File Nos. 811-5270
33-16338
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. 64 [ X ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ X ]
Amendment No. 64 [ 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.
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)
____ on (date) pursuant to paragraph (b)
____ 60 days after filing pursuant to paragraph (a)(1)
____ on September 30, 1998 pursuant to paragraph (a)(1)
_X__ 75 days after filing pursuant to paragraph (a)(2)
____ on (date) pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following box:
____ this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>
DREYFUS DISCIPLINED SMALLCAP STOCK FUND
DREYFUS TAX-EFFICIENT GROWTH FUND
CROSS-REFERENCE SHEET PURSUANT TO RULE 495(A)
The following post-effective amendment to the Registrant's Registration
Statement on Form N-1A relates to Dreyfus Disciplined Smallcap Stock Fund and
Dreyfus Tax-Efficient Growth Fund and does not affect the Registration
Statements of the following Series of the Registrant:
DREYFUS BOND MARKET INDEX FUND
DREYFUS DISCIPLINED INTERMEDIATE BOND FUND
DREYFUS MONEY MARKET RESERVES
DREYFUS MUNICIPAL RESERVES
DREYFUS U.S. TREASURY RESERVES
DREYFUS DISCIPLINED STOCK FUND
DREYFUS INTERNATIONAL EQUITY ALLOCATION FUND
DREYFUS INSTITUTIONAL PRIME MONEY MARKET FUND
DREYFUS INSTITUTIONAL GOVERNMENT MONEY MARKET FUND
DREYFUS INSTITUTIONAL U.S. TREASURY MONEY MARKET FUND
DREYFUS INSTITUTIONAL S&P 500 STOCK INDEX FUND
DREYFUS PREMIER LIMITED TERM INCOME FUND
DREYFUS PREMIER BALANCED FUND
DREYFUS PREMIER SMALL CAP STOCK FUND
DREYFUS PREMIER SMALL COMPANY STOCK FUND
DREYFUS PREMIER LARGE COMPANY STOCK FUND
DREYFUS PREMIER TAX MANAGED GROWTH FUND
DREYFUS PREMIER MIDCAP STOCK FUND
DREYFUS DISCIPLINED SMALLCAP STOCK FUND CROSS-REFERENCE SHEET:
Items in
Part A of
Form N-1A Caption Page
- --------- ------- ----
1 Front and Back Cover Pages Cover
2 Risk/Return Summary: 2, 3, 4
Investment, Risks, and
Performance
3 Risk/Return Summary: 5
Fee Table
4 Investment Objectives, 2, 3
Principal Investment
Strategies, and Related
Risks
5 Management's Discussion 4
of Fund Performance
6 Management, Organization, 6, 8
and Capital Structure
7 Shareholder Information 8, 11
8 Distribution Agreements 5
9 Financial Highlights Not Applicable
Information
ii
<PAGE>
DREYFUS DISCIPLINED SMALLCAP STOCK FUND
DREYFUS TAX-EFFICIENT GROWTH FUND
CROSS-REFERENCE SHEET PURSUANT TO RULE 495(A) (CONTINUED)
Items in
Part B of
Form N-1A Caption Page
- --------- ------- ----
10 Cover Page, Table of Cover
Contents
11 Fund History B-2
12 Description of the Fund B-2, B-38
and Its Investments and
Risks
13 Management of the Fund B-14
14 Control Persons and B-21
Principal Holders of
Securities
15 Investment Advisory B-21, B-26, B-42
and Other Services
16 Brokerage Allocation B-38
and Other Services
17 Capital Stock and B-41
Other Securities
18 Purchase, Redemption B-23, B-27, B-29, B-33
and Pricing of Shares
19 Taxation of the Fund B-34
20 Underwriters B-23
21 Calculation of B-40
Performance Data
22 Financial Statements B-41
Items in
Part C of
Form N-1A Caption Page
- --------- ------- ----
23 Exhibits C-1
24 Persons Controlled by C-4
or Under Common
Control with Registrant
25 Indemnification C-4
iii
<PAGE>
DREYFUS DISCIPLINED SMALLCAP STOCK FUND
DREYFUS TAX-EFFICIENT GROWTH FUND
CROSS-REFERENCE SHEET PURSUANT TO RULE 495(A) (CONTINUED)
Items in
Part C of
Form N-1A Caption Page
- --------- ------- ----
26 Business and Other C-4
Connections of the
Investment Underwriter
27 Principal Underwriters C-8
28 Location of Accounts and C-10
Records
29 Management Services C-10
30 Undertakings C-10
DREYFUS TAX-EFFICIENT GROWTH FUND CROSS-REFERENCE SHEET:
Items in
Part A of
Form N-1A Caption Page
- --------- ------- ----
1 Front and Back Cover Pages Cover
2 Risk/Return Summary: 2, 3, 4
Investment, Risks, and
Performance
3 Risk/Return Summary: 5
Fee Table
4 Investment Objectives, 2, 3
Principal Investment
Strategies, and Related
Risks
5 Management's Discussion 4
of Fund Performance
6 Management, Organization, 6, 8
and Capital Structure
7 Shareholder Information 8, 11
8 Distribution Agreements 5
9 Financial Highlights Not Applicable
Information
iv
<PAGE>
DREYFUS DISCIPLINED SMALLCAP STOCK FUND
DREYFUS TAX-EFFICIENT GROWTH FUND
CROSS-REFERENCE SHEET PURSUANT TO RULE 495(A) (CONTINUED)
Items in
Part B of
Form N-1A Caption Page
- --------- ------- ----
10 Cover Page, Table of Cover
Contents
11 Fund History B-2
12 Description of the Fund B-2, B-38
and Its Investments and
Risks
13 Management of the Fund B-14
14 Control Persons and B-21
Principal Holders of
Securities
15 Investment Advisory B-21, B-26, B-42
and Other Services
16 Brokerage Allocation B-38
and Other Services
17 Capital Stock and B-41
Other Securities
18 Purchase, Redemption B-23, B-27, B-29, B-33
and Pricing of Shares
19 Taxation of the Fund B-34
20 Underwriters B-23
21 Calculation of B-40
Performance Data
22 Financial Statements B-41
Items in
Part C of
Form N-1A Caption Page
- --------- ------- ----
23 Exhibits C-1
24 Persons Controlled by C-4
or Under Common
Control with Registrant
25 Indemnification C-4
v
<PAGE>
DREYFUS DISCIPLINED SMALLCAP STOCK FUND
DREYFUS TAX-EFFICIENT GROWTH FUND
CROSS-REFERENCE SHEET PURSUANT TO RULE 495(A) (CONTINUED)
Items in
Part C of
Form N-1A Caption Page
- --------- ------- ----
26 Business and Other C-4
Connections of the
Investment Underwriter
27 Principal Underwriters C-8
28 Location of Accounts and C-10
Records
29 Management Services C-10
30 Undertakings C-10
vi
<PAGE>
DREYFUS
DISCIPLINED
SMALLCAP
STOCK FUND
Investing in small-cap stocks
in seeking to outperform the
Standard & Poor's SmallCap 600(REGISTERED) Index
PROSPECTUS September 30, 1998
DREYFUS [LOGO]
As with all mutual funds, the Securities and Exchange Commission does not
guarantee that the information in this prospectus is accurate or complete, nor
has it judged this fund for investment merit. It is a criminal offense to state
otherwise.
<PAGE>
CONTENTS
THE FUND
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What every investor should 2 Goal/Approach
know about the fund 3 Main Risks
4 Past Performance
5 Expenses
6 Management
YOUR INVESTMENT
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Information for managing 7 Account Policies
your fund account 10 Distributions and Taxes
11 Services for Fund Investors
13 Instructions for Regular Accounts
15 Instructions for IRAs
FOR MORE INFORMATION
- --------------------------------------------------------------------------------
Where to learn more about Back Cover
this and other Dreyfus
funds
1
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Dreyfus DISCIPLINED SMALLCAP STOCK FUND THE FUND
Ticker Symbol: _______________
[ICON] GOAL/APPROACH
The fund seeks total investment returns (consisting of capital appreciation and
income) that surpass the Standard & Poor's SmallCap 600(REGISTERED) Index (S&P
SmallCap 600). This objective may be changed without shareholder approval. The
fund invests in a blended portfolio of growth and value stocks of small
capitalization companies chosen through a disciplined process that combines
computer modeling techniques, fundamental analysis, and risk management.
In selecting securities, Dreyfus uses a computer model to identify and rank
stocks within an industry based on three categories:
o VALUE, or how a stock is priced relative to its perceived intrinsic worth
o GROWTH, in this case the sustainability or growth of earnings
o FINANCIAL PROFILE, which measures the financial health of the company.
Dreyfus then uses fundamental analysis to select the most attractive of the
top-ranked securities and to determine those issues that should be sold. In
conducting this analysis, Dreyfus uses information technology as well as Wall
Street sources and company management to stay abreast of current developments.
Dreyfus manages risk by diversifying across companies and industries, limiting
the potential adverse impact from any one stock or industry. The fund is
structured so that its sector weightings and risk characteristics, such as
growth, size, quality and yield are similar to those of the S&P SmallCap 600.
Consistency of returns and stability of the fund's share price compared to the
S&P SmallCap 600 are primary goals of the fund.
[LEFT SIDE BAR]
CONCEPTS TO UNDERSTAND
SMALL CAPITALIZATION COMPANIES: new and often entrepreneurial companies.
Small-cap companies tend to grow faster than larger-cap companies and typically
use any profits for expansion rather than for paying dividends. They are also
more volatile than larger companies and fail more often. The fund generally
invests in companies having market capitalizations from $100 million to $2
billion.
S&P SMALLCAP 600: an unmanaged index consisting of the stocks of 600 publicly
traded U.S. companies chosen for market size, liquidity and industry group
representation. The stocks comprising the S&P SmallCap 600 have market
capitalizations from $50 million to $2 billion.
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[ICON] MAIN RISKS
While stocks have historically been a leading choice of long-term investors,
they do fluctuate in price. Accordingly, the value of your investment in the
fund will go up and down, which means that you could lose money.
Small and mid-size companies may present additional risks because their earnings
are less predictable, their share prices more volatile and their securities less
liquid than large, established companies. Some of the fund's investments will
rise and fall based on investor perception rather than economics. Other
investments anticipate future products or services whose delay or failure could
cause the stock price to drop.
Growth companies are expected to increase their earnings faster than the overall
market. If expectations are not met, investors can punish the stocks
inordinately, even if earnings do increase. Investments in growth companies may
lack the dividend yield that can cushion stock prices in market downturns.
Value stocks are those that are believed to be underpriced in terms of price or
other various financial measurements. Investments in value stocks are subject to
the risk that their intrinsic values may never be realized by the market, or
that their prices may go down. And, while investments in value stocks may limit
down-side risk over time, the fund may, as a trade-off, produce smaller gains
than riskier stock funds.
By investing in both growth and value stocks, the fund could be impacted less by
the underperformance of either style. This may at times result in more modest
gains than funds that utilize only one investment style.
The fund may invest in securities of foreign issuers. Foreign securities are
subject to political, economic, currency and other risks. As a result, foreign
securities may be less liquid and their prices more volatile than securities of
comparable domestic issuers
Under adverse market conditions, the fund could invest some or all of its assets
in money market securities. Although the fund would do this only in seeking to
avoid losses, it could reduce the benefit from any upswing in the market.
[LEFT SIDE BAR]
OTHER POTENTIAL RISKS
The fund may invest some assets in options, futures and foreign currencies.
These practices are used primarily to hedge the fund's portfolio, but may be
used to increase returns; however, such practices may sometimes reduce returns
or increase volatility.
At times, the fund may engage in short-term trading, which could produce higher
brokerage costs and taxable distributions.
3
<PAGE>
The fund is not an index fund. The fund may hold securities not listed in the
S&P SmallCap 600 and may hold fewer securities than the index, either of which
could cause the fund to underperform the index.
4
<PAGE>
[ICON] PAST PERFORMANCE
Past performance information is not available for the fund as of the date of
this Prospectus.
--------------------
This fund is a mutual fund: a pooled investment that is professionally managed
and gives you the opportunity to participate in financial markets. It strives to
reach its stated goal, although as with all mutual funds, it cannot offer
guaranteed results.
An investment in the fund is not a bank deposit. It is not FDIC-insured or
government-endorsed. It is not a complete investment program. You could lose
money in this fund, but you also have the potential to make money.
5
<PAGE>
[ICON] EXPENSES
As an investor, you pay certain fees and expenses in connection with the fund,
which are described in the table below. Shareholder transaction fees are paid
from your account. Annual fund operating expenses are paid out of fund assets,
so their effect is included in the share price. The fund has no sales charge
(load).
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FEE TABLE
SHAREHOLDER TRANSACTION FEES
% OF TRANSACTION AMOUNT
Maximum redemption fee* 1.00%
ANNUAL FUND OPERATING EXPENSES
% OF AVERAGE DAILY NET ASSETS
Management fee 1.25%
12b-1 fee 0.25%
Other expenses** 0.00%
- --------------------------------------------------------------------------------
TOTAL 1.50%
*For redemptions or exchanges of shares made within 6 months of their issuance.
**Other expenses are based on estimated amounts for the current fiscal year.
- --------------------
EXPENSE EXAMPLE
1 Year 3 Years
[$ ] [$ ]
--- ---
This example shows what you could pay in expenses over time. It uses the same
hypothetical conditions other funds use in their prospectuses: $10,000 initial
investment, 5% total return each year and no changes in expenses. The figures
shown would be the same whether you sold your shares at the end of a period or
kept them. Because actual return and expenses will be different, the example is
for comparison only.
- --------------------------------------------------------------------------------
[LEFT SIDE BAR]
CONCEPTS TO UNDERSTAND
MANAGEMENT FEE: the fee paid to The Dreyfus Corporation for managing the fund.
Unlike the arrangements between most funds and their investment advisers,
6
<PAGE>
Dreyfus pays all fund expenses except for brokerage fees, taxes, interest, fees
and expenses of the non-interested directors, Rule 12b-1 fees and extraordinary
expenses.
12B-1 FEE: the fee paid to Mellon Bank, N.A. and its affiliates for shareholder
servicing and to the fund's distributor for shareholder servicing and
promotional expenses. Because this fee is paid out of the fund's assets on an
ongoing basis, over time it will increase the cost of your investment and may
cost you more than paying other types of sales charges.
7
<PAGE>
[ICON] MANAGEMENT
The fund's investment adviser is The Dreyfus Corporation, 200 Park Avenue, New
York, NY 10166. Founded in 1947, Dreyfus manages one of the nation's leading
mutual fund complexes with more than $100 billion in over 150 mutual fund
portfolios. Dreyfus is the mutual fund business of Mellon Bank Corporation, a
broad-based financial services company with a bank at its core. With more than
$325 billion of assets under management and $1.6 trillion of assets under
administration and custody, Mellon provides a full range of banking, investment
and trust products and services to individuals, businesses and institutions. Its
mutual fund companies place Mellon as the leading bank manager of mutual funds.
Mellon is headquartered in Pittsburgh, Pennsylvania.
THE DREYFUS ASSET MANAGEMENT PHILOSOPHY: discipline and consistency are
important to investment success. For each fund, Dreyfus seeks to establish
clear, systematic guidelines for portfolio management and decision making.
The fund will be managed by Gene F. Cervi. Mr. Cervi is Director of Investment
Research for Laurel Capital Advisers and a Vice President of Mellon Bank, which
he joined in 1982. Mr. Cervi earned a bachelor's degree from the college of
William and Mary and a master's degree from Ohio State University. He is a
chartered financial analyst. Mr. Cervi is employed by Dreyfus as a portfolio
manager for the fund.
[LEFT SIDE BAR]
CONCEPTS TO UNDERSTAND
YEAR 2000 ISSUES: the fund could be adversely affected if the computer systems
used by Dreyfus and the fund's other service providers do not properly process
and calculate date-related information from and after January 1, 2000.
While year 2000-related computer problems could have a negative effect on the
fund, Dreyfus is working to avoid such problems and to obtain assurances from
service providers that they are taking similar steps.
8
<PAGE>
YOUR INVESTMENT
[ICON] ACCOUNT POLICIES
BUYING SHARES
You pay no sales charges to invest in this fund. Your price for fund shares is
the fund's net asset value per share (NAV), which is generally calculated as of
the close of trading on the New York Stock Exchange (usually 4:00 p.m. Eastern
time) every day the exchange is open. Your order will be priced at the NAV next
calculated after your order is accepted by the fund or other entity authorized
to accept orders on behalf of the fund. The fund's investments are valued based
on market value, or where market quotations are not readily available, based on
fair value as determined in good faith by the fund's board.
- --------------------
MINIMUM INVESTMENTS
Initial Additional
- --------------------------------------------------------------------------------
Regular accounts $2,500 $100
$500 for Teletransfer investments
Traditional IRAs $750 no minimum
Spousal IRAs $750 no minimum
Roth IRAs $750 no minimum
Education IRAs $500 N/A
Dreyfus automatic $100 $100
investment plans
All investments must be in U.S. dollars. Third-party checks cannot be accepted.
You may be charged a fee for any check that does not clear. Maximum TeleTransfer
purchase is $150,000 per day.
[LEFT SIDE BAR]
CONCEPTS TO UNDERSTAND
TRADITIONAL IRA: an individual retirement account. Your contribution may or may
not be deductible depending on your circumstances. Assets can grow tax-free;
distributions are taxable as income.
SPOUSAL IRA: an IRA funded by a working spouse in the name of a non-working
spouse.
ROTH IRA: an IRA with non-deductible contributions, tax-free growth of assets,
and tax-free distributions to pay retirement expenses.
9
<PAGE>
EDUCATION IRA: an IRA with nondeductible contributions, tax-free growth of
assets, and tax-free distributions to pay educational expenses.
FOR MORE COMPLETE IRA INFORMATION, CONSULT YOUR TAX PROFESSIONAL.
10
<PAGE>
SELLING SHARES
You may sell shares at any time. Your shares will be sold at the next NAV
calculated after your order is accepted by the fund's transfer agent or other
entity authorized to accept orders on behalf of the fund. Any certificates
representing fund shares being sold must be returned with your redemption
request. Your order will be processed promptly and you will generally receive
the proceeds within a week.
Before selling recently purchased shares, please note that:
o if the fund has not yet collected payment for the shares you are
selling, it may delay sending the proceeds until it has collected
payment, which may take up to eight business days.
o if you are selling or exchanging shares within six months of their
issuance, the fund will deduct a 1% redemption fee (not charged on
shares sold through the Systematic Withdrawal Plan or Dreyfus
Auto-Exchange Privilege, or shares acquired through reinvestment).
- --------------------
LIMITATIONS ON SELLING SHARES BY PHONE
<TABLE>
<CAPTION>
Minimum Maximum
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Check request no minimum $150,000 per day
Wire $1,000 $250,000 for joint accounts every 30 days
TeleTransfer $500 $250,000 for joint accounts every 30 days
</TABLE>
There are no dollar limitations when selling shares by written request, except
for wire redemptions ($1,000 minimum).
[LEFT SIDE BAR]
WRITTEN SELL ORDERS
Some circumstances require that written sell orders be signature guaranteed.
These include:
o amounts of $100,000 or more
o amounts of $1,000 or more on accounts whose address has been changed within
the last 30 days
o requests to send the proceeds to a different payee or address
A SIGNATURE GUARANTEE helps protect against fraud. You can obtain one from most
banks or securities dealers, but not from a notary public. For joint accounts,
each signature must be guaranteed. Please call us to ensure that your signature
guarantee will be processed correctly.
11
<PAGE>
--------------------
GENERAL POLICIES
If your account falls below $500, the fund may ask you to increase your balance.
If it is still below $500 after 45 days, the fund may close your account and
send you the proceeds.
Unless you decline telephone privileges on your application, you may be
responsible for any fraudulent telephone order as long as Dreyfus takes
reasonable measures to verify the order.
The fund reserves the right to:
o refuse any purchase or exchange request that could adversely affect the fund
or its operations, including those from any individual or group who, in the
fund's view, is likely to engage in excessive trading (usually defined as
more than four exchanges out of the fund within a calendar year)
o refuse any purchase or exchange request in excess of 1% of the fund's total
assets
o change or discontinue its exchange privilege, or temporarily suspend this
privilege during unusual market conditions
o change its minimum investment amounts
o delay sending out redemption proceeds for up to seven days (generally applies
only in cases of very large redemptions, excessive trading or during unusual
market conditions)
The fund also reserves the right to make a "redemption in kind" -- payment in
portfolio securities rather than cash -- if the amount you are redeeming is
large enough to affect fund operations (for example, if it represents more than
1% of the fund's assets).
[LEFT SIDE BAR]
THIRD-PARTY INVESTMENTS
If you invest through a third party (rather than directly with Dreyfus), the
policies and fees may be different from those described here. Banks, brokers,
401(k) plans, financial advisers and financial supermarkets may charge
transaction fees and may set different minimum investments or limitations on
buying or selling shares. Consult a representative of your plan or financial
institution if in doubt.
12
<PAGE>
[ICON] DISTRIBUTIONS AND TAXES
The fund pays its shareholders dividends from its net investment income, and
distributes any net capital gains that it has realized, annually. Your
distributions will be reinvested in the fund unless you instruct the fund
otherwise. There are no fees or sales charges on reinvestments.
Fund dividends and distributions are taxable to most investors (unless your
investment is in an IRA or other tax-advantaged account). The tax status of any
distribution is the same regardless of how long you have been in the fund and
whether you reinvest your distributions or take them as income. In general,
distributions are taxable as follows:
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TAXABILITY OF DISTRIBUTIONS
Type of Tax rate for Tax rate for
distribution 15% bracket 28% bracket or above
- --------------------------------------------------------------------------------
Income Ordinary Ordinary
dividends income rate income rate
Short-term Ordinary Ordinary
capital gains income rate income rate
Medium-term
capital gains 15% 28%
Long-term
capital gains 10% 20%
- --------------------
The tax status of the distributions for each calendar year will be detailed in
your annual tax statement from the fund.
Because everyone's tax situation is unique, always consult your tax professional
about federal, state and local tax consequences.
[LEFT SIDE BAR]
TAXES ON TRANSACTIONS
Except in tax-advantaged accounts, any sale or exchange of fund shares may
generate a tax liability.
The table at right can provide a "rule of thumb" guide for your potential tax
liability when selling or exchanging fund shares. The second row, "Short-term
capital gains," applies to fund shares sold up to 12 months after buying them.
13
<PAGE>
The third row, "Medium-term capital gains," applies to shares held for more than
12 months but no more than 18. The last row, "Long-term capital gains," applies
to shares held for more than 18 months. Pending legislation would eliminate
medium-term capital gains and change the holding period for long-term capital
gains to 12 months.
Starting January 1, 2001, sales of securities held for more than five years will
be taxed at special lower rates.
[ICON] SERVICES FOR FUND INVESTORS
AUTOMATIC SERVICES
Buying or selling shares automatically is easy with the services described
below. With each service, you select a schedule and amount, subject to certain
restrictions. You can set up most of these services with your application or by
calling 1-800-645-6561.
- ---------------------
FOR INVESTING
Dreyfus Automatic For making automatic investments from a
Asset Builder(REGISTERED) designated bank account.
Dreyfus Payroll For making automatic investments through a
Savings Plan payroll deduction.
Dreyfus Government For making automatic investments
Direct Deposit from your federal employment,
Privilege Social Security or other regular federal
government check.
Dreyfus Dividend For automatically reinvesting the
Sweep dividends and distributions from
one Dreyfus fund into another (not available for
IRAs).
FOR EXCHANGING SHARES
Dreyfus Auto- For making regular exchanges
Exchange Privilege from one Dreyfus fund into
another.
14
<PAGE>
FOR SELLING SHARES
Dreyfus Automatic For making regular withdrawals from most
Withdrawal Plan Dreyfus funds.
[LEFT SIDE BAR]
DREYFUS FINANCIAL CENTERS
Through a nationwide network of Dreyfus Financial Centers, Dreyfus offers a full
array of investment services and products. This includes information on mutual
funds, brokerage services, tax-advantaged products and retirement planning. Our
experienced financial consultants can help you make informed choices and provide
you with personalized attention in handling account transactions. The Financial
Centers also offer informative seminars and events. To find the Financial Center
nearest you, call 1-800-499-3327.
--------------------
EXCHANGE PRIVILEGE
You can exchange $500 or more from one Dreyfus fund into another (no minimum for
retirement accounts). You can request your exchange in writing or by phone. Be
sure to read the current prospectus for any fund into which you are exchanging.
Any new account established through an exchange will have the same privileges as
your original account (as long as they are available). Other than the redemption
fee described above under "Account Policies, Selling Shares," there is currently
no fee for exchanges, although you may be charged a sales fee when exchanging
into any fund that has one.
DREYFUS TELETRANSFER PRIVILEGE
To move money between your bank account and your Dreyfus fund account with a
phone call, use the Dreyfus TeleTransfer Privilege. You can set up TeleTransfer
on your account by providing bank account information and following the
instructions on your application.
ACCOUNT STATEMENTS
The fund will send your regular account statements and yearly statements
detailing the tax characteristics of any dividends and distributions you have
received.
[LEFT SIDE BAR}
RETIREMENT PLANS
Dreyfus offers a variety of retirement plans, including traditional, Roth and
Education IRAs. Here's where you call for information:
15
<PAGE>
o for traditional, rollover, Roth and Education IRAs, call 1-800-645-6561
o for SEP-IRAs, 401(k) and 403(b) accounts, call 1-800-322-7880
o for Keogh accounts, call 1-800-358-5566
16
<PAGE>
INSTRUCTIONS FOR REGULAR ACCOUNTS
TO OPEN AN ACCOUNT
[ICON] In Writing
Complete the application.
Mail your application and a check to:
The Dreyfus Family of Funds
P.O. Box 9387, Providence, RI 02940-9387
[ICON] By Telephone
WIRE Have your bank send your investment to The Boston Safe Deposit & Trust
Company, with these instructions:
o DDA# [______]
o the fund name
o your Social Security or tax ID number
o name(s) of investor(s)
Call us to obtain an account number.
Return your application.
[ICON] Automatically
WITH AN INITIAL INVESTMENT Indicate on your application which automatic
service(s) you want. Return your application with your investment.
WITHOUT ANY INITIAL INVESTMENT Check the Dreyfus Step Program option on your
application. Return your application, then complete the additional materials
when they are sent to you.
[ICON] Via the Internet
COMPUTER Visit the Dreyfus Web site, http://www.dreyfus.com, and follow the
instructions to download an account application.
TO ADD TO AN ACCOUNT
[editor's note: under "In Writing"]
17
<PAGE>
Fill out an investment slip, and write your account number on your check.
Mail the slip and the check to:
The Dreyfus Family of Funds
P.O. Box 105, Newark, NJ 07101-0105
[editor's note: under "By Telephone"]
WIRE Have your bank send your investment to The Boston Safe Deposit & Trust
Company, with these instructions:
o DDA# [______]
o the fund name
o your account number
o name(s) of investor(s)
ELECTRONIC CHECK Same as wire, but insert "[____]" before your account number
and add ABA# [___-______]
TELETRANSFER Request TeleTransfer on your application. Call us to request your
transaction.
[editor's note: under "Automatically"]
ALL SERVICES Call us to request a form to add any automatic investing service
(see "Services for Fund Investors"). Complete and return the forms along with
any other required materials.
[editor's note: under "Via the Internet"]
----------
TO SELL SHARES
[editor's note: under "In Writing"]
Write a letter of instruction that includes:
o your name(s) and signature(s)
o your account number
o the fund name the dollar amount you want to sell
o how and where to send the proceeds
18
<PAGE>
Obtain a signature guarantee or other documentation, if required (see "Account
Policies -- Selling Shares").
Mail your request to:
The Dreyfus Family of Funds
P.O. Box 9671, Providence, RI 02940-9671
[editor's note: under "By Telephone"]
WIRE Be sure the fund has your bank account information on file. Call us to
request your transaction. Proceeds will be wired to your bank.
TELETRANSFER Be sure the fund has your bank account information on file. Call us
to request your transaction. Proceeds will be sent to your bank by electronic
check.
CHECK Call us to request your transaction. A check will be sent to the address
of record.
[editor's note: under "Automatically"]
DREYFUS AUTOMATIC WITHDRAWAL PLAN Call us to request a form to add the plan.
Complete the form, specifying the amount and frequency of withdrawals you would
like.
Be sure to maintain an account balance of $5,000 or more.
[editor's note: under "Via the Internet"]
----------
[RIGHT SIDE BAR]
To reach Dreyfus, call toll free in the U.S.
1-800-645-6561
Outside the U.S. 516-794-5452
Make checks payable to:
THE DREYFUS FAMILY OF FUNDS
You also can deliver requests to any Dreyfus Financial Center. Because
processing time may vary, please ask the representative when your account will
be credited or debited.
19
<PAGE>
CONCEPTS TO UNDERSTAND
WIRE TRANSFER: for transferring money from one financial institution to another.
Wiring is the fastest way to move money, although your bank may charge a fee to
send or receive wire transfers.
ELECTRONIC CHECK: for transferring money out of a bank account. Your transaction
is entered electronically, but may take up to eight business days to clear.
Electronic checks usually are available without a fee at all Automated Clearing
House (ACH) banks.
20
<PAGE>
INSTRUCTIONS FOR IRAS
TO OPEN AN ACCOUNT
[ICON] In Writing
Complete an IRA application, making sure to specify the fund name and to
indicate the year the contribution is for.
Mail your application and a check to:
The Dreyfus Trust Company, Custodian
P.O. Box 6427, Providence, RI 02940-6427
[ICON] By Telephone
----------
[ICON] Automatically
WITHOUT ANY INITIAL INVESTMENT Call us to request a Dreyfus Step Program form.
Complete and return the form along with your application.
[ICON] Via the Internet
COMPUTER Visit the Dreyfus Web site, http://www.dreyfus.com, and follow the
instructions to download an account application
TO ADD TO AN ACCOUNT
[editor's note: under "In Writing"]
Fill out an investment slip, and write your account number on your check.
Indicate the year the contribution is for.
Mail in the slip and the check (see "To Open an Account").
[editor's note: under "By Telephone"]
21
<PAGE>
WIRE Have your bank send your investment to The Boston Safe Deposit & Trust
Company, with these instructions:
o DDA# [______]
o the fund name
o your account number
o name of investor
o the contribution year
ELECTRONIC CHECK Same as wire, but insert "[____]" before your account number
and add ABA# [___-______]
TELEPHONE CONTRIBUTION Call to request us to move money from a regular Dreyfus
account to an IRA (both accounts must have the same name).
[editor's note: under "Automatically"]
ALL SERVICES Call us to request a form to add an automatic investing service
(see "Services for Fund Investors"). Complete and return the form along with any
other required materials.
All contributions will count as current year.
[editor's note: under "Via the Internet"]
----------
TO SELL SHARES
[editor's note: under "In Writing"]
Write a letter of instruction that includes:
o your name and signature
o your account number
o the fund name
o the dollar amount you want to sell
o how and where to send the proceeds
o whether the distribution is qualified or premature
o whether the 10% TEFRA should be withheld
Obtain a signature guarantee or other documentation, if required.
Mail in your request (see "To Open an Account").
22
<PAGE>
[editor's note: under "By Telephone"]
----------
[editor's note: under "Automatically"]
DREYFUS AUTOMATIC WITHDRAWAL PLAN Call us to request instructions to establish
the plan.
[editor's note: under "Via the Internet"]
----------
[RIGHT SIDE BAR]
To reach Dreyfus, call toll free in the U.S.
1-800-645-6561
Outside the U.S. 516-794-5452
Make checks payable to:
THE DREYFUS TRUST CO., CUSTODIAN
You also can deliver requests to any Dreyfus Financial Center. Because
processing time may vary, please ask the representative when your account will
be credited or debited.
CONCEPTS TO UNDERSTAND
WIRE TRANSFER: for transferring money from one financial institution to another.
Wiring is the fastest way to move money, although your bank may charge a fee to
send or receive wire transfers.
ELECTRONIC CHECK: for transferring money out of a bank account. Your transaction
is entered electronically, but may take up to eight business days to clear.
Electronic checks usually are available without a fee at all Automated Clearing
House (ACH) banks.
23
<PAGE>
FOR MORE INFORMATION
Dreyfus Disciplined Smallcap Stock Fund,
A Series of The Dreyfus/Laurel Funds, Inc.
More information on this fund is available free upon request, including the
following:
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI provides more details about the fund and its policies. A current SAI is
on file with the Securities and Exchange Commission (SEC) and is incorporated by
reference (is legally considered part of this prospectus).
SEC file number: 811-5270
[LEFT SIDE BAR]
TO OBTAIN INFORMATION:
BY TELEPHONE
Call 1-800-645-6561
BY MAIL Write to:
Dreyfus Family of Funds
144 Glenn Curtiss Boulevard
Uniondale, NY 11556-0144
BY E-MAIL Send your request to [email protected]
ON THE INTERNET Text-only versions of fund documents can be viewed online or
downloaded from:
SEC
http://www.sec.gov
24
<PAGE>
DREYFUS
http://www.dreyfus.com
You can also obtain copies by visiting the SEC's Public Reference Room in
Washington, DC (phone 1-800-SEC-0330) or by sending your request and a
duplicating fee to the SEC's Public Reference Section, Washington, DC
20549-6009.
25
<PAGE>
DREYFUS DISCIPLINED SMALLCAP STOCK FUND
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
SEPTEMBER 30, 1998
This Statement of Additional Information ("SAI"), which is not a
prospectus, supplements and should be read in conjunction with the current
Prospectus of Dreyfus Disciplined Smallcap Stock Fund (the "Fund"), dated
September 30, 1998, as it may be revised from time to time. The Fund is a
separate, diversified portfolio of The Dreyfus/Laurel Funds, Inc. (the
"Company"), an open-end management investment 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. -- Call 516-794-5452
TABLE OF CONTENTS
PAGE
Description of the Fund................................................... B-2
Management of the Fund.................................................... B-18
Management Arrangements................................................... B-24
Purchase of Shares........................................................ B-26
Distribution Plan......................................................... B-28
Redemption of Shares...................................................... B-30
Shareholder Services...................................................... B-32
Determination of Net Asset Value.......................................... B-37
Dividends, Other Distributions and Taxes.................................. B-37
Portfolio Transactions.................................................... B-42
Performance Information................................................... B-43
Information About the Fund................................................ B-44
Transfer and Dividend Disbursing Agent, Custodian, Counsel and
Independent Auditors.................................................... B-46
Financial Statements...................................................... B-47
Appendix.................................................................. B-48
<PAGE>
DESCRIPTION OF THE FUND
THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTIONS OF THE FUND'S PROSPECTUS ENTITLED "GOAL/APPROACH" AND "MAIN
RISKS."
The Company is a Maryland corporation formed on August 6, 1987. Before
October 17, 1994, the Company's name was The Laurel Funds, Inc. The Company is
an open-end management investment company comprised of separate portfolios,
including the Fund, each of which is treated as a separate fund. The Fund is
diversified, which means that, with respect to 75% of its total assets, the Fund
will not invest more than 5% of its assets in the securities of any single
issuer.
The Dreyfus Corporation ("Dreyfus") serves as the Fund's investment
manager.
CERTAIN PORTFOLIO SECURITIES
The Fund may purchase the portfolio securities described below.
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 that 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 the agencies or instrumentalities described in (b), (c) and (d) in the
future, other than as set forth above, since it is not obligated to do so by
law.
COMMERCIAL PAPER. The Fund may invest in commercial paper issued in
reliance on the so-called "private placement" exemption from registration
afforded by Section 4(2) of the Securities Act of 1933, 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, such as the Fund,
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
B-2
<PAGE>
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.
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 Fund's credit guidelines. 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 Fund's credit guidelines.
WHEN-ISSUED SECURITIES AND DELAYED DELIVERY TRANSACTIONS. 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
B-3
<PAGE>
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.
To secure advantageous prices or yields, the Fund 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 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
delayed delivery commitments.
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.
ADRS AND NEW YORK SHARES. The Fund may invest in U.S. dollar-denominated
ADRs and "New York Shares." ADRs typically are issued by an American bank or
trust company and evidence ownership of underlying securities issued by foreign
companies. New York Shares are securities of foreign companies that are issued
for trading in the United States. ADRs and New York Shares 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,
B-4
<PAGE>
including those resulting from adverse political and economic developments and
the imposition of foreign governmental laws or restrictions. See "Foreign
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 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. 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 holders.
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 National Association of Securities Dealers, Inc. apply to the
distribution of IPOs. Corporations offering IPOs generally have a limited
operating history and may involve greater risk.
OTHER INVESTMENT COMPANIES. The Fund may invest in securities issued by
other investment companies to the extent that such investments are consistent
with the Fund's investment objective and policies and permissible under the
Investment Company Act of 1940, as amended ("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.
INVESTMENT TECHNIQUES
In addition to the principal investment strategies discussed in the Fund's
prospectus, the Fund also may engage in the investment techniques described
below.
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.
B-5
<PAGE>
LOANS OF FUND SECURITIES. The Fund may lend securities from its portfolio
to brokers, dealers and other financial institutions needing to borrow
securities to complete certain transactions. The Fund continues to be entitled
to payments in amounts equal to the interest, dividends or other distributions
payable on the loaned securities, which affords the Fund an opportunity to earn
interest on the amount of the loan and on the loaned securities' collateral.
Loans of portfolio securities may not exceed 33-1/3% of the value of the Fund's
total assets and the Fund will receive collateral consisting of cash, U.S.
Government securities or irrevocable letters of credit which will be maintained
at all times in an amount equal to at least 100% of the current market value of
the loaned securities. These loans are terminable by the Fund at any time upon
specified notice. The Fund might experience risk of loss if the institution with
which it has engaged in a portfolio loan transaction breaches its agreement with
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 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.
DERIVATIVE INSTRUMENTS. The Fund may purchase and sell various financial
instruments ("Derivative Instruments"), including financial futures contracts
(such as index futures contracts) and options (such as options on U.S. and
foreign securities or indices of such securities) 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
B-6
<PAGE>
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 may 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
B-7
<PAGE>
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
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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
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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."
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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 writes a call, it assumes a short futures position. If the
Fund writes 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.
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<PAGE>
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.
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<PAGE>
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.
B-13
<PAGE>
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
on 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.
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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 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. 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."
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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
risks will be materially reduced if this option is implemented.
INVESTMENT RESTRICTIONS
FUNDAMENTAL. The following fundamental 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 25% or more 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 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 borrowing, and (b) the Fund may
issue multiple classes of shares. The purchase or sale of options, forward
contacts, futures contracts, including those relating to indices, and options on
futures contracts or indices 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 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
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<PAGE>
mortgage loans, or securities of companies that engage in the 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 the 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
options, forward contracts, and futures contracts, including those related to
indices, and options on futures contracts or indices.
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.
NON-FUNDAMENTAL. The Fund has adopted the following additional
non-fundamental investment restrictions. These non-fundamental restrictions
may be changed without shareholder approval, in compliance with applicable
law and regulatory policy.
1. 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 that are not readily marketable. For purposes
of this limitation, illiquid securities shall not include commercial paper
issued pursuant to Section 4(2) of the Securities Act of 1933, as amended, and
securities that may be resold under Rule 144A under that 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.
2. The Fund will 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.
3. The Fund will 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.
4. The Fund will 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.
5. The Fund will not purchase any security while borrowings representing
more than 5% of the Fund's total assets are outstanding.
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If a percentage restriction is adhered to at the time of an investment, a
later increase or decrease in such percentage resulting from a change in the
values of assets will not constitute a violation of such restriction, except as
otherwise required by the 1940 Act.
MANAGEMENT OF THE FUND
FEDERAL LAW AFFECTING MELLON BANK
The Glass-Steagall Act of 1933 prohibits national banks from engaging in
the business of underwriting, selling or distributing securities and prohibits a
member bank of the Federal Reserve System from having certain affiliations with
an entity engaged principally in that business. The activities of Mellon Bank,
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
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 OF THE COMPANY
The Company's Board is responsible for the management and supervision of
the Fund. The Board approves all significant agreements between the Company, on
behalf of the Fund, and those companies that furnish services to the Fund. These
companies are as follows:
The Dreyfus Corporation...............................Investment Adviser
Premier Mutual Fund Services, Inc............................Distributor
Dreyfus Transfer, Inc.....................................Transfer Agent
Mellon Bank.......................................Custodian for the Fund
.......The Company has a Board composed of twelve Directors. 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").
B-18
<PAGE>
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: 80 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: 81 years old. Address: Massachusetts Business
Development Corp., 50 Milk Street, Boston, Massachusetts 02109.
o+JOSEPH S. DIMARTINO, Director of the Company. Since January 1995, Mr.
DiMartino has served as Chairman of the Board for various funds in the
Dreyfus Family of Funds. He is also 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, Staffing Resources, Inc., a temporary placement agency,
Carlyle Industries, Inc. (formerly Belding Heminway, Inc.), a button
packager and distributor, and Century Business Services, Inc., a
provider of various outsourcing functions for small and medium sized
corporations. 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; 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; former Chairman of the Board
and Director, Rexene Corporation; Chairman of the Board and Director,
Tetra Technology Corporation 1991-1993; Director, Medalist Corporation
1992-1993. From November 1995 to January 1997, Director, Access
B-19
<PAGE>
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; Member of Advisory Committee, Decedents
Estates Laws of Pennsylvania; 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 Hyams 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.
o+BENAREE PRATT WILEY. Director of the Company; President and CEO of The
Partnership, an organization dedicated to increasing the representation
of African Americans in positions of leadership, influence and
decision-making in Boston, MA; Trustee, Boston College; Trustee, WGBH
Educational Foundation; Trustee, Children's Hospital; Director, The
Greater Boston Chamber of Commerce; Director, The First Albany
Companies, Inc.; from April 1995 to March 1998, Director, TBC, an
B-20
<PAGE>
affiliate of Dreyfus. Age: 51 years old. Address: 334 Boylston
Street, Suite 400, Boston, Massachusetts.
- --------------------------------
* "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
#MARGARET W. CHAMBERS. Vice President and Secretary of the Company. Senior
Vice President and General Counsel of Funds Distributor, Inc. From
August 1996 to March 1998, she was Vice President and Assistant General
Counsel for Loomis, Sayles & Company, L.P. From January 1986 to July
1996, she was an associate with the law firm of Ropes & Gray. Age: 38
years old.
#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.
#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. 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. From July 1994 to November 1995, she was a Fund Accountant for
Investors Bank &Trust Company. 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. 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.
B-21
<PAGE>
#STEPHANIE PIERCE. Vice President, Assistant Treasurer and Assistant
Secretary of the Company. Vice President and Client Development
Manager of Funds Distributor, Inc. From April 1997 to March 1998, she
was employed as a Relationship Manager with Citibank, N.A. Age: 29
years old.
#GEORGE A. RIO. Vice President and Assistant Treasurer of the Company.
Executive Vice President and Client Service Director of Funds
Distributor, Inc. From June 1995 to March 1998, he was Senior Vice
President and Senior Key Account Manager for Putnam Mutual Funds. From
May 1994 to June 1995, he was Director of Business Development for
First Data Corporation. From September 1983 to May 1994, he was Senior
Vice President & Manager of Client Services and Director of Internal
Audit at The Boston Company. Age: 43 years old.
#JOSEPH F. TOWER, III. Vice President and Assistant Treasurer of the
Company. Senior Vice President, Treasurer, Chief Financial Officer and
a Director 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. From March 1990 to May 1996, she
was employed by U.S. Trust Company of New York, where she held various
sales and marketing positions. 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 address of each officer of the Fund is 200 Park Avenue, New York, New
York 10166.
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 Trustee/Director
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
Trustees/Directors of the Dreyfus/Laurel Funds). In addition, the Dreyfus/Laurel
Funds pay each Trustee/Director 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 Trustee/Director who is not an "interested person"
of the Company (as defined in the 1940 Act) for travel and out-of-pocket
expenses.
B-22
<PAGE>
For the fiscal year ended October 31, 1997, the aggregate amount of fees
and expenses received by each current Director (with the exception of Ms. Wiley
who was not a Director of the Company as of October 31, 1997) 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 P. Brennan includes $25,000 paid by the
Dreyfus/Laurel Funds to be the 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 S.
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
B-23
<PAGE>
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 paid for the year ended December 31, 1997.
**** The Dreyfus Family of Funds consists of ___ mutual 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 September __,
1998.
[As of September _, 1998, the following shareholder(s) owned of record
5% or more of Fund shares: ]
MANAGEMENT ARRANGEMENTS
THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTIONS IN THE FUND'S PROSPECTUS ENTITLED "EXPENSES" AND "MANAGEMENT."
Dreyfus is a wholly-owned subsidiary of Mellon Bank Corporation
("Mellon"). 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.
MANAGEMENT AGREEMENT. Dreyfus serves as 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
was approved with respect to the Fund on July 30, 1998 to continue until April
4, 2000. Thereafter, the Management Agreement will be 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 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 (as defined in the 1940 Act).
B-24
<PAGE>
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; Ronald P. O'Hanley III, Vice
Chairman; J. David Officer, Vice Chairman 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 services; William V.
Healey, Assistant Secretary; and Mandell L. Berman, Burton C. Borgelt, Frank
V. Cahouet and Richard F. Syron, directors.
EXPENSES. Under the 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. 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, which would have the effect of lowering the expense ratio
of the Fund and increasing return to investors. In addition, the Fund is subject
to a distribution plan under which the Fund spends annually up to .25% of its
average daily net assets for distribution and shareholder servicing activities.
See "Distribution Plan." Expenses attributable to the Fund are charged against
the Fund's assets; other expenses of the Company are allocated among its funds
on the basis determined by the Board, including, but not limited to,
proportionately in relation to the net assets of each fund.
THE DISTRIBUTOR. Premier Mutual Fund Services, Inc. (the "Distributor"),
located at 60 State Street, Boston, Massachusetts 02109, serves as the Fund's
distributor on a best efforts basis pursuant to an agreement which is renewable
annually. 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 certain
banks, securities brokers or dealers and other financial institutions ("Agents")
for these services. The Distributor also acts as distributor for the other funds
in the Dreyfus Family of Funds and for certain other investment companies.
PURCHASE OF SHARES
THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTIONS IN THE FUND'S PROSPECTUS ENTITLED "ACCOUNT POLICIES,"
"SERVICES FOR FUND INVESTORS," "INSTRUCTIONS FOR REGULAR ACCOUNTS," AND
"INSTRUCTIONS FOR IRAS."
GENERAL. 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
B-25
<PAGE>
aggregate minimum initial purchase for its customers of $2,500. Subsequent
investments must be at least $100. However, 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 for subsequent purchases. The initial investment
must be accompanied by the 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 accounts, the minimum initial
investment is $50. The Fund reserves the right to offer Fund shares without
regard to minimum purchase requirements to employees participating in certain
qualified or non-qualified employee benefit plans or other programs where
contributions or account information can be transmitted in a manner and form
acceptable to the Fund. The Fund reserves the right to vary further the initial
and subsequent investment minimum requirements at any time.
Fund shares also are offered without regard to the minimum initial
investment requirements through Dreyfus-AUTOMATIC Asset Builder(R), 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.
Management understands that some Agents may impose certain conditions on
their clients which are different from those described in the Fund's Prospectus
and this Statement of Additional Information, and, to the extent permitted by
applicable regulatory authority, may charge their clients direct fees. You
should consult your Agent in this regard. See "Distribution Plan."
Fund shares are sold on a continuous basis at the net asset value per
share next determined after an order in proper form is received by the Transfer
Agent or other entity authorized to receive orders on behalf of the Fund. Net
asset value per share is determined as of the close of trading on the floor of
the New York Stock Exchange (currently 4:00 p.m., New York time), on each day
the New York Stock Exchange is open for business. For purposes of determining
net asset value, options and futures contracts will be valued 15 minutes after
the close of trading on the floor of the New York Stock Exchange. Net asset
value per share is computed by dividing the value of the Fund's net assets
(i.e., the value of its assets less liabilities) by the total number of Fund
shares outstanding. The Fund's investments are valued based on market value or,
where market quotations are not readily available, based on fair value as
determined in good faith by the Company's Board. Certain securities may be
valued by an independent pricing service approved by the Company's Board and are
valued at fair value as determined by the pricing service. For further
information regarding the methods employed in valuing the Fund's investments,
see "Determination of Net Asset Value".
B-26
<PAGE>
Orders for the purchase of Fund shares received by dealers by the close of
trading on the floor of the New York Stock Exchange 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 net asset value determined
as of the close of trading on the floor of the New York Stock Exchange on that
day. Otherwise, the orders will be based on the next determined net asset value.
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 canceled and the institution could
be held liable for resulting fees and/or losses.
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
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
$1,000,000 ("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.
DREYFUS TELETRANSFER PRIVILEGE. You may purchase shares by telephone
through 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. 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 Automated Clearing House member may be so designated.
Dreyfus TELETRANSFER purchase orders may be made at any time. Purchase orders
received by 4:00 p.m. New York time, on any business day that Dreyfus Transfer,
Inc., the Fund's transfer and dividend disbursing agent (the "Transfer Agent"),
and the New York Stock Exchange are open for business will be credited to the
shareholder's Fund account on the next bank business day following such purchase
order. Purchase orders made after 4:00 p.m. New York time, on any business day
the Transfer Agent and the New York Stock Exchange are open for business, or
orders made on Saturday, Sunday or any Fund holiday (e.g., when the New York
Stock Exchange is not open for business), will be credited to the shareholder's
Fund account on the second bank business day following such purchase order. 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 Shares - Dreyfus TELETRANSFER
Privilege."
B-27
<PAGE>
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.
SHARE CERTIFICATES. Share certificates are issued upon written request
only. No certificates are issued for fractional shares.
DISTRIBUTION PLAN
THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTION IN THE FUND'S PROSPECTUS ENTITLED "EXPENSES."
Fund shares are subject to fees for distribution and shareholder services.
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.
DISTRIBUTION PLAN. Fund shares are subject to a Distribution Plan (the
"Plan") adopted pursuant to the Rule. The Plan allows the Fund to spend annually
up to 0.25% 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
B-28
<PAGE>
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 for distribution related services
and/or shareholder services. 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 fees are payable
pursuant to the Plan without regard to expenses incurred.
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. Potential investors should read the Fund's
Prospectus and this SAI in light of the terms governing Agreements with their
Agents.
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 Dreyfus (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 was approved by the entire Board of Directors and by
the Directors who were neither "interested persons" of the Company nor Dreyfus
(as defined in the 1940 Act) and who did not have any direct or indirect
financial interest in the operation of the Plan at a meeting held on July 30,
1998. The Plan is subject to annual approval by the entire Board of Directors
and by the Directors who are neither interested persons nor have any direct or
indirect financial interest in the operation of the Plan, by vote cast in person
at a meeting called for the purpose of voting on the Plan. The Plan is
terminable 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 (as defined in the
1940 Act) of the outstanding shares of the Fund.
REDEMPTION OF SHARES
THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTION IN THE FUND'S PROSPECTUS ENTITLED "ACCOUNT POLICIES," "SERVICES
FOR FUND INVESTORS," "INSTRUCTIONS FOR REGULAR ACCOUNTS" AND
"INSTRUCTIONS FOR IRAS."
REDEMPTION FEE. The Fund will deduct a redemption fee equal to 1% of the
net asset value of Fund shares redeemed (including redemptions through the use
of the Fund Exchanges service) less than 6 months following the issuance of such
shares. The redemption fee will be deducted from the redemption proceeds and
retained by the Fund.
No redemption fee will be charged on the redemption or exchange of shares
(1) through the Fund's Automatic Withdrawal Plan or Dreyfus Auto-Exchange
Privilege, (2) through accounts that are reflected on the records of the
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<PAGE>
Transfer Agent as omnibus accounts approved by Dreyfus Service Corporation, (3)
through accounts established by Agents approved by Dreyfus Service Corporation
that utilize the National Securities Clearing Corporation's networking system,
or (4) acquired through the reinvestment of dividends or capital gain
distributions. The redemption fee may be waived, modified or terminated at any
time.
REDEMPTION THROUGH A SELECTED DEALER. Customers of certain Agents
("Selected Dealers") may make redemption requests to their 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 New York
Stock Exchange (currently 4:00 p.m., 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 New York Stock Exchange,
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 New York Stock Exchange 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 New York Stock Exchange on that day. Otherwise,
the Fund shares will be redeemed at the next determined net asset value. 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.
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 ($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 Shareholder Services Form, or 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 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:
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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."
DREYFUS TELETRANSFER PRIVILEGE. You may request by telephone that
redemption proceeds be transferred between your Fund account and your bank
account. Only a bank account maintained in a domestic financial institution
which is an Automated Clearing House member may be designated. Redemption
proceeds will be on deposit in your account at an Automated Clearing House
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. 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 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.
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REDEMPTION COMMITMENT. The Company 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 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 SECTIONS IN THE FUND'S PROSPECTUS ENTITLED "ACCOUNT POLICIES" AND
"SERVICES FOR FUND INVESTORS."
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
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<PAGE>
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(REGISTERED) 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 new account 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.
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.
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<PAGE>
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 other 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.
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 Builder(R), 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
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<PAGE>
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 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 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,
SEP-IRAs and IRA "Rollover Accounts."
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 a 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.
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
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<PAGE>
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 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 anticipated 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 Fund Exchanges 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.
DETERMINATION OF NET ASSET VALUE
THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTION IN THE FUND'S PROSPECTUS ENTITLED "ACCOUNT POLICIES."
VALUATION OF PORTFOLIO SECURITIES. Each Fund's securities are valued at
the last sale price on the securities exchange or national securities market on
which such securities primarily are traded. Securities not listed on an exchange
or national securities market, or securities in which there were no
transactions, are valued at the average of the most recent bid and asked prices.
Bid price is used when no asked price is available. Any assets or liabilities
initially expressed in terms of foreign currency will be translated into U.S.
dollars at the midpoint of the New York interbank market spot exchange rate as
quoted on the day of such translation or, if no such rate is quoted on such
date, such other quoted market exchange rate as may be determined to be
appropriate by Dreyfus. If the Fund has to obtain prices as of the close of
trading on various exchanges throughout the world, the calculation of net asset
value may not take place contemporaneously with the determination of prices of
certain of the Fund's securities. Short-term investments are carried at
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<PAGE>
amortized cost, which approximates value. Expenses and fees, including the
management fee and fees pursuant to the Plan, are accrued daily and taken into
account for the purpose of determining the net asset value of the Fund's 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 New York Stock Exchange 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 " 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. It is expected that the Fund will qualify for treatment as a
regulated investment company ("RIC") under the Internal Revenue Code of 1986, as
amended ("Code") so long as such qualification is in the best interests of its
shareholders. To qualify for treatment as a 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 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
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<PAGE>
shares of the Fund held for six months or less and 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 a 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 federal 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.
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 in 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 it distributes that income 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 (I.E., 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
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Requirement and avoid imposition of the 4% excise tax mentioned in the
Prospectus under "Dividends, Other Distributions and Taxes" ("Excise Tax") --
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.
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 gains and losses. 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 contracts and options) 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 option and straddle investments.
Under Section 1256 of the Code, any gain or loss realized by the Fund with
respect to certain future 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. The 60%
portion treated as long-term capital gain will qualify for the reduced maximum
tax rates on non-corporate taxpayers' net capital gain enacted by the Taxpayer
Relief Act of 1997 -- 20% (10% for taxpayers in the 15% marginal tax bracket)
for gain recognized on capital assets held for more than 18 months -- instead of
the 28% rate in effect before that legislation, which now applies to gain
recognized on capital assets held for more than one year but not more than 18
months.
Offsetting positions held by the Fund involving certain options, future or
forward contracts may constitute "straddles," which are defined to include
"offsetting positions" in actively traded personal property. All or a portion of
any capital gain from certain straddle transactions may be recharacterized as
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ordinary income. If the Fund were treated as entering into a straddle by reason
of its engaging in certain options, future or forward contract transactions, the
straddle would be characterized as a "mixed straddle" if at least one of the
positions comprising a part of the straddle was a Section 1256 Contract. 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.
If the Fund has an "appreciated financial position" -- generally, an
interest (including an interest through an option, futures or forward contract,
or short sale) with respect to any stock, debt instrument (other than "straight
debt"), or partnership interest the fair market value of which exceeds its
adjusted basis -- and enters into a "constructive sale" of the same or
substantially similar property, the Fund will be treated as having made an
actual sale thereof, with the result that gain will be recognized at that time.
A constructive sale generally consists of a short sale, an offsetting notional
principal contract, or futures or forward contract entered into by the Fund or a
related person with respect to the same or substantially similar property. In
addition, if the appreciated financial position is itself a short sale or such a
contract, acquisition of the underlying property or substantially similar
property will be deemed a constructive sale.
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. 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.
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, it may
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<PAGE>
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
the rate of 31% of capital gain distributions and of the gross proceeds from a
redemption of Fund shares unless the shareholder certifies his or her foreign
status to the Fund.
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
B-41
<PAGE>
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,
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<PAGE>
however, the ability of the Fund to participate in volume transactions will
produce better executions for the Fund. It is the present opinion of the
Directors that the desirability of retaining the Dreyfus as investment manager
to the Fund outweighs any disadvantages that may be said to exist from exposure
to simultaneous transactions.
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. Portfolio turnover may vary from year to
year as well as within a year. In periods in which extraordinary market
conditions prevail, Dreyfus will not be deterred from changing the Fund's
investment strategy as rapidly as needed, in which case higher turnover rates
can be anticipated. 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 to any
other considerations when Dreyfus deems it appropriate to make changes in the
Fund's assets.
PERFORMANCE INFORMATION
THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTION IN THE FUND'S PROSPECTUS ENTITLED "PAST PERFORMANCE."
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.
Performance information for the Fund may be compared, in reports and
promotional literature, to indexes including, but not limited to: (i) the
Russell 2000(REGISTERED) Value Index, the Russell 2000(REGISTERED) Growth Index,
or the Russell 2000(REGISTERED) Stock Index; (ii) the Standard & Poor's SmallCap
600 (REGISTERED) Index; (iii) the Dow Jones Industrial Average; (iv) 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; (v) 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; (vi) the Consumer Price Index
B-43
<PAGE>
(a measure of inflation) to assess the real rate of return from an investment in
the Fund; and (vii) products managed by a universe of money managers with
similar 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 relating to his or
her 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.
INFORMATION ABOUT THE FUND
THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTION IN THE FUND'S PROSPECTUS ENTITLED "THE FUND".
The Company has an authorized capitalization of 25 billion shares of
$0.001 par value stock. 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 nineteen portfolios of the Company. Fund
shares are of one class and have equal rights as to dividends and in
liquidation. Fund shares have no preemptive or subscription rights and are
freely transferable.
Unless otherwise required by the 1940 Act, ordinarily it will not be
necessary for the Company to hold annual meetings of shareholders. As a result,
Fund shareholders may not consider each year the election of Board members 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 Board member from office.
Shareholders may remove a Board member by the affirmative vote of a majority of
the Company's outstanding voting shares. In addition, the Board will call a
meeting of shareholders for the purpose of electing Board members if, at any
time, less than a majority of the Board members then holding office have been
elected by shareholders.
The Company is a "series fund," which is a mutual fund divided into
separate portfolios, each of which is treated as a separate entity for certain
matters under the 1940 Act and for other purposes. A shareholder of one
portfolio is not deemed to be a shareholder of any other portfolio. For certain
B-44
<PAGE>
matters shareholders vote together as a group; as to others they vote separately
by portfolio.
Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted under the provisions of the 1940 Act or applicable state law or
otherwise to the holders of the outstanding voting securities of an investment
company, such as the Company, will not be deemed to have been effectively acted
upon unless approved by the holders of a majority of the outstanding shares of
each series affected by such matter. Rule 18f-2 further provides that a series
shall be deemed to be affected by a matter unless it is clear that the interests
of each series in the matter are identical or that the matter does not affect
any interest of such series. The Rule exempts the selection of independent
accountants and the election of Board members from the separate voting
requirements of the Rule.
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.
[___________] was appointed by the Directors to serve as the Fund's
independent auditors for the period 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.
B-45
<PAGE>
FINANCIAL STATEMENTS
[To be filed by Amendment.]
B-46
<PAGE>
APPENDIX
DESCRIPTION OF STANDARD & POOR'S, MOODY'S,
FITCH, DUFF AND IBCA 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.
S&P's letter ratings may be modified by the addition of a plus (+) or a
minus (-) sign designation, which is used to show relative standing within the
major rating categories, except in the AAA (Prime Grade) category.
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.
Issues assigned an A rating are regarded as having the greatest capacity for
timely payment. Issues in this category are delineated with the numbers 1, 2 and
3 to indicate the relative degree of safety.
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.
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<PAGE>
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 the major rating categories, except in the Aaa category and in
the categories below 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.
COMMERCIAL PAPER RATINGS
The rating Prime-1 (P-1) is the highest commercial paper rating assigned
by Moody's. Issuers of P-1 paper must have a superior capacity for repayment of
short-term promissory obligations, and ordinarily will be evidenced by leading
market positions in well established industries, high rates of return on funds
employed, conservative capitalization structures with moderate reliance on debt
and ample asset protection, broad margins in earnings coverage of fixed
financial charges and high internal cash generation, and well established access
to a range of financial markets and assured sources of alternate liquidity.
B-48
<PAGE>
FITCH INVESTORS SERVICES, L.P. ("FITCH")
SHORT-TERM 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+'.
DUFF & PHELPS INC. ("DUFF")
COMMERCIAL PAPER RATINGS
The rating Duff-1 is the highest commercial paper rating assigned by Duff.
Paper rated Duff-1 is regarded as having very high certainty of timely payment
with excellent liquidity factors which are supported by ample asset protection.
Risk factors are minor.
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.
B-49
<PAGE>
DREYFUS
TAX-EFFICIENT
GROWTH FUND
Investing in common stocks for long-term capital appreciation
while minimizing taxable gains and income
PROSPECTUS September 30, 1998
DREYFUS [LOGO]
As with all mutual funds, the Securities and Exchange Commission does not
guarantee that the information in this prospectus is accurate or complete, nor
has it judged this fund for investment merit. It is a criminal offense to state
otherwise.
<PAGE>
CONTENTS
THE FUND
- --------------------------------------------------------------------------------
What every investor should 2 Goal/Approach
know about the fund 3 Main Risks
4 Past Performance
5 Expenses
6 Management
YOUR INVESTMENT
- --------------------------------------------------------------------------------
Information for managing 7 Account Policies
your fund account 10 Distributions and Taxes
11 Services for Fund Investors
13 Instructions for Regular Accounts
15 Instructions for IRAs
FOR MORE INFORMATION
- --------------------------------------------------------------------------------
Where to learn more about Back Cover
this and other Dreyfus
funds
1
<PAGE>
Dreyfus TAX-EFFICIENT GROWTH FUND THE FUND
Ticker Symbol: __________
[ICON] GOAL/APPROACH
The fund seeks long-term capital appreciation consistent with minimizing
realized capital gains and taxable current income. This objective may be changed
without shareholder approval. The fund invests in a diversified portfolio of
common stocks of companies that Fayez Sarofim & Co. (Sarofim), the fund's
sub-investment adviser, believes offer above average potential for appreciation
in market value.
The fund manages risk by diversifying across companies and industries, limiting
the potential adverse impact from any one stock or industry. Under normal market
conditions, the fund invests principally in common stocks of domestic and
foreign issuers and common stocks with warrants attached. The fund will
generally seek investment opportunities in larger capitalized companies
(companies with market capitalizations exceeding $5 billion) that Sarofim
believes have the potential to experience strong earnings growth. The fund will
also invest in issuers that it considers undervalued in terms of current
earnings, assets, or growth prospects. Under normal market conditions, the fund
does not expect to have a substantial portion of its assets invested in
instruments other than common stocks.
To minimize adverse tax impacts on investors in the fund, the fund employs a
long-term, low portfolio turnover investment approach and emphasizes investments
in equities of high-quality companies, generally with relatively low yields.
High portfolio turnover may result in increased realization of short-term
capital gains that, when distributed to the fund's shareholders, are taxable to
them as ordinary income, and greater transaction costs to the fund.
Consequently, the annual portfolio turnover rate for the fund generally will not
exceed 15%, and will exceed 25% only given extraordinary market conditions.
When advisable, the fund will sell under-performing securities to realize
capital losses that may be used to offset realized capital gains from the sale
of securities in other transactions. The fund also invests in companies with
meaningful share repurchase programs as a means of returning excess cash to
shareholders.
[LEFT SIDE BAR]
CONCEPTS TO UNDERSTAND
The Taxpayer Relief Act of 1997 lowered the top tax rate on long-term capital
gains for assets held for more than 18 months from 28% to 20%; legislation
awaiting approval by the President would reduce this holding period to 12
months. Long-term gains are generally taxed at a more favorable rate than
short-term capital gains and current income.
2
<PAGE>
[ICON] MAIN RISKS
Stocks do fluctuate in price. The value of your investment in the fund will go
up and down, which means that you could lose money.
The fund may invest in securities of foreign issuers. Foreign securities are
subject to political, economic, currency and other risks. As a result, foreign
securities may be less liquid and their prices more volatile than securities of
comparable domestic issuers.
The fund primarily invests in growth stocks that are expected to increase their
earnings at a certain rate. If these expectations are not met, investors can
punish the stocks inordinately, even if earnings do increase. In addition,
growth stocks typically lack the dividend yield that can cushion stock prices in
market downturns.
Value stocks are those that are believed to be underpriced in terms of various
financial measurements. Investments in value stocks are subject to the risk that
their intrinsic values may never be realized by the market, or that their prices
may go down.
Under adverse market conditions, the fund could invest some or all of its assets
in money market securities. Although the fund would do this only in seeking to
avoid losses, it could reduce the benefit from any upswing in the market.
Due to the fund's tax-efficient investment approach, the fund may be expected to
provide only a nominal or relatively low level of taxable income as compared to
a traditionally managed mutual fund. Accordingly, the fund is designed for
long-term investors with little or no need for investment income. Conversely,
the fund is not designed for, and may not be suitable for, investors such as
qualified pension, profit-sharing and other tax-deferred retirement plans, or
individual retirement accounts (IRAs), whose income is not subject to current
federal income taxation. The fund is not a tax-exempt fund and may be expected
to earn and distribute taxable income and to realize and distribute capital
gains from time to time.
[LEFT SIDE BAR]
OTHER POTENTIAL RISKS
The fund may write (I.E., sell) covered call option contracts. This practice can
be used to hedge the fund's portfolio and also to increase returns. It may
sometimes reduce returns or increase volatility.
3
<PAGE>
[ICON] PAST PERFORMANCE
Past performance information is not available for the fund as of the date of
this Prospectus.
--------------------
This fund is a mutual fund: a pooled investment that is professionally managed
and gives you the opportunity to participate in financial markets. It strives to
reach its stated goal, although as with all mutual funds, it cannot offer
guaranteed results.
An investment in the fund is not a bank deposit. It is not FDIC-insured or
government-endorsed. It is not a complete investment program. You could lose
money in this fund, but you also have the potential to make money.
4
<PAGE>
[ICON] EXPENSES
As an investor, you pay certain fees and expenses in connection with the fund,
which are described in the table below. Shareholder transaction fees are paid
from your account. Annual fund operating expenses are paid out of fund assets,
so their effect is included in the share price. The fund has no sales charge
(load).
- --------------------
FEE TABLE
SHAREHOLDER TRANSACTION FEES
% OF TRANSACTION AMOUNT
Maximum redemption fee* 1.00%
- --------------------
ANNUAL FUND OPERATING EXPENSES
% OF AVERAGE DAILY NET ASSETS
Management fee 1.10%
12b-1 fee 0.25%
Other expenses** 0.00%
- --------------------------------------------------------------------------------
TOTAL 1.35%
* For redemptions or exchanges of shares made within 6 months of their issuance.
** Other expenses are based on estimated amounts for the current fiscal year.
- --------------------
EXPENSE EXAMPLE
1 Year 3 Years
[$ ] [$ ]
--- ---
This example shows what you could pay in expenses over time. It uses the same
hypothetical conditions other funds use in their prospectuses: $10,000 initial
investment, 5% total return each year and no changes in expenses. The figures
shown would be the same whether you sold your shares at the end of a period or
kept them. Because actual return and expenses will be different, the example is
for comparison only.
- --------------------------------------------------------------------------------
[LEFT SIDE BAR]
CONCEPTS TO UNDERSTAND
MANAGEMENT FEE: the fee paid to The Dreyfus Corporation for managing the fund.
Unlike the arrangements between most funds and their investment advisers,
Dreyfus pays all fund expenses except for brokerage fees, taxes, interest, fees
and expenses of the non-interested directors, Rule 12b-1 fees and extraordinary
expenses.
5
<PAGE>
12B-1 FEE: the fee paid to Mellon Bank, N.A. and its affiliates for shareholder
servicing and to the fund's distributor for shareholder servicing and
promotional expenses. Because this fee is paid out of the fund's assets on an
ongoing basis, over time it will increase the cost of your investment and may
cost you more than paying other types of sales charges.
[ICON] MANAGEMENT
The fund's investment adviser is The Dreyfus Corporation, 200 Park Avenue, New
York, NY 10166. Founded in 1947, Dreyfus manages one of the nation's leading
mutual fund complexes with more than $100 billion in over 150 mutual fund
portfolios. Dreyfus is the mutual fund business of Mellon Bank Corporation, a
broad-based financial services company with a bank at its core. With more than
$325 billion of assets under management and $1.6 trillion of assets under
administration, Mellon provides a full range of banking, investment and trust
products and services to individuals, businesses and institutions. Its mutual
fund companies place Mellon as the leading bank manager of mutual funds. Mellon
is headquartered in Pittsburgh, Pennsylvania.
Dreyfus has engaged Sarofim, located at Two Houston Center, Suite 2907, Houston,
Texas 77010, to serve as the fund's sub-investment adviser. Sarofim, a
registered investment adviser, was formed in 1958. As of June 30, 1998, Sarofim
managed approximately $55.5 billion in assets for [_#_] other registered
investment companies and provided investment advisory services to discretionary
accounts having aggregate assets of approximately [$_] billion. Sarofim, subject
to the supervision and approval of Dreyfus, provides investment advisory
assistance and the day-to-day management of the fund's investments, as well as
investment research and statistical information, under a Sub-Investment Advisory
Agreement with Dreyfus.
The fund's primary portfolio manager is Fayez Sarofim, the founder of Sarofim.
Dreyfus and Sarofim also provide research services for the fund and for other
funds advised by Dreyfus and Sarofim, respectively, through a professional staff
of portfolio managers and securities analysts.
[LEFT SIDE BAR]
CONCEPTS TO UNDERSTAND
THE DREYFUS ASSET MANAGEMENT PHILOSOPHY: discipline and consistency are
important to investment success. For each fund, Dreyfus seeks to establish
clear, systematic guidelines for portfolio management and decision making.
YEAR 2000 ISSUES: the fund could be adversely affected if the computer systems
used by Dreyfus and Sarofim and the fund's other service providers do not
properly process and calculate date-related information from and after January
1, 2000.
While year 2000-related computer problems could have a negative effect on the
fund, Dreyfus and Sarofim are working to avoid such problems and to obtain
assurances from service providers that they are taking similar steps.
6
<PAGE>
YOUR INVESTMENT
[ICON] ACCOUNT POLICIES
BUYING SHARES
You pay no sales charges to invest in this fund. Your price for fund shares is
the fund's net asset value per share (NAV), which is generally calculated as of
the close of trading on the New York Stock Exchange (usually 4:00 p.m. Eastern
time) every day the exchange is open. Your order will be priced at the next NAV
calculated after your order is accepted by the fund or other entity authorized
to accept orders on behalf of the fund. The fund's investments are valued based
on market value, or where market quotations are not readily available, based on
fair value as determined in good faith by the fund's board.
- --------------------
MINIMUM INVESTMENTS
Initial Additional
- --------------------------------------------------------------------------------
Regular accounts $2,500 $100
$500 for TeleTransfer Investments
Traditional IRAs $750 no minimum
Spousal IRAs $750 no minimum
Roth IRAs $750 no minimum
Education IRAs $500 N/A
Dreyfus automatic $100 $100
investment plans
The fund is not designed for, and may not be suitable for, investment by IRAs.
FOR MORE COMPLETE IRA INFORMATION, CONSULT YOUR TAX PROFESSIONAL.
All investments must be in U.S. dollars. Third-party checks cannot be accepted.
You may be charged a fee for any check that does not clear. Maximum TeleTransfer
purchase is $150,000 per day.
SELLING SHARES
You may sell shares at any time. Your shares will be sold at the next NAV
calculated after your order is accepted by the fund's transfer agent or other
entity authorized to accept orders on behalf of the fund. Any certificates
representing fund shares being sold must be returned with your redemption
request. Your order will be processed promptly and you will generally receive
the proceeds within a week.
Before selling recently purchased shares, please note that:
7
<PAGE>
o if the fund has not yet collected payment for the shares you are selling, it
may delay sending the proceeds for up to eight business days;
o if you are selling or exchanging shares within six months of their issuance,
the fund will deduct a 1% redemption fee (not charged on shares sold through
the Systematic Withdrawal Plan or Dreyfus Auto-Exchange Privilege, or shares
acquired through reinvestment).
- --------------------
LIMITATIONS ON SELLING SHARES BY PHONE
<TABLE>
<CAPTION>
Minimum Maximum
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Check request no minimum $150,000 per day
Wire $1,000 $250,000 for joint accounts every 30 days
TeleTransfer $500 $250,000 for joint accounts every 30 days
</TABLE>
There are no dollar limitations when using a written sell order.
[LEFT SIDE BAR]
WRITTEN SELL ORDERS
Some circumstances require that written sell orders be signature guaranteed.
These include:
o amounts of $100,000 or more
o amounts of $1,000 or more on accounts whose address has been changed within
the last 30 days
o requests to send the proceeds to a different payee or address
A SIGNATURE GUARANTEE helps protect against fraud. You can obtain one from most
banks or securities dealers, but not from a notary public. For joint accounts,
each signature must be guaranteed. Please call us to ensure that your signature
guarantee will be processed correctly.
--------------------
GENERAL POLICIES
If your account falls below $500, the fund may ask you to increase your balance.
If it is still below $500 after 45 days, the fund may close your account and
send you the proceeds.
Unless you decline telephone privileges on your application, you may be
responsible for any fraudulent telephone order as long as Dreyfus takes
reasonable measures to verify the order.
The fund reserves the right to:
8
<PAGE>
o refuse any purchase or exchange request that could adversely affect the
fund or its operations, including those from any individual or group
who, in the fund's view, is likely to engage in excessive trading
(usually defined as more than four exchanges out of the fund within a
calendar year)
o refuse any purchase or exchange request in excess of 1% of the fund's
total assets
o change or discontinue its exchange privilege, or temporarily suspend
this privilege during unusual market conditions
o change its minimum investment amounts
o delay sending out redemption proceeds for up to seven days (generally
applies only in cases of very large redemptions, excessive trading or
during unusual market conditions)
The fund also reserves the right to make a "redemption in kind" -- payment in
portfolio securities rather than cash -- if the amount you are redeeming is
large enough to affect fund operations (for example, if it represents more than
1% of the fund's assets).
[LEFT SIDE BAR]
THIRD-PARTY INVESTMENTS
If you invest through a third party (rather than directly with Dreyfus), the
policies and fees may be different from those described here. Banks, brokers,
401(k) plans, financial advisers and financial supermarkets may charge
transaction fees and may set different minimum investments or limitations on
buying or selling shares. Consult a representative of your plan or financial
institution if in doubt.
9
<PAGE>
[ICON] DISTRIBUTIONS AND TAXES
The fund pays its shareholders dividends from its net investment income, and
distributes any net capital gains that it has realized, annually. Your
distributions will be reinvested in the fund unless you instruct the fund
otherwise. There are no fees or sales charges on reinvestments.
The fund will manage its portfolio transactions to seek to minimize realized
capital gains and taxable current income and expects that its distributions will
consist primarily of long-term capital gains.
Fund dividends and distributions are taxable to most investors (unless your
investment is in an IRA or other tax-advantaged account). The tax status of any
distribution is the same regardless of how long you have been in the fund and
whether you reinvest your distributions or take them as income. In general,
distributions are taxable as follows:
- --------------------
TAXABILITY OF DISTRIBUTIONS
Type of Tax rate for Tax rate for
distribution 15% bracket 28% bracket or above
- --------------------------------------------------------------------------------
Income Ordinary Ordinary
dividends income rate income rate
Short-term Ordinary Ordinary
capital gains income rate income rate
Medium-term
capital gains 15% 28%
Long-term
capital gains 10% 20%
- --------------------
The tax status of the distributions for each calendar year will be detailed in
your annual tax statement from the fund.
Because everyone's tax situation is unique, always consult your tax professional
about federal, state and local tax consequences. The fund is not designed for,
and may not be suitable for, investment by qualified retirement plans, IRAs or
other investors whose income is not subject to current federal income taxation.
[LEFT SIDE BAR]
TAXES ON TRANSACTIONS
Except in tax-advantaged accounts, any sale or exchange of fund shares may
generate a tax liability.
10
<PAGE>
The table at right can provide a "rule of thumb" guide for your potential tax
liability when selling or exchanging fund shares. The second row, "Short-term
capital gains," applies to fund shares sold up to 12 months after buying them.
The third row, "Medium-term capital gains," applies to shares held for more than
12 months but no more than 18 months. The last row, "Long-term capital gains,"
applies to shares held for more than 18 months. Pending legislation would
eliminate medium-term capital gains and change the holding period for long-term
capital gains to 12 months.
Starting January 1, 2001, sales of securities held for more than five years will
be taxed at special lower rates.
11
<PAGE>
[ICON] SERVICES FOR FUND INVESTORS
AUTOMATIC SERVICES
Buying or selling shares automatically is easy with the services described
below. With each service, you select a schedule and amount, subject to certain
restrictions. You can set up most of these services with your application or by
calling 1-800-645-6561.
- --------------------
FOR INVESTING
Dreyfus Automatic For making automatic investments from a
Asset Builder(REGISTERED) designated bank account.
Dreyfus Payroll For making automatic investments through a payroll
Savings Plan deduction.
Dreyfus Government For making automatic investments
Direct Deposit from your federal employment, Social Security
Privilege or other regular federal government check.
Dreyfus Dividend For automatically reinvesting the dividends and
Sweep distributions from one Dreyfus fund into another
(not available for IRAs).
FOR EXCHANGING SHARES
Dreyfus Auto- For making regular exchanges from one Dreyfus
Exchange Privilege fund into another.
FOR SELLING SHARES
Dreyfus Automatic For making regular withdrawals from most
Withdrawal Plan Dreyfus funds.
[LEFT SIDE BAR]
DREYFUS FINANCIAL CENTERS
Through a nationwide network of Dreyfus Financial Centers, Dreyfus offers a full
array of investment services and products. This includes information on mutual
funds, brokerage services, tax-advantaged products and retirement planning. Our
experienced financial consultants can help you make informed choices and provide
you with personalized attention in handling account transactions. The Financial
Centers also offer informative seminars and events. To find the Financial Center
nearest you, call 1-800-499-3327.
--------------------
12
<PAGE>
EXCHANGE PRIVILEGE
You can exchange $500 or more from one Dreyfus fund into another (no minimum for
retirement accounts). You can request your exchange in writing or by phone. Be
sure to read the current prospectus for any fund into which you are exchanging.
Any new account established through an exchange will have the same privileges as
your original account (as long as they are available). Other than the redemption
fee described above under "Account Policies, Selling Shares," there is currently
no fee for exchanges, although you may be charged a sales fee on any fund that
has one.
DREYFUS TELETRANSFER PRIVILEGE
To move money between your bank account and your Dreyfus fund account with a
phone call, use the Dreyfus TeleTransfer Privilege. You can set up TeleTransfer
on your account by providing bank account information and following the
instructions on your application.
ACCOUNT STATEMENTS
The fund will send you regular account statements and a yearly statement
detailing the tax characteristics of any dividends and distributions you have
received.
13
<PAGE>
INSTRUCTIONS FOR REGULAR ACCOUNTS
TO OPEN AN ACCOUNT
[ICON] In Writing
Complete the application.
Mail your application and a check to:
The Dreyfus Family of Funds
P.O. Box 9387, Providence, RI 02940-9387
[ICON] By Telephone
WIRE Have your bank send your investment to The Boston Safe Deposit & Trust
Company, with these instructions:
o DDA# [______]
o the fund name
o your Social Security or tax ID number
o name(s) of investor(s)
Call us to obtain an account number.
Return your application.
[ICON] Automatically
WITH AN INITIAL INVESTMENT Indicate on your application which automatic
service(s) you want. Return your application with your investment.
WITHOUT ANY INITIAL INVESTMENT Check the Dreyfus Step Program option on your
application. Return your application, then complete the additional materials
when they are sent to you.
[ICON] Via the Internet
COMPUTER Visit the Dreyfus Web site, http://www.dreyfus.com, and follow the
instructions to download an account application.
14
<PAGE>
TO ADD TO AN ACCOUNT
[editor's note: under "In Writing"]
Fill out an investment slip, and write your account number on your check.
15
<PAGE>
Mail the slip and the check to:
The Dreyfus Family of Funds
P.O. Box 105, Newark, NJ 07101-0105
[editor's note: under "By Telephone"]
WIRE Have your bank send your investment to The Boston Safe Deposit & Trust
Company, with these instructions:
o DDA# [______]
o the fund name
o your account number
o name(s) of investor(s)
ELECTRONIC CHECK Same as wire, but insert "[____]" before your account number
and add ABA# [___-______]
TELETRANSFER Request TeleTransfer on your application. Call us to request your
transaction.
[editor's note: under "Automatically"]
ALL SERVICES Call us to request a form to add any automatic investing service
(see "Services for Fund Investors"). Complete and return the forms along with
any other required materials.
[editor's note: under "Via the Internet"]
----------
TO SELL SHARES
[editor's note: under "In Writing"]
Write a letter of instruction that includes:
o your name(s) and signature(s)
o your account number
o the fund name
o the dollar amount you want to sell
o how and where to send the proceeds
Obtain a signature guarantee or other documentation, if required (see "Account
Policies -- Selling Shares").
16
<PAGE>
Mail your request to:
The Dreyfus Family of Funds
P.O. Box 9671, Providence, RI 02940-9671
[editor's note: under "By Telephone"]
WIRE Be sure the fund has your bank account information on file. Call us to
request your transaction. Proceeds will be wired to your bank.
TELETRANSFER Be sure the fund has your bank account information on file. Call us
to request your transaction. Proceeds will be sent to your bank by electronic
check.
CHECK Call us to request your transaction. A check will be sent to the address
of record.
[editor's note: under "Automatically"]
DREYFUS AUTOMATIC WITHDRAWAL PLAN Call us to request a form to add the plan.
Complete the form, specifying the amount and frequency of withdrawals you would
like.
Be sure to maintain an account balance of $5,000 or more.
[editor's note: under "Via the Internet"]
----------
[RIGHT SIDE BAR]
To reach Dreyfus, call toll free in the U.S.
1-800-645-6561
Outside the U.S. 516-794-5452
Make checks payable to:
THE DREYFUS FAMILY OF FUNDS
You also can deliver requests to any Dreyfus Financial Center. Because
processing time may vary, please ask the representative when your account will
be credited or debited.
17
<PAGE>
CONCEPTS TO UNDERSTAND
WIRE TRANSFER: for transferring money from one financial institution to another.
Wiring is the fastest way to move money, although your bank may charge a fee to
send or receive wire transfers.
ELECTRONIC CHECK: for transferring money out of a bank account. Your transaction
is entered electronically, but may take up to eight business days to clear.
Electronic checks usually are available without a fee at all Automated Clearing
House (ACH) banks.
18
<PAGE>
INSTRUCTIONS FOR IRAS
The fund is not designed for, and may not be suitable for, investment by IRAs.
TO OPEN AN ACCOUNT
[ICON] In Writing
Complete an IRA application, making sure to specify the fund name and to
indicate the year the contribution is for.
Mail your application and a check to:
The Dreyfus Trust Company, Custodian
P.O. Box 6427, Providence, RI 02940-6427
[ICON] By Telephone
----------
[ICON] Automatically
WITHOUT ANY INITIAL INVESTMENT Call us to request a Dreyfus Step Program form.
Complete and return the form along with your application.
[ICON] Via the Internet
COMPUTER Visit the Dreyfus Web site, http://www.dreyfus.com, and follow the
instructions to download an account application.
TO ADD TO AN ACCOUNT
[editor's note: under "In Writing"]
Fill out an investment slip, and write your account number on your check.
Indicate the year the contribution is for.
Mail in the slip and the check (see "To Open an Account").
[editor's note: under "By Telephone"]
19
<PAGE>
WIRE Have your bank send your investment to The Boston Safe Deposit & Trust
Company, with these instructions:
o DDA# [______]
o the fund name
o your account number
o name of investor
o the contribution year
ELECTRONIC CHECK Same as wire, but insert "[____]" before your account number
and add ABA# [___-______]
TELEPHONE CONTRIBUTION Call to request us to move money from a regular Dreyfus
account to an IRA (both accounts must have the same name).
[editor's note: under "Automatically"]
ALL SERVICES Call us to request a form to add an automatic investing service
(see "Services for Fund Investors"). Complete and return the form along with any
other required materials.
All contributions will count as current year.
TO SELL SHARES
[editor's note: under "In Writing"]
Write a letter of instruction that includes:
o your name and signature
o your account number
o the fund name
o the dollar amount you want to sell
o how and where to send the proceeds
o whether the distribution is qualified or premature
o whether the 10% TEFRA should be withheld
Obtain a signature guarantee or other documentation, if required.
Mail in your request (see "To Open an Account").
[editor's note: under "By Telephone"]
----------
20
<PAGE>
[editor's note: under "Automatically"]
SYSTEMATIC WITHDRAWAL PLAN Call us to request instructions to establish the
plan.
[RIGHT SIDE BAR]
To reach Dreyfus, call toll free in the U.S.
1-800-645-6561
Outside the U.S. 516-794-5452
21
<PAGE>
Make checks payable to:
DREYFUS TRUST CO., CUSTODIAN
You also can deliver requests to any Dreyfus Financial Center. Because
processing time may vary, please ask the representative when your account will
be credited or debited.
CONCEPTS TO UNDERSTAND
WIRE TRANSFER: for transferring money from one financial institution to another.
Wiring is the fastest way to move money, although your bank may charge a fee to
send or receive wire transfers.
ELECTRONIC CHECK: for transferring money out of a bank account. Your transaction
is entered electronically, but may take up to eight business days to clear.
Electronic checks usually are available without a fee at all Automated Clearing
House (ACH) banks.
22
<PAGE>
FOR MORE INFORMATION
Dreyfus Tax-Efficient Growth Fund,
A Series of The Dreyfus/Laurel Funds, Inc.
More information on this fund is available free upon request, including the
following:
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI provides more details about the fund and its policies. A current SAI is
on file with the Securities and Exchange Commission (SEC) and is incorporated by
reference (is legally considered part of this prospectus).
SEC file number: 811-5270
[LEFT SIDE BAR]
TO OBTAIN INFORMATION:
BY TELEPHONE
Call 1-800-645-6561
BY MAIL Write to:
Dreyfus Family of Funds
144 Glenn Curtiss Boulevard
Uniondale, NY 11556-0144
BY E-MAIL Send your request to [email protected]
ON THE INTERNET Text-only versions of fund documents can be viewed online or
downloaded from:
SEC
http://www.sec.gov
23
<PAGE>
DREYFUS
http://www.dreyfus.com
You can also obtain copies by visiting the SEC's Public Reference Room in
Washington, DC (phone 1-800-SEC-0330) or by sending your request and a
duplicating fee to the SEC's Public Reference Section, Washington, DC
20549-6009.
24
<PAGE>
- --------------------------------------------------------------------------------
DREYFUS TAX-EFFICIENT GROWTH FUND
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
SEPTEMBER 30, 1998
This Statement of Additional Information ("SAI"), which is not a
prospectus, supplements and should be read in conjunction with the current
Prospectus of Dreyfus Tax-Efficient Growth Fund (the "Fund"), dated September
30, 1998, as it may be revised from time to time. The Fund is a separate,
diversified portfolio of The Dreyfus/Laurel Funds, Inc. (the "Company"), an
open-end management investment 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. -- Call 516-794-5452
TABLE OF CONTENTS
PAGE
Description of the Fund........................................... B-2
Management of the Fund............................................ B-10
Management Arrangements........................................... B-11
Purchase of Shares................................................ B-19
Distribution Plan................................................. B-22
Redemption of Shares.............................................. B-24
Shareholder Services.............................................. B-26
Determination of Net Asset Value.................................. B-30
Dividends, Other Distributions and Taxes.......................... B-31
Portfolio Transactions............................................ B-35
Performance Information........................................... B-37
Information About the Fund........................................ B-38
Transfer and Dividend Disbursing Agent, Custodian, Counsel and
Independent Auditors............................................ B-39
Financial Statements.............................................. B-40
Appendix.......................................................... B-41
<PAGE>
DESCRIPTION OF THE FUND
THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTIONS OF THE FUND'S PROSPECTUS ENTITLED "GOAL/APPROACH" AND "MAIN
RISKS."
The Company is a Maryland corporation formed on August 6, 1987. Before
October 17, 1994, the Company's name was The Laurel Funds, Inc. The Company is
an open-end management investment company comprised of separate portfolios,
including the Fund, each of which is treated as a separate fund. The Fund is
diversified, which means that, with respect to 75% of its total assets, the Fund
will not invest more than 5% of its assets in the securities of any single
issuer.
The Dreyfus Corporation ("Dreyfus") serves as the Fund's investment
manager. Dreyfus has engaged Fayez Sarofim & Co. ("Sarofim") to serve as the
Fund's sub-investment adviser and to provide day-to-day management of the Fund's
investments, subject to the supervision of Dreyfus. Dreyfus and Sarofim are
referred to collectively as the "Advisers."
CERTAIN PORTFOLIO SECURITIES
The Fund may purchase the portfolio securities described below.
EQUITY SECURITIES. Equity securities fluctuate in value, often based on
factors unrelated to the value of the issuer of the securities, and such
fluctuations can be pronounced. Changes in the value of the Fund's investments
will result in changes in the value of its shares and thus the Fund's total
return to investors.
BANK OBLIGATIONS. The Fund may purchase bankers' acceptances, certificates
of deposit, time deposits, and other short-term obligations issued by domestic
banks, foreign subsidiaries or foreign branches of domestic banks, domestic and
foreign branches or foreign banks, domestic savings and loan associations and
other banking institutions. Included among such obligations are Eurodollar
Certificates of Deposit ("ECDs"), Yankee Certificates of Deposit ("Yankee CDs")
and Eurodollar Time Deposits ("ETDs").
COMMERCIAL PAPER AND CORPORATE DEBT OBLIGATIONS. 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, 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, such as the Fund, who agree that they are purchasing the paper for an
investment and not with a view to public distribution. Any resale by the
purchaser must be in an exempt transaction. Section 4(2) paper is normally
resold to other investors through or with the assistance of the issuer or
investment dealers who make a market in Section 4(2) paper, thus providing
liquidity. Pursuant to guidelines established by the Company's Board of
Directors, the Advisers 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. The Fund may also invest in short-term
corporate debt obligations rated at least Baa by Moody's Investors Service,
B-2
<PAGE>
Inc., or BBB by Standard & Poor's Rating Services, a division of the McGraw-Hill
Companies, Inc., or, if unrated, of comparable quality as determined by the
Advisers.
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.
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 that 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 the 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.
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
B-3
<PAGE>
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.
AMERICAN DEPOSITORY RECEIPTS ("ADRS") AND NEW YORK SHARES. The Fund may
invest in U.S. dollar-denominated ADRs and "New York Shares." ADRs typically are
issued by an American bank or trust company and evidence ownership of underlying
securities issued by foreign companies. New York Shares are securities of
foreign companies that are issued for trading in the United States. ADRs and New
York Shares 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, including those resulting from adverse political and
economic developments and the imposition of foreign governmental laws or
restrictions. See "Foreign Securities."
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 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."
ILLIQUID SECURITIES. The Fund will not knowingly invest more than 15% of
the value of its net assets in illiquid securities such as time deposits.
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 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"). Rule 144A securities generally must be sold to other
qualified institutional buyers. Liquidity determinations with respect to Section
4(2) paper and Rule 144A securities will be made by the Board of Directors or by
the Advisers pursuant to guidelines established by the Board of Directors. The
Board or the Advisers will consider availability of reliable price information
and other relevant information in making such determinations. 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
B-4
<PAGE>
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 holders.
MUNICIPAL OBLIGATIONS. Municipal obligations generally include debt
obligations issued to obtain funds for various public purposes as well as
certain industrial development bonds issued by or on behalf of 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. Industrial development bonds, in most cases, are revenue bonds that
generally do not carry the pledge of the credit of the issuing municipality, but
generally are guaranteed by the corporate entity on whose behalf they are
issued. Notes are short-term instruments which 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 include
municipal lease/purchase agreements which are similar to installment purchase
contracts for property or equipment issued by municipalities.
WARRANTS. A warrant is an instrument issued by a corporation which gives
the holder the right to subscribe to a specified amount of the corporation's
capital stock at a set price for a specified period of time. The Fund may invest
up to 5% of its net assets in warrants, except that this limitation does not
apply to warrants purchased by the Fund that are sold in units with, or attached
to, other 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.
MANAGEMENT POLICIES
The Fund may engage in the following practices in furtherance of its
investment objective:
BORROWING. The Fund is permitted to borrow to the extent permitted under
the 1940 Act, which permits an investment company to borrow in an amount up to
33-1/3% of the value of its total assets. The Fund currently intends to borrow
money only for temporary or emergency (not leveraging) purposes, in an amount up
to 15% of the value of its total assets (including the money borrowed) valued at
the lesser of cost or market, less liabilities (not including the amount
borrowed) at the time the borrowing is made. While borrowings exceed 5% of the
Fund's total assets, the Fund will not make any additional investments.
B-5
<PAGE>
DERIVATIVE INSTRUMENTS. The Fund may invest, to a limited extent, in
derivatives ("Derivatives"). These are financial instruments which derive their
performance, at least in part, from the performance of an underlying asset,
index or interest rate. The Fund may invest in Derivatives for a variety of
reasons, including to hedge certain market risks, to provide a substitute for
purchasing or selling particular securities or to increase potential income
gain. Derivatives may provide a cheaper, quicker or more specifically focused
way for the Fund to invest than "traditional" securities would.
Derivatives can be volatile and involve various types and degrees of risk,
depending upon the characteristics of the particular Derivative and the
portfolio as a whole. Derivatives permit the Fund to increase or decrease the
level of risk, or change the character of the risk, to which its portfolio is
exposed in much the same way as the Fund can increase or decrease the level of
risk, or change the character of the risk, of its portfolio by making
investments in specific securities.
Derivatives can decrease the liquidity of the Fund's portfolio and make
more difficult the accurate pricing of the Fund's portfolio. Derivatives may
entail investment exposures that are greater than their cost would suggest,
meaning that a small investment in Derivatives could have a large potential
impact on the fund's performance. If the Fund invests in Derivatives at
inappropriate times or judges market conditions incorrectly, such investments
may lower the Fund's return or result in a loss. The Fund also could experience
losses if it were unable to liquidate its position because of an illiquid
secondary market. The market for many Derivatives is, or suddenly can become,
illiquid. Changes in liquidity may result in significant, rapid and
unpredictable changes in the prices for Derivatives.
When required by the Securities and Exchange Commission ("SEC"), the Fund
will set aside permissible liquid assets in a segregated account to cover its
obligations relating to its transactions in Derivatives. To maintain this
required cover, the Fund may have to sell portfolio securities at
disadvantageous prices at times since it may not be possible to liquidate a
Derivative position at a reasonable price. Derivatives may be purchased on
established exchanges or through privately negotiated transactions referred to
as over-the-counter Derivatives. Exchange-traded Derivatives generally are
guaranteed by the clearing agency which is the issuer or counterparty to such
Derivatives. This guarantee usually is supported by a daily payment system
(i.e., variation margin requirements) operated by the clearing agency in order
to reduce overall credit risk. As a result, unless the clearing agency defaults,
there is relatively little counterparty credit risk associated with Derivatives
purchased on an exchange. By contrast, no clearing agency guarantees
over-the-counter Derivatives. Therefore, each party to an over-the-counter
Derivative bears the risk that the counterparty will default. Accordingly, the
Advisers will consider the creditworthiness of counterparties to
over-the-counter Derivatives in the same manner as it would review the credit
quality of a security to be purchased by the Fund. Over-the-counter Derivatives
are less liquid than exchange-traded Derivatives since the other party to the
transaction may be the only investor with sufficient understanding of the
Derivative to be interested in bidding for it.
OPTIONS--IN GENERAL. The Fund may write (I.E., sell) call options with
respect to specific securities. A call option gives the purchaser of the option
B-6
<PAGE>
the right to buy, and obligates the writer to sell, the underlying security or
securities at the exercise price at any time during the option period, or at a
specific date.
A covered call option written by the Fund is a call option with respect to
which the Fund owns the underlying security or otherwise covers the transaction
by segregating cash or other securities. The Fund may write covered call option
contracts to the extent of 20% of the value of its net assets at the time such
option contracts are written. A covered call option sold by the Fund exposes the
Fund during the term of the option to possible loss of opportunity to realize
apprecitation in the market price of the underlying security or to possible
continued holding of a security which might otherwise have been sold to protect
against depreciation in the market price of the security. The principal reason
for writing covered call options is to realize through the receipt of premiums,
a greater return than would be realized on the underlying securities alone. The
Fund receives a premium from writing covered call options which it retains
whether or not the option is exercised.
There is no assurance that sufficient trading interest to create a liquid
secondary market on a securities exchange will exist for any particular option
or at any particular time, and for some options no such secondary market may
exist. A liquid secondary market in an option may cease to exist for a variety
of reasons. In the past, for example, higher than anticipated trading activity
or order flow, or other unforeseen events, at times have rendered certain of the
clearing facilities inadequate and resulted in the institution of special
procedures, such as trading rotations, restrictions on certain types of order or
trading halts or suspensions in one or more options. There can be no assurance
that similar events, or events that may otherwise interfere with the timely
execution of customers' orders, will not recur. In such event, it might not be
possible to effect closing transactions in particular options. If, as a covered
call option writer, the Fund is unable to effect a closing purchase transaction
in a secondary market, it will not be able to sell the underlying security until
the option expires or it delivers the underlying security upon exercise or it
otherwise covers its position.
Successful use by the Fund of options will be subject to the Advisers'
ability to predict correctly movements in the prices of individual stocks or the
stock market generally. To the extent the Advisers' predictions are incorrect
the Fund may incur losses.
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
risks will be materially reduced if this option is implemented.
B-7
<PAGE>
INVESTMENT RESTRICTIONS
FUNDAMENTAL. The following fundamental 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 25% or more 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 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 borrowing, and (b) the Fund may
issue multiple classes of shares. The purchase or sale of options, forward
contacts, futures contracts, including those relating to indices, and options on
futures contracts or indices 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 issuer (other than securities issued or guaranteed by the U.S. Government,
its agencies or instrumentalities, and securities of other investment companies)
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 the 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 the 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
options, forward contracts, and futures contracts, including those related to
indices, and options on futures contracts or indices.
B-8
<PAGE>
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 fundamental
investment objective, policies, and limitations as the Fund.
NON-FUNDAMENTAL. The Fund has adopted the following additional
non-fundamental investment restrictions. These non-fundamental restrictions may
be changed without shareholder approval, in compliance with applicable law and
regulatory policy.
1. 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 commercial paper
issued pursuant to Section 4(2) of the Securities Act of 1933 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.
2. The Fund will 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.
3. The Fund will not purchase securities on margin, except that the Fund
may obtain such short-term credits as are necessary for the clearances of
transactions, and provided that margin payments in connection with futures
contracts and options shall not constitute purchasing securities on margin.
4. The Fund will not sell securities short, or purchase, sell or write
puts, calls or combinations thereof, except as described in the Fund's
Prospectus and this SAI.
5. The Fund will not purchase any security while borrowings representing
more than 5% of the Fund's total assets are outstanding.
If a percentage restriction is adhered to at the time of an investment, a
later increase or decrease in such percentage resulting from a change in the
values of assets will not constitute a violation of such restriction, except as
otherwise required by the 1940 Act.
MANAGEMENT OF THE FUND
FEDERAL LAW AFFECTING MELLON BANK
The Glass-Steagall Act of 1933 prohibits national banks from engaging in
the business of underwriting, selling or distributing securities and prohibits a
member bank of the Federal Reserve System from having certain affiliations with
an entity engaged principally in that business. The activities of Mellon Bank,
B-9
<PAGE>
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's 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
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 OF THE COMPANY
The Company's Board is responsible for the management and supervision of
the Fund. The Board approves all significant agreements between the Company, on
behalf of the Fund, and those companies that furnish services to the Fund. These
companies are as follows:
The Dreyfus Corporation Investment Adviser
Fayez Sarofim & Co. Investment Sub-Adviser
Premier Mutual Fund Services, Inc. Distributor
Dreyfus Transfer, Inc. Transfer Agent
Mellon Bank Custodian for the Fund
The Company has a Board composed of twelve Directors. The following lists
the Directors and officers and their positions with the Company and their
present and principal occupations during the past five years. Each Director who
is an "interested person" of the Company (as defined in the 1940 Act) is
indicated by an asterisk(*). Each of the Directors also serves as a Trustee of
The Dreyfus/Laurel Funds Trust and The Dreyfus/Laurel Tax-Free Municipal Funds
(collectively, with the Company, the "Dreyfus/Laurel Funds").
o+RUTHMARIE 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: 80 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: 81 years
old. Address: Massachusetts Business Development Corp., 50 Milk Street,
Boston, Massachusetts 02109.
B-10
<PAGE>
o+JOSEPH S. DIMARTINO. Director of the Company. Since January 1995, Mr.
DiMartino has served as Chairman of the Board for various funds in the
Dreyfus Family of Funds. 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, Staffing Resources, Inc., a temporary placement agency, Carlyle
Industries, Inc. (formerly Belding Heminway, Inc.), a button packager and
distributor, and Century Business Services, Inc., a provider of various
outsourcing functions for small and medium sized corporations. 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; 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; former Chairman of the Board and
Director, Rexene Corporation; Chairman of the Board and Director, Tetra
Technology 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*ARCHS. 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.
B-11
<PAGE>
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 Professorof Law,
Duquesne University Law School; Director, Urban Redevelopment Authority of
Pittsburgh; Member of Advisory Committee, Decedents Estates Laws of
Pennsylvania; 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 Hyams 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.
o+BENAREE PRATT WILEY. Director of the Company; President and CEO of The
Partnership, an organization dedicated to increasing the representation of
African Americans in positions of leadership, influence and
decision-making in Boston, MA; Trustee, Boston College; Trustee, WGBH
Educational Foundation; Trustee, Children's Hospital; Director, The
Greater Boston Chamber of Commerce; Director, The First Albany Companies,
Inc.; from April 1995 to March 1998, Director, TBC, an affiliate of
Dreyfus. Age: 51 years old. Address: 334 Boylston Street, Suite 400,
Boston, Massachusetts.
- ------------------------------
* "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
#MARGARET W. CHAMBERS. Vice President and Secretary of the Company. Senior Vice
President and General Counsel of Funds Distributor, Inc. From August 1996
to March 1998, she was Vice President and Assistant General Counsel for
Loomis, Sayles & Company, L.P. From January 1986 to July 1996, she was an
associate with the law firm of Ropes & Gray. Age: 38 years old.
B-12
<PAGE>
#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.
#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. 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. From
July 1994 to November 1995, she was a Fund Accountant for Investors Bank &
Trust Company. 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. 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.
#STEPHANIE PIERCE. Vice President, Assistant Treasurer and Assistant Secretary
of the Company. Vice President and Client Development Manager of Funds
Distributor, Inc. From April 1997 to March 1998, she was employed as a
Relationship Manager with Citibank, N.A. Age: 29 years old.
#GEORGE A. RIO. Vice President and Assistant Treasurer of the Company. Executive
Vice President and Client Service Director of Funds Distributor, Inc. From
June 1995 to March 1998, he was Senior Vice President and Senior Key
Account Manager for Putnam Mutual Funds. From May 1994 to June 1995, he
was Director of Business Development for First Data Corporation. From
September 1983 to May 1994, he was Senior Vice President & Manager of
Client Services and Director of Internal Audit at The Boston Company. Age:
43 years old.
B-13
<PAGE>
#JOSEPH F. TOWER, III. Vice President and Assistant Treasurer of the Company.
Senior Vice President, Treasurer, Chief Financial Officer and a Director
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. From March 1990 to May 1996, she
was employed by U.S. Trust Company of New York, where she held various
sales and marketing positions. Age: 36 years old.
- -----------------------------
# Officer also serves as an officer for other companies advised by Dreyfus,
including The Dreyfus/Laurel Funds 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.
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 Sarofim (or of any parent, subsidiary or affiliate thereof) serves as
an officer or Director of the Company. The Dreyfus/Laurel Funds pay each
Trustee/Director 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 Trustees/Directors of the Dreyfus/Laurel Funds). In addition, the
Dreyfus/Laurel Funds pay each Trustee/Director 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 Trustee/Director who is not an
"interested person" of the Company (as defined in the 1940 Act) for travel and
out-of-pocket expenses.
B-14
<PAGE>
For the fiscal year ended October 31, 1997, the aggregate amount of fees
and expenses received by each current Director (with the exception of Ms. Wiley,
who was not a Director of the Company as of October 31, 1997) from the Company
and all other funds in the Dreyfus Family of Funds for which such person is a
Board member were as follows:
<TABLE>
<CAPTION>
Total Compensation
From the Company
Aggregate and Fund Complex
Name of Board Compensation Paid to Board
Member From the Company# Member****
- ------------- ----------------- --------------------
<S> <C> <C>
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
</TABLE>
# 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 P. Brennan includes $25,000 paid by the
Dreyfus/Laurel Funds to be the 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 S.
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 paid for the year ended December 31, 1997.
**** The Dreyfus Family of Funds consists of [___] mutual funds.
B-15
<PAGE>
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 September [__],
1998.
As of September [__], 1998, the following shareholder(s) owned of record
5% or more of Fund shares: [NEED SHAREHOLDERS]
MANAGEMENT ARRANGEMENTS
THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTIONS IN THE FUND'S PROSPECTUS ENTITLED "EXPENSES" AND "MANAGEMENT."
Dreyfus is a wholly-owned subsidiary of Mellon Bank Corporation
("Mellon"). 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.
MANAGEMENT AGREEMENT. Dreyfus serves as 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 supervises and monitors the performance of Sarofim in making
investment decisions for the Fund based on the Fund's investment objective,
policies and restrictions.
The Management Agreement was approved by the Board of Directors with
respect to the Fund on July 30, 1998 to continue until April 4, 2000.
Thereafter, the Management Agreement will be 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 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 (as
defined in the 1940 Act).
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; Ronald P. O'Hanley III, Vice Chairman; J.
David Officer, Vice Chairman 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 Services; William V. Healey, Assistant Secretary; and
Mandell L. Berman, Burton C. Borgelt, Frank V. Cahouet and Richard F. Syron,
directors.
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<PAGE>
SUB-INVESTMENT ADVISORY AGREEMENT. Sarofim provides investment advisory
assistance and day-to-day management of the Fund's investments pursuant to the
Sub-Investment Advisory Agreement (the "Sub-Advisory Agreement") dated July 30,
1998 between Dreyfus and Sarofim. The Sub-Advisory Agreement was approved by the
Company's Board, including a majority of the Board members who are not
"interested persons" of any party to the Sub-Advisory Agreement, at a meeting
held on July 30, 1998, and will continue in effect until April 4, 2000.
Thereafter, the Sub-Advisory Agreement will be subject to review and approval at
least annually by the Board of Directors. The Sub-Advisory 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, Dreyfus, or
Sarofim 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
Sub-Advisory Agreement is terminable without penalty (i) by Dreyfus on sixty
(60) days' notice, (ii) by the Company's Board or by vote of the holders of a
majority of the Fund's shares on sixty (60) days' notice, or (iii) by Sarofim on
not less than ninety (90) days' notice. The Sub-Advisory Agreement will
terminate automatically in the event of its assignment (as defined in the 1940
Act) or upon the termination of the Management Agreement for any reason.
The following persons are officers and/or directors of Sarofim: Fayez S.
Sarofim, Chairman of the Board and President: Raye G. White, Executive Vice
President, Secretary, Treasurer and a director; Russell M. Frankel, Russell B.
Hawkins, William K. McGee, Jr., Charles E. Sheedy and Ralph Thomas, Senior Vice
Presidents; and James A. Reynolds, III, Vice President.
Sarofim provides day-to-day management of the Fund's investments in
accordance with the stated policies of the Fund, subject to the supervision of
Dreyfus and the approval of the Company's Board. Dreyfus and Sarofim provide the
Fund with portfolio managers who are authorized by the Company's Board to
execute purchases and sales of securities. The Fund's principal portfolio
manager is Fayez S. Sarofim, who is assisted by Russell B. Hawkins and
Christopher Sarofim. Dreyfus and Sarofim also maintain research departments
with professional staffs of portfolio managers and securities analysts who
provide research services for the Fund and other funds advised by Dreyfus and
Sarofim.
Under the Sub-Advisory Agreement, Dreyfus has agreed to pay Sarofim a
monthly fee at the annual rate of .30 of 1% of the value of the Fund's average
daily net assets.
EXPENSES. Under the Management Agreement, the Fund has agreed to pay
Dreyfus a monthly fee at the annual rate of 1.10% of the value of the Fund's
average daily net assets. Dreyfus pays all of the Fund's expenses, except
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<PAGE>
brokerage fees, taxes, interest, fees and expenses of the non-interested
directors (including counsel fees), Rule 12b-1 fees (if applicable) and
extraordinary expenses. Although Dreyfus does not pay for the fees and expenses
of the non-interested Directors (including counsel fees), Dreyfus is
contractually required to reduce its investment management fee by an amount
equal to the Fund's allocable share of such fees and expenses. 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. In addition, the Fund is subject
to a distribution plan under which the Fund spends annually up to .25% of its
average daily net assets for distribution and shareholder servicing activities.
See "Distribution Plan." Expenses attributable to the Fund are charged against
the Fund's assets; other expenses of the Company are allocated among its funds
on the basis determined by the Board, including, but not limited to,
proportionately in relation to the net assets of each fund.
THE DISTRIBUTOR. Premier Mutual Fund Services, Inc. (the "Distributor"),
located at 60 State Street, Boston, Massachusetts 02109, serves as the Fund's
distributor on a best efforts basis pursuant to an agreement which is renewable
annually. 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 certain
banks, securities brokers or dealers and other financial institutions ("Agents")
for these services. The Distributor also acts as distributor for the other funds
in the Dreyfus Family of Funds and for certain other investment companies.
PURCHASE OF SHARES
THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTIONS IN THE FUND'S PROSPECTUS ENTITLED "ACCOUNT POLICIES,"
"SERVICES FOR FUND INVESTORS," "INSTRUCTIONS FOR REGULAR ACCOUNTS" AND
"INSTRUCTIONS FOR IRAS."
GENERAL. 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. However, 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 for subsequent purchases. The fund is designed
for long-term investors with little or no need for investment income. The fund
is not designed for, and may not be suitable for, investors such as qualified
pension, profit-sharing and other tax-deferred retirement plans, or IRAs, whose
income is not subject to current federal income taxation. The initial investment
must be accompanied by the 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
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<PAGE>
their pay directly deposited into their Fund accounts, the minimum initial
investment is $50. The Fund reserves the right to offer Fund shares without
regard to minimum purchase requirements to employees participating in certain
qualified or non-qualified employee benefit plans or other programs where
contributions or account information can be transmitted in a manner and form
acceptable to the Fund. The Fund reserves the right to vary further the initial
and subsequent investment minimum requirements at any time.
Fund shares also are offered without regard to the minimum initial
investment requirements through Dreyfus AUTOMATIC Asset Builder(REGISTERED),
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.
Management understands that some Agents may impose certain conditions on
their clients which are different from those described in the Fund's Prospectus
and this Statement of Additional Information, and, to the extent permitted by
applicable regulatory authority, may charge their clients direct fees. You
should consult your Agent in this regard. See "Distribution Plan."
Fund shares are sold on a continuous basis at the net asset value per
share next determined after an order in proper form is received by the Transfer
Agent or other entity authorized to receive orders on behalf of the Fund. Net
asset value per share is determined as of the close of trading on the floor of
the New York Stock Exchange (currently 4:00 p.m., New York time), on each day
the New York Stock Exchange is open for business. For purposes of determining
net asset value, options and futures contracts will be valued 15 minutes after
the close of trading on the floor of the New York Stock Exchange. Net asset
value per share is computed by dividing the value of the Fund's net assets
(I.E., the value of its assets less liabilities) by the total number of Fund
shares outstanding. The Fund's investments are valued based on market value or,
where market quotations are not readily available, based on fair value as
determined in good faith by the Company's Board. Certain securities may be
valued by an independent pricing service approved by the Company's Board and are
valued at fair value as determined by the pricing service. For further
information regarding the methods employed in valuing the Fund's investments,
see "Determination of Net Asset Value."
Orders for the purchase of Fund shares received by dealers by the close of
trading on the floor of the New York Stock Exchange 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 net asset value determined
as of the close of trading on the floor of the New York Stock Exchange on that
day. Otherwise, the orders will be based on the next determined net asset value.
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
B-19
<PAGE>
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 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
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
$1,000,000 ("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.
DREYFUS TELETRANSFER PRIVILEGE. You may purchase shares by telephone
through 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. 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 Automated Clearing House member may be so designated.
Dreyfus TELETRANSFER purchase orders may be made at any time. Purchase orders
received by 4:00 p.m. New York time, on any business day that Dreyfus Transfer,
Inc., the Fund's transfer and dividend disbursing agent (the "Transfer Agent"),
and the New York Stock Exchange are open for business will be credited to the
shareholder's Fund account on the next bank business day following such purchase
order. Purchase orders made after 4:00 p.m., New York time, on any business day
the Transfer Agent and the New York Stock Exchange are open for business, or
orders made on Saturday, Sunday or any Fund holiday (e.g., when the New York
Stock Exchange is not open for business), will be credited to the shareholder's
Fund account on the second bank business day following such purchase order. 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 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
B-20
<PAGE>
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.
SHARE CERTIFICATES. Share certificates are issued upon written request
only. No certificates are issued for fractional shares.
DISTRIBUTION PLAN
THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTION IN THE FUND'S PROSPECTUS ENTITLED "EXPENSES."
Fund shares are subject to fees for distribution and shareholder services.
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.
DISTRIBUTION PLAN. Fund shares are subject to a Distribution Plan (the
"Plan") adopted pursuant to the Rule. The Plan allows the Fund to spend annually
up to 0.25% 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 for distribution related services
and/or shareholder services. 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 fees are payable
pursuant to the Plan without regard to expenses incurred.
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. Potential investors should read the Fund's
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<PAGE>
Prospectus and this SAI in light of the terms governing Agreements with their
Agents.
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 Dreyfus (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 was approved by the entire Board of Directors and by
the Directors who are neither "interested persons" of the Company nor Dreyfus
(as defined in the 1940 Act) and who did not have any direct or indirect
financial interest in the operation of the Plan at a meeting held on July 30,
1998. The Plan is subject to annual approval by the entire Board of Directors
and by the Directors who are neither interested persons nor have any direct or
indirect financial interest in the operation of the Plan, by vote cast in person
at a meeting called for the purpose of voting on the Plan. The Plan is
terminable 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 (as defined in the
1940 Act) of the outstanding shares of the Fund.
REDEMPTION OF SHARES
THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTION IN THE FUND'S PROSPECTUS ENTITLED "ACCOUNT POLICIES," "SERVICES
FOR FUND INVESTORS," "INSTRUCTIONS FOR REGULAR ACCOUNTS" AND
"INSTRUCTIONS FOR IRAS."
REDEMPTION FEE. The Fund will deduct a redemption fee equal to 1% of the
net asset value of Fund shares redeemed (including redemptions through the use
of the Fund Exchanges service) less than 6 months following the issuance of such
shares. The redemption fee will be deducted from the redemption proceeds and
retained by the Fund.
No redemption fee will be charged on the redemption or exchange of shares
(1) through the Fund's Automatic Withdrawal Plan or Dreyfus Auto-Exchange
Privilege, (2) through accounts that are reflected on the records of the
Transfer Agent as omnibus accounts approved by Dreyfus Service Corporation, (3)
through accounts established by Agents approved by Dreyfus Service Corporation
that utilize the National Securities Clearing Corporation's networking system,
or (4) acquired through the reinvestment of dividends or capital gain
distributions. The redemption fee may be waived, modified or terminated at any
time.
REDEMPTION THROUGH A SELECTED DEALER. Customer's of certain Agents
("Selected Dealer") may make redemption requests to their 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 New York
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<PAGE>
Stock Exchange (currently 4:00 p.m., 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 New York Stock Exchange,
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 New York Stock Exchange 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 New York Stock Exchange on that day. Otherwise,
the Fund shares will be redeemed at the next determined net asset value. 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.
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 ($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 Shareholder Services Form, or 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 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.
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<PAGE>
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. You may request by telephone that
redemption proceeds be transferred between your Fund account and your bank
account. Only a bank account maintained in a domestic financial institution
which is an Automated Clearing House member may be designated. Redemption
proceeds will be on deposit in your account at an Automated Clearing House
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. 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 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. The Company 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 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
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<PAGE>
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 SECTIONS IN THE FUND'S PROSPECTUS ENTITLED "ACCOUNT POLICIES" AND
"SERVICES FOR FUND INVESTORS."
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 Touch(REGISTERED) 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.
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<PAGE>
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 new account 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.
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,
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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 Offered Shares, provided that, if the
sales load applicable to the Offered Shares exceeds the maximum
sales load charged by the fund from which dividends or distributions
are being swept, without giving effect to any reduced loads, the
difference will be deducted.
D. Dividends and distributions paid by a fund may be invested in shares
of other funds that impose a contingent deferred sales charge
("CDSC") and the applicable CDSC, if any, will be imposed upon
redemption of such shares.
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 Builder(REGISTERED), 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 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 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,
SEP-IRAs and IRA "Rollover Accounts."
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
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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 a 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.
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.
THE FUND IS NOT DESIGNED FOR, AND MAY NOT BE SUITABLE FOR, INVESTORS SUCH
AS QUALIFIED PENSION, PROFIT-SHARING AND OTHER TAX-DEFERRED RETIREMENT PLANS,
WHOSE INCOME IS NOT SUBJECT TO CURRENT FEDERAL INCOME TAXATION.
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 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 anticipated 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.
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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 Fund Exchanges 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.
DETERMINATION OF NET ASSET VALUE
THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTION IN THE FUND'S PROSPECTUS ENTITLED "ACCOUNT POLICIES."
VALUATION OF PORTFOLIO SECURITIES. Each Fund's securities are valued at
the last sale price on the securities exchange or national securities market on
which such securities primarily are traded. Securities not listed on an exchange
or national securities market, or securities in which there were no
transactions, are valued at the average of the most recent bid and asked prices.
Bid price is used when no asked price is available. Any assets or liabilities
initially expressed in terms of foreign currency will be translated into U.S.
dollars at the midpoint of the New York interbank market spot exchange rate as
quoted on the day of such translation or, if no such rate is quoted on such
date, such other quoted market exchange rate as may be determined to be
appropriate by the Dreyfus. If the Fund has to obtain prices as of the close of
trading on various exchanges throughout the world, the calculation of net asset
value may not take place contemporaneously with the determination of prices of
certain of the Fund's securities. Short-term investments are carried at
amortized cost, which approximates value. Expenses and fees, including the
management fee and fees pursuant to the Plan, are accrued daily and taken into
account for the purpose of determining the net asset value of the Fund's 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
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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
New York Stock Exchange 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 "DISTRIBUTIONS AND TAXES."
The term "regulated investment company" ("RIC") does not imply the
supervision of management or investment practices or policies by any government
agency.
GENERAL. It is expected that the Fund will continue to qualify for
treatment as a RIC under the Internal Revenue Code of 1986, as amended, (the
"Code") so long as such qualification is in the best interests of its
shareholders. To qualify for treatment as a 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 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 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 a 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,
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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.
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 in 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 it distributes that income 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" "Excise Tax" -- 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 would be adjusted to reflect the amounts of
income included and deductions taken under the election.
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OPTIONS TRANSACTIONS. Gains from options derived by the Fund with respect
to its business of investing in securities will qualify as permissible income
under the Income Requirement.
Ordinarily, gains and losses realized from portfolio transactions will be
treated as capital gains and losses. However, all or a portion of the gain
realized 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 option and straddle transactions.
Under Section 1256 of the Code, any gain or loss realized by the Fund with
respect to certain options ("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. The 60% portion treated as
long-term capital gain will qualify for the reduced maximum tax rates on
non-corporate taxpayers' net capital gain enacted by the Taxpayer Relief Act of
1997 -- 20% (10% for taxpayers in the 15% marginal tax bracket) on capital
assets held for more than 18 months -- instead of the 28% rate in effect before
that legislation, which now applies to gain on capital assets held for more than
one year but not more than 18 months. Pending legislation, the Internal Revenue
Service Restructuring and Reform Act of 1998, would reduce the 18-month holding
period for 20% gain to 12 months.
Offsetting positions held by the Fund involving certain options may
constitute "straddles," which are defined to include "offsetting positions" in
actively traded personal property. 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 transactions, such straddles would be characterized as "mixed
straddles" if the 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.
If the Fund has an "appreciated financial position" - generally, an
interest (including an interest through an option or short sale) with respect to
any stock, debt instrument (other than "straight debt"), or partnership interest
the fair market value of which exceeds its adjusted basis - and enters into a
"constructive sale" of the same or substantially similar property, the Fund will
be treated as having made an actual sale thereof, with the result that gain will
be recognized at that time. A constructive sale generally consists of a short
sale, an offsetting notional principal contract, or futures or forward contract
entered into by the Fund or a related person with respect to the same or
substantially similar property. In addition, if the appreciated financial
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position is itself a short sale or such a contract, acquisition of the
underlying property or substantially similar property will be deemed a
constructive sale.
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 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
the rate of 31% of capital gain distributions and of the gross proceeds from a
redemption of Fund shares unless the shareholder certifies his or her foreign
status to the Fund.
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.
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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 and Sarofim also place transactions for other
accounts that they provide 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.
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..
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
or Sarofim exercise investment discretion. Such services may include advice
concerning the value of securities; the advisability of investing in, purchasing
or selling securities; the availability of securities or the purchasers or
sellers of securities; furnishing analyses and reports concerning issuers,
industries, securities, economic factors and trends, portfolio strategy and
performance of accounts; and effecting securities transactions and performing
functions incidental thereto (such as clearance and settlement).
The receipt of research services from broker-dealers may be useful to
Dreyfus or Sarofim in rendering investment management services to the Fund
and/or their other clients; and, conversely, such information provided by
brokers or dealers who have executed transaction orders on behalf of other
clients of Dreyfus or Sarofim 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
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otherwise be incurred if these organizations were to attempt to develop
comparable information through their own staffs.
Although the Advisers manage other accounts in addition to the Fund,
investment decisions for the Fund are made independently from decisions made for
these other accounts. It sometimes happens that the same security is held by
more than one of the accounts managed by Dreyfus or Sarofim. 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. It is the present opinion of the
Directors that the desirability of retaining Dreyfus as investment manager, and
Sarofim as sub-investment adviser, 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. Portfolio turnover may vary from year to
year as well as within a year. In periods in which extraordinary market
conditions prevail, Dreyfus will not be deterred from changing the Fund's
investment strategy as rapidly as needed, in which case higher turnover rates
can be anticipated. 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 to any
other considerations when Dreyfus or Sarofim deems it appropriate to make
changes in the Fund's assets.
PERFORMANCE INFORMATION
THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTION IN THE FUND'S PROSPECTUS ENTITLED "PAST PERFORMANCE."
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
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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.
Performance information for the Fund may be compared, in reports and
promotional literature, to indexes including, but not limited to: (i) the
Standard & Poor's 500 Composite Stock Price Index, (ii) the Russell 1000 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 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, Fayez Sarofim,
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.
INFORMATION ABOUT THE FUND
THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTION IN THE FUND'S PROSPECTUS ENTITLED "THE FUND".
The Company has an authorized capitalization of 25 billion shares of
$0.001 par value stock. 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 nineteen portfolios of the Company. Fund
shares are of one class and have equal rights as to dividends and in
liquidation. Fund shares have no preemptive or subscription rights and are
freely transferable.
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<PAGE>
Unless otherwise required by the 1940 Act, ordinarily it will not be
necessary for the Company to hold annual meetings of shareholders. As a result,
Fund shareholders may not consider each year the election of Board members 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 Board member from office.
Shareholders may remove a Board member by the affirmative vote of a majority of
the Company's outstanding voting shares. In addition, the Board will call a
meeting of shareholders for the purpose of electing Board members if, at any
time, less than a majority of the Board members then holding office have been
elected by shareholders.
The Company is a "series fund," which is a mutual fund divided into
separate portfolios, each of which is treated as a separate entity for certain
matters under the 1940 Act and for other purposes. A shareholder of one
portfolio is not deemed to be a shareholder of any other portfolio. For certain
matters shareholders vote together as a group; as to others they vote separately
by portfolio.
Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted under the provisions of the 1940 Act or applicable state law or
otherwise to the holders of the outstanding voting securities of an investment
company, such as the Company, will not be deemed to have been effectively acted
upon unless approved by the holders of a majority of the outstanding shares of
each series affected by such matter. Rule 18f-2 further provides that a series
shall be deemed to be affected by a matter unless it is clear that the interests
of each series in the matter are identical or that the matter does not affect
any interest of such series. The Rule exempts the selection of independent
accountants and the election of Board members from the separate voting
requirements of the Rule.
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.
B-37
<PAGE>
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.
[__________] was appointed by the Directors to serve as the Fund's
independent auditors for the period ending August 31, 1999, 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.
B-38
<PAGE>
FINANCIAL STATEMENTS
[To be filed by amendment.]
B-39
<PAGE>
APPENDIX
DESCRIPTION OF STANDARD & POOR'S, MOODY'S, FITCH AND DUFF 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.
S&P's letter ratings may be modified by the addition of a plus (+) or a
minus (-) sign designation, which is used to show relative standing within the
major rating categories, except in the AAA (Prime Grade) category.
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.
Issues assigned an A rating are regarded as having the greatest capacity for
timely payment. Issues in this category are delineated with the numbers 1, 2 and
3 to indicate the relative degree of safety.
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.
B-40
<PAGE>
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 the major rating categories, except in the Aaa category and in
the categories below 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.
COMMERCIAL PAPER RATINGS
The rating Prime-1 (P-1) is the highest commercial paper rating assigned
by Moody's. Issuers of P-1 paper must have a superior capacity for repayment of
short-term promissory obligations, and ordinarily will be evidenced by leading
market positions in well established industries, high rates of return on funds
employed, conservative capitalization structures with moderate reliance on debt
and ample asset protection, broad margins in earnings coverage of fixed
financial charges and high internal cash generation, and well established access
to a range of financial markets and assured sources of alternate liquidity.
B-41
<PAGE>
FITCH INVESTORS SERVICES, L.P. ("FITCH")
SHORT-TERM 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+'.
DUFF & PHELPS INC. ("DUFF")
COMMERCIAL PAPER RATINGS
The rating Duff-1 is the highest commercial paper rating assigned by Duff.
Paper rated Duff-1 is regarded as having very high certainty of timely payment
with excellent liquidity factors which are supported by ample asset protection.
Risk factors are minor.
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.
B-42
<PAGE>
THE DREYFUS/LAUREL FUNDS, INC.
(formerly, The Laurel Funds, Inc.)
PART C
OTHER INFORMATION
Item 23. EXHIBITS
(a)(1) Articles of Incorporation dated July 31, 1987.
Incorporated by reference to Post-Effective Amendment No.
41 to the Registrant's Registration Statement on Form N-1A
("Post-Effective Amendment No. 41") filed on December 29,
1995.
(a)(2) 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.
(a)(3) Articles of Amendment dated March 31, 1994. Incorporated
by reference to Post-Effective Amendment No. 41.
(a)(4) Articles Supplementary dated March 31, 1994 reclassifying
shares. Incorporated by reference to Post-Effective
Amendment No. 41.
(a)(5) Articles Supplementary dated May 24, 1994 designating and
classifying shares. Incorporated by reference to
Post-Effective Amendment No. 39.
(a)(6) Articles of Amendment dated October 17, 1994. Incorporated
by reference to Post-Effective Amendment No. 31 to the
Registrant's Registration Statement on Form N-1A
("Post-Effective Amendment No. 31") filed on December 13,
1994.
(a)(7) Articles Supplementary dated December 19, 1994 designating
classes. Incorporated by reference to Post-Effective
Amendment No. 32 to the Registrant's Registration Statement
on Form N-1A ("Post-Effective Amendment No. 32") filed on
December 19, 1994.
(a)(8) Articles of Amendment dated June 9, 1995. Incorporated by
reference to Post-Effective Amendment No. 39.
(a)(9) Articles of Amendment dated August 30, 1995. Incorporated
by reference to Post-Effective Amendment No. 39.
(a)(10) Articles Supplementary dated August 31, 1995 reclassifying
shares. Incorporated by reference to Post-Effective
Amendment No. 39.
(a)(11) Articles of Amendment dated October 31, 1995 designating
and classifying shares. Incorporated by reference to
Post-Effective Amendment No. 41.
<PAGE>
(a)(12) Articles of Amendment dated November 22, 1995 designating
and reclassifying shares. Incorporated by reference to
Post-Effective Amendment No. 41.
(a)(13) Articles of Amendment dated July 15, 1996. Incorporated by
reference to Post-Effective Amendment No. 53 to the
Registrant's Registration Statement on Form N-1A
("Post-Effective Amendment No. 53") filed on August 20, 1997.
(a)(14) Articles of Amendment dated February 27, 1997. Incorporated by
reference to Post-Effective Amendment No. 53.
(a)(15) Articles of Amendment dated August 13, 1997. Incorporated by
reference to Post-Effective Amendment No. 53.
(a)(16) Articles of Amendment dated October 30, 1997. Incorporated by
reference to Post-Effective Amendment No. 56 to the
Registrant's Registration Statement on Form N-1A
("Post-Effective Amendment No. 56") filed on November 4, 1997.
(a)(17) Articles of Amendment dated July __, 1998. To be filed by
amendment.
(b) Bylaws. Incorporated by reference to Post-Effective
Amendment No. 53.
(c) Specimen security. Incorporated by Reference to Post-Effective
Amendment No. 54 to the Registrant's Registration Statement on
Form N-1A.
(d)(1) Form of Investment Management Agreement between Mellon
Bank, N.A. and the Registrant. Incorporated by reference
to Post-Effective Amendment No. 41.
(d)(2) Amended Exhibit A to Investment Management Agreement between
Mellon Bank, N.A. and the Registrant. To be filed by
amendment.
(d)(3) 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.
(d)(4) Form of Sub-Investment Advisory Agreement between The Dreyfus
Corporation and Fayez Sarofim & Co. (relating to Dreyfus
Tax-Efficient Growth Fund). To be filed by amendment.
(e)(1) Distribution Agreement between Premier Mutual Fund
Services, Inc. and the Registrant. Incorporated by
reference to Post-Effective Amendment No. 31.
(e)(2) Amended Exhibit A to Distribution Agreement between Premier
Mutual Fund Services, Inc. and the Registrant. To be filed by
amendment.
(f) Not Applicable.
C-2
<PAGE>
(g)(1) Form of Custody Agreement between the Registrant and Mellon
Bank, N.A. Incorporated by reference to Post-Effective
Amendment No. 41.
(g)(2) Sub-Custodian Agreement between Mellon Bank, N.A. and
Boston Safe Deposit and Trust Company. To be filed by
amendment.
(h) Not Applicable.
(i)(1) Opinion of counsel is incorporated by reference to the
Registrant's Registration Statement on Form N-1A --
Registration No. 33-16338 ("Registration Statement") filed
on August 6, 1987 and to Post-Effective Amendment No. 32
and Post-Effective Amendment No. 56.
(i)(2) Opinion of counsel (relating to the addition of the Dreyfus
Disciplined Smallcap Stock Fund and Dreyfus Tax-Efficient
Growth Fund series). To be filed by amendment.
(i)(3) Consent of counsel.
(j) Not Applicable.
(k) Not Applicable.
(l) Letter of Investment Intent. Incorporated by reference to the
Registration Statement.
(m)(1) Distribution Plan for Dreyfus Disciplined Smallcap Stock Fund
and Dreyfus Tax-Efficient Growth Fund. To be filed by
amendment.
(m)(2) 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. Restated Distribution
Plan for Dreyfus Disciplined Stock Fund is incorporated by
reference to Post-Effective Amendment No. 61 to the
Registrant's Registration Statement on Form N-1A
("Post-Effective Amendment No. 61").
(m)(3) Form of Distribution Plan and Service Plans (relating to
Class B Shares and Class C Shares). Incorporated by
reference to Post-Effective Amendment No. 32.
(n) Financial Data Schedule. To be filed by amendment.
(p)(1) Power of Attorney of Marie E. Connolly dated
January 28, 1998, incorporated by reference to
Post-Effective Amendment No. 62.
C-3
<PAGE>
(p)(2) Powers of Attorney of the Directors dated January 28, 1998,
incorporated by reference to Post-Effective Amendment No.
62.
(p)(3) Power of Attorney of Benaree Pratt Wiley dated May 28,
1998, incorporated by reference to Post-Effective Amendment
No. 63.
Item 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Not Applicable.
Item 25. INDEMNIFICATION
(a) Subject to the exceptions and limitations contained in Section (b) below:
(i) every person who is, or has been a Director or officer of the
Registrant (hereinafter referred to as "Covered Person") shall be
indemnified by the appropriate Series to the fullest extent permitted by
law against liability and against all expenses reasonably incurred or paid
by him in connection with any claim, action, suit or proceeding in which
he becomes involved as a party or otherwise by virtue of his being or
having been a Covered Person and against amounts paid or incurred by him
in the settlement thereof;
(ii) the words "claim," "action," "suit," or "proceeding" shall
apply to all claims, actions, suits or proceedings (civil, criminal or
other, including appeals), actual or threatened while in office or
thereafter, and the words "liability" and "expenses" shall include,
without limitation, attorneys' fees, costs, judgments, amounts paid in
settlement, fines, penalties and other liabilities.
(b) No indemnification shall be provided hereunder to a Covered Person:
(i) who shall have been adjudicated by a court or body before which
the proceeding was brought (A) to be liable to the Registrant or its
Shareholders by reason of willful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in the conduct of his office
or (B) not to have acted in good faith in the reasonable belief that his
action was in the best interest of the Funds; or
(ii) in the event of a settlement, unless there has been a
determination that such Covered Person did not engage in willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office,
(A) by the court or other body approving the settlement;
(B) by at least a majority of those Directors who are neither
interested persons of the Registrant nor are parties to the matter
based upon a review of readily available facts (as opposed to a full
trial-type inquiry); or
(C) by written opinion of independent legal counsel based upon
a review of readily available facts (as opposed to a full trial-type
inquiry);
C-4
<PAGE>
provided, however, that any Shareholder may, by appropriate legal proceedings,
challenge any such determination by the Directors, or by independent counsel.
(c) The Registrant may purchase and maintain insurance on behalf of any Covered
Person against any liability asserted against him and incurred by him in any
such capacity or arising out of his status as such, whether or not the
Registrant would have the power to indemnify him against such liability. The
Registrant may not acquire or obtain a contract for insurance that protects or
purports to protect any Covered Person against any liability to the Registrant
or its shareholders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
involved in the conduct of his office.
(d) Expenses in connection with the preparation and presentation of a defense to
any claim, action, suit or proceeding of the character described in paragraph
(a) above may be paid by the appropriate Series from time to time prior to final
disposition thereof upon receipt of an undertaking by or on behalf of such
Covered Person that such amount will be paid over by him to the applicable
Series if it is ultimately determined that he is not entitled to indemnification
hereunder; provided, however, that either (i) such Covered Person shall have
provided appropriate security for such undertaking, (ii) the Registrant is
insured against losses arising out of any such advance payments or (iii) either
a majority of the Directors who are neither interested persons of the funds nor
parties to the matter, or independent legal counsel in a written opinion, shall
have determined, based upon a review of readily available facts (as opposed to a
full trial-type inquiry), that there is reason to believe that such Covered
Person will be found entitled to indemnification hereunder.
Item 26. BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT ADVISER
Investment Adviser -- The Dreyfus Corporation
The Dreyfus Corporation ("Dreyfus") and subsidiary companies comprise a
financial service organization whose business consists primarily of providing
investment management services as the investment adviser, manager and
distributor for sponsored investment companies registered under the Investment
Company Act of 1940 and as an investment adviser to institutional and individual
accounts. Dreyfus also serves as sub-investment adviser to and/or administrator
of other investment companies. Dreyfus Service Corporation, a wholly-owned
subsidiary of Dreyfus, serves primarily as a registered broker-dealer of shares
of investment companies sponsored by Dreyfus and of other investment companies
for which Dreyfus acts as investment adviser, sub-investment adviser or
administrator. Dreyfus Management, Inc., another wholly-owned subsidiary,
provides investment management services to various pension plans, institutions
and individuals.
OFFICERS AND DIRECTORS OF INVESTMENT ADVISER
Name and Position
WITH DREYFUS OTHER BUSINESSES
MANDELL L. BERMAN Real estate consultant and private investor
Director 29100 Northwestern Highway, Suite 370
Southfield, Michigan 48034;
Past Chairman of the Board of Trustees:
Skillman Foundation;
Member of The Board of Vintners Intl.
C-5
<PAGE>
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.*
C-6
<PAGE>
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 Avenue
Chestnut Hill, Massachusetts 02167-3934
J. DAVID OFFICER Vice Chairman:
Vice Chairman The Dreyfus Corporation;
Director
Dreyfus Financial Services Corporation*****;
Dreyfus Investment Services
Corporation*****;
Mellon Trust of Florida
2875 Northeast 191st Street
North Miami Beach, Florida 33180
Mellon Preferred Capital Corporation****;
Boston Group Holdings, Inc.****;
Mellon Trust of New York
1301 Avenue of the Americas - 41st Floor
New York, New York 10019;
Mellon Trust of California
400 South Hope Street
Los Angeles, California 90071-2806;
C-7
<PAGE>
Executive Vice President:
Mellon Bank, N.A.***;
Vice Chairman and Director:
The Boston Company, Inc.****;
President and Director:
RECO, Inc.****;
The Boston Company Financial Services,
Inc.****;
Boston Safe Deposit and Trust Company****
RONALD P. O'HANLEY Vice Chairman:
Vice Chairman The Dreyfus Corporation*;
Director:
The Boston Company Asset Management,
LLC****; TBCAM Holding, Inc.****; Franklin
Portfolio Holdings, Inc. Two International
Place - 22nd Floor Boston, Massachusetts
02110; Mellon Capital Management Corporation
595 Market Street, Suite #3000 San
Francisco, California 94105; Certus Asset
Advisors Corporation One Bush Street, Suite
450 San Francisco, California 94104;
Mellon-France Corporation***;
Chairman and Director:
Boston Safe Advisors, Inc.****;
Partner Representative:
Pareto Partners
271 Regent Street
London, England W1R 8PP;
Chairman and Trustee:
Mellon Bond Associates, LLP***;
Mellon Equity Associates, LLP***;
Trustee:
Laurel Capital Advisors, LLP***;
Chairman, President and Chief Executive Officer:
Mellon Global Investing Corp.***;
Partner:
McKinsey & Company, Inc.
Boston, Massachusetts
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+++;
C-8
<PAGE>
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*;
General Counsel Dreyfus Management, Inc.*;
and Secretary 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
JEFFREY N. NACHMAN President and Director:
Vice President - Mutual Dreyfus Transfer, Inc.
Fund Accounting One American Express Plaza
Providence, Rhode Island 02903
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.
C-9
<PAGE>
** 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 Union Trust Building, 501
Grant Street, Room 179, Pittsburgh, Pennsylvania 15259.
+ 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 to 53 State Street, Boston,
Massachusetts 02103.
Item 27. 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 Preferred Money Market Fund
30) Dreyfus Institutional Short Term Treasury Fund
31) Dreyfus Insured Municipal Bond Fund, Inc.
C-10
<PAGE>
32) Dreyfus Intermediate Municipal Bond Fund, Inc.
33) Dreyfus International Funds, Inc.
34) Dreyfus Investment Grade Bond Funds, Inc.
35) The Dreyfus/Laurel Funds Trust
36) The Dreyfus/Laurel Tax-Free Municipal Funds
37) Dreyfus LifeTime Portfolios, Inc.
38) Dreyfus Liquid Assets, Inc.
39) Dreyfus Massachusetts Intermediate Municipal Bond
Fund
40) Dreyfus Massachusetts Municipal Money Market Fund
41) Dreyfus Massachusetts Tax Exempt Bond Fund
42) Dreyfus MidCap Index Fund
43) Dreyfus Money Market Instruments, Inc.
44) Dreyfus Municipal Bond Fund, Inc.
45) Dreyfus Municipal Cash Management Plus
46) Dreyfus Municipal Money Market Fund, Inc.
47) Dreyfus New Jersey Intermediate Municipal Bond Fund
48) Dreyfus New Jersey Municipal Bond Fund, Inc.
49) Dreyfus New Jersey Municipal Money Market Fund, Inc.
50) Dreyfus New Leaders Fund, Inc.
51) Dreyfus New York Insured Tax Exempt Bond Fund
52) Dreyfus New York Municipal Cash Management
53) Dreyfus New York Tax Exempt Bond Fund, Inc.
54) Dreyfus New York Tax Exempt Intermediate Bond Fund
55) Dreyfus New York Tax Exempt Money Market Fund
56) Dreyfus 100% U.S. Treasury Intermediate Term Fund
57) Dreyfus 100% U.S. Treasury Long Term Fund
58) Dreyfus 100% U.S. Treasury Money Market Fund
59) Dreyfus 100% U.S. Treasury Short Term Fund
60) Dreyfus Pennsylvania Intermediate Municipal Bond Fund
61) Dreyfus Pennsylvania Municipal Money Market Fund
62) Dreyfus Index Funds, Inc.
63) Dreyfus Short-Intermediate Government Fund
64) Dreyfus Short-Intermediate Municipal Bond Fund
65) The Dreyfus Socially Responsible Growth Fund, Inc.
66) Dreyfus Stock Index Fund, Inc.
67) Dreyfus Tax Exempt Cash Management
68) The Dreyfus Third Century Fund, Inc.
69) Dreyfus Treasury Cash Management
70) Dreyfus Treasury Prime Cash Management
71) Dreyfus Variable Investment Fund
72) Dreyfus Worldwide Dollar Money Market Fund, Inc.
73) General California Municipal Bond Fund, Inc.
74) General California Municipal Money Market Fund
75) General Government Securities Money Market Fund, Inc.
76) General Money Market Fund, Inc.
77) General Municipal Bond Fund, Inc.
78) General Municipal Money Market Fund, Inc.
79) General New York Municipal Bond Fund, Inc.
80) General New York Municipal Money Market Fund
81) Dreyfus Premier Insured Municipal Bond Fund
82) Dreyfus Premier California Municipal Bond Fund
83) Dreyfus Premier Equity Funds, Inc.
84) Dreyfus Premier International Funds, Inc.
C-11
<PAGE>
85) Dreyfus Premier GNMA Fund
86) Dreyfus Premier Worldwide Growth Fund, Inc.
87) Dreyfus Premier Municipal Bond Fund
88) Dreyfus Premier New York Municipal Bond Fund
89) Dreyfus Premier State Municipal Bond Fund
90) Dreyfus Premier Value Fund
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 Office and Treasurer
Compliance Officer
Joseph F. Tower, III+ Director, Senior Vice Vice President
President, Treasurer and and Assistant
Chief Financial Officer 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 28. 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
C-12
<PAGE>
Item 29. MANAGEMENT SERVICES
Not Applicable
Item 30. UNDERTAKINGS
(1) 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.
(2) 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.
(3) To file a post-effective amendment using financial statements, which
need not be certified, within six months from the effective date of
Registrant's 1933 Act Registration Statement, with respect to the
Registrant's Dreyfus Disciplined Smallcap Stock Fund and Dreyfus
Tax-Efficient Growth Fund.
C-13
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it has duly caused
this Amendment to its 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 17th day of July, 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 dates
indicated.
SIGNATURES TITLE DATE
/s/Marie E. Connolly* President, Treasurer 7/17/98
- ------------------------
Marie E. Connolly
/s/Francis P. Brennan* Director, 7/17/98
________________________ Chairman of the Board
Francis P. Brennan
/s/Ruth Marie Adams* Director 7/17/98
- ------------------------
Ruth Marie Adams
/s/Joseph S. DiMartino* Director 7/17/98
- ------------------------
Joseph S. DiMartino
/s/James M. Fitzgibbons* Director 7/17/98
- ------------------------
James M. Fitzgibbons
/s/Kenneth A. Himmel* Director 7/17/98
- ------------------------
Kenneth A. Himmel
/s/Stephen J. Lockwood* Director 7/17/98
- ------------------------
Stephen J. Lockwood
/s/Roslyn M. Watson* Director 7/17/98
- ------------------------
Roslyn M. Watson
/s/J. Tomlinson Fort* Director 7/17/98
- ------------------------
J. Tomlinson Fort
<PAGE>
/s/Arthur L. Goeschel* Director 7/17/98
- ------------------------
Arthur L. Goeschel
/s/Arch S. Jeffery* Director 7/17/98
- ------------------------
Arch S. Jeffery
/s/John Sciullo* Director 7/17/98
- ------------------------
John Sciullo
/s/Benaree Pratt Wiley* Director 7/17/98
- ------------------------
Benaree Pratt Wiley
*By: /s/ Elba Vasquez
------------------------
Elba Vasquez
Attorney-in-Fact
<PAGE>
EXHIBIT INDEX
(a)(1) Articles of Incorporation dated July 31, 1987. Incorporated by
reference to Post-Effective Amendment No. 41 to the Registrant's
Registration Statement on Form N-1A ("Post-Effective Amendment
No. 41") filed on December 29, 1995.
(a)(2) 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.
(a)(3) Articles of Amendment dated March 31, 1994. Incorporated by
reference to Post-Effective Amendment No. 41.
(a)(4) Articles Supplementary dated March 31, 1994 reclassifying
shares. Incorporated by reference to Post-Effective Amendment
No. 41.
(a)(5) Articles Supplementary dated May 24, 1994 designating and
classifying shares. Incorporated by reference to Post-Effective
Amendment No. 39.
(a)(6) Articles of Amendment dated October 17, 1994. Incorporated by
reference to Post-Effective Amendment No. 31 to the Registrant's
Registration Statement on Form N-1A ("Post-Effective Amendment
No. 31") filed on December 13, 1994.
(a)(7) Articles Supplementary dated December 19, 1994 designating
classes. Incorporated by reference to Post-Effective Amendment
No. 32 to the Registrant's Registration Statement on Form N-1A
("Post-Effective Amendment No. 32") filed on December 19, 1994.
(a)(8) Articles of Amendment dated June 9, 1995. Incorporated by
reference to Post-Effective Amendment No. 39.
(a)(9) Articles of Amendment dated August 30, 1995. Incorporated by
reference to Post-Effective Amendment No. 39.
(a)(10) Articles Supplementary dated August 31, 1995 reclassifying
shares. Incorporated by reference to Post-Effective Amendment
No. 39.
(a)(11) Articles of Amendment dated October 31, 1995 designating and
classifying shares. Incorporated by reference to Post-Effective
Amendment No. 41.
(a)(12) Articles of Amendment dated November 22, 1995 designating and
reclassifying shares. Incorporated by reference to Post-Effective
Amendment No. 41.
(a)(13) Articles of Amendment dated July 15, 1996. Incorporated by
reference to Post-Effective Amendment No. 53 to the Registrant's
Registration Statement on Form N-1A ("Post-Effective Amendment
No. 53") filed on August 20, 1997.
(a)(14) Articles of Amendment dated February 27, 1997. Incorporated by
reference to Post-Effective Amendment No. 53.
(a)(15) Articles of Amendment dated August 13, 1997. Incorporated by
reference to Post-Effective Amendment No. 53.
<PAGE>
(a)(16) Articles of Amendment dated October 30, 1997. Incorporated by
reference to Post-Effective Amendment No. 56 to the Registrant's
Registration Statement on Form N-1A ("Post-Effective Amendment
No. 56") filed on November 4, 1997.
(a)(17) Articles of Amendment dated July __, 1998. To be filed by
amendment.
(b) Bylaws. Incorporated by reference to Post-Effective Amendment
No. 53.
(c) Specimen security. Incorporated by Reference to Post-Effective
Amendment No. 54 to the Registrant's Registration Statement on
Form N-1A.
(d)(1) Form of Investment Management Agreement between Mellon Bank, N.A.
and the Registrant. Incorporated by reference to Post-Effective
Amendment No. 41.
(d)(2) Amended Exhibit A to Investment Management Agreement between
Mellon Bank, N.A. and the Registrant. To be filed by amendment.
(d)(3) 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.
(d)(4) Form of Sub-Investment Advisory Agreement between The Dreyfus
Corporation and Fayez Sarofim & Co. (relating to Dreyfus
Tax-Efficient Growth Fund).
(e)(1) Distribution Agreement between Premier Mutual Fund Services, Inc.
and the Registrant. Incorporated by reference to Post-Effective
Amendment No. 31.
(e)(2) Amended Exhibit A to Distribution Agreement between Premier
Mutual Fund Services, Inc. and the Registrant. To be filed by
amendment.
(f) Not Applicable.
(g)(1) Form of Custody Agreement between the Registrant and Mellon Bank,
N.A. Incorporated by reference to Post-Effective Amendment No.
41.
(g)(2) Sub-Custodian Agreement between Mellon Bank, N.A. and Boston Safe
Deposit and Trust Company. To be filed by amendment.
(h) Not Applicable.
(i)(1) Opinion of counsel is incorporated by reference to the
Registrant's Registration Statement on Form N-1A -- Registration
No. 33-16338 ("Registration Statement") filed on August 6, 1987
and to Post-Effective Amendment No. 32 and Post-Effective
Amendment No. 56.
(i)(2) Opinion of counsel (relating to the addition of the Dreyfus
Disciplined Smallcap Stock Fund and Dreyfus Tax-Efficient Growth
Fund series). To be filed by amendment.
(i)(3) Consent of counsel.
(j) Not Applicable.
<PAGE>
(k) Not Applicable.
(l) Letter of Investment Intent. Incorporated by reference to the
Registration Statement.
(m)(1) Distribution Plan for Dreyfus Disciplined Smallcap Stock Fund and
Dreyfus Tax-Efficient Growth Fund. To be filed by amendment.
(m)(2) 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. Restated
Distribution Plan for Dreyfus Disciplined Stock Fund is
incorporated by reference to Post-Effective Amendment No. 61 to
the Registrant's Registration Statement on Form N-1A
("Post-Effective Amendment No. 61").
(m)(3) Form of Distribution Plan and Service Plans (relating to Class B
Shares and Class C Shares). Incorporated by reference to
Post-Effective Amendment No. 32.
(n) Financial Data Schedule. To be filed by amendment.
(p)(1) Power of Attorney of Marie E. Connolly dated January 28, 1998,
incorporated by reference to Post-Effective Amendment No. 62.
(p)(2) Powers of Attorney of the Directors dated January 28, 1998,
incorporated by reference to Post-Effective Amendment No. 62.
(p)(3) Power of Attorney of Benaree Pratt Wiley dated May 28, 1998,
incorporated by reference to Post-Effective Amendment No. 63.
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W.
Second Floor
Washington, D.C. 20036-1800
July 17, 1998
The Dreyfus/Laurel Funds, Inc.
200 Park Avenue - 55th Floor
New York, New York 10166
Dear Sir or Madam:
In connection with the filing of Post-Effective Amendment No. 64 to
the Registration Statement on Form N-1A (File Nos. 811-5270 and 33-16338)
of The Dreyfus/Laurel Funds, Inc., which you are about to file with the
Securities and Exchange Commission, we hereby consent to the reference to
our firm as "counsel" in the Statements of Additional Information of
Dreyfus Disciplined Smallcap Stock Fund and Dreyfus Tax-Efficient Growth
Fund incorporated by reference into the respective Prospectuses of those
Funds.
Very truly yours,
/s/ Kirkpatrick & Lockhart LLP
<PAGE>
