserve System, or to a correspondent bank if the investor's
bank is not a member. Fees ordinarily are imposed by such bank and usually
are borne by the investor. Immediate notification by the correspondent bank
to the investor's bank is necessary to avoid a delay in crediting the funds
to the investor's bank account.
Investors with access to telegraphic equipment may wire redemption
requests to the Transfer Agent by employing the following transmittal code
which may be used for domestic or overseas transmissions:
Transfer Agent's
Transmittal Code Answer Back Sign
144295 144295 TSSG PREP
Investors who do not have direct access to telegraphic equipment may
have the wire transmitted by contracting a TRT Cables operator at 1-800-654-
7171, toll free. Investors should advise the operator that the above
transmittal code must be used and should also inform the operator of the
Transfer Agent's answer back sign.
To change the commercial bank or account designated to receive
redemption proceeds, a written request must be sent to the Transfer Agent.
This request must be signed by each shareholder, with each signature
guaranteed as described below under "Stock Certificates; Signatures."
Stock Certificates; Signatures. Any certificates representing Fund
shares to be redeemed must be submitted with the redemption request.
Written redemption requests must be signed by each shareholder, including
each holder of a joint account, and each signature must be guaranteed.
Signatures on endorsed certificates submitted for redemption also must be
guaranteed. The Transfer Agent has adopted standards and procedures
pursuant to which signature-guarantees in proper form generally will be
accepted from domestic banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies
and savings associations as well as from participants in the NYSE Medallion
Signature Program, the Securities Transfer Agents Medallion Program
("STAMP") and the Stock Exchanges Medallion Program. Guarantees must be
signed by an authorized signatory of the guarantor and "Signature-
Guaranteed" must appear with the signature. The Transfer Agent may request
additional documentation from corporations, executors, administrators,
trustees or guardians, and may accept other suitable verification
arrangements from foreign investors, such as consular verification. For
more information with respect to signature-guarantees, please call one of
the telephone numbers listed on the cover.
Dreyfus TeleTransfer Privilege. Investors should be aware that if they
have selected the Dreyfus TeleTransfer Privilege, any request for a wire
redemption will be effected as a Dreyfus TeleTransfer transaction through
the ACH system unless more prompt transmittal specifically is requested.
Redemption proceeds will be on deposit in the investor's account at an ACH
member bank ordinarily two business days after receipt of the redemption
request. See "Purchase of Fund Shares--Dreyfus TeleTransfer Privilege."
Redemption Commitment. The Fund has committed itself to pay in cash
all redemption requests by any shareholder of record of the Fund, limited in
amount during any 90-day period to the lesser of $250,000 or 1% of the value
of the Fund's net assets at the beginning of such period. Such commitment
is irrevocable without the prior approval of the SEC. In the case of
requests for redemption in excess of such amount, the Board of Directors
reserves the right to make payments in whole or in part in securities or
other assets in case of an emergency or any time a cash distribution would
impair the liquidity of the Fund to the detriment of the existing
shareholders. In this event, the securities would be valued in the same
manner as the Fund's portfolio is valued. If the recipient sold such
securities, brokerage charges would be incurred.
Suspension of Redemptions. The right of redemption may be suspended or
the date of payment postponed (a) during any period when the NYSE is closed
(other than customary weekend and holiday closings), (b) when trading in the
markets the Fund ordinarily utilizes is restricted, or when an emergency
exists as determined by the SEC so that disposal of the Fund's investments
or determination of its net asset value is not reasonably practicable, or
(c) for such other periods as the SEC by order may permit to protect the
Fund's shareholders.
SHAREHOLDER SERVICES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Shareholder Services."
Fund Exchanges. Shares of any Class of the Fund may be exchanged for
shares of certain other eligible funds advised or administered by Dreyfus.
Shares of the funds purchased by exchange will be purchased on the basis of
relative net asset value per share as follows:
A. Exchanges for shares of funds that are offered without a
sales load will be made without a sales load.
B. Shares of funds purchased without a sales load may be
exchanged for shares of other funds sold with a sales load, and
the applicable sales load will be deducted.
C. Shares of funds purchased with a sales load may be exchanged
without a sales load for shares of other funds sold without a
sales load.
D. Shares of funds purchased with a sales load, shares of funds
acquired by a previous exchange from shares purchased with a sales
load and additional shares acquired through reinvestment of
dividends or other distributions of any such funds (collectively
referred to herein as "Purchased Shares") may be exchanged for
shares of other funds sold with a sales load (referred to herein
as "Offered Shares"), provided that, if the sales load applicable
to the Offered Shares exceeds the maximum sales load that could
have been imposed in connection with the Purchased Shares (at the
time the Purchased Shares were acquired), without giving effect to
any reduced loads, the difference will be deducted.
To accomplish an exchange under item D above, shareholders must notify
the Transfer Agent of their prior ownership of fund shares and their account
number.
To request an exchange, an investor, or an investor's Agent acting on
the investor's behalf, must give exchange instruction to the Transfer Agent
in writing or by telephone. The ability to issue exchange instructions by
telephone is given to all Fund shareholders automatically, unless the
investor checks the applicable "No" box on the Account Application,
indicating that the investor specifically refuses this Privilege. By using
the Telephone Exchange Privilege, the investor authorizes the Transfer Agent
to act on telephonic instructions (including over The Dreyfus Touchr
Automated Telephone System) from any person representing himself or herself
to be the investor, or a representative of the investor's Agent, and
reasonably believed by the Transfer Agent to be genuine. Telephone
exchanges may be subject to limitations as to the amount involved or the
number of telephone exchanges permitted. Shares issued in certificate form
are not eligible for telephone exchange.
Exchanges of Fund shares held by a Retirement Plan may be made only
between the investor's Retirement Plan account in one fund and such
investor's Retirement Plan account in another fund.
To establish a personal retirement plan by exchange, shares of the fund
being exchanged must have a value of at least the minimum initial investment
required for shares of the fund into which the exchange is being made. The
minimum initial investment is generally $750 for Dreyfus-sponsored Keogh
Plans, IRAs (including regular IRAs, spousal IRAs for a non-working spouse,
Roth IRAs, IRAs set up under a Simplified Employee Pension Plan ("SEP-
IRAs"), and rollover IRAs), and 403(b)(7) Plans with only one participant,
and $500 for Dreyfus-sponsored Education IRAs. To exchange shares held in
corporate plans, 403(b)(7) Plans and SEP-IRAs with more than one
participant, the minimum initial investment is $100 if the plan has at least
$2,500 invested among shares of the same Class of the funds in the Dreyfus
Family of Funds. To exchange shares held in a personal retirement plan
account, the shares exchanged must have a current value of at least $100.
Dreyfus Auto-Exchange Privilege. The Dreyfus Auto-Exchange Privilege
permits an investor to purchase, in exchange for shares of the Fund, shares
of certain other eligible funds in the Dreyfus Family of Funds. This
Privilege is available only for existing accounts. With respect to Fund
shares held by a Retirement Plan, exchanges may be made only between the
investor's Retirement Plan account in one fund and such investor's
Retirement Plan account in another fund. Shares will be exchanged on the
basis of relative net asset value as described above under "Fund Exchanges."
Enrollment in or modification or cancellation of this Privilege is effective
three business days following notification by the investor. An investor
will be notified if the investor's account falls below the amount designated
to be exchanged under this Privilege. In this case, an investor's account
will fall to zero unless additional investments are made in excess of the
designated amount prior to the next Dreyfus Auto-Exchange transaction.
Shares held under IRA and other retirement plans are eligible for this
Privilege. Exchanges of IRA shares may be made between IRA accounts and
from regular accounts to IRA accounts, but not from IRA accounts to regular
accounts. With respect to all other retirement accounts, exchanges may be
made only among those accounts.
Fund Exchanges and Dreyfus Auto-Exchange Privilege are available to
shareholders resident in any state in which shares of the fund being
acquired may legally be sold. Shares may be exchanged only between accounts
having identical names and other identifying designations.
Shareholder Services Forms and prospectuses of the other funds may be
obtained by calling 1-800-645-6551. The Fund reserves the right to reject
any exchange request in whole or in part. The Fund Exchange service or
Dreyfus Auto-Exchange Privilege may be modified or terminated at any time
upon notice to shareholders.
Automatic Withdrawal Plan. The Automatic Withdrawal Plan permits an
investor with a $5,000 minimum account to request withdrawal of a specified
dollar amount (minimum of $50) on either a monthly or quarterly basis.
Withdrawal payments are the proceeds from sales of Fund shares, not the
yield on the shares. If withdrawal payments exceed reinvested dividends and
distributions, the investor's shares will be reduced and eventually may be
depleted. Automatic Withdrawal may be terminated at any time by the
investor, the Fund or the Transfer Agent. Shares for which certificates
have been issued may not be redeemed through the Automatic Withdrawal Plan.
Dreyfus Dividend Sweep. Dreyfus Dividend Sweep allows investors to
invest automatically their dividends or dividends and capital gain
distributions, if any, from the Fund in shares of certain other eligible
funds in the Dreyfus Family of Funds of which the investor is a shareholder.
Shares of the same Class of other funds purchased pursuant to this Privilege
will be purchased on the basis of relative net asset value per share as
follows:
A. Dividends and other distributions paid by a fund may be
invested without imposition of a sales load in shares of other
funds that are offered without a sales load.
B. Dividends and other distributions paid by a fund which does
not charge a sales load may be invested in shares of other funds
sold with a sales load, and the applicable sales load will be
deducted.
C. Dividends and other distributions paid by a fund which
charges a sales load may be invested in shares of other funds sold
with a sales load (referred to herein as "Offered Shares"),
provided that, if the sales load applicable to the Offered Shares
exceeds the maximum sales load charged by the fund from which
dividends or distributions are being swept, without giving effect
to any reduced loads, the difference will be deducted.
D. Dividends and other distributions paid by a fund may be invested
in shares of other funds that impose a contingent deferred sales
charge ("CDSC") and the applicable CDSC, if any, will be imposed
upon redemption of such shares.
Corporate Pension/Profit-Sharing and Retirement Plans. The Fund makes
available to corporations a variety of prototype pension and profit-sharing
plans including a 401(k) Salary Reduction Plan. In addition, the Fund makes
available Keogh Plans, IRAs, including regular IRAs, spousal IRAs for a non-
working spouse, Roth IRAs, SEP-IRAs, Education IRAs, and IRA "Rollover
Accounts"), and 403(b)(7) Plans. Plan support services also are available.
Investors who wish to purchase Fund shares in conjunction with a Keogh
Plan, a 403(b)(7) Plan or an IRA, including an SEP-IRA, may request from the
Distributor forms for adoption of such plans.
The entity acting as custodian for Keogh Plans, 403(b)(7) Plans or IRAs
may charge a fee, payment of which could require the liquidation of shares.
All fees charged are described in the appropriate form.
Shares may be purchased in connection with these plans only by direct
remittance to the entity acting as custodian. Purchases for these plans may
not be made in advance of receipt of funds.
The minimum initial investment for corporate plans, Salary Reduction
Plans, 403(b)(7) Plans and SEP-IRAs with more than one participant, is
$1,000, with no minimum on subsequent purchases. The minimum initial
investment is $750 for 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 and $500
for Dreyfus-sponsored Education IRAs, with no minimum on subsequent
purchases.
The investor should read the Prototype Retirement Plan and the
appropriate form of Custodial Agreement for further details on eligibility,
service fees and tax implications, and should consult a tax adviser.
DETERMINATION OF NET ASSET VALUE
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "How to Buy Fund Shares."
Restricted securities, as well as securities or other assets for which
market quotations are not readily available, or which are not valued by a
pricing service approved by the Board, are valued at fair value as
determined in good faith by the Board. The Board will review the method of
valuation on a current basis. In making their good faith valuation of
restricted securities, the Board generally will take the following factors
into consideration: restricted securities which are, or are convertible
into, securities of the same class of securities for which a public market
exists usually will be valued at market value less the same percentage
discount at which purchased. This discount will be revised periodically by
the Board if it believes that the discount no longer reflects the value of
the restricted securities. Restricted securities not of the same class as
securities for which a public market exists usually will be valued initially
at cost. Any subsequent adjustment from cost will be based upon
considerations deemed relevant by the Board.
New York Stock Exchange Closings. The holidays (as observed) on which
the NYSE is currently scheduled to be closed are: New Year's Day, Martin
Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Dividends, Other
Distributions and Taxes."
The term "regulated investment company" does not imply the supervision
of management or investment practices or policies by any government agency.
General. To qualify for treatment as a regulated investment company
("RIC") under the Internal Revenue Code of 1986, as amended ("Code"), the
Fund -- which is treated as a separate corporation for federal tax purposes-
- - (1) must distribute to its shareholders for each taxable year at least 90%
of its investment company taxable income (generally consisting of net
investment income, net short-term capital gain and net gains from certain
foreign currency transactions) ("Distribution Requirement") and (2) must
meet certain asset diversification and other requirements.
Any dividend or other distribution paid shortly after an investor's
purchase of shares may have the effect of reducing the net asset value of
the shares below the cost of his or her investment. Such a dividend or
other distribution would be a return on investment in an economic sense,
although taxable as stated in the Fund's Prospectus. In addition, if a
shareholder sells shares of the Fund held for six months or less and
receives a capital gain distribution with respect to those shares, any loss
incurred on the sale of those shares will be treated as a long-term capital
loss to the extent of the capital gain distribution received.
Dividends and other distributions declared by the Fund in October,
November or December of any year and payable to shareholders of record on a
date in any of those months are deemed to have been paid by the Fund and
received by the shareholders on December 31 of that year if the
distributions are paid by the Fund during the following January.
Accordingly, those distributions will be taxed to the shareholders for the
year in which that December 31 falls.
Foreign Taxes. Dividends and interest received by the Fund and gains
realized thereby, may be subject to income, withholding or other taxes
imposed by foreign countries and U.S. possessions ("foreign takes") that
would reduce the yield and/or return on its securities. Tax conventions
between certain countries and the United States may reduce or eliminate
these foreign taxes, however, and many foreign countries do not impose taxes
on capital gains in respect of investments by foreign investors. If more
than 50% of the value of the Fund's total assets at the close of its taxable
year consists of securities of foreign corporations, it will be eligible to,
and may, file an election ("Election") with the Internal Revenue Service
that will enable its shareholders, in effect, to receive the benefit of the
foreign tax credit with respect to any foreign or U.S. possessions' income
taxes paid by it. Pursuant to the Election, the Fund would treat those
taxes as dividends paid to its shareholders and each shareholder would be
required to (1) include in gross income and treat as paid by him or her, his
or her proportionate share of those taxes, (2) treat his or her share of
those taxes and of any dividend paid by the Fund that represents income from
foreign or U.S. possessions sources as his or her own income from those
sources and (3) either deduct the taxes deemed paid by him or her in
computing his or her taxable income or, alternatively, use the foregoing
information in calculating the foreign tax credit against his or her federal
income tax. No deduction for foreign taxes may be claimed by a shareholder
who does not itemize deductions. Generally, a credit for foreign taxes may
not exceed the shareholder's federal income tax attributable to his total
foreign source taxable income. The Fund will report to its shareholders
shortly after each taxable year their respective shares of the income from
sources within, and taxes paid to, foreign countries and U.S. possessions if
it makes the Election.
Foreign Currency, Futures, Forwards and Hedging Transactions. Gains
from the sale or other disposition of foreign currencies (except certain
gains therefrom that may be excluded by future regulations), and gains from
options, futures and forward contracts derived by the Fund with respect to
its business of investing in securities or foreign currencies, will qualify
as permissible income under the Income Requirement. However, income from
the disposition of options and futures contracts (other than those on
foreign currencies) will be subject to the Short-Short Limitation if they
are held for less than three months. Income from the disposition of foreign
currencies, and options, futures and forward contracts thereon, that are not
directly related to the Fund's principal business of investing in securities
(or options and futures with respect to securities) also will be subject to
the Short-Short Limitation if they are held for less than three months.
If the Fund satisfied certain requirements, any increase in value of a
position that is part of a "designated hedge" will be offset by any decrease
in value (whether realized or not) of the offsetting hedging position during
the period of the hedge for purposes of determining whether the Fund
satisfies the Short-Short Limitation. Thus, only the net gain (if any) from
the designated hedge will be included in gross income for purposes of that
limitation. The Fund will consider whether it should seek to qualify for
this treatment for its hedging transactions. To the extent the Fund does
not so qualify, it may be forced to defer the closing out of certain
options, futures, forward contracts and foreign currency positions beyond
the time when it otherwise would be advantageous to do so, in order for the
Fund to continue to qualify as a RIC.
Ordinarily, gains and losses realized from portfolio transactions will
be treated as capital gain and loss. However, a portion of the gains or
losses from the disposition of foreign currencies and certain foreign-
currency-denominated instruments (including debt instruments and financial
forward, futures and option contracts) may be treated as ordinary income or
loss under Section 988 of the Code. In addition, all or a portion of any
gain realized from the sale or other disposition of certain market discount
bonds will be treated as ordinary income. Moreover, all or a portion of the
gain realized from engaging in "conversion transactions" that otherwise
would be treated as capital gain may be treated as ordinary income under
Section 1258 of the Code. "Conversion transactions" are defined to include
certain straddle transactions, transactions marketed or sold as producing
capital gains and other transactions described in Treasury regulations to be
issued in the future.
Under Section 1256 of the Code, any gain or loss realized by the Fund
from certain futures, forward contracts and options transactions will be
treated as 60% long-term capital gain or loss and 40% short-term capital
gain or loss. Gain or loss will arise upon exercise or lapse of such
contracts and options as well as from closing transactions. In addition,
any such contracts or options remaining unexercised at the end of the Fund's
taxable year will be treated as sold for their then fair market value (a
process known as "marking-to-market"), resulting in additional gain or loss
to the Fund characterized in the manner described above.
Offsetting positions held by the Fund involving certain contracts or
options may constitute "straddles", which are defined to include "offsetting
positions" in actively traded personal property. The tax treatment of
straddles is governed by Sections 1092 and, to the extent noted above, 1258
of the Code, which in certain circumstances override or modify Sections 1256
and 988. As a result, all or a portion of any capital gain from certain
straddle transactions may be recharacterized as ordinary income. If the
Fund were treated as entering into straddles by reason of its engaging in
certain contracts or options transactions, such straddles would be
characterized as "mixed straddles" if the forward contracts or options
transactions comprising a part of such straddles were governed by Section
1256. The Fund may make one or more elections with respect to mixed
straddles; depending on which election is made, if any, the results to the
Fund may differ. If no election is made, then to the extent the straddle
and conversion transactions rules apply to positions established by the
Fund, losses realized by the Fund will be deferred to the extent of
unrealized gain in the offsetting position. Moreover, as a result of the
straddle rules, short-term capital loss on straddle positions may be
recharacterized as long-term capital loss, and long-term capital gains may
be treated as short-term capital gains or ordinary income.
Passive Foreign Investment Companies. The Fund may invest in the stock
of "passive foreign investment companies" ("PFICs"). A PFIC is a foreign
corporation that, in general, meets either of the following tests: (1) at
least 75% of its gross income is passive or (2) an average of at least 50%
of its assets produce, or are held for the production of, passive income.
Under certain circumstances, the Fund will be subject to federal income tax
on a portion of any "excess distribution" received on the stock of a PFIC or
of any gain on disposition of the stock (collectively "PFIC income"), plus
interest thereon, even if the Fund distributes the PFIC income as a taxable
dividend to its shareholders. The balance of the PFIC income will be
included in the Fund's investment company taxable income and, accordingly,
will not be taxable to it to the extent that income is distributed to its
shareholders. If the Fund invests in a PFIC and elects to treat the PFIC as
"qualified electing fund," then in lieu of the foregoing tax and interest
obligation, the Fund would be required to include in income each year its
pro rata share of the qualified electing fund's annual ordinary earnings and
net capital gain (the excess of net long-term capital gain over net short-
term capital loss) -- which probably would have to be distributed to satisfy
the Distribution Requirement and avoid imposition of the 4% excise tax
referred to in the Fund's Prospectus under "Dividends, Other Distributions
and Taxes" -- even if those earnings and gain were not received by the Fund.
Pursuant to proposed regulations, open-end RICs, such as the Fund,
would be entitled to elect to "mark-to-market" their stock in certain PFICs.
"Marking-to-market," in this context, means recognizing as gain for each
taxable year the excess, as of the end of that year, of the fair market
value of each such PFIC's stock over the adjusted basis in that stock
(including mark-to-market gain for each prior year for which an election was
in effect).
Foreign Currency Gains and Losses. Gains and losses attributable to
fluctuations in foreign currency exchange rates that occur between the time
the Fund accrues dividends, interest or other receivables, or expenses or
other liabilities, denominated in a foreign currency and the time the Fund
actually collects the receivables or pays the liabilities generally are
treated as ordinary income or ordinary loss. Similarly, on the disposition
of a debt security denominated in a foreign currency, or of an option or
forward contract on a foreign currency, gains or losses attributable to
fluctuations in the value of the foreign currency between the date of
acquisition of the security, option or contract and the date of disposition
also are treated as ordinary income or loss. These gains or losses may
increase or decrease the amount of the Fund's investment company taxable
income to be distributed to its shareholders.
State and Local Taxes. Depending on the Fund's activities in states and
localities in which it is deemed to be conducting business, the Fund may be
subject to the tax laws thereof. Shareholders are advised to consult their
tax advisers concerning the application of state and local taxes.
Foreign Shareholders - U.S. Federal Income Taxation. U.S. federal
income taxation of a shareholder who, as to the United States, is a non-
resident alien individual, a foreign trust or estate, a foreign corporation
or a foreign partnership (a "foreign shareholder") depends on whether the
income from the Fund is "effectively connected" with a U.S. trade or
business carried on by the shareholder, as discussed generally below.
Special U.S. federal income tax rules that differ from those described below
may apply to certain foreign persons who invest in the Fund, such as a
foreign shareholder entitled to claim the benefits of an applicable tax
treaty. Foreign shareholders are advised to consult their own tax advisers
with respect to the particular tax consequences to them of an investment in
the Fund.
Foreign Shareholders - Income Not Effectively Connected. Dividends
distributed to a foreign shareholder whose ownership of Fund shares is not
effectively connected with a U.S. trade or business carried on by the
foreign shareholder generally will be subject to U.S. federal withholding
tax of 30% (or lower treaty rate). Capital gains realized by foreign
shareholders on the sale of Fund shares and distributions to them of net
capital gain (the excess of net long-term capital gain over net short-term
capital loss) generally will not be subject to U.S. federal income tax
unless the foreign shareholder is a non-resident alien individual and is
physically present in the United States for more than 182 days during the
taxable year. In the case of certain foreign shareholders, the Fund may be
required to withhold U.S. federal income tax at a rate of 31% from capital
gain distributions and the gross proceeds from a redemption of Fund shares
unless the shareholder furnishes the Fund with a certificate regarding the
shareholder's foreign status.
Foreign Shareholders - Effectively Connected Income. If a foreign
shareholder's ownership of Fund shares is effectively connected with a U.S.
trade or business carried on by the foreign shareholder, then all
distributions to that shareholder and any gains realized by that shareholder
on the disposition of Fund shares will be subject to U.S. federal income tax
at the graduated rates applicable to U.S. citizens or domestic corporations,
as the case may be. Foreign shareholders also may be subject to the branch
profits tax.
Foreign Shareholders - Estate Tax. Foreign individuals generally are
subject to federal estate tax on their U.S. situs property, such as shares
of the Fund, that they own at the time of their death. Certain credits
against that tax and relief under applicable tax treaties may be available.
PORTFOLIO TRANSACTIONS
All portfolio transactions of the Fund are placed on behalf of the Fund
by Dreyfus. Debt securities purchased and sold by the Fund are generally
traded on a net basis (i.e., without commission) through dealers acting for
their own account and not as brokers, or otherwise involve transactions
directly with the issuer of the instrument. This means that a dealer (the
securities firm or bank dealing with the Fund) makes a market for securities
by offering to buy at one price and sell at a slightly higher price. The
difference between the prices is known as a spread. Other portfolio
transactions may be executed through brokers acting as agent. Dreyfus uses
its best efforts to obtain execution of portfolio transactions at prices
which are advantageous to the Fund and at spreads and commission rates, if
any, which are reasonable in relation to the benefits received. Dreyfus
also places transactions for other accounts that it provides with investment
advice.
Brokers and dealers involved in the execution of portfolio transactions
on behalf of the Fund are selected on the basis of their professional
capability and the value and quality of their services. In selecting
brokers or dealers, Dreyfus will consider various relevant factors,
including, but not limited to, the size and type of the transaction; the
nature and character of the markets for the security to be purchased or
sold; the execution efficiency, settlement capability, and financial
condition of the broker-dealer; the broker-dealer's execution services
rendered on a continuing basis; and the reasonableness of any spreads (or
commissions, if any). Any spread, commission, fee or other remuneration
paid to an affiliated broker-dealer is paid pursuant to the Company's
procedures adopted in accordance with Rule 17e-1 of the 1940 Act.
Brokers or dealers may be selected who provide brokerage and/or
research services to the Fund and/or other accounts over which Dreyfus or
its affiliates exercise investment discretion. Such services may include
advice concerning the value of securities; the advisability of investing in,
purchasing or selling securities; the availability of securities or the
purchasers or sellers of securities; furnishing analyses and reports
concerning issuers, industries, securities, economic factors and trends,
portfolio strategy and performance of accounts; and effecting securities
transactions and performing functions incidental thereto (such as clearance
and settlement).
The receipt of research services from broker-dealers may be useful to
Dreyfus in rendering investment management services to the Fund and/or its
other clients; and, conversely, such information provided by brokers or
dealers who have executed transaction orders on behalf of other clients of
Dreyfus may be useful to these organizations in carrying out their
obligations to the Fund. The receipt of such research services does not
reduce these organizations' normal independent research activities; however,
it enables these organizations to avoid the additional expenses which might
otherwise be incurred if these organizations were to attempt to develop
comparable information through their own staffs.
Although Dreyfus manages other accounts in addition to the Fund,
investment decisions for the Fund are made independently from decisions made
for these other accounts. It sometimes happens that the same security is
held by more than one of the accounts managed by Dreyfus. Simultaneous
transactions may occur when several accounts are managed by the same
investment adviser, particularly when the same investment instrument is
suitable for the investment objective of more than one account.
When more than one account is simultaneously engaged in the purchase or
sale of the same investment instrument, the prices and amounts are allocated
in accordance with a formula considered by Dreyfus to be equitable to each
account. In some cases this system could have a detrimental effect on the
price or volume of the investment instrument as far as the Fund is
concerned. In other cases, however, the ability of the Fund to participate
in volume transactions will produce better executions for the Fund. While
the Directors will continue to review simultaneous transactions, it is their
present opinion that the desirability of retaining Dreyfus as investment
adviser to the Fund outweighs any disadvantages that may be said to exist
from exposure to simultaneous transactions.
During the fiscal years ended October 31, 1995, 1996 and 1997, the Fund
paid brokerage commissions of $31,984, $31,794 and $12,756, respectively.
Portfolio Turnover. The portfolio turnover rate for the Fund is
calculated by dividing the lesser of the Fund's annual sales or purchases of
portfolio securities (exclusive of purchases and sales of securities whose
maturities at the time of acquisition were one year or less) by the monthly
average value of securities in the Fund during the year. The Fund's
portfolio turnover rates for the fiscal years ended October 31, 1996 and
1997 were 34.24% and 7.39%, respectively.
PERFORMANCE INFORMATION
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Performance
Information."
Average annual total return is calculated by determining the ending
redeemable value of an investment purchased with a hypothetical $1,000
payment made at the beginning of the period (assuming the reinvestment of
dividends and other distributions), dividing by the amount of the initial
investment, taking the "n"th root of the quotient (where "n" is the number
of years in the period) and subtracting 1 from the result.
The Fund's total return for the period September 15, 1994 (commencement
of operations) to October 31, 1997 for Investor shares and Restricted shares
were 6.28% and 5.62%, respectively. Total return is calculated by
subtracting the amount of the Fund's net asset value per share at the
beginning of a stated period from the net asset value per share at the end
of the period (after giving effect to the reinvestment of dividends and
other distributions during the period), and dividing the result by the net
asset value per share at the beginning of the period.
Average annual total return (expressed as a percentage) for Investor
shares of the Fund for each of the periods noted was:
Average Annual Total Return for the
Periods Ended October 31, 1997
1 Year 5 Years 10 Years Inception
Investor Shares 1.38% __ __ 4.75%
(9/15/94)
Inception date appears in parentheses following the average annual total
return since inception.
Average annual total return (expressed as a percentage) for Restricted
shares of the Fund for each of the periods noted was:
Average Total Return for the
Periods Ended October 31, 1997
1 Year 5 Years 10 Years Inception
Restricted Shares 1.64% __ __ 4.94%
(9/15/94)
Inception date appears in parentheses following the average annual total
return since inception.
Performance information for the Fund may be compared, in reports and
promotional literature, to indexes including, but not limited to: (i) the
Morgan Stanley Capital International-Europe Australasia Asia Far East (MSCI-
EAFE)r Index; (ii) the Standard & Poor's 500 Composite Stock Price Index,
the Dow Jones Industrial Average, or other appropriate unmanaged domestic or
foreign indices of performance of various types of investments so that
investors may compare the Fund's results with those of indices widely
regarded by investors as representative of the securities markets in
general; (iii) other groups of mutual funds tracked by Lipper Analytical
Services, a widely used independent research firm which ranks mutual funds
by overall performance, investment objectives and assets, or tracked by
other services, companies, publications, or persons who rank mutual funds on
overall performance or other criteria; (iv) the Consumer Price Index (a
measure of inflation) to assess the real rate of return from an investment
in the Fund; and (v) products managed by a universe of money managers with
similar country allocation and performance objectives. Unmanaged indices
may assume the reinvestment of dividends but generally do not reflect
deductions or administrative and management costs and expenses.
From time to time, advertising material for the Fund may include
biographical information relating to its portfolio manager and may refer to,
or include commentary by the portfolio manager relating to investment
strategy, asset growth, current or past business, political, economic or
financial conditions and other matters of general interest to investors.
INFORMATION ABOUT THE FUND
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "General Information."
Each Fund share, when issued and paid for in accordance with the terms
of the offering, is fully paid and non-assessable. Fund shares have no
preemptive or subscription rights and are freely transferable. The Fund is
one of eighteen portfolios of the Company.
Each Fund will send annual and semi-annual financial statements to all
its shareholders.
TRANSFER AND DIVIDEND DISBURSING AGENT, CUSTODIAN, COUNSEL
AND INDEPENDENT AUDITORS
Dreyfus Transfer, Inc., a wholly-owned subsidiary of Dreyfus, P.O. Box
9671, Providence, Rhode Island 02940-9671, is the Company's transfer and
dividend disbursing agent. Under a transfer agency agreement with the
Company, Dreyfus Transfer, Inc. arranges for the maintenance of shareholder
account records for the Fund, the handling of certain communications between
shareholders and the Fund and the payment of dividends and distributions
payable by the Fund. For these services, Dreyfus Transfer, Inc. receives a
monthly fee computed on the basis of the number of shareholder accounts it
maintains for the Company during the month, and is reimbursed for certain
out-of-pocket expenses.
Boston Safe Deposit and Trust Company, One Boston Place, Boston, MA
02109, is the Fund's custodian. Under a custody agreement with the Company,
Boston Safe Deposit and Trust Company holds the Fund's portfolio securities
and keeps all necessary accounts and records. Dreyfus Transfer, Inc. and
Boston Safe Deposit and Trust Company, as custodian, have no part in
determining the investment policies of the Fund or which securities are to
be purchased or sold by the Fund.
Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue, N.W., Second
Floor, Washington, D.C. 20036, has passed upon the legality of the shares
offered by the Prospectus and this Statement of Additional Information.
KPMG Peat Marwick LLP was appointed by the Directors to serve as the
Fund's independent auditors for the year ending October 31, 1998, providing
audit services including (1) examination of the annual financial statements,
(2) assistance, review and consultation in connection with SEC filings and
(3) review of the annual federal income tax return filed on behalf of the
Fund.
FINANCIAL STATEMENTS
The financial statements for the fiscal year ended October 31, 1997,
including notes to the financial statements and financial highlights and the
Independent Auditors' Report, are included in the Annual Report to
shareholders. A copy of the Annual Report accompanies this Statement of
Additional Information. The financial statements from the Annual Report,
and the Independent Auditor's Report thereon contained therein, and related
notes, are incorporated herein by reference.
APPENDIX
DESCRIPTION OF RATINGS
Bond, Note and Commercial Paper Ratings
Standard & Poor's ("S&P")
Bond Ratings
AAA An obligation rated `AAA' has the highest rating assigned by S&P.
The obligor's capacity to meet its financial commitment on the
obligation is extremely strong.
AA An obligation rated `AA' differs from the highest rated issues
only in small degree. The obligors capacity to meet its financial
commitment on the obligation is very strong.
A An obligation rated `A' is somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions than obligations in higher rated categories. However,
the obligor's capacity to meet its financial commitment on the
obligation is still strong.
BBB An obligation rated `BBB' exhibits adequate protection parameters.
However, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity of the obligor to meet
its financial commitment on the obligation.
Obligations rated `BB', `B', `CCC', `CC', and `C' are regarded as
having significant speculative characteristics. `BB' indicates the
least degree of speculation and `C' the highest. While such
obligations will likely have some quality and protective
characteristics, these may be outweighed by large uncertainties or
major exposures to adverse conditions.
BB An obligation rated `B' is less vulnerable to nonpayment than
other speculative issues. However, it faces major ongoing
uncertainties or exposure to adverse business, financial, or
economic conditions, which could lead to the obligor's inadequate
capacity to meet its financial commitment on the obligation.
B An obligation rated `B' is more vulnerable to nonpayment than
obligations rated `BB', but the obligor currently has the capacity
to meet its financial commitment on the obligation. Adverse
business, financial, or economic conditions will likely impair the
obligor's capacity or willingness to meet its financial commitment
on the obligation.
CCC An obligation rated `CCC' is currently vulnerable to nonpayment
and is dependent upon favorable business, financial and economic
conditions for the obligor to meet its financial commitment on the
obligation. In the event of adverse business, financial, or
economic conditions, the obligor is not likely to have the
capacity to meet its financial commitment on the obligation.
CC An obligation rated `CC' is currently highly vulnerable to
nonpayment.
C The `C' rating may be used to cover a situation where a bankruptcy
petition has been filed or similar action has been taken, but
payments on this obligation are being continued.
D An obligation rated `D' is in payment default. The `D' rating
category is used when payments on a obligation are not made on the
date due even if the applicable grace period has not expired,
unless S&P believes that such payments will be made during such
grace period. The `D' rating also will be used upon the filing of
a bankruptcy petition or the taking of a similar action if
payments on an obligation are jeopardized.
The ratings from `AA' to `CCC' may be modified by the addition of a
plus (+) or a minus (-) sign to show relative standing within the major
rating categories
Note Ratings
SP-1 Strong capacity to pay principal and interest. An issue
determined to possess a very strong capacity to pay debt service
is given a plus (+) designation.
SP-2 Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse finance and economic changes over the
term of the notes.
SP-3 Speculative capacity to pay principal and interest.
Commercial Paper Ratings
An S&P commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more
than 365 days.
A-1 This designation indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess
extremely strong safety characteristics are denoted with a plus
sign (+) designation.
A-2 Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as
high as for issuers designated `A-1.'
A-3 Issues carrying this designation have an adequate capacity for
timely payment. They are, however, more vulnerable to the adverse
effects of changes in circumstances than obligations carrying the
higher designations.
B Issues rated `B' are regarded as having only speculative capacity
for timely payment.
C This rating is assigned to short-term debt obligations with a
doubtful capacity for payment.
D Debt rated `D' is in payment default. The `D' rating category is
used when interest payments of principal payments are not made on
the date due, even if the applicable grace period has not expired,
unless S&P believes such payments will be made during such grace
period.
Moody's
Bond Ratings
Aaa Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and generally
are referred to as "gilt edge." Interest payments are protected
by a large or by an exceptionally stable margin and principal is
secure. While the various protective elements are likely to
change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what
generally are known as high-grade bonds. They are rated lower
than the best bonds because margins of protection may not be as
large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa
securities.
A Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper-medium-grade
obligations. Factors giving security to principal and interest
are considered adequate, but elements may be present which suggest
a susceptibility to impairment some time in the future.
Baa Bonds which are rated Baa are considered as medium grade
obligations (i.e., they are neither highly protected nor poorly
secured). Interest payments and principal security appear
adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment charac
teristics and in fact have speculative characteristics as well.
Ba Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well-assured. Often the
protection of interest and principal payments may be very
moderate, and thereby not well safeguarded during both good and
bad times over the future. Uncertainty of position characterizes
bonds in this class.
B Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal
payments or of maintenance of other terms of the contract over any
long period of time may be small.
Caa Bonds which are rated Caa are of poor standing. Such issues may
be in default or there may be present elements of danger with
respect to principal or interest.
Ca Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or
have other marked short-comings.
C Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects
of ever attaining any real investment standing.
Moody's applies the numerical modifiers 1, 2 and 3 to show relative
standing within each generic rating classification from Aa through B.
The modifier 1 indicates a ranking for the security in the higher end
of a rating category; the modifier 2 indicates a mid-range ranking; and
the modifier 3 indicates a ranking in the lower end of a rating
category.
Notes and other Short-Term Obligations
There are four rating categories for short-term obligations that define
an investment grade situation. These are designated Moody's Investment
Grade as MIG 1 (best quality) through MIG 4 (adequate quality). Short-term
obligations of speculative quality are designated SG.
In the case of variable rate demand obligations (VRDOs), a two
component rating is assigned. The first element represents an evaluation of
the degree of risk associated with scheduled principal and interest
payments, and the other represents an evaluation of the degree of risk
associated with the demand feature. The short-term rating assigned to the
demand feature of VRDOs is designated as VMIG. When either the long- or
short-term aspect of a VRDO is not rated, that piece is designated NR, e.g.,
Aaa/NR or NR/VMIG 1.
MIG 1/
VMIG 1 This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support
or demonstrated broad-based access to the market for refinancing.
MIG-2/
MIG 2 This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.
MIG 3/
VMIG 3 This designation denotes favorable quality. All security elements
are accounted for but there is lacking the undeniable strength of
the preceding grades. Liquidity and cash flow protection may be
narrow and market access for refinancing is likely to be less well
established.
MIG 4/
VMIG 4 This designation denotes adequate quality. Protection commonly
regarded as required of an investment security is present and
although not distinctly or predominantly speculative, there is
specific risk.
Commercial Paper Rating
Moody's employs the following three designations, all judged to be
investment grade, to indicate the relative repayment ability of rated
issuers:
Prime-1 Issuers rated Prime-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations.
Prime-1 repayment ability will often be evidenced by many of the
following characteristics:
- Leading market positions in well-established industries.
- High rates of return on funds employed.
- Conservative capitalization structure with moderate
reliance on debt and ample asset protection.
- Broad margins in earnings coverage of fixed financial
charges and high internal cash generation.
- Well-established access to a range of financial markets
and assured sources of alternate liquidity.
Prime-2 Issuers rated Prime-2 (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations. This
will normally be evidenced by many of the characteristics cited
above but to a lesser agree. Earnings trends and coverage ratios,
while sound, may be more subject to variation. Capitalization
characteristics, while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is maintained.
Prime-3 Issuers rated Prime-3 (or supporting institutions) have an
acceptable ability for repayment of senior short-term
obligations. The effect of industry characteristics and market
compositions may be more pronounced. Variability in earnings and
profitability may result in changes in the level of debt
protection measurements and may require relatively high financial
leverage. Adequate alternative liquidity is maintained.
Fitch Investor Services, Inc. ("Fitch")
Bond Ratings
AAA Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by
reasonably forseeable events.
AA Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay
principal is very strong, although not quite as strong as bonds
rated `AAA'. Because bonds rated in the `AAA' and `AA' categories
are not significantly vulnerable to foreseeable future
developments, short-term debt of these issuers is generally rated
`F-1+'.
A Bonds considered to be investment grade and of high credit
quality, The obligor's ability to pay interest an repay principal
is considered to be strong, but may be more vulnerable to adverse
changes in economic conditions and circumstances than bonds with
higher ratings.
BBB Bonds considered to be investment grade and satisfactory credit
quality. The obligor's ability to pay interest and repay
principal is considered to be adequate. Adverse changes in
economic conditions and circumstances, however, are more likely to
have adverse impact on these bonds and, therefore, impair timely
payment. The likelihood that the ratings of these bonds will fall
below investment grade is higher than for bonds with higher
ratings
BB Bonds are considered speculative. The obligor's ability to pay
interest and repay principal may be affected over time by adverse
economic changes. However, business and financial alternatives
can be identified, which could assist the obligor in satisfying
its debt service requirements.
B Bonds are considered highly speculative. While bonds in this
class are currently meeting debt service requirements, the
probability of continued timely payment of principal and interest
reflects the obligor's limited margin of safety and the need for
reasonable business and economic activity throughout the life of
the issue.
CCC Bonds have certain identifiable characteristics that, if not
remedied, may lead to default. The ability to meet obligations
requires an advantageous business and economic environment.
CC Bonds are minimally protected. Default in payment of interest
and/or principal seems probable over time.
C Bonds are in imminent default in payment of interest or principal.
DDD, DD
and D Bonds are in default on interest and/or principal payments. Such
bonds are extremely speculative and should be valued on the basis
of their ultimate recovery value in liquidation or reorganization
of the obligor. `DDD' represents the highest potential for
recovery on these bonds, and `D' represents the lowest potential
for recovery.
+/- Plus and minus signs are used with a rating symbol to indicate the
relative position of a credit within the rating category. Plus
and minus signs, however, are not used in the `DDD', `DD', or `D'
categories.
Short-Term and Commercial Paper Ratings
Fitch's short-term ratings apply to debt obligations that are payable
on demand or have original maturities of up to three years, including
commercial paper, certificates of deposit, medium-term notes, and municipal
and investment notes.
Although the credit analysis is similar to Fitch's bond rating
analysis, the short-term rating places greater emphasis than bond ratings on
the existence of liquidity necessary to meet the issuer's obligations in a
timely manner.
F-1+ Exceptionally Strong Credit Quality. Issues assigned this rating
are regarded as having the strongest degree of assurance for
timely payment.
F-1 Very Strong Credit Quality. Issues assigned this rating reflect
an assurance of timely payment only slightly less in degree than
issues rated `F-1+'.
F-2 Good Credit Quality. Issues assigned this rating have a
satisfactory degree of assurance for timely payment, but the
margin of safety is not as great as for issues assigned `F-1+' and
`F-1' ratings.
F-3 Fair Credit Quality. Issues assigned this rating have
characteristics suggesting that the degree of assurance for timely
payment is adequate; however, near-term adverse changes could
cause these securities to be rated below investment grade.
D Default. Issues assigned this rating are in actual or imminent
payment default.
Duff & Phelps Inc. ("Duff & Phelps")
Long-Term Ratings
AAA Highest credit quality. The risks factors are negligible, being
only slightly more than for risk-free U.S. Treasury debt.
AA+ High credit quality. Protection factors are strong. Risk is
AA modest but may vary slightly from time to time because of economic
AA- conditions.
A+ Protections factors are average but adequate. However, risk
A factors are more variable and greater in periods of economic stress.
A-
BBB+ Below-average protection factors but still considered sufficient
BBB for prudent investment. Considerable variability in risk during
BBB- economic cycles.
BB+ Below investments grade but deemed likely to meet obligations when
BB due. Present or prospective financial protection factors fluctuate
BB- according to industry conditions or company fortunes. Overall
quality may move up or down frequently within this category.
B+ Below investment grade and possessing risk that obligations will
B not be met when due. Financial protection factors will fluctuate
B- widely according to economic cycles, industry conditions and/or
company fortunes. Potential exists for frequent changes in the
rating within this category or into a higher or lower rating grade.
CCC Well below investment-grade securities. Considerable uncertainty
exists as to timely payment of principal, interest or preferred
dividends. Protection factors are narrow and risk can be substantial
with unfavorable economic/industry conditions, and/or with unfavorable
company developments.
DD Defaulted debt obligations. Issuer failed to meet scheduled
principal and/or interest payments.
Short-Term and Commercial Paper Ratings
D-1+ Highest certainty of timely payment. Short-term liquidity,
including internal operating factors and/or access to alternative
sources of funds, is outstanding, and safety is just below risk-
free U.S. Treasury short-term obligations.
D-1 Very high certainty of timely payment. Liquidity factors are
excellent and supported by good fundamental protection factors.
Risk factors are minor.
D-1- High certainly of timely payment. Liquidity factors are strong
and supported by good fundamental protection factors. Risk
factors are very small.
D-2 Good certainty of timely payment. Liquidity factors and company
fundamentals are sound. Although ongoing funding needs may
enlarge total financial requirements, access to capital markets is
good. Risk factors are small.
D-3 Satisfactory liquidity and other protection factors qualify issues
as to investment grade. Risk factors are larger and subject to
more variation. Nevertheless, timely payment is expected.
D-4 Speculative investment characteristics. Liquidity is not
sufficient to insure against disruption in debt service.
Operating factors and market access may be subject to a high
degree of variation.
D-5 Issuer failed to meet scheduled principal and/or interest
payments.
IBCA Limited/IBCA Inc. ("IBCA")
Short-Term Obligations and Commercial Paper Ratings.
Short-term obligations, including commercial paper, rated A1+ by IBCA
are obligations supported by the highest capacity for timely repayment.
Obligations rated A1 have a very strong capacity for timely repayment.
Obligations rated A2 have a strong capacity for repayment, although such
capacity may be susceptible to adverse changes in business, economic or
financial conditions. Obligations rated B1 have adequate capacity for
timely repayment, but such capacity is more susceptible to adverse changes
in business, economic, or financial conditions than for obligations in
higher categories. Obligations rated B2 have a capacity for repayment that
is susceptible to adverse changes in business, economic, or financial
conditions. Obligations rated C1 have an inadequate capacity to ensure
timely repayment. Obligations rated D1 have a high risk of default or are
currently in default.
STATEMENT OF ADDITIONAL INFORMATION
MARCH 1, 1998
THE DREYFUS/LAUREL FUNDS, INC.
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with each Fund's current
prospectus, dated March 1, 1998, as it may be revised from time to time.
The Funds listed below are separate, diversified portfolios of The
Dreyfus/Laurel Funds, Inc. (formerly, "The Laurel Funds, Inc.") (the
"Company"), an open-end management investment company that offers shares of
common stock of these Funds. Shares of the Funds are offered without sales
commissions.
Dreyfus Money Market Reserves ("Money Market Reserves") (formerly, the
"Dreyfus/Laurel Prime Money Market Fund")
Dreyfus U.S. Treasury Reserves ("U.S. Treasury Reserves") (formerly,
the "Dreyfus/Laurel U.S. Treasury Money Market Fund")
Dreyfus Municipal Reserves ("Municipal Reserves") (formerly, the
"Dreyfus/Laurel Tax-Exempt Money Market Fund")
Dreyfus Institutional Prime Money Market Fund ("Institutional Prime
Fund") (formerly, the "Dreyfus/Laurel Institutional Prime Money Market
Fund")
Dreyfus Institutional Government Money Market Fund ("Institutional
Government Fund") (formerly, the "Dreyfus/Laurel Institutional
Government Money Market Fund")
Dreyfus Institutional U.S. Treasury Money Market Fund ("Institutional
U.S. Treasury Fund") (formerly, the "Dreyfus/Laurel Institutional U.S.
Treasury Money Market Fund")
The Dreyfus Corporation ("Dreyfus") serves as the Funds' investment
manager.
Premier Mutual Fund Services, Inc. ("Premier") is the distributor of
the Funds' shares.
To obtain a copy of a Fund's Prospectus, please write to the Funds at
144 Glenn Curtiss Boulevard, Uniondale, New York 11556-0144, or call the
following numbers:
Call Toll Free 1-800-645-6561
In New York City - Call 1-718-895-1206
Outside the U.S. and Canada - Call 516-794-5452
TABLE OF CONTENTS
Page
Investment Information and Risk Factors 3
Investment Limitations 9
Principal Shareholders 11
Directors and Officers 12
Investment Management and Other Services 17
Federal Law Affecting Mellon Bank 20
Purchase of Fund Shares 21
Redemption of Fund Shares 21
Shareholder Services 23
Portfolio Transactions 26
Net Asset Value 27
Performance Calculations 28
Taxes 30
Information About the Funds 32
Transfer and Dividend Disbursing Agent, Custodian, Counsel
and Independent Auditors 32
Financial Statements 33
Appendix 34
INVESTMENT INFORMATION AND RISK FACTORS
Municipal Securities (Municipal Reserves). The municipal securities in
which the Municipal Reserves will invest are limited to those obligations
which at the time of purchase:
1. are backed by the full faith and credit of the United States; or
2. are municipal notes rated MIG-1/VMIG-1 or MIG-2/VMIG-2 by Moody's
Investors Service, Inc. ("Moody's") or SP-1 or SP-2 by Standard &
Poor's, a division of The McGraw-Hill Companies, Inc. ("S&P"), or,
if not rated, are of equivalent investment quality as determined by
Dreyfus under guidelines approved by the Board of Directors or are
obligations of an issuer which has outstanding municipal bonds rated
Aa or higher by Moody's or Aa or higher by S&P; or
3. are municipal bonds rated Aa or higher by Moody's or AA or higher by
S&P or, if not rated, are of equivalent investment quality as
determined by Dreyfus under guidelines approved by the Board of
Directors or are obligations of an issuer which has outstanding
municipal notes rated MIG-1/VMIG-1 or MIG-2/VMIG-2 by Moody's or SP-
1 or SP-2 by S&P; or
4. are other types of municipal securities, provided that such
obligations are rated Prime-2 or higher by Moody's or A-2 or
higher by S&P or determined by Dreyfus to be of comparable quality
pursuant to guidelines approved by the Board of Directors (see the
Appendix for a description of these ratings).
The municipal securities in which Municipal Reserves may invest include
municipal notes, short-term municipal bonds and municipal leases. Municipal
notes are generally used to provide for the issuer's short-term capital
needs and generally have maturities of one year or less. Examples include
tax anticipation and revenue anticipation notes which generally are issued
in anticipation of various seasonal revenues, bond anticipation notes,
construction loan notes and tax exempt commercial paper. Short-term
municipal bonds may include "general obligation bonds," which are secured by
the issuer's pledge of its faith, credit and taxing power for payment of
principal and interest, "revenue bonds," which are generally paid from the
revenues of a particular facility or a specific excise or other source and
"industrial revenue bonds," which are issued by or on behalf of public
authorities to provide funding for various privately operated industrial and
commercial facilities. "Municipal leases," which may take the form of a
lease or an installment purchase or conditional sale contract, are issued by
state and local governments and authorities to acquire a wide variety of
equipment and facilities such as fire and sanitation vehicles,
telecommunications equipment and other capital assets.
Municipal Reserves may invest more than 25% of its assets in industrial
development bonds, in participation interests therein issued by banks, and
in municipal securities and other obligations issued or guaranteed by the
U.S. Government, its agencies or instrumentalities.
When the assets and revenues of an agency, authority, instrumentality
or other political subdivision are separate from those of the government
creating the issuing entity and a security is backed only by the assets or
revenues of the entity, the entity will be deemed to be the sole issuer of
the security. Similarly, in the case of an industrial development bond
backed only by the assets or revenues of the non-governmental user, the non-
governmental user will be deemed to be the sole issuer of the bond.
Municipal Reserves will invest in securities, including the foregoing
types of securities, only if the investments are of a type which would
satisfy the requirements of Rule 2a-7 promulgated under the Investment
Company Act of 1940, as amended ("1940 Act") and only to the extent
permitted by Municipal Reserves' investment limitations. Accordingly, if
the creating agency, authority, instrumentality or other political
subdivision or some other entity, such as an insurance company or other
corporate obligor, guarantees a security purchased by Municipal Reserves or
a bank issues a letter of credit in support of a security purchased by
Municipal Reserves, it will not purchase any security which, as to 75% of
the value of all securities held, it would result in the value of all
securities issued or guaranteed by a single guarantor or issuer of letters
of credit exceeding 10% of the total value of the Fund's assets.
The achievement of the investment objective of Municipal Reserves is
dependent in part on the continuing ability of the issuers of municipal
securities in which the Fund invests to meet their obligations for the
payment of principal and interest when due. Municipal securities
historically have not been subject to registration with the Securities and
Exchange Commission ("SEC"), although there have been proposals which would
require registration in the future.
Obligations of issuers of municipal securities are subject to the
provisions of bankruptcy, insolvency, and other laws affecting the rights
and remedies of creditors. In addition, the obligations of such issuers may
become subject to laws enacted in the future by Congress or state
legislatures, or referenda extending the time for payment of principal
and/or interest, or imposing other constraints upon enforcement of such
obligations or upon the ability of municipalities to levy taxes. There is
also the possibility that, as a result of litigation or other conditions,
the ability of any issuer to pay, when due, the principal of and interest on
its municipal securities may be materially affected.
Variable Rate Municipal Obligations (Municipal Reserves). The interest
rates payable on certain municipal securities, including municipal leases,
in which Municipal Reserves may invest, called "variable rate" obligations,
are not fixed and may fluctuate based upon changes in market rates. The
interest rate payable on a variable rate municipal security is adjusted
either at predesignated periodic intervals or whenever there is a change in
the market rate to which the security's interest rate is tied. Other
features may include the right whereby Municipal Reserves may demand
prepayment of the principal amount of the obligation prior to its stated
maturity and the right of the issuer to prepay the principal amount prior to
maturity. The main benefit of variable rate municipal securities is that
the interest rate adjustment minimizes changes in the market value of the
obligation. As a result, the purchase of variable rate municipal securities
enhances the ability of Municipal Reserves to maintain a stable net asset
value per share and to sell an obligation prior to maturity at a price
approximating the full principal amount of the obligation. The payment of
principal and interest by issuers of certain municipal securities purchased
by Municipal Reserves may be guaranteed by letters of credit or other credit
facilities offered by banks or other financial institutions. Such
guarantees will be considered in determining whether a municipal security
meets the investment quality requirements of Municipal Reserves.
Variable rate obligations purchased by Municipal Reserves may include
participation interests purchased by Municipal Reserves from banks,
insurance companies or other financial institutions and variable rate
obligations that are backed by irrevocable letters of credit or guarantees
of banks. Municipal Reserves can exercise the right, on not more than
thirty days' notice, to sell such an instrument back to the bank from which
it purchased the instrument and draw on the letter of credit for all or any
part of the principal amount of Municipal Reserves' participation interest
in the instrument, plus accrued interest, but will do so only (i) as
required to provide liquidity to Municipal Reserves, (ii) to maintain a high
quality investment portfolio, or (iii) upon a default under the terms of the
demand instrument. Banks and other financial institutions retain portions
of the interest paid on such variable rate obligations as their fees for
servicing such instruments and the issuance of related letters of credit,
guarantees and repurchase commitments. Dreyfus will monitor the pricing,
quality and liquidity of variable rate demand obligations and participation
interests therein held by Municipal Reserves on the basis of published
financial information, rating agency reports and other research services to
which Municipal Reserves may subscribe.
Stand-by Commitments (Municipal Reserves). Municipal Reserves may
purchase municipal securities together with the right to resell them to the
seller at an agreed-upon price or yield within specified periods prior to
their maturity dates. The right to resell is commonly known as a "stand-by
commitment," and the aggregate price which Municipal Reserves pays for
securities with a stand-by commitment may be higher than the price which
otherwise would be paid. The primary purpose of this practice is to permit
Municipal Reserves to be as fully invested as practicable in municipal
securities while preserving the necessary flexibility and liquidity to meet
unanticipated redemptions. In this regard, Municipal Reserves acquires
stand-by commitments solely to facilitate portfolio liquidity and does not
exercise its rights thereunder for trading purposes. In connection with
stand-by commitments, Municipal Reserves will segregate on its records cash
or liquid high-grade debt obligations of the Fund in an amount at least
equal to the commitments. On delivery dates under the commitments,
Municipal Reserves will meet its obligations from maturing securities, sales
of securities held in a separate account or other available sources of cash.
Since the value of a stand-by commitment is dependent on the ability of the
stand-by commitment writer to meet its obligation to repurchase, the policy
of Municipal Reserves is to enter into stand-by commitment transactions only
with municipal securities dealers which are determined to present minimal
credit risks as determined by Dreyfus.
The acquisition of a stand-by commitment does not affect the valuation
or maturity of the underlying municipal securities which continue to be
valued in accordance with the amortized cost method. Stand-by commitments
acquired by Municipal Reserves are valued at zero in determining net asset
value. When Municipal Reserves pays directly or indirectly for a stand-by
commitment its cost is reflected as unrealized depreciation for the period
during which the commitment is held. Stand-by commitments do not affect the
average weighted maturity of the Fund's portfolio of securities.
Floating Rate Securities (Money Market Reserves, Municipal Reserves,
Institutional Prime Fund and Institutional Government Fund). A floating
rate security is one whose terms provide for the automatic adjustment of
interest rate whenever a specified interest rate changes. The interest on
floating rate securities is ordinarily tied to and is a percentage of the
prime rate of a specified bank or some similar objective standard such as
the 90-day U.S. Treasury bill rate and may change daily. Generally, changes
in interest rates on a floating rate security will reduce changes in the
security's market value from the original purchase price resulting in the
potential for capital appreciation or capital depreciation being less than
for fixed income obligations with a fixed interest rate.
ECDs, ETDs and Yankee CDs (Money Market Reserves, Municipal Reserves,
Institutional Prime Fund and Institutional Government Fund). These Funds
may purchase Eurodollar certificates of deposit ("ECDs"), which are U.S.
dollar-denominated certificates of deposit issued by foreign branches of
domestic banks, Eurodollar time deposits ("ETDs"), which are U.S. dollar
denominated deposits in a foreign branch of a domestic bank or a foreign
bank, and Yankee-Dollar certificates of deposit ("Yankee CDs") which are
certificates of deposit issued by a domestic branch of a foreign bank
denominated in U.S. dollars and held in the United States. ECDs, ETDs, and
Yankee CDs are subject to somewhat different risks than domestic obligations
of domestic banks. These risks are discussed in the Prospectuses.
Government Obligations (All Funds). Each Fund may invest in a variety
of U.S. Treasury obligations, which differ only in their interest rates,
maturities and times of issuance: (a) U.S. Treasury bills have a maturity
of one year or less, (b) U.S. Treasury notes have maturities of one to ten
years, and (c) U.S. Treasury bonds generally have maturities of greater than
ten years.
In addition to U.S. Treasury obligations, the Money Market Reserves and
Municipal Reserves, Institutional Prime and Institutional Government Funds
may invest in obligations issued or guaranteed by U.S. Government agencies
and instrumentalities which are supported by any of the following: (a) the
full faith and credit of the U.S. Treasury (such as Government National
Mortgage Association ("GNMA") participation certificates), (b) the right of
the issuer to borrow an amount limited to a specific line of credit from the
U.S. Treasury, (c) discretionary authority of the U.S. Government agency or
instrumentality, or (d) the credit of the instrumentality. (Examples of
agencies and instrumentalities are: Federal Land Banks, Federal Housing
Administration, Farmers Home Administration, Export-Import Bank of the
United States, Central Bank for Cooperatives, Federal Intermediate Credit
Banks, Federal Home Loan Banks, General Services Administration, Maritime
Administration, Tennessee Valley Authority, District of Columbia Armory
Board, Inter-American Development Bank, Asian-American Development Bank,
Student Loan Marketing Association, International Bank for Reconstruction
and Development and Federal National Mortgage Association ("FNMA") No
assurance can be given that the U.S. Government will provide financial
support to U.S. Government agencies or instrumentalities such as those
described in (b), (c) and (d) in the future, other than as set forth above,
since it is not obligated to do so by law.
Repurchase Agreements (All Funds). The Funds may enter into repurchase
agreements with U.S. Government securities dealers recognized by the Federal
Reserve Board, with member banks of the Federal Reserve System, or with
other brokers or dealers that meet the credit guidelines of the Board of
Directors. In a repurchase agreement, the Fund buys a security from a
seller that has agreed to repurchase the same security at a mutually agreed
upon date and price. A Fund's resale price will be in excess of the
purchase price, reflecting an agreed upon interest rate. This interest rate
is effective for the period of time the Fund is invested in the agreement
and is not related to the coupon rate on the underlying security.
Repurchase agreements may also be viewed as a fully collateralized loan of
money by the Fund to the seller. The period of repurchase agreements will
usually be short, from overnight to one week, and at no time will a Fund
invest in repurchase agreements for more than one year. A Fund will always
receive as collateral securities whose market value including accrued
interest is, and during the entire term of the agreement remains, at least
equal to 100% of the dollar amount invested by the Fund in each agreement,
and the Fund will make payment for such securities only upon physical
delivery or upon evidence of book entry transfer to the account of the
Custodian. If the seller defaults, the Fund might incur a loss if the value
of the collateral securing the repurchase agreement declines and might incur
disposition costs in connection with liquidating the collateral. In
addition, if bankruptcy proceedings are commenced with respect to the seller
of a security which is the subject of a repurchase agreement, realization
upon the collateral by the Fund may be delayed or limited. Dreyfus seeks to
minimize the risk of loss through repurchase agreements by analyzing the
creditworthiness of the obligors under repurchase agreements, in accordance
with the credit guidelines of the Company's Board of Directors.
Reverse Repurchase Agreements (Money Market Reserves, Municipal
Reserves and Institutional Prime Fund). A Fund may enter into reverse
repurchase agreements to meet redemption requests where the liquidation of
portfolio securities is deemed by Dreyfus to be inconvenient or
disadvantageous. A reverse repurchase agreement is a transaction whereby a
Fund transfers possession of a portfolio security to a bank or broker-dealer
in return for a percentage of the portfolio security's market value. The
Fund retains record ownership of the security involved including the right
to receive interest and principal payments. At an agreed upon future date,
the Fund repurchases the security by paying an agreed upon purchase price
plus interest. Cash or liquid high-grade debt obligations of the Fund equal
in value to the repurchase price including any accrued interest will be
maintained in a segregated account while a reverse repurchase agreement is
in effect.
When-Issued Securities (All Funds). New issues of U.S. Treasury and
Government securities are often offered on a when-issued basis. This means
that delivery and payment for the securities normally will take place
approximately 7 to 45 days after the date the buyer commits to purchase
them. The payment obligation and the interest rate that will be received on
securities purchased on a when-issued basis are each fixed at the time the
buyer enters into the commitment. Each Fund will make commitments to
purchase such securities only with the intention of actually acquiring the
securities, but the Fund may sell these securities or dispose of the
commitment before the settlement date if it is deemed advisable as a matter
of investment strategy. Cash or marketable high grade debt securities equal
to the amount of the above commitments will be segregated on each Fund's
records. For the purpose of determining the adequacy of these securities
the segregated securities will be valued at market. If the market value of
such securities declines, additional cash or securities will be segregated
on the Fund's records on a daily basis so that the market value of the
account will equal the amount of such commitments by the Fund.
Securities purchased on a when-issued basis and the securities held by
each Fund are subject to changes in market value based upon the public's
perception of changes in the level of interest rates. Generally, the value
of such securities will fluctuate inversely to changes in interest rates --
i.e., they will appreciate in value when interest rates decline and decrease
in value when interest rates rise. Therefore, if in order to achieve higher
interest income each Fund remains substantially fully invested at the same
time that it has purchased securities on a "when-issued" basis, there will
be a greater possibility of fluctuation in the Fund's net asset value.
When payment for when-issued securities is due, each Fund will meet its
obligations from then-available cash flow, the sale of segregated
securities, the sale of other securities or, and although it would not
normally expect to do so, from the sale of the when-issued securities
themselves (which may have a market value greater or less than the Fund's
payment obligation). The sale of securities to meet such obligations
carries with it a greater potential for the realization of capital gains,
which are subject to federal income tax.
Loans of Fund Securities (All Funds except U.S. Treasury Reserves).
Each Fund has authority to lend its portfolio securities provided (1) the
loan is secured continuously by collateral consisting of U.S. Government
securities or cash or cash equivalents adjusted daily to make a market value
at least equal to the current market value of these securities loaned;
(2) the Fund may at any time call the loan and regain the securities loaned;
(3) the Fund will receive any interest or dividends paid on the loaned
securities; and (4) the aggregate market value of securities loaned will not
at any time exceed one-third of the total assets of the Fund. In addition,
it is anticipated that a Fund may share with the borrower some of the income
received on the collateral for the loan or that it will be paid a premium
for the loan. In determining whether to lend securities, Dreyfus considers
all relevant factors and circumstances including the creditworthiness of the
borrower.
Commercial Paper (Money Market Reserves, Municipal Reserves,
Institutional Prime Fund and Institutional Government Fund). The Funds may
invest in commercial paper issued in reliance on the so-called "private
placement" exemption from registration afforded by Section 4(2) of the
Securities Act of 1933 ("Section 4(2) paper"). Section 4(2) paper is
restricted as to disposition under the federal securities laws and generally
is sold to investors who agree that they are purchasing the paper for an
investment and not with a view to public distribution. Any resale by the
purchaser must be in an exempt transaction. Section 4(2) paper is normally
resold to other investors through or with the assistance of the issuer or
investment dealers who make a market in Section 4(2) paper, thus providing
liquidity. Pursuant to guidelines established by the Company's Board of
Directors, Dreyfus may determine that Section 4(2) paper is liquid for the
purposes of complying with the Fund's investment restriction relating to
investments in illiquid securities.
Master/Feeder Option. The Company may in the future seek to achieve
any 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 a Fund will be given at least
30 days' prior notice of any such investment. Such investment would be made
only if the Company's Board of Directors determines it to be in the best
interest of a Fund and its shareholders. In making that determination, the
Board will consider, among other things, the benefits to shareholders and/or
the opportunity to reduce costs and achieve operational efficiency.
Although the Funds believe that the Board will not approve an arrangement
that is likely to result in higher costs, no assurance is given that costs
will be materially reduced if this option is implemented.
INVESTMENT LIMITATIONS
The following limitations have been adopted by each Fund. A Fund may
not change any of these fundamental investment limitations or its investment
objective without the consent of: (a) 67% or more of the shares present at a
meeting of shareholders duly called if the holders of more than 50% of the
outstanding shares of a Fund are present or represented by proxy; or
(b) more than 50% of the outstanding shares of a Fund, whichever is less.
Each Fund may not:
1. Purchase any securities which would cause more than 25% of the
value of a Fund's total assets at the time of such purchase to be invested
in the securities of one or more issuers conducting their principal
activities in the same industry. (For purposes of this limitation, U.S.
Government securities, and state or municipal governments and their
political subdivisions are not considered members of any industry. In
addition, this limitation does not apply to investments in domestic banks,
including U.S. branches of foreign banks and foreign branches of U.S.
banks.)
2. Borrow money or issue senior securities as defined in the 1940 Act
except that (a) a Fund may borrow money in an amount not exceeding one-third
of the Fund's total assets at the time of such borrowings, and (b) a Fund
may issue multiple classes of shares. The purchase or sale of futures
contracts and related options shall not be considered to involve the
borrowing of money or issuance of senior securities.
3. Purchase with respect to 75% of a Fund's total assets securities
of any one issuer (other than securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities) if, as a result, (a) more
than 5% of a Fund's total assets would be invested in the securities of that
issuer, or (b) a Fund would hold more than 10% of the outstanding voting
securities of that issuer.
4. Make loans or lend securities, if as a result thereof more than
one-third of the Fund's total assets would be subject to all such loans.
For purposes of this limitation debt instruments and repurchase agreements
shall not be treated as loans.
5. Purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent a
Fund from investing in securities or other instruments backed by real
estate, including mortgage loans, or securities of companies that engage in
real estate business or invest or deal in real estate or interests therein).
6. Underwrite securities issued by any other person, except to the
extent that the purchase of securities and later disposition of such
securities in accordance with the Fund's investment program may be deemed an
underwriting.
7. Purchase or sell commodities except that each Fund may enter into
futures contracts and related options, forward currency contacts and other
similar instruments.
Each Fund may:
Notwithstanding any other fundamental investment policy or limitation,
invest all of its investable assets in securities of a single open-end
management investment company with substantially the same investment
objective, policies and limitations as the Fund.
None of the Funds intends to engage in futures contracts, related
options or forward currency contracts.
The Funds have adopted the following additional non-fundamental
restrictions. These non-fundamental restrictions may be changed without
shareholder approval, in compliance with applicable law and regulatory
policy.
1. No Fund shall sell securities short, unless it owns or has the
right to obtain securities equivalent in kind and amounts to the securities
sold short.
2. No Fund shall purchase securities on margin, except that a Fund
may obtain such short-term credits as are necessary for the clearance of
transactions.
3. No Fund shall purchase oil, gas or mineral leases.
4. Each Fund will not purchase or retain the securities of any issuer
if the officers, Directors of the Fund, its advisers, or managers, owning
beneficially more than one half of one percent of the securities of such
issuer, together own beneficially more than five percent of such securities.
5. No Fund will purchase securities of issuers (other than securities
issued or guaranteed by domestic or foreign governments or political
subdivisions thereof), including their predecessors, that have been in
operation for less than three years, if by reason thereof, the value of such
Fund's investment in securities would exceed 5% of such Fund's total assets.
For purposes of this limitation, sponsors, general partners, guarantors and
originators of underlying assets may be treated as the issuer of a security.
6. None of the Funds will invest more than 10% of the value of its
net assets in illiquid securities, including repurchase agreements with
remaining maturities in excess of seven days, time deposits with maturities
in excess of seven days and other securities which are not readily
marketable. For purposes of this limitation, illiquid securities shall not
include Section 4(2) Paper and securities which may be resold under Rule
144A under the Securities Act of 1933, provided that the Board of Directors,
or its delegate, determines that such securities are liquid based upon the
trading markets for the specific security.
7. No Fund may invest in securities of other investment companies,
except as they may be acquired as part of a merger, consolidation or
acquisition of assets and except to the extent otherwise permitted by the
1940 Act.
8. No Fund shall purchase any security while borrowings representing
more than 5% of the Fund's total assets are outstanding.
9. No Fund will purchase warrants if at the time of such purchase:
(a) more than 5% of the value of such Fund's assets would be invested in
warrants, or (b) more than 2% of the value of the Fund's assets would be
invested in warrants that are not listed on the New York or American Stock
Exchange (for purposes of this limitation, warrants acquired by a Fund in
units or attached to securities will be deemed to have no value).
10. No Fund will purchase puts, calls, straddles, spreads and any
combination thereof if by reason thereof the value of its aggregate
investment in such classes of securities will exceed 5% of its total assets
except that: (a) this limitation shall not apply to standby commitment, and
(b) this limitation shall not apply to a Fund's transactions in futures
contracts and related options.
PRINCIPAL SHAREHOLDERS
The following shareholder(s) owned 5% or more of the outstanding Investor
shares of the following Funds at February 9, 1998:
MONEY MARKET RESERVES: Dreyfus Investment Services Inc., Two Mellon Bank
Center, Attn: Cashiering Department, Pittsburgh, PA 15259; 5% record.
MUNICIPAL RESERVES: John Sharon, P.O. Box 7168, Alhambra, CA 91802-7168; 6%
record and Robert A. Dunn, Elizabeth J. Dunn, Joint Tenant, 39 River Road,
PO Box 7189, North Arlington, NJ 07031-6101: 6% record.
U.S. TREASURY RESERVES: Boston & Co., Attn: John Kacikno, 3 Mellon Bank
Center, Pittsburgh, PA 15259; 77% record.
The following shareholder(s) owned 5% or more of the outstanding Class
R shares of the following Funds at February 9, 1998;
MONEY MARKET RESERVES: Dreyfus Investment Services, Inc., Attn: Cashiering
Dept., 2 Mellon Bank Center, Pittsburgh, PA 15259-0001: 39% record and;
Boston & Co., Attn: Jack Kacikno, 3 Mellon Bank Center, Pittsburgh, PA
15259: 41% record.
MUNICIPAL RESERVES: Boston & Co., Attn: Jack Kacikno, 3 Mellon Bank Center,
Pittsburgh, PA 15259: 63% record; The Chase Manhattan Bank, Attn: Global
Trust, 450 W 33rd Street, FL.15, New York, NY 10001-3603: 13% record and;
Mellon Bank, NA, Capital Markets Customers, One Mellon Bank Center, Room 151-
0440, Attn: Cindy Kieffer, Pittsburgh, PA 15258-0001: 6% record.
U.S. TREASURY RESERVES: Mellon Bank NA - Mellon PSFS, CTA Operations Unit,
PO Box 7899, Philadelphia, PA 19101-7899: 38% record; Mellon Bank, NA -
Western Region, CTA Operations Unit, PO Box 7899, Philadelphia, PA 19101-
7899: 17% record; Boston & Co., Attn: John Kacikno, 3 Mellon Bank Center,
Pittsburgh, PA 15259: 9% record; Mellon Bank, DE, CTA Operations Unit, Room
199-5264, PO Box 7899, Philadelphia, PA 19101-7899: 6% record and; Dreyfus
Investment Services, Inc., 2 Mellon Bank Center, Pittsburgh, PA 15259-0001:
6% record.
The following shareholder(s) owned 5% or more of the outstanding voting
shares of the following Funds at February 9, 1998:
INSTITUTIONAL PRIME FUND: Boston & Co., Attn: John Kacikno, 3 Mellon Bank
Center, Pittsburgh, PA 15259: 88% record.
INSTITUTIONAL GOVERNMENT FUND: Boston & Co., Attn: John Kacikno, 3 Mellon
Bank Center, Pittsburgh, PA 15259: 72% record; Mac & Co., Mutual Funds
Operations, PO Box 3198, Pittsburgh, PA 15230-3198: 9% record and; Dreyfus
Investment Services, Inc., Attn: Cashiering Dept., 2 Mellon Bank Center,
Pittsburgh, PA 15259-0001: 6% record.
INSTITUTIONAL U.S. TREASURY FUND: Boston & Co., Attn: John Kacikno, 3
Mellon Bank Center, Pittsburgh, PA 15259: 74% record and The Chase Manhattan
Bank, Attn: Global Trust, 450 W 33rd Street, FL 15, New York, NY 10001-2603;
21% record.
DIRECTORS AND OFFICERS
The Company has a Board composed of eleven Directors which supervises
the Fund's investment activities and reviews contractual arrangements with
companies that provide the Funds with services. The following lists the
Directors and officers and their positions with the Company and their
present and principal occupations during the past five years. Each Director
who is an "interested person" of the Company (as defined in the 1940 Act) is
indicated by an asterisk. Each of the Directors also serves as a Trustee of
The Dreyfus/Laurel Funds Trust and The Dreyfus/Laurel Tax-Free Municipal
Funds (collectively, with the Company, the "Dreyfus/Laurel Funds").
Directors of the Company
o+RUTH MARIE ADAMS. Director of the Company; Professor of English and Vice
President Emeritus, Dartmouth College; Senator, United Chapters of Phi
Beta Kappa; Trustee, Woods Hole Oceanographic Institution; from
November 1995 to January 1997, Director, Access Capital Strategic
Community Investment Fund, Inc. - Institutional Investment Portfolio.
Age: 83 years old. Address: 1026 Kendal Lyme Road, Hanover, New
Hampshire 03755.
o+FRANCIS P. BRENNAN. Chairman of the Board of Directors and Assistant
Treasurer of the Company; Director and Chairman, Massachusetts Business
Development Corp.; and from November 1995 to January 1997, Director,
Access Capital Strategic Community Investment Fund, Inc. - Bank
Portfolio. Age: 80 years old. Address: Massachusetts Business
Development Corp., 50 Milk Street, Boston, Massachusetts 02109.
o+JOSEPH S. DIMARTINO, Director of the Company since February 1995. Since
January 1995, Mr. DiMartino has served as Chairman of the Board for
various funds in the Dreyfus Family of Funds. He is also Chairman of
the Board of Staffing Resources, Inc., a temporary placement agency.
Mr. DiMartino also serves as a Director of the Muscular Dystrophy
Association, HealthPlan Services Corporation, a provider of marketing,
administrative and risk management services to health and other benefit
programs, The Noel Group, Inc., a venture capital company, Carlyle
Industries, Inc. (formerly Belding Heminway Company, Inc.), a button
packager and distributor, and Curtis Industries, Inc., a national
distributor of security products, chemicals, and automotive and other
hardware. Mr. DiMartino is also a Board member of 152 other funds in
the Dreyfus Family of Funds. From November 1995 to January 1997,
Director, Access Capital Strategic Community Investment Fund, Inc. -
Institutional Investment Portfolio and Bank Portfolio. For more than
five years prior to January 1995, he was President, a director and,
until August 24, 1994, Chief Operating Officer of Dreyfus and Executive
Vice President and a director of Dreyfus Service Corporation, a wholly-
owned subsidiary of Dreyfus. From August 1994 to December 31, 1994, he
was a director of Mellon Bank Corporation. Age: 54 years old.
Address: 200 Park Avenue, New York, New York 10166.
o+JAMES M. FITZGIBBONS. Director of the Company; Chairman, Howes Leather
Company, Inc.; Director, Fiduciary Trust Company; Chairman, CEO and
Director, Fieldcrest-Cannon Inc.; Director, Lumber Mutual Insurance
Company; Director, Barrett Resources, Inc.; from November 1995 to
January 1997, Director, Access Capital Strategic Community Investment
Fund, Inc. - Bank Portfolio. Age: 63 years old. Address: 40 Norfolk
Road, Brookline, Massachusetts 02167.
o*J. TOMLINSON FORT. Director of the Company; Partner, Reed, Smith, Shaw &
McClay (law firm). From November 1995 to January 1997, Director,
Access Capital Strategic Community Investment Fund, Inc. - Bank
Portfolio. Age: 69 years old. Address: 204 Woodcock Drive,
Pittsburgh, Pennsylvania 15215.
o+ARTHUR L. GOESCHEL. Director of the Company; Director, Calgon Carbon
Corporation; Director, Cerex Corporation; Director, National Picture
Frame Corporation; former Chairman of the Board and Director, Rexene
Corporation; Chairman of the Board and Director, Tetra Corporation 1991-
1993; Director, Medalist Corporation 1992-1993. From November 1995 to
January 1997, Director, Access Capital Strategic Community Investment
Fund, Inc. - Institutional Investment Portfolio. Age: 76 years old.
Address: Way Hallow Road and Woodland Road, Sewickley, Pennsylvania
15143.
o+KENNETH A. HIMMEL. Director of the Company; former Director, The Boston
Company, Inc. ("TBC") and Boston Safe Deposit and Trust Company;
President and Chief Executive Officer, Himmel & Co., Inc.; Vice
Chairman, Sutton Place Gourmet, Inc.; Managing Partner, Franklin
Federal Partners. From November 1995 to January 1997, Director, Access
Capital Strategic Community Investment Fund, Inc. - Bank Portfolio.
Age: 51 years old. Address: 625 Madison Avenue, New York, New York
10022.
o*ARCH S. JEFFERY. Director of the Company; Financial Consultant. From
November 1995 to January 1997, Director, Access Capital Strategic
Community Investment Fund, Inc. - Institutional Investment Portfolio.
Age: 80 years old. Address: 1817 Foxcroft Lane, Unit 306, Allison
Park, Pennsylvania 15101.
o+STEPHEN J. LOCKWOOD. Director of the Company; President and CEO, LDG
Management Company Inc.; CEO, LDG Reinsurance Underwriters, SRRF
Management Inc. and Medical Reinsurance Underwriters Inc.; from
November 1995 to January 1997, Director, Access Capital Strategic
Community Investment Fund, Inc. - Institutional Investment Portfolio.
Age: 50 years old. Address: 401 Edgewater Place, Wakefield,
Massachusetts 01880.
o+JOHN J. SCIULLO. Director of the Company; Dean Emeritus and Professor of
Law, Duquesne University Law School; Director, Urban Redevelopment
Authority of Pittsburgh; from November 1995 to January 1997, Director,
Access Capital Strategic Community Investment Fund, Inc. -
Institutional Investment Portfolio. Age: 66 years old. Address: 321
Gross Street, Pittsburgh, Pennsylvania 15224.
o+ROSLYN M. WATSON. Director of the Company; Principal, Watson Ventures,
Inc.; Director, American Express Centurion Bank; Director,
Harvard/Pilgrim Community Health Plan, Inc.; from November 1995 to
January 1997, Director, Access Capital Strategic Community Investment
Fund, Inc. - Bank Portfolio; Director, Massachusetts Electric Company;
Director, the Hymans Foundation, Inc., prior to February, 1993; Real
Estate Development Project Manager and Vice President, The Gunwyn
Company. Age: 48 years old. Address: 25 Braddock Park, Boston,
Massachusetts 02116-5816.
_______________________________________________________
* "Interested person" of the Company, as defined in the 1940 Act.
o Member of the Audit Committee.
+ Member of the Nominating Committee.
# Officer also serves as an officer for other investment companies
advised by Dreyfus, including The Dreyfus/Laurel Funds Trust and The
Dreyfus/Laurel Tax-Free Municipal Funds.
Officers of the Company
#MARIE E. CONNOLLY. President and Treasurer of the Company. President,
Chief Executive Officer, Chief Compliance Officer and a director of the
Distributor and Funds Distributor, Inc., the ultimate parent of which
is Boston Institutional Group, Inc. Age: 40 years old.
#RICHARD W. INGRAM. Vice President and Assistant Treasurer of the Company.
Executive Vice President of the Distributor and Funds Distributor, Inc.
From March 1994 to November 1995, he was Vice President and Division
Manager for First Data Investor Services Group. From 1989 to 1994, he
was Vice President, Assistant Treasurer and Tax Director - Mutual Funds
of TBC. Age: 42 years old.
#CHRISTOPHER J. KELLEY. Vice President and Assistant Secretary of the
Company. Vice President and Senior Associate General Counsel of Funds
Distributor, Inc. and the Distributor, and an officer of certain
investment companies advised or administered by Harris Trust and
Savings Bank, Waterhouse Asset Management, Inc., J.P. Morgan & Co.
Incorporated and Montgomery Asset Management, L.P., or their respective
affiliates. From April 1994 to July 1996, Mr. Kelley was Assistant
Counsel at Forum Financial Group. From October 1992 to March 1994, Mr.
Kelley was employed by Putnam Investments in legal and compliance
capacities. Age: 33 years old.
#KATHLEEN K. MORRISEY. Vice President and Assistant Secretary of the
Company. Vice President and Assistant Secretary of Funds Distributor,
Inc. Manager of Treasury Services Administration and an officer of
certain investment companies advised or administered by J.P. Morgan &
Co. Incorporated, Montgomery Asset Management, L.P., and Dresdner RCM
Global Investors, Inc., or their respective affiliates. From July 1994
to November 1995, she was a Fund Accountant II for Investors Bank &
Trust Company. Prior to that she was a Finance student at Stonehill
College in North Easton, MA. Age: 25 years old.
#MARY A. NELSON. Vice President and Assistant Treasurer of the Company.
Vice President of the Distributor and Funds Distributor, Inc. From
September 1989 to July 1994, she was an Assistant Vice President and
Client Manager for TBC. Age: 33 years old.
#MICHAEL S. PETRUCELLI. Vice President, Assistant Treasurer and Assistant
Secretary of the Company. Senior Vice President and director of
Strategic Client Initiatives of Funds Distributor, Inc. and an officer
of certain investment companies advised or administered by J.P. Morgan
& Co. Incorporated. From December 1989 through November, 1996, he was
employed by GE Investments where he held various financial, business
development and compliance positions. He also served as Treasurer of
the GE Funds and as Director of GE Investment Services. Age: 36 years
old.
#JOSEPH F. TOWER, III. Vice President and Assistant Treasurer of the
Company. Senior Vice President, Treasurer and Chief Financial Officer
of the Distributor and Funds Distributor, Inc. From 1988 to August
1994, he was employed by TBC where he held various management positions
in the Corporate Finance and Treasury areas. Age: 35 years old.
#ELBA VASQUEZ. Vice President and Assistant Secretary of the Company.
Assistant Vice President of Funds Distributor, Inc. She has been an
employee since May 1996 as a Sales Associate in the distribution of
World Equity Benchmark Shares ("WEBS"). From March 1990 to May 1996,
she was employed by U.S. Trust Company of New York. As an officer of
U.S. Trust, she held various positions in the sales and marketing of
their proprietary family of mutual funds. Age: 36 years old.
#DOUGLAS C. CONROY. Vice President and Assistant Secretary of the Company.
Assistant Vice President of Funds Distributor, Inc. From April 1993 to
January 1995, he was a Senior Fund Accountant for Investors Bank &
Trust Company. From December 1991 to March 1993, he was employed as a
fund accountant at TBC. Age: 28 years old.
The address of each officer of the Company is 200 Park Avenue, New
York, New York 10166.
The officers and Directors of the Company as a group owned beneficially
less than 1% of the Fund's total shares outstanding as of February 9, 1998.
No officer or employee of Premier (or of any parent, subsidiary or
affiliate thereof) receives any compensation from the Company for serving as
an officer or Director of the Company. In addition, no officer or employee
of Dreyfus (or of any parent, subsidiary or affiliate thereof) serves as an
officer or Director of the Company. The Dreyfus/Laurel Funds pay each
Director/Trustee who is not an "interested person" of the Company (as
defined in the 1940 Act), $27,000 per annum (and an additional $25,000 for
the Chairman of the Board of Directors/Trustees of the Dreyfus/Laurel
Funds). In addition, the Dreyfus/Laurel Funds pay each Director/Trustee who
is not an "interested person" of the Company (as defined in the 1940 Act),
$1,000 per joint Dreyfus/Laurel Funds Board meeting attended, plus $750 per
joint Dreyfus/Laurel Funds Audit Committee meeting attended, and reimburse
each Director/Trustee who is not an "interested person" of the Company (as
defined in the 1940 Act), for travel and out-of-pocket expenses.
For the fiscal year ended October 31, 1997, the aggregate amount of fees
and expenses received by each current Director from the Company and all other
funds in the Dreyfus Family of Funds for which such person is a Board member
were as follows:
Total Compensation
From the Company
Aggregate and Fund Complex
Name of Board Compensation Paid to Board
Member From the Company# Member****
Ruth Marie Adams $10,000 $31,500
Francis P. Brennan* $19,833 $63,750
Joseph S. DiMartino** None $517,075***
James M. Fitzgibbons $10,583 $31,500
J. Tomlinson Fort** None None
Arthur L. Goeschel $11,500 $37,500
Kenneth A. Himmel $10,167 $32,500
Arch S. Jeffery** None None
Stephen J. Lockwood $11,167 $33,250
John J. Sciullo $11,167 $32,500
Roslyn M. Watson $11,167 $32,500
# Amounts required to be paid by the Company directly to the non-
interested Directors, that would be applied to offset a portion of
the management fee payable to Dreyfus, are in fact paid directly by
Dreyfus to the non-interested Directors. Amount does not include
reimbursed expenses for attending Board meetings, which amounted to
$14,973 for the Company.
* Compensation of Francis Brennan includes $25,000 paid by the
Dreyfus/Laurel Funds to be Chairman of the Board.
** Joseph S. DiMartino, J. Tomlinson Fort and Arch S. Jeffery are paid
directly by Dreyfus for serving as Board members of the Company and
the funds in the Dreyfus/Laurel Funds. For the fiscal year ended
October 31, 1997, the aggregate amount of fees and expenses received
by Joseph DiMartino, J. Tomlinson Fort and Arch S. Jeffery from
Dreyfus for serving as a Board member of the Company were $11,833,
$11,833 and $11,500, respectively, and for serving as a Board member
of all funds in the Dreyfus/Laurel Funds (including the Company) were
$35,500, $35,500 and $34,500, respectively. In addition, Dreyfus
reimbursed Messrs. DiMartino, Fort and Jeffery a total of $4,494 for
expenses attributable to the Company's Board meetings, which is not
included in the $14,973 amount in note # above.
***Actual amounts for the year ending December 31, 1997.
****The Dreyfus Family of Funds consists of 152 mutual funds.
INVESTMENT MANAGEMENT AND OTHER SERVICES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Management of the
Funds."
Advisory Services. Dreyfus (200 Park Avenue, New York, New York 10166)
serves as each Fund's investment manager. Dreyfus is a wholly-owned
subsidiary of Mellon Bank, N.A. ("Mellon Bank") (One Mellon Bank Center,
Pittsburgh, PA 15259), each Fund's prior investment manager. Pursuant to
an Investment Management Agreement, transferred from Mellon Bank to Dreyfus
effective as of October 17, 1994, Dreyfus provides, or arranges for one or
more third parties to provide, investment advisory, administrative, custody,
fund accounting and transfer agency services to each Fund. As investment
manager, Dreyfus manages each Fund by making investment decisions based on
each Fund's investment objective, policies and restrictions, and is paid a
fee as described in the Fund's Prospectus.
The Investment Management Agreement will continue from year to year
provided that a majority of the Directors who are not "interested persons"
of the Funds or Dreyfus and either a majority of all Directors or a majority
of the shareholders of each Fund approve its continuance. The Management
Agreement was last approved by the Board of Directors on January 28, 1998 to
continue until April 4, 1999. The Company may terminate the Investment
Management Agreement, upon the vote of a majority of the Board of Directors
or upon the vote of a majority of the outstanding voting securities of each
Fund on sixty (60) days' written notice to Dreyfus. Dreyfus may terminate
the Investment Management Agreement upon 60 days' written notice to the
Company. The Investment Management Agreement will terminate immediately and
automatically upon its assignment.
The following persons are officers and/or directors of Dreyfus: W.
Keith Smith, Chairman of the Board; Christopher M. Condron, President, Chief
Executive Officer, Chief Operating Officer and a director; Stephen E.
Canter, Vice Chairman, Chief Investment Officer and a director; Lawrence S.
Kash, Vice Chairman-Distribution and a director; William T. Sandalls, Jr.,
Senior Vice President and Chief Financial Officer; Mark N. Jacobs, Vice
President, General Counsel and Secretary; Patrice M. Kozlowski, Vice
President-Corporate Communications; Mary Beth Leibig, Vice President-Human
Resources; Jeffrey N. Nachman, Vice President-Mutual Fund Accounting; Andrew
S. Wasser, Vice President-Information Systems; William V. Healey, Assistant
Secretary; and Mandell L. Berman, Burton C. Borgelt, Frank V. Cahouet and
Richard F. Syron, directors.
For the last three fiscal years, each Fund had the following expenses:
For the Fiscal Years Ended October 31,
1997 1996 1995
Money Market Reserves
Advisory fees $1,931,340 $1,651,339 $1,479,772
U.S. Treasury Reserves
Advisory fees $2,571,553 $2,138,371 $1,588,710
Municipal Reserves
Advisory fees $1,080,023 $1,182,931 $1,074,708
Institutional Prime Fund
Advisory fees $848,936 $808,812 $1,294,365
Institutional Government Fund
Advisory fees $382,114 $458,878 $590,518
Institutional U.S. Treasury Fund
Advisory fees $1,097,044 $967,698 $967,664
Distribution and Shareholder Servicing Plan. The SEC has adopted Rule
12b-1 under the 1940 Act (the "Rule") regulating the circumstances under
which investment companies such as the Company may, directly or indirectly,
bear the expenses of distributing their shares. The Rule defines
distribution expenses to include expenditures for "any activity which is
primarily intended to result in the sale of fund shares." The Rule, among
other things, provides that an investment company may bear such expenses
only pursuant to a plan adopted in accordance with the Rule. With respect
to the Investor shares of Money Market Reserves, U.S. Treasury Reserves and
Municipal Reserves, the Company has adopted a Distribution Plan (the
"Distribution Plan") pursuant to the Rule, under which Premier may enter
into Selling Agreements with Agents (as defined below). Under the
Distribution Plan, each of Money Market Reserves, U.S. Treasury Reserves and
Municipal Reserves, may spend annually up to 0.25% (currently limited by the
Board to 0.20%) of its average daily net assets attributable to Investor
shares for costs and expenses incurred in connection with the sale of such
shares and for shareholder servicing.
With respect to the Institutional Prime, Institutional Government and
Institutional U.S. Treasury Funds (the "Institutional Funds"), the Company
has adopted a Shareholder Servicing Plan (the "Institutional Plan") which is
not subject to the Rule, and may enter into Shareholder Servicing Agreements
with Agents (as defined below).
The Institutional Plan permits each Institutional Fund to compensate
certain banks, brokers, dealers or other financial institutions (including
Dreyfus and its affiliates) (collectively "Agents") that have entered into
Shareholder Servicing Agreements with the Company. Payments under the
Institutional Plan are calculated daily and paid monthly at a rate or rates
set from time to time by an Institutional Fund, provided that the annual
rate may not exceed 0.15% of the average daily net asset value of the Fund
shares. Payments under the Institutional Plan may be increased without
shareholder approval.
The fees payable under the Institutional Plan are used primarily to
compensate or reimburse Agents for shareholder services provided, and
related expenses incurred by such Agents. The shareholder services provided
by Agents may include: (i) aggregating and processing purchase and
redemption requests for Fund shares from their customers and transmitting
net purchase and redemption orders to the Distributor or Transfer Agent;
(ii) providing customers with a service that invests the assets of their
accounts in Fund shares pursuant to specific or pre-authorized instructions;
(iii) processing dividend and distribution payments from a Fund on behalf of
customers; (iv) providing information periodically to customers showing
their positions in Fund shares; (v) arranging for bank wires; and
(vi) providing general shareholder liaison services.
The Distribution Plan and the Institutional Plan each provides that a
report of the amounts expended thereunder, and the purposes for which such
expenditures were incurred, must be made to the Directors for their review
at least quarterly. In addition, the Distribution Plan provides that it may
not be amended to increase materially the costs which a Fund may bear for
distribution pursuant to the plan without approval of a Fund's shareholders,
and that other material amendments of the Distribution Plan must be approved
by the vote of a majority of the Directors and of the Directors who are not
"interested persons" of the Company and who do not have any direct or
indirect financial interest in the operation of the Distribution Plan or in
the related Selling Agreements, cast in person at a meeting called for the
purpose of considering such amendments. Both plans are subject to annual
approval by all of the Directors and by the Directors who are neither
"interested persons" nor have any direct or indirect financial interest in
the operation of either plan or in the related Selling Agreements or
Shareholder Servicing Agreements, by vote cast in person at a meeting called
for the purpose of voting on such approval. Each plan was so approved by
the Directors at a meeting held on January 28, 1998. The plans are
terminable, as to a Fund's class of shares, at any time by vote of a
majority of the Directors who are not "interested persons" and have no
direct or indirect financial interest in the operation of the plan or in the
related Selling Agreements or Shareholder Servicing Agreements or by vote of
the holders of a majority of the outstanding shares of such class of a Fund.
For the fiscal year ended October 31, 1997, the distribution and
service fees by the Funds subject to the Distribution Plan were:
Dreyfus Money Market Reserves $353,962
Dreyfus Municipal Reserves $ 35,730
Dreyfus U.S. Treasury Reserves $ 75,449
For the fiscal year ended October 31, 1997, the service fees by the
Funds subject to the Institutional Plan were:
Dreyfus Institutional Prime Money Market Fund $ 848,936
Dreyfus Institutional Government Money Market Fund $ 382,113
Dreyfus Institutional U.S. Treasury Money Market Fund $1,097,044
The Distributor; Sub-Administrator. Premier serves as the Funds'
distributor pursuant to an agreement which is renewable annually. Premier
also acts as distributor for the other funds in the Dreyfus Family of Funds
and for certain other investment companies. Premier also serves as sub-
administrator to the Funds pursuant to a Sub-Administration Agreement
effective October 17, 1994.
FEDERAL LAW AFFECTING MELLON BANK
The Glass-Steagall Act of 1933 prohibits national banks from engaging
in the business of underwriting, selling or distributing securities and
prohibits a member bank of the Federal Reserve System from having certain
affiliations with an entity engaged principally in that business. The
activities of Mellon Bank in informing its customers of, and performing,
investment and redemption services in connection with a Fund, and in
providing services to a Fund as custodian, as well as Dreyfus' investment
advisory activities, may raise issues under these provisions. Mellon Bank
has been advised by its counsel that the activities contemplated under these
arrangements are consistent with its statutory and regulatory obligations.
Changes in either federal or state statutes and regulations relating to
the permissible activities of banks and their subsidiaries or affiliates, as
well as further judicial or administrative decisions or interpretations of
such future statutes and regulations, could prevent Mellon Bank or Dreyfus
from continuing to perform all or a part of the above services for its
customers and/or a Fund. If Mellon Bank or Dreyfus were prohibited from
serving a Fund in any of its present capacities, the Board of Directors
would seek an alternative provider(s) of such services.
PURCHASE OF FUND SHARES
The following information supplements and should be read in conjunction
with the section in each Fund's Prospectus entitled "How to Buy Fund
Shares."
Dreyfus TeleTransfer Privilege. Dreyfus TeleTransfer purchase orders
may be made at any time. Purchase orders received by 4:00 p.m. New York
time, on any business day that Dreyfus Transfer, Inc., the Fund's transfer
and dividend disbursing agent (the "Transfer Agent"), and the New York Stock
Exchange (the "NYSE") are open for business will be credited to the
shareholder's Fund account on the next bank business day following such
purchase order. Purchase orders made after 4:00 p.m. New York time, on any
business day the Transfer Agent and the NYSE are open for business, or
orders made on Saturday, Sunday or any Fund holiday (e.g., when the NYSE is
not open for business), will be credited to the shareholder's Fund account
on the second bank business day following such purchase order. To qualify
to use the Dreyfus TeleTransfer Privilege, the initial payment for purchase
of Fund shares must be drawn on, and redemption proceeds paid to, the same
bank and account as are designated on the Account Application or Shareholder
Services Form on file. If the proceeds of a particular redemption are to be
wired to an account at any other bank, the request must be in writing and
signature-guaranteed. See "Redemption of Fund Shares - Dreyfus TeleTransfer
Privilege."
REDEMPTION OF FUND SHARES
The following information supplements and should be read in conjunction
with the section of each Fund's Prospectus entitled "How to Redeem Fund
Shares."
Check Redemption Privilege (Money Market Reserves, U.S. Treasury
Reserves and Municipal Reserves). Each Fund provides Redemption Checks
("Checks") automatically upon opening an account, unless the investor
specifically refuses the Check Redemption Privilege by checking the
applicable "No" box on the Account Application. The Check Redemption
Privilege may be established for an existing account by a separate signed
Shareholder Services Form. Checks will be sent only to the registered
owner(s) of the account and only to the address of record. The Account
Application or Shareholder Services Form must be manually signed by the
registered owner(s). Checks are drawn on the investor's Fund account and
may be made payable to the order of any person in an amount of $500 or more.
When a Check is presented to the Transfer Agent for payment, the Transfer
Agent, as the investor's agent, will cause the Fund to redeem a sufficient
number of full or fractional shares in the investor's account to cover the
amount of the Check. Dividends are earned until the Check clears. After
clearance, a copy of the Check will be returned to the investor. Investors
generally will be subject to the same rules and regulations that apply to
checking accounts, although the election of this Privilege creates only a
shareholder-transfer agent relationship with the Transfer Agent.
If the amount of the Check is greater than the value of the shares in
an investor's account, the Check will be returned marked insufficient funds.
Checks should not be used to close an account.
Wire Redemption Privilege. By using this Privilege, the investor
authorizes the Transfer Agent to act on wire, telephone or letter redemption
instructions from any person representing himself or herself to be the
investor, or a representative of the investor's Agent, and reasonably
believed by the Transfer Agent to be genuine. With respect to the
Institutional Prime Fund only, ordinarily, the Fund will initiate payment
for shares redeemed pursuant to this Privilege on the same business day if
the Transfer Agent receives the redemption request in proper form prior to
5:00 p.m., New York time, on such day; otherwise the Fund will initiate
payment on the next business day. With respect to the Institutional
Government Fund and the Institutional U.S. Treasury Fund only, ordinarily,
the Funds will initiate payment for shares redeemed pursuant to this
Privilege on the same business day if the Transfer Agent receives the
redemption request in proper form prior to 3:00 p.m., New York time, on such
day; otherwise the Funds will initiate payment on the next business day.
With respect to each Fund other than the Institutional Prime Fund, the
Institutional Government Fund and the Institutional U.S. Treasury Fund,
ordinarily, the Funds will initiate payment for shares redeemed pursuant to
this Privilege on the next business day after receipt if the Transfer Agent
receives the redemption request in proper form. Redemption proceeds ($1,000
minimum) will be transferred by Federal Reserve wire only to the commercial
bank account specified by the investor on the Account Application or the
Shareholder Services Form, or to a correspondent bank if the investor's bank
is not a member of the Federal Reserve System. Fees ordinarily are imposed
by such bank and borne by the investor. Immediate notification by the
correspondent bank to the investor's bank is necessary to avoid a delay in
crediting the funds to the investor's bank account.
Investors with access to telegraphic equipment may wire redemption
requests to the Transfer Agent by employing the following transmittal code
which may be used for domestic or overseas transmissions:
Transfer Agent's
Transmittal Code Answer Back Sign
144295 144295 TSSG PREP
Investors who do not have direct access to telegraphic equipment may
have the wire transmitted by contacting a TRT Cables operator at
1-800-654-7171, toll free. Investors also should advise the operator that
the above transmittal code must be used and also inform the operator of the
Transfer Agent's answer back sign.
To change the commercial bank or account designated to receive
redemption proceeds, a written request must be sent to the Transfer Agent.
This request must be signed by each shareholder, with each signature
guaranteed as described below under "Stock Certificates; Signatures."
Dreyfus TeleTransfer Privilege. Investors should be aware that if they
have selected the Dreyfus TeleTransfer privilege, any request for a wire
redemption will be effected as a Dreyfus TeleTransfer transaction through
the Automated Clearing House (ACH) system unless more prompt transmittal
specifically is requested. Redemption proceeds will be on deposit in the
investor's account at an ACH member bank ordinarily two business days after
receipt of the redemption request. See "Purchase of Fund Shares -- Dreyfus
TeleTransfer Privilege."
Stock Certificates; Signatures. Any certificates representing Fund
shares to be redeemed must be submitted with the redemption request.
Written redemption requests must be signed by each shareholder, including
each holder of a joint account, and each signature must be guaranteed.
Signatures on endorsed certificates submitted for redemption also must be
guaranteed. The Transfer Agent has adopted standards and procedures
pursuant to which signature-guarantees in proper form generally will be
accepted from domestic banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies
and savings associations, as well as from participants in the New York Stock
Exchange Medallion Signature Program, the Securities Transfer Agents
Medallion Program ("STAMP"), and the Stock Exchanges Medallion Program.
Guarantees must be signed by an authorized signatory of the guarantor and
"Signature-Guaranteed" must appear with the signature. The Transfer Agent
may request additional documentation from corporations, executors,
administrators, trustees or guardians, and may accept other suitable
verification arrangements from foreign investors, such as consular
verification. For more information with respect to signature-guarantees,
please call one of the telephone numbers listed on the cover.
Redemption Commitment. Each Fund has committed itself to pay in cash
all redemption requests by any shareholder of record, limited in amount
during any 90-day period to the lesser of $250,000 or 1% of the value of the
Fund's net assets at the beginning of such period. Such commitment is
irrevocable without the prior approval of the SEC. In the case of requests
for redemption in excess of such amount, the Company's Board reserves the
right to make payments in whole or in part in securities or other assets of
the Fund in case of an emergency or any time a cash distribution would
impair the liquidity of the Fund to the detriment of the existing
shareholders. In such event, the securities would be valued in the same
manner as the Fund's portfolio is valued. If the recipient sold such
securities, brokerage charges might be incurred.
Suspension of Redemptions. The right of redemption may be suspended or
the date of payment postponed (a) during any period when the NYSE is closed
(other than customary weekend and holiday closings), (b) when trading in the
markets a Fund ordinarily utilizes is restricted, or when an emergency
exists as determined by the SEC so that disposal of a Fund's investments or
determination of its net asset value is not reasonably practicable, or (c)
for such other periods as the SEC by order may permit to protect a Fund's
shareholders.
SHAREHOLDER SERVICES
The following information supplements and should be read in conjunction
with the section of each Fund's Prospectus entitled "Shareholder Services."
Fund Exchanges. Shares of other funds purchased by exchange will be
purchased on the basis of relative net asset value per share as follows:
A. Exchanges for shares of funds that are offered without a
sales load will be made without a sales load.
B. Shares of funds purchased without a sales load may be
exchanged for shares of other funds sold with a sales load, and
the applicable sales load will be deducted.
C. Shares of funds purchased with a sales load may be exchanged without
a sales load for shares of other funds sold without a
sales load.
D. Shares of funds purchased with a sales load, shares of funds
acquired by a previous exchange from shares purchased with a sales
load, and additional shares acquired through reinvestment of
dividends or distributions of any such funds (collectively
referred to herein as "Purchased Shares") may be exchanged for
shares of other funds sold with a sales load (referred to herein
as "Offered Shares"), provided that, if the sales load applicable
to the Offered Shares exceeds the maximum sales load that could
have been imposed in connection with the Purchased Shares (at the
time the Purchased Shares were acquired), without giving effect to
any reduced loads, the difference will be deducted.
To accomplish an exchange under item D above, shareholders must notify
the Transfer Agent of their prior ownership of fund shares and their account
number.
To request an exchange, an investor, or an investor's Agent acting on
the investor's behalf, must give exchange instructions to the Transfer Agent
in writing or by telephone. The ability to issue exchange instructions by
telephone is given to all Fund shareholders automatically, unless the
investor checks the applicable "No" box on the Account Application,
indicating that the investor specifically refuses this Privilege. By using
the Telephone Exchange Privilege, the investor authorizes the Transfer Agent
to act on telephonic instructions (including over The Dreyfus Touch
automated telephone system) from any person representing himself or herself
to be the investor or a representative of the investor's Agent, and
reasonably believed by the Transfer Agent to be genuine. Telephone
exchanges may be subject to limitations as to the amount involved or the
number of telephone exchanges permitted. Shares issued in certificate form
are not eligible for telephone exchanges.
To establish a personal retirement plan by exchange, shares of the fund
being exchanged must have a value of at least the minimum initial investment
required for the fund into which the exchange is being made. The minimum
initial investment is generally $750 for Dreyfus-sponsored Keogh Plans, IRAs
(including regular IRAs, spousal IRAs for a non-working spouse, Roth IRAs,
IRAs set up under a Simplified Employee Pension Plan ("SEP-IRAs"), and
rollover IRAs) and 403(b)(7) Plans with only one participant, and $500 for
Dreyfus-sponsored education IRAs. To exchange shares held in corporate
plans, 403(b)(7) Plans and SEP-IRAs with more than one participant, the
minimum initial investment is generally $100 if the plan has at least $2,500
invested among the funds in the Dreyfus Family of Funds. To exchange shares
held in personal retirement plans, the shares exchanged must have a current
value of at least $100. Different investment minimums apply with respect to
the Funds. See "How to Buy Fund Shares" in each Fund's Prospectus.
Dreyfus Auto-Exchange Privilege. The Dreyfus Auto-Exchange Privilege
permits an investor to purchase, in exchange for shares of a Fund, shares of
certain other funds in the Dreyfus Family of Funds. This Privilege is
available only for existing accounts. Shares will be exchanged on the basis
of relative net asset value as described above under "Fund Exchanges."
Enrollment in or modification or cancellation of this Privilege is effective
three business days following notification by the investor. An investor
will be notified if his account falls below the amount designated to be
exchanged under this Privilege. In this case, an investor's account will
fall to zero unless additional investments are made in excess of the
designated amount prior to the next Dreyfus Auto-Exchange transaction.
Shares held under IRA and other retirement plans are eligible for this
Privilege. Exchanges of IRA shares may be made between IRA accounts and
from regular accounts to IRA accounts, but not from IRA accounts to regular
accounts. With respect to all other retirement accounts, exchanges may be
made only among those accounts.
Fund Exchanges and Dreyfus Auto-Exchange Privilege are available to
shareholders resident in any state in which shares of the fund being
acquired legally may be sold. Shares may be exchanged only between accounts
having identical names and other identifying designations.
Shareholder Services Forms and prospectuses of the other funds may be
obtained by calling 1-800-645-6561. Each Fund reserves the right to reject
any exchange request in whole or in part. The Fund Exchanges service or the
Auto-Exchange Privilege may be modified or terminated at any time upon
notice to shareholders.
Automatic Withdrawal Plan. The Automatic Withdrawal Plan permits an
investor with a $5,000 minimum account to request withdrawal of a specified
dollar amount (minimum of $50) on either a monthly or quarterly basis.
Withdrawal payments are the proceeds from sales of Fund shares, not the
yield on the shares. If withdrawal payments exceed reinvested dividends and
distributions, the investor's shares will be reduced and eventually may be
depleted. Automatic Withdrawal may be terminated at any time by the
investor, the Fund or the Transfer Agent. Shares for which certificates
have been issued may not be redeemed through the Automatic Withdrawal Plan.
Dreyfus Dividend Sweep. Dreyfus Dividend Sweep allows investors to
invest automatically their dividends or dividends and capital gain
distributions, if any, paid by a Fund in shares of another fund in the
Dreyfus Family of Funds of which the investor is a shareholder. Shares of
other funds purchased pursuant to this privilege will be purchased on the
basis of relative net asset value per share as follows:
A. Dividends and other distributions paid by a fund
may be invested without imposition of a sales load in
shares of other funds that are offered without a sales
load.
B. Dividends and other distributions paid by a fund
which does not charge a sales load may be invested in
shares of other funds sold with a sales load, and the
applicable sales load will be deducted.
C. Dividends and other distributions paid by a fund
which charges a sales load may be invested in shares of
other funds sold with a sales load (referred to herein
as "Offered Shares"), provided that, if the sales load
applicable to the Offered Shares exceeds the maximum
sales load charged by the fund from which dividends or
distributions are being swept, without giving effect to
any reduced loads, the difference will be deducted.
D. Dividends and other distributions paid by a fund
may be invested in shares of other funds that impose a
contingent deferred sales charge ("CDSC") and the
applicable CDSC, if any, will be imposed upon redemption
of such shares.
PORTFOLIO TRANSACTIONS
All portfolio transactions of each Fund are placed on behalf of a Fund
by Dreyfus. Debt securities purchased and sold by a Fund are generally
traded on a net basis (i.e., without commission) through dealers acting for
their own account and not as brokers, or otherwise involve transactions
directly with the issuer of the instrument. This means that a dealer (the
securities firm or bank dealing with a Fund) makes a market for securities
by offering to buy at one price and sell at a slightly higher price. The
difference between the prices is known as a spread. Other portfolio
transactions may be executed through brokers acting as agent. A Fund will
pay a spread or commissions in connection with such transactions. Dreyfus
uses its best efforts to obtain execution of portfolio transactions at
prices which are advantageous to a Fund and at spreads and commission rates,
if any, which are reasonable in relation to the benefits received. Dreyfus
also places transactions for other accounts that it provides with investment
advice.
Brokers and dealers involved in the execution of portfolio transactions
on behalf of a Fund are selected on the basis of their professional
capability and the value and quality of their services. In selecting
brokers or dealers, Dreyfus will consider various relevant factors,
including, but not limited to, the size and type of the transaction; the
nature and character of the markets for the security to be purchased or
sold; the execution efficiency, settlement capability, and financial
condition of the broker-dealer; the broker-dealer's execution services
rendered on a continuing basis; and the reasonableness of any spreads (or
commissions, if any). Any spread, commission, fee or other remuneration
paid to an affiliated broker-dealer is paid pursuant to the Company's
procedures adopted in accordance with Rule 17e-1 of the Act.
Brokers or dealers may be selected who provide brokerage and/or
research services to a Fund and/or other accounts over which Dreyfus or its
affiliates exercise investment discretion. Such services may include advice
concerning the value of securities; the advisability of investing in,
purchasing or selling securities; the availability of securities or the
purchasers or sellers of securities; furnishing analyses and reports
concerning issuers, industries, securities, economic factors and trends,
portfolio strategy and performance of accounts; and effecting securities
transactions and performing functions incidental thereto (such as clearance
and settlement).
The receipt of research services from broker-dealers may be useful to
Dreyfus, in rendering investment management services to a Fund and/or its
other clients; and, conversely, such information provided by brokers or
dealers who have executed transaction orders on behalf of other clients of
Dreyfus may be useful to these organizations in carrying out their
obligations to a Fund. The receipt of such research services does not
reduce these organizations' normal independent research activities; however,
it enables these organizations to avoid the additional expenses which might
otherwise be incurred if these organizations were to attempt to develop
comparable information through their own staffs.
Although Dreyfus manages other accounts in addition to the Funds,
investment decisions for each Fund are made independently from decisions
made for these other accounts. It sometimes happens that the same security
is held by more than one of the accounts managed by Dreyfus. Simultaneous
transactions may occur when several accounts are managed by the same
investment adviser, particularly when the same investment instrument is
suitable for the investment objective of more than one account.
When more than one account is simultaneously engaged in the purchase or
sale of the same investment instrument, the prices and amounts are allocated
in accordance with a formula considered by Dreyfus to be equitable to each
account. In some cases this system could have a detrimental effect on the
price or volume of the investment instrument as far as a Fund is concerned.
In other cases, however, the ability of the Fund to participate in volume
transactions will produce better executions for the Fund. While the
Directors will continue to review simultaneous transactions, it is their
present opinion that the desirability of retaining Dreyfus as investment
advisers to the Funds outweighs any disadvantages that may be said to exist
from exposure to simultaneous transactions.
None of the Funds paid a stated brokerage commission during the fiscal
years ended October 31, 1995, 1996 and 1997.
NET ASSET VALUE
The use of amortized cost is permitted by Rule 2a-7 under the 1940 Act.
Pursuant to the provisions of Rule 2a-7, the Directors have established
procedures reasonably designed to stabilize each Fund's price per share, as
computed for the purpose of sale and redemption, at $1.00. These procedures
include the determination by the Directors, at such times as they deem
appropriate, of the extent of deviation, if any, of each Fund's current net
asset value, using market values, from $1.00; periodic review by the
Directors of the amount of and the methods used to calculate the deviation;
maintenance of records of the determination; and review of such deviations.
The procedures employed to stabilize each Fund's price per share require the
Directors to promptly consider what action, if any, should be taken by the
Directors if such deviation exceeds 1/2 of one percent. Such procedures
also require the Directors to take appropriate action to eliminate or
reduce, to the extent reasonably practicable, material dilution or other
unfair effects resulting from any deviation. In addition to such
procedures, Rule 2a-7 requires each Fund to purchase instruments having
remaining maturities of 397 days or less, to maintain a dollar-weighted
average portfolio maturity of 90 days or less and to invest only in
securities determined by the Directors to be of high quality, as defined in
Rule 2a-7, with minimal credit risks.
In periods of declining interest rates, the indicated daily yield on
shares of a Fund computed by dividing the annualized daily income on the
Fund by the net asset value computed as above may tend to be higher than a
similar computation made by using a method of valuation based upon market
prices and estimates. In periods of rising interest rates, the indicated
daily yield on shares of a Fund computed the same way may tend to be lower
than a similar computation made by using a method of calculation based upon
market prices and estimates.
New York Stock Exchange Closings. The holidays (as observed) on which
the NYSE is currently scheduled to be closed are: New Year's Day, Martin
Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
PERFORMANCE CALCULATIONS
Each Fund computes its current annualized and compound effective yields
using standardized methods required by the SEC. The annualized yield for
each Fund is computed by (a) determining the net change in the value of a
hypothetical account having a balance of one share at the beginning of a
seven calendar day period; (b) dividing the net change by the value of the
account at the beginning of the period to obtain the base period return; and
(c) annualizing the results (i.e., multiplying the base period return by
365/7). The net change in the value of the account reflects the value of
additional shares purchased with dividends declared on both the original
share and such additional shares, but does not include realized gains and
losses or unrealized appreciation and depreciation. Compound effective
yields are computed by adding 1 to the base period return (calculated as
described above), raising that sum to a power equal to 365/7 and subtracting
1.
Yield may fluctuate daily and does not provide a basis for determining
future yields. Because each Fund's yield fluctuates, its yield cannot be
compared with yields on savings accounts or other investment alternatives
that provide an agreed-to or guaranteed fixed yield for a stated period of
time. However, yield information may be useful to an investor considering
temporary investments in money market instruments. In comparing the yield
of one money market fund to another, consideration should be given to each
Fund's investment policies, including the types of investments made, length
of maturities of portfolio securities, the methods used by each fund to
compute the yield (methods may differ) and whether there are any special
account charges which may reduce effective yield.
The following are the current and effective yields for the Funds for
the seven-day period ended October 31, 1997:
Current Yield Effective Yield
Investor Class R Investor Class R
Money Market Reserves 5.04% 5.24% 5.17% 5.38%
U.S. Treasury Reserves 4.85% 5.05% 4.97% 5.18%
Municipal Reserves 3.18% 3.38% 3.23% 3.44%
Current Yield Effective Yield
Institutional Prime Fund 5.42% 5.57%
Institutional Government Fund 5.28% 5.42%
Institutional U.S. Treasury Fund 5.13% 5.26%
Municipal Reserves may also, from time to time, utilize tax-equivalent
yields. The tax-equivalent yield is calculated by dividing that portion of
the Fund's yield (as calculated above) which is tax-exempt by one minus a
stated tax rate and adding the quotient to that portion of the Fund's yield,
if any (as calculated above), that is not tax-exempt. The following is the
tax-equivalent yields based on a tax rate of 39.6% for Municipal Reserves for
the seven-day period ended October 31, 1997:
Investor Class R
Tax-Equivalent Yield 5.26% 5.60%
Municipal Reserves may from time to time for illustrative purposes only
use tax-equivalency tables which compare tax-exempt yields to their equivalent
taxable yields for relevant federal income tax brackets. The following is an
example of such a table:
Tax Bracket 28% 31% 36% 39.6%
Tax-Exempt Yields Equivalent Taxable Yields
4.5% 6.25% 6.52% 7.03% 7.45%
5.0% 6.94% 7.25% 7.81% 8.28%
5.5% 7.64% 7.97% 8.59% 9.11%
6.0% 8.33% 8.70% 9.38% 9.93%
6.5% 9.03% 9.42% 10.16% 10.76%
From time to time, Fund advertisements may include statistical data or
general discussions about the growth and development of Dreyfus Retirement
Services (in terms of new customers, assets under management, market share,
etc.) and its presence in the defined contribution plan market.
From time to time, advertising material for a Fund may include
biographical information relating to its portfolio manager and may refer to,
or include commentary by the portfolio manager relating to, investment
strategy, asset growth, current or past business, political, economic or
financial conditions and other matters of general interest to investors.
TAXES
Federal Tax--General. To qualify for treatment as a regulated investment
company ("RIC") under the Internal Revenue Code of 1986, as amended (the
"Code"), each Fund -- each of which is treated as a separate corporation for
federal tax purposes -- (1) must distribute to its shareholders for each
taxable year at least 90% of its investment company taxable income (generally
consisting of taxable net investment income and net short-term capital gain,
if any), or, in the case of Municipal Reserves, its net interest income
excludable from gross income under section 103(a) of the Code; (2) must derive
at least 90% of its annual gross income from specified sources; and (3) must
meet certain asset diversification and other requirements.
Municipal Reserves. Dividends paid by Municipal Reserves will qualify as
"exempt-interest dividends," and thus will be excludable from gross income by
its shareholders, if that Fund satisfies the additional requirement that, at
the close of each quarter of its taxable year, at least 50% of the value of
its total assets consists of securities the interest on which is excludable
from gross income under section 103(a) of the Code ("tax-exempt interest");
that Fund intends to continue to satisfy this requirement. The aggregate
amount designated by Municipal Reserves as exempt-interest dividends for any
taxable year may not exceed its tax-exempt interest for the year over certain
amounts disallowed as deductions. The treatment of dividends from that Fund
under local and state income tax laws may differ from the treatment thereof
under the Code.
If shares of the Municipal Reserves are sold at a loss after being held
for six months or less, the loss will be disallowed to the extent of any
exempt-interest dividends received on those shares.
Tax-exempt interest attributable to certain private activity bonds
("PABs") (including, in the case of a RIC receiving interest on such bonds, a
proportionate part of the exempt-interest dividends paid by that RIC) is an
item of tax preference for purposes of the federal alternative minimum tax.
Exempt-interest dividends received by a corporate shareholder also may be
indirectly subject to that tax without regard to whether the Municipal
Reserves' tax-exempt interest was attributable to those bonds.
Entities or persons who are "substantial users" (or persons related to
"substantial users") of facilities financed by PABs or industrial development
bonds ("IDBs") should consult their tax advisers before purchasing shares of
the Municipal Reserves because, for users of certain of these facilities, the
interest on those bonds is not exempt from federal income tax. For these
purposes, the term "substantial user" is defined generally to include a "non-
exempt person" who regularly uses in trade or business a part of a facility
financed from the proceeds of PABs or IDBs.
Up to 85% of social security and railroad retirement benefits may be
included in taxable income for recipients whose adjusted gross income
(including income from tax-exempt sources such as the Municipal Reserves) plus
50% of their benefits exceeds certain base amounts. Exempt-interest dividends
paid by that Fund still are tax-exempt to the extent described in the Fund's
Prospectus; they are only included in the calculation of whether a recipient's
income exceeds the established amounts.
If Municipal Reserves invests in any instrument that generate taxable
income, under the circumstances described in its prospectus, distributions of
the interest earned thereon will be taxable to its shareholders as ordinary
income to the extent of its earnings and profits. Moreover, if Municipal
Reserves realizes capital gain as a result of market transactions, any
distribution of that gain will be taxable to its shareholders. There also may
be collateral federal income tax consequences regarding the receipt of exempt-
interest dividends by shareholders such as S corporations, financial
institutions and property and casualty insurance companies. A shareholder
falling into any such category should consult its tax adviser concerning its
investment in shares of Municipal Reserves.
State and Local Taxes. Depending upon the extent of a Fund's activities
in states and localities in which its offices are maintained, in which its
agents or independent contractors are located, or in which it is otherwise
deemed to be conducting business, the Fund may be subject to the tax laws of
such states or localities. Shareholders are advised to consult their tax
advisers concerning the application of state and local taxes.
Foreign Shareholders - U.S. Federal Income Taxation. U.S. federal income
taxation of a shareholder who, as to the United States, is a non-resident
alien individual, a foreign trust or estate, a foreign corporation or a
foreign partnership (a "foreign shareholder") depends on whether the income
from a Fund is "effectively connected" with a U.S. trade or business carried
on by the shareholder, as discussed generally below. Special U.S. federal
income tax rules that differ from those described below may apply to certain
foreign persons who invest in a Fund such as a foreign shareholder entitled to
claim the benefits of an applicable tax treaty. Foreign shareholders are
advised to consult their own tax advisers with respect to the particular tax
consequences to them of an investment in a Fund.
Foreign Shareholders - Dividends. Dividends (other than exempt-interest
dividends) distributed to a foreign shareholder whose ownership of Fund shares
is not effectively connected with a U.S. trade or business carried on by the
foreign shareholder ("effectively connected") generally will be subject to a
U.S. federal withholding tax of 30% (or lower treaty rate). If a foreign
shareholder's ownership of Fund shares is effectively connected, however, then
all distributions to that shareholder will not be subject to such withholding
and instead will be subject to U.S. federal income tax at the graduated rates
applicable to U.S. citizens and domestic corporations, as the case may be.
Foreign shareholders also may be subject to the branch profits tax.
Foreign Shareholders - Estate Tax. Foreign individuals generally are
subject to U.S. federal estate tax on their U.S. situs property, such as
shares of a Fund, that they own at the time of their death. Certain credits
against that tax and relief under applicable tax treaties may be available.
INFORMATION ABOUT THE FUNDS
The following information supplements and should be read in conjunction
with the section in the Funds' prospectuses entitled "General Information."
Each Fund share, when issued and paid for in accordance with the terms
of the offering, is fully paid and non-assessable. Fund shares have no
preemptive or subscription rights and are freely transferable. The Funds
are six of eighteen investment portfolios authorized by the Company's Board
of Directors.
The Funds will send annual and semi-annual financial statements to all
of their shareholders.
TRANSFER AND DIVIDEND DISBURSING AGENT, CUSTODIAN, COUNSEL
AND INDEPENDENT AUDITORS
Dreyfus Transfer, Inc., a wholly-owned subsidiary of Dreyfus, P.O. Box
9671, Providence, Rhode Island 02940-9671, is the Company's transfer and
dividend disbursing agent. Under a transfer agency agreement with the
Company, Dreyfus Transfer, Inc. arranges for the maintenance of shareholder
account records for the Funds, the handling of certain communications
between shareholders and the Funds and the payment of dividends and
distributions payable by the Funds. For these services, Dreyfus Transfer,
Inc. receives a monthly fee computed on the basis of the number of
shareholder accounts it maintains for the Company during the month and is
reimbursed for certain out-of-pocket expenses.
Mellon Bank, the parent of Dreyfus, located at One Mellon Bank Center,
Pittsburgh, Pennsylvania 15258, acts as custodian of the Funds' investments.
Under a custody agreement with the Company, Mellon Bank holds the Funds'
portfolio securities and keeps all necessary accounts and records. Dreyfus
Transfer, Inc. and Mellon Bank, as custodian, have no part in determining
the investment policies of the Funds or which securities are to be purchased
or sold by the Funds.
Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue, N.W., Second
Floor, Washington, D.C. 20036, has passed upon the legality of the shares
offered by the Prospectuses and this Statement of Additional Information.
KPMG Peat Marwick LLP was appointed by the Directors to serve as the
Funds' independent auditors for the year ending October 31, 1998, providing
audit services including (1) examination of the annual financial statements,
(2) assistance, review and consultation in connection with SEC filings and (3)
review of the annual federal income tax returns filed on behalf of the Funds.
FINANCIAL STATEMENTS
The financial statements for the fiscal year ended October 31, 1997,
including notes to the financial statements, financial highlights and the
Independent Auditors' Report are included in each Fund's Annual Report to
shareholders. A copy of each Annual Report accompanies this Statement of
Additional Information. The financial statements included in the Annual
Reports, and the Independent Auditors' Reports thereon contained therein, and
related notes, are incorporated herein by reference.
APPENDIX
DESCRIPTION OF SECURITIES RATINGS
Municipal Bond, Municipal Note, Bond, Note and Commercial Paper Ratings
Standard & Poor's ("S&P")
Bond Ratings
AAA An obligation rated `AAA' has the highest rating assigned by
S&P. The obligor's capacity to meet its financial commitment on the
obligation is extremely strong.
AA An obligation rated `AA' differs from the highest rated issues
only in small degree. The obligors capacity to meet its financial
commitment on the obligation is very strong.
A An obligation rated `A' is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions
than obligations in higher rated categories. However, the obligor's
capacity to meet its financial commitment on the obligation is still
strong.
BBB An obligation rated `BBB' exhibits adequate protection
parameters. However, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity of the
obligor to meet its financial commitment on the obligation.
The ratings from `AA' to `BBB' may be modified by the addition of a plus
(+) or a minus (-) sign to show relative standing within the major rating
categories.
Note Ratings
SP-1 Strong capacity to pay principal and interest. An issue
determined to possess a very strong capacity to pay debt service is
given a plus (+) designation.
SP-2 Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse finance and economic changes over the term
of the notes.
Commercial Paper Ratings
An S&P commercial paper rating is a current assessment of the likelihood
of timely payment of debt having an original maturity of no more than 365
days.
A-1 This designation indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess
extremely strong safety characteristics are denoted with a plus sign
(+) designation.
A-2 Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high
as for issuers designated
`A-1'.
A-3 Issues carrying this designation have an adequate capacity for
timely payment. They are, however, more vulnerable to the adverse
effects of changes in circumstances than obligations carrying the
higher designations.
Moody's
Bond Ratings
Aaa Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and generally are
referred to as "gilt edge". Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa Bonds which are rated Aa are judged to be of high quality by
all standards. Together with the Aaa group they comprise what
generally are known as high-grade bonds. They are rated lower than
the best bonds because margins of protection may not be as large as
in Aaa securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.
A Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper-medium-grade
obligations. Factors giving security to principal and interest are
considered adequate, but elements may be present which suggest a
susceptibility to impairment some time in the future.
Baa Bonds which are rated Baa are considered as medium grade
obligations (i.e., they are neither highly protected nor poorly
secured). Interest payments and principal security appear adequate
for the present but certain protective elements may be lacking or
may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact
have speculative characteristics as well.
Moody's applies the numerical modifiers 1, 2 and 3 to show relative
standing within each generic rating classification from Aa through Baa.
The modifier 1 indicates a ranking for the security in the higher end of
a rating category; the modifier 2 indicates a mid-range ranking; and the
modifier 3 indicates a ranking in the lower end of a rating category.
Notes and other Short Term-Obligations
There are four rating categories for short-term obligations that define
an investment grade situation. These are designated Moody's Investment Grade
as MIG 1 (best quality) through MIG 4 (adequate quality). Short-term
obligations of speculative quality are designated SG.
In the case of variable rate demand obligations (VRDOs), a two component
rating is assigned. The first element represents an evaluation of the degree
of risk associated with scheduled principal and interest payments, and the
other represents an evaluation of the degree of risk associated with the
demand feature. The short-term rating assigned to the demand feature of VRDOs
is designated as VMIG. When either the long- or short-term aspect of a VRDO
is not rated, the piece is designated NR, e.g., Aaa/NR or NR/VMIG 1.
MIG 1/
VMIG 1 This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing.
MIG-2/
VMIG 2 This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.
MIG 3/
VMIG 3 This designation denotes favorable quality. All security elements
are accounted for but there is lacking the undeniable strength of
the preceding grades. Liquidity and cash flow protection may be
narrow and market access for refinancing is likely to be less well
established.
MIG 4/
VMIG 4 This designation denotes adequate quality. Protection commonly
regarded as required of an investment security is present and
although not distinctly or predominantly speculative, there is
specific risk.
Commercial Paper Rating
Moody's employs the following three designations, all judged to be
investment grade, to indicate the relative repayment ability of rated issuers:
Prime-1 Issuers rated Prime-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-1
repayment ability will often be evidenced by many of the following
characteristics:
Leading market position in well-established industries.
High rates of return on funds employed.
Conservative capitalization structure with moderate
reliance on debt and ample asset protection.
Broad margins in earnings coverage of fixed financial
charges and high internal cash generation.
Well-established access to a range of financial markets
and assured sources of alternate liquidity.
Prime-2 Issuers rated Prime-2 (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations. This
will normally be evidenced by many of the characteristics cited
above but to a lesser agree. Earnings trends and coverage ratios,
while sound, may be more subject to variation. Capitalization
characteristics, while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is maintained.
Prime-3 Issuers rated Prime-3 (or supporting institutions) have an
acceptable ability for repayment of senior short-term obligations.
The effect of industry characteristics and market compositions may
be more pronounced. Variability in earnings and profitability may
result in changes in the level of debt protection measurements and
may require relatively high financial leverage. Adequate
alternative liquidity is maintained.
Fitch Investor Services, Inc. ("Fitch")
Bond Ratings
AAA Bonds considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong ability to
pay interest and repay principal, which is unlikely to be affected
by reasonably foreseeable events.
AA Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal
is very strong, although not quite as strong as bonds rated `AAA'.
Because bonds rated in the `AAA' and `AA' categories are not
significantly vulnerable to foreseeable future developments, short-
term debt of these issuers is generally rated `F-1+'.
A Bonds considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay principal
is considered to be strong, but may be more vulnerable to adverse
changes in economic conditions and circumstances than bonds with
higher ratings.
BBB Bonds considered to be investment grade and satisfactory credit
quality. The obligor's ability to pay interest and repay principal
is considered to be adequate. Adverse changes in economic
conditions and circumstances, however, are more likely to have
adverse impact on these bonds and, therefore, impair timely payment.
The likelihood that the ratings of these bonds will fall below
investment grade is higher than for bonds with higher ratings.
+/- Plus and minus signs are used with a rating symbol to indicate
the relative position of a credit within the rating category.
Short-Term and Commercial Paper Ratings
Fitch's short-term ratings apply to debt obligations that are payable on
demand or have original maturities of up to three years, including commercial
paper, certificates of deposit, medium-term notes, and municipal and
investment notes.
Although the credit analysis is similar to Fitch's bond rating analysis,
the short-term rating places greater emphasis than bond ratings on the
existence of liquidity necessary to meet the issuer's obligations in a timely
manner.
F-1+ Exceptionally Strong Credit Quality. Issues assigned this
rating are regarded as having the strongest degree of assurance for
timely payment.
F-1 Very strong Credit Quality. Issues assigned this rating
reflect an assurance of timely payment only slightly less in degree
than issues rated `F-1+'.
F-2 Good Credit Quality. Issues assigned this rating have a
satisfactory degree of assurance for timely payment, but the margin
of safety is not as great as for issues assigned `F-1+' and `F-1'
ratings.
Duff & Phelps Inc. ("Duff & Phelps")
Long-Term Ratings
AAA Highest credit quality. The risks factors are negligible,
being only slightly more than for risk-free U.S. Treasury debt.
AA+ High credit quality. Protection factors are strong. Risk is modest
but may vary AA slightly from time to time because of economic
conditions.
AA-
A+ Protections factors are average but adequate. However, risk
factors are more
A variable and greater in periods of economic stress.
A-
BBB+ Below-average protection factors but still considered
sufficient for prudent
BBB investment. Considerable variability in risk during economic
cycles.
BBB-
Short-Term and Commercial Paper Ratings
D-1+ Highest certainty of timely payment. Short-term liquidity,
including internal operating factors and/or access to alternative
sources of funds, is outstanding, and safety is just below risk-free
U.S. Treasury short-term obligations.
D-1 Very high certainty of timely payment. Liquidity factors are
excellent and supported by good fundamental protection factors.
Risk factors are minor.
D-1- High certainly of timely payment. Liquidity factors are strong
and supported by good fundamental protection factors. Risk factors
are very small.
D-2 Good certainty of timely payment. Liquidity factors and
company fundamentals are sound. Although ongoing funding needs may
enlarge total financial requirements, access to capital markets is
good. Risk factors are small.
D-3 Satisfactory liquidity and other protection factors qualify
issues as to investment grade. Risk factors are larger and subject
to more variation. Nevertheless, timely payment is expected.
IBCA Limited/IBCA Inc. ("IBCA")
Commercial Paper Ratings
Short-term obligations, including commercial paper, rated A-1+
by IBCA are obligations supported by the highest capacity for timely
repayment. Obligations rated A-1 have a strong capacity for timely
repayment. Obligations rated A-1 have a very strong capacity for
timely repayment. Obligations rated A-2 have a strong capacity for
timely repayment, although such capacity may be susceptible to
adverse changes in business, economic or financial conditions.
Municipal Notes generally are used to provide for short-term capital
needs and usually have maturities of one year or less. They include the
following:
1. Tax Anticipation Notes are issued to finance working capital needs
of municipalities. Generally, they are issued in anticipation of various
seasonal tax revenues, such as income, sales, use and business taxes, and are
payable from these specific future taxes.
2. Revenue Anticipation Notes are issued in expectation of receipt of
other types of revenues, such as Federal revenues available under the Federal
Revenue Sharing Programs.
3. Bond Anticipation Notes are issued to provide interim financing
until long-term financing can be arranged. In most cases, the long-term bonds
then provide the money for the repayment of the Notes.
4. Construction Loan Notes are sold to provide construction financing.
After successful completion and acceptance, many projects receive permanent
financing through the Federal Housing Administration under the Federal
National Mortgage Association ("Fannie Mae") or the Government National
Mortgage Association ("Ginnie Mae").
5. Tax-Exempt Commercial Paper is a short-term obligation with a stated
maturity of 365 days or less. It is issued by agencies of state and local
governments to finance seasonal working capital needs or as short-term
financing in anticipation of longer term financing.
Municipals Bonds, which meet longer term capital needs and generally have
maturities of more than one year when issued, have three principal
classifications:
1. General Obligation Bonds are issued by such entities as states,
counties, cities, towns, and regional districts. The proceeds of these
obligations are used to fund a wide range of public projects, including
construction or improvement of schools, highways and roads, and water and
sewer systems. The basic security behind General Obligation Bonds is the
issuer's pledge of its full faith and credit and taxing power for the payment
of principal and interest. The taxes that can be levied for the payment of
debt service may be limited or unlimited as to the rate or amount of special
assessments.
2. Revenue Bonds generally are secured by the net revenues derived from
a particular facility, group of facilities, or, in some cases, the proceeds of
a special excise or other specific revenue source. Revenue Bonds are issued
to finance a wide variety of capital projects including electric, gas, water
and sewer systems; highways, bridges, and tunnels; port and airport
facilities; colleges and universities; and hospitals. Many of these Bonds
provide additional security in the form of a debt service reserve fund to be
used to make principal and interest payments. Housing authorities have a wide
range of security, including partially or fully insured mortgages, rent
subsidized and/or collateralized mortgages, and/or the net revenues from
housing or other public projects. Some authorities provide further security
in the form of a state's ability (without obligation) to make up deficiencies
in the debt service reserve fund.
3. Industrial Development Bonds are considered municipal bonds if the
interest paid thereon is exempt from Federal income tax and are issued by or
on behalf of public authorities to raise money to finance various privately
operated facilities for business and manufacturing, housing, health, sports,
and pollution control. These Bonds are also used to finance public facilities
such as airports, mass transit systems, ports, and parking. The payment of
the principal and interest on such Bonds is dependent solely on the ability of
the facility's user to meet its financial obligations and the pledge, if any,
of real and personal property as security for such payment.
4. Other Municipal Obligations incurred for a variety of financing
purposes, including: Municipal Leases, which may take the form of a lease or
an installment purchase or conditional sale contract, are issued by state and
local governments and authorities to acquire a wide variety of equipment and
facilities such as fire and sanitation vehicles, telecommunications equipment
and other capital assets. Municipal leases frequently have special risks not
normally associated with general obligation or revenue bonds. Leases and
installment purchase or conditional sale contracts (which normally provide for
title to the leased asset to pass eventually to the government issuer) have
evolved as a means for governmental issuers to acquire property and equipment
without meeting the constitutional and statutory requirements for the issuance
of debt. The debt-issuance limitations of many state constitutions and
statutes are deemed to be inapplicable because of the inclusion in many leases
or contracts of "non-appropriation" clauses that provide that the governmental
issuer has no obligation to make future payments under the lease or contract
unless money is appropriated for such purpose by the appropriate legislative
body on a yearly or other periodic basis. To reduce this risk, the Tax-Exempt
Money Fund will only purchase Municipal leases subject to a non-appropriation
clause when the payment of principal and accrued interest is backed by an
unconditional irrevocable letter of credit, or guarantee of a bank or other
entity acceptable to the Adviser.
DESCRIPTION OF MUNICIPAL SECURITIES
Municipal Notes generally are used to provide for short-term capital
needs and usually have maturities of one year or less. They include the
following:
1. Tax Anticipation Notes are issued to finance working capital needs
of municipalities. Generally, they are issued in anticipation of various
seasonal tax revenues, such as income, sales, use and business taxes, and are
payable from these specific future taxes.
2. Revenue Anticipation Notes are issued in expectation of receipt of
other types of revenues, such as Federal revenues available under the Federal
Revenue Sharing Programs.
3. Bond Anticipation Notes are issued to provide interim financing
until long-term financing can be arranged. In most cases, the long-term bonds
then provide the money for the repayment of the Notes.
4. Construction Loan Notes are sold to provide construction financing.
After successful completion and acceptance, many projects receive permanent
financing through the Federal Housing Administration under the Federal
National Mortgage Association ("Fannie Mae") or the Government National
Mortgage Association ("Ginnie Mae").
5. Tax-Exempt Commercial Paper is a short-term obligation with a stated
maturity of 365 days or less. It is issued by agencies of state and local
governments to finance seasonal working capital needs or as short-term
financing in anticipation of longer term financing.
Municipals Bonds, which meet longer term capital needs and generally have
maturities of more than one year when issued, have three principal
classifications:
1. General Obligation Bonds are issued by such entities as states,
counties, cities, towns, and regional districts. The proceeds of these
obligations are used to fund a wide range of public projects, including
construction or improvement of schools, highways and roads, and water and
sewer systems. The basic security behind General Obligation Bonds is the
issuer's pledge of its full faith and credit and taxing power for the payment
of principal and interest. The taxes that can be levied for the payment of
debt service may be limited or unlimited as to the rate or amount of special
assessments.
2. Revenue Bonds generally are secured by the net revenues derived from
a particular facility, group of facilities, or, in some cases, the proceeds of
a special excise or other specific revenue source. Revenue Bonds are issued
to finance a wide variety of capital projects including electric, gas, water
and sewer systems; highways, bridges, and tunnels; port and airport
facilities; colleges and universities; and hospitals. Many of these Bonds
provide additional security in the form of a debt service reserve fund to be
used to make principal and interest payments. Housing authorities have a wide
range of security, including partially or fully insured mortgages, rent
subsidized and/or collateralized mortgages, and/or the net revenues from
housing or other public projects. Some authorities provide further security
in the form of a state's ability (without obligation) to make up deficiencies
in the debt service reserve fund.
3. Industrial Development Bonds are considered municipal bonds if the
interest paid thereon is exempt from Federal income tax and are issued by or
on behalf of public authorities to raise money to finance various privately
operated facilities for business and manufacturing, housing, health, sports,
and pollution control. These Bonds are also used to finance public facilities
such as airports, mass transit systems, ports, and parking. The payment of
the principal and interest on such Bonds is dependent solely on the ability of
the facility's user to meet its financial obligations and the pledge, if any,
of real and personal property as security for such payment.
4. Other Municipal Obligations incurred for a variety of financing
purposes, including: Municipal Leases, which may take the form of a lease or
an installment purchase or conditional sale contract, are issued by state and
local governments and authorities to acquire a wide variety of equipment and
facilities such as fire and sanitation vehicles, telecommunications equipment
and other capital assets. Municipal leases frequently have special risks not
normally associated with general obligation or revenue bonds. Leases and
installment purchase or conditional sale contracts (which normally provide for
title to the leased asset to pass eventually to the government issuer) have
evolved as a means for governmental issuers to acquire property and equipment
without meeting the constitutional and statutory requirements for the issuance
of debt. The debt-issuance limitations of many state constitutions and
statutes are deemed to be inapplicable because of the inclusion in many leases
or contracts of "non-appropriation" clauses that provide that the governmental
issuer has no obligation to make future payments under the lease or contract
unless money is appropriated for such purpose by the appropriate legislative
body on a yearly or other periodic basis. To reduce this risk, the Tax-Exempt
Money Fund will only purchase Municipal leases subject to a non-appropriation
clause when the payment of principal and accrued interest is backed by an
unconditional irrevocable letter of credit, or guarantee of a bank or other
entity acceptable to the Adviser.
THE DREYFUS/LAUREL FUNDS, INC.
(formerly, The Laurel Funds, Inc.)
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
Included in Part A:
Financial Highlights for each of the periods indicated.
Included in Part B:
The following are incorporated by reference to the
Registrant's Annual Reports to Shareholders for the period
ended October 31, 1996 filed on January 3, 1997.
- Report of Independent Auditors
- Portfolio of Investments
- Statements of Assets and Liabilities
- Statements of Operations
- Statements of Changes in Net Assets
- Notes to Financial Statements
(b) Exhibits:
1(a) Articles of Incorporation dated July 31, 1987. Filed
herewith.
1(b) Articles Supplementary dated October 15, 1993 increasing
authorized capital stock. Incorporated by reference to Post-
Effective Amendment No. 39 to the Registrant's Registration
Statement on Form N-1A ("Post-Effective Amendment No. 39")
filed on September 22, 1995.
1(c) Articles of Amendment dated March 31, 1994. Filed herewith.
1(d) Articles Supplementary dated March 31, 1994 reclassifying
shares. Filed herewith.
1(e) Articles Supplementary dated May 24, 1994 designating and
classifying shares. Incorporated by reference to Post-
Effective Amendment No. 39.
1(f) Articles of Amendment dated October 17, 1994. Incorporated by
reference to Post-Effective Amendment No. 31 filed on December
13, 1994.
1(g) Articles Supplementary dated December 19, 1994 designating
classes. Incorporated by reference to Post-Effective
Amendment No. 32 filed on December 19, 1994.
1(h) Articles of Amendment dated June 9, 1995. Incorporated by
reference to Post-Effective Amendment No. 39.
1(i) Articles of Amendment dated August 30, 1995. Incorporated by
reference to Post-Effective Amendment No. 39.
1(j) Articles Supplementary dated August 31, 1995 reclassifying
shares. Incorporated by reference to Post-Effective Amendment
No. 39.
1(k) Articles of Amendment dated October 31, 1995 designating and
classifying shares. Filed herewith.
1(1) Articles of Amendment dated November 22, 1995 designating and
reclassifying shares filed herewith.
2 Bylaws. Incorporated by reference to Pre-Effective Amendment
No. 1 to the Registrant's Registration Statement on Form N-1A
filed on August 6, 1987 -- Registration No. 33-16338
("Registration Statement").
3 Not Applicable.
4 Specimen security. To be filed by amendment.
5(a) Investment Sub-Advisory Agreement among Mellon Bank,
N.A., S.A.M. Finance S.A. and the Registrant for the European
Fund. Incorporated by reference to Post-Effective Amendment
No. 22 filed on September 3, 1993.
5(b) Investment Management Agreement between Mellon Bank, N.A. and
the Registrant. Filed herewith.
5(c) Investment Sub-Advisory Agreement among Mellon Bank, N.A.,
S.A.M. Finance S.A. and the Registrant for the International
Equity Allocation Fund. Incorporated by reference to Post-
Effective Amendment No. 31 filed on December 13, 1994.
5(d) Assignment and Assumption Agreement among Mellon Bank, N.A.,
The Dreyfus Corporation and the Registrant (relating to
Investment Management Agreement). Incorporated by reference
to Post-Effective Amendment No. 31 filed on December 13, 1994.
5(e) Assignment Agreement among Mellon Bank, N.A., The Dreyfus
Corporation, S.A.M. Finance S.A. and the Registrant (relating
to Investment Sub-Advisory Agreement for the European Fund).
To be filed by amendment.
5(f) Assignment Agreement among Mellon Bank, N.A., The Dreyfus
Corporation, S.A.M. Finance S.A. and the Registrant (relating
to Investment Sub-Advisory Agreement for the International
Equity Allocation Fund). To be filed by amendment.
6 Distribution Agreement between Premier Mutual Fund Services,
Inc. and the Registrant. Incorporated by reference to Post-
Effective Amendment No. 31 filed on December 13, 1994.
7 Not Applicable.
8(a) Custody Agreement with Boston Safe Deposit and Trust Company
with respect to the European Fund. Incorporated by reference
to Post-Effective Amendment No. 23 filed on December 30, 1993.
8(b) Custody Agreement between the Registrant and Mellon Bank, N.A.
Filed herewith.
8(c) Supplement to Custody Agreement with Boston Safe Deposit and
Trust Company with respect to the European Fund. Incorporated
by reference to Post-Effective Amendment No. 29 filed on May
19, 1994.
8(d) Custody Agreement with Boston Safe Deposit and Trust Company
with respect to the International Equity Allocation Fund. To
be filed by amendment.
8(e) Sub-Custodian Agreement between Mellon Bank, N.A. and Boston
Safe Deposit and Trust Company. Filed herewith.
10 Opinion of counsel is incorporated by reference to the
Registration Statement and to Post-Effective Amendment No. 32
filed on December 19, 1994. Consent of counsel is filed
herewith.
11 Not Applicable.
12 Not Applicable.
13 Letter of Investment Intent. Incorporated by
reference to the Registration Statement.
14 Not Applicable.
15(a) Restated Distribution Plan (relating to Investor Shares and
Class A Shares) for Dreyfus Bond Market Index Fund, Dreyfus
International Equity Allocation Fund, Dreyfus Institutional
Government Money Market Fund, Dreyfus Institutional Prime Money
Market Fund, Dreyfus Institutional U.S. Treasury Money Market
Fund, Dreyfus Money Market Reserves, Dreyfus Municipal Reserves,
Dreyfus BASIC S&P 500 Stock Index Fund, Dreyfus U.S. Treasury
Reserves, Dreyfus Premier Balanced Fund, Dreyfus Premier Limited
Term Income Fund, Dreyfus Premier Small Company Stock Fund and
Dreyfus Disciplined Intermediate Bond Fund, incorporated by
reference to Post-Effective Amendment No. 31 filed on December
13, 1994. Restated Distribution Plan for Dreyfus Disciplined
Stock Fund is filed herewith.
15(b) Form of Distribution and Service Plans (relating to Class B
Shares and Class C Shares). Incorporated by reference to
Post-Effective Amendment No. 32 filed on December 19, 1994.
16 Schedule for Computation of Performance Calculation for
Dreyfus Disciplined Intermediate Bond Fund is incorporated by
reference to Post-Effective amendment No. 44 filed on April
30, 1996. Schedule for Computation of Performance Calculation
for other funds is also incorporated by reference to
Post-Effective Amendment No. 26 filed on March 1, 1994.
18 Rule 18f-3 Plans.
25 Powers of Attorney of the Directors and Officers dated April
5, 1995. Incorporated by reference to Post-Effective
Amendment No. 35 filed on April 7, 1995.
Item 25. Persons Controlled by or Under Common Control with Registrant
Not Applicable.
Item 26. Number of Holders of Securities
------------------------------------------
Set forth below are the number of recordholders of securities
of each series of the Registrant as of February 9, 1998:
<TABLE>
<CAPTION>
<S> <C> <C>
Fund Class Recordholders
- ---- _____ ______________
Dreyfus Bond Market Index Fund BASIC Shares 68
Investor Shares 24
Dreyfus Disciplined Stock Fund 55,055
Dreyfus International Equity Allocation Fund Restricted Shares 317
Investor Shares 200
Dreyfus Institutional Government Money Market Fund - 16
Dreyfus Institutional Prime Money Market Fund - 94
Dreyfus Institutional U.S. Treasury Money Market Fund - 29
Dreyfus Money Market Reserves Class R 774
Investor shares 17,965
Dreyfus Municipal Reserves Class R 256
Investor shares 1,155
Dreyfus BASIC S&P 500 Stock Index Fund - 2,731
Dreyfus U.S. Treasury Reserves Class R - 1,714
Investor shares 59
Dreyfus Premier Balanced Fund Class A 1,045
Class B 2,260
Class C 152
Class R 167
Dreyfus Premier Limited Term Income Fund Class A 1,042
Class B 63
Class C 13
Class R 978
Dreyfus Premier Small Company Stock Fund Class A 951
Class B 2,277
Class C 169
Class R 2,012
Dreyfus Disciplined Intermediate Bond Fund Investor class 21
Restricted shares 716
</TABLE>
Item 27. Indemnification
--------------------
Under a provision of the Registrant's Second Amended and Restated
Agreement and Declaration of Trust (the "Declaration of Trust"), any past or
present Trustee or officer of the Registrant is indemnified to the fullest
extent permitted by law against liability and all expenses reasonably
incurred by him/her in connection with any action, suit or proceeding to
which he/she may be a party or otherwise involved by reason of his/her being
or having been a Trustee or officer of the Registrant.
This provision does not authorize indemnification against any liability
to the Registrant or its shareholders to which such Trustee or officer would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of his/her duties. Moreover, this provision
does not authorize indemnification where such Trustee or officer is finally
adjudicated not to have acted in good faith in the reasonable belief that
his/her actions were in or not opposed to the best interests of the
Registrant. Expenses may be paid by the Registrant in advance of the final
disposition of any action, suit or proceeding upon receipt of an undertaking
by such Trustee or officer to repay such expenses to the Registrant if it is
ultimately determined that indemnification of such expenses is not authorized
under the Declaration of Trust.
Item 28. Business and Other Connections of Investment Adviser (continued)
________ ________________________________________________________________
Officers and Directors of Investment Adviser
____________________________________________
Name and Position
with Dreyfus Other Businesses
_________________ ________________
MANDELL L. BERMAN Real estate consultant and private investor
Director 29100 Northwestern Highway, Suite 370
Southfield, Michigan 48034;
Past Chairman of the Board of Trustees:
Skillman Foundation;
Member of The Board of Vintners Intl.
BURTON C. BORGELT Chairman Emeritus of the Board and
Director Past Chairman, Chief Executive Officer and
Director:
Dentsply International, Inc.
570 West College Avenue
York, Pennsylvania 17405;
Director:
DeVlieg-Bullard, Inc.
1 Gorham Island
Westport, Connecticut 06880
Mellon Bank Corporation***;
Mellon Bank, N.A.***
FRANK V. CAHOUET Chairman of the Board, President and
Director Chief Executive Officer:
Mellon Bank Corporation***;
Mellon Bank, N.A.***;
Director:
Avery Dennison Corporation
150 North Orange Grove Boulevard
Pasadena, California 91103;
Saint-Gobain Corporation
750 East Swedesford Road
Valley Forge, Pennsylvania 19482;
Teledyne, Inc.
1901 Avenue of the Stars
Los Angeles, California 90067
W. KEITH SMITH Chairman and Chief Executive Officer:
Chairman of the Board The Boston Company****;
Vice Chairman of the Board:
Mellon Bank Corporation***;
Mellon Bank, N.A.***;
Director:
Dentsply International, Inc.
570 West College Avenue
York, Pennsylvania 17405
CHRISTOPHER M. CONDRON Vice Chairman:
President, Chief Mellon Bank Corporation***;
Executive Officer, The Boston Company****;
Chief Operating Deputy Director:
Officer and a Mellon Trust***;
Director Chief Executive Officer:
The Boston Company Asset Management,
Inc.****;
President:
Boston Safe Deposit and Trust Company****
STEPHEN E. CANTER Director:
Vice Chairman and The Dreyfus Trust Company++;
Chief Investment Officer, Formerly, Chairman and Chief Executive Officer:
and a Director Kleinwort Benson Investment Management
Americas Inc.*
LAWRENCE S. KASH Chairman, President and Chief
Vice Chairman-Distribution Executive Officer:
and a Director The Boston Company Advisors, Inc.
53 State Street
Exchange Place
Boston, Massachusetts 02109;
Executive Vice President and Director:
Dreyfus Service Organization, Inc.**;
Director:
Dreyfus America Fund+++;
The Dreyfus Consumer Credit Corporation*;
The Dreyfus Trust Company++;
Dreyfus Service Corporation*;
President:
The Boston Company****;
Laurel Capital Advisors***;
Boston Group Holdings, Inc.;
Executive Vice President:
Mellon Bank, N.A.***;
Boston Safe Deposit and Trust
Company****
RICHARD F. SYRON Chairman of the Board and
Director Chief Executive Officer:
American Stock Exchange
86 Trinity Place
New York, New York 10006;
Director:
John Hancock Mutual Life Insurance Company
John Hancock Place, Box 111
Boston, Massachusetts, 02117;
Thermo Electron Corporation
81 Wyman Street, Box 9046
Waltham, Massachusetts 02254-9046;
American Business Conference
1730 K Street, NW, Suite 120
Washington, D.C. 20006;
Trustee:
Boston College - Board of Trustees
140 Commonwealth Ave.
Chestnut Hill, Massachusetts 02167-3934
WILLIAM T. SANDALLS, JR. Director:
Senior Vice President and Dreyfus Partnership Management, Inc.*;
Chief Financial Officer Seven Six Seven Agency, Inc.*;
Chairman and Director:
Dreyfus Transfer, Inc.
One American Express Plaza
Providence, Rhode Island 02903
President and Director:
Lion Management, Inc.*;
Executive Vice President and Director:
Dreyfus Service Organization, Inc.*;
Vice President, Chief Financial Officer and
Director:
Dreyfus America Fund+++;
Vice President and Director:
The Dreyfus Consumer Credit Corporation*;
The Truepenny Corporation*;
Treasurer, Financial Officer and Director:
The Dreyfus Trust Company++;
Treasurer and Director:
Dreyfus Management, Inc.*;
Dreyfus Service Corporation*;
Formerly, President and Director:
Sandalls & Co., Inc.
MARK N. JACOBS Vice President, Secretary and Director:
Vice President, Lion Management, Inc.*;
General Counsel Secretary:
and Secretary The Dreyfus Consumer Credit Corporation*;
Dreyfus Management, Inc.*;
Assistant Secretary:
Dreyfus Service Organization, Inc.**;
Major Trading Corporation*;
The Truepenny Corporation*
PATRICE M. KOZLOWSKI None
Vice President-
Corporate Communications
MARY BETH LEIBIG None
Vice President-
Human Resources
ANDREW S. WASSER Vice President:
Vice President-Information Mellon Bank Corporation***
Services
WILLIAM V. HEALEY President:
Assistant Secretary The Truepenny Corporation*;
Vice President and Director:
The Dreyfus Consumer Credit Corporation*;
Secretary and Director:
Dreyfus Partnership Management Inc.*;
Director:
The Dreyfus Trust Company++;
Assistant Secretary:
Dreyfus Service Corporation*;
Dreyfus Investment Advisors, Inc.*;
Assistant Clerk:
Dreyfus Insurance Agency of Massachusetts,
Inc.+++++
______________________________________
* The address of the business so indicated is 200 Park Avenue, New York,
New York 10166.
** The address of the business so indicated is 131 Second Street,
Lewes, Delaware 19958.
*** The address of the business so indicated is One Mellon Bank Center,
Pittsburgh, Pennsylvania 15258.
**** The address of the business so indicated is One Boston Place,
Boston, Massachusetts 02108.
+ The address of the business so indicated is Atrium Building,
80 Route 4 East, Paramus, New Jersey 07652.
++ The address of the business so indicated is 144 Glenn Curtiss Boulevard,
Uniondale, New York 11556-0144.
+++ The address of the business so indicated is 69, Route `d'Esch, L-
1470 Luxembourg.
++++ The address of the business so indicated is 69, Route `d'Esch, L-
2953 Luxembourg.
+++++ The address of the business so indicated is 53 State Street, Boston,
Massachusetts 02103.
Item 29. Principal Underwriters
________ ______________________
(a) Other investment companies for which Registrant's principal
underwriter (exclusive distributor) acts as principal underwriter or
exclusive distributor:
1) Comstock Partners Funds, Inc.
2) Dreyfus A Bonds Plus, Inc.
3) Dreyfus Appreciation Fund, Inc.
4) Dreyfus Asset Allocation Fund, Inc.
5) Dreyfus Balanced Fund, Inc.
6) Dreyfus BASIC GNMA Fund
7) Dreyfus BASIC Money Market Fund, Inc.
8) Dreyfus BASIC Municipal Fund, Inc.
9) Dreyfus BASIC U.S. Government Money Market Fund
10) Dreyfus California Intermediate Municipal Bond Fund
11) Dreyfus California Tax Exempt Bond Fund, Inc.
12) Dreyfus California Tax Exempt Money Market Fund
13) Dreyfus Cash Management
14) Dreyfus Cash Management Plus, Inc.
15) Dreyfus Connecticut Intermediate Municipal Bond Fund
16) Dreyfus Connecticut Municipal Money Market Fund, Inc.
17) Dreyfus Florida Intermediate Municipal Bond Fund
18) Dreyfus Florida Municipal Money Market Fund
19) The Dreyfus Fund Incorporated
20) Dreyfus Global Bond Fund, Inc.
21) Dreyfus Global Growth Fund
22) Dreyfus GNMA Fund, Inc.
23) Dreyfus Government Cash Management
24) Dreyfus Growth and Income Fund, Inc.
25) Dreyfus Growth and Value Funds, Inc.
26) Dreyfus Growth Opportunity Fund, Inc.
27) Dreyfus Income Funds
28) Dreyfus Institutional Money Market Fund
29) Dreyfus Institutional Short Term Treasury Fund
30) Dreyfus Insured Municipal Bond Fund, Inc.
31) Dreyfus Intermediate Municipal Bond Fund, Inc.
32) Dreyfus International Funds, Inc.
33) Dreyfus Investment Grade Bond Funds, Inc.
34) The Dreyfus/Laurel Funds Trust
35) The Dreyfus/Laurel Tax-Free Municipal Funds
36) Dreyfus LifeTime Portfolios, Inc.
37) Dreyfus Liquid Assets, Inc.
38) Dreyfus Massachusetts Intermediate Municipal Bond Fund
39) Dreyfus Massachusetts Municipal Money Market Fund
40) Dreyfus Massachusetts Tax Exempt Bond Fund
41) Dreyfus MidCap Index Fund
42) Dreyfus Money Market Instruments, Inc.
43) Dreyfus Municipal Bond Fund, Inc.
44) Dreyfus Municipal Cash Management Plus
45) Dreyfus Municipal Money Market Fund, Inc.
46) Dreyfus New Jersey Intermediate Municipal Bond Fund
47) Dreyfus New Jersey Municipal Bond Fund, Inc.
48) Dreyfus New Jersey Municipal Money Market Fund, Inc.
49) Dreyfus New Leaders Fund, Inc.
50) Dreyfus New York Insured Tax Exempt Bond Fund
51) Dreyfus New York Municipal Cash Management
52) Dreyfus New York Tax Exempt Bond Fund, Inc.
53) Dreyfus New York Tax Exempt Intermediate Bond Fund
54) Dreyfus New York Tax Exempt Money Market Fund
55) Dreyfus 100% U.S. Treasury Intermediate Term Fund
56) Dreyfus 100% U.S. Treasury Long Term Fund
57) Dreyfus 100% U.S. Treasury Money Market Fund
58) Dreyfus 100% U.S. Treasury Short Term Fund
59) Dreyfus Pennsylvania Intermediate Municipal Bond Fund
60) Dreyfus Pennsylvania Municipal Money Market Fund
61) Dreyfus Premier California Municipal Bond Fund
62) Dreyfus Premier Equity Funds, Inc.
63) Dreyfus Premier International Growth Fund, Inc.
64) Dreyfus Premier GNMA Fund
65) Dreyfus Premier Worldwide Growth Fund, Inc.
66) Dreyfus Premier Insured Municipal Bond Fund
67) Dreyfus Premier Municipal Bond Fund
68) Dreyfus Premier New York Municipal Bond Fund
69) Dreyfus Premier State Municipal Bond Fund
70) Dreyfus Premier Value Fund
71) Dreyfus Index Funds, Inc.
72) Dreyfus Short-Intermediate Government Fund
72) Dreyfus Short-Intermediate Municipal Bond Fund
73) The Dreyfus Socially Responsible Growth Fund, Inc.
75) Dreyfus Stock Index Fund, Inc.
76) Dreyfus Tax Exempt Cash Management
77) The Dreyfus Third Century Fund, Inc.
78) Dreyfus Treasury Cash Management
79) Dreyfus Treasury Prime Cash Management
80) Dreyfus Variable Investment Fund
81) Dreyfus Worldwide Dollar Money Market Fund, Inc.
82) General California Municipal Bond Fund, Inc.
83) General California Municipal Money Market Fund
84) General Government Securities Money Market Fund, Inc.
85) General Money Market Fund, Inc.
86) General Municipal Bond Fund, Inc.
87) General Municipal Money Market Fund, Inc.
88) General New York Municipal Bond Fund, Inc.
89) General New York Municipal Money Market Fund
(b)
Positions and
Name and principal Positions and offices with offices with
business address the Distributor Registrant
__________________ ___________________________ _____________
Marie E. Connolly+ Director, President, Chief President and
Executive Officer and Compliance Treasurer
Officer
Joseph F. Tower, III+ Director, Senior Vice President, Vice President
Treasurer and Chief Financial Officer and Assistant
Treasurer
Richard W. Ingram Executive Vice President Vice President
and Assistant
Treasurer
Mary A. Nelson+ Vice President Vice President
and Assistant
Treasurer
Paul Prescott+ Vice President None
Jean M. O'Leary+ Assistant Secretary and None
Assistant Clerk
John W. Gomez+ Director None
William J. Nutt+ Director None
________________________________
+ Principal business address is 60 State Street, Boston, Massachusetts
02109.
++ Principal business address is 200 Park Avenue, New York, New York 10166.
Item 30. Location of Accounts and Records
________________________________
1. First Data Investor Services Group, Inc.,
a subsidiary of First Data Corporation
P.O. Box 9671
Providence, Rhode Island 02940-9671
2. Mellon Bank, N.A.
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258
3. Dreyfus Transfer, Inc.
P.O. Box 9671
Providence, Rhode Island 02940-9671
4. The Dreyfus Corporation
200 Park Avenue
New York, New York 10166
Item 31. Management Services
_______ ___________________
Not Applicable
Item 32. Undertakings
________ ____________
(1) To file a post-effective amendment, using financial statements
which need not be certified, within four to six months, from the
effective date of Registrant's 1933 Act Registration Statement
with respect to the Registrant's Dreyfus Technology Growth Fund.
(2) To call a meeting of shareholders for the purpose of voting upon
the question of removal of a Board member or Board members when
requested in writing to do so by the holders of at least 10% of
the Registrant's outstanding shares and in connection with such
meeting to comply with the provisions of Section 16(c) of the
Investment Company Act of 1940 relating to shareholder
communications.
(3) To furnish each person to whom a prospectus is delivered with a
copy of the Fund's latest Annual Report to Shareholders, upon
request and without charge.
SIGNATURES
__________
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all
of the requirements for effectiveness of this Amendment to the Registration
Statement pursuant to Rule 485 (b) under the Securities Act of 1933 and has
duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
and State of New York on the 26th day of February, 1998.
The Dreyfus/Laurel Funds, Inc.
BY: /s/Marie E. Connolly*
------------------------------
MARIE E. CONNOLLY, PRESIDENT
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, this Amendment to the Registration Statement
has been signed below by the following persons in the capacities and on the
date indicated.
Signature Title Date
__________________________ ___________________ __________
/s/Marie E. Connolly* President, Treasurer 02/26/98
__________________________
Marie E. Connolly
/s/Francis P. Brennan* Director 02/26/98
__________________________ Chairman of the Board
Francis P. Brennan
/s/Ruth Marie Adams* Director 02/26/98
__________________________
Ruth Marie Adams
/s/Joseph S. DiMartino* Director 02/26/98
__________________________
Joseph S. DiMartino
/s/James M. Fitzgibbons* Director 02/26/98
__________________________
Jamaes M. Fitzgibbons
/s/Kenneth A. Himmel* Director 02/26/98
__________________________
Kenneth A. Himmel
/s/Stephen J. Lockwood* Director 02/26/98
- --------------------------
Stephen J. Lockwood
/s/Roslyn M. Watson* Director 02/26/98
- --------------------------
Roslyn M. Watson
/s/J. Tomlinson Fort* Director 02/26/98
__________________________
J. Tomlinson Fort
/s/Arthur L. Goeschel* Director 02/26/98
__________________________
Arthur L. Goeschel
/s/Arch S. Jeffery* Director 02/26/98
__________________________
Arch S. Jeffery
/s/John Sciullo* Director 02/26/98
__________________________
John Sciullo
*BY: /s/ Michael Petrucelli
---------------------
Michael Petrucelli
Attorney-in-Fact
Independent Auditors' Consent
To the Shareholders and Board of Directors
The Dreyfus/Laurel Funds, Inc.
We consent to the use of our reports dated December 17, 1997 on the
financial statements and financial highlights of Dreyfus Institutional U.S.
Treasury Money Market Fund, Dreyfus Institutional Government Money Market
Fund, Dreyfus Institutional Prime Money Market Fund, Dreyfus Municipal
Reserves, Dreyfus Money Market Reserves, Dreyfus U.S. Treasury Reserves,
Dreyfus Bond Market Index Fund, Dreyfus Premier Limited Term Income Fund,
Dreyfus Disciplined Intermediate Bond Fund, Dreyfus BASIC S&P 500 Stock
Index Fund, Dreyfus Disciplined Stock Fund, Dreyfus Premier Small Company
Stock Fund, Dreyfus Premier Balanced Fund and Dreyfus International Equity
Allocation Fund of The Dreyfus/Laurel Funds, Inc. included in the Annual
Reports which are incorporated by reference in the Statements of Additional
Information. We also consent to the references to our firm under the
headings OFinancial HighlightsO in the Prospectuses and OCustodian, Transfer
and Dividend Disbursing Agent, Counsel and Independent AuditorsO in the
Statements of Additional Information for the above referenced funds.
KPMG Peat Marwick LLP
New York, New York
February 16, 1998
-4-
THE DREYFUS/LAUREL FUNDS, INC.
AMENDED AND RESTATED DISTRIBUTION PLAN
WHEREAS, The Dreyfus/Laurel Funds, Inc. (formerly, The Laurel Funds,
Inc.) (the "Investment Company") is registered as an open-end management
investment company under the Investment Company Act of 1940, as amended,
(the "1940 Act") and consists of one or more distinct portfolios of shares
of common stock (collectively, the "Funds" and individually, a "Fund"), as
may be established and designated from time to time; and
WHEREAS, the Investment Company and its Distributor, a broker-dealer
registered under the Securities Act of 1934, as amended, have entered into a
Distribution Plan pursuant to which the Distributor will act as the
distributor of shares (the "Shares") of the Funds; and
WHEREAS, the Board of Directors of the Investment Company has adopted
the Distribution Plan in accordance with the requirements of the 1940 Act
and Rule 12b-1 thereunder, and has concluded, in the exercise of it
reasonable business judgment and in light of its fiduciary duties, that
there is a reasonable likelihood that the Distribution Plan will benefit the
Investment Company and the holders of the Funds' Shares;
NOW THEREFORE, the Investment Company hereby restates the Distribution
Plan as set forth below in this Amended and Restated Distribution Plan (the
"Plan"):
Section 1. Payments for Distribution-Related Services and Shareholder
Servicing. The Investment Company may pay for any activities or expenses
primarily intended to result in the sale of Shares of the Funds and/or
shareholder servicing provided to the Funds, as listed on Exhibit A, as such
Exhibit may be amended from time to time. Payments by the Investment
Company under this Section of this Plan will be calculated daily and paid
monthly at a rate or rates set from time to time by the Investment Company's
Board of Directors, provided that no rate set by the Board for any Fund may
exceed, on an annual basis, 0.10% of the value of a Fund's average daily net
assets.
Section 2. Expenses Covered by Plan. The fees payable under Section 1
of this Plan may be used to compensate (i) Mellon Bank, N.A. and/or any of
its affiliates for shareholder servicing services provided by such entities,
and/or (ii) the Distributor for distribution and/or shareholder servicing
services provided by it, and related expenses incurred, including payments
by the Distributor to compensate banks, broker/dealers or other financial
institutions that have entered into written agreements with respect to
shareholder services and sales support services ("Agreements") with the
Distributor ("Selling and Servicing Agents"), for shareholder servicing and
sales support services provided, and related expenses incurred, by such
Selling and Servicing Agents.
Section 3. Agreements. The Distributor may enter into written
Agreements with Selling and Servicing Agents, such Agreements to be
substantially in such forms as the Board of Directors of the Investment
Company may duly approve from time to time.
Section 4. Limitations on Payments. Payments made by a particular
Fund under Section 1 must be for distribution and/or shareholder servicing
rendered for or on behalf of such Fund. However, joint distribution or
sales support financing with respect to a Fund (which financing may also
involve other investment portfolios or companies that are affiliated persons
of such a person, or affiliated persons of the Distributor) shall be
permitted in accordance with applicable regulations of the Securities and
Exchange Commission as in effect from time to time.
Except for the payments specified in Section 1, no additional payments
are to be made by the Investment Company under this Plan, provided that
nothing herein shall be deemed to preclude the payments a Fund is otherwise
obligated to make to The Dreyfus Corporation ("Dreyfus") pursuant to the
Investment Management Agreement, and for the expenses otherwise incurred by
such Fund and the Investment Company on behalf of the Shares in the normal
conduct of such Fund's business pursuant to the Investment Management
Agreement. To the extent any payments by the Investment Company on behalf
of a Fund to Dreyfus, or any affiliate thereof, or to any party pursuant to
any agreement, or, generally, by the Investment Company on behalf of a Fund
to any party, are deemed to be payments for the financing of any activity
primarily intended to result in the sale of the Shares within the context of
Rule 12b-1 under the 1940 Act, then such payments shall be deemed to have
been approved pursuant to this Plan without regard to Section 1.
Notwithstanding anything herein to the contrary, no Fund shall be
obligated to make any payments under this Plan that exceed the maximum
amounts payable under Rule 2830 of the Conduct Rules of the National
Association of Securities Dealers, Inc.
Section 5. Reports. So long as this Plan is in effect, the
Distributor and/or Dreyfus shall provide to the Investment Company's Board
of Directors, and the Directors shall review at least quarterly, a written
report of the amounts expended by a Fund pursuant to the Plan, or by Selling
and Servicing Agents pursuant to Agreements, and the purposes for which such
expenditures were made.
Section 6. Majority Vote. As used herein, the term "Majority Vote" of
the Shares of a Fund means a vote of the holders of the lesser of (a) more
than fifty percent (50%) of the outstanding Shares of such Fund or (b) sixty-
seven percent (67%) or more of the Shares of such Fund present at a
shareholders' meeting in person or by proxy.
Section 7. Approval of Plan. This Plan will become effective at such
time as is specified by the Board of Directors, as to any Fund; provided,
however, that the Plan is approved by (a) Majority Vote of the Shares of
such Fund, and (b) a majority of the Board of Directors, including a
majority of the Directors who are not "interested persons" (as defined in
the 1940 Act) of the Investment Company and who have no direct or indirect
financial interest in the operation of this Plan or in any Agreements
entered into in connection with this Plan, pursuant to a vote cast in person
at a meeting called for the purpose of voting on the approval of this Plan.
Section 8. Continuance of Plan. This Plan shall continue in effect
for so long as its continuance is specifically approved at least annually by
the Investment Company's Board of Directors in the manner described in
Section 7(b) hereof.
Section 9. Amendments. This Plan may be amended at any time by the
Board of Directors; provided, that (a) any amendment to increase materially
the costs which a Fund's Shares may bear for distribution pursuant to this
Plan shall be effective only upon the Majority Vote of the outstanding
Shares of such Fund, and (b) any material amendments of the terms of this
Plan shall become effective only upon approval as provided in Section 7(b)
hereof.
Section 10. Termination. This Plan is terminable, as to a Fund,
without penalty at any time by (a) a vote of a majority of the Directors who
are not "interested persons" (as defined in the 1940 Act) of the Investment
Company and who have no direct or indirect financial interest in the
operation of this Plan or in any Agreements entered into in connection with
this Plan, or (b) a Majority Vote of the outstanding Shares of the Fund.
Section 11. Selection/Nomination of Directors. While this Plan is in
effect, the selection and nomination of those Directors who are not
"interested persons" (as defined in the 1940 Act) of the Investment Company
shall be committed to the discretion of such non-interested Directors.
Section 12. Records. The Investment Company will preserve copies of
this Plan, and any related Agreements and any written reports regarding this
Plan presented to the Board of Directors, for a period of not less than six
(6) years from the date of this Plan, such Agreement or written report, as
the case may be, the first two (2) years of such period in an easily
accessible place.
Section 13. Miscellaneous. The captions in this Plan are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect.
IN WITNESS WHEREOF, the Investment Company has adopted this Amended and
Restated Distribution Plan as of this 17th day of October, 1994, as revised,
October 25, 1995 and ________ __, 1997.
EXHIBIT A
THE DREYFUS/LAUREL FUNDS, INC.
Dreyfus Disciplined Stock Fund
THE DREYFUS FAMILY OF FUNDS
(Dreyfus Premier Family of Funds - Funds Included in Exhibit I)
Rule 18f-3 Plan
Rule 18f-3 under the Investment Company Act of 1940, as amended
(the "1940 Act"), requires that the Board of an investment company desiring
to offer multiple classes of shares pursuant to said Rule adopt a plan
setting forth the differences among the classes with respect to shareholder
services, distribution arrangements, expense allocations and any related
conversion features or exchange privileges.
The Board, including a majority of the non-interested Board
members, of each of the investment companies, or series thereof, listed on
Exhibit I attached hereto (each, a "Fund") which desires to offer multiple
classes has determined that the following plan is in the best interests of
each class individually and the Fund as a whole:
1. Class Designation: Fund shares shall be divided into Class
A, Class B, Class C and Class R.
2. Differences in Availability: Class A shares, Class B
shares and Class C shares shall be available only to clients of banks, brokers,
dealers and other financial institutions, except that full-time or part-time
employees or directors of The Dreyfus Corporation ("Dreyfus") or any of its
affiliates or subsidiaries, Board members or a fund advised by Dreyfus,
including members of the Fund's Board, or the spouse or minor child of any
of the foregoing may purchase Class A shares directly through the Fund's
Distributor.
Class R shares shall be sold primarily to bank trust departments and
other financial service providers acting on behalf of customers having a
qualified trust or investment account or relationship at such institution, or
to customers who have received and hold shares of the Fund distributed to them
by virtue of such an account or relationship.
3. Differences in Services: Other than shareholder services
provided under the Distribution Plan for Class A shares and the Service Plan
for Class B and Class C shares, the services offered to shareholders of each
Class shall be substantially the same, except that Right of Accumulation and
Letter of Intent shall be applicable only to holders of Class A shares and
Reinvestment Privilege shall be applicable only to holders of Class A and
Class B shares.
4. Differences in Distribution Arrangements: Class A shares
shall be offered with a front-end sales charge, as such term is defined in
Article III, Section 26(b), of the Rules of Fair Practice of the National
Association of Securities Dealers, Inc., and a deferred sales charge (a
"CDSC"), as such term is defined in said Section 26(b), may be assessed on
certain redemptions of Class A shares purchased without an initial sales
charge as part of an investment of $1 million or more. The amount of the
sales charge and the amount of and provisions relating to the CDSC
pertaining to the Class A shares are set forth on Schedule A hereto. Class
A shares shall be subject to a Distribution Plan adopted pursuant to Rule
12b-1 under the 1940 Act. The Distribution Plan for Class A shares allows
the Fund to spend annually up to 0.25% of its average daily net assets
attributable to Class A shares to compensate Dreyfus Service Corporation, an
affiliate of Dreyfus, for shareholder servicing activities, and the Fund's
Distributor for shareholder servicing activities and for activities or
expenses primarily intended to result in the sale of Class A shares.
Class B shares shall not be subject to a front-end sales charge,
but shall be subject to a CDSC. The amount of and provisions relating to
the CDSC are set forth on Schedule B hereto. Class B shares shall be
subject to a Distribution Plan and Service Plan each adopted pursuant to
Rule 12b-1 under the 1940 Act. Under the Distribution Plan for Class B
shares, the Fund pays the Distributor for distributing the Fund's Class B
shares at an aggregate annual rate of .50 of 1% of the value of the average
daily net assets of Class B. Under the Service Plan for Class B shares, the
Fund pays Dreyfus Service Corporation or the Distributor for the provision
of certain services to the holders of Class B shares a fee at the annual
rate of .25 of 1% of the value of the average daily net assets of Class B.
Class C shares shall not be subject to a front-end sales charge,
but shall be subject to a CDSC. The amount of and provisions relating to
the CDSC are set forth on Schedule C hereto. Class C shares shall be
subject to a Distribution Plan and Service Plan each adopted pursuant to
Rule 12b-1 under the 1940 Act. Under the Distribution Plan for Class C
shares, the Fund pays the Distributor for distributing the Fund's Class C
shares at an aggregate annual rate of .75 of 1% of the value of the average
daily net assets of Class C. Under the Service Plan for Class C shares, the
Fund pays Dreyfus Service Corporation or the Distributor for the provision
of certain services to the holders of Class C shares a fee at the annual
rate of .25 of 1% of the value of the average daily net assets of Class C.
Class A, Class B and Class C shares shall vote separately with
respect to any matter relating to the Plan or Plans that effect them.
Class R shares shall not be subject to a front-end sales charge,
CDSC, distribution plan or service plan.
5. Expense Allocation: The following expenses shall be
allocated, to the extent practicable, on a Class-by-Class basis: (a) fees
under the Distribution Plans and Service Plan; (b) printing and postage
expenses payable by the Fund related to preparing and distributing materials,
such as proxies, to current shareholders of a specific Class; and (c)
litigation or other legal expenses relating solely to a specific Class.
6. Conversion Features: Class B shares shall automatically
convert to Class A shares after a specified period of time after the date of
purchase, based on the relative net asset value of each such Class without
the imposition of any sales charge, fee or other charge, as set forth on
Schedule D hereto. No other Class shall be subject to any automatic
conversion feature.
7. Exchange Privileges: Class A shares shall be exchangeable
only for (a) Class A shares (however the same may be named) of other funds
managed or administered by Dreyfus; (b) Investor shares (however the same
may be named) of other funds managed or administered by Dreyfus; (c) BASIC
shares (however the same may be named) of other funds managed or
administered by Dreyfus (subject to the minimum investment amount applicable
to such shares); (d) shares of funds managed or administered by Dreyfus
which do not have separate share classes; and (e) shares of certain other
funds, as specified from time to time.
Class B shares shall be exchangeable only for (a) Class B shares
(however the same may be named) of other funds managed or administered by
Dreyfus with the same CDSC structure as the Fund; and (b) shares of certain
other funds, as specified from time to time.
Class C shares shall be exchangeable only for (a) Class C shares
(however the same may be named) of other funds managed or administered by
Dreyfus with the same CDSC structure as the Fund; and (b) shares of certain
other funds, as specified from time to time.
With respect to Dreyfus Premier Small Cap Value Fund only,
fund shares that are subject to a CDSC shall be exchangeable for
shares of Dreyfus Worldwide Dollar Money Market Fund, Inc. The shares so
purchased shall be held in a special account created solely for this
purpose("Exchange Account"). Exchanges of shares from an Exchange Account
only can be made into certain other funds managed or administered by
Dreyfus. No CDSC shall be charged when an investor exchanges into an
Exchange Account; however, the applicable CDSC shall be imposed when shares
are redeemed from an Exchange Account or other applicable Fund account.
Upon redemption, the applicable CDSC shall be calculated without regard to
the time such shares were held in an Exchange Account.
Class R shares shall be exchangeable only for (a) Class R shares
(however the same may be named) of other funds managed or administered by
Dreyfus; (b) Restricted shares (however the same may be named) of other
funds managed or administered by Dreyfus; (c) BASIC shares (however the same
may be named) of other funds managed or administered by Dreyfus (subject to
the minimum investment amount applicable to such shares); (d) shares of
funds managed or administered by Dreyfus which do not have separate share
classes; and (e) shares of certain other funds, as specified from time to
time.
Dated: April 26, 1995
Revised as of: January 16, 1998
EXHIBIT I
The Dreyfus/Laurel Funds, Inc. -
Dreyfus Premier Balanced Fund
Dreyfus Premier Small Company Stock Fund
Dreyfus Premier Small Cap Value Fund
SCHEDULE A
Dreyfus Premier Small Cap Value Fund
Front-End Sales Charge--Class A Shares--The public offering price for Class
A shares shall be the net asset value per share of that Class plus a sales
load as shown below:
Dreyfus Premier Balanced Fund
Dreyfus Premier Small Company Stock Fund
Front-End Sales Charge-Class A Shares - Effective December 1, 1996, the public
offering price for Class A shares, except as set forth below, shall be the net
asset value per share of that Class plus a sales load as shown below:
Total
Sales
Load
Amount of Transaction As a % of As a % of
offering net asset
price per value per
share share
Less than $50,000 5.75 6.10
$50,000 to less than $100,000 4.50 4.70
$100,000 to less than $250,000 3.50 3.60
$250,000 to less than $500,000 2.50 2.60
$500,000 to less than $1,000,000 2.00 2.00
$1,000,000 or more -0- -0-
Dreyfus Premier Balanced Fund
Dreyfus Premier Small Company Stock Fund
Front-End Sales Charge-Class A Shares - Shareholders Beneficially Owning
Shares on November 30, 1996--For shareholders who beneficially owned Class A
shares held in a Fund account on November 30, 1996, the public offering price
for Class A shares shall be the net asset value per share of that Class plus a
sales load as shown below:
Total
Sales
Load
Amount of Transaction As a % of As a % of
offering net asset
price per value per
share share
Less than $50,000 4.50 4.70
$50,000 to less than $100,000 4.00 4.20
$100,000 to less than $250,000 3.00 3.10
$250,000 to less than $500,000 2.50 2.60
$500,000 to less than $1,000,000 2.00 2.00
$1,000,000 or more -0- -0-
Contingent Deferred Sales Charge--Class A Shares--A CDSC of 1% shall be
assessed at the time of redemption of Class A shares purchased without an
initial sales charge as part of an investment of at least $1,000,000 and
redeemed within one year after purchase. The terms contained in Schedule B
pertaining to the CDSC assessed on redemptions of Class B shares (other than
the amount of the CDSC and its time periods), including the provisions for
waiving the CDSC, shall be applicable to the Class A shares subject to a
CDSC. Letter of Intent and Right of Accumulation shall apply to such
purchases of Class A shares.
SCHEDULE B
Contingent Deferred Sales Charge--Class B Shares--A CDSC payable to the
Fund's Distributor shall be imposed on any redemption of Class B shares
which reduces the current net asset value of such Class B shares to an
amount which is lower than the dollar amount of all payments by the
redeeming shareholder for the purchase of Class B shares of the Fund held by
such shareholder at the time of redemption. No CDSC shall be imposed to the
extent that the net asset value of the Class B shares redeemed does not
exceed (i) the current net asset value of Class B shares acquired through
reinvestment of dividends or capital gain distributions, plus (ii) increases
in the net asset value of the shareholder's Class B shares above the dollar
amount of all payments for the purchase of Class B shares of the Fund held
by such shareholder at the time of redemption.
If the aggregate value of the Class B shares redeemed has declined
below their original cost as a result of the Fund's performance, a CDSC may
be applied to the then-current net asset value rather than the purchase
price.
In circumstances where the CDSC is imposed, the amount of the
charge shall depend on the number of years from the time the shareholder
purchased the Class B shares until the time of redemption of such shares.
Solely for purposes of determining the number of years from the time of any
payment for the purchase of Class B shares, all payments during a month
shall be aggregated and deemed to have been made on the first day of the
month. The following table sets forth the rates of the CDSC:
CDSC as a % of
Year Since Amount Invested
Purchase Payment or Redemption
Was Made Proceeds
First
4.00
Second
4.00
Third
3.00
Fourth
3.00
Fifth
2.00
Sixth
1.00
In determining whether a CDSC is applicable to a redemption, the
calculation shall be made in a manner that results in the lowest possible
rate. Therefore, it shall be assumed that the redemption is made first of
amounts representing shares acquired pursuant to the reinvestment of
dividends and distributions; then of amounts representing the increase in
net asset value of Class B shares above the total amount of payments for the
purchase of Class B shares made during the preceding six years; then of
amounts representing the cost of shares purchased six years prior to the
redemption; and finally, of amounts representing the cost of shares held for
the longest period of time within the applicable six-year period.
Waiver of CDSC--The CDSC shall be waived in connection with (a) redemptions
made within one year after the death or disability, as defined in Section
72(m)(7) of the Internal Revenue Code of 1986, as amended (the "Code"), of
the shareholder, (b) redemptions 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
Fund's Distributor exceeds one million dollars, (c) redemptions as a result
of a combination of any investment company with the Fund by merger,
acquisition of assets or otherwise, (d) a distribution following retirement
under a tax-deferred retirement plan or upon attaining age 70-1/2 in the
case of an IRA or Keogh plan or custodial account pursuant to Section 403(b)
of the Code and (e) redemptions pursuant to the Automatic Withdrawal Plan,
as described in the Fund's Prospectus. Any Fund shares subject to a CDSC
which were purchased prior to the termination of such waiver shall have the
CDSC waived as provided in the Fund's prospectus at the time of the purchase
of such shares.
SCHEDULE C
Contingent Deferred Sales Charge--Class C Shares--A CDSC of 1.00% payable to
the Fund's Distributor shall be imposed on any redemption of Class C shares
within one year of the date of purchase. The basis for calculating the
payment of any such CDSC shall be the method used in calculating the CDSC
for Class B shares. In addition, the provisions for waiving the CDSC shall
be those set forth for Class B shares.
SCHEDULE D
Conversion of Class B Shares--Class B shares shall automatically convert to
Class A shares on the first Fund business day of the month in which the
sixth anniversary of the date of purchase occurs (unless otherwise specified
by the Board), based on the relative net asset values for shares of each
such Class, and shall be subject to the Distribution Plan for Class A shares
but shall no longer be subject to the Distribution Plan and Service Plan
applicable to Class B shares. (Such conversion is subject to suspension by
the Board members if adverse tax consequences might result.) At that time,
Class B shares that have been acquired through the reinvestment of dividends
and distributions ("Dividend Shares") shall be converted in the proportion
that a shareholder's Class B shares (other than Dividend Shares) converting
to Class A shares bears to the total Class B shares then held by the
shareholder which were not acquired through the reinvestment of dividends
and distributions.
THE DREYFUS FAMILY OF FUNDS
(Dreyfus Premier Family of Funds - Funds Included in Exhibit I)
Rule 18f-3 Plan
Rule 18f-3 under the Investment Company Act of 1940, as amended
(the "1940 Act"), requires that the Board of an investment company desiring
to offer multiple classes of shares pursuant to said Rule adopt a plan
setting forth the differences among the classes with respect to shareholder
services, distribution arrangements, expense allocations and any related
conversion features or exchange privileges.
The Board, including a majority of the non-interested Board
members, of each of the investment companies, or series thereof, listed on
Exhibit I attached hereto (each, a "Fund") which desires to offer multiple
classes has determined that the following plan is in the best interests of
each class individually and the Fund as a whole:
1. Class Designation: Fund shares shall be divided into Class
A, Class B, Class C and Class R.
2. Differences in Availability: Class A shares, Class B
shares and Class C shares shall be available only to clients of banks, brokers,
dealers and other financial institutions, except that full-time or part-time
employees or directors of The Dreyfus Corporation ("Dreyfus") or any of its
affiliates or subsidiaries, Board members or a fund advised by Dreyfus,
including members of the Fund's Board, or the spouse or minor child of any
of the foregoing may purchase Class A shares directly through the Fund's
Distributor. In addition, holders of Investor shares of the Fund as of
January 15, 1998 may continue to purchase Class A shares of the Fund at net
asset value per share.
[Dreyfus Premier Midcap Stock Fund] Class R shares shall
be sold primarily to bank trust departments and other financial service
providers acting on behalf of customers having a qualified trust or
investment account or relationship at such institution, or to customers who
have received and hold shares of the Fund distributed to them by virtue of
such an account or relationship. In addition, holders of Restricted shares
of the Fund as of January 15, 1998 may continue to purchase Class R shares
of the Fund whether or not they would otherwise be eligible to do so.
[Dreyfus Premier Large Company Stock Fund] Class R Shares are
sold only to holders of Restricted shares of the Fund as of November 30,
1997.
3. Differences in Services: Other than shareholder services
provided under the Distribution Plan for Class A shares and the Service Plan
for Class B and Class C shares, the services offered to shareholders of each
Class shall be substantially the same, except that Right of Accumulation and
Letter of Intent shall be applicable only to holders of Class A shares and
Reinvestment Privilege shall be applicable only to holders of Class A and
Class B shares.
4. Differences in Distribution Arrangements: Class A shares
shall be offered with a front-end sales charge, as such term is defined in
Article III, Section 26(b), of the Rules of Fair Practice of the National
Association of Securities Dealers, Inc., and a deferred sales charge (a
"CDSC"), as such term is defined in said Section 26(b), may be assessed on
certain redemptions of Class A shares purchased without an initial sales
charge as part of an investment of $1 million or more. The amount of the
sales charge and the amount of and provisions relating to the CDSC
pertaining to the Class A shares are set forth on Schedule A hereto. Class
A shares shall be subject to a Distribution Plan adopted pursuant to Rule
12b-1 under the 1940 Act. The Distribution Plan for Class A shares allows
the Fund to spend annually up to 0.25% of its average daily net assets
attributable to Class A shares to compensate Dreyfus Service Corporation, an
affiliate of Dreyfus, for shareholder servicing activities, and the Fund's
Distributor for shareholder servicing activities and for activities or
expenses primarily intended to result in the sale of Class A shares.
Class B shares shall not be subject to a front-end sales charge,
but shall be subject to a CDSC. The amount of and provisions relating to
the CDSC are set forth on Schedule B hereto. Class B shares shall be
subject to a Distribution Plan and Service Plan each adopted pursuant to
Rule 12b-1 under the 1940 Act. Under the Distribution Plan for Class B
shares, the Fund pays the Distributor for distributing the Fund's Class B
shares at an aggregate annual rate of .75 of 1% of the value of the average
daily net assets of Class B. Under the Service Plan for Class B shares, the
Fund pays Dreyfus Service Corporation or the Distributor for the provision
of certain services to the holders of Class B shares a fee at the annual
rate of .25 of 1% of the value of the average daily net assets of Class B.
Class C shares shall not be subject to a front-end sales charge,
but shall be subject to a CDSC. The amount of and provisions relating to
the CDSC are set forth on Schedule C hereto. Class C shares shall be
subject to a Distribution Plan and Service Plan each adopted pursuant to
Rule 12b-1 under the 1940 Act. Under the Distribution Plan for Class C
shares, the Fund pays the Distributor for distributing the Fund's Class C
shares at an aggregate annual rate of .75 of 1% of the value of the average
daily net assets of Class C. Under the Service Plan for Class C shares, the
Fund pays Dreyfus Service Corporation or the Distributor for the provision
of certain services to the holders of Class C shares a fee at the annual
rate of .25 of 1% of the value of the average daily net assets of Class C.
Class A, Class B and Class C shares shall vote separately with
respect to any matter relating to the Plan or Plans that effect them.
Class R shares shall not be subject to a front-end sales charge,
CDSC, distribution plan or service plan.
5. Expense Allocation: The following expenses shall be
allocated, to the extent practicable, on a Class-by-Class basis: (a) fees
under the Distribution Plans and Service Plan; (b) printing and postage
expenses payable by the Fund related to preparing and distributing materials,
such as proxies, to current shareholders of a specific Class; and (c)
litigation or other legal expenses relating solely to a specific Class.
6. Conversion Features: Class B shares shall automatically
convert to Class A shares after a specified period of time after the date of
purchase, based on the relative net asset value of each such Class without
the imposition of any sales charge, fee or other charge, as set forth on
Schedule D hereto. No other Class shall be subject to any automatic
conversion feature.
7. Exchange Privileges: Class A shares shall be exchangeable
only for (a) Class A shares (however the same may be named) of other funds
managed or administered by Dreyfus; (b) Investor shares (however the same
may be named) of other funds managed or administered by Dreyfus; (c) BASIC
shares (however the same may be named) of other funds managed or
administered by Dreyfus (subject to the minimum investment amount applicable
to such shares); (d) shares of funds managed or administered by Dreyfus
which do not have separate share classes; and (e) shares of certain other
funds, as specified from time to time.
Class B shares shall be exchangeable only for (a) Class B shares
(however the same may be named) of other funds managed or administered by
Dreyfus with the same CDSC structure as the Fund; and (b) shares of certain
other funds, as specified from time to time.
Class C shares shall be exchangeable only for (a) Class C shares
(however the same may be named) of other funds managed or administered by
Dreyfus with the same CDSC structure as the Fund; and (b) shares of certain
other funds, as specified from time to time.
Fund shares that are subject to a CDSC shall be exchangeable for
shares of Dreyfus Worldwide Dollar Money Market Fund, Inc. The shares so
purchased shall be held in a special account created solely for this
purpose("Exchange Account"). Exchanges of shares from an Exchange Account
only can be made into certain other funds managed or administered by
Dreyfus. No CDSC shall be charged when an investor exchanges into an
Exchange Account; however, the applicable CDSC shall be imposed when shares
are redeemed from an Exchange Account or other applicable Fund account.
Upon redemption, the applicable CDSC shall be calculated without regard to
the time such shares were held in an Exchange Account.
Class R shares shall be exchangeable only for (a) Class R shares
(however the same may be named) of other funds managed or administered by
Dreyfus; (b) Restricted shares (however the same may be named) of other
funds managed or administered by Dreyfus; (c) BASIC shares (however the same
may be named) of other funds managed or administered by Dreyfus (subject to
the minimum investment amount applicable to such shares); (d) shares of
funds managed or administered by Dreyfus which do not have separate share
classes; and (e) shares of certain other funds, as specified from time to
time.
Dated: April 26, 1995
Revised as of: January 16, 1998
EXHIBIT I
The Dreyfus/Laurel Funds, Inc. -
Dreyfus Premier Midcap Stock Fund
Dreyfus Premier Large Company Stock Fund
SCHEDULE A
Front-End Sales Charge--Class A Shares--The public offering price for Class
A shares shall be the net asset value per share of that Class plus a sales
load as shown below:
Total
Sales
Load
Amount of Transaction As a % of As a % of
offering net asset
price per value per
share share
Less than $50,000 5.75 6.10
$50,000 to less than $100,000 4.50 4.70
$100,000 to less than $250,000 3.50 3.60
$250,000 to less than $500,000 2.50 2.60
$500,000 to less than $1,000,000 2.00 2.00
$1,000,000 or more -0- -0-
In addition, holders of Investor shares of the Fund as of January 15, 1998
may continue to purchase Class A shares of the Fund at net asset value per
share.
Contingent Deferred Sales Charge--Class A Shares--A CDSC of 1% shall be
assessed at the time of redemption of Class A shares purchased without an
initial sales charge as part of an investment of at least $1,000,000 and
redeemed within one year after purchase. The terms contained in Schedule B
pertaining to the CDSC assessed on redemptions of Class B shares (other than
the amount of the CDSC and its time periods), including the provisions for
waiving the CDSC, shall be applicable to the Class A shares subject to a
CDSC. Letter of Intent and Right of Accumulation shall apply to such
purchases of Class A shares.
SCHEDULE B
Contingent Deferred Sales Charge--Class B Shares--A CDSC payable to the
Fund's Distributor shall be imposed on any redemption of Class B shares
which reduces the current net asset value of such Class B shares to an
amount which is lower than the dollar amount of all payments by the
redeeming shareholder for the purchase of Class B shares of the Fund held by
such shareholder at the time of redemption. No CDSC shall be imposed to the
extent that the net asset value of the Class B shares redeemed does not
exceed (i) the current net asset value of Class B shares acquired through
reinvestment of dividends or capital gain distributions, plus (ii) increases
in the net asset value of the shareholder's Class B shares above the dollar
amount of all payments for the purchase of Class B shares of the Fund held
by such shareholder at the time of redemption.
If the aggregate value of the Class B shares redeemed has declined
below their original cost as a result of the Fund's performance, a CDSC may
be applied to the then-current net asset value rather than the purchase
price.
In circumstances where the CDSC is imposed, the amount of the
charge shall depend on the number of years from the time the shareholder
purchased the Class B shares until the time of redemption of such shares.
Solely for purposes of determining the number of years from the time of any
payment for the purchase of Class B shares, all payments during a month
shall be aggregated and deemed to have been made on the first day of the
month. The following table sets forth the rates of the CDSC:
CDSC as a % of
Year Since Amount Invested
Purchase Payment or Redemption
Was Made Proceeds
First
4.00
Second
4.00
Third
3.00
Fourth
3.00
Fifth
2.00
Sixth
1.00
In determining whether a CDSC is applicable to a redemption, the
calculation shall be made in a manner that results in the lowest possible
rate. Therefore, it shall be assumed that the redemption is made first of
amounts representing shares acquired pursuant to the reinvestment of
dividends and distributions; then of amounts representing the increase in
net asset value of Class B shares above the total amount of payments for the
purchase of Class B shares made during the preceding six years; then of
amounts representing the cost of shares purchased six years prior to the
redemption; and finally, of amounts representing the cost of shares held for
the longest period of time within the applicable six-year period.
Waiver of CDSC--The CDSC shall be waived in connection with (a) redemptions
made within one year after the death or disability, as defined in Section
72(m)(7) of the Internal Revenue Code of 1986, as amended (the "Code"), of
the shareholder, (b) redemptions 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
Fund's Distributor exceeds one million dollars, (c) redemptions as a result
of a combination of any investment company with the Fund by merger,
acquisition of assets or otherwise, (d) a distribution following retirement
under a tax-deferred retirement plan or upon attaining age 70-1/2 in the
case of an IRA or Keogh plan or custodial account pursuant to Section 403(b)
of the Code and (e) redemptions pursuant to the Automatic Withdrawal Plan,
as described in the Fund's Prospectus. Any Fund shares subject to a CDSC
which were purchased prior to the termination of such waiver shall have the
CDSC waived as provided in the Fund's prospectus at the time of the purchase
of such shares.
SCHEDULE C
Contingent Deferred Sales Charge--Class C Shares--A CDSC of 1.00% payable to
the Fund's Distributor shall be imposed on any redemption of Class C shares
within one year of the date of purchase. The basis for calculating the
payment of any such CDSC shall be the method used in calculating the CDSC
for Class B shares. In addition, the provisions for waiving the CDSC shall
be those set forth for Class B shares.
SCHEDULE D
Conversion of Class B Shares--Class B shares shall automatically convert to
Class A shares on the first Fund business day of the month in which the
sixth anniversary of the date of purchase occurs (unless otherwise specified
by the Board), based on the relative net asset values for shares of each
such Class, and shall be subject to the Distribution Plan for Class A shares
but shall no longer be subject to the Distribution Plan and Service Plan
applicable to Class B shares. (Such conversion is subject to suspension by
the Board members if adverse tax consequences might result.) At that time,
Class B shares that have been acquired through the reinvestment of dividends
and distributions ("Dividend Shares") shall be converted in the proportion
that a shareholder's Class B shares (other than Dividend Shares) converting
to Class A shares bears to the total Class B shares then held by the
shareholder which were not acquired through the reinvestment of dividends
and distributions.
THE DREYFUS FAMILY OF FUNDS
(Funds Included in Schedule A)
Rule 18f-3 Plan
Rule 18f-3 under the Investment Company Act of 1940, as amended (the
"1940 Act"), requires that the Board of an investment company desiring to
offer multiple classes of shares pursuant to said Rule adopt a plan setting
forth the differences among the classes with respect to shareholder
services, distribution arrangements, expense allocations and any related
conversion features or exchange privileges.
The Board, including a majority of the non-interested Board members, of
each of the investment companies, or series thereof, listed on Schedule A
attached hereto (each, a "Fund") which desires to offer multiple classes has
determined that the following plan is in the best interests of each class
individually and the Fund as a whole:
1. Class Designation: Fund shares shall be divided into Investor
Class (formerly Institutional Class and prior thereto Investor Class) and
Restricted Class (formerly Retail Class and prior thereto Class R).
2. Differences in Availability: Investor shares shall be offered to
any investor.
The sale of Restricted shares shall be limited to bank trust
departments and other financial service providers acting on behalf of
customers having a qualified trust or investment account or relationship at
such institution, and to customers who have received and hold shares of the
Fund distributed to them by virtue of such an account or relationship, and
to those investors who have held shares of that Class (however previously
designated) prior to August 15, 1997 and have continued to hold shares of
that Class.
3. Differences in Services: Other than shareholder services provided
under the Distribution Plan, the services offered to shareholders of each
Class shall be the same.
4. Differences in Distribution Arrangements: Investor shares shall
be subject to a Distribution Plan adopted pursuant to Rule 12b-1 under the
1940 Act. The Distribution Plan for Investor shares allows the Fund to
spend annually up to 0.25% of its average daily net assets attributable to
Investor shares to compensate Dreyfus Service Corporation, an affiliate of
The Dreyfus Corporation ("Dreyfus"), for shareholder servicing activities,
and the Fund's Distributor for shareholder servicing activities and for
activities or expenses primarily intended to result in the sale of Investor
shares.
Restricted shares shall not be subject to a Distribution Plan.
5. Expense Allocation: The following expenses shall be allocated on
a Class-by-Class basis: (a) fees under the Distribution Plan; (b) printing
and postage expenses payable by the Fund related to preparing and
distributing materials, such as proxies, to current shareholders of a
specific Class; and (c) litigation or other legal expenses relating solely
to a specific Class.
6. Conversion Features: There shall be no automatic conversion
feature for either the Investor Class or Restricted Class.
7. Exchange Privileges: Investor shares shall be exchangeable only
for (a) Investor shares (however the same may be named) of other funds
managed or administered by Dreyfus; (b) Class A shares (however the same may
be named) of other funds managed or administered by Dreyfus (subject to any
sales load applicable to such shares); (c) BASIC shares (however the same
may be named) of other funds managed or administered by Dreyfus (subject to
the minimum investment amount applicable to such shares); (d) shares of
funds managed or administered by Dreyfus which do not have separate share
classes; and (e) shares of certain other funds, as specified from time to
time.
Restricted shares shall be exchangeable only for (a) Restricted shares
(however the same may be named) of other funds managed or administered by
Dreyfus; (b) Class R shares (however the same may be named) of other funds
managed or administered by Dreyfus; (c) BASIC shares (however the same may
be named) of other funds managed or administered by Dreyfus (subject to the
minimum investment amount applicable to such shares); (d) shares of funds
managed or administered by Dreyfus which do not have separate share classes;
and (e) shares of certain other funds, as specified from time to time.
Dated: April 26, 1996
Revised as of: August 15, 1997
SCHEDULE A
The Dreyfus/Laurel Funds, Inc. -
Dreyfus Disciplined Midcap Stock Fund
Dreyfus Disciplined Equity Income Fund
Dreyfus Disciplined Intermediate Fund
Dreyfus International Equity Allocation Fund
THE DREYFUS FAMILY OF FUNDS
(Funds Included in Schedule A)
Rule 18f-3 Plan
Rule 18f-3 under the Investment Company Act of 1940, as amended
(the "1940 Act"), requires that the Board of an investment company desiring
to offer multiple classes of shares pursuant to said Rule adopt a plan
setting forth the differences among the classes with respect to shareholder
services, distribution arrangements, expense allocations and any related
conversion features or exchange privileges.
The Board, including a majority of the non-interested Board
members, of each of the investment companies, or series thereof, listed on
Schedule A attached hereto (each, a "Fund") which desires to offer multiple
classes has determined that the following plan is in the best interests of
each class individually and the Fund as a whole:
1. Class Designation: Fund shares shall be divided into
Investor Class (formerly Institutional Class and prior thereto Investor Class)
and BASIC Class (formerly Retail Class and prior thereto Class R).
2. Differences in Availability: Investor shares and BASIC shares
shall be offered to any investor. The minimum initial investment
requirement for Investor shares shall be $2,500, or $750 for 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 (collectively, "Individual Retirement Plans") and
$500 for Dreyfus-sponsored Education IRAs. The minimum initial investment
requirement for BASIC shares shall be $10,000, or $5,000 for Individual
Retirement Plans. The minimum subsequent investment requirement for
Investor shares shall be $100, with no minimum on subsequent purchases for
Individual Retirement Plans and Education IRAs. The minimum subsequent
investment requirement for BASIC shares shall be $1,000 (or $100 for
shareholders of that Class prior to August 15, 1997, with no minimum for
shareholders of that Class prior to August 15, 1997 with respect to
Individual Retirement Plans). Other than the different minimum initial and
subsequent investment requirements, there shall be no differences in
availability between the Classes.
3. Differences in Services: Other than shareholder services provided
under the Distribution Plan, the services offered to shareholders of each
Class shall be the same.
4. Differences in Distribution Arrangements: Investor shares shall
be subject to a Distribution Plan adopted pursuant to Rule 12b-1 under the
1940 Act. The Distribution Plan for Investor shares allows the Fund to
spend annually up to 0.25% of its average daily net assets attributable to
Investor shares to compensate Dreyfus Service Corporation, an affiliate of
The Dreyfus Corporation ("Dreyfus"), for shareholder servicing activities,
and the Fund's Distributor for shareholder servicing activities and for
activities or expenses primarily intended to result in the sale of Investor
shares.
BASIC shares shall not be subject to a Distribution Plan.
5. Expense Allocation: The following expenses shall be
allocated on a Class-by-Class basis: (a) fees under the Distribution Plan; (b)
printing and postage expenses payable by the Fund related to preparing and
distributing materials, such as proxies, to current shareholders of a
specific Class; and (c) litigation or other legal expenses relating solely
to a specific Class.
6. Conversion Features: There shall be no automatic conversion
feature for either the Investor Class or BASIC Class.
7. Exchange Privileges: Investor shares shall be exchangeable only
for (a) Investor shares (however the same may be named) of other funds
managed or administered by Dreyfus; (b) Class A shares (however the same may
be named) of other funds managed or administered by Dreyfus (subject to any
sales load applicable to such shares); (c) BASIC shares (however the same
may be named) of other funds managed or administered by Dreyfus (subject to
the minimum investment amount applicable to such shares); (d) shares of
funds managed or administered by Dreyfus which do not have separate share
classes; and (e) shares of certain other funds, as specified from time to
time.
BASIC shares shall be exchangeable only for (a) BASIC shares (however
the same may be named) of other funds managed or administered by Dreyfus;
(b) Restricted shares (however the same may be named) of other funds managed
or administered by Dreyfus to the extent a shareholder is otherwise eligible
to purchase that Class of shares; (c) Class R shares (however the same may
be named) of other funds managed or administered by Dreyfus to the extent a
shareholder is otherwise eligible to purchase that Class of shares; (d)
Investor shares (however the same may be named) of other funds managed or
administered by Dreyfus; (e) Class A shares (however the same may be named)
of other funds managed or administered by Dreyfus (subject to any sales load
applicable to such shares); (f) shares of funds managed or administered by
Dreyfus which do not have separate share classes; and (g) shares of certain
other funds, as specified from time to time.
Dated: April 26, 1995
Revised as of : January 1, 1998
SCHEDULE A
The Dreyfus/Laurel Funds, Inc. -
Dreyfus Bond Market Index Fund
THE DREYFUS FAMILY OF FUNDS
(Funds Included in Schedule A)
Rule 18f-3 Plan
Rule 18f-3 under the Investment Company Act of 1940, as amended (the
"1940 Act"), requires that the Board of an investment company desiring to
offer multiple classes of shares pursuant to said Rule adopt a plan setting
forth the differences among the classes with respect to shareholder
services, distribution arrangements, expense allocations and any related
conversion features or exchange privileges.
The Board, including a majority of the non-interested Board members, of
each of the investment companies, or series thereof, listed on Schedule A
attached hereto (each a "Fund"), which desires to offer multiple classes has
determined that the following plan is in the best interests of each class
individually and the Fund as a whole:
1. Class Designation: Fund shares shall be divided into Investor
Class and Class R.
2. Differences in Availability: The sale of Investor shares of a
Fund shall be limited to accounts of investors maintaining related
securities, brokerage, commodities trading or similar accounts with banks,
securities brokers or dealers or other financial institutions that have
entered into selling agreements with the Fund's distributor and to those
retail investors who have held Investor shares of a Fund prior to September
1, 1995 and have continued to hold Investor shares of that Fund.
Class R shares of a Fund shall be sold primarily to bank trust
departments and other financial service providers acting on behalf of
customers having a qualified trust or investment account or relationship at
such institution, or to customers who has received and hold shares of that
Fund distributed to them by virtue of such an account or relationship.
3. Differences in Services: Other than shareholder services provided
under the Distribution Plan, the services offered to shareholders of each
Class shall be the same.
4. Differences in Distribution Arrangements: Investor shares shall
be subject to a Distribution Plan adopted pursuant to Rule 12b-1 under the
1940 Act. The Distribution Plan for Investor shares allows the Fund to
spend annually up to 0.25% of its average daily net assets attributable to
Investor shares to compensate Dreyfus Service Corporation, an affiliate of
The Dreyfus Corporation ("Dreyfus"), for shareholder servicing activities,
and the Fund's Distributor for shareholder servicing activities and for
activities or expenses primarily intended to result in the sale of Investor
shares.
Class R shares shall not be subject to a Distribution Plan.
5. Expense Allocation: The following expenses shall be allocated, to
the extent practicable, on a Class-by-Class basis: (a) fees under the
Distribution Plan; (b) printing and postage expenses payable by the Fund
related to preparing and distributing materials, such as proxies, to current
shareholder of a specific Class; and (c) litigation or other legal expenses
relating solely to a specific Class.
6. Conversion Features: There shall be no automatic conversion
feature for either the Investor Class or Class R.
7. Exchange Privileges: Investor shares shall be exchangeable only
for (a) Investor shares (however the same may be named) of other funds
managed or administered by Dreyfus; (b) Class A shares (however the same may
be named) of other funds managed or administered by Dreyfus (subject to any
sales load applicable to such shares); (c) BASIC shares (however the same
may be named) of other funds managed or administered by Dreyfus (subject to
the minimum investment amount applicable to such shares); (d) shares of
funds managed or administered by Dreyfus which do not have separate share
classes; and (e) shares of certain other funds specified from time to time.
Class R shares shall be exchangeable only for (a) Class R shares
(however the same may be named) of other funds managed or administered by
Dreyfus; (b) Restricted shares (however the same may be named) of other
funds managed or administered by Dreyfus; (c) BASIC shares (however the same
may be named) of other funds managed or administered by Dreyfus (subject to
the minimum investment amount applicable to such shares); (d) shares of
funds managed or administered by Dreyfus which do not have separate share
classes; and (e) shares of certain other funds specified from time to time.
Date: April 26, 1995
Revised as of: August 15, 1997
SCHEDULE A
The Dreyfus/Laurel Funds, Inc. -
Dreyfus Money Market Reserves
Dreyfus Municipal Reserves
THE DREYFUS FAMILY OF FUNDS
(Dreyfus Premier Family of Funds -
Fixed-Income Funds Included in Exhibit I)
Rule 18f-3 Plan
Rule 18f-3 under the Investment Company Act of 1940, as amended
(the "1940 Act"), requires that the Board of an investment company desiring
to offer multiple classes of shares pursuant to said Rule adopt a plan
setting forth the differences among the classes with respect to shareholder
services, distribution arrangements, expense allocations and any related
conversion features or exchange privileges.
The Board, including a majority of the non-interested Board
members, of each of the investment companies, or series thereof, listed on
Exhibit I attached hereto (each, a "Fund") which desires to offer multiple
classes has determined that the following plan is in the best interests of
each class individually and the Fund as a whole:
1. Class Designation: Fund shares shall be divided into Class
A, Class B, Class C and Class R.
2. Differences in Availability: Class A shares, Class B
shares and Class C shares shall be available only to clients of banks, brokers,
dealers and other financial institutions, except that full-time or part-time
employees or directors of The Dreyfus Corporation ("Dreyfus") or any of its
affiliates or subsidiaries, Board members or a fund advised by Dreyfus,
including members of the Fund's Board, or the spouse or minor child of any
of the foregoing may purchase Class A shares directly through the
Distributor.
Class R shares shall be sold primarily to bank trust
departments and other financial service providers acting on behalf of
customers having a qualified trust or investment account or relationship at
such institution, or to customers who have received and hold shares of the
Fund distributed to them by virtue of such an account or relationship.
3. Differences in Services: Other than shareholder services
provided under the Distribution Plan for Class A shares and the Service Plans
for Class B and Class C shares, the services offered to shareholders of each
Class shall be substantially the same, except that Right of Accumulation and
Letter of Intent shall be applicable only to holders of Class A shares and
Reinvestment Privilege shall be applicable only to holders of Class A and
Class B shares.
4. Differences in Distribution Arrangements: Class A shares
shall be offered with a front-end sales charge, as such term is defined in
Article III, Section 26(b), of the Rules of Fair Practice of the National
Association of Securities Dealers, Inc., and a deferred sales charge (a
"CDSC"), as such term is defined in said Section 26(b), may be assessed on
certain redemptions of Class A shares purchased without an initial sales
charge as part of an investment of $1 million or more. The amount of the
sales charge and the amount of and provisions relating to the CDSC
pertaining to the Class A shares are set forth on Schedule A hereto. Class
A shares shall be subject to a Distribution Plan adopted pursuant to Rule
12b-1 under the 1940 Act. The Distribution Plan for Class A shares allows
the Fund to spend annually up to 0.25% of its average daily net assets
attributable to Class A shares to compensate Dreyfus Service Corporation, an
affiliate of Dreyfus, for shareholder servicing activities, and the Fund's
Distributor for shareholder servicing activities and for activities or
expenses primarily intended to result in the sale of Class A shares.
Class B shares shall not be subject to a front-end sales charge,
but shall be subject to a CDSC. The amount of and provisions relating to
the CDSC are set forth on Schedule B hereto. Class B shares shall be
subject to a Distribution Plan and Service Plan each adopted pursuant to
Rule 12b-1 under the 1940 Act. Under the Distribution Plan for Class B
shares, the Fund pays the Distributor for distributing the Fund's Class B
shares at an aggregate annual rate of .50 of 1% of the value of the average
daily net assets of Class B. Under the Service Plan for Class B shares, the
Fund pays Dreyfus Service Corporation or the Distributor for the provision
of certain services to the holders of Class B shares a fee at the annual
rate of .25 of 1% of the value of the average daily net assets of Class B.
Class C shares shall not be subject to a front-end sales charge,
but shall be subject to a CDSC. The amount of and provisions relating to
the CDSC are set forth on Schedule C hereto. Class C shares shall be
subject to a Distribution Plan and Service Plan each adopted pursuant to
Rule 12b-1 under the 1940 Act. Under the Distribution Plan for Class C
shares, the Fund pays the Distributor for distributing the Fund's Class C
shares at an aggregate annual rate of .50 of 1% of the value of the average
daily net assets of Class C. Under the Service Plan for Class C shares, the
Fund pays Dreyfus Service Corporation or the Distributor for the provision
of certain services to the holders of Class C shares a fee at the annual
rate of .25 of 1% of the value of the average daily net assets of Class C.
Class A, Class B and Class C shares shall vote separately with
respect to any matter relating to the Plan or Plans that effect them.
Class R shares shall not be subject to a front-end sales charge,
CDSC, distribution plan or service plan.
5. Expense Allocation: The following expenses shall be
allocated, to the extent practicable, on a Class-by-Class basis: (a) fees
under the Distribution Plans and Service Plan; (b) printing and postage
expenses payable by the Fund related to preparing and distributing materials,
such as proxies, to current shareholders of a specific Class; and (c)
litigation or other legal expenses relating solely to a specific Class.
6. Conversion Features: Class B shares shall automatically
convert to Class A shares after a specified period of time after the date of
purchase, based on the relative net asset value of each such Class without
the imposition of any sales charge, fee or other charge, as set forth on
Schedule D hereto. No other Class shall be subject to any automatic
conversion feature.
7. Exchange Privileges: Class A shares shall be exchangeable
only for (a) Class A shares (however the same may be named) of other funds
managed or administered by Dreyfus; (b) Investor shares (however the same
may be named) of other funds managed or administered by Dreyfus; (c) BASIC
shares (however the same may be named) of other funds managed or
administered by Dreyfus (subject to the minimum investment amount applicable
to such shares); (d) shares of funds managed or administered by Dreyfus
which do not have separate share classes; and (e) shares of certain other
funds, as specified from time to time.
Class B shares shall be exchangeable only for (a) Class B shares
(however the same may be named) of other funds managed or administered by
Dreyfus with the same CDSC structure as the Fund; and (b) shares of certain
other funds, as specified from time to time.
Class C shares shall be exchangeable only for (a) Class C shares
(however the same may be named) of other funds managed or administered by
Dreyfus with the same CDSC structure as the Fund; and (b) shares of certain
other funds, as specified from time to time.
Class R shares shall be exchangeable only for (a) Class R shares
(however the same may be named) of other funds managed or administered by
Dreyfus; (b) Restricted shares (however the same may be named) of other
funds managed or administered by Dreyfus; (c) BASIC shares (however the same
may be named) of other funds managed or administered by Dreyfus (subject to
the minimum investment amount applicable to such shares); (d) shares of
funds managed or administered by Dreyfus which do not have separate share
classes; and (e) shares of certain other funds, as specified from time to
time.
Dated: April 26, 1995
Revised as of: August 15, 1997
EXHIBIT I
The Dreyfus/Laurel Funds, Inc. -
Dreyfus Premier Limited Term Income Fund
The Dreyfus/Laurel Tax-Free Municipal Funds -
Dreyfus Premier Limited Term Municipal Fund
Dreyfus Premier Limited Term California Municipal Fund
Dreyfus Premier Limited Term Massachusetts Municipal
Fund
Dreyfus Premier Limited Term New York Municipal Fund
SCHEDULE A
Front-End Sales Charge--Class A Shares--The public offering price for Class
A shares shall be the net asset value per share of that Class plus a sales
load as shown below:
Total
Sales
Load
Amount of Transaction As a % of As a % of
offering net asset
price per value per
share share
Less than $100,000 3.00 3.10
$100,000 to less than $250,000 2.75 2.80
$250,000 to less than $500,000 2.25 2.30
$500,000 to less than $1,000,000 2.00 2.00
$1,000,000 or more -0- -0-
Contingent Deferred Sales Charge--Class A Shares--A CDSC of 1% shall be
assessed at the time of redemption of Class A shares purchased without an
initial sales charge as part of an investment of at least $1,000,000 and
redeemed within one year after purchase. The terms contained in Schedule B
pertaining to the CDSC assessed on redemptions of Class B shares (other than
the amount of the CDSC and its time periods), including the provisions for
waiving the CDSC, shall be applicable to the Class A shares subject to a
CDSC. Letter of Intent and Right of Accumulation shall apply to such
purchases of Class A shares.
SCHEDULE B
Contingent Deferred Sales Charge--Class B Shares--A CDSC payable to the
Fund's Distributor shall be imposed on any redemption of Class B shares
which reduces the current net asset value of such Class B shares to an
amount which is lower than the dollar amount of all payments by the
redeeming shareholder for the purchase of Class B shares of the Fund held by
such shareholder at the time of redemption. No CDSC shall be imposed to the
extent that the net asset value of the Class B shares redeemed does not
exceed (i) the current net asset value of Class B shares acquired through
reinvestment of dividends or capital gain distributions, plus (ii) increases
in the net asset value of the shareholder's Class B shares above the dollar
amount of all payments for the purchase of Class B shares of the Fund held
by such shareholder at the time of redemption.
If the aggregate value of the Class B shares redeemed has declined
below their original cost as a result of the Fund's performance, a CDSC may
be applied to the then-current net asset value rather than the purchase
price.
In circumstances where the CDSC is imposed, the amount of the
charge shall depend on the number of years from the time the shareholder
purchased the Class B shares until the time of redemption of such shares.
Solely for purposes of determining the number of years from the time of any
payment for the purchase of Class B shares, all payments during a month
shall be aggregated and deemed to have been made on the first day of the
month. The following table sets forth the rates of the CDSC:
CDSC as a % of
Year Since Amount Invested
Purchase Payment or Redemption
Was Made Proceeds
First
3.00
Second
3.00
Third
2.00
Fourth
2.00
Fifth
1.00
Sixth
0.00
In determining whether a CDSC is applicable to a redemption, the
calculation shall be made in a manner that results in the lowest possible
rate. Therefore, it shall be assumed that the redemption is made first of
amounts representing shares acquired pursuant to the reinvestment of
dividends and distributions; then of amounts representing the increase in
net asset value of Class B shares above the total amount of payments for the
purchase of Class B shares made during the preceding five years; then of
amounts representing the cost of shares purchased five years prior to the
redemption; and finally, of amounts representing the cost of shares held for
the longest period of time within the applicable five-year period.
Waiver of CDSC--The CDSC shall be waived in connection with (a) redemptions
made within one year after the death or disability, as defined in Section
72(m)(7) of the Internal Revenue Code of 1986, as amended (the "Code"), of
the shareholder, (b) redemptions 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
Fund's Distributor exceeds one million dollars, (c) redemptions as a result
of a combination of any investment company with the Fund by merger,
acquisition of assets or otherwise, (d) a distribution following retirement
under a tax-deferred retirement plan or upon attaining age 70-1/2 in the
case of an IRA or Keogh plan or custodial account pursuant to Section 403(b)
of the Code and (e) redemption pursuant to the Automatic Withdrawal Plan, as
described in the Fund's Prospectus. Any Fund shares subject to a CDSC which
were purchased prior to the termination of such waiver shall have the CDSC
waived as provided in the Fund's prospectus at the time of the purchase of
such shares.
SCHEDULE C
Contingent Deferred Sales Charge--Class C Shares--A CDSC of .75% payable to
the Fund's Distributor shall be imposed on any redemption of Class C shares
within one year of the date of purchase. The basis for calculating the
payment of any such CDSC shall be the method used in calculating the CDSC
for Class B shares. In addition, the provisions for waiving the CDSC shall
be those set forth for Class B shares.
SCHEDULE D
Conversion of Class B Shares--Class B shares shall automatically convert to
Class A shares on the first Fund business day of the month in which the
sixth anniversary of the date of purchase occurs (unless otherwise specified
by the Board), based on the relative net asset values for shares of each
such Class, and shall be subject to the Distribution Plan for Class A shares
but shall no longer be subject to the Distribution Plan and Service Plan
applicable to Class B shares. (Such conversion is subject to suspension by
the Board members if adverse tax consequences might result.) At that time,
Class B shares that have been acquired through the reinvestment of dividends
and distributions ("Dividend Shares") shall be converted in the proportion
that a shareholder's Class B shares (other than Dividend Shares) converting
to Class A shares bears to the total Class B shares then held by the
shareholder which were not acquired through the reinvestment of dividends
and distributions.
Dreyfus U.S. Treasury Reserves
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</TABLE>
